Last Updated 10 May 2020

India Tyres Industry

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There exists huge competition among the top few players who dominate the market and that results in low margins. These players are constantly focused on advertising, branding their products and strengthening their distribution network by increasing dealer network so as to increase their market share. Inputs in Tree: The industry is highly intensive with the Raw material Consumption. The Raw material costs accounts for 65-70% of the total production cost of tires. Natural rubber constitutes is the major raw material for the product and is used by the industry which accounts for around 43% of the total cost.

The other raw materials consumed by the tree industry are crude derivatives such as carbon black, rubber Heimlich, synthetic rubber and nylon tree cord fabric, Therefore, rising crude oil prices increase raw material costs and affect the profitability of the company. Based on the customer segments, the tree market has been broadly divided into 2 categories: Original Equipment Manufacturers (MOM) Replacement Market. 1) Original Equipment Manufacturers - This includes automobile manufacturers like - Hero Honda, Data Motors, Amaranth Suzuki etc.

The demand from the MOM market fluctuates directly in line with end-use demand for the automobile/construction equipment segment; hence prone high degree of cyclic variation. The total tree sales to Memos are on an average 40-45% of the total sales. 2) Replacement Market - These are the end customers who replace old tires of their vehicles. This demand depends on factors such as vehicle population on - road, road conditions, overloading norms, miles driven. This is less cyclical than MOM demand and is generally provides higher- margin business for manufacturers.

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The replacement market accounts for 45-50% of the total sales. Ratification Carters: Retaliation of Car tires has brought a significant change in the industry. In the Passenger Car market, Retaliation has reached 98. %. These tires have their cords running radically from bead at 90 degrees angle to the remover long the outer surface of the tree. Reinforcing mediums that are used in these tires are nylon, polyester, fiber glass and steel. These tires are generally 20. 0% more expensive than the Bias Tires. These tires have longer life and provide greater fuel efficient and better Road Grip.

Due to The poor road condition of Indian roads the penetration of radial tires in India (nearly. O%) as compared to global trend behoove. O%. The Radial tree cannot be retreated and the only option is replacement. This has changed the way the Replacement market works. This has also led to an increase in sale of the car tires in the replacement market. As services such as retreating are not possible we see a greater bullwhip effect in the supply chain. Competitor Analysis:- There are many players in this industry fighting for the same space.

Due too lack of high product differentiation this product operates similar to a commodity. Using the rule of top 3 we have chosen the below companies to analyses the completion in this market. PASSENGER CAR I COMPANY I MARKET SHARE I APOLLO | | MR. | | 119% I BRIDGETOWN We have used the Potter's five forces analysis in order to explain the market and threat and strengths for any industry in this particular field. Madras Rubber Factory (MR.): History: - MR. Ltd. 's one of Indian's largest manufacturer of automotive tubes; Tires.

It was incorporated as private limited company minion in order to take over the business of a partnership firm which was called c the "Madras Rubber Factory started by late Sir. K. M Mammon Maniple. Thecompany in April 1961. MR. was converted into public limited entered tree manufacturing in 1962 through a technical win R&D centre and currently functions independently. Strength &Weakness Analysis:- Strengths: 1. Good R&D imitative 2. Established brand name(key in the replacement market) 3. Extensive distribution network. Weakness: 1. High Capital Intensive 2. Cost pressure 3. Dealer Relations 4.

Pricing Pressure Market Strategy: * MR. has aggressively pursued a PULL Marketing Strategy to sell its tiers. In this strategy the manufacturer uses promotion,advertising and other forms of communication to induce the consumers and create a demand the product from the dealers. * MR. almost exclusively concentrates on Brand awareness exercises, such assessments and advertisements. * MR.,Compared to other tire manufacturer pays a little attention to incentives the dealers but still the dealer are motivated to stock MR. tiers simply because they have high brand retail recall and due to the customer demands.

Collaborations: MR. had collaborated with automobile MOM"s who source their tires from MR. India are:- * General Motors * Maidenhair and Maidenhair * Marti * Data Motors Value Proposition:- MR. prides itself in making tires that go into some of the most trying conditions on Indian roads. Consequently, MR. offers a compelling value proposition to heavy icicle owners as well as passenger car and two wheeler owners. Quality Tires that endure in the worst conditions. It drives home this macho message through its mascot, the MR. muscleman. MR. - Price Leader:- MR. have long been leaders in the passenger car tree segment.

By the virtue of their market share, they have traditionally been price makers. MR. using the Mark UP Pricing Method. The tree industry being a very raw material intensive industry, the input costs mainly decides the price of tires. Infect, 90% of a tires cost comprises of its raw material costs. Mark up pricing is the common pricing method followed across he tree industry. This involves adding a standard mark-up to the there's production cost. Apollo Tires:- Apollo Tires Ltd. Is currently the world's 15th biggest tree manufacturer and has annual consolidated revenues of RSI 121. 5 billion I. . US$ 2. 5 billion in year 2011. District of state Kraal. In 2006 the company carried out one of the biggest acquisition by acquiring Dunlop Tires International of South Africa. At present the company has four manufacturing units in India, two in Zanzibar, two in South Africa and 1 in Netherlands. It has a huge network of dealers and extensive distribution outwork of over 4,000 dealerships in India. Out of these 4000 dealers, over 2,500 are exclusive outlets. When looking into oversees business, in South Africa, it has over 900 dealerships, of which 190 dealers are accredited by Dunlop.

Its major revenue stream is India from where it gets 59% of its revenues, and then Europe which accounts for 28% of the revenue and 13% of its revenue comes from Africa. The tagging of Apollo tires is "Go the Distance" which he has followed for decades and their USPS is stronghold over the Indian tree market. Timeline: * 1976: Apollo Tires was registered by Uranus Sings 1977: Established its 1st plant at Vertebra, Kraal, India * 1991: Established the 2nd plant at Linda district of Gujarat. * 1994: Entered into 2 wheeler tree market * 1995: Established its 3rd plant at Jaywalkers district of Kernel. 2006: Expansion of operation in oversees market by acquiring Dunlop Africa operations. * 2008: Established a new plant at metropolitan city Achaean of state Tamil Undue, India * 2009: Acquired Predestinated, a Netherlands-based winter-tree maker for an undisclosed sum from Russian's bankrupt largest tree manufacturer Matte- Predestine NV. * 2010: Apollo tires launched Graduates tires in India. 2011: Signed a Mom with Tamil Undue government relating to investment of RSI 2,100 core as part of Apollo Greenfield project. * 2012: News of Apollo Tires likely to acquire stake in Cooper Tire & Rubber Company. In passenger car segment the car Apollo tires share the no. L position with MR. tires with market share of 24% with Bridgetown at the third spot with market share of 19%. Products: Car Radials Tube Type (Amazed XSL Quantum) ex. Radials Hawk I Amazed XSL Storm I Alloy Wheels I Haste I Inspire I Torque I Slay I Nirvana I Multipurpose Frost I Sphere I I Cinch I Quest Tubeless Radials I Accelerate I Hawk I Amazed XSL I I Tubeless Radials Car I Jeep I Armor I Gripper I Panther I Mama Trooper SWAT ANALYSIS: Strengths:- 1 . Wide product variety 2. Excellent Geographical coverage across Asian, European and African markets. 3.

Good financial position 4. Good Brand awareness about the product 5. Over 4000 dealerships in India, and over 900 in South Africa 6. Has manufacturing plants at India, AS, Zanzibar and Netherlands Weakness:- 1. Low presence in latest car models. 2. Low presence in two/three wheeler segment 3. Brand yet to establish it like the market leaders Opportunity:- 1. Emerging markets and improved lifestyle . More tie-ups with Automobile companies as it's mainly into BIB market. 3. Improved Infrastructure has fuelled more and more transportation 4. Emergence of India as a hub for small car production Threat:- 1. Price wars 2.

Stiff competition from national and international brands. 3. Cheaper technologies. 4. Volatility in prices and availability of raw material as Indian's rubber production is less than its demand. 5. Government Policies w. r. T export duties, import duties, tax levied on automobile industries and economic condition of nation as it determines the sale of automobiles. Competition 1 . Bridgetown 2. SEAT 3. MR. 4. Continental 5. Goodyear 6. Yashmak 7. Peril BRIDGETOWN: Parent Company-Bridgetown Category-Tree Industry Tagging/ Slogan-Passion for excellence USPS- A renowned name for innovation and quality of product.

Bridgetown Corporation: Bridgetown the world's leading tree company was born in 1931 with an aim to serve people by providing quality products. Bridgetown is a Japanese $ 80 billion company with a market share of 18. 6 % worldwide ; a profit of $ 797. 5 million. It has strength of 1. 1 lakes of employees serving at about 150 countries. Bridgetown is led y Mr. Chigoes and has 46 tree ; 52 non-tree plants for diversified products in 24 nations marketing their product in more than 150 nations.

Bridgetown is busy at developing ; promoting comprehensive product lines - from value oriented, medium priced tires to high performance tires for the world's highest performance cars -Mediumistic, Honda, Suzuki, Toyota, Audit, Volkswagen, Handy and other famous brands of cars and other vehicles. Now, as the world's no. 1 tree company, Bridgetown Corporation has made its presence felt on a global level. It has subsidiaries spread across the world - from America to Australia and from Africa to Europe. Adding to this, Bridgetown also provides value added services to its customers.

Collaborators: Toyota Handy Soda Mercedes BMW General Motors Ford Core Competency: International Quality ; pedigree: Quality counts as the main reason why Memos prefer Bridgetown over other competitor tree manufactures. Bridgetown has always banked on its quality USPS to capture market share. The Japanese attention to quality seems to have percolated down to Bridgetown India, from its parent company. World over, the Bridgetown brand has been synonymous with its cutting-edge technology and quality. The Fl

Association: The brand awareness that Bridgetown Corporation's collaboration with Fl has earned globally and its recognition as a leader in the tree industry has helped its Indian arm, IBIS, position itself as a premium tree manufacturer in the Indian market. Channel reach: With about 3000 dealers and distributors, Bridgetown India has one of the largest reach across the country as compared to other tree manufacturers. SOOT ANALYSIS:- 1 . Bridgetown has its roots from The Firestone Tire and Rubber Company of US and Bridgetown Tire Company Limited of US. 2.

They have 52 enterprises of over 50,000 employees that testify to the fact that it's a big brand name. 3. Company has diversified into other businesses including production of air springs, industrial fibers, approach towards building more sustainable and CEO-friendly products. 5. They have a strong brand name through Motor sports and car-racing. Weakness: 1 . Still to have considerable market share in developing countries 2. Products are perceived to be at a high-price segment- need to focus on developing economy products. Opportunity: 1 . Excellent opportunity in emerging economies of the world. 2.

Edge over better immunization regarding its environmental-friendly initiatives Threats: 1 . There is Stiff Competition from national and international brands. 2. Japanese ; US economies are not growing much . They have reached a maturity phase-as it has its major operations there. 3. Government Policies with respect to export/ import duties, tax levied on automobile industries and economic condition of nation since it determines the sale of automobiles. 4. Introduction of other transport facilities like metros, mono/local trains which keep pollution hazards caused by combustion of automobile fuels. 5.

Volatility of raw material price. . Fluctuation of exchange rates. Generic Strategies Analysis: Cost Leadership Goodyear needs to focus on maintaining a cost leadership strategy in order to attain their goal of "being the lowest cost producer of top three companies". Goodyear maintains cost leadership because of its production volume and economies of scale. Cost Focus and Differentiation Focus Brimstone's main competitors have, and will continue to develop sub-brands and acquire strategic business units in order to execute focus strategies on niche segments of the market, previously unreachable by them. Insofar Growth Matrix :-

Bridgetown I Existing Products I New Products I Existing Market I Market Penetration-Increase the promotional efforts of current tree lines in order to compete with Michelin 's strong brand image. Also use parent company (Bridgetown) to bolster the promotional efforts of the smaller subsidiaries as well. I Product Developmentally and push new retreated tires on the European market that is promoted to overcome the negative image of low quality I New Market I Market Development Indian and Chinese middle class and tree market is growing rapidly and there is an opportunity to capture that growth with premium tires.

I DiversificationDevelop a Bridgetown formula one clothing and accessories line to be sold in China. Value Proposition: Brimstone's main value proposition is international quality and value for money. Every Bridgetown customer is assured of a tire that is of international standards and money. Porter's Five Forces (Bridgetown): Marketing Strategies: Segmentation, Targeting ; Positioning (STEP): Segmentation: There are basic 2 segments in the passenger car segments 1.

Automobile and industry equipment manufacturers / original equipment manufacturer which constitute of 2. Replacement market which constitute of 30% f the total market of the passenger car tree market. Targeting:- Passenger cars, LLC, HCI, Subs, The target group of Indian car tree industry is both MOM and replacement groups thus all the player offer their product line in both the segment by targeting passenger cars, LLC, HCI, Subs Positioning:- When it comes to positioning market players position themselves very differently in the above 2 segments.

For the MOM segments the positioning is not of much use since the basic game is on margins and on the past relationship which matters thus we can say that the market players positions themselves on past relationship with he MOM in this segments The real positioning takes place in the replacement segments which constitute 30% of the total market share. Here the position taken by different players is based on luxury, style, utility and safety.

Product, Price, Place ; Promotion: (4 AS): Product: The tires companies all offer very similar products with very minor changes in them where the end consumer is not able to differentiate tem to a large extent. They are generally measured in terms of durability, endurance and Safety. Price: There are many players in this market with a very low product differentiation; once price plays a vital role in this category. The prices of these products are very similar to each other and often the channel members play on low margins and large volumes to be successful in the market.

Place: The distribution channel includes: * Factory * Divisional ; Regional distribution center * Carrying and Forward Agents * Dealers Though the channel members require huge working capital in this industry. The return provided by the channel is high rewarding and hence making it a lucrative industry with many plays wanting to enter the channel. Sell their products. The expenditure on promotion is the responsibility of the company as the dealers and distributors work on a very low margin and cannot afford to promote the product.

Interview with Professor Parka's Mature Dry. Mature is an Engineering Graduate both in Electrical and Mechanical Engineering and a Post Graduate in Advanced Manufacturing Technology from University of Melbourne, Australia. Dry. Mature has three decades of work experience of which approximately two decades was in the Fortune 100 companies at senior echelons in USA, Australia and India. He was working with Ford Motors India as the Supply Chains Head. On requesting him to give his insights about the tree industry he immediately agreed to help us. Dry.

Mature who also happens to be a fulfillment professor at Great Lakes Institute Of Management gave us a very informative interview and we learnt a lot through our brief talk with him. The following are some of the key learning from the interview. Dry. Mature initially spoke about the Indian Tree industry that it faces huge competition, cost and price pressure. The zooming auto industry has driven the growth and number of vehicles is swelling. The truck and bus market is the largest in terms of value. The tree is an assembly of many components that are built up on drum and then cured in a press under heat and pressure.

While the tree industry is largely dominated by the organized sector, the unrecognized sector is predominant with respect to bicycle tires. The industry is a major consumer of the domestic rubber market. Natural rubber constitutes 80% while synthetic rubber constitutes only 20% of the material content in Indian tires. Interestingly, world-wide, the proportion of natural to synthetic rubber in tires is 30:70 The sector is raw-material intensive, with raw material accounting for 70% of he total costs of production.

The major factors affecting the demand for tires include the level of industrial activity, availability and cost of credit, transportation volumes and network of roads, execution of vehicle loading rules, retaliation, retreating and exports. The tree manufacturing process involves a long term planning. Most of the manufacturers give yearly schedule to the suppliers and the manufacturers manufacture according to that schedule. They do not cater only to a particular company say Ford.

A tree manufacturer like Goodyear will supply tires to Toyota, Chrysler, Ford and many other companies. They schedule at their level-a schedule of 3 days or 1 month or 1 week inventory each company is taking and accordingly schedule it. This is as far as the tree manufacturer's scheduling is concerned. Once it is ready they directly supply to the car manufacturers. The tree manufacturing company does not only manufacture car tires, they also manufacture for trucks and other commercial vehicles.

Volume is low as compared to car but the value is high. Every truck requires 7 wheel tires. So there are vehicles which require more tires than cars, hence value wise it is much higher than the cars. Companies eke Goodyear India also manufacture tires for passenger/military airplane are directly supplied to the plane manufacturers. So hence there is no supply chain or distribution channel as such. The distributors and dealers come into place at the replacement market (over 50% markets) All the sales and distribution also happens here.

Otherwise it is directly to the plane or car manufacturers. Marketing a tree is a very crucial aspect to look at. What do you look at, as a car manufacturer while buying a tree? How to valuate which company to go for? It depends on the specification and the design of the car, terrain f the road, mileage and speed of the car and hence the desired tree appropriate for it. Let also depends on what is the life of tree that you expect. The composition of the tree I. E the rubber quality etc also plays a major role here in choosing a tree for a car company.

The grip of the tree is very important while selecting a tree. As the tree film which does not have any contact with the road I. E. No friction; plays a critical role when a car decides to stop and how quickly the tree comes to halt is observed. Since tree is a commodity and cannot be much differentiated, the car companies stick to heir loyal tree manufacturers as they have a long term relationship with them. And because of this relationship, the tree manufacturing company sells tires at a very low profit margin.

Although KIT exists, you find that all car manufacturers will have a maximum of 2 tree suppliers unless it is a highly dedicated monopoly product. This is because in a situation where one of the suppliers is going under strike and the other supplier senses the car manufacturer's dyer need for supply they will refuse to negotiate. Most of these tree suppliers know all information of what is happening internally in their competitor company. In India as well as in America you will find only few car manufacturers having their own car tires.

The tires are also tested for their quality as we have to give some sort of an assurance to the car manufacturers about the good life of the tree and a warrantee that the tree won't get worn off before the promised period. The cost of tree faults such as puncture or tree burn is not borne by the car company. Just like for buying laptop, you don't guarantee of the battery life. The real sales and distribution happens in the secondary market that is placement market. What is the channel structure? There will be 2 distributors-primary and secondary distributor and a 3rd main dealer.

The destination of this chain is towards the rural areas. Why was nylon tires introduced in the market? It is partly because of technology change. They are radial tires with more grip as a subsequent to tubeless tires. Another significant aspect is that rubber tires are retread but nylon tires are not retread able. You can add more material and retread the design part. Therefore you not only have more choice but you can also repair the tires. Retreating has now completely stopped and more focused in the replacement market.

That's why you find more rubber tires though manufacturing cost is more here. Primary and secondary distributors are usually company owned. The number of distributors depends on the financial position and capacity of the company. The company distributors distribute through only 1 company tires but the other big distributors might cater to several brands. Secondary distributors usually in the remote areas distribute to many manufacturers and dealers definitely supply to many companies as they are not obliged to any particular company unlike

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