APOLLO TYRE CASE STUDY

APOLLO TYRES : Learning from Environmental Scanning

Ankur patel(MBA-IB)Amity International Business School

Purpose of the Case Study

How to track and identify opportunities and threats in the macro-environment.

How to assess the importance of demographic, economic, political and technological factors.

How to sustain, survive and grow in the changing business milieu.

Introduction

One of the leading tyre companies in India.

Turnover of Rs. 2600 crore.

2nd largest in the country.

17th largest in the world.

Major Competitors – MRF, Ceat, JK Industries.

Karan Sinha – Strategy Head

The cup of coffee…….

Worried

There is change everywhere..

•Volatile business envt.

• Tremendous economic growth

• Political scenario

• Societal changes

• Technology boom…

we need to do something otherwise we will get devoured by these changes in envt.

Satish Mehra – Chief operating officer

The whole data crunching is going to take a lot of time, cant go for it bcoz of busy schedule.

Hire BOSTON CONSULTANCY GROUP

to scan the macro envt. and present their findings with the impact on their company.

Methodology

To identify factors - drive economic growth in the country.

Selection of final factors - by statistical correlations

Development of ECONOMETRICS MODEL

The Indian tyre industry

• AGRICULTURE

• INDUSTRIAL PERFORMANCE

•TRANSPORTATION

•PRODUCTION OF VEHICLES

• Mainly dominated by Organised Sector.

• Unorganised sector holds bicycle tyres.

depends

seg

me

nt

• 2.61 lac villages

• 6.23 lac kms of metalled roads

• 9.81 kms of unmetalled roads

•4.12 lac trucks •1.27 buses•7.23 lac cars

potential

• RM costs 70% of cost of prod.

• Rubber and carbon prices - low

• Lower costs of prod.

• Free ex-imp policy

RM intensiv

e

The Indian economy

Liberalised foreign investment and exchange regimes.

Significant reductions in tariffs and other trade barriers.

Reform and modernization of the financial sector

Significant adjustment in govt. monetary and fiscal policies.

Higher growth rates Lower inflation

Significant increases in foreign investment.

Resulted in

After 1991…

Economic Growth

Increase in goods

transport

More mobility

Passenger transport

Increase in income

More production

More consumption

Increase transport demand

Good transportatio

n

Efficient movnt. of goods and services

Economic growth

Relationship between Transport and Economy

DEMAND FOR TYRES

3 SEGMENTS

ORIGINAL EQUIPMENT

MAKERS

REPLACEMENT EXPORTS

Primary driver of demand

2nd driver of demand

Less than 10% of total demand

Depends on automobile production

Depends on automobile output in the recent past

1996 1997 1998 1999 2000 2001 2002 2003 20040

100

200

300

400

500

600

Demand Graph

years

DEMAND

IN

LACS

Macro factors selected for econometrics

Macro Factors Rejected

Due to low or negative co relations.

Year ( time)

GDP Absolute

Inflation

Road length

Index of industrial production (IIP)

Service Sector Contribution

GDP per capita

Monsoon and Agriculture

National HighwayWages

Employment, PLR, FDI

SENSEX

lower costs for the tyre industry

Free import of all types of new tyres and tubes

Reduction in tariffs

Increase in production

Liberalized foreign investment

Increase in income

Adjustments in govt. monetary and fiscal policies

Increase in consumption

pattern

OPPORTUNITIES IN MACRO ENVT.

Increasing population

How macro economic analysis has a bearing on company's marketing strategy??

Inflation

Less consumption

Less production

Less transportatio

n

Schemes, discount.

Increase in income

Increase in consumption

Increasing demand of

vehicles

Increase in replacement

tyre segment

Can tie link with

automoblie companies

Eg…

Strategies to stay in step with the changes..

Go according to the customers’ tastes and prefrences.

Youth population is increasing –Can go for campaigns attracting youth too go for DRIFTING, RACING, where tyres are a significant driver.

Have tie ups with automobile companies.

Can have tie ups in the rural areas where consumption of the two wheelers as well as tractors is increasing at an enormous rate.

Straws to the winds

If Apollo tyre makes tie-up with the various automobile industry then in the long run it will serve to the company .

For example: Hero Honda Motors has tie-up with MRF tyres and TVS Tyres.