The Indian Tyre Industry

THE INDIAN TYRE INDUSTRY A Strategic Management project 2/12/2014 Section E Anvita Kasar (PGP/17/259) Viral Malvaniya (PGP/17/274) Nabeel Ahmed (PGP/17/278) Nidhi Aggarwal (PGP/17/282) Nimisha Drolia (PGP/17/283) Sandeep Bhat (PGP/17/290)

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TABLE OF CONTENTS

INTRODUCTION ........................................................................................................................................ 3

MRF TYRES LIMITED ............................................................................................................................... 4

MICHELIN INDIA ................................................................................................................................... 6

APOLLO TYRES ................................................................................................................................... 11

JK TYRES .............................................................................................................................................. 13

CEAT TYRES LTD. ............................................................................................................................... 16

APPENDIX ............................................................................................................................................. 21

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INTRODUCTION

Given the complex nature of the tyre industry and the wide variety of products and consumer segments, it

makes it difficult for the market players to follow any pure generic strategy. The following analysis of the

two strategies helps us to answer as to why any particular strategy cannot be followed in isolation:

Cost Leadership: The major cost of the tyre industry comes from the input materials which is rubber.

The players do not have much control on the volatile prices of the input raw materials making it

difficult for the companies to reduce their production costs much. Therefore, any one company which

tries to follow this strategy cannot achieve much success as the major costs are common for all the

companies in the industry.

Product Differentiation: The branding of the tyre is of not much value to the OEMs and within a

product there are only few features that can be distinguished from others. Also, any innovation in the

product can be easily imitated due to easy availability of the technology. Hence pure product

differentiation strategy cannot be fully employed in the industry.

However, in order to gain a competitive advantage the companies are trying to follow separate strategy in

the different range of products it offers.

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MRF TYRES LIMITED

MRF is the market leader among tyre manufacturers in India constituting 24% market share in terms

of revenues. It has strong brand recall and high quality commanding the price-maker status. It has a strong

presence in the T&B segment which is the largest segment of the tyre industry having about 19% market

share. It is the leader in the two/ three-wheeler segment (including motorcycles) and tractor front tyres

and holds second place in the passenger cars and tractor - rear tyres. It also exports around 12% of its

gross sales.

Company Strategy

MRF Tyres Ltd. is one company which has the most diversified range of products. Having ruled out the

pure generic strategy for the industry, MRF depends less on its own value chain and instead focuses on

the value chain of the customers. MRF thus, follows a differentiated business delivery model which is

responsive and adaptive to the needs of the customers and also delivers the products at low cost.

With presence in a large variety of products, the company tries to achieve low-cost benefit with some

products catering to the low-cost and economy segment, integrated through some product categories

where it stands out with its superior quality and strength despite supplying it at low cost and focused

differentiation with its new range of products in the aviation sector.

The following table summarizes some of its products according to different strategies:

Low Cost Strategy Focused Differentiation

Strategy

Integrated Strategy

Passenger Cars- ZCC, ZVT, VTM

Catering to brands like Maruti,

Hyundai

2 wheelers- Zapper RF, Zapper FV

OTR/T&B- Musclerok Smooth

Farm Services- Front Shakti Life,

Rib

Aero Muscle- MRF is the

first domestic company to

focus on the niche area of

aviation tyres for helicopters

and aircrafts in the defense

sector

Passenger Cars- ZLO, ZSLK,

Wanderer

2 wheelers- Meteor, Zapper Vyde

OTR/T&B- Musclerok X,

Industrial

Farm Services- Shakti Super,

Power Tiller

Strategic Issue

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The industry and MRF Tyres alike are facing similar problems of shrinking bottom-line and increasing

competition. MRF till recently had refrained from backward integration strategy and had focused only on

horizontal expansion by increasing its manufacturing capacity. This has prevented MRF from effectively

addressing the issue of control over raw material prices and regular supply. Another major threat has been

the competition from international players, specifically due to the low taxes on imported tyres as

compared to imported rubber and other raw materials. The expansion by MRF had been focused within

the country which helped it create a strong international image of being a quality tyre manufacturer, but

restricted its access to the niche international markets such as the high end sports tyre market and ability

to compete with the international players.

Recommendations

Given the recent developments in the raw materials market, the status of labor reforms in the country and

no signs of dealing with the disparity in the tax structure (on imported tyres compared to imported raw

materials), the company should now look for expanding into the new emerging markets such as African

and South American markets. Also, it should adopt the backward integration strategy for acquiring rubber

plantation units in these new markets. It should also adopt the inorganic growth strategy for expanding

into international market through mergers and acquisitions. To compete with the international players, it

should focus on establishing strategic joint ventures and development centres for entering into the niche

sports tyres market.

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MICHELIN INDIA

Michelin India has a predominated differentiation based strategy and relies on superior quality and brand

appeal to gain a premium on its products. Michelin came to India almost a decade ago and today markets

its range of tubeless car radial, tubeless and tube type bus and truck radial tyres. Today, Michelin in India

offers Product for India Market for Passenger Cars, Truck & Bus, Two Wheeler & OTR (Off the Road),

According to Abhijeet Bakre, Head-Marketing at Michelin India, and the organization is looking to

establish its brand in India. As they are completely new to the market, at present Michelin is a small

player in the market. To grow by 25% in sales volume, Michelin decided to tap on the emerging markets

such as India. The tyres sold in India are formulated or tweaked to meet the local road conditions and the

consumer expectations of the market.

Passenger Car

Michelin, continuing its trend of innovation was among the first tyre company to introduce tubeless tyres

in India for vehicles. Their Product Offering includes tubeless radial tyres for passenger cars starting from

a Maruti 800, Alto, Zen, Esteem, Hyundai Getz, Accent, Ford Ikon to Honda City and many more.

Michelin Passenger Car radials such as Primacy LC, Pilot Preceda 2, Pilot Sport, Energy XM1+ not only

saves fuel & the environment but are also high on performance and safety. Their SUV range of tyres such

as Latitude Cross, LTX A/T 2 , Latitude Tour HP offers maximum grip & durability as well as the on

road comfort. The partnership in the OE business with car manufacturers like Honda & Mercedes, the

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strong and growing network of dealers and innovative distribution programs like Tyre Plus have been

the key drivers for fostering the growth of Michelin in India.

Truck & Bus Tyres

Michelin Radials for Truck and Bus are designed to work optimally as per the Indian road conditions.

These tyres not only offer better mileage, but also last that much longer, thereby substantially reducing

cost per km. Michelins XDE2* XDY3,XZE2 & XZY3 are some of the truck and bus radial tyres that

cater to the Indian driving conditions. These radial tyres are proving to provide the fleet owners with the

best value for their money in terms of fuel economy and longer life. International formats of distribution

like Michelin Truck Service Centre offers more value to the customers wherein customer gets all Tyres

and Tyre related services under one roof at reasonable cost. Their partnership in the OE business with

theVolvo Bus & an extensive dealer network across the country ensures our reach to our existing &

potential customers.

Two Wheel Tyres

With its impressive track record in innovating two wheel technologies and winning championships

globally, Michelin has recently introduced its Two Wheel Tyres for the Indian Market. Both Sirac Street

and Pilot Sporty provide excellent levels of dry and wet grip, handling and comfort on Indian bikes.

OTR Tyres

MICHELIN, continuing its trend of innovation was the first tyre company to introduce OTR radial tyres

in India. Michelin Earthmover tires are built to perform. As the undisputed leader in radial tyre

technology, Michelin tires are engineered to provide Long tyre life, Exceptional protection against cuts,

punctures and tears, Excellent traction, Fuel economy and Smooth ride and operator comfort.

The following table gives a bifurcation of various brands of tyres on the basis of strategy they follow

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Category Product Generic Strategy

Passenger Cars Michelin

Energy*XM2

Differentiation

Advantage : Runs Longer, saves more fuel and is robust

and safer

Michelin Pilot

Preceda

Focused Differentiation

Scope : For city driving

Advantage : Ultimate Sports Performances, designed for

Asian needs

Michelin

Primacy LC

Low Cost Strategy

Advantage : Less Driving noise, saves fuel, longevity

and safety

Michelin

Primacy HP

Differentiation Strategy

Advantage: Lasts 25% longer, brakes shorter in the wet

Michelin Pilot

Sport 3

Differentiation Strategy

Advantage: Better road holding, driving pleasure

Michelin

Energy*XM1

Integrated Strategy

Advantage: Saves fuel, safety

Michelin

Primacy 3 ST

Differentiation Strategy

Better road grip, quieter ride, improved handling

SUV Michelin

Latitude Tour

HP

Differentiation Strategy

Advantage : Gives maximum comfort, lasts longer and

safety guaranteed

Michelin

Latitude Cross

Focused Differentiation Strategy

Advantage : traction of all terrain type, exceptional

mileage

Michelin LTX

A/T2

Differentiation Strategy

Advantage: Maximum all-terrain traction

Light Truck Michelin Agilis Focused Differentiation Strategy

Advantage : Improved mileage, very robust

Motorcycle Michelin Pilot Differentiation Strategy

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STRATEGIC ISSUE FACED

One of the main strategic issues facing Michelin India is the limited distribution and logistics system of

Michelin tires in India. Hence despite the superior products, the availability of Michelins products at the

demanded place is a challenge. Tire industry being very much customer oriented, distribution channel

plays a very important role for connecting with the customer. The steps taken for overcoming this

problem was the joint venture with Apollo Tyres. The JV failed after Apollo tyres exited the JV due to

prevailing market conditions and slower than projected pace of radialisation. With the limited dealer

network and the failure of joint venture with Apollo tyres have aggravated the issue.

RECOMMENDATIONS

Michelin with its global brand value and assured quality with its dedicated R&D and work culture needs a

proper distribution network to complement its manufacturing and marketing prowess. Hence an integrated

strategy is needed in India, for Michelin to gain its market share. The distribution network would be

obtained best with a joint venture. But after the failure of JV with Apollo tyres, Michelin would need to

build its distribution network. The cost savings associated with the distribution network would enable the

firm to move towards cost efficiency and become more affordable for the end users. With its

manufacturing facility at Chennai, TYREPLUS is an addition to Michelins initiative of innovative

distribution programs that aim to enhance retail experience for customers. Another such programme is

Michelin Priority Partners (MPP), under which Michelin creates partnerships with dealers who share the

strategic orientation of the company Offer the customers best quality products and services at the best

price. Hence there is a need for an efficient network of distributors to make the products of Michelin

reach the users, which remains a challenge for Michelin. Hence to attain the objective of 25% of sales, it

needs to reach on par with MRF and JK Tyres in terms of reach to the consumer. This could be achieved

Sporty,

Michelin Sirac

Street, Pilot

Street Radial,

Pilot Road 2

Advantage : Dry grip, Wear resistant, good breaking

efficiency, high mileage

OTR XZSL, SM27,

XM 37, SGLA2

L2/G2, XSE7

Focused Differentiation

Each tyre is custom made for the specific purpose of skid

steer loaders or graders or loaders or bolldozers, etc

Advantage: Log tyre life, exceptional protection against

cuts, excellent traction, fuel economy and smooth ride

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if the focus is on both cost and differentiation of products through a dedicated distribution network, hence

an integrated strategy is proposed.

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APOLLO TYRES

By the end of 2005, Apollo Tyres India Ltd. had become the second largest tire manufacturing company

in India after MRF. They offer variety of SKUs in almost all the segments of automobiles. They have

grown inorganically by acquiring plants overseas. This has enabled them with capabilities in different

market segments. Apollo until late nineties primarily focussed in the low cost segment. Their sales were

concentrated to truck and bus market(HCV).In mid-nineties they ventured into the radial tyre market. As

radialisation continued they moved in to more niche segments. In 2008 they acquired Netherlands based

which was a premium brand in the European markets. Taking forward this collaboration Apollo is slowly

focussing on in its strategy to expand its markets to south American markets. Currently Apollo has

adopted low cost strategy in Hatchbacks and radial bus and truck tyres. Since there is huge potential for

high end luxury cars in india in coming years Apollo has started rolling out premium products that match

in performance with companies like Michelin ,Bridgestone and Pirelli but at a lower cost, hence following

and integrated strategy for sections. In OTR category, low cost has been the key strategy through out its

history.The following table gives a bifurcations of various brands of tyres on the basis of strategy they

follow.

Low Cost

Stratgey Integrated Stratgey

Passenger Car Tyres

Amazer Acceler Maxx

Amazer XL ALNAC 4G

Acclere Aspire 4G

Hawkz A/T

Hawkz H/L

Heavy Commercial Vehichles

Amar Gold Endurace

Amar

Kaizen

XT-9

XT-7

OTR

Dhruv

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Krishak

Krishak Super

XTRAX RC317

Power haul

Krishak Premium

CR

Problems With Current Strategy:

Apollo Tyres have grown leaps and bounds in terms of market penetration and sales. The company has

been successfully able to leverage upon its cross national manufacturing units to cater the needs of the

respective regions. The major problem in their strategy has been a conflict or overlap of their generic

strategies brand. Even after acquisition of BV Vredestein which is a premium brand of tyres, the brand

image of the company was still considered to be in the low cost segment. Although the company has all

the competencies to become a number one brand in india,it still has a long way to go before it can

compete with the global players.

Proposed Strategy :

Apollo Tyres has to prioritize their strategy in terms of their product placements. They can sell/market all

the niche products under the Vredestien brand which Is a renowned premium brand all over the world.

Along with it they can continue their dominance in the low cost segment by their parent brand name.They

also should enter into the two-wheeler segment which they failed to catch on.It can be seen that even the

companies which ventured late into the two wheeler tyre market(CEAT and Dunlop) are reaping good

returns. This trend might continue considering the socio-economic factors and the ever slow developing

road infrastructure of the country.

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JK TYRES COMPANY STRATEGY

The strategy followed by JK Tires is mostly of Focused Differentiation. Following reasons helped us to

arrive at the same:-

Through continuous innovation, it has stayed ahead of the race. It was not only the pioneer of high performance radial technology in India, it also introduced tires such as H-Rated, V-Rated

and Z-Rated for racing cars. This has helped in the growth of its client base over the last few

years. It set up Asias first tire and Polymer Research Center, HASETRI, which is actively engaged in advanced tire testing and Polymer research.

Advantages of JK Steel Radials over conventional nylon truck tires are as follows:

Better fuel economy up to 10% or more fuel saving compared to nylon tires Longer life around 50% to 100% more than nylon tires Significantly lower maintenance costs and downtime Lower cost per kilometer (CPKM): up to 10% or more savings in tire cost per km. Better puncture resistance More riding comfort and reduced cargo damage Better traction and braking, both on wet and dry roads Excellent high-speed capability

The company is quick in delivering solutions. The strategy has been to offset any losses or shortfall in supply of tires, as tires account for 5% of the value of a passenger car. For example,

when there was a "slowdown" in one of the company's six plants in Banmore, Madhya Pradesh,

the company strategists swung into action to speed up the completion of its Chennai plant, ahead

of schedule.

Since the OEMs reputation is at stake if something goes wrong with the tires, unless they are assured that you have the quality and the capability, they will not go with you. Also since

switching costs in this industry is low which gives high bargaining power to buyers (OEMs), maintaining adequate supply of tires as per demand could be a differentiating strategy to boost

client base.

The company invests heavily in services. It has 20 wheel centers which is equipped with technically advanced equipment and provides solutions to all truck and bus tires. Thus it

differentiates itself from competitors by providing high class services for truck and bus tires. The

Wheels Centers-cum-showroom is spread over 8,000 sq ft and has a nitrogen inflator machine, air

compressors, greasing pumps, pneumatic wrenches and a generator set to ensure end-to-end truck

and bus tire care.

Relationship with the Buyers: JK Tires is the first choice for some of the largest tractor manufacturers of India like Mahindra & Mahindra, John Deere and TAFE.

High level of exports: JK Tires was the first company in India to export all steel truck radials (both tubeless type and tube tire) to more than 80 countries worldwide including to USA, UK, Australia, Gulf countries and South American countries. The company is accredited with:

o GCC certificate for exports to Gulf countries. o E mark certificate for exports to European countries. o DOT certificate for export to America. o In Metro certificate for exports to Brazil.

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MAJOR STRATEGIC ISSUES FACED BY THE COMPANY

JK Tires relies more on the replacement segment to gain market share; it commands about 30 percent share in truck and bus tires segment in the replacement market. However, it has poor

presence in Passenger car market. With the growth of OEMs in Passenger Car Market, this market offers high potential.

Most of the huge investments at JK Tires are funded by debt. The government in its bid to counter inflation has been increasing interest rates which may affect the profitability of the

company.

Category Product Generic Strategy

Passenger Cars UX1 Focused Differentiation

Scope : Super luxury cars

Advantage : Ultra-high performance tubeless radials

Ultima Sport Focused Differentiation

Scope : For city driving

Advantage : Shorter braking distances with better grip

Ultima Neo Integrated Strategy

Scope : For all hatchbacks

Advantage : Ensures fuel savings due to low rolling resistance

LCV

(Light

Trucks/Buses)

Steel King,

JET XTRA,

JET RIB,

JET R MILES

Integrated Strategy

Scope : All LCVs Advantage : Better fuel efficiency, higher mileage

JET TRAK 39 Focused Differentiation

Scope : All LCVs Advantage : Very high load carrying capacity

Farm Services Sona HF Tractor

Rear

Integrated Strategy

Scope : All Tractors

Advantage : Longer Life, Better Fuel efficiency

Sona Tractor

Rear,

SONA Tractor

Front,

SONA H/F

Tractor Front,

SONA 5 Tractor

Trailer

Focused Differentiation

Scope : All applications

Advantage : Better traction, retreadability, high load carrying

capacity,

Off-The-Road

(OTR)

V-BHTEL,

V-BHSS,

VEM-027

EG-04 DX

Integrated Strategy

Scope : Industrial Sites/Earthmovers

Advantage : Increased Durability, Wear resistant

VEM-045,

VEM-99,

EG-04

Focused Differentiation

Scope : Industrial/Construction Sites

Advantage : Better anchorage, load carrying capacity, resistant

to external damages

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RECOMMENDATIONS

Since tire sales to OEMs constitute about 40-45% of the total sales, therefore JK Tires should focus on the OEM segment also. Since it is already a dominant player in the replacement segment

in the Truck and Bus category, it should start expanding in the OEM segment and also tap the

passenger car market.

To combat the price volatility of raw materials and inability to pass on price rise to OEMs/Replacement Market, the company should adopt the backward integration strategy to acquire rubber plantation units.

The company should restructure its finances.

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CEAT TYRES LTD.

With two major tyre plants in Maharasthra, one each in Halol - Gujarat, Cochin - Kerala, through RADO

Tyres, and two plants in CKITL and ACPL in Sri Lanka, through CEAT Kelani, CEAT produces over 7

million tyres a year and commands around 13% share of the Indian tyre market. They have a robust

national network consisting of 34 regional offices and over 3,500 dealers among which approximately

100 are exclusive dealers running the CEAT Shoppe outlets for passenger cars segments and 96 exclusive

dealers running the CEAT HUBs for Truck & Bus Segments.

The companys net sales increased by 15% from a year-ago and this was accompanied by volume growth

of 16%, according to Anant Goenka, Chairman of Ceat. Truck and Bus tyres are the highest contributor to

the annual turnover of the Company (61 per cent)

Net profit almost tripled to Rs.67 crore as the company did not see any exceptional expenditure in the

December quarter.

Company Strategy

In the year 1996, CEAT launched a new radial car tyre 'Maestro', the first radial tyre in India to use state-

of-the-art polyester tyre cord technology combined with steel belts. They also launched a new heavy-duty

product 'Stamina', which is a light commercial vehicle tyre. The radial tyre plant has commenced

commercial production in Nasik and the formula one radial tyre was received in the market.

In 2001, when Mr. Paras Chawdhary took over as the CEO of the company, the bad time was at its peak:

CEAT was over-leveraged, it had no money to spend, no financial institution was willing to support it,

and raising money through the equity route was just not possible as the share price at that time was too

low.

Under the leadership of Mr. Chaowdhary, CEAT reduced the debt burden and thereby cut the interest

payout. It stopped all fresh investments as it was desperate to clean up its books. It also made significant

changes with top to bottom approach and company started making profits with good growth rate.

During the year 2004-05, the company entered into agreement with Pirelli of Italy for outsourcing radial

tyres, which were marketed in the brand name, CEAT Spider Radials.

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The year 2010-11 saw significant R&D efforts to develop new raw materials, enhancement in the quality

of tyres and new range of products. Innovative launches of first of its kind concepts in the truck and farm

category during the year under review have set into motion the process of thought leadership by CEAT. In

light of the increasing raw material costs, successful efforts were made in development of cheaper

substitutes for costly raw materials without compromising on quality parameters. This has helped the

Company to not only reduce cost but also in optimizing material consumption.

1. Tyres that are sold to OEMs follow the B2B sales process hence they do not require an elaborate

distribution network. Also tyres that are exported use the distribution network of some other

company. Hence the most challenging Sales and Distribution network is developed for the

Replacement Market. This supports Mr. Chowdhary's objective to focus on the replacement

market where the company's share in its total sales was just 50 per cent. The replacement market

is important for tyre manufacturers as the consumers here don't mind paying extra for a quality

product.

2. The company put its might behind ensuring the quality of the products. Earlier, the quality of its

products was acceptable, but not something that would create a customer pull. This was even

more so as CEAT started targeting 20 per cent of its revenues from the export market where

profitability was good.

3. CEAT has restructured internal processes which include mergers of various roles and making

operations more efficient.

4. Over the time, CEAT decided to get into high-margin segments (90 per cent of its products are

now in that category).

The following table summarizes some of its products according to different strategies:

Low Cost Strategy Focused Differentiation

Strategy

Integrated Strategy

Trucks/LCV FM super, LUG XL,

MILE XL

2 wheelers- Formula series,

Earth Movers HT series, Rock XL

New Rib pattern and

Gripp technology through

R&D.

Truck/LCV - Pro series,

Buland series in light truck

Farm Vehicles - Ayushman

Series

2 wheelers Vertigo Series

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bias

2 Wheelers Secura Series

Car and SUV - Milaze for

better mileage and Rhino

series for safety

Strategic Issue

In the period of 2001- 2010, very few suppliers were willing to give materials since the company had not

cleared the dues of over Rs 150 crore (Rs 1.5 billion). And it was getting increasingly difficult to explain

to the investing community and the board the reasons for the worsening profit margin vis-a-vis its

competitors. There were also legacy issues in Maharashtra. Currently, major constraints for CEAT are its

size and investment especially when the stiff competition in Indian as well as Global market demands

these.

The company plans to expand capacity and become the countrys second or third biggest tyre maker,

where it is now No. 4. To reach that goal, it plans to grow at a rate of 20% every year, outpacing the tyre

markets growth of around 8%.

Recommendations

Before 2001, company was not working efficiently which led to huge losses and debt in the books. After

appointment of Mr. Paras Chawdhary, companys functioning improved at a significant rate and internal

defects were also obviated. CEAT started focusing on replacement market and opened a new production

facility of Radial tyres in Halol, Gujarat where the company could afford the labor at 40 percent cost of

Maharashtra. Our recommendation would be to stick to the present differentiation strategy in tyres and

maintain the efficiency levels in the factories. Also to reach to the number 3 position, CEAT should

expand at the present or higher rate. Once investment opportunities are wide, alliance and acquisition

strategies should be implemented to boost the sales in the export market as well. Company already has

ventured jointly with companies in Srilanka and Bangladesh, it could now move further in developing

South East Asia and Middle East regions where automobile industry is growing.

Goodyear tyres presence in India is over 90 years old. It is a market leader in farm segment. Though the

tractor industry in India has witnessed a decline in 2012, your companys farm OE business has registered

a 2% growth. The companys farm replacement business has registered a healthy growth of 14%, which is

much higher than that of the industry. Passenger vehicles sales grew at 8.5% (Source: Society of Indian

Automobile Manufacturers), which translated to moderate consumer tyre demand from the Original

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Equipment Manufacturer (OEM) customers, however, the OE business has registered a healthy growth

and we continue to gain market share. Consumer replacement tyres also felt softening of demand due to

rising pressure on consumers purchasing ability as a result of higher interest rates, fuel prices and food

inflation.

Product-wise Generic Strategy:

The overall generic strategy is Focussed Differentiation for most of the products of company. The

classification of products here however is taken in the basis of tyre families

Product Advantage Generic strategy

Assurance tyres Help provide a smooth quite ride and redefined

handling. Mostly for on road vehicles, and are all

seasoned and fuel efficient

Focussed integration

Eagle tyres Help provide steering precision and confident

handling. Mainly used for sports vehicles

Focussed differentiation

Efficient Grip tyres Help evacuate water from beneath the tread with

their wide circumferential grooves. These are

mostly summer-season tyres used for sports

vehicles

Focussed differentiation

Excellence tyres The OE tuned asymmetric tread design helps

provide responsive handling and a smooth ride.

These are also summer, sports vehicle tyres.

Focussed differentiation

Fierce tyres Designed to help enhance driving performance

while also providing a stylish appearance. Mainly

highway tyres.

Focussed differentiation

Fortera tyres Help provide enhanced forward and lateral

traction for stable handling. Mainly for high

performance sports vehicles

Focussed differentiation

Integrity tyres These are all season tyres popular with many

vehicles for everyday on-road driving.

Focussed differentiation

Ultra Grip tyres Utilize innovative technologies to help provide

enhanced winter traction, mainly for sports

vehicles

Focussed differentiation

Wrangler tyres Tough tread compound helps deliver rugged on-

and off- road performance, on all kinds of terrains.

Focussed differentiation

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Mainly used for farm traction

Strategic issues:

As pointed out in the companys annual report, the growth in farm sector is witnessing a decline due to

various reasons. The crop output from Kharif season (monsoon) has declined over the years, owing to a

drought in certain parts of the country leading to lower farm income and thereby likely to impact the

business in the future. With the farm OE industry on a decline, the replacement industry is facing high

levels of competitive pressure. Hence, to grow its market shares in the replacement market, the Company

is focusing on channel expansion and extraction. The Company plans to continue focusing on expanding

this product in the targeted markets that is the farm vehicles.

However, considering the slow growth in the sector, the sales may decline (as seen in the year 2012).

Recommendations:

To get over this, the company needs to expand, not only in the farm segment, but also in the passenger car

segment which is growing very rapidly in the country. Also the company may consider introducing new

products in the two-wheeler segment, which has shown promising growth.

For innovating in these segments, while continuing focus on the farm segment, the company needs to

invest more on innovation and technological enhancement of the existing products.

To fund these investments, the company may use its leveraging capacities, given that currently the

company has no debts, long term or short term, in its books. Thus, by taking the advantages of leverage,

the company can make its product line more attractive to diverse customer base.

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APPENDIX A BRIEF HISTORY OF TYRE INDUSTRY

World

The history of the tyre industry is closely interwined with those of the rubber and automobiles. Although

metal tyres existed before the discovery of rubber, the true meaning of the word is intimately connected

with the use of elastomers. Major technological breakthroughs such as the vulcanization process (Charles

Goodyear, 1839) and the pneumatic tyre (Robert William Thomson for bicycles in 1846; the Michelin

brothers for automobiles in 1895) led to the establishment of the first tyre companies at the beginning of

the 20th century. The tyre industry has grown tremendously ever since in tandem with the auto industry.

Today the global industry encompasses around 400 factories world-wide producing more than 1 billion

units globally.

The peak of the industrys dynamics in the modern era was reached in the late 1980s when a series of dramatic restructuring occurred. While in 1985 fourteen companies shared 75% of the market, towards

the end of the decade, after a series of mergers, the big three (Goodyear, Michelin and Bridgestone) controlled over half of the industry. Most of these include a US target company and a European or

Japanese buyer.

India

The origin of the Indian Tyre Industry lies in 1926 with Dunlop Rubber Limited setting up the first tyre

company in West Bengal. MRF joined the industry in 1946. Since then, the Indian tyre industry has

grown rapidly. We can divide it in following five phases.

Phase 1(1920-35) - During 1920 to 1935, there was no domestic production. Indian tyre industry was

dominated by foreign players in the pre-Independence period. Hence the demands met through imports.

Dunlop (U.K), Firestone &Goodyear (USA) were the key players in the industry. Policy regime was also

liberal for imports which helped these players.

Phase 2 (1936-60) - In the year 1936 the domestic production started by Dunlop, Firestone, Goodyear and

Indian tyre & rubber company. In 1956 with recommendation of the Tariff Commission, Government

imposed tariff &non-tariff barriers on imports.

Phase 3 (1961-74) - In 1961-74, government came up with policies which facilitated licensing of

additional production capacity, regulation on capacity expansion and repatriation of profits of foreign

companies, enforcement of export obligation on MNC and protection from external competition. These

encouraged Indian companies like MRF, Premier and In-check to enter manufacturing sector.

Phase 4 (1975-91) - This period saw entry of large Indian business houses like Singhania & Modi in the

industry. Domestic companies had technical support from MNCs. There was introduction of radial tyres

and vertical integration during this time. Also, there was an exponential growth in tyre production &

exports.

Phase 5 (After 1992) - With external trade liberalisation and reduction in import duty, the re-entry of

MNCs started either independently or in collaboration with Indian capital. Also, there was progressive reduction seen in import duty. Over the period of last ten years Indian tyre industry has grown rapidly.

22

GLOBAL AND LOCAL MARKET DESCRIPTION

Size of Market:

Global

The Global Tyre market is moderately concentrated with top seven players accounting for around 65% of

total global tyre sales (2009). Further, the top three players - Michelin, Bridgestone and Goodyear control

50 per cent of the total global tyre market, with Michelin and Bridgestone close competitors for the

leadership position. The global truck tyre market size is estimated to be around 146 million tyres (in

2009), with Asia accounting for around 45 per cent followed by Europe at 18 per cent.

Local

The industry is moderately concentrated, with the top seven players accounting for over 80 per cent

market share. The Indian tyre industry grew by around 8% in FY13. The industry is dominated by the

Truck and Bus segment. Replacement market continues to remain crucial for the truck-bus category while

the passenger vehicle segment drives the OEM sales. Indian Replacement Market has grown by over 4%

in FY13. Tyre exports also grew at a healthy rate. Off-the-road category and Truck and Bus tyre category

contribute to over 70% of total tyre exports (in tonnage terms). The Middle East region and South East

Asian countries are major export destinations, together contributing to over 60 per cent of total tyres

exported, in value terms.

The performance of the Tyre Industry is largely influenced by the Replacement segment, as truck tyres

account for the largest share of the Industrys product mix. The increase in outlay of buses under JNNURM scheme in future is expected to aid the Tyre industry. The Indian Tyre Industry has over 30

players; however Apollo Tyres and MRF Ltd have closely competed for the top slot. While MRF

dominates sales of passenger and motorcycle tyres, Apollo Tyres is the leader in truck and bus tyre

category. MRF is also the largest exporter of tyres in value terms. Recently multinational players like

Michelin have begun operations in India (Michelle has a plant in Chennai), Bridgestone have also set up

capacities for production of truck and bus radial tyres.

23

Product Categories and Customers:

The Indian tyre industry can be categorized into the OEM segment (24 per cent market share),

replacement market (65 per cent) and exports (11 per cent). The OEM segment comprises automobile

manufacturers, while the replacement segment mainly consists of the transportation and corporate sectors,

and individuals.

Tyres can be classified into two main segments on the basis of vehicle categories - commercial vehicle

tyres and passenger vehicle tyres. Commercial vehicle tyres include medium and heavy commercial

vehicles (MHCV), light commercial vehicle (LCV) and tractor tyres. Passenger vehicle tyres include car,

jeep, motorcycle and scooter tyres. Category-wise mix in Production is shown below (2011-12).

Product categories and Market segments are shown below:-

For FY13, passenger car tyre sales have remained quite flat with minimal growth. Market statistics

indicate that SUV and van tyre segments have again shown stable growth of around 3.8%. Truck-bus

24

tyres have shown growth of around 11%, though a decline in demand for cross ply tyres, particularly in

the truck-bus and light truck categories, have been noted. Growth of Radial tyres in Truck-bus segment

has led to longer replacement cycles. Radials have a 60% share in the OEM market and 22% in

replacement.

Radialisation

Tyre technology witnessed an important innovation - Radialisation - in 1978. Although it offers several

advantages such as additional mileage, fuel saving and improved driving, radialisation did not pick up in

India in the initial years. This can be attributed to factors such as the poor condition of Indian roads, older

vehicles produced in India not having a suitable structure for fitment of radial tyres, misconception that

radial tyres are not required for Indian vehicles, unwillingness of consumers to pay a higher price for

radial tyres, among others. However, the situation has changed radically in recent years, especially for

passenger car tyres, where radialisation has reached 98 per cent and is expected to touch 100 per cent in

the next few years. In the medium and heavy commercial vehicles segment too, there has been sharp

growth in radialisation over the last 3-4 years due to significant capacity addition by major players. Radial

tyres are priced approximately 25-30 per cent higher than comparable cross-ply tyres.

Pricing Structure:

Margins of players are sensitive to prices of raw materials, as it accounts for 70 per cent of sales and 75

per cent of the total operating cost. Natural rubber, nylon tyre cord (NTC), carbon black, styrene

butadiene rubber (SBR), poly butadiene rubber (PBR), rubber chemicals, butyl rubber and zinc oxide are

the key raw materials, accounting for 92-94 per cent of the total raw material cost. The remaining 8-10

per cent includes aromatic oil, bead wire, process oil, stearic acid, etc. Movement in raw material price

dictates the industrys profitability.

Raw Materials cost have increased over the past few years. Despite the industry being moderately

concentrated, players have not been able to fully pass on the rise in these costs to consumers. This is

because the decrease in customs duty over the years has led to cheaper imports from China and other

South East Asian countries, thus exerting pressure on tyre prices. This has impacted the margins of

players. In terms of type of tyres, radial tyres command a premium as compared to traditional bias tyres.

25

PORTERS FIVE FORCE ANALYSIS

The tyres & rubber market will be analyzed taking manufacturers of tyres as players. The key buyers will

be taken as vehicle manufacturers (for mounting as original equipment), and the aftermarket, which

includes garages, warehouses and distribution centers, independent dealers, and retail stores (that sell

replacement tyres directly to consumers), and raw material producers as the key suppliers.

1. Competitive Rivalry - Medium Despite there being more than forty players in the Indian tyre industry, there is high concentration

of market power with the top ten players claiming almost 95% of the market share. Category wise

also, for e.g., in passenger car segment, 2 wheelers and commercial vehicles, only top 3-4 players

hold about 75-80% of market share. But individually the companies have market shares very

similar to each other and hence, there is rivalry existing between them.

2. Bargaining Power of Buyers Moderate The buyer market can be divided into two segments- the OEMs and the replacement market. The OEMs have a strong position with respect to their contracts with the tyre manufacturers. There are low switching costs and hence their bargaining power is very high. Also, due to fragmented

nature of the market, increase in costs cannot be transferred to the buyers completely and the

existence of many players makes the replacement market also very powerful in terms of their

bargain. Buyer power is strengthened by the lack of differentiation in the product offered by

players. Consequently, they are able to shop around for the cheapest deal. However, some

manufacturers benefit from brand strength, with many buyers opting for reputable brands in

recognition of their performance and quality. Additionally, tyres are essential products for buyers;

such products are not dispensable, and this reduces buyer power. Overall, buyer power is assesses

as moderate

3. Bargaining Power of Suppliers High The supply of raw material can also be segregated into two parts- Natural rubber and other petro-

chemical based material. The demand for rubber which is the main raw material is very high

unlike the production and so the bargaining power of rubber manufacturers in India is high.

However, tyre companies can now buy rubber from the international market which is reducing

their power. But, in case of other materials (carbon black, nylon tyre cord), the prices are beyond

the control of the tyre industry and hence, the bargaining power of suppliers is high.

4. Threat of New Entrants Medium The tyre industry is highly capital-intensive with long payback periods. Also, there are lower

margins which make it very difficult for the new players to enter and sustain. New entrants must

be aware of strict environmental and safety regulations imposed by governments. These

regulations change frequently, are becoming more stringent and can have an adverse effect upon

business. The existence of strong brands, with reputations for performance and quality, acts as a

further barrier to entry for new companies. Existing companies also benefit from economies of

scale, which new entrants would be required to develop. But, there is scope for the automobile

players who can do backward-integration and thus, strengthening new players.

5. Threat of Substitutes Weak The EOMs have the option to use imported tyres (with the advent of Chinese competition) when the prices in the domestic market start increasing. However, the replacement market consumers

do not have this luxury and so we can say that the substitute threat is weak. One possible

substitute is counterfeit tyres, including tyres that are designed to look like those from major-

name brands, but produced and sold more cheaply. However, in general the trade in counterfeit

vehicle parts does not occupy a large share of the market

26

INDUSTRY TRENDS AND DRIVING FORCES

Industry trends (short-term):

Tyre production increased by 7.6% in tonnage terms in 2012 over 2011, led mainly by growth in the Truck and Bus tyre category, which constitutes 50% of total tyre production.

T&B production grew at 6.4% (in tonnage terms) in 2012 due to increase in pick up in replacement demand. However, the pace of growth remained slow due to weak industrial growth.

Weak replacement demand in fourth quarter of 2012-13 coupled with weak OE sales is expected to have led to lower demand.

Trends in tyre production

Demand drivers:

Commercial vehicles segment: Replacement market trends are the major drivers of demand in commercial vehicle tyres, which in turn are dependent on the industry activities and freight

movement. The latter are dependent on performance of agriculture, infrastructure, housing and

industrial sector.

Passenger vehicles segment: The demand in this segment is primarily from the OEM segment followed by replacement segment and exports.OEM demand depends on new product launch.

Replacement demand depends on life of the car tyre and usage of a car in terms of number of

kms. It is mainly dependent on new car sales, which in turn is dependent on personal disposable

income.

27

Exports: total exports grew by 21% in 2011-12. This growth was mainly driven by steep growth in Off The Road category (65%) and Truck and Bus tyre category (12%).

28

IDENTIFICATION AND DESCRIPTION OF STRATEGIC GROUPS

Tyre industry can be broadly classified in to different segments like

1) Commercial Vehicle segment

2) Passenger Vehicle segment

3) Others

Commercial Segment Vehicle:

The commercial vehicle segment is the largest segment in terms of value.

Low cost Strategy Group:

MRF, Apollo Tyres, Ceat and JK are the major players in the low cost strategy group in this segment. In

the past Apollo tyres had a clear cut edge over its competitors. But as the trend of radialisation continues

there has been a shift in market share .JK and MRFs market share has been constantly increasing in recent

years as Apollo was late to enter in the radial market.

Differentiation Strategy Group

In the premium segments the major players are Michellin tyres, Pirelli and Bridgestone. These brands

have been able to capture market share even from the low cost strategy group companies. These

companies used to import tyres to India for sales are now in pursuit to set up manufacturing plants in

India. Michellin has set up Rs 4500 Crores green field plant for the Truck-Bus Radial Category and

Bridgestone is expected to set up TBR plants in Pithampur, MP and Chakan, Pune.

Passenger Car Vehicle:

The share of these segments in the total tyre market has changed significantly in the past decade, with the

share of passenger vehicle tyres increasing over this period. The major companies in the low cost strategy

group consists of companies like Apollo ,MRF,JK tyres and CEAT. These companies have different

SKUs to cater to the needs of the customer. Price war is very much common. The margins are very low

for OEM tyres as there are many suppliers in the market, where as for OEMs margins are comparatively

much higher.

0

10

20

30

2010 2011 2012 2013

CV-segment Radilisation

29

In the Premium segment strategy group players like Michellin ,Pirelli ,Yokohoma ,Sumitomo caters are

mostly to high end vehicles .As the number of luxury cars have been increasing rapidly the demand for

premium tyres have been on the rise. These tyres are mostly imported for their manufacturing facilities

located outside India.

In Motorcycle and Scooter segment there is only one dominant strategy group which is of low cost in

nature. Dominant players are MRF and CEAT.

Some OEM companies use premium tyres like Continental and Pirelli also.

Other Segments

Tractors and OTR.

There is only low cost Strategy Group in this sector as the customer base is mainly farmers. Good year is

a major player in this industry. So far very less or almost no foreign players have entered this market.

0

20000

40000

60000

80000

100000

120000

2008 2009 2010 2011 2012

Passenger Car-Market share

Apollo

MRF

JK

Ceat

30

KEY SUCCESS FACTORS

The global tyres and rubber market has experienced fluctuating levels of decline and robust growth for the

2008-2012 period. This is down to variations in geographical markets, with tyre demand declining in

Europe as new registrations collapse while replacement markets in Asia Pacific saw an increase following

natural disasters. The market is expected to accelerate and achieve moderate growth across the forecast

period.

Order-winners and order qualifiers and its use in the establishment of the relative importance of certain

performance objectives. Order winner and order qualifier are criteria defined by managers within their

operation strategy plan to gain competitive advantage in the market. The success of a company depends

greatly on Order-winner factor (Slack, Lewis 2008). It is the most important factor that drives customers

to purchase a product or service from a company. When planning the competitive strategies the Order-

winning factor should be at the top of priority list, because in the long run it will benefit the company

with an increase in business, provided that higher performances on this factor is achieved.

Although order qualifier is not as important as order-winner factor but it plays also an important role as it

is used as a bait to draw customers attention to product or service. Slack, Lewis (2008) states that companies must be above a particular level of operations performances to draw customers attention, but the performance of order-winning factor is what is going to influence the customers decision towards a product or service.

Being a homogenous product, there is not much difference in products offered by competing tyre

manufacturers. There are a large number of buyers in this market; however, their position is strengthened

by the fact that market players must compete heavily on price due to the largely undifferentiated nature of

the product. However, companies do try to differentiate themselves by outdoing one another in some

Points of Parity, such as quality, safety, tread design, economy, etc.

The top market players must compete on product design, performance, price and terms, reputation,

customer service, and consumer convenience. The fact that the product is largely undifferentiated

increases rivalry further.

