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Company Bankruptcy Report The purpose of this paper is to present a detailed analysis of the company. It is important to consider the changes that have occurred over the years so the paper also discusses the basic changes that have occurred throughout the previous years. Of course, it is equally pertinent to consider the situation in the market place because the market determines our progress. Therefore, the paper also deals with the significance of the market in relation to the company. The falling status of the company is a well known fact by now. To some extent the company’s inefficiency is itself responsible for this current state of the company. However, this paper also reiterates how the exogenous factors, not directly under the control of the company; have led the company to its present state. The latter part of the essay deals with a personal assessment of how critical the situation is for the company. Also, the measures that are deemed necessary at this point in time are highlighted so that the important propositions could be understood. Overall, the paper will help get an idea of the current situation and would inform about the steps that need to be taken to save the company from bankruptcy. Before moving onto the discussion of why the current situation has arisen, a brief overview of the history of the company in the last few years is necessary. A Brief Overview The company, Goodyear Tyres and Rubbers started operating in the 1898 and since then has been able to achieve a lot many objectives. It is important that at that time there were only 13 members who initiated this company and led it to the place where the company stands today. Although it took the company fifty three years to reach the one billion dollar milestone, yet the progress of the company throughout has been remarkable. (“Historical Overview”, 2010) Over the last few years, the company progressed increasingly and the result was that the company on average earned nearly $20 million every year. The number of investors that own the company also obviously has increased because of the incentive of the very high sales. It is important to note that due to the constant efforts of the 69,000 workers in the Goodyear the company has been so successful that it has been named the number one tyre manufacturers of Latin America and North America and the second best tyre manufacturing firm of Europe. Through the years, the company has expanded greatly and the expansion has not just been limited to the US. It has moved out worldwide and is currently operating in 23 different countries using 57 plants. (“At a glance”, 2010) The above mentioned figures were some that were reported in the last few years. At present, however, the course of proceedings has altered. The net sales reported in 2009 were around $16.3 million. Although this is a lot, it still is $4 billion less than the average that existed for the last few years. The bankruptcy that has risen due to this fact is a very big concern for us. Before the issue of bankruptcy and its implications on the company are discussed in much detail, it is important to elaborate on the reasons that have led the company to bankruptcy so that in the future these reasons can be avoided. The reasons of bankruptcy If something is not planned well it is likely to end in disaster. (Romando, 2006) Further, if something has been planned but has not been prepared for, also leads to a bad result. In a similar way, something that has been planned and has been prepared for cannot be carried out in the best possible manner, if the persons concerned are not concerned about their respective responsibilities. The presence of the three above mentioned, in the context of the company, has been responsible for the bankruptcy issues that the company is facing presently. The extent to which each of the above mentioned causes applies to the business organisation is different for each company. However these three are the basic determinants of the failures of the companies. It seems that the case of Goodyear Tyre and Rubbers is no different. In the case of this company though, the extent to which all three apply is different. The market position of Goodyear in the tyre industry of the US (and worldwide) is a popular reality. The Goodyear tyre company, as mentioned above, is one of the most leading tyre industries in the US. Worldwide however, it is the third best one after Bridgestone and Michelin. (Bloomberg, 2009) Thus overall, the company has a large share of the tyre industry in the US and the industry globally. The operation of the company globally is a very important thing as it leads to a greater market, consumer choices etc. However, what is important is to realise that the operation internationally has unwanted circumstances too. It seems that Goodyear is one firm that has been affected considerably due to the fact that it sells products to not just the United States but also to countries worldwide. Recently, there has been observed a very hard tussle between the United States and the China government. What ever the political ideologies or interests of the countries may be, they have a direct impact on the economies of both the countries. The US- China relations had never been very friendly. However over the last year the situation has worsened to a greater extent. (Landlois and Andrejzak, 2009) The worsening of the relations of the two countries means that the trade relations are altered between the two. The direct consequence has been on the Goodyear Tyres and Rubbers. Because the US does not want the Chinese products to be more in demand in its markets, it has imposed very high tariffs on the products of China. Tariffs are additional amounts that have to be paid in order to sell a product into another country. This reduces the amount of the volumes that are imported because the higher prices of the foreign goods make them less competitive and so less in demand in the domestic markets. So far, the US has been very successful in the restriction of imports. This is advantageous for companies such as ours because lesser number of imports of foreign goods mean that we would not have to face a lot of competition from abroad. Also, the higher prices of such products make it easier for the people to substitute the products for ours. Though, this is not where the story ends. As retaliation, the Chinese government also imposed very high tariffs on the US made goods. The consequence generally was that the US goods became very expensive and hence less competitive in the local Chinese markets. The demand fell considerably and so the companies lost all their monetary deposits. The same has been the case for the Goodyear Tyre and Rubbers Co. The tariff that was imposed on the products of the company led to an overall decrease of approximately 57%. Since China is a very big country in terms of its economy, a 57% decrease in the demand means a lot. The decrease in the demand led to many consequences. Firstly, the fall in the demand meant that the sales were fewer in number than before. In 2008, the Chinese sent approximately 47 million tires to the US which contributed to around 20 % of the replacement-tire market. (Landlois and Andrejzak, 2009) However over the last year this percentage has fallen to roughly 8 %. The abrupt change in the demand has affected many tiring companies. However Goodyear, since it is the most dominant tire company in the US and has the greatest marker share, has suffered the most. The decrease in the demand for the Goodyear tires has led the sales to fall by around 20% which is a stark figure. This means that 20% of the revenues that could be earned earlier due to the sales of the products have been lost because of the introduction of the tariffs. The reduction of the sales means that the investment decisions of the people have also been affected. Over the last