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The Threat of Rivalry

NUMBER OF
COMPETITORS

Industry growth

Few major players, MRF


has the most market
share
4
ICRA expects the tyre
industry to report a
growth of 4%-8% over the
next three years

Fixed cost/ storage cost

2.5

Differentiation

2.5

Switching cost

1.5

Opnenness of terms of
sale

Excess capacity

Strategic stakes

Asset specialization

Fixed cost of exit

Govt. restrictions

Long storage life, no


specific maintenance
required for the storage
Radial and tubeless tyres
being the special products
No built in switching costs
associated
Terms and policies are
open to all the firms

No strategic stakes

Radial tyres and tubeless


tyres are special products

No Govt. restrictions

Average

2.5

The Threat of Entry


Economies of scale

Requires huge capital, 330


cr of capital

Product differentiation

3.5

Requires differentiation
like grip, tubeless, radial,
off road, racing etc

Customers highly value


the brand of the tyres and
are loyal to them

Brand identity

Switching cost

Access to channels of
distribution

3.5

Capital requirement

Access to
technology/know how
Access to raw material

Govt. protection

Average

No implicit cost associated


with switching
No easy access to
distributed channels,
requires effort amd time
to setup
Huge capital required to
setup a tyre
manufacturing plant

Not easily available,


require heavy R&D cost

Raw material easily


available, natural &
synthetic rubber, nylon
fabric, steel/copper wires
No protection from govt.,
anyone can enter the
market

3.2

The threat of substitute


Available of close
substitute
Switching cost

4.5

Tanks tracks, Manglev,


Hovercraft, no close
substitute
Very high cost associated

Substitute price value

Profitability of producers of
substitute

Average

Substitutes have no direct


impact on tyres, used
mainly in defence
4.125

The bargaining power of buyers


Number of buyers

Availability of substitutes

Along with major


automobile companies
many vehicle owners are
the customers of tyres
No close substitutes

Switching cost

No in built switching cost

Backward integration

No automobile company
makes tyres nor willing to
make in future
Have significant
contribution to the
vehicles performance
specially in racing and
tough terrain
Not significant cost
contribution to vehicles
total cost
Automobile industry is in
profit

Contribution to quality

Contribution to cost

Buyers profitability

Average

3.5

The bargaining power of suppliers


Number of suppliers

Availability of substitutes

Switching cost
Suppliers Threat of
forward integration
Industrys threat of
backward integration
Contribution to quality

Industrys importance to
suppliers

Average

Overall average

Many suppliers available


for raw rubber and
synthetic rubber
50 % comsumption of
rubber is in tyre industry
No switching cost in built

2
4

No rubber producers are in


tyre industry
No tyre makers produce
rubber nor they are
planning
Average contribution to the
quality, quality depends
majorly on the process
As the tyre industry is the
50 % consumer of the
rubber industry

3.26