High performance tyres are less likely to overheat, grip the road better, and offer a safer ride than

most other tyres. They are expensive, however, and may not last as long. These are order

qualifiers and in future they have tendency to become order winners. In the past ten years, the

high performance/ultra high performance market has grown by almost 10%. That trend is

expected to continue.

Comfort tyres (touring): Touring tyres offer the twin advantage of endurance with superior ride comfort. These classes of tyres are a favourite amongst long distance

car drivers such as business travellers. This factor is actually order qualifiers and

need to be present in all tyres.

Mileage: One of the biggest value propositions of radial tyres is the improved mileage that it brings with it. Mileage is the top priority for the Indian middle class

buyer. With higher research in investments in this field, they tend to become order

qualifiers as all competitors would be having a reasonable mileage.

Price: Tyre prices play a much smaller role in the passenger car tyre industry, compared to tyre features. Consumers are more concerned about the attributes of the

tyre (quality, durability, etc) than its price. Due to highly undifferentiated nature of

the product, price wars too tend to happen as the customer would go for a lower

priced product.

Wear life: The wear life of a tyre determines the life if the tyre. The more durable a tyre, the higher will be its wear life. It is tough to be differentiated much as serves as

a order qualifier for the segment. But due to increased research and development in

this area, this may become order winner in future.

31

Grip: Given the high seasonal differences in India, consumers typically look for tyres that suit their local climate. Thus, while consumers in arid areas look for tyres that

can endure high temperatures; consumers in monsoon fed areas prefer tyres that can

grip the road even in the worst of seasons. This needs to be present in all tyres and

serve as order qualifiers.

Cornering and braking: Cornering and braking refers to the way a tyre handles the extreme shear and frictional forces it experiences when the vehicle cuts corners or

brakes at high speeds. Superior braking and cornering performance is always desired

by sports and highway drivers. This too serves as an order qualifier and needs to be

present in all tyres.

A company can gain competitive advantage concentrating on one or both of the following factors, and

hence these serve as the key success factors in tyre industry

1. Quality: With increased expenses in this field, companies can produce high quality tyres to serve various segments and hence differentiate. Brand perception plays a big role here as customers are

very brand loyal in which quality plays a big role.

2. Global Brand Image: As the more and more tyre manufacturers expand their operations across the globe, the importance of establishing their brand in the minds of the consumer is increasing.

As new players step into emerging markets, advertising helps introduce them to the public and

establish brand recognition, possibly before their competitors have the chance. The high

performance craze also adds to the advertising mix. Consumers likely to buy high performance

tyres are often lured by magazine, TV ads, and even product placement in movies and TV shows.

3. Pricing: Within acceptable levels of quality, introduction of cheaper brand tyres has placed greater pressure on prices. There have been continued rises in imports of cheaper tyres from

China. If tyres are over the price range, most customers will turn away from leading tyre brands.

With modern manufacturing practices, the average cost of tyres has decreased leading to a price

advantage which can be passed on the consumers.

1. Lower input costs Managing raw material costs will allow any given tyre manufacturer to increase

profits over their competition. The recent rise in natural gas and petroleum prices has

placed an increased burden on this aspect of the business. Using e-business technology

has also allowed certain manufacturer to obtain their raw materials at lower costs.

Longterm supply contracts also serve as a common industry strategy to reduce costs.

Outsourcing manufacturing, especially of the lower end, economy tyres, has been a

strategy recently employed as well. Labor costs are another critical cost driver. Properly

executed management and commission structures can help ensure efficiency in the

workplace.

2. Efficient Production Despite the fairly recent trend toward increased differentiation, to compete in the

tyre industry you still have to be a cost leader. After 62 people were killed due to faulty

tyres in 2000, the Firestone recall resulted in National Highway Traffic Safety

Administration passing the TREAD Act increasing test standards, labeling requirements,

pressure monitoring and reporting standards.

3. Low cost Distribution To be low cost distributor in the tyre industry any tyre manufacturer might

consider downsizing their distribution centers, if at all possible, this will lower their cost

distribution. Many companies also eliminate their outside storagetherefore reducing any unnecessary costs. Tyre companies typically adjust their inventory on a quarterly

basis to prevent them from backlogging and loosing money. Also, the smaller firms in

this industry may be too small and are usually spread out all over the world, which causes

them to work together in order to produce efficiently while still maintaining low costs.

4. Tight Control System

32

The overall goal of many of these firms is typically to be highly competitive

while also being a low cost producer. It is very obvious that there is a great opportunity to

capitalize on the growing demand for the American-made tyre on an international basis.

Employees are also working hard on expanding their companys production capabilities, improving productivity and increasing the overall manufacturing that is involved. Also,

many tyre manufacturers prefer to produce their automobile tyres in the U.S. because of

the political instability and country volatility. These are some of the main concerns that

discourage manufacturing in countries other than the U.S and because transport costs for

tyres are typically bulky relative to their prices.

4. Innovation: Ever since the recent economic downturn, consumers are constantly seeking affordable products. Businesses that are able to maintain a degree of creativity and originality

throughout their products, as well as having them accessible at affordable prices, will appeal to a

wide group of consumers. Tyres demand high-tech innovations; these are expenses that only few

tyre companies can afford. The evolutions of tyres stand testimony to the value of innovation.

Disruptive innovation can be the order winner for the future.

33

BRIEF HISTORY

1.) MRF Tyres Ltd.

MRF Limited (Madras Rubber Factory Ltd.) is an Indian based multibillion company manufacturing,

distributing and selling rubber tyres including tubes, flaps, tread rubber and conveyor belts in India and

more than 65 countries abroad also with a presence in coats and paints, toys and motorsports. Started as a

toy balloon manufacturing unit in 1946 by KM Mammen Mappillai in Madras, it started tread rubber

manufacturing in 1952. In few years, it was able to draw out the MNCs that were operating in India and

became the only Indian-owned unit with 50% share of Indian tread-rubber market. From a Pvt. Ltd. Co. it

was converted into a public company in 1961 and manufacture of automobile tyres was started in

collaboration with Mansfield Tyre and Rubber Co. By 1960s it had begun exporting its quality tyres to

overseas markets with its offices in U.S. and Beirut. To increase its base, it ventured into collaboration

with BF Goodrich Tyre Co. for technical knowhow in 1981. Further, the Co. started to grow receiving

constant recognition in quality improvement and customer satisfaction. With its increasing interest in

sports, it also started a cricket training academy Pace Foundation and is involved in car racing, karting

and rallying. Today, MRF is the leading player in the tyre industry with a brand of its own.

2.) Michelin

Compagnie Generale des Etablissements Michelin (Michelin or "the company") is a manufacturer and

seller of tires. It is also engaged in the distribution of navigation systems, as well as in the production of

lifestyle products. The company operates in 170 countries worldwide. It is headquartered in Clermont-

Ferrand, France and employed 113,443 people as on December 31, 2012.

Michelin was incorporated on 28 May 1888. In 1891, it took out its first patent for a removable pneumatic

tyre which was used by Charles Terront to win the world's first long distance cycle race, the 1891 Paris

BrestParis. Michelin has made a number of innovations to tyres, including in 1946 the radial tyre.

Michelin had bought the then bankrupt Citron in the 1930s. In 1934, Michelin introduced a tyre, which if

punctured, would run on a special foam lining, now known as a run-flat tyre.

In 1988, Michelin acquired the tyre and rubber manufacturing divisions of the American B.F. Goodrich

Company founded in 1870. This included the Norwood, North Carolina manufacturing plant which

supplied tyres to the U.S. Space Shuttle Program. Two years later, it bought Uniroyal, Inc., founded in

1892 as the United States Rubber Company.

3.) Apollo Tyres

Its first plant was commissioned in Perambra, Kerala. The company now has four manufacturing units,

one in South Africa, two in Zimbabwe and one in Netherlands. It has a network of over 4,000 dealerships

in India, of which over 2,500 are exclusive outlets. In 1967, Apollo Tyres was registered. In 1991, its

second plant was started in Limda, Gujarat and the third plant in 1995. It started selling tyres for two-

wheelers in 1994. In 2006, it took over Dunlops Africa Operations and expanded operations outside

India. It further expanded acquiring a green field project in 2008 and Netherlands based tyre makers

Vredestien BBV. It sold of its South African operations to Sumitomo Rubber Industries of Japan and

another failure faced by the company was that its proposed takeover of Cooper tyres failed due to months

legal standoffs and delays.