year approximately 34% of the investors have stepped out of the company on the basis of the fact that the company would most likely to incur costs in the future. For the rest of the investors, there have not been proper incentives. Although the profit improvement program has been started to look into the progress of the company in the future in terms of higher profits, it has not yet achieved its goals. The reason here is the fact that the company’s leadership has been in such a state of chaos because of the sudden change in the demand patterns that it has been hard to formulate certain policies that could help motivate the investors. Attempts have been made to provide better dividends but it seems that the way the policy is carried out is not properly planned for. The new policy seeks to motivate the investors into investing by providing better dividends however it fails to recognize that currently the state of the company is such that it needs to compel the investors by promising extremely high dividends. Of course this action might lead to a problem in the future because of the higher dividends that have to be paid from the profits of the company but at this point this action is pertinent for the stability of the company. (Investors in People, 2006) There are some times when everything has been planned and has been prepared for but the leadership fails to achieve the implementation of certain policies. This has also been the case for Goodyear. Recently, the administration faced a problem because of a new design that was introduced in the company. The Goodyear tyres and rubbers launched tyres that were made of a different synthetic rubber. Everything had been planned because it was believed that the new tyres would be welcomed as they would be very durable and would increase friction so that accidents are fewer in number. However the way this new scheme of tyres was introduced to the market was disappointing. For a new product to become successful in the market, it has to be advertised. Generally companies spend a lot on the advertising of products, especially new ones. However the response of the leadership has not been very cordial in regard to the advertising of the new product. No attempt as such has been made to attract the customers into buying the product. The leadership has been the least interested in the promotion of the product. At a stage, where the company is already suffering from bankruptcy issues, the promotion of the new product could have increased the demand of the product and would have made the company competitive in the world market. It would also have compensated for the revenue that had been lost to the tariffs imposed by China. These were the objectives that could have been achieved but were not, all due to the irresponsibility of the marketing department of the company. Certain Remedies As mentioned before, it is important that in order to deal with the problem of bankruptcy the company should attract investment. The current state of the company is not very motivating for investors. However they can be motivated to spend more in many ways. In order to survive, the company needs to keep the major share holders satisfied so that they do not back out in this situation. (Shane, 2008) This can be done if they are provided better percentages in the profits of the company. At this stage, it is important that all of the investors are given are given an incentive. However the increase in the percentages of the profits that are given to the investors may help improve the situation in the short term only. In the long run the company may suffer again because of the bankruptcy issues that could arise due to the increases in the percentages as a lot of the profits would be given as compensation for the present bankruptcy issue. In order to avoid this and to deal with the problem that is prevalent presently, the company should motivate large shareholders by providing greater investment opportunities. (OECD, 2002) Secondly, the company should look forward to trading in other countries where there are no barriers to the sale of its products. China is a huge market but at present nothing can be said about the future of working in China. There is a great risk to the company if it keeps on relying on its business in China without any surety that the situation would alter to the positive side. As a consequence, there is a need to explore better markets that have lesser tariffs. The products can be made more competitive in such markets by spending on the quality and reducing the prices. Thus, the demand can be increased. There is a great potential for the company to operate in Asian countries where there is a cheap source of labour, less competition and ample opportunities. Further, the company should try to improve its marketing strategy. As has been in the past, the marketing strategy of the company has been very weak. The result is that the aims have not been fulfilled. Goodyear has a huge market and if enough is not spent on marketing it would lose the market it dominates. Competitors like Michelin and Bridgestone spend huge amounts on advertising of their products and Goodyear should do the same. Conclusion To conclude, the company Goodyear has been a victim to bankruptcy mainly because of the present state of the economy of the US. The China-US relations and the consequent policies of the governments’ of the two states have affected the company a lot. The imposition of the tariffs has led to an overall decrease in the demand of the products of the company. Additionally, the policies that are responsible for attracting the investors are not adequate. Also, the marketing strategy of the company is weak compared to its competitors. In order to deal with the bankruptcy issue, the company should act in a responsible manner. Firstly it should motivate investors, especially large stakeholders, by providing them with additional benefits. Secondly, the company should concentrate more on the exploration of markets that do not include tariffs so as to compensate the loss that has been created due to the tariff imposition in China. Thirdly, the company should spend more on its advertising as this would lead it to excel in terms of improving demand and being more competitive. The last and most important point that the company needs to deal with is the creation of a proper work culture. Although the bankruptcy has not been directly related with the work culture in the present state, a proper work culture ensures that each agent of the organisation takes full responsibility of his/her actions. As a result, the work culture ensures that every one is happy with the work they do and motivates the workers to work hard. With 69,000 employees, we need to have a proper culture that could help the employees to be more comfortable in uniting under one slogan. This would ultimately leas to a progress of the company in the long term and would help deal with the pressing issue of bankruptcy that presently dominates the company. References Bloomberg. (2009). Goodyear Tyre and Rubber Co. UK: Bloomberg. Goodyear Tyre and Rubbers. (2010). At a glance. Goodyear Corporate. Retrieved from http://www.goodyear.com/corporate/about/glance.html Goodyear Tyre and Rubbers. (2010). Historical Overview. Goodyear Corporate. Retrieved from http://www.goodyear.com/corporate/history/ Landlois, S. and Andrejzak, M. (2009). US: The Wall Street Journal, 14 September. Investors in People. (2006). Business Improvement with Investors in People: Leadership and Management Handbook. UK: Stationery Office. OECD. (2002). International Investment Perspectives. US: OECD Romando, R. (2006). Bankrupt Companies. Ezine Articles. Retrieved from http://ezinearticles.com/?Bankrupt-Companies&id=254013 Shane, S. (2008). Fools Gold?: The Truth Behind Angel Investing in America (Financial Management Association Survey and Synthesis Series). USA: Oxford UP. Read More