Scenario Study

8/3/2019 Scenario Study

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Scenario study

Tyre Industry

We, group II presents our tyre Industry

scenario study. Though we made ahumble proposal, on how to enter theindustry as a new player, our plans arenot void of mistakes. Please coperate.


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overview OF INDUSTRYvMAJOR PLAYERS

vMRF GOODYEAR

vCEAT FALCON

vJK TVS

vAPPOLO

vBRIDGESTONE

These companies produce 80% of the entire industry.

Turnover estimated to be 20,000 crores by 2014.

(present turnover in units 50 million.)


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maJOR ISSUES IN INDUSTRYvHIGH COST OF RAW MATERIALS

vRUBBER DUTY NOT CUT YET

vIMPORTS OF RADIAL AND LUXURY TYRES

vLOW AVAILABILITY OF RUBBER


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INDUSTRY SUMMARY2010vDOMESTIC DEMAND OF TYRE 9-10% ANNUALLY

vRADIAL TYRES@ INFLECTION POINT

v2.2 BILLION $ FDI IN NEXT 5 YEARS

vREPLACEMENT SECTOR FAST GROWING

vIMPORTS TO SLOW DOWN

v

EXPORTS TO TAKE BACK SEAT WITH EXPONENTIAL DOMESTICUSAGE GROWTH

vRISING INPUT COSTS POSE BIG CHALLENGE.


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MACRO ENVIORNMENT

vRAW MATERIALS USED:-

vNatural rubber

vStyrene butadine (synthetic rubber)

vCarbon black

vSilica

vSulphur

vVulcanizing accelerators, anti-oxidents, textile fabric,

steel.


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Macro enviormentvGOVERNMENT

vAnti- dumping duty on china/thai tyres (upto 90$/tyre)

vExport duty on natural rubber - 20%.

vPlea to reduce import duty to 7.5% by ATMA rejected.

vMaximum ceiling limit of 20.46Rs on rubber import.


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Macro enviornmentvECONOMIC CONDITIONS

vTyre sales have direct correlation with GDP

vExise duty brought down from 14% to 10%

vImproved infrastructure better roads- more car sales

vIncreased purchasing power of youth

vStrong revival in automobile field after depression.


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Macro environmentvSOCIAL AND CULTURAL

vIncreased living standard of middle class

vAttitude of youth- love towards speed and class-

better luxury car sales

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

from, esteem/status need to Security need, as perMaslows heirarchy.


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Macro environmentvLOBBYING POWERS

vATMA (AUTOMOTIVE TYRE MANUFACTURERS

ASSOSIATION) - LOBBYING FOR REDUCTION IN IMPORT DUTY OF RUBBERAND RISING DUTY ON DUMPING OF SECOND HAND TYRES. AFFLENT LOBBY WITH

LOT OF FINANCIAL BACKING.

vRUBBER 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 PLANvWE 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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UspvUSP or Unique Selling Proposition of our company is

that, we offer PUNTURE-PROOF TYRES.

vThe 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.

vHaving only one direct competitor in the sector,

makes it a duopoly, and the USP provides us almost

monopolistic powers.

v

Watch advertisement.


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Objectives of entryvProduction 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.

vCapturing replacement sector, now dominated by

Bridgestone, by massive advertisement and USP

vCapturing the remodeling and customization industry

with attractive price schemes. (when compared to the

imported tyres used now)


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Initial outlay

Annual Capacity Type Outlay

1.5 Million(10,00,000) Cross-Ply 4000-6000Million

1.5 Million(10,00,000)

Radial 7000-8000Million

2,00,000 Only Luxury Punture-Proof 3500-4000MillionThe major Barrier in entering the tyre industry is thehuge initial outlay. Since we are concentrating only onpremium tyres with limited production to cater to anexclusive segment initially, our initial outlay will be less.


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Production requirements

Segment Prod estimate Total prod.

Luxury cars OEM 5000*(4+1) 25,000

Existing Cars(replacement)

20,000*(1)(avrgereplacement)

20,000

CustomizationMarket

10,000*4 40,000

Inventory /stock 10,000*4 40,000ContingencyDemand(Optional)

75,000 75,000

Total estimate 2,00,000


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RAWMATERIALSvOur 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.

vAs we expand/diversify, we plan to import natural

rubber.


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Pricing strategyvDemand for luxury segment remains more or less

inelastic, due to predictable demand and price-

insensitive Consumer segment.

vTherefore, 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 gainmomentum, in R&D and develop similar products.


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PricingvSince 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.

vSo the ideal strategy will be skimming. Will also help

us to cover initial costs.


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PricingvLimitations of skimming policy

vAttract competition since we have a patented USP,

we have unique product differentiation which will help

us overcome direct/inderect competition.

v

Low inventory turn over rates compensated by hugeretailer promotion techniques.

vWe sacrifice High sales for high profit.


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LocationvPlant Location:

vMaharashtra, since 4 major luxury cars manufacturers

(Mercedes, Audi, Volkswagen, BMW) are having theironly plant in Maharashtra, this helps in direct OEM

negotiations and lesser freight charges for the same.

vPlant 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.)


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competitionvDirect competition

vIn this segment, we face direct competition of from

Bridgestone, TURANZA Series of tyres, the only premium cartyres produced in Inida. (Bridgestone only concentrates on

Replacement market, and the USP makes ours more superior.)

vMRF has a Wanderer Premium segment but is limited only to

SUVs.

vWe face indirect competition from imported premium tyres

(we overcome this by providing same standards with

attractive pricing)


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STRATEGYvOEMS 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.

vSINCE 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.

vUSP MAKES US WELL-SELLABLE.


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StrategyvThe 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).

vNo other company except Bridgestone is having a

premium segment tyre manufacturing plant. The timedelay for establishment of such a plant will give us a

headstart.


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strategyvAfter break even, we intend to shift to car

tyres(radial), or premium bike tyres as per market

conditions then.

vOur 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 youvWe appreciate your cooperation and apologize for any

mistakes, (known or unknown).

vGROUP 2.

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Scenario Study