34

4.) JK Tyres

JK Tyre & Industries Ltd is an Automotive Tyre, Tubes and Flaps manufacturing company based in

Delhi, India. The name JK is derived from the initials of Kamlapatji (18841937) and his father Seth

Juggilal (18571922). It is the Radial tire Leader in India and is the only tyre manufacturer offering the

entire range of 4 wheeler radials for Trucks, Buses and Cars. It has a worldwide customer base in over 80

countries across all 6 continents. Headquartered in Delhi, it has six manufacturing centers across Mysore,

Banmore (MP), Kankroli (Rajasthan), and Chennai. It is the manufacturer of Indias largest OTR tyre-

VEM 045, and has 21% market share in passenger car segment. JK Tyre has also enhanced its global

reach by taking over Tornel, a renowned Mexican company, which has 3 plants in Mexico. JK Tyre

started manufacturing tyres in 1977 with a capacity of 0.5 million tyres per annum. It has grown multi-

fold over the years, and currently has a capacity of more than 16.6 million tyres per annum from its 9

plants in India and Mexico. The company has an R&D division, Hari Shankar Singhania Elastomer and

Tyre Research Institute (HASETRI) with headquarters at Kankroli. HASETRI was established in October

1991, and is one of its kinds in Asia.

5.) Ceat Tyres

CEAT tyres is a manufacturer and seller of tires. It works towards construction, preparation, repairing,

importing, dealing and selling of tyres in all types of vehicles.

CEAT (Cavi Elettrici e Affini Torino) was formed in 1924 for electric cables and allied products. In

1958 it was sold to Pirelli and entered India in collaboration with TATA. In 1982 CEAT was taken over

by RPG group which renamed it to CEAT limited. CEAT introduced CEAT Cricket Ratings in 1995 in

association for overall performance rating of cricketers.

6.) Falcon Tyres

Falcon Tyres Limited is an Indian company, marketed under the DUNLOP brand, and is known for its

high quality products with unique patterns and designs. Their clientele includes some of the leading

automotive manufacturers of India, such as Hero Moto Corp, Royal Enfield, Bajaj Auto, Piaggio Vehicles

Pvt. Ltd., Mahindra, Honda Motors, Scooter India, etc. Along with these OEMs, Falcon has a significant

presence in the export and replacement segments of the market as well.

Falcon was incorporated in 1973. With its state-of-the-art plant at Mysore, it was taken over by the Ruia

Group in December 2005. It entered into a Technical Aid Agreement with Sumitomo Rubber Industries

Ltd. of Japan which provided the company access to the latest International technology, new product

range, upgraded product quality and the best processes. The production capacity of the Mysore plant was

gradually augmented from 350,000 tyres a month to more than 1,000,000 tyres a month and is being

further enhanced. A 6 MW co-generation power plant has also been commissioned.

35

PROFILE

1.) MRF Tyres Ltd.

Head Office No.114,Greams Road, Chennai-600006, Tamil

Nadu

Enterprise value 80893.017 ( Rs. in Millions)

Profit 8022.1 (Rs. in Millions) (year ending Sep 2013)

Market Share 24.4%

Number of Employees 15494 (2011)

Brands Wanderer, Supertrekker, Estate, Twintread, Safari

Products and Services Tires- Passenger Cars, Two-wheelers and OTR

Zapper, Meteor, Revz, Sandgrip

Sports Goods- MRF Pace Foundation

Toys-Funskool

Paints & Coats, Conveyor Belts, Precured Treading

System

Markets 65 countries

Production Facilities India and Sri Lanka

Average Growth Rate 8-10%

2.) Michelin

Head Office Compagnie Generale des Etablissements Michelin

23 place des Carmes-Dechaux 63040

Clermont-Ferrand Cedex 9

France

Enterprise value (as of 22-2-2014) $17.43 Billion

Profit $ 1500 million

Michelin's share of the global market (2012) 14.6%

Number of Employees( Dec 2012) 113,443

Brands Michelin, Bfgoodrich, Uniroyal, Tigar, Kormoran,

Lleber, Riken, Taurus, and Warrior

Products and Services Tires- Car, Van, Motorcycle, Scooter, Bicycle,

Motor racing, Truck, Agricultural Equipments,

Earthmovers and Aviation

Travel services- Maps and Guides, ViaMichelin

Lifestyle products- Shop Michelin

Markets (2012) 170 countries

Production Facilities 18 countries

Average Growth Rate +0.84%

3.) Apollo Tyres

Head Office Sector 32

Apollo House, 7 Institutional Area

GURGAON-122001

Enterprise value 6269.76 (Rs. in Crores)

Profit 3125 (Rs. in millions)

Market Share 20.6%

Number of Employees 16000

Brands Apollo, Kaizen, Maloya, Regal, Vredestein

36

Products and Services Acclere, Amazer, Aspire, Hawkz, Quantum,

Dhruv, Krishak

Markets 118 countries

Production Facilities 4 countries

Average Growth Rate 5-6%

4.) JK Tyres

Head Office New Delhi

Enterprise value (as of 22-2-2014) 564.57 (Rs. in Crores)

JK Tyres share of the global market (2012) 14.6%

Number of Employees( 03-09-2013) 5,010

Brands Passenger Car-Ultima XP, Tornado, Vectra, Rally

OTR-VEM AS-E3, E4-SS, VEM-045-E4,

VEM 99E4

Truck Tyre- Jet-One, Jet-R Plus, Jet-R Miles, Jet Xtra

load, Star lug

Products and Services Tyres-Passenger Car Radials, Truck/Bus Bias,

Truck/Bus Radial, LCV, SCV, Farm, Off-The-Road

Markets (2012) 80 countries

Production Facilities 6 in India, 3 in Mexico

Average Growth Rate -0.79%

5.) Ceat Tyres

Head Office Mumbai, India

Enterprise value (as of 22-2-2014) 1,005.26 Cr

CEAT's share of the Indian market (2012) 13%

Number of Employees( Dec 2012) 5,220 (As of 2008)

Products and Services Tires- Trucks and heavy duty vehicles, Light

Commercial vehicles, Earthmovers, Forklifts,

Tractors, Trailers, Cars, SUVs, Motorcycles and

scooters

Markets (2012) 110 countries

Production Facilities 2 countries

Average Growth Rate 6-7%

6.) Falcon Tyres

Head Office FALCON TYRES LTD.

K.R.S. Road, Metagalli

Mysore 570016, India

Enterprise value (as of 22-2-2014) INR 107.31 Cr

Company Size 1001-5000 employees

Brands Dunlop (India), Falcon and Donin (export market)

37

Products and Services Tires- 3 wheeler(auto jap, auto stat, autoking, kargil,

leader, lug, steel, super star), car(pc523), farm, jeep,

LCV, moped(challenger, geo cruiser, magic, maxigrip,

monstergrip, unigrip, zebra y plus, ecostar),

motorcycle(challenger, geo cruiser, magic, maxigrip,

monstergrip, unigrip, zebra y plus, ecostar),

scooter(challenger, geo cruiser, magic, maxigrip)

Markets Mainly India

Production Facilities Mysore

Growth Rate(2012) +0.71%

COMPARATIVE SWOT ANALYSIS

Company Strengths Weaknesses Opportunities Threats

1.) MRF Ltd. Enjoys No.1 position in tyre industry with

brand equity and

loyalty of customers

With wide product portfolio has a good

export market

Has 7 manufacturing facilities in India, a

strong distribution

channel and sound

financial position

Diversification into Funskool, MRF Pace

Foundation and MRF

Racing

Constant innovation and advertising itself

as an eco-friendly tyre

making Co.

Faces volatility in industrial relations

and have faced

problems of labour

unrest (cases of

lockouts reported)

Developing countries with

growing car

consumers

present an

opportunity of

emerging new

markets

Growth of the automobile

industry leading

to more tie-ups

(as it is involved

in B2B

marketing)

Scope of diversification

Strong Competition

with national

and international

brands and price

wars

Volatility in prices and

availability of

raw material as

Indias rubber production is

less than demand

Availability of cheaper

technology

makes it easier

for newer

companies to

enter the market

2.) Michelin Comprehensive brand portfolio and brand

diversity

Global market leaders in earthmover, aircraft

radial and agricultural

tires

Global market leaders in earthmover, aircraft

radial and agricultural

Significant recalls due to defects

Excessive dependence on

external distribution

network

Developing countries with

growing car

consumers

present an

opportunity of

emerging new

markets

Growth of replacement and

Strong Competition

with national

and international

brands and price

wars

Volatility in prices and

availability of

raw material as

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tires

Premium brand image

Extensive operational network enabling

economies of scale

car and van tires

market

Indias

Many stringent regulations

3.) Apollo Tyres

Wide product variety

Excellent geographical coverage

across Asian

European and African

markets

Robust financial condition

Perceived as a premium brand

Overseas manufacturing plants

Low presence in latest car models

Two wheeler/three wheeler presence

non-existent

Not yet an established market leader as a

brand

Increased possibility of

OEM tie-ups

Ever improving transportation

infrastructure

Emergence of India as a hub

for small car

manufacturing

Price Wars

Stiff competition from domestic

and foreign

players

Volatility of prices in key raw

material-Natural

Rubber

Cheaper manufacturing

technologies

4.) JK Tyres Wide dealership network

Premium brand name

Good understanding of customer needs

Continuously innovating and

improving the

efficiency levels

They have successfully received

accreditations of ISO

9000 QS 9001 and

ISO 14001

Steel Wheel initiative -implemented as one

stop sales cum service

center.

