Tires are such an integral part of daily life that most individuals never give serious thought to them until they fail. Yet, the worldwide tire industry is a multi-billion dollar market that is characterized by a few sellers, intense competition, and international considerations including market barriers and currency valuations. Over the past 20 years, the industry has consolidated to the point that it might well be considered an oligopoly, yet the individual companies within the market do not behave in typical oligopolistic fashion. This research considers the industry as a whole, and the strategies of three companies in particular--Goodyear Tire & Rubber, Cooper Tire & Rubber and Michelin--and evaluates the strategies that these companies have elected to follow.
There are two components to the tire market: the original equipment market and the replacement market (Von Liew, 2002). The original equipment market includes those tires that are included on vehicles when dealers sell them; these tires are sold directly to the automotive manufacturers (such as General Motors and Ford), and included on the vehicle as part of the production process. Unlike many other vehicle components, however, tires are shipped with the name of their original manufacturer clearly visible, so being a part of the original equipment process can help build brand awareness and possibly brand loyalty. However, Ford and Firestone recently encountered problems with this arrangement when Ford blamed Firestone tires for accidents occurring with Ford sport utility vehicles, and the resulting poor publicity was considered to be harmful to the Firestone brand ().
The original equipment market is characterized by small profit margins as the major car manufacturers seek to cut costs in order to maintain their own profit margins. Cooper Tire, alone among the three companies considered here, does not participate in this market, but instead sells only to the rep...