Decision Making Process of the Goodyear Tire and Rubber Company

CONTENTS

Case overview................................................................................

Step 1: Define Problems ....................................................................

Step 2: Enumerate the Decision Factors ..................................................

Step 3: Consider Relevant Information .....................................................

Step 4: Identify the Best Alternative .......................................................

Step 5: Develop a plan for implementing the chosen alternative .........................

Step 6: Evaluate the decision.....................................................................

Cases Overview

The Goodyear Tire and Rubber Company decided to reconsider about Sears offer in 1992, as Goodyear tires were losing popularity and demand in Sears and customers were searching for higher grade and greater quality products. The market then was saturated, and was divided to the two main subgroups which were the original tire market and the replacement tire market. The Original Equipment Manufacturer tires were sold by tire manufacturers directly to automobile manufacturers, which account for 25 - 30% of production annually. The replacement tire marker on the other hand accounted for 70 - 75 % of the market share annually. This is where Goodyear has the utmost advantage, and is the market share leader within the US market.

Goodyear need to reconsider on the Sears proposal because they realize that there is 3.2% decline in market share for passenger car replacement tire in US. This share decline represented a loss of about 4.9 million tire units. Nearly 2 million worn out Goodyear brand tire were being replaced annually at 850 Sears Auto Centers in Unites States. If Goodyear accept the proposal, it would represent a significant change in distribution policy and create conflict with its franchised dealer. They also need to consider whether to sell only Goodyear Eagle brand or all of its brands.

In order to decide which is the best decision to made, the Goodyear can use a systematic decision making process that can help management to find a better solution

Step 1: Define Problems

In order to make the decision, Goodyear first needs to define the problems that occur in their company. Based on the case reconsider the proposal, the main problems for the company upon analyzing the case are there is a decline in market share of replacement tires, and less repurchased tires.

The second problem is that it was believed that 2 million Goodyear tires were replaced by competition at Sears. The failure to repurchase Goodyear brand tires happened by default because the remarkable loyalty of Sears customers led them to buy the best tire available from those offered by Sears which did not include Goodyear brand tires.

Step 2: Enumerate the Decision Factors

Two set of decision factors must be enumerated in the decision making process. Alternative courses of action are controllable decision factors because the decision maker has complete command on them. In this case, the company can decide whether they want to accept the proposal of selling the company's popular Eagle brand tire at Sears.

A) Alternative course of action

* Accept Sears' proposal by changing its distribution policy by including their own Goodyear seller, that will carry their brands exclusively, or continue sales to Sears, whilst considering which products within the product line is to be sold to Sears.

* Reject Sears proposal and maintain as per before, without implementing any change

Uncertainties, on the other hand, are uncontrollable factors that the manager cannot influence such as competitor's action, market size and buyer response to marketing action

B) Uncertainties

* Dealers may influence customers to buy other brand since only a few buyers are knowledgeable enough when it comes to tires. The market is such that most purchases are highly based on recommendation from dealer.

* Brand loyalty and tires are highly elastic products. It is difficult to build on brand loyalty without the help of dealers.

* Product cannibalization, between Sears and franchised dealers.

Step 3: Consider Relevant Information

The third step in decision making is considering the relevant information that related to the alternatives identified by the manager as being likely affect future events. These includes, characteristic of industry, consumers or competitive environment, characteristics of organizations and characteristics of the alternatives themselves. In this case, Goodyear can use marketing mix analysis and SWOT analysis.

Marketing mix (4'Ps') analysis

Product Goodyear now having 12 brands under Umbrella brands. However, Sears propose to sell Eagle brand at their store because of its popularity.

Price Carrying premium tire at high