1. What barriers to entry has Goodyear created or taken advantage of?
2. Goodyear has production facilities throughout the world. What competitive advantages might global production provide Goodyear?
3. How do tire manufacturing facilities in Japan fit in with Goodyear's strategy to create shareholder value?
4. How will Bridgestone's acquisition of Firestone affect Goodyear? How might Goodyear respond to this move by Bridgestone?

The U.S. tire industry illustrates the troubles faced by multinational firms that have lost their source of differential advantage. Although Europe once was a profitable market for the Big Four U.S. tiremakers-Goodyear, Firestone, Goodrich, and Uniroyal-each of these firms has, by now, partially or completely eliminated its European manufacturing operations. The reason is the extraordinary price competition resulting from a lack of unique products or production processes and the consequent ease of entry into the market by new firms. Moreover, these firms then faced well-financed challenges in the U.S. market by, among others, the French tiremaker Michelin, the developer of the radial tire and its related production technology. Uniroyal responded by selling off its European tire-manufacturing operation and reinvesting its money in businesses that were less competitive there (and, hence, more profitable) than the tire industry. This reinvestment includes its chemical, plastics, and industrial-products businesses in Europe. Similarly, Goodrich stopped producing tires for new cars and expanded its operations in polyvinyl chloride resin and specialty chemicals. In 1986, Uniroyal and Goodrich merged their tire units to become Uniroyal Goodrich Tire, selling only in North America. Late in 1989, its future in doubt, Uniroyal Goodrich sold out to Michelin. The previous year, in early 1988, Firestone sold out to the Japanese tiremaker Bridgestone. Goodyear is now the only one of the Big Four tiremakers that is still a U.S. company.
Goodyear, the world's number one tire producer before Michelin's acquisition of Uniroyal Goodrich, has maintained its leadership by investing more than $1 billion to build the most automated tire-making facilities in the world and is aggressively expanding its chain of wholly owned tire stores to maintain its position as the largest retailer of tires in the United States. It has also invested heavily in research and development to produce tires that are recognized as being at the cutting edge of world-class performance. Based on product innovation and high advertising expenditures, Goodyear dominates the high-performance segment of the tire market; it has captured nearly 90% of the market for high-performance tires sold as original equipment on American cars and is well represented on sporty imports. Geography has given Goodyear and other American tire manufacturers a giant assist in the U.S. market. Heavy and bulky, tires are expensive to ship overseas.

  • CreatedJune 27, 2014
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