Apollo Tyres Limited

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Apollo Tyres Limited

Apollo Tyres Limited (Apollo Tyres) is a tyre manufacturing company, incorporated in 1975. In 1977, the first plant was commissioned at Cochin, Kerala. In 2006, it acquired Dunlop Tyres International, South Africa and Zimbabwe. It manufactures tyres, tubes and flaps for commercial and passenger vehicles. Apollo Tyres Ltd. was founded in 1975 and is headquartered in Gurgaon, India.

It operates through its subsidiaries namely, Apollo Mauritius Holdings Pvt Ltd, Apollo Tyres AG, Apollo South Africa Holding Pty Ltd, Apollo Tyres Pte Ltd, Apollo Tyres Nigeria Ltd, Apollo Tyres South Africa Pty Ltd, Dunlop Africa Marketing United Kingdom Ltd, Apollo Tyres GmbH and Apollo Tyres Zrt. The Groups plants located in Kerala and Gujarat. The Group operates in India, South Africa and Internationally. GENESIS Brand Apollo Tyres’ genesis dates back to the mid 1970s, when its first corporate identity was unveiled.

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Popularly known as the unending road, the logo was depicted as a stylized alphabet “A” in red with an endless road running through it and was conceptualized by Head start Advertising. It stood for passion, aggression and tireless striving to achieve excellence in all spheres. And mirrored in many ways, the long journey the company would make to its evolution as a dynamic, multi-cultural and multi-location entity. This initial identity served Apollo’s dreams and ambitions well for over 30 years.

This identity established Apollo Tyres in its primary market – India, and witnessed Apollo’s first foray outside its home market. In recent times, in its journey towards a global organization, a need was felt to innovate, think afresh and re-depict the manner in which the organization operated and related to its customers and the world. It was a need to externally project the internal reality of Apollo and its people – young, dynamic, multi-hued and always different from others. MAJOR ISSUES As the global economic crisis continues to intensify Apollo has had to, like many others, shift gear.

But the current environment is throwing up opportunities for non-organic growth and here Apollo is “taking a long hard look” at firms which are becoming more realistically valued. Dunlop acquisition in South Africa in 2006 is a good example of this. “This was a perfect gateway to Africa, a huge growth market of the future. In considering opportunities for non-organic growth – which could be an entire business, manufacturