The structure of the tire industry in India
Michelin in India
Questions:
1. What is the structure of the tire industry in India (Five forces in the
industry, strategic success factors in the industry)?
2. What is the structure of competition in the tire Industry of India(Strategic
group mapping, Industry Matrix, and competitive grid)?
3. What is the performance and strategy of the main player of India?
4. Is this industry and its various segments attractive to existing
competitors and new entrants?
5. Please carry out a comprehensive strategic evaluation of the Industry’s
attractiveness as well as an in-depth analysis of the structure of
competition. You are are expected to study the structure of competition
among the different tire makers operating in India. Special attention must
be paid to the six main Indian tire makers—MRF, JK Tyres, Apollo Tyres,
Ceat, Falcon Tyres and TVS strichakra.
6. Position the companies in strategic maps. These maps must be elaborated
according to information and data about the technological, market, and
product strategies of the six tire makers. Secondly, on the basis of the
return on the investment and the return on the equity, you must conduct
a performance analysis for each of the six Indian tire manufacturers and
their economic and financial results.
Solution
What is the structure of the tire industry in India?
The structure of the tire industry is regarded as the fastest growing industry in India. The
industry is expected to grow by 7-9% over the next five years (Chitnis, 2007).
. The industry's performance is affected by five forces namely:
The threat of new entrants
Bargaining power of suppliers
Buyer bargaining power
Threats of new substitutes
Market rivalry
A good performing industry attracts new entrants who exert pressure on the current
producers by incorporating new and advanced products that are likely to acquire a good market
share in the future. Suppliers in the dominant position tend to reduce the profitability margins by
taking advantage of the essence of their product. In a free market where prices are flexible,
buyers tend to purchase the best product available but minimizing the cost as possible. In
addition, new substitutes can easily replace the already existing product in the market especially
when the tiers are of good quality and the prices are lower. Finally, already existing producers
strive to win the biggest market share and if the rivalry is intense, it lowers the prices hence
declining price margins (Magretta, 2011).
For the industry to improve they need strategic success factors to be put in place.
Constant effective communication should be enhanced especially when communicating to a
large crowd. The industry should also improve employee response in the strategic decision
making of the management. Strategies and business reviews should be constantly be updated by
recording industry performance (Li & Solis, 2013).
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2. What is the structure of competition in the tire Industry of India (Strategic group
mapping, Industry Matrix, and competitive grid)?
India tire industry is at a very stiff competition where MRF, JK, and Apollo are at market rivalry.
MRF is the leading industry. Every industry wants to increase its customer base hence acquiring
the biggest market share as possible (Chitnis, 2007).
Strategic group mapping
Other industries are manufacturing high-quality tires that cannot get out of the rim even
when at very high pressure. These tires must also have excellent quite ride, relatively low rolling
resistance and low chances of cupping and no snow or dirt traction.
Industry matrix
The industry matrix shows the business strength to thrive in a competitive environment.
MRF gains the greatest market share (21). It provides the market with high-quality tires which
not only used in cars but also commercial vehicles, two-wheel, and three-wheel vehicles.
Competitive grid
It provides a competitive advantage of a competitor's information. Based on this, MRF ought to
have a competitive advantage over the other competitors. It should produce durable and
affordable tires to have a wide range of usage.
3. What is the performance and strategy of the main player in India?
MRF being the leading tire manufacturers provides diversified products hence delivering
tires for each category of the vehicle thus having a colossal presence. The industry also has
strong brand loyalty hence gaining a large customer base who takes automotive-related advice
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from the industry. Henceforth, the industry provides tires that will fit every wheel in any
automotive. Also, is the leading industry with the highest annual sales of both original equipment
manufacturer and the exports (Chitnis, 2007).
Q4. The attractiveness of the industry
The industry is very attractive to existing competitors and new entrants since it the first
rated industry with the highest growth rate. Wider and more complex tires are expected to be
produced in the future because of the rising demand for the tires. The market of the industry is
expanding also because of the diverse range of automotive such as commercial vehicles, personal
cars, and farm types of machinery. Besides, automotive demand is very high since vehicles and
other machinery form the backbone of a stable infrastructure in an economy.
Q5. Comprehensive Strategic Evaluation
The industry is very attractive because the market growth is expected to grow up to 7-
9%. In the modern world, many cars are bought at a very extraordinary rate thus providing a
promising venture in the business. Moreover, different types of automotive are manufactured
every day. In the year 2005, MRF made sales of Rs29, 757 million, JK got RS20, 757 million
Apollo had Rs22, 358 million, and TVS sold RS1, 991million while falcon tire sold Rs1, 936
million. In the past few years, the sales of tires have been gradually increasing thus making more
profit each year. For instance, MRF made a 15% increase in business in the years 2004 and 2005.
Q6. Position of the company strategic map
The figure below shows the strategic map of the leading producers of tires in India. Since the
year 2001 to 2005, MRF has been the leading and most competitive tire industry. It makes high
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technological advancement which makes it have the biggest market share in India and the rest of
the world.
Strategic Maps of the Tires Companies
20012002200320042005
0
5000
10000
15000
20000
25000
30000
35000
MRFJKApolloTVSceatfalcon
MRF is the leading producer in the tire manufacturing industry. It makes a sale of not less
than RS15000 million. TVS and Falcon make the least annual sales of less than RS500 million.
Performance analysis on return on investment and return on equity Graph
20012002200320042005
0
500
1000
1500
2000
2500
3000
MRFJKCEATAPOLLOTVSFALCON
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The figure above shows the analysis of return on equity and return on the investment. The
high cost of production facilitates declining profits. If the cost of production is cut down, the
return on investment would increase.
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References
Chitnis, A. (2007). Michelin in the Land of the Maharajahs. Richard Ivey School of Business,
The University of Western Ontario.
Magretta, J. (2011). Understanding Michael Porter: The essential guide to competition and
strategy. Harvard business press.
https://books.google.co.ke/books?id=t5BaoG0tAoUC&printsec=frontcover&dq=,%2BJoan.%2B
Understanding%2BMichael%2BPorter:%2BThe%2Bessential%2Bguide%2Bto%2Bcompetition
%2Band%2Bstrategy.%2B&hl=en&sa=X&ved=0ahUKEwjZlpfQr4boAhViQkEAHZm2D9sQ6
AEIMTAB#v=onepage&q=%2C%2BJoan.%2BUnderstanding%2BMichael%2BPorter%3A%2
BThe%2Bessential%2Bguide%2Bto%2Bcompetition%2Band%2Bstrategy.%2B&f=false
Li, C., & Solis, B. (2013). The seven success factors of social business strategy. John Wiley &
Sons.
https://books.google.com/books?hl=en&lr=&id=E1LDLtsiSNoC&oi=fnd&pg=PP7&dq=
References+Li,+Charlene,+and+Brian+Solis.+The+seven+success+factors+of+social+bu
siness+strategy.+John+Wiley+%09%26+Sons,+2013.+&ots=0UrY8l2V6x&sig=H4OLz
DvKIF8dMrGiPSkX34dD5wM&redir_esc=y#v=onepage&q=References%20Li%2C%20
Charlene%2C%20and%20Brian%20Solis.%20The%20seven%20success%20factors%20
of%20social%20business%20strategy.%20John%20Wiley%20%09%26%20Sons%2C%
202013.&f=false
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