caracco

[caracco]

Human Capital (Chapter 12)

When Goodyear hires new talent, they invest a lot of time and resources to get their associates up to speed. Goodyear hires new talent that has extensive tire or sales experience. Or has been extremely successful in college. They hire good talent. All of their new associates go through a 3 month training prior to being placed in their job role. For example, all new sales associates go through a Tire Bootcamp in their first week, presentation course, work in a company owned stores to see how the business work, spend time in a manufacturing plant, job shadow, and more. They invest a lot of time and resources to make sure the associates have a strong understanding of the business as well as the resources/tools to succeed.

Goodyear invest in human capital through high quality training and ongoing development programs. The company has each one of their associates develop an individual development plan at the beginning of the year. It is part of their objectives to have one and effectively complete. These development plans are designed to help their associates developing and enhancing their skills. Effective strategic leaders recognize the importance of learning from success and from failure when helping their firm use the strategic management process. This continuous development plan keep education top of mind and show how the company wants to have continuous investment in human capital.

[caracco]

Organizational Structure (Chapter 11)

In 2016, Goodyear combined the North America and Latin America businesses worlds. New leaders were announced for the Americas new business unit and Europe, Middle East and Asia (EMEA). The Americas business unit would be led by Steve McClellan. The EMEA unit will be led by Jean-Claude Kihn. CEO Richard Kramer stated, “This new organization is structured to accelerate growth and maximize earnings over time through simplicity, speed, and an intense focus on our customers and markets." The manufacturing plants would combine in the region, including the new Americas plant in San Luis Potosi, Mexico. Combining the business units will help serve customer and consumers more effectively and efficiently. It provides greater flexibility to anticipate market changes and react faster for them. This is because we can integrate processes such as product development, market forecasting, and product supply. The company will be able to product more high-value-added tires by having manufacturing efforts combined. It helps the company reach their maximum potential.

[caracco]

Ownership Concentration: Chapter 10

Elliot Investment Management L.P. has the largest stake in Goodyear. Elliot holds 10% stake at the Goodyear Tire and Rubber Company. They are a large-block shareholders because they own at least 5% of the company’s issued shares, in this case they own 10% of their shares. The investment firm just wrote a letter to the company proposing the following items: 5 new directors join the 12-member board, selling their store network to pay down debt, and forming an operational review committee to develop operational and margin improvements. Their proposed items would increase their stock from where it is currently at $14 to low-$30 range. Elliot feels the company is being financially mismanaged and lagging its rivals, such as Michelin and Bridgestone. Their stock has continued to suffer for years. Elliot has proposed similar actions to large companies that have high stocks in like eBay. The letter was issued in May. Goodyear responded with the following statement in May: "We value input from our shareholders and regularly engage with them. We are reviewing Elliott's recommendations, and we intend to meet with them to discuss their views in more detail.” Goodyears board of directors makes up 12 people, which includes their CEO Rich Kramer.

https://www.nasdaq.com/articles/elliott-management-says-goodyear-tire-worth-at-least-$21-a-share

[caracco]

Synergistic Strategic Alliance: Chapter 9

On August 23, 2021 Goodyear announced a strategic collaboration with Plus. Plus is a global provider of self-driving truck technology. The company helps provide autonomous trucking solutions. They are based in Silicon Valley and founded in 2016. Goodyear will provide the connected tires that will help enhance transportation efficiency and safety for semi-trucks powered by Plus. The trucks are a level 4 autonomous driving technology . By Goodyear and Plus developing the synergistic strategic alliance they will work together to strengthen each other.  Plus autonomous driving system will incorporate Goodyears connected tires. They can work together to improve overall driving performance, fuel economy, reduce carbon impact and long-haul safety. It will help Goodyear stay at the forefront of new technology and autonomous solutions.  As Shawn Kerrigan, COO and CO-Founder of Plus stated, "We are constantly exploring new opportunities to generate more value for customers using our autonomous driving technology. The collaboration between Plus and Goodyear enables us to leverage both companies' innovative fuel efficiency technologies, and harness these to further improve the performance of autonomous trucks."

[caracco]

Acquisition (Chapter 8) :

Goodyear operates in 23 countries around the world. In June 2021, Goodyear completed the acquisition of Cooper Tire. This was a global strategy designed to strengthen leadership positions in Global Tire Industry. It helped further strength Goodyear’s leading position in the U.S. and North American Markets. Cooper and Goodyear are the only 2 United States Tire Manufacturer. The acquisition of Cooper made Goodyear the only U.S. tire manufacturer giving them the competitive edge. Also, it helped double the company’s presence in China by opening new doors to relationships with local automakers and broader distribution with the addition of 2500 retail stores.

The acquisition helped new global distribution and manufacturing expansion. It will expand Goodyear manufacturing footprint to 3 additional plant that will add 97,000 units of passenger and light truck tires. This continues to strengthen Goodyear's global strategy.  Cooper had a strong Goodyear is a premium brand; however, they were losing share of account at the mid-tier tire market. Cooper is a strong mid-tier tire brand that can help add value to their portfolio. This helps Goodyear increase their market size as they can expand to new potential markets with a new tire tier option. They will reach more customers who are not looking for a premium tire.

[caracco]

Corporate-Level Strategy (Chapter 6)

Goodyear over the years has had different corporate-level strategies to gain competitive advantage in the market. Goodyears dominant business continue to be a tire manufacturer over the years. However, they have taken on different ventures to diversify their business. One of their latest diversifications was to not only be a tire manufacturer but a distributor as well. In 2018, Goodyear and Bridgestone came together and formed one of the largest tire distribution joint ventures in the United States. The two companies’ combined and created TireHub. This is an example of related constrained diversification strategy. The company use to outsource their tires to different distributors and lose margin. Instead they ventured into an a new industry that has many similarities as the existing industry.  The related constrained diversification strategy links the manufacturing and distribution.  TireHub combined both Goodyear and Bridgestone’s wholesale distribution to be able to reach a vast majority of retail locations in the United States. This is be the new primary distributor for these companies and they will rely less on third-party distribution. It will provide a fully integrated distribution, warehousing, sales and delivery system. They headquartered the company in Atlanta and have more than 80 distribution centers and warehouses in the United States. TireHub is a 50/50 venture and managed by an independent team. Goodyear and TireHub are one of the only tire manufacturers to venture into distribution to help diversify their corporation. This strategy allows the company to have a competitive edge and retain more of their profits through different venture.

[caracco]

First Mover (Chapter 5)

The online business is huge. People rely on quick fast deliveries . Amazon has led the way. Goodyear needed to do the same for tire installation. No customer likes to sit in a shop all day to wait for their tires to be installed. Goodyear was a first mover for the mobile tire install business. In 2018. Goodyear presented Roll, which was a new tire-buying and installation experience for the industry. It was designed to make tire purchasing and installation easier. Goodyear leveraged their www.goodyear.com buying platform to allow customers to choose mobile install instead of in-store installation. The customer would purchase tires online, schedule a mobile installation date, and the van would come out to their location to install the tires. Customers could buy and get tires installed at the comfort of their home, work, kids soccer practice, etc. Goodyear initially piloted Roll in Washington, DC and now is launched across the country. A first mover is a company that takes the first step to have a competitive advantage in the market. Goodyear was a first mover with mobile install and making an easier tire buying process for their consumers. Now, there are several mobile installers nationwide and several competitors, like Michelin, have been second and last movers.

Source: https://www.businesswire.com/news/home/20181015005306/en/Presenting-Roll-by-Goodyear-A-Simple-Way-to-Buy-and-Install-Tires

[caracco]

Market Segmentation (Chapter 4)

Market segmentation is a process that groups people together with interest or needs. Goodyears target market is to supply tires to anyone with a vehicle; however, it is not feasible for one corporation to supply every vehicle on the road. They need to manage their resources and capabilities correctly to choose target customers that provide profitability. They need to have teams dedicated to different channels of the business. Goodyear has commercial tires, passenger tires, and specialty tires (such as racing, aviation and original equipment manufacturer vehicles). Goodyear has completed research and found the following for tire buyers: 45% think price is the most important factor, 33% for type of outlet, and 22% for the brand.

Goodyear segments their consumers in 4 categories:

Price-Constrained Buyer

Commodity Buyer

Value-Oriented Buyer

Quality Buyer

The company utilizes their 4 different brands to hit all of the different market segmentations. Below breaks down their tire brand to hit each market segmentation.

Goodyear: Premium Product

Dunlop: Specialty Product

Cooper: Mid-Tier Product

Kelly: Economy Product

[caracco]

Outsourcing (Chapter 3)

Goodyear outsources for different parts of their business to effectively create value. Outsourcing is the purchase of a value-creating activity or a support function activity from an external supplier. I am going to discuss a few or the many components that Goodyear outsources.

Goodyear Credit Card: Goodyear partners with Citi Bank to provide a financing option to their customers. Their credit card allows 6 months interest free on $250 or more. Goodyear outsources this function because they do not have the capability to setup an internal banking function. The credit card has their own logo. It helps brand awareness and providing financing to their customer.

RightThing: Goodyear partnered with RightThing for their talent acquisition partner in 2022. RightThing the leader in recruitment process outsourcing (RPO). Goodyear is outsourcing for their recruiting and hiring needs for its North American employees. RightThing oversees the overall recruiting process and help streamline talent acquisition operations.  As well, the company helps with university recruiting initiatives. Goodyear no longer had the resources to recruit outside the corporations. Outsourcing this function has allowed them to reach a larger base and bring in the largest customer base.

Rebate Center: Goodyear offers rebates to their customers 365 days a year. Goodyear does not manage the rebates for their customers. Goodyear uses a company called 360insights to manage their rebates. 360insights is a partner engagement and business optimization company that enables goodyear to better manage their rebates and engage with their customer. The company helps process millions of rebates for the company each year. Goodyear currently does not have the bandwidth internally to process the rebates.

[caracco]

External Environment

Goodyear has shift to use more sustainable materials in their tire products. Today, eight product lines, include sustainable materials. In January 2023, Goodyear unveiled a tire, that passed all regulatory testing, that is comprised of 90% sustainable materials. The tire includes 17 featured ingredients across 12 different components. Some of these featured ingredients include the use of soybean oil which reduces Goodyear’s use of petroleum based products. Another feature is using recycled polyester for the tire cords. The goal for the corporation is to have a 100% sustainable-material tire by 2030.

Goodyear decided they need to utilize their resources to build strong commitment for sustainable products in the market to build a better future.  This touches on a few segments regarding general environment. The main segment is sustainable physical environment. Goodyear is trying to make positive impacts on the environment as well as forecasting the lack of supplies that are going to run out in the future. More than 99% of the worlds natural rubber is made from latex derived from trees, primarily from SE Asia.  Of that, approximately 70% of the worlds natural rubber is used for the tire industry. Goodyear will need to continue to complete environmental scanning and monitoring to stay on top of new innovations for alternative raw materials that are more sustainable. Their long term goal is to completely replace petroleum oil from all of their products with a sustainable product. They must anticipate sourcing changes as well, stay aware of what their competitors, like Michelin, are doing. No tire manufacturer has completely removed petroleum from their products and developed a 100% sustainable-material tire. It is a race to the finish and the company must stay vigilant to get there. The five forces of the competition model must constantly be evaluated through the development.

Photo of 90% sustainable tire Goodyear showcased in January 2023:

Sources: