Tire Industry in Industry; PEST Analysis

GUJARAT TECHNOLOGICAL UNIVERSITY

REPORT
ON
RISK MANAGEMENT
NARMADA COLLEGE OF MANAGEMENT
BHARUCH
AS PARTIAL REQUIREMENT FOR THE DEGREE OF
MASTER OF BUSINESS ADMINISTRATION
(M.B.A)

ACADEMIC YEAR: 2018

SUBMITTED BY

AKSHAY JIREMALI (2002)

KIRAN GOHIL (2021)

M.B.A. (SEM-4)

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 Tire Industry in Industry; PEST Analysis

INTRODUCTION

In today’s world of intense competition and rapid dynamism, all the companies worldwide are
tuning their focuses on the customer. Suddenly, the customer had succeeded in capturing all the attention
of the companies towards him, so much so, that the once famous maxim, “customer is the god” has
become so true and relevant today. There has been a “paradigm shift” in the thinking of these companies
and none other then the customer has brought this about.

Earlier there was a sellers market, since goods and services were in short supply and the sellers
use to call the shots. But, ever since the advent of the era of globalization, there has been total
transformation in the way the customers being perceived. Today, marketers are directing their efforts in
retaining the customers and customers’ base. Their focus has shifted towards integrating the three
elements people, service and marketing.

The customer’s importance has assumed imponderable proportions in today’s world, because of
the inherent value that the customers command. A customers can “make or break” a company. It is the
responsibility of every company to see that all its customers are equally satisfied with them, for one single
dissatisfied customer will tell at least nine others about the dissatisfaction and will spark off a chain
reaction and spell doom for that company. In such scenario, retention of the existing customers assumes
diabolical proportion. Research has thrown light on some important aspects of customers’ retention it has
been proved empirically that acquiring new customers can cost five times more than the cost involved in
satisfying and retaining current customers.

In the past, the customers was taken for a ride, as there were not many players in the fields, not
much importance was attached to product safety, quality, service and product appeal. The attitude of the
manufacture was that of “caveat – emptor”. Thanks to the government policies on liberalization,
globalization and privatization (LPG), the market scenario has changed today. Today, the customer has a
host of defense mechanism like the customers protection laws, regulation of the government, the powerful
hands of the organization, customers’ courts, switching to substitute or competitors that offer at
competitive prices, etc. The maxim,” caveat – emptor” has been replaced by “caveat venditor”.

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In the past, after sales service was consider as a cost center, Companies were lethargic in
attending to customers complaints. Availability of trainee service personal and quality genuine spare parts
posed serious problems. However, with the rising competition, there could not be much product
differentiation, as price and quality were comparable and latest technology was to each and every
company in the field. Since, there could not be much differential a tangible assets, the companies
concentrated on the “intangible assets”, namely the “service factor”, which served as a major
differentiator. Today after sales service is an important aspect of every company, and it is no more
considered as a cost center, but considered as a profit center. Every organization strives hard to retain its
existing customers at any cost since it is five times costly to get a new customers, then to retain an
existing customers. Today most of the industries use information technology to best services to their
customers.

HISTORY OF APOLLO TYRE COMPANY

“People deliver innovation

Innovations deliver success

A few of the difference our people made”

1975 Inception

1976 Registered as a company

1977 First Plant commissioned in Perambra(Cochin, Kerala)

1991 Second Plant commissioned in Limda (Baroda, Gujarat)

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 Tire Industry in Industry; PEST Analysis

1995 Acquired Premier Tyres in Kalamassery (Cochin, Kerala)

1996 Exclusive Tubes Plant Commissioned in Ranjangaon (Pune, Maharastra)

2000 Exclusive Radial Capacity established in Limda

2000 Established APOLLO TYRES Health Care Clinic for HIV. Aids awareness

2003 Expansion of passenger car radial capacity to 6600 tyres per day

2004 Production of India’s first H-Speed rated tubless passengers car radial tyres

2004 Support in setting up India’s first emergency medical service in Baroda

2005 APOLLO TYRES health care clinic in Udaipur in Rajasthan and Kanpur in Uttra
Pradesh

2006 Expansion of passenger car radial capacity to 10000 tyres per day

2006 Expansion of passenger car range to include 4x4 and all terrain tyre

2006 Acquired Dunlop tyres international in South Africa and Zimbabwe

2006 Opening of Apollo tyres health care clinic in Ukkadam, Tamilnadu

2006 Launch of Dura Tread, trading material and solutions

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 Tire Industry in Industry; PEST Analysis

