Goodyear Tire and Rubber Company - Market Analysis

Market Analysis Paper

The Goodyear Tire and Rubber Company is in a monopolistic competition market class as it possesses “the four distinguishing characteristics of monopolistic competition [which] are: many sellers, differentiated products, multiple dimensions of competition, [and] easy entry of new firms in the long run” (Colander, 303).

Globally, there are approximately 150 tire manufacturers totaling $180 billion in sales. Of these, the top five manufacturers account for 50 percent of the market (Bridgestone [Japan], Michelin [France], Goodyear [United States], Mainland China [Germany], and Pirelli [Italy], respectively) both in volume and sales dollars; however, the top three in the United States, Bridgestone, Michelin, and Goodyear, typically “…don’t take into account rivals reactions” (Colander, 303). All three brands are sold through various tire retailers like Wal-Mart and NTB (National Tire and Battery) and car dealerships but a quick look at the Sunday insert or Google search reveals that a sale on one company’s tires does not prompt a reaction and sale by another brand. Appendix ‘B’ represents a typical retailer wherein there are two manufacturers (who combined account for four percent of U.S. sales) running the same advertisement and there are no others who are ‘chasing’ them. Unlike, the other two, Goodyear also has a separate distribution and retail network of corporate and independently owned tire centers further perpetuating its resistance to react to discounted prices by other manufacturers (Firestone, a division of Bridgestone, has franchised retail outlets, but not under the Bridgestone name). Coincidentally, most “sales” are not brand specific but store competitive (i.e. buy three tires and get one free, but the retailer often does not disclose or care which manufacturer the customer buys as their main source of profit is in the installation labor and sales of road hazard insurance).

Ultimately, all tires are essentially the same. They are round, black, made from either natural or synthetic rubber, manufactured in a tread mold with a supportive structure (i.e. steel belts), and require somewhat specialized labor for the injection process. Yet Goodyear spent $408 million on advertising in 2013 and its competitors spent a comparable amount, hence product differentiation as David Colander explains it “…it is based on advertising to convince people that one firms good is different from the goods of competitors. The good may or may not really be different” (Colander, 303).

Interestingly, however, is that each of these major manufacturers (and many of the smaller ones) does have many of the same sources of service and distribution. All are sold by the major retailers mentioned earlier and they can be bought online from discount operations. In this characteristic, there are not many dimensions of competition.

While there