Scenario study

Tyre Industry
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We, group II presents our tyre Industry scenario study. Though we made a humble proposal, on how to enter the industry as a new player, our plans are not void of mistakes. Please coperate.

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overview OF INDUSTRY
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MAJOR PLAYERS MRF CEAT JK APPOLO BRIDGESTONE TVS GOODYEAR FALCON

These companies produce 80% of the entire industry. Turnover estimated to be 20,000 crores by 2014. 4/29/12 (present turnover in units 50 million.)

maJOR ISSUES IN INDUSTRY

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HIGH COST OF RAW MATERIALS RUBBER DUTY NOT CUT YET IMPORTS OF RADIAL AND LUXURY TYRES LOW AVAILABILITY OF RUBBER

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INDUSTRY SUMMARY2010
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DOMESTIC DEMAND OF TYRE 9-10% ANNUALLY RADIAL TYRES@ INFLECTION POINT 2.2 BILLION $ FDI IN NEXT 5 YEARS REPLACEMENT SECTOR FAST GROWING IMPORTS TO SLOW DOWN EXPORTS TO TAKE BACK SEAT WITH EXPONENTIAL DOMESTIC

USAGE GROWTH
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RISING INPUT COSTS POSE BIG CHALLENGE.

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MACRO ENVIORNMENT
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RAW MATERIALS USED:Natural rubber Styrene butadine (synthetic rubber) Carbon black Silica Sulphur Vulcanizing accelerators, anti-oxidents, textile fabric,

steel. 4/29/12

Macro enviorment
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GOVERNMENT Anti- dumping duty on china/thai tyres (upto 90$/tyre) Export duty on natural rubber - 20%. Plea to reduce import duty to 7.5% by ATMA rejected. Maximum ceiling limit of 20.46Rs on rubber import.

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Macro enviornment
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ECONOMIC CONDITIONS Tyre sales have direct correlation with GDP Exise duty brought down from 14% to 10% Improved infrastructure better roads- more car sales Increased purchasing power of youth Strong revival in automobile field after depression.

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Macro environment
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SOCIAL AND CULTURAL Increased living standard of middle class Attitude of youth- love towards speed and class-

better luxury car sales

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Car is no more seen as a luxury item. Gradual shift

from, esteem/status need to Security need, as per Maslows heirarchy.

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Macro environment
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LOBBYING POWERS ATMA (AUTOMOTIVE TYRE MANUFACTURERS

LOBBYING FOR REDUCTION IN IMPORT DUTY OF RUBBER

ASSOSIATION) -

AND RISING DUTY ON DUMPING OF SECOND HAND TYRES. AFFLENT LOBBY WITH LOT OF FINANCIAL BACKING.

RUBBER GROWERS LOBBY (STRONG LOBBY WITH BACKING OF

POLITICS AND SENTIMENTAL ATTACHMENT OF BEING FARMERS, LOBBYING FOR INCREASED IMPORT DUTY ON RUBBER IMPORT, SO AS TO PREVENT CHEAPER RUBBER FROM ASEAN)

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BUSINESS PLAN
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WE WILL ENTER THE TYRE INDUSTRY WITH EXCLUSIVE

PRODUCTION OF LUXURY TYRES (COVERING ONLY 1.7% OF TOTAL TYRE MARKET OF LUXURY TYRES, PRESENTLY SUPPORTED BY IMPORT AND THE ONLY INDIAN COMPETITOR IN THIS SECTOR BEING BRIDGESTONE TURANZA)

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Usp
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USP or Unique Selling Proposition of our company is

that, we offer PUNTURE-PROOF TYRES.

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The proposition must be one that the competition

either cannot, or does not, offer. It must be unique either a uniqueness of the brand or a claim not otherwise made in that particular field of advertising.
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Having only one direct competitor in the sector,

makes it a duopoly, and the USP provides us almost monopolistic powers. 4/29/12
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Watch advertisement.

Objectives of entry
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Production and supply of tyres to OEMs of premium

segment car manufacturers as per their own standards, at a cheaper rate than at which they are importing.
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Capturing replacement sector, now dominated by

Bridgestone, by massive advertisement and USP

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Capturing the remodeling and customization industry

with attractive price schemes. (when compared to the imported tyres used now) 4/29/12

Initial outlay
Annual Capacity 1.5 Million (10,00,000) 1.5 Million (10,00,000) Type Cross-Ply Outlay 4000-6000 Million

7000-8000 Million The major Barrier in entering the tyre industry is the huge initial outlay. Luxurywe are concentrating only on Since Punture-Proof 3500-4000Million 2,00,000 Only premium tyres with limited production to cater to an exclusive segment initially, our initial outlay will be less.

Radial

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Production requirements
Segment Luxury cars OEM Existing Cars (replacement) Customization Market Inventory /stock Contingency Demand (Optional) Total estimate 4/29/12 Prod estimate 5000*(4+1) 20,000*(1) (avrge replacement) 10,000*4 10,000*4 75,000 Total prod. 25,000 20,000

40,000 40,000 75,000

2,00,000

RAWMATERIALS
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Our own rubber plantations based in Lonavla,

Maharashtra will supply RSS-4 grade natural rubber, needed for production initially (as the initial production is just 2,00,000 units), which will solve the raw material bottleneck.
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As we expand/diversify, we plan to import natural

rubber.

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Pricing strategy
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Demand for luxury segment remains more or less

inelastic, due to predictable demand and priceinsensitive Consumer segment.

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Therefore, Price Skimming Technique to be used set

relatively high price (since it is a premium segment and strong USP) for the product and tries to break even at the earliest, before the competition gain momentum, in R&D and develop similar products.

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Pricing
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Since we use a a Patented USP, and a very strong one

in the segment, we have the advantage of having early adopters of this technology and besides, this product is a premium luxury product where at this level, consumers are less price sensitive.
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So the ideal strategy will be skimming. Will also help

us to cover initial costs.

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Pricing
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Limitations of skimming policy

Attract competition since we have a patented USP,

we have unique product differentiation which will help us overcome direct/inderect competition.
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Low inventory turn over rates compensated by huge

retailer promotion techniques.

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We sacrifice High sales for high profit.

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Location
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Plant Location: Maharashtra, since 4 major luxury cars manufacturers

(Mercedes, Audi, Volkswagen, BMW) are having their only plant in Maharashtra, this helps in direct OEM negotiations and lesser freight charges for the same.
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Plant build with estimated capacity only, but however

with a lot of expansion capabilities, provided, we brach out further, in future. (so that fixed cost incurred will be the same.) 4/29/12

competition
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Direct competition

In this segment, we face direct competition of from

Bridgestone, TURANZA Series of tyres, the only premium car tyres produced in Inida. (Bridgestone only concentrates on Replacement market, and the USP makes ours more superior.)
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MRF has a Wanderer Premium segment but is limited only to

SUVs.
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We face indirect competition from imported premium tyres

(we overcome this by providing same standards with attractive pricing)

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STRATEGY
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OEMS IMPORT TYRES AT PRESENT SCENARIO. SAME STANDARD

TYRES, MANUFACTURED BY US, WILL OFFER THEM CHEAPER, BUT QUALITY ALTERNATIVE. WILL TIE UP WITH OEMS, BEFOREHAND AND BECOME A SUPPORT INDUSTRY .
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SINCE IMPORTED TYRES ARE PRICED MUCH HIGHER, CHINESE/THAI

TYRES PRICE REMAIN HIGH BECAUSE OF ANTI DUMPING DUTY AND BRIDGESTONE TURANZA PRICES WILL BE HIGHER, BEACAUSE OF THEIR FRIEGHT CHARGES AS THEIR FACTORY IS LOCATED IN BENGAL, WE WILL HAVE AN EDGE OVER ALL COMPETITION.
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USP MAKES US WELL-SELLABLE.

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Strategy
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The technology we use, is imported from a foreign

company, called Rhino, and is patented. We understand that this may attract competitors, but the patent will force them to turn to R&D which will take time (give time for our company to be established).
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No other company except Bridgestone is having a

premium segment tyre manufacturing plant. The time delay for establishment of such a plant will give us a headstart.

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strategy
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After break even, we intend to shift to car

tyres(radial), or premium bike tyres as per market conditions then.

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Our production plants will be meeting our minimal

production replacement initially and the facility will have expansion possibilities, to accommodate futureexpansions.

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Swot analysis

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Thank you
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We appreciate your cooperation and apologize for any

mistakes, (known or unknown).

GROUP 2.

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