Description
The ppt describes how Michelin entered Indian markets.It also features its JV's with indian companies.
Structure of Tire Industry in India
3 major markets
OEM
34.2%
Replacement Market 58.9%
Export Market 6.9%
This was different from the worldwide trend
Worldwide market
• OEM 25% • Replacement 75%
Car tires
Commercial Vehicle tires Line of products among the 3 markets 2 and 3 wheeler tires
LCV tires OTR and agricultural vehicle tires
Exhibit 6 of Case A
1926 – British Company Dunlop set up its factory in Calcutta
•First player Soon 3 foreign players also entered the market
•American’s firestone, Goodyear, Italian Ceat 1960s – Indianization •Emergence of several local players 1980s – Acquisitions and consolidations •Modis bought Firestone subsidiary •CEAT taken over by RPG •Dunlop by Falcon tyres MRF emerged to be the market leader
Tyre industry in India 40 competitors 70 million tyres
4 local players MRF, Apollo, Ceat and JK 75% of sales
Foreign Players Goodyear, Firestone, Italian CEAT
MRF •Market leader – 21% market share •Focus on 3 main markets – Car 2 and 3 wheeler and CV •Very strong distribution network – 2500 sales outlet •70% sales in replacement market •Introduced radial tyres for CV in India
•Main supplier for Volvo trucks and Tata Motors
JK Tyres •Market Share – 20.3% •Pioneer of Radial Tyres india and 85% share of this market •Innovation Strategy •Not present in 2 and 3 wheeler and OTR and Agri vehicles •2 brands – JK tyres and Vikrant •110 sales outlet
CEAT •Market Share – 14% •Production facility in Sri Lanka apart from India •Own brand distribution network – CEAT Shoppe •Widest range of tyres – 17 types •17% of sales from exports •Very large overseas market share – Singapore, UAE and Phillippines
Apollo Tyres •20.5% •140 Apollo Radial World and 48 Apollo Pragati Kendra •8% export to emerging economies like Latin America and Africa •Truck and bus radial tyres •Expected to introduce radial tyres of South American subsidiary in India
Good year was the main tyre supplier to Maruti Bridgestone focussed on OEM market and supplied for Indica
PROS
•Vehicle production increased by almost 2.5 times over a decade •Major growth in car & 2-3 wheelers •Replacement market dominates •Radial tyres-major leap in the usage percentage, car 28% to 85%, but LCV & CV Change by only 1-2% •Low customs duty for 2-3 wheeler tyres as compared to 65% duty for tyres of CV •Huge acceptance of radial tyres show acceptance of newer & better products •Heavy competition in radial tyre market which has newly emerged •Rubber prices on an increase & supply of low quality rubber from Sri Lanka •Price sensitive market
CONS
Post 2000 phase
In the middle of IT boom Disposable income & nuclear metropolitan life on an increase Educated population were getting the purchasing power & becoming increasingly aware Age group of 20 to 40 which are usually experimenters
Demand could be created
Tubeless tyres-growth of 20% per year Not much competition in this category. Only MRF, Apollo, Bridgestone & Goodyear But the width is not yet present So considering the growing car market & advantages of tubeless tyres in car, Indian market might have potential
Wide Geographic Cover
170 countries,71 production facilities in 19 countries, 6 rubber tree plantations
But breakdown of total sales by geographic zone was unbalanced. Focus on Europe & North America
Continuous innovation:
• Radial tyre in 1946 • Tubeless tyre in 1976 • Michelin Energy Green tyre in 1994 • Unseatable PAX tyre in 1996
World
Leader
Close Competition Tyre industry highly concentrated
• Japanese Bridgestone Group • American Goodyear Group
• 3 companies accounting for 54% of world sales. • Sales also concentrated region wise
Strategic for Michelin
Aimed to increase its market share in emerging countries through: •Sale of radial tires for trucks had good prospects
Not a strong presence in Asia (which represents 1/3rd of world sales) with the exception of Japan.
Aimed to increase its market in Asia, particularly in BRIC countries.
Intended to privilege selective capacity investments & acquisitions on these high growth emerging markets.
International expansion through:
• Wholly owned subsidiaries • Joint Ventures
The Indian domestic tire manufacturers dominate the industry almost exclusively
The sales of Michelin is dominated by the Radial tires, which up till now had been growing rather slowly, though this situation is changing
Michelin tires were sold at a premium which is a deterrent for the price sensitive Indian consumer
Michelin itself had only recently made a decision to enter the developing markets extensively, their sales had been dominated by developed markets
India was a high risk market because of its unique consumer pattern, market structure and competitive scenario
Market research conducted by Michelin in 2000 had revealed that penetrative power of luxury radial tires was abysmally low
Entry on its own by setting up a subsidiary
Import
Setting up a production plant in India
Agreements with Automobile manufacture rs Joint Venture with a domestic player
Buying a stake in an Indian Company
Setting up its own-brand distribution network
Current Product Offerring Michelin came to India a decade ago ( as said on the website)
Offers product for India Market for Passenger Cars, Trucks & Buses, TwoWheelers and OTR
•Cars •Tubeless tyres for wide range of cars, radial as well as few varities of cross ply tyres •OEM tie-up with Honda and Mercedes •Distribution program – “ Tyre Plus” •Trucks and Buses •Concentration on radial tyres •International formats of distribution like “Michelin Truck Service Centre” - all Tyres and Tyre related services under one roof at reasonable cost •Tie-up with Volvo •OTR •First company to introduce OTR radial tyres in India
JV with Apollo Tyres in 2003 Till 2005 the tyres were imported from France Supplies Tyres for Honda’s City and Civic model. Current Market Share of 19% worldwide and 8.5 % in India.
Will be setting up a factory in TN by 2012 Plans to invest Rs 7000 cr in next 5 years Planning to go solo as they have already reduced their stake in Apollo( with which they had a JV in 2003) to 7%
Annual volume growth upwards of 3.5%, stronger on the higher added-value segments; Operating margin upwards of 10%;
Inventory capped at 16% of net sales;
A minimum 10% Return on Capital Employed;
Significantly positive and recurring free cash flow.
Gaining a competitive advantage, by tapping the relatively untapped markets of “tubeless tires” Look at creating a partnership with an Indian Company which is more of a strategic and a cultural fit with Michelin
With the Indian Industry entering into a consolidation mode, Michelin can look at possible takeover targets in Indian Markets
Push Strategy to capitalize on the huge growth opportunities in the replacement markets Try to capture the burgeoning rural markets, by creating partnerships at the various stages of the rural distribution network Bring about modifications in the products to better adapt the Indian markets in terms of quality and price
doc_970723948.pptx
The ppt describes how Michelin entered Indian markets.It also features its JV's with indian companies.
Structure of Tire Industry in India
3 major markets
OEM
34.2%
Replacement Market 58.9%
Export Market 6.9%
This was different from the worldwide trend
Worldwide market
• OEM 25% • Replacement 75%
Car tires
Commercial Vehicle tires Line of products among the 3 markets 2 and 3 wheeler tires
LCV tires OTR and agricultural vehicle tires
Exhibit 6 of Case A
1926 – British Company Dunlop set up its factory in Calcutta
•First player Soon 3 foreign players also entered the market
•American’s firestone, Goodyear, Italian Ceat 1960s – Indianization •Emergence of several local players 1980s – Acquisitions and consolidations •Modis bought Firestone subsidiary •CEAT taken over by RPG •Dunlop by Falcon tyres MRF emerged to be the market leader
Tyre industry in India 40 competitors 70 million tyres
4 local players MRF, Apollo, Ceat and JK 75% of sales
Foreign Players Goodyear, Firestone, Italian CEAT
MRF •Market leader – 21% market share •Focus on 3 main markets – Car 2 and 3 wheeler and CV •Very strong distribution network – 2500 sales outlet •70% sales in replacement market •Introduced radial tyres for CV in India
•Main supplier for Volvo trucks and Tata Motors
JK Tyres •Market Share – 20.3% •Pioneer of Radial Tyres india and 85% share of this market •Innovation Strategy •Not present in 2 and 3 wheeler and OTR and Agri vehicles •2 brands – JK tyres and Vikrant •110 sales outlet
CEAT •Market Share – 14% •Production facility in Sri Lanka apart from India •Own brand distribution network – CEAT Shoppe •Widest range of tyres – 17 types •17% of sales from exports •Very large overseas market share – Singapore, UAE and Phillippines
Apollo Tyres •20.5% •140 Apollo Radial World and 48 Apollo Pragati Kendra •8% export to emerging economies like Latin America and Africa •Truck and bus radial tyres •Expected to introduce radial tyres of South American subsidiary in India
Good year was the main tyre supplier to Maruti Bridgestone focussed on OEM market and supplied for Indica
PROS
•Vehicle production increased by almost 2.5 times over a decade •Major growth in car & 2-3 wheelers •Replacement market dominates •Radial tyres-major leap in the usage percentage, car 28% to 85%, but LCV & CV Change by only 1-2% •Low customs duty for 2-3 wheeler tyres as compared to 65% duty for tyres of CV •Huge acceptance of radial tyres show acceptance of newer & better products •Heavy competition in radial tyre market which has newly emerged •Rubber prices on an increase & supply of low quality rubber from Sri Lanka •Price sensitive market
CONS
Post 2000 phase
In the middle of IT boom Disposable income & nuclear metropolitan life on an increase Educated population were getting the purchasing power & becoming increasingly aware Age group of 20 to 40 which are usually experimenters
Demand could be created
Tubeless tyres-growth of 20% per year Not much competition in this category. Only MRF, Apollo, Bridgestone & Goodyear But the width is not yet present So considering the growing car market & advantages of tubeless tyres in car, Indian market might have potential
Wide Geographic Cover
170 countries,71 production facilities in 19 countries, 6 rubber tree plantations
But breakdown of total sales by geographic zone was unbalanced. Focus on Europe & North America
Continuous innovation:
• Radial tyre in 1946 • Tubeless tyre in 1976 • Michelin Energy Green tyre in 1994 • Unseatable PAX tyre in 1996
World
Leader
Close Competition Tyre industry highly concentrated
• Japanese Bridgestone Group • American Goodyear Group
• 3 companies accounting for 54% of world sales. • Sales also concentrated region wise
Strategic for Michelin
Aimed to increase its market share in emerging countries through: •Sale of radial tires for trucks had good prospects
Not a strong presence in Asia (which represents 1/3rd of world sales) with the exception of Japan.
Aimed to increase its market in Asia, particularly in BRIC countries.
Intended to privilege selective capacity investments & acquisitions on these high growth emerging markets.
International expansion through:
• Wholly owned subsidiaries • Joint Ventures
The Indian domestic tire manufacturers dominate the industry almost exclusively
The sales of Michelin is dominated by the Radial tires, which up till now had been growing rather slowly, though this situation is changing
Michelin tires were sold at a premium which is a deterrent for the price sensitive Indian consumer
Michelin itself had only recently made a decision to enter the developing markets extensively, their sales had been dominated by developed markets
India was a high risk market because of its unique consumer pattern, market structure and competitive scenario
Market research conducted by Michelin in 2000 had revealed that penetrative power of luxury radial tires was abysmally low
Entry on its own by setting up a subsidiary
Import
Setting up a production plant in India
Agreements with Automobile manufacture rs Joint Venture with a domestic player
Buying a stake in an Indian Company
Setting up its own-brand distribution network
Current Product Offerring Michelin came to India a decade ago ( as said on the website)
Offers product for India Market for Passenger Cars, Trucks & Buses, TwoWheelers and OTR
•Cars •Tubeless tyres for wide range of cars, radial as well as few varities of cross ply tyres •OEM tie-up with Honda and Mercedes •Distribution program – “ Tyre Plus” •Trucks and Buses •Concentration on radial tyres •International formats of distribution like “Michelin Truck Service Centre” - all Tyres and Tyre related services under one roof at reasonable cost •Tie-up with Volvo •OTR •First company to introduce OTR radial tyres in India
JV with Apollo Tyres in 2003 Till 2005 the tyres were imported from France Supplies Tyres for Honda’s City and Civic model. Current Market Share of 19% worldwide and 8.5 % in India.
Will be setting up a factory in TN by 2012 Plans to invest Rs 7000 cr in next 5 years Planning to go solo as they have already reduced their stake in Apollo( with which they had a JV in 2003) to 7%
Annual volume growth upwards of 3.5%, stronger on the higher added-value segments; Operating margin upwards of 10%;
Inventory capped at 16% of net sales;
A minimum 10% Return on Capital Employed;
Significantly positive and recurring free cash flow.
Gaining a competitive advantage, by tapping the relatively untapped markets of “tubeless tires” Look at creating a partnership with an Indian Company which is more of a strategic and a cultural fit with Michelin
With the Indian Industry entering into a consolidation mode, Michelin can look at possible takeover targets in Indian Markets
Push Strategy to capitalize on the huge growth opportunities in the replacement markets Try to capture the burgeoning rural markets, by creating partnerships at the various stages of the rural distribution network Bring about modifications in the products to better adapt the Indian markets in terms of quality and price
doc_970723948.pptx