General Tyre & Rubber Company

A B2B ANALYSIS

By
Urooj Daudpota
Muhammad Khalid Shuja
Salman Awan

Submitted to
Professor Hassaan Ahmed
 Acknowledgement
We would like to acknowledge and extend our heartfelt gratitude to Sir Hassaan Ahmed,
Faculty of Management Science, Bahria University Karachi Campus for whom we made
this report for.

His constant guidance and willingness to share his vast knowledge and expertise pertaining
to B2B marketing helped us with the completion of this report.
 Contents
1. Introduction ................................................................................................................. 1

2. Environment Scanning .................................................................................................... 2

2.1 Macroenvironment .................................................................................................... 2

2.2 Microenvironment ..................................................................................................... 3

3. Business Buying Centers ................................................................................................ 4

4. Product Life Cycle .......................................................................................................... 5

5. Product Strategy .............................................................................................................. 7

5.1 Products of General Tyre .......................................................................................... 7

5.2 Product Demand ........................................................................................................ 8

5.3 Product Mission......................................................................................................... 9

5.4 Tyre Demand Forecast .............................................................................................. 9

6. Value Chain .................................................................................................................. 10

6.1 Value chain model ................................................................................................... 10

6.2 Customers ................................................................................................................ 11

6.3 Pakistani Tyre Industry ........................................................................................... 13

7. Segmentation, Targeting & Positioning:....................................................................... 14

7.1 Market Segmenting ................................................................................................. 14

7.2 Product-Market Structure: ....................................................................................... 14

7.3 Competitors ............................................................................................................. 15

7.4 Positioning............................................................................................................... 15

7.5 Perceptual Quadrant: ............................................................................................... 16

8. Marketing Communication for General Tyre ............................................................... 17

8.1 Communication ....................................................................................................... 17

 8.2 Marketing planning systems.................................................................................... 17

8.3 Marketing control system ........................................................................................ 17

8.4 New product development systems ......................................................................... 17

8.5 Marketing objectives and goals ............................................................................... 17

9. Pricing Strategy............................................................................................................. 18

10. International Strategy .................................................................................................. 19

11. Financials .................................................................................................................... 20

10.1 Competitor financial analysis: ............................................................................... 20

10.2 General tyre financial analysis .............................................................................. 21

 1. Introduction
General Tyre & Rubber Company Pakistan was established in 1963 when General Tyre
International Coporation of USA decided to step its foot in Pakistan. Initially the company
started with a 25 acre plot in Landhi, Karachi, capable of producing only 120,000 tyres
annually.

In 1977 GTIC (USA) sold 90% shares of the company to the current owners Bibojee
Services Ltd, while still retaining 10% ownership in the company. Later on in 1985 General
Tyres went through a major expansion and was resultantly able to produce up to 600,000
tyres per annum.
In 1987, Continental AG (Germany) acquired GTIC (USA) which gave them a 10% share
in General Tyres (Pakistan). The spokesperson of the company claims that Continental AG
gives training to the people at General Tyres, formulations for tyre making and also selects
equipment through approved suppliers for them under a program. Under this program
General Tyres has to make sure that all rules and regulations provided by Continental AG
are followed strictly and that all quality standards are maintained. Continental AG also
owns the brand name “General”.
As of today, General Tyres is capable of producing approximately 2.5 million tyres per
annum, these tyres come in different varieties, suitable for all sorts of vehicles (cars, trucks,
buses, rickshaws, etc.), on top of that General Tyres has a separate plant for the production
of motorcycle tyres, which is capable of producing 1 million tyres per annum. General
Tyres is the first and largest tyre company of Pakistan, it is easy on the pocket and is used
by majority of the domestic auto manufacturers.
Currently, Bibojee Services holds 27.79% of shares in the company, Pak Kuwait
Investment Company holds 30% shares in the company, whereas Continental AG owns
10% shares in the company. The rest of the shares belong to the public.
Mission
 To offer quality products at competitive prices to our customers.
 To endeavor to be the market leader by enhancing market share, consistently
improving efficiency and the quality of our products.
 To improve performance in all operating areas, so that profitability increases
thereby ensuring growth for the company and increasing return to the stakeholders.
Vision
To be the leader in tyre technology by building the company’s image through,
 Quality improvement.
 Competitive pricing.
 Customer satisfaction & meeting social obligations.
1|PAGE
 2. Environment Scanning
2.1 Macroenvironment

Political
Political instability has been a cancer for a Pakistan since decades, add to that the
corruption, interference in different industries by the government, taxation, etc. All of these
factors can have a major impact on the long term profitability of General Tyres, to remain
profitable and excel, General Tyres has to tread carefully in such a politically hostile
environment.
Economic
General Tyres makes use of economic indicators such as Pakistan’s growth rate, inflation,
labor costs, consumer spending, etc. to conceive ideas pertaining to the types of products
they should manufacture, pricing their products and also making their manufacturing
processes as cost effective as possible.
Social
General Tyres has been around for more than 50 years in this nation, they are well aware
of the fact that understanding the attitudes and shared beliefs of the Pakistani people can
help them better develop the perfect marketing message. Having a complete understanding
of the nation’s demographics, cultures, etc. General Tyres has made the perfect product
portfolio which caters to Pakistani people from all different strata.
Technological
Due to the rapid improvements in technology throughout the years, like many other things
automobiles are changing for the better. The tyre industry all around the world has been a
victim of disruption due to swift advancements in technology, cars these days require wider
contact patches on the roads and carefully designed treads that not only improve traction
but also improve mileage. These benefits can only be delivered to the customers by General
Tyres if they can spend on research and development, and be able to offer products of the
same standards that the foreign competitors are offering, such as Michelin, Pirrelli,
Yokohama, Toyo, etc.
Environmental
General Tyres is required by the Government of Pakistan to abide by all laws pertaining to
the environment in Pakistan. The company also takes recycled tyre compound to create
new tyres to reduce their carbon footprint.

2|PAGE
Legal
General Tyres’ makes sures that all its market offerings are patented and cannot be imitated
by the local competitors such as Diamond, Servis, Haq and Panther. Other than that,
General Tyres abides by all rules and regulations set by Pakistan’s government regarding
health and safety within an organization.

2.2 Microenvironment
Strengths

Strong Presence in Pakistan

Except some exceptions, all automobiles manufactured by domestic manufacturers such as
Toyota Indus, Pak Suzuki, Ghandhara Nissan, etc, come standard with General Tyres.
Exceptional Research & Development
Being a stakeholder in the company, Continental AG (one of the world’s largest tyre
brands) aids General Tyres when it comes to development of tyres and formulation of
compounds.
Superior Quality Control
Being under the program of Continental AG, General Tyres has to follow strict regulations
which ensure that no product of substandard quality leaves the factory.
Pricing
General offers tyres of the same profile that foreign competitors offer at a much lower
price.
Weaknesses
Overdependence on the Paksitani Market
Although General Tyres does export its products to Middle-Eastern countries, it mostly
relies on Pakistan for generating majority of its revenue.
Slow Growth in the Export Market
General Tyres is yet to make a major impact in the international market, in the past it has
exported racing car tyres to England, passenger car radials to Kuwait and Dubai, and bus
tyres to Bangladesh and Nepal but it has failed to make a significant impact.

3|PAGE
Opportunities
Export Market
General Tyres has the infrastructure to compete with brands from frontier and emerging
markets such as Barez Tyres in Iran, as it certainly makes products of higher quality than
numerous brands from such markets.
Hybrid Vehicle Segment
General Tyres has yet to manufacture a tyre specifically made for hybrid/electric vehicles
that is quiet and has treads with low rolling resistance which can improve a car’s mileage.
Threats
Foreign Competitors
General Tyres has some of the world’s most well reputed tyre brands such as Bridgestone,
Yokohama, Michelin, Nexen, Continental, etc competing with it in the Pakistani market.
Some of them even offer much more superior products such as Yokohama Advan DB,
Bridgestone Potenza etc.
Used Tyre Market
Smuggled tyres dubbed as “Kaabli” have a high presence in the Pakistani market, people
who do not want to spend a lot on tyres prefer these cheaper alternatives which are
detrimental for their vehicles.
Counterfeit Tyre Manufacturing in Pakistan
Some dubious retailers also sell fake tyres, these tyres are basically extremely cheap and
are of poor quality. People are convinced into buying these because of the cheap ‘great
price’ being offered by the retailer and fake packaging/rebadging of these tyres.

3. Business Buying Centers

 Initiators: Need to replace perceived by the driver of the vehicle
 Influencers: Service engineer, Friends/Family, self-research, technical teams, Firm
owners.
 Deciders: Technical teams
 Buyers: Owner of firms.
 End users: Engineers fixing the parts, Drivers.
 Gatekeepers: Higher management.

4|PAGE
 4. Product Life Cycle

The tyre demand curve has been superimposed over the classical product life cycle curve.
As can be seen tyres follow the classical curve to a remarkable degree. Analysis of the tyre
life cycle leads to the following conclusion: Tyres are currently at the middle of the growth
period (Stage III) of the product life cycle. Demand growth is about 6 percent per year.

An understanding to the role of tyres involves an analysis of product life cycles and
specifically the tyre life cycles. A product life cycle is a forecast of product growth and
length of Life based on an S-curve analysis. It depicts in effect the life of a product in a
time frame. Frequently a product life cycle is projected for a new product prior to
introduction. It is akin to writing an obituary at birth. Product life cycle is related to
technological forecasting and long-range planning. Life cycle analysis is used to anticipate
trends and pinpoint needs. It makes possible incremental analysis (cost of growth).

Some products have life cycles of several months (hula hoops) others have life cycles of
decades (autos tyres aspirin nylon television etc.).

5|PAGE
The life cycle of a product can be generally divided into five categories.

 The first stage is experimentation and development. At this point the product is a
technical innovation that has been subjected to a market assessment.
 Second is the commercialization stage. This is the period of product introduction to
the marketplace. Needless to say many products do not survive this stage. The
concept of customer orientation for example has been developed to decrease this
failure rate.
 Stage III is the period of growth. Product demand is increasing. The size of the total
market is expanding. Often shortages occur. The presence of competitors
accelerates product differentiation. Brand preference makes an appearance.
 Next the product reaches maturity (Stage IV). Demand is levelling off and the
market is becoming saturated. Sales growth parallels population growth. There are
fierce efforts to hold brand preference. Often this stage includes product
differentiation to a fine degree; a multitude of product claims; aggressive
promotional practices; intensive distribution efforts; sophisticated advertising
techniques; ingenious packaging; emphasis on customer service; and sometimes
lowering of prices. The maturity stage of a product can be brief in time or may last
for many years.
 Finally the product reaches a period of decline (Stage V). The product begins to
lose consumer appeal. Overcapacity exists and plants are closed. Prices deteriorate.

Fashion: Product life cycles affected by fashion are usually characterized by a more
rapid growth stage a shorter maturity stage followed by rapid decline. Tyres are
generally unaffected by fashion. Should a fashion occur it will affect product mix only?

6|PAGE
 5. Product Strategy
5.1 Products of General Tyre

Passenger Car Tyres

 Euro star
 Euro glide
 Euro tycoon
 Euro Klass
 Euro Kompact
 XP 2000
 Radial ST
 Euro Kruze
 BG tempo Plus
 BG Trako Plus

Light Truck Tyres

 Super All Grip

 Star Sprinter
 Euro Load
 Power Jet Commercial
 Chief
 Non-Directional
 Traction Rib
 GLT
 BG Vano Plus

Truck & Bus

 Heavy Contract Transport

 Super Loader
 GQT
 Traction Rib
 Super Tiger

7|PAGE
 Tractor Tyres

 Power Lug
 Super Power Lug
 Super All Grip Traction
 Agri Trac
 Agri Rib
 Black Bull

Motorcycle Tyres

 70 CC
 125 CC
 Tubeless Tyres

Rickshaw Tyres

 Chief

5.2 Product Demand

A forecast of growth trends in the product life cycle requires an analysis of the determinants
of demand. The basic factors affecting product demand can be discussed within the
following general groupings: product mission technology fashion and product-market
structure. Each of these categories will be discussed relative to tyres.

8|PAGE
5.3 Product Mission

A product seeking to assume the role of tyres would of necessity be required to have load-
carrying capacity have cushioning ability transmit driving and braking torque produce
cornering force provide flotation provide lateral stability resist abrasion provide steering
response have low rolling resistance and be durable and safe. Add to this fact that a
sophisticated personal transportation system has been developed around tyres and one can
conclude that there is not an immediate competitive threat from a substitute product.

5.4 Tyre Demand Forecast

A tyre demand forecast from the tyre life cycle indicates a continued expansion for tyres.

This can be expected since more leisure time has resulted in an increasing mobility of
people. The bulk of this travel will be by automobile.

A major factor in this projection is the 42500 miles of interstate highway system. The
interstate system represents less than 1 percent of the total highways but accounts for nearly
20 percent of the total vehicle mileage travelled.

9|PAGE
 6. Value Chain

6.1 Value chain model

10 | P A G E
6.2 Customers

General Tyre has wide range of customers because it is one of the oldest tyre company in
Pakistan. Its products are used from motor bike to heavy tractor. Generally interested in
mileage offered, price, type of technology used, product presence in market and services
offered. Deciding factor is cost v/s benefit.

Customer Motorcycle Car tyre Bus Tyre Truck tyre Specialized

Vehicles
Tyre

KARAKORAM
MOTORS (PVT) LTD.

HINO PAK MOTORS

LTD.

AL-GHAZI TRACTORS
LTD.

11 | P A G E
GHANDHARA
NISSAN LTD.

HONDA ATLAS CARS

(PVT) LTD.

INDUS MOTOR
COMPANY LTD.

PAK SUZUKI MOTOR

CO.LTD.

AFZAL MOTORS
(PVT) LTD

12 | P A G E
6.3 Pakistani Tyre Industry

13 | P A G E
 7. Segmentation, Targeting & Positioning:
Traditionally the tyre industry has divided the market into three or even more segments.
Tyre makers have brands to meet these different segments. These are usually characterised
as Good-Better-Best, or Budget-Value-Premium. I think the middle segment is getting
increasingly squeezed as the budget brands develop improved quality and performance,
while the premium brands increasingly generate their profit from products where few
budget brands can compete. General Tyre works on same strategy to cater its customers.

This model has two key consequences. First will be an impact on the sales of mid-range
brands. Second will be that the premium brands will focus more on profitability and margin
and less on volume and gross market share.

7.1 Market Segmenting

Market is spreading in wide range throughout Karachi Sukkhar Lahore Multan Pindi
Peshawar. GTR has four market segments to cater to.
These are:
• The Original Equipment Manufacturers (Vehicle Assemblers).
• The Replacement or the After Market.
• Government Departments / Institutions.
• The Export Market

7.2 Product-Market Structure:

The changing nature of the product market structure will affect product demand. Close
attention must be paid to the demand for the primary product (motor vehicles) that uses
tyres.

14 | P A G E
7.3 Competitors

The Company will compete for all business opportunities vigorously, fairly, ethically and
legally. The Company will comply with all laws, regulating discuss pricing, cost,
production plans, business strategies, or any other proprietary or confidential information
with its competitors

7.4 Positioning

Positioned as the market leaders because the name ‘GENERAL’ carries the highest top of
the mind brand name recall in Pakistan when it comes to tyres. The capacity of the
Company stands at 2.5 million tyres approximately meeting one third of the country’s
demand. General is producing tyre sizes and patterns that cover almost 85% of the sizes in
demand in Pakistan.

15 | P A G E
7.5 Perceptual Quadrant:

16 | P A G E
 8. Marketing Communication for General Tyre

8.1 Communication

General Tyre does the following for its marketing communication:

 Advertising and promotions are rarely used they rather do corporate marketing in
which they find their prospects and provide them with details and pamphlets of
their business.
 They carry out seminars to educate people about tyres.
 They provide consultancy on tyre care and services.
 They deliver lectures on tyre care to drivers and service people.
 They develop programme to suit customer requirements.
 Provide expert opinion on tyre savings.

8.2 Marketing planning systems

Planning system starts by the gathering of timely information and its implication on new
marketing products.

8.3 Marketing control system

Control system comprises with the unique setup of individuals who keeps an eye on new
and old market competitors.

8.4 New product development systems

Developing new products on a fast moving track it has wide variety of products for almost
every vehicle.

8.5 Marketing objectives and goals

The General Tyre & Rubber Company of Pakistan Limited (the “Company”) is
committed to conduct its affairs ethically and lawfully. This Code of Conduct establishes
policies and procedures that are intended to guide employees, officers, and directors in
the performance of their duties and responsibilities and ensure compliance with the
Company's commitment to ethical and lawful conduct. These policies and procedures
shall apply to all employees and officers and directors of GTR.
General Tyre & Rubber Company of Pakistan has the culture and history of undertaking
social and philanthropic activities which reflects the commitment of its sponsors towards
17 | P A G E
the social uplift of the down trodden. During the year, the Company contributed Rs. 1,495
million towards national exchequer under various modes. markets and sell its tyres in
replacement market through more than 100 nationwide authorized dealers most of whom
have been working with General Tyre for more than three decades setting a milestone on
customer loyalty and satisfaction.

9. Pricing Strategy
Strategy used by General Tyre is competitive pricing as there is massive competition in the
market due to which price sensitivity is high.

18 | P A G E
10. International Strategy

19 | P A G E
 11. Financials

10.1 Competitor financial analysis:

20 | P A G E
10.2 General tyre financial analysis

The company currently has 3.4 million units in capacity (FY16: 3.2 million) with
production of 2.3 million units against nearly 2.4 million tons during FY16. The capacity
utilization has come down from 73 percent to 68 percent with a slight slow-down in the
automotive sector during FY17. As capacity has been raised, the company's utilization has
not managed to keep up with the highs of earlier years (FY10: 87%, FY11: 82%). The
capacity has grown by 80 percent between FY10 and FY17, while production has grown
by 50 percent.
Even so, a lot of it, is associated with the changing demand in the automobile industry. The
sector was not performing too great after 2007 which was a peak year in the history of the
industry. The economy continued to get into macroeconomic crises. The turning point
started late 2016 when financing became cheaper as interest rates were reduced, and
inflation remained controlled. Overall growth in demand for vehicles grew as people could
afford buying the vehicles. These dynamics supported higher production.
The biggest segment in terms of volumetric sales remains passenger cars with almost 45
percent share in total. The other major segment is Motorcycle is half as much sales as in
the passenger cars. Volume wise, motorcycle production has been growing dramatically in
the country due to the emergence of new Chinese players but seeing General Tyre's sales
numbers, it seems it has not managed to bag contracts with new players.
The company's sales may have reduced during FY17 as the company went through a
transition to implementing the Enterprise Resource Planning (ERP) system for business
applications and MIS. Switching over, from old system to new, affected sales resulting in
underutilization. The company has been making investments into improving the efficiency
of its plants as well. A new mixing plant was installed which started running during FY17.
The company is now planning a major expansion, as mentioned above that would raise
capacity from the current 3.2 to 4 million tyre sets in the short run and to 6 million tyre sets
thereafter.
Growths in revenues against growth in production however show that revenues have grown
consistently even as production did not grow too much. The company's focus on OEMs
21 | P A G E
may have affected its opportunity to supply to the replacement markets. Though it does
face significantly competition in that market not only from imported tyres from China,
which are much cheaper in price, but also smuggled tyres through porous borders. In fact,
informal studies reveal that nearly 80 percent of the tyre market is being catered to by
imported and smuggled tyres. Even if only the smuggled element is reduced, there will be
40 percent of the market share up for the taking for players like General Tyre.
The company does not have very high margins as it imports raw materials including
synthetic and natural rubber. Input costs are dependent on global movement in commodity
prices as well as exchange rate fluctuations. Margins over the years have gone up and down
between 13 percent and 24 percent over the past seven years.

Recent financials for the nine months of FY18 show despite a growth in revenue of 19
percent, the company saw its net margins drop by 42 percent and gross margin by 26
percent. The revenue growth was supported by higher sales for traditional markets such as
the passenger car segment but also a revival in tractor sales that led to greater volumes of
farm rear tyres (24%) and farm front tyres (19%). Sales to light trucking segment also grew
(18%).
However, the company argues that it could not meet its planned sales target due to the
delay in government tender related sales. In Feb-18, the company also increased the prices
in the replacement market because of the rise in raw material prices and depreciation of
rupee. This may have affected sales here as well since its competitors in the undocumented
sector did not raise prices accordingly as they do not pay taxes.

While the gross margin decline came about due to the aforementioned reasons, especially
the depreciation of rupee that is affecting a lot of companies that import their primary
inputs, the company's net margins dropped on account of higher finance costs and other
overheads as the company embarks on expansion.
Moving forward, the company will likely further pass on the exchange losses and input
price hikes onto its primary customers, if needed. On the flip side, it could inversely see a
growth in sales as rupee continues in decline since imported tyres will become expensive.

22 | P A G E
The company has to strike a balance in pricing its tyre to utilize this opportunity.
General Tyre is a major supplier of passenger car tyres and it would serve well to snag
contracts from the new car ventures that are coming into the market including Kia and
Hyundai. It should already see a growth in the segment due to the organic demand in cars,
plus the upcoming introduction of Nissan Sunny launched by its associate company
Ghandhara.Trucking segment will continue to flourish as new players enter and demand
grows with CPEC activity taking off. Meanwhile, the agriculture sector is also up for a
boost given government support to farmers, and sales tax reduction in the tractor segment.

On the other hand, while some trends indicate strong demand, the economy has entered
into austerity. Interest rates have been raised and may see a subsequent hike going forward
which could affect the affordability of car and motorcycle purchases, since much of them
are bank financing, in turn affecting GYTR's primary business. While individual car buyers
may suffer, institutional car buyers specially those supported by ride sharing apps like
Careem and Uber may find banking products that work out for them.

23 | P A G E