FREE ESSAY ON GOODYEAR SWOT ANALYSIS

GOODYEAR SWOT ANALYSIS

STRENGTHS
Size
Product diversity
Total market coverage
An American company
International sales
Generally increasing sales revenue since 1991
Brand recognition
Brand loyalty
Reduction in debt since 1991
Introduction of new tire lines
The Blimp
P/E ratio
The world's No. 1 tire manufacturer
Patents: 2,903
Trademarks: 5
WEAKNESSES
Size
Declining stock price
Internet sales
Dealer contracts that my be inhibiting Internet sales
Layoffs
Sales declines in Europe, Asia, Latin America
OPPORTUNITIES
New international markets: China, India, Russia
New international markets: Internet sales
R&D expenditures\innovations
THREATS
Competition:
Internet sales
Wholesale club stores (tire sales)
Bridgestone
Cooper
Continental
Michelin
Pep Boys (auto service stores)
Midas (auto service stores)
Auto Zone (auto service stores)
Independents
OVERVIEW OF STRENGTHS
Size still matters and Goodyear has size. Its 1999 sales were $12,881,000,000
representing a one-year sales growth of 2%. Its net income was $241,000,000, a lot of
money but a decrease of 64.7% from one year earlier. Despite that drop in net income,
Goodyear paid a $.30 dividend. Its net income also beat Wall Street's expectations. It
has become the world leader in tire sales as a result of its alliance with Japan's
Sumitomo Rubber Industries. Goodyear ranks No. 130 in Fortune Magazine's 500 list of
large companies.
Its product diversity includes the manufacture and sale of tires, industrial and consumer
products from rubber including belts, hoses, and tank tracks, and a wide range of
synthetic rubber, resins, and organic chemicals. Goodyear supplies tires to European and
North American auto manufacturers and construction and agricultural equipment
manufacturers. Good year operates more than 900 retail tire outlets that also provide
auto repair services.
If you want to buy American, this is the company. Despite its world-wide presence,
Goodyear is an American company. Like many American manufacturers, though, it has
extended its reach to include international markets in order to stay ahead of its
competition. It has more than 90 facilities in 30 countries, and world-wide marketing
operations. 
Two attributes that any company desires are brand recognition and brand loyalty. Goodyear
enjoys both. Its blimps are one of the world's most recognized advertising symbols. For
1999, it ranked No. 1 in six of eight categories to lead its industry in Fortune's "Most
Admired List". Leadership categories included quality, innovativeness, employee talent,
social responsibility, financial soundness, and long-term investment. Of these, quality
is probably the most important in creating and keeping brand loyalty.
Its P/E ratio is 15.95, a very conservative number when compared to Internet stocks,
which frequently have P/E ratios of 50 or more. The industry (rubber/plastics) P/E ratio
is 13.65 while the broad market (8,000 stocks traded on the NYSE, AMEX, and NASDAQ, has a
P/E of 39.46. 
Another strength is its intangibles, which include a 100,000-person workforce, patents
and trademarks. Goodyear owns 2,903 patents and five trademarks (Goodyear, Hi-Miler,
Viper, Vintner, and Allegra).
OVERVIEW OF WEAKNESSES
As indicated previously, size matters. Size can be a weakness, though, as well as a
strength. In 1999, Goodyear's sales were down from 1998 in the Eastern Europe, Africa
Middle East market, Latin America market, Engineered Products market, and Chemical
Products market. The stock price dropped from a 52 week high of $66.75 to a February 15
close of $24.25. Its EPS (earnings per share) growth dropped 64.7% over the last 12
months. This is a company in trouble. The question is will its size inhibit its recover?
Large companies like Goodyear are often compared to aircraft carriers. They need a great
deal of time to turn around. 
The Internet can be a weakness to many companies, not only Goodyear. Is Goodyear
preparing to compete with the on-line sale of tires? Customers are no longer obligated to
drive to the nearest tire outlet. A customer may go "on-line" and order a tire at the
best competitive price, have it shipped to his home, and pay considerably less than he
would at his neighborhood tire store. While Goodyear may see the weakness (and
opportunity) here, it may be prohibited from using this tool because of its contracts
with local dealers. 
Because of a poor showing in 1999, Goodyear's financial ratios have become a weakness.
Following are some examples as culled from Hoover's On-line, The Business Network:
Goodyear Industry* Market**
Price Sales 0.29 0.59 2.03
Days Sales Outstanding 73.77 54.33 57.93
Inventory turnover 4.2 5.1 6.7
Days COGS in Inventory 85 71 54
Asset Turnover 1.1 1.2 0.4
Net Receivable Turnover 5.4 6.7 6.3
In order to attract the capital necessary to grow, Goodyear must reverse its poor
showing. In 1998, it announced a 3% reduction in its workforce (2,800 jobs).
*Industry: Rubber/Plastic
**Market: NYSE, AMEX, NASDAQ
OPPORTUNITIES
Four areas present themselves for opportunities: new territories, Internet sales,
innovations, and acquisitions.
New territories included China, India, and Russia. For the past several years, China has
been encouraging capitalism in a somewhat of a hurry up/go slow fashion. With the spread
of instant communication around the world, it has become increasingly difficult for
totalitarian leaders to keep their subjugated populations from learning about the freedom
and prosperity of the West. With the fall of communism in the former USSR and in Eastern
Europe, Chinese leaders have begun to recognize more and more that granting economic
freedom to more and more citizens may be the only way for the leaders to remain in power.
As a result, China has been encouraging Western investment, and Western capitalism has
responded in an effort to acquire a portion of a market that contains an estimated 1.4
billion people. 
India also presents a large market in that it, too, contains a large population estimated
at 1.2 billion. While Russia's population is considerably smaller, it nonetheless,
represents an open market with little in the way of competition. 
While these markets present great opportunities for growth, they are represent danger.
These countries do not have the reputation of Western democracies for enforcing private
property rights. In Russia and China, the concept of permitting the four tools of
production (land, labor, captial, and entrepreneurship) to be placed in private hands is
new. These have been traditionally "command" economies, not "demand" economies.
As discussed previously, Goodyear's lack of a presence on the Internet presents a
weakness. It also presents an opportunity. Consumers are becoming comfortable with
ordering an increasing number of items via the Internet. Goodyear is missing an
opportunity by remaining "off-line".
Goodyear continues to invest more than $300,000,000 per year in an effort to improve its
present product line and create new products. One of its more recent popular "inventions"
was the "Aqua Tread" tire, a tire that purportedly reduces the dangers of hydroplaning,
the propensity that (light weight) cars have to slide uncontrollably over standing water.

Finally, Goodyear has grasped opportunities in foreign markets by either forming
alliances with or acquiring its competition. Its most recent move in this area was the
formation of a broad alliance with Tokyo-based Sumitomo Rubber Industries. The alliance
created four geographical joint ventures (one in the U.S., one in Europe, and two in
Japan), one joint venture for purchasing and one for sharing research. 
THREATS
Every human endeavor faces two threats: internal and external. This paper reported
previously that Goodyear ranked No. 1 in six of eight categories in its industry as "Most
Admired" according to Fortune Magazine. It appears, then, that it is avoiding internal
threats. Based on its recent performance, though, an internal re-organization may be
coming.
Externally, the company faces enormous competition:
Internet sales
Wholesale club stores (BJ's, Wal-Mart, Sam's Club)
Bridgestone
Cooper
Continental
Michelin
Pep Boys (auto service stores)
Midas (auto service stores)
Auto Zone (auto service stores)
Independents
Goodyear must continue to be effective (doing the right things) and efficient (doing
things right) to maintain its leadership role and to survive in this extremely
competitive market. Based on its 1999 performance, it may have let its guard down, but
its long-term prospects continue to appear to be good.
Bibliography
Sources:
Hoover's On-line Business Network
Goodyear press releases
Goodyear Annual Report (1998)
Strategic Management, Third Edition, Alex Miller,
Irwin/McGraw Hill, Boston, MA, 1998