Apollo Tyres

Parent Company

Apollo

Category

Tyre Industry

Sector

Automobiles

Tagline/ Slogan

Go the distance

USP

Stronghold over the Indian tyre market

STP

Segment

Automobile and industry equipment manufacturers /OEMs

Target Group

Passenger cars, LCV, HCV, SUVs, Agricultural and off the road
vehicle manufacturers, users and service providers.

Positioning

Luxury, Style, Utility & Safety

SWOT Analysis
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

Strength

6. Has manufacturing plants at India, SA, Zimbabwe and

Netherlands
1. Low presence in latest car models.
2. Low presence in two/three wheeler segment

Weakness

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
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.

Threats

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.
Competition
1. Bridgestone
2. CEAT
3. MRF
4. Continental
5. Goodyear
6. Yokohama

Competitors

7. Pirelli

Michael Porter's Five Forces Model, a way to look at IndianTyre Industry.

Michael E Porter's five forces model is any day a best tool to

analyze any business industry. So with thisarticle I have tried to
look at Indian Tyre Industry through Porter's view.
Bargaining Power of Suppliers
A low concentration of suppliers means there are many suppliers with limited bargaining power. Low
concentration of suppliers positively affects Tyre Industry Assignment. "Low Concentration Of Suppliers
(Tyre Industry Assignment)" has a significant impact, so an analyst should put more weight into it. "Low
Concentration Of Suppliers (Tyre Industry Assignment)" will have a long-term positive impact on the this
entity, which adds to its value. This qualitative factor will lead to a decrease in costs. "Low Concentration Of
Suppliers (Tyre Industry Assignment)" is a difficult qualitative factor to defend, so competing institutions will
have an easy time overcoming it."Low Concentration Of Suppliers (Tyre Industry Assignment)" is a difficult
qualitative factor to overcome, so the investment will have to spend a lot of time trying to overcome this
issue.
When suppliers are reliant on high volumes, they have less bargaining power, because a producer can
threaten to cut volumes and hurt the suppliers profits. This can positively affect Tyre Industry Assignment.
"Volume Is Critical To Suppliers (Tyre Industry Assignment)" is an easily defendable qualitative factor, so
competing institutions will have a difficult time overcoming it."Volume Is Critical To Suppliers (Tyre Industry
Assignment)" is a difficult qualitative factor to overcome, so the investment will have to spend a lot of time
trying to overcome this issue.
When critical production inputs are similar, it is easier to mix and match inputs, which reduces supplier
bargaining power; a positive for Tyre Industry Assignment. "Critical Production Inputs Are Similar (Tyre
Industry Assignment)" has a significant impact, so an analyst should put more weight into it. "Critical
Production Inputs Are Similar (Tyre Industry Assignment)" is an easily defendable qualitative factor, so
competing institutions will have a difficult time overcoming it."Critical Production Inputs Are Similar (Tyre
Industry Assignment)" is a difficult qualitative factor to overcome, so the investment will have to spend a lot of
time trying to overcome this issue.

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 rawmaterials like carbon black and chemicals which account low in quantity terms
but are high costgenerators. Also the price of NTC fluctuates in line with the prices of
Caprolactam (a petroleumderivative)-its 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.
OEM's
The OEMs are always in strong position when the bargaining power of buyers is
concerned. Thereason 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 aregiven to them as they are buying in bulk and the relation
gives the tyre firms some thing calledbrand association
Replacement
The scene in replacement segment is quite reverse as the bargaining power for the
replacementsegment is moderate due to the fact that the buyers are not that strong as
compared to OEMs. Thedemand in buses and truck segment is always high because of
Indian poor road conditions apartfrom 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. Thischeaper option, around 20-25% of the original tyre cost, is present in developed
countries sincesome 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
highlycapital 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. Thereason 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 concerneddue to low production cost as
well as other relevant benefits. So for any of the global big shotIndian company will be a
good option to go for.
5) Industry rivalry
High, because gradually the overseas players are expanding their wings over Indian tyre
industryand 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 presentbecause of various reasons like rising input costs, low
realizations from growing OEM segmentwhere 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 risingits head and that to in high realization
segment of Bus-Truck tyres and last but not the least theunorganized sector is always
there to give head ache to these established players like CEAT, JK, Apollo and MRF etc.

Porter's five forces model on Automobile Industry

1. Barriers to Entry - It's true that the average person can't come along and start manufacturing automobiles. The
emergence of foreign competitors with the capital, required technologies and management skills began to undermine the
market share of many automobile companies. Globalization the tendency of world investment and businesses to move
from national and domestic markets to a worldwide environment, is a huge factor affecting the auto market. More than
ever, itis becoming easier for foreign automakers to enter the Domestic market .Automobiles depend heavily on
consumer trends and tastes. While car companies do sell a large proportion of vehicles to businesses and car rental
companies (fleet sales), consumer sales is the largest source of revenue. For this reason, taking consumer and business

confidence into accountshould be ahigher priority than considering the regular factors like earnings growth anddebt load .
2. Threat of Substitutes - Rather than looking at the threat of someone buying a different car, there is also need to also
look at the likelihood of people taking the bus, train or airplane to their destination. The higher the cost of operating a
vehicle, the more likely people will seek alternative transportation options. The price of gasoline has a large effect on
consumers' decisions to buy vehicles. Trucks and sport utility vehicles have higher profit margins, but they also guzzle
gas compared to smaller sedans and light trucks. When determining the availability of substitutes you should also
consider time, money, personal preference and convenience in the auto travel industry. Then decide if one car maker
poses a big threat as a substitute.
3. Competitive Rivalry - Highly competitive industries generally earn low returns because the cost of competition is
high. The auto industry is considered to be an oligopoly (A market condition in which sellers are so few that the actions of
any one of them will materially affect price) which helps to minimize the effects of price-based competition. The
automakers understand that price-based competition does not necessarily lead to increases in the size of the
marketplace, historically they have tried to avoid price-based competition, but more recently the competition has
intensified - rebates, preferred financing and long-term warranties have helped to lure in customers, but they also put
pressure on the profit margins for vehicle sales. Every year, car companies update their cars. This is a part of normal
operations, but there can be a problem when a company decides to significantly change the design of a car. These
changes can cause massive delays and glitches, which result in increased costs and slower revenue growth. While a
new design may pay off significantly in the long run, it's always a risky proposition
4. Bargaining Power of Suppliers - The automobile supply business is quite fragmented (there are many firms). Many
suppliers rely on one or two automakers to buy a majority of their products. If an automaker decided to switch suppliers,
it could be devastating to the previous supplier's business. As a result, suppliers are extremely susceptible to the
demands and requirements of the automobile manufacturer and hold very little power. For parts suppliers, the life span of
an automobile is very important. The longer a car stays operational, thegreater theneed for replacement parts. On the
other hand, new parts are lasting longer, which is great for consumers, but is not suchgood news for parts makers.
When, for example, most car makers moved from using rolled steel to stainless steel, the change extended the life of
parts by several years.
5. Bargaining Power of Buyers -The bargaining power of automakers are unchallenged. Consumers may become
dissatisfied with many of the products being offered by certain automakers and began looking for alternatives, namely
foreign cars. On the other hand, while consumers are very price sensitive, they don't have much buying power as they
never purchase huge volumes of cars.

Example : Porter's 5 Forces Model of the NANO car

There is continuing interest in the study of the forces that impact on an organisation, particularly those that can be
harnessed to provide competitive advantage. The ideas and models which emerged during the period from 1979 to the
mid-1980s were based on the idea that competitive advantage came from the ability to earn a return on investment that
was better than the average for the industry sector. As Porter's 5 Forces analysis deals with factors outside an industry
that influence the nature of competition within it, the forces inside the industry (microenvironment) that influence the way
in which firms compete .

BARRIERS TO ENTRY
Time and cost of entry - Time is most essential thing while launching a product in any market. The launch of the NANO
is quite viable as the demand of the small car is on the rise in the market. By the cost of the entry we mean the initial
capital required to set up a new firm is very high, it makes the chances of the chances of new entrants are very less.
Knowledge and Technology - Ideas and Knowledge that provides competitive advantage over others when patented,
preventing others from using it and thus creates barrier to entry. The TATA motors have great knowledge/ experience in
the automobile industry and has renowned technological advantage because of the recent acquisition and mergers.
Product Differentiation and Cost Advantage - The new product has to be different and attractive to be accepted by the

customers. Attractiveness can be measured in the terms of the features , price etc. At this level the price of the NANO
car was one thing that is attracting customers. And above all this the image , trust the name TATA carries with it.
Government Policy and Expected Retaliation - Although government's job is to preserve free competitive market, it
restricts competition through regulations and restrictions. The government tried to promote the TATA Motors to start a
plant by providing land and tax rebates. But the unexpected retaliation by the local people surface in the setting up of the
plant which costed the company a lot.
Access to Distribution Channels - When a new product a launched a well developed distribution is must for its
success. The TATA motors had a advantage of well established distribution channel across the world.

SUBSTITUTES
Price band - The threat that consumer will switch to a substitute product if there has been an increase in price of the
product or there has been a decrease in price of the substitute product. If the price of the NANO car will increase the
main expected customers ie the one switching from bike to car will not move to car and will remain in the bike only. Thus
the price is kept checked in this manner.
Substitutes performance - The performance of the substitute sector will also play a important role in the success of the
NANO car. If the price of the Bike segment increases or the price band of the small segment fall , it will have effect on the
quantity required in the market. Its just on the price but also the features and the other services associated or it may be
the status symbol story. The success of the electric car segment with player like REVA can also effect the demand of the
NANO.
Buyers willingness - Products with improving price/performance tradeoffs relative to present industry products. It will
determine the willingness of the buyer to but the NANO car.The willingness of the customers to go forward try the new
product in the market ie 'NANO'. They might be willing to go for the test products like Maruti 800 , Santro etc.

COMPETITIVE RIVALRY
Number and Diversity of Competitor - This describes the competition between the existing firms in an industry. the
current Business Policy & Competitive Strategy scenario, the small car market in India is very competitive with players
like Maruti Suzuki, Tata Motors, Hyundai etc. which was pretty much dominated by Maruti. But with launch of Nano the 1
lakh car the whole momentum of the market has shifted. Now to be competitive in market other companies have to either
slash rates of their existing model or have to go back to the drawing board and build again.
Price Competition - Advertising battles may increase total industry demand, but may be costly to smaller competitors.
Products with similar function limit the prices firms can charge. Price competition often leaves the entire industry worse
off. NANO is the only player so it has the price freedom but as the Maruti and Honda are also planning to launch the car
in the same segment the price competition will start.
Exit Barriers - Even if the product fails in the market its not that easy for the company to exit the market just like that
because of the heavy investment it has made in the initial stage. If the NANO fails or falls flat the TATA motors will not be
in a state to slow done the product even when NANO production line can be used by the other products after few
modification as for NANO only the new product line were setup and huge cost were incurred.
Product Quality - Increasing consumer warranties or service is very common these days. To maintain low cost,
companies consistently has to make manufacturing improvements to keep the business competitive. This requires
additional capital expenditure which tends to eat up company's earning. On the other hand if no one else can provide
products/ services the way you do you have a monopoly. NANO enjoys the monopoly are there are no competitors in this
segment.

BUYERS
Switching Costs - If switching to another product is simple and cheap the customers does not think much before doing
it. In case of NANO car the switching cost from bike to car is too high. Thus increasing the demand of the car many fold.
Number of customers/ Volume of sales - If there are few buyers then they are able to dictate the terms. They pull
down the cost by Bargaining. The bargaining power of buyer is high as there are lot of choice available to the buyer and
the service do not vary from one manufacturer to the other. They force the manufactures to improve the quality. All this
can be clearly seen in the case of NANO car the price tag at which it has been offered or the quality of the NANO car no
compromises has been done at any front.

Brand Image - The brand image of the TATA and the segment in which the NANO has been the most attractive thing in
the entire package.

SUPPLIERS
Number and Size of Suppliers - A company to manufacture its products requires raw material, labor etc. If there are few
suppliers providing material essential to make a product then they can set the price high to capture more profit. Powerful
suppliers can squeeze industry profitability to great extend. In case of NANO the supplier are limited and the size of the
suppliers are big enough to bring about the controlling power in the price of the car. The NANO car has more than 128
suppliers in all and the major portion of the building cost of the car is the parts supplied by the suppliers.
Unique Service / Product - Suppliers' products have few substitutes. Supplier industry is dominated by a few firms. The
some parts of the NANO car are obtain from the supplier who them are big enough and limited substitutes are available
against them. So the entire production line depends upon them only.
Ability to substitute - Suppliers' products have high switching costs. In many case even when substitute are available
its not that easy to opt for substitute as the next product in the assembly line depends upon it. If the change in the any
part is brought about the long list of depended parts also have to be changed , which in most cases is not feasible to do.

Tata motors strengths

The internationalisation strategy so far has been to keep local managers in new acquisitions, and to only transplant a
couple of senior managers from India into the new market. The benefit is
that Tata has been able to exchange expertise. For example after the Daewoo acquisition the Indian company leaned
work discipline and how to get the final product 'right first time.'

Tata Motors Limited acquired Daewoo Motor's Commercial vehicle business in 2004 for around USD $16
million.

The company has had a successful alliance with Italian mass producer Fiat since 2006. This has enhanced the
product portfolio for Tata and Fiat in terms of production, knowledge exchange , logistics and its infrastructure.

In the summer of 2008 Tata Motor's successfully purchased the Land Rover and Jaguar brands from Ford
Motors for UK 2.3 million. Two of the World's luxury car brand have been added to its portfolio of brands, and
has undoubtedly off the company the chance to market vehicles in the luxury segments.

NANO is the cheapest car in the World. The range of Super Milo fuel efficient buses are powered by superefficient, eco-friendly engines.
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