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Q.1: what is the structure of tire industry in India?

What is the structure of competition in the tire


industry in India?

Exclusively dominated by local players i.e. 90%


Indianized: Acquisition of most of the subsidiaries of foreign companies by local players
Growing strongly due to expansion of automobile market
Two main tire technologies: Diagonal/cross-ply and Radial technology, market dominated by
cross-ply, slow growth of radial tires, contribute 85% of car tire sales by volume
Three major markets: Original equipment manufacturer (OEM) 34.2% sales, replacement
market 58.9% sales, and export market 6.9% sales
More dependence on replacement market due to automobile market expansion
OEM market: Major Indian and non-Indian companies, main buyers: Maruti Udyog, Tata
Motors, Toyota Motors, and various foreign companies, fierce price war: more pressure on
suppliers to reduce prices, more pressure for input costs and quality
Replacement Market: independent garages and dealers, trend towards vertical integration
by tire manufacturers, price conscious customers, focus on imports due to low prices,
collaboration with Chinese companies
Exports: to emerging countries
Multiple line of products in all these markets, commercial vehicle tires sales volume 60%
especially radial tire, but slow growth, car tire sales volume 17% with strong growth,
tubeless tires sales volume 6.3% with strong growth, two-wheeler tiers sales volume 29%
strong growth but less profit, three-wheeler tires sales volume 19%, LCVs and agricultural
vehicle tires sales volume 6%.

Competition:

Consisted of 40 competitors with total production of 70 million tires, four major local players
Increase in R&D costs, increase in cost of entry, growing rivalry, pressure of the carmakers
have leaded to concentration and rationalization of Indian tire industry
Major players have own production facilities and extensive distribution network, close
technological links with foreign companies, specialization in various types of tires
manufacturing, exports to emerging and developing countries, focused markets, long-term
partnerships with vehicle manufacturers.

Q.2: what is the performance and strategy of the main players of the Indian tire industry in India?
Is this industry and its various segments attractive to existing competitors and new entrants?

Headed by MRF with major sales in replacement market, highest production facilities and
extensive distribution network, 21% market share
JK tyres: close technological links with German company, pioneer of radial tires, specialized
in car tire and commercial vehicle tire market, owned production facilities and outlets,
20.3%
CEAT: market share 14%, manufactured different types of tires, large exports, few plants
Birla Tyres: market share 7%, single production facility, target almost all vehicles, export to
more than 43 countries
Apollo Tyres: market share 20.5%, production facilities, own brand distribution network,
export to emerging countries
TVS Sricakra: leader in tires and tubes for two-wheelers
Falcon tyres: wide range of tires, long-term partnerships with vehicle manufacturers, only
cross-ply tires
Goodyear India: two major plants, own distribution network, active in OEM and replacement
markets, doesnt produce tires for two and three wheelers
Bridgestone India: 30% market share in radial car segment, focused on OEM market

Industry:
Indian tire industry as early said is exclusively dominated by local players and Indianized, but it has
strong growth potential due to expansion of automobile market.
For existing competitors: It is attractive due to their dominance, can diversify their product lines,
partner with local and foreign companies to come up with technological improvements, substantial
growth is predicted by tire industry specialists, existing competitors can expand and create barriers
for entry for new players through building more production plants, owning more distribution
channels, investing in R&D, vertical and horizontal integration, benefiting from economics of scale,
and learning curves. They can still opt for product and market developments in other markets.
For new entrants: Indian tire industry doesnt seems attractive as for existing competitors, because
new entrants would need huge investments for their presence in India, they would be faced with
strong competition from local players. Although they can partner with small players but regulatory
compliance and strong market pressure for low prices would not produce positive returns for long
time.
Q.3: what kind of international expansion is pursued by Michelin? What are Michelins economic,
financial, and stock market results? Are they the consequence of a strong and defensible
competitive advantage in the world tire industry?
International expansion: the company expanded through continuous innovation, wider range of
tires, and expansion in its portfolio of brands. It mainly targeted replacement market. It aimed to
serve commercial vehicle tire segment in emerging countries. Its breakdown for sales by geographic
zone was unbalanced. Europe and North America accounted for 85% of its total sales, weak
presence in Asia excluding Japan. It aimed to target the BRIC countries in the future. It intended to
privilege selective capacity investments and acquisitions in emerging markets. It relied on the setting
up wholly owned subsidiaries and joint ventures in target countries. It privileged joint ventures,
where local environment was uncertain and volatile. In Europe and US, it had own-branded

distribution networks. Same radial tires across countries to capitalize on its brands. Strict internal
controls and audits were placed to ensure to specific international expansion strategy.
Economic, financial and stock market results:
Michelin sales declined by 0.6% from 2004 to 2005, its net assets increased by 4.3% from 2004 to
2005, its equity has declined by 1.6% from 2004 to 2005, and its operating profit has increased by
5.31%. Further its stock market has remained above CAC40 Index (France) throughout all periods. It
had 19.4% market share value in the world tire industry in 2004. Its sales and operating profit in Car
and LCV tires, commercial vehicle tires, and specialty vehicle tire has increased from 2004 to 2005.
Its sales in Europe has declined by 6.25% from 2004 to 2005, increased in North America by 2.36%,
and also increased in other geographic zones 15.92%.
Are they the consequence of a strong and defensible competitive advantage in the world tire
industry?
Yes. Because the performance of company like Michelin depends on several factors like: the
intensity of competition in specific geographic zones, advancement in technology, investments in
R&D, diversification of products and markets, establishment of infrastructure for expansion and
particularly change in market needs and nature of industry. Michelin sales has declined due to
intense competition in Europe which contributes to major sale volume for company, although the
company had improved its sales in North America and other geographic regions like emerging
countries but the overall impact of Europe has produced negative results for company. Its increase in
assets is due to developing infrastructure, investing in R&D, developing markets and products in
emerging markets. The decline in equity may be an indicator of weak investor confidence for
investments in emerging markets. Therefore, we can results for Michelin Company may refer to
build strong and defensible competitive advantage in world tire industry.