2006 Launch of India’s first range of ultra high performance V and W-speed rated
passenger car radial

2007 Launch of Regal Truck and Bus radial tyres

2007 Launch of Dura tyres, retreaded tyres from Apollo

2007 Launch of the Apollo Tennis Initiatinve and Mission 2018

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 Tire Industry in Industry; PEST Analysis

PEST ANALYSIS OF TIRE INDUSTRY

Tire Market in India is growing strongly and their production increasing from every year. In
2005, there were 40 tire manufacturing companies working in India which was consisted of
major big brands in tire industry such as Good year, MRF, Falcon Tires and Bridge stones etc.
we apply pest analysis on this market to check at what extent political, economical, technological
and social factors are affecting this tire industry in India.

POLITICAL:

The government policy is much favored too local manufactures as said by the managing director
of Goodyear India in 2005 that the tire market in India was almost exclusively dominated by
local players and 90% of all tires on the Indian market were made and sold by the local Indian
companies so Big companies like Good year, Michelin etc are hardly visible in India

Tire Industry “Indianized”

Government is providing more leverage to the local market that the foreign tire
companies coming towards India. In 1926, when big giants in tire manufacturing like Dunlop,
American firestone, Goodyear and Italian Ceat had much capital started their production plant in
India than this had been a big treat for the local tire market. So Indian Government Immediately
took an action and made a policy that if any foreign tire manufacturing company wanted to start
their tire business in India than they had to act as locally and their names also seemed like locally
such as Dunlop changed into Dunlop India and from Goodyear to Goodyear India. This
“Indianized” process speeded up with the acquisition of most of the subsidiaries of foreign
companies that operated in India: Firestone was bought by Modis in the early 1980s and Ceat
and Dunlop were taken oven by RPG.

Agreements with other foreign companies:

There are many contracts and agreement of Indian companies with other foreigner companies
which are as follows:

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 Tire Industry in Industry; PEST Analysis

 Under the Bangkok agreement, car and two wheelers tires were imported from china and
South Korea at 10 percent custom duty. These imported tires had an average price 30
percent lower than tires sold by Indian companies. Some Indian companies like Apollo
and JK tires tried to collaborate with Chinese companies in order to jointly produce cross
ply tires.
 In 1984, there was a agreement between the Indian and Japanese companies to get the
model of Maruti 800 from Japanese company.
 Ford and Dacia Logan are soon to be manufacture under the agreement by the Indian
company with the foreign companies.

ECONOMICAL:

Growth of tire industry:

The tire industry is growing in India day by day. In 1926, first tires were made by British
company Dunlop. This gave rise to flourish of tire industry in India. When Cross ply tires were
first introduced than 65 % of tire sales in India were covered by cross ply tires. But with the
introduction of radial tire, radial tires represented 85% of car tire sales by volume. All the tire
manufacturing companies are increasing their shares because tire industry in India is grooming
with every year. In 2005, MRF, Apollo and JK tires had a tough competition and had a tough
competition between them.

Increases price of raw material:

The prices of natural rubber and petroleum, which are essential components for the
manufacturing of tires, becoming higher and higher which is badly effecting the tire
manufacturing industry.

TECHNOLOGY:

Technological creation in the Indian tyer industry is in effect geared to expansion

research, connection the adjust of tread design, back up material etc. on the whole

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of the key players do not employ in basic explore due to the elevated expenses
involved. The base of information for the home firm has been during reverse
engineering, combined venture and collaboration.

The stress given by Indian tyer companies to applied research and the setting up of
well-equipped in house R&D center by the companies.

Technology up stage Indian tyer technology has exhibit flexibility in maintain

inflow of technology in the course of foreign collaboration and couture the same to
Indian wants R&D is basically trade or market driven. But basic inputs suppliers
could also help in conceive new projects.

SOCIAL:

presently small families are demanding for 2/4 wheelers for individuals. The sales

of tyers have gained more in past decade. from upper class families with more than
1 car per family observed to be increasing demand of a tyers exponentially, mainly
In cities where working couple find difficult to maintain them without more than 1
car. As we know foe its saving frenzy has now been slowly warming up to an idea
of EMI and buying on credit. due to these factors, there is an enormous demand In
passenger cars.

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 Tire Industry in Industry; PEST Analysis

Michael Porter’s five forces model

1) Bargaining power of supplier

Bargaining power of suppliers can be segregated in two parts according to the demand of
industry.

Rubber

There are two reasons behind this being low first one is most of the tyre firms get150 days credit
for buying the rubber from international market which is not the case if they buy it from
domestic rubber growers. And the second reason is, this credit is being offered at LIBOR, which
is the London Inter-bank Offered Rate. It is the rate of interest at which banks borrow funds from
other banks.

Other Petro chemical based material (Carbon black, Nylon tyre cord etc.)

The power of suppliers is high in this category as India is limping back in case of Petro based
raw materials like carbon black and chemicals which account low in quantity terms but are high
cost generators. Also the price of NTC fluctuates in line with the prices of Caprolactam (a
petroleum derivative)-it¡¦s main raw material. The prices of these materials are beyond control of
tyre industry.

2) Bargaining power of buyers

This can be seggeregated into two parts as follows.

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 Tire Industry in Industry; PEST Analysis

OEM's

The OEMs are always in strong position when the bargaining power of buyers is concerned. The
reason behind this is most of them are having contract with their relative tyre manufacturer under
which the prices of tyre remains stable for this OEM irrespective of market price. The benefits
are given to them as they are buying in bulk and the relation gives the tyre firms some thing
called brand association.

Replacement

The scene in replacement segment is quite reverse as the bargaining power for the replacement
segment is moderate due to the fact that the buyers are not that strong as compared to OEMs.
The demand in buses and truck segment is always high because of Indian poor road conditions
apart from this the purchase is made in small units.

3) Threat of substitute

It is moderate or as the industry is facing opposition from retreading sector all over the globe.
This cheaper option, around 20-25% of the original tyre cost, is present in developed countries
since some decade back. And this is heading to wards strong position here in India too.

4) Threat of new entrants

The threat of new entrant is moderate or can be described as low because the industry is highly
capital intensive and the level of technological expertise required is also highly specific.

But if we see from domestic (Indian) industry's point of view, this better can be defined as high.
The reason being, global tyre industry is already seeing mergers and acquisitions in order to
restructure. And as of now India and China going to be the hub of activities as far as tyre
industry is concerned due to low production cost as well as other relevant benefits. So for any of
the global big shot Indian company will be a good option to go for.

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 Tire Industry in Industry; PEST Analysis

5) Industry rivalry

High, because gradually the overseas players are expanding their wings over Indian tyre industry
and also a limited and every player is moving towards automated technology, like ERP and
SCM.

Apart from the aforementioned reason, the industry is seeing high competitive scenario at present
because of various reasons like rising input costs, low realizations from growing OEM segment
where the vehicle manufacturers are not ready to share the burden of tyre firms, the portion of
replacement pie continuously taken away by the retreading sector which is slowly but firmly
rising its head and that to in high realization segment of Bus-Truck tyres and last but not the least
the unorganized sector is always there to give head ache to these established players like CEAT,
JK, Apollo and MRF etc.

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 Tire Industry in Industry; PEST Analysis

SWOT Analysis

Parent company Apollo

Category Tyer industry
Sector Automobile
Slogan Go to distance
Usp Stronghold over the Indian tyer market

Stp

Segment Automobile and industry equipment manufacturers/OEMs

Target Passenger car, LCV, HCV, SUVs, Agricultural and off the road
group vehicle manufactures, users and service provider.

Positioning Luxury, style, utility & Safety

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 Tire Industry in Industry; PEST Analysis

SWOT Analysis

Strengths 1. Wide product variety

2. Excellent geographical coverage across Asian, European and

African
3. Good financial position

4. Good brand awareness about the product

5. Over 4000 dealership in India, and over 900 in South Africa
6. Has manufacturing plants at India, SA, Zimbabwe and
Netherlands

Weaknesses 1. Low presence in latest car models.

2. Low presence in 2/4 wheeler segment
3. Bran yet to establish itself like the market leaders.
Opportunities 1. Emerging markets and improves lifestyle
2. More tie-up with Automobile companies as it’s mainly into
B2B markets.
3. Improve infrastructure has fuelled more and more
transportation.
4. Emergence of India a hub for mall car production.
Threats 1. Price wars
2. Stiff competition from national and international brands
3. Cheaper technologies
4. Volatility in price and availability of raw material as India’s
rubber production is less than its demand.

5. Government policies W.R.T export duties, import duties, tax

levied on automobile industries and economic conditions of nation
as it determines the sale of automobile.

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