FREE ESSAY ON GOODYEAR EXECUTIVE SUMMARY

GOODYEAR EXECUTIVE SUMMARY

Group Project
"Executive Summary"
The following is an executive summary of The Goodyear Tire Corporation. This case
analysis will include a company background followed by a five forces model of the
industry competition and SWOT analysis. The summary will also include a financial
analysis of the corporation along with Goodyears corporate level strategies and
objectives. Finally, alternatives will be addressed, recommendations will be made, and
implementation and control will be discussed.
COMPANY BACKGROUND
By 1986, Goodyear had a debt of $3.7 billion dollars. From 1982-1986 Goodyear's principal
business was development, distribution, and sales of times for most applications. Gooyear
was a multi-product, diversified conglomerate. Goodyear's approach to becoming a global
company was having only one single global strategy, instead of tailoring products and
distribution to each national market.
THE FIVE FORCES MODEL OF INDUSTRY COMPETITION
Potential Entrants
Barriers to entry: 
The market is at a mature stage, but the entry level is fairly low.
Degree of Rivalry
? The degree of rivalry is high. Tires are sold almost everywhere.
? The companies are interdependent, the competitive actions of one company directly
affect the profitability of the others in the industry.
Bargaining Power of Suppliers
? The bargaining power of the suppliers is high. Tires are a necessity. 
Bargaining Power of Buyers
? The bargaining power of the buyers is relatively low. With the nature of the
competition in the industry, the top firms are doing everything possible to get
advertising space from retailers.
Substitutes
? The threat of substitutes is high. There are many tire companies to choose from. You
can purchase tires from many different stores from Sears to Wal-mart.
GOODYEAR TIRE CORPORATION
Goodyear's Internal Strengths
? Goodyear's management 
-When Gualt became CEO he implemented a flatter structure with fewer layers and changing
the culture involving everyone in the organization and returning to the basic concepts of
reducing costs, identifying corporate assets to sell in order to reduce the 3.7 billion
dollar debt and going to customer-oriented tire manufacturing operation.
-Gualt being very "involved" came in and turned the company around in about four years
after coming to Goodyear in 1991.
-Gault divested assets not related to the tire business to reduce costs also removing
light bulbs from his office and selling the corporate aircraft, Goodyear's New York
apartment and laying off thousands of "associates" shows his commitment to reducing the
cost and debt, which is another strength we found at Goodyear. 
? Brand name loyalty
? Strong customer focus approach
? Innovation
? Goodyear's TQC program
-Gualt would not allow shoddy merchandise and expects the best quality in the industry.
The global company is committed to quality in every aspect of the operation and
satisfying their customers. 
-When Gault first took over the company he realized the need for major change within the
company that involved everyone who worked for Goodyear. He stated, "There was no quick
fix or instant formula for success". He knew that it was a matter of returning to the
basic concepts that many technology-driven companies often forget. To start, Gault wanted
to 
1. Review all of the companies operations.
2. Reduce costs
3. Identify corporate assets to sell in order to reduce debt.
4. Eventually create a world-class, market driven, customer oriented tire manufacturing
operation.
These are a number of strengths we found that helped Goodyear to become "No. 1 in
Tires".
Goodyear's Internal Weaknesses:
? High operating costs
-This included costs from light bulbs to employees, which resulted in 19,000 employee
layoffs in 1991 and down to 89,000 in 1994.
? Having operations not related to the tire business.
? High debt.
-Gault came in a tried to get rid of the debt which was accruing a million dollars
interest daily
The External Environment:
Opportunities
? Goodyear's opportunities are to go overseas where it will be less to produce and
manufacture goods.
? Create more joint ventures
-Goodyear noticed that in order to capture a large market share they must have
distribution centers. This resulted in Goodyear selling tires through the Canadian Tire
and Discount Tire.
-Goodyear realized consumers were buying tires at multi-brand discount outlets, as well
as warehouses, which resulted in Goodyear opening a chain of "Just Tires" that sell only
tires, mounting, balancing, and alignment, with no auto repair. 
Threats
? Customers want to product available in heavily shopped stores like Kmart, Wal-mart, and
Sears.
? Other chains which sell in larger quantity and offer at lower prices.
FINANCIAL ANALYSIS
Financial Analysis
(dollars in millions)
Profit Ratios
Gross Profit Margin = (Sales - COGS)/Sales = (12,288.20 - 9,271.40)/12,288.20 = 24.6%
Net Profit Margin = Net Income/Sales Revenue = 567.00/12,288.20 = 4.6%
Liquidity Ratios
Current Ratio = Current Assets/Current Liabilities = 3,622.70/2,572.00 = 1.41
Quick Ratio = (Current Assets - Inventory)/Current Liabilities = (3,622.7 -
1,425.10)/2,572.00 = 0.85
Activity Ratios
Inventory Turnover = COGS/Inventory = 9,271.40/1,425.10 = 6.51
Leverage Ratios
Debt-to-Assets Ratio = Total Debt/Total Assets = 6,320.10/9,123.30 = 0.69
Debt-to-Equity Ratio = Total Debt/Total Equity = 6,320.10/2,803.20 = 2.25
This financial analysis shows that Goodyear is in good financial standing. The company is
making enough sales revenue to cover general and administrative expenses and other
operating costs, as well as make a profit in the end. This is demonstrated by the profit
ratios above. Goodyear is also well able to meet its short-term obligations. As the
liquidity ratios show, the company could quickly convert enough assets into cash to cover
the claims of short-term creditors. While a portion of those assets is in inventories,
the majority of those claims could be paid off without relying on the sale of
inventories. The company turns over its inventory 6.51 times a year, so inventory is
sitting for almost two months before it is sold. The inventory turnover may need to be
increased so that they are not carrying that amount of excess stock in inventory for so
long. The leverage ratios show that Goodyear is highly leveraged by using more debt than
equity. This shows a solid capital structure for the company.
GOODYEARS' CORPORATE LEVEL STRATEGY AND OBJECTIVES
ALTERNATIVES
? Status Quo
The highly competitive tire industry consists of well known established brands such as
Michelin, Firestone, BF Goodrich, and Goodyear, all competing in a mature commodity
industry. Which going global and adding value, quality, and convenience is crucial to be
successful.
? Diversification Into Related Products
Goodyear needs to continue to keep their costs down and by doing this they could easy
have continued success in the the global tire industry. 
? Global Expansion
Currently, Goodyear has a global industry which reaches many countries. This global
expansion was a smart plan for Goodyear because it helped to control their costs and
reduce their debt to help them start planning on a profit.
RECOMMENDATIONS
Goodyear is a company that has been through some really rough times. The industry that
Goodyear is in is a competitive one in that they have to keep pumping money into R&D to
stay on the cutting edge and keep providing a competitive product to the market. Gibara
had been vice president of strategic planning and business development as well as CFO.
The company is on the right track now and needs to keep the same focus to stay
successful. However, Goodyera will have to invest more in the global market in order to
maintain its profit growth and to maintain its competitive edge. Furthermore, Goodyear
needs to continue to provide excellent customer service by providing what the customers
want. It is good to have a great leader and we believe that Gibara has the background to
lead the company and continue to stay successful.
IMPLEMENTATION AND CONTROL
? Continue to expand globally
? Continue to advertise, market, and expand.
? Invest in technology
Controls
? Monitor costs
? Redirect Profits into expansions
? Continue to keep up with technological changes.
CONCLUSIONS
By 1995, Goodyear was a leader and a very profitable business. They had slashed costs and
had improved operating performance, boosted overall quality production, and reduced the
debt. One way that Gualt achieved this status was by being very thrifty in all the areas
of the company. Another way that Gualt turned the company around is by implementing an
aggressive marketing program that focused on what the customer wanted: convenience, quick
service, low prices, and a good selection to choose from.