2010

MRF Tyres

International
Academy
of Sonam
Management Aggarwal
& PGPM/0911/045
Entrepreneurship 2009-2011
 MRF Tyres
About Company
Title : Public
Founded : 1949(chennai)
Headquarters : Chennai, India
Industry : Manufacturing
Products : Car tyres, Motorcycle tyres

MRF is India's largest tyre manufacturing company, and among the

dozen largest worldwide. It exports to more than 65 countries.

MRF received the highest rankings in the study in four of the five
Factors Determining overall satisfaction with tyres

1) Appearance 3) Traction
2) Durability 4) Handling

History
MRF Ltd. India‟s largest manufacturer of automotive tyres and tubes, as
incorporated as private limited company in1960 to take over the
business of a partnership firm called the Madras Rubber Factory, started
by late Sri. K. M Mammen Mapillai. The company was converted into
public limited company in April 1961. MRF entered tyre manufacturing
in 1962 through a technical collaboration with Mansfield, USA. Over the
years, the company has established its own R&D center and currently
functions independently.

Present

It is also involved in a range of other activities via subsidiaries. Funskool

India, a Joint venture between Hasbro and MRF, is a major toy
manufacturing company in the country. MF Pretreads offers world class
precured tyre retreading service, and MRF Muscleflex is involved in
making conveyor belts. It is presently under the leadership of Vinoo
Mammen, son of the late K.M. Mammen Mappillai.

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Mr. Arun Mammen - Managing Director of the Company w.e.f April 1,
2004.

Other Activities

MRF has been involved in the development of cricket through its

sponsorship of many cricketers and MRF Pace Foundation. At one point
of time, MRF was the bat sponsor of world-class batsmen including
Brian Lara, Sachin Tendulkar and Australian captain Steve Waugh.

Sachin now uses Adidas bats, and MRF are currently sponsoring
Gautam Gambhir and Rohit sharma two other members of the Indian
cricket team.

Recent Forays

tested to weather the toughest conditions on any road. With more than
85 tyre variants, MRF holds the highest market share of 22% in terms of
sales volume in the tyre industry.

MRF also manufacturers its MUSCLEFLEX brand of conveyor belting at

one of the most at the most advanced “ State of the Art”, facilities in
India.

MRF pretreads is yet another innovation from MRF industries which is

the most advanced procured retreading system in India.

Become the first domestic company to venture into the niche area of
developing and manufacturing of aviation tyres branded “ Aero Muscle”
for helicopters and aircrafts which targeted the defense sector.

Competitors

 Apollo tyres
 JK tyre and Ind
 Ceat
 TVS Srichakra

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Comparison With Competitors

Companies Last price Market cap Sales Net Profit Total

(RsCr) Turnover Assets
MRF 5802.95 2461.11 5672.845 253.02 2082
Apollo 53.05 2673.85 4071.55 108.12 2051
JK 172.05 706.43 4922.00 18.89 1677
Ceat 133.40 456.81 2555.99 -16.12 949
TVS Srichakra 184.90 141.58 576.35 8.97 222

Ratios Analysis for the year 2008

 Liquidity Ratios
 Current Ratio(times) = 1.31
 Quick Ratio(times) = 0.67

 Turnover Ratios
 Average collection period(days) = 37
 Average creditors(days) = 61
 Average Inventory(days) = 69

 Solvency Ratios
 Long term debt equity ratio(times) = 0.65
 Interest coverage ratio(times) = 3.82

• The long term debt equity ratio is pretty healthy.

• The raw material costs form a major chunk of overall operating
expenditure and so any fluctuation in that area could effect the
company‟s overall prospects adversely.
• This is also visible from the fact that the operating margin is very low
as can be deducted from the PAT/ total income percentage.
• The current ratio and Quick ratio are pretty decent.
• The intense competition in the sector has also had its impact on the
company going by its PAT/ Total Income percentage.

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SWOT Analysis

Strengths

 Established brand name(key in the replacement market)

 Extensive distribution network.
 Good R&D initative

Weakness

 Cost pressure
 Pricing Pressure
 High Capital Intensive

Core Competencies

Undisputed market leader

* Recall

Its leadership position, coupled with its strong brand recall and high
quality, MRF commands the Price Maker status. MRF has strong
presence in the T&B segment, the largest segment of the tyre industry
and commands around 19% market share in the segment. It holds
second place in the passenger cars.

* Complete Market Coverage

Over the years MRF has created a formidable product line, length,
breadth to serve every segment. Its complete market coverage is one of
the reason why it is undisputed market leader today.

Brand Recognition And Brand Recall

When it comes to top of mind brand recall , MRF beats rest of the
competition hands down. MRF has for long concentrated on aggressive
brand promotion. Sports celebrities and event endorsements have been a
major vehicle for their brand promotion activities.

Strong Exports :-

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Exports account for around 12% of the gross sales in MRF. The company
exports to over 65 countries worldwide. Its largest tyre exporter in South
Africa. Over the past decade, MRF has improved its technologies and
tyre quality significantly, to compete effectively with other players in the
International Market. Most of its exports are non-radial, nylon cross ply
trees, are exported to other developing countries such as Sri Lanka.

Dealer Relations

 MRF has aggressively pursued a PULL Marketing Strategy

to sell its tyres.
 In a pull strategy the manufacturer uses advertising, promotion
and other forms of communication to induce the consumers to
demand the product from the dealers.
 MRF therefore almost exclusively concentrates on Brand
awareness exercises, such as advertisements and
endorsements.
 Compared to other tyre manufacturer, MRF pays a little attention
to incentivizing the dealers.

Yet dealer are motivated to stock MRF tyres simply because they have
high brand retail recall and so the customer demands it.

Collaborations

MRF had collaborated with automobile OEM‟s who source their tyres
from MRF India are:-

 Maruti
 Mahindra and Mahindra
 Tata Motors
 General Motors

Basis for Segmentation – Vehicle type

There is very little direct interaction between the company and the
customer. Tyre companies sell mostly to dealers in the replacement
market and to OEM‟s

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MRF :- The complete Market Coverage Approach

M1(cars) M2(Trucks) M3(2wheelers)

P1 Touring Tyres Economy High grip

P2 Sports Tyres Mileage Touring

P3 Economy Tyres Endurance Best-fit Tyres

Target Customers

 The Indian passenger car owner

 OME‟s- Original Equipment Manufacturer
 Tyre dealers

Business Model

Business to business Partner

Differentiation and Positioning Strategies

Being a homogeneous product, there is not much difference in

products offered by competing tyre manufacturer. However,
companies do try to differentiate themselves by outdoing one another in
some points of Parity such as Quality, safety, tread design,
economy etc.

* Establishing category membership :-

MRF Tyres with muscle : The MRF muscleman, clearly states the
category membership MRF subscribes to MRF communicates to the
customer its superior endurance and strength. The Co sponsors, a
number of sports such as cricket and rlly racing, to position its tyres as
high endurance and sporty. Its slogan “ Tyres we Race, are Tyres you Buy
„‟ stands testimony to their membership.

* Value Proposition :-
Value proposition are a set of benefits that companies offer to satisfy
customer needs. It answers the customer‟s question,- „‟ What is in it for
me?”
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 * MRF- Endurance guarateed:-

MRF prides itself in making tyres that go into some of the most trying
conditions on Indian roads. Consequently, MRF offers a compelling
value proposition to heavy vehicle owners as well as passenger car and
two wheeler owners. Quality Tyres that endure in the worst conditions. It
drives home this macho message through its mascot, the MRF
muscleman.

Pricing Strategies

MRF – Price Leader

MRF have long been leaders in the passenger car tyre segment. By the
virtue of their market share, they have traditionally been price makers.

MRF using the Mark UP Pricing Method

The tyre industry being a very raw material intensive industry, the input
costs mainly decides the price of tyres. Infact, 90% of a tyres cost
comprises of its raw material costs. Marup pricing is the common pricing
method followed across the tyre industry. This involves adding a
standard markup to the tyre‟s production cost.

Financials of MRF Quarterly Annual

Income Statement (Dec '09) (Sep '09)
Net Sales 1656.30 5672.84
Other Income 6.04 25.36
PBDIT 254.94 716.72
Net Profit 119.41 253.03

Balance Sheet
Total Share Capital 4.24
Net Worth 1361.42
Total Debt 292.79
Net Block 933.56
Investments 148.57
Net Current Assets 285.84
Total Assets 1654.21

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