Business to Business

Project: Apollo Tyres

Group Member: Harikesh Pandey A - 31 Shradha Jha A - 16 Priyanka Jethva A- 15 Tejashree Kadam B Naved Shaikh B - 44

Introduction to the Company : Apollo Tyres Ltd

Apollo Tyres Ltd is the world's 7th biggest tyre manufacturer, with annual consolidated revenues of Rs 121.5 billion (US$ 2.5 billion) in 2011. It was founded in 1976. Its first plant was commissioned in Perambra, Kerala. The company now has four manufacturing units in India, one in South Africa, two in Zimbabwe and 1 in Netherlands. It has a network of over 4,000 dealerships in India, of which over 2,500 are exclusive outlets. It gets 59% of its revenues from India, 28% from Europe and 13% from Africa. Apollo tyres was awarded the FICCI award among large industries category for the best Quality systems. It is planning to become the 10th biggest tyre manufacturer in the world with annual revenues of $6 billion by 2016. On 12 June 2013, it is reported that Apollo Tyres Ltd would buy US-based Cooper Tire & Rubber Company for about $2.5 billion in a deal that would make it the world's seventhlargest tyre maker. Apollo's cash offer of $35 per share represents a premium of about 43 percent to Cooper's share price on the New York Stock Exchange. Apollo Tyres, which does not currently operate in the United States, gets two-thirds of its revenue from India. The acquisition of Cooper, the world's 11th biggest tyre company by sales, will give Apollo access to the US market for replacement tyres for cars and light and medium trucks. The two companies had combined sales of $6.6 billion in 2012.

What Industry it belongs to?

Tyre Industry
Technology generation in the Indian tyre industry has witnessed a fair amount of expertise and versatility to absorb, adapt and modify international technology to suit Indian conditions. This is reflected in the swift technology progression from cotton (reinforcement) carcass to high-performance radial tyres in a span of four decades. Globalization has led to the linking of the economies of all the nations and therefore major Indian players in the tyre industry are pursuing global strategies to enhance their competitiveness in world markets. The present section broadly undertakes an overview of the Indian tyre industry through an examination of its growth trends with respect to production, exports and acquisition of technological capabilities. Key Features At present there are 40 listed companies in the tyre sector in India. Major players are MRF, JK Tyres, and Apollo Tyres & CEAT, which account for 63 per cent of the organized tyre market. The other key players include Modi Rubber, Kesoram Industries and Goodyear India, with 11 per cent, 7 per cent and 6 per cent share respectively. Dunlop, Falcon, Tyre Corporation of India Limited (TCIL), TVSSrichakra, Metro Tyres and Balkrishna Tyres are some of the other significant players in the industry. While the tyre industry is largely dominated by the organized sector, the unorganized sector is predominant with respect to bicycle tyres. The industry is a major consumer of the domestic rubber market. Natural rubber constitutes 80% while synthetic rubber constitutes only 20% of the material content in Indian tyres. Interestingly, world-wide, the proportion of natural to synthetic rubber in tyres is 30:70 The sector is raw-material intensive, with raw material accounting for 70% of the total costs of production Total production figures in tonnage: 11.35 lakh MT & total production of tyres in all categories: 811 lakh (2007-08)

 Current level of radialization includes 95% for all passenger car tyres, 12% for light commercial vehicles and 3% for heavy vehicles (truck and bus) Restrictions were placed on import of used /retreaded tyres since April 2006 Import of new tyres & tubes is freely allowed, except for radial tyres in the truck/bus segment which has been placed in the restricted list since November 2008 Total value of tyre exports from India is approximately Rs 3000 crore (2007-08) The major factors affecting the demand for tyres include the level of industrial activity, availability and cost of credit, transportation volumes and network of roads, execution of vehicle loading rules, radialization, retreading and exports. Production

Fig 1: Category-wise tyre production in India for 2007-08 & 2008-09 with percentage of change Source: Automotive Tyre Manufacturers Association (ATMA). Data available only for two years

Figure 1 displays production figures for different categories of tyres in the year 2007-08 and 2008-09 (April-September). It shows a relatively significant increase in percentage of production of tyres in the segments related to passenger cars, tractors, light commercial vehicles and motorcycles. On the other hand, production of tyres for scooters and mopeds declined by nearly 8 per cent. SALES

Fig 3: Supply of key tyre categories to various segments like replacement market, original equipment market (vehicle manufacturers) and export market for the year 2007-08 Source: Automotive Tyre Manufacturers Association (ATMA). Data available only for two years Tyre supplies are targeted and marketed primarily to the following categories: Replacement market, Original Equipment Manufacturers, Export, Government Supplies and State Transport Undertakings. The replacement market is significant for manufacturers of tyres in the category of motor cycles, scooters/mopeds and tractors, while the OEM segment is significant for the category of passenger cars and jeeps.

Technology generation Technology generation in the Indian tyre industry is essentially geared to development research, involving the change of tread design, reinforcement material etc. Most of the major players do not engage in basic research due to the high costs involved. The source of technology for the domestic firms has been through reverse engineering, joint ventures and collaborations. The emphasis given by Indian tyre companies to applied research and the setting up of wellequipped in-house R&D centers by the companies, which are manned by experts and experienced professionals, have also helped in technology upgradation. Indian tyre technology has exhibited versatility in maintaining inflow of technology through foreign collaborations and tailoring the same to Indian needs. R&D is essentially business or market driven. However, raw material suppliers could also help in conceiving new projects. Compound development and in-process problems have been the main thrust of in-house R&D in the Indian tyre industry. (Iyer & Upadhyay, 2008)

Fig 4: Comparison of R&D Expenditure, Exports, Sales & Raw Materials Expenditure among all companies for the period from 2000-07 Note: The primary vertical axis depicts expenditure on R&D (at current prices) in Rs (crores), while the secondary vertical axis depicts the percentage of exports and raw material expenses in relation to sales. Source: CMIE database (figures generated from the 40 listed companies in the sector) A significant proportion of R&D effort in the tyre sector is carried out by four or five top companies. The proportion of raw material expenditure in relation to sales has witnessed a sharp spurt in 2007. The proportion of exports to total sales continues to be negligible in the tyre sector and a major portion of the sales revenue is garnered through the domestic market. Expenditure on Imported Technology and R&D Intensity: Comparison between Top Ten Firms and All Other Companies in the Tyre industry

Fig 5: Comparison of expenditure on imported technology (at current prices) and R&D intensity among top ten players and all remaining firms (sectoral aggregate) in the Indian tyre sector. Note: The primary vertical axis depicts expenditure on imported technology (at current prices) in Rs (crores), while the secondary vertical axis depicts R&D intensity (in percentages). Source: CMIE database Tyre technology up gradation is an extremely difficult process, particularly in the Indian scenario, due to several factors. First, since tyre technology encompasses various disciplines such as polymer, chemical, steel etc. compromises have to be made in the up gradation of technology because of a) the conflict and complementarity inherent in these disciplines, b) the usage pattern of the tyres and c) the cost factor. Further, a tyres performance could be affected due to factors such as the weather, loading pattern etc. Despite these bottlenecks technology up gradation in Indian tyre industry during the last few decades has been significant. This has been possible to some extent due to government approvals of collaborations with MNCs in this sector. The emphasis given by Indian tyre companies to applied research, the setting up of well-equipped in house R&D centres by large tyre companies, manned by experts and experienced professionals have also helped in technology up gradation. Indian tyre technology has exhibited versatility in maintaining inflow of technology through foreign collaborations and tailoring the same to Indian needs. Automation Tyre production traditionally, is multi-stage, with significant inter-stage differences in the intensity of labour requirement, and a highly complex process involving the use of around 37 different materials including rubber, steel, fabrics and vulcanizing materials. The production system in the Indian tyre industry has been traditionally very labour intensive. The automation of manufacturing processes has increased gradually, which has slashed the size of the workforce to a considerable degree and has effected a change in its composition. The degree of automation has been greater in the area of radial technology, while cross ply technology is still labour intensive. The firms have been resorting to automation in order to tackle problems related to labour unionization and indiscipline in the sector.

The rationale provided by the firms for the increasing drive towards automation of the manufacturing facilities has been that high quality and uniformity of the final product usually cannot be guaranteed with a labour intensive process. (Iyer & Upadhyay 2008). New Policy Initiatives The tyre industry in India has had to grapple with raw material price volatility, rupee appreciation and cheap Chinese imports. In this connection, some of the recent initiatives by the government to facilitate the growth of the sector include:

No WTO bound rates for Tyres and Tubes No restrictions on the import of all raw materials required for tyre manufacture except carbon black, which has been placed in the restricted list

Increasing thrust on development of road infrastructure

Future prospects of the Indian Tyre industry The Indian Tyre industry is expected to show a healthy growth rate of 9-10% over the next five years, according to a study by Credit Analysis and Research Limited (CARE). While the truck and bus tyres are set to register a compounded annual growth rate (CAGR) of 8%, the light commercial vehicles (LCV) segment is expected to show a CAGR of about 14 %. However, we have to also take account of the effect of the global recession on the sector in making these assessments. The growth of the sector is closely linked to the expansion plans of the automobile companies, the governments thrust on development of road infrastructure and the sourcing of auto parts by the global Original Equipment Manufacturers (OEMs). Some significant hurdles towards attaining these projected growth rates could be raw material related price volatility, rupee appreciation and the looming threat of cheap Chinese imports. The Indian tyre companies need to make active efforts to explore newer markets as the existing markets for bus-truck tyres, which account for about 45 % of the total export volume, is nearing saturation. There is also an urgent need to increase the degree of radialization in order to safeguard their share in the export market. Global tyre manufacturers have been making constant efforts to innovate and offer a diverse range of products such as tyres with pressure warning systems, run flat tyres, eco-friendly tyres and energy efficient tyres. In this context, the Indian domestic companies have to pursue a growth strategy of continuous innovation and increasing emphasis on product differentiation.

Segment
Segment:
Automobile and industry equipment manufacturers /OEMs

Target market:
Apollo tyres TG are all groups manufacturing following vehicle: Passenger Vehicles(e.g.) Car Motorcycle Bicycle Bus

Commercial Vehicles(e.g.) Truck(/ lorry) Van Coach Bus Taxicab Trailers Box truck (also known as a straight truck) Off-High Way Vehicles: Pickup trucks All-Terrain Vehicle (ATV) / Motorcycle Motorsports Rally, Desert Racing, and Rock crawling.

Positioning:
Luxury, Style, Utility & Safety.

Vision:
A significant player in the global tyres industry and a brand of choice, providing customer delight and continuously enhancing stakeholder value.

Values:

Customer First Business Ethics Care for Society Empowerment Communicate Openly One Family

Competitors
1. Bridgestone 2. CEAT 3. MRF 4. Continental 5. Goodyear 6. Yokohama 7. Pirelli

Push strategy/Pull strategy? Explain & justify?

Justification:
A push strategy in marketing is used when there has been developed or improved a new product which is unknown to the consumer. As there is no consumer demand in the product launch, the product and the information are "pushed" to the consumer by distribution and promotion. An example of this is a perfume product. Women do not request to smell a fragrance they never smelled before; it is simply "pushed" to them, through the advertisement Due to the information asymmetry the producer tries by signalling to reduce the information gap between the consumer and the product. This is reached by promotion or other services like personal dialog. In the case of Apollo tyres there is no case of customization and hence there is no special demand made by the B2B clients and company makes it accordingly as the technicalities required by the firms for the increasing drive towards automation of the manufacturing facilities relating to high quality and uniformity of the final product usually.

After sales:
The combined companys diversified product offering will serve the passenger car, light and heavy truck, farm, and off-the-road vehicle segments. The extended global reach creates opportunities to provide customers and distributors around the world with increased access to the quality tires they have come to expect from each of their respective brands. Expert help at the Shoppes help you understand the finer nuances of our tyres, and even offer quick and easy tips on tyre care. It also have a team of highly-skilled service professionals who provide prompt after-sales services, including wheel balancing and aligning. Expert help at the Shoppes help you understand the finer nuances of our tyres, and even offer quick and easy tips on tyre care. We also have a team of highly-skilled service professionals who provide prompt after-sales services, including wheel balancing and aligning.

Services

Computerised alignment Computerised balancing Automatic tyre changing Digital tyre inflation Periodic tyre rotation Rim-straightening Nitrogen inflation (select outlets)

Modes of payment
Apollo offers credit card system payment. Online payment options through the terms: Options to pay 5% in advance or 100% online. Tube included in the price for Tube Type Tyres. Prices are inclusive of taxes and delivery charges. The following three ways through which a B2B client can approach online: Select tyres as per size or vehicle type. Check availability and delivery time at your location. Add to cart, avail special offers. Select fitment center or home delivery options. Clients can also pay through cash or card and get discount according to bulk requirements. Credit limit of 30 days can be issued for small purchases and 45-90days for bulk purchases as per contractual legal agreement on written format with the acceptance between both the parties. This offer is available for customers as the Company want to have a good and long relationship with them and ultimately enhancing customer satisfaction resulting into primarily lead generations and secondarily profits along the same time.

Feedback of existing customers:Showrooms are of good conditions and environment is friendly with quick service. Tyres are of good quality efficient on all kachha and pakka roads. Variants are available as showrooms have ready stock available with them Reasonable prices with better offers which suits us with stylus features.

SWOT
Strength 1. Wide product variety 2. Excellent Geographical coverage across Asian, European and African markets. 3. Good financial position. 4. Good Brand awareness about the product. 5. Over 4000 dealerships in India and over 900 in South Africa. 6. Has manufacturing plants at India, SA, Zimbabwe and Netherlands. Weakness 1. Low presence in latest car models. 2. Low presence in two/three wheeler segment 3. Brand yet to establish itself like the market leaders Opportunity 1. Emerging markets and improved lifestyle 2. More tie-ups with Automobile companies as its mainly into B2B market. 3. Improved Infrastructure has fuelled more and more transportation 4. Emergence of India as a hub for small car production Threats 1. Price wars 2. Stiff competition from national and international brands 3. Cheaper technologies 4. Volatility in prices and availability of raw material as indias rubber production is less than its demand 5. Government Policies w.r.t export duties, import duties, tax levied on automobile industries and economic condition of nation as it determines the sale of automobiles.