Good Year Case Analysis h3h3m

Case: Goodyear Tire and Rubber, K&P Question: What is Goodyear Tire & Rubber Company’s: (a) U.S. Market share for original equipment enger car tires, (b) U.S. Market share for replacement enger car tires, and (c) U.S. share of “retail points of sale?” Answer: The U.S. Market share is 38% for original equipment, and 15% for replacement enger car tires. U.S. share of “retail points of sale” is 18.51%. Rationale: U.S. Market share for original equipment is provided as 38% of the total market in 1991. Exhibit 5 similarly provides Market share for enger tires, at 15% in 1991. In order to calculate share of retail points of sale, Goodyear’s Point of Sale volume is divided by the total US Retail Points of Sale for Major Tire Brands in the United States. Goodyear’s POS in 1991 is listed as 7,964, and the sum of all values of major tire brands yields a total US POS of 43,030. Thus, POS share is calculated as:

Question: What is the average replacement tire volume sold through Sears Auto Centers? Through Goodyear-owned and franchised Goodyear dealers? Answer: Average volume through Sears Auto Centers is 6.410 million total units, and 7,541 units per Sears dealer. Goodyear-owned and franchised dealers have a total average

replacement tire volume of 10.586 million units and 3,025 units per dealer, but their replacement enger car tire volume alone is 7.672 million units and 2,193 per dealer. Rationale: Average volume can be calculated using the percentage of total replacement tire market volume and total unit sales for the entire market. Replacement enger car market share for Sears is stated to be 5.5% in 1991. Knowing that Sears only has a significant share of the replacement enger car tire industry, which represents 75% of the total replacement car tire industry, and also given the market volume for total replacement tires is listed as 155.4 million units, multiplying market share by market volume, equates: (

)

Given the number of Sears Centers is 850, 6.410

850 = 7,541

To calculate volume through Goodyear-owned and franchised Goodyear dealers, we first calculate a weighted average of the market share for the three separate tire categories: enger, Light-Truck, and Highway-Truck, which are listed, for Goodyear, at 15%, 11%, and 23%, respectively. enger tires are stated to for 75% of annual sales, with the remainder split between Light-Truck and Highway-Truck (each assumed to represent a 12.5% share). The weighted averages are calculated as:

Using this weighted average, volume is calculated by multiplying Total Unit Sales, Goodyear’s Unit Volume, and the Weighted Average. Goodyear’s Unit Volume is calculated as the unit volume of Goodyear Stores (3500), divided by Goodyear’s Retail Points of Sale (7964), yielding 43.95%. The final equation for Average Unit Sales is: ( Given the number of Goodyear stores is 3500, 10,586,237

) 3500 = 3,025

Presented differently: 75% of total replacement tire sales (155.4) = 116.5 Goodyear’s total share of this is 15%, and their franchised/owned share of the total is 43.9%, so 15% x 116.5 x 43.9% = 7.672 million units of replacement enger car tires only, and 2,193 per dealer (7,672,000 3500).