Dial a tyre service- an innovative concept,

with the ordered tyre

being delivered at

your doorstep.

They have limited market share due to

presence of other

players

They have low presence in two/three

wheeler segment

Emerging markets and

improved

lifestyle

More tie-ups with automobile

companies

Horizontal and concentric

diversification

Emergence of India as a hub

for small car

production

Volatility in prices and

availability of

raw material

Government Policies with

respect to export

duties, import

duties, tax levied

on automobile

industries

Introduction of other transport

facilities like

metro, monorails

and local trains

Price wars

Stiff competition from national

and international

brands

5.) Ceat Tyres

All vendors ISO certified

Strong brand image

Very high customer satisfaction and hence

brand loyalty

Extensive distributional network

Less significance in international market

Developing countries with

growing car

consumers

present an

opportunity of

emerging new

markets

Improved infrastructure

Tough competition with

national and

international

brands and price

wars

Volatility in prices and

availability of

raw material

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giving push to

demand of

heavy duty tyres

Opportunities in market abroad

Many stringent regulations

6.) Falcon tyres

High quality products

Strong presence in domestic market

Low market share

Negative growth rate in the past

Labor issues

Developing countries with

growing car

consumers

present an

opportunity of

emerging new

markets

Growth of replacement and

car and two and

three wheeler

tires market

Increasing rates of interest

Global economy

Rising cost of raw materials

(natural rubber)

Tax changes

Price war and strong

competition

from global

players

COMPARATIVE VCA

FIRM INFRASTRUCTURE

1.) MRF Tyres

MRF (Madras Rubber Factory) is head quartered at Chennai. They have 6 manufacturing facilities in

India (all in south) in proximity of rubber belt of India, with sales network divided in 4 zones;

east(14), west (23), south(33) and north(27 dealers)- very strong and developed distribution network.

2.) Michelin

Michelins IT organization is segmented into to two regions. First, the worldwide level, MASC (for

Master Resolution Center application) is devoted to the comprehension of resolutions with local

business units. Michelin initiated a program of transformation in 2005 designated SIMPLE

PERCENTAGE / IT, and it was implemented in an evolutionary method in several phases, which

measures the activities of IT through the use of function points. But besides this usefulness of

measure of performances, function points also supports project planning, measuring project progress

and supports setting priorities based on size and scope.

3.) Apollo

Apollo Tyres head office is based at Gurgaon .It also has regional offices in Asia Europe and Africa.

In terms of IT, its integrated using an ERP system, SAP. Right from procurement of raw materials to

the sales and distribution is integrated via SAP. The firm has manufacturing plants across three

continents and supplier dealer networks throughout the world.

4.) JK Tyres

The company has headquarters at Delhi. It has six modern plants in India which are strategically

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located at Mysore, Banmore, Kankroli, and Chennai. It has a worldwide customer base in over 80

countries across all 6 continents.

5.) Ceat Tyres

CEATs organization is segmented into to two regions. The worldwide level, and the domestic level.

With headquarter in India, it has two production facilities in India and Srilanka. While looking

forward to collaborate with major tire producers, currently CEAT produces 9.4 lacs tyre per month.

These are sold majorly in India and exported in other 110 countries.

6.) Falcon

Falcon has state-of-art manufacturing plant in Mysore with production capacity of 1,000,000 tyres a

month. The company has partnered with OEMs and has kept pace by developing tyres for newer models in a short span of time. It has also commissioned a 6 MW cogeneration power plant.

HR POLICIES:

1.) MRF Tyres

MRF has an integrated human resource training .They recruit people from campuses-poly techniques

and and engineering colleges and will be provided on the job training in the plant or sales field.

2.) Michelin

Michelin offers every new employee a personalized welcome and an induction program that enables

them to learn about the Company, its values, strategy and organization, to become familiar with their

work environment, and to build a relationship network. The D-Way program is helping to develop

gender diversity in plants by enabling each facility to analyze their job opportunities for women.

3.) Apollo Tyres

The Academy encourages employees to be a part of workshops, conferences and seminars organised

for professional growth and learning. It has even resulted in networking with diverse communities

across industries, further fuelling the knowledge bank of an employee. The nomination for the

programmes is made by the department heads and the nature of the training imparted is a pulling

factor in itself .The entire gamut of training programmes has acted as a retention tool for Apollo

Tyres. A healthy mix of behavioural and technical learning programmes has brought out a polished

individual.

4.) JK Tyres

JK Tyres aims to be amongst the top 25 best employers in India. It provides a conducive work

environment fostering all-round growth of its employees. They have sports, entertainment, and health

benefit programmes for employees. The company also provides adequate training programmes at

every level of each function. The Company invests significantly in some of the worlds best HR

practices such as talent management programs, executive coaching for developing leaders, creating

mentoring culture in the organization, competency mapping, assessment and development center, 360

degree feedback and management development programs, etc.

5.) Ceat Tyres

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After being acquired by RPG group, CEAT has seen appreciable work culture. It promotes the

freedom given to employees at work and emphasizes on the fact that every employee can make a

difference. CEAT celebrates a number of events ranging from major festivals like Navratri, Diwali to

informal events like dance parties and quarterly connects just to keep the enthusiasm of employees

going. The average worker age at new plant of Halol is 23 years. The shop floor of car radial plant is

managed by all women employees.

TECHNOLOGY:

1.) MRF Tyres

The MRF R&D team has made strides in developing Radial-tyre technology for Indian roads, based

on its cross-ply techno competence. MRF has laid great emphasis on strong R&D and continuous

product up gradation, which has led to the successful development of the unique tyre technology for

cross-ply tyres. Additionally, MRF has developed its very own radial tyre technology to suit the

tough service conditions on Indian roads - for both, the passenger and commercial segments. This has

led to the launch of several innovative products.

2.) Michelin

Michelin enjoys a capacity for innovation unmatched anywhere in the industry, with a technology

center operating in Europe, Asia and the United States, 6,000 people involved in research,

development and process engineering, a portfolio of more than 2,000 patent families being expanded

by 250 new filings a year, and an annual budget of more than 600 million.

3.) Apollo

R&D:-Apollo has ain house R&D centre at Limda plant baroda They also have knowledge transfer

with other companies and also through consulting services.

4.) JK Tyres

Technology has always been the companys driving force. JK Tyre pioneered radial technology in

India way back in 1977. The companys plants are equipped with the worlds most advanced

manufacturing and testing machines. The company recently commissioned a Green Field Project in

Chennai, which is intended to increase the capacity of its plants to 20 million tyres per annum. It also

established the first independent research and testing centre (HASETRI) for developing better

technologies for elastomers and tyres.

5.) Ceat Tyres

Serving over 100 countries with excellent quality of tires, the hunger of CEAT is not satisfied. They

continuously look for the opportunities with their R&D functions support. Currently they seek to

produce various PCR and TBR size tires. With youth as a part of their team CEAT observes active

participation in Quality Circles (QC), Quality and Management (Q&M), and Cross Functional Team

(CFT). CEAT is the first tyre company in India to get the ISO/TS 16949:2002 certification

PROCUREMENT:

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1.) MRF Tyres

MRF tyre sources its raw materials from Kerala. They own few rubber plantations in Kerala. Other

raw materials like synthetic rubber and other chemicals are sourced from throughout the world.

2.) Michelin

Researchers involved in polymer synthesis and materials physics and chemistry work alongside

analytic chemistry experts to understand, design, develop and process engineer raw materials and

components that improve performance. Michelin produces 35% of its synthetic rubber and 70% of its

Truck and Earthmover steel cables.

3.) Apollo

Apollo tyre has a constant set of suppliers for procurement with whom relations have been established

for a long period of time. They have strict supplier quality assurance tests to ensure quality of raw

materials.

4.) Ceat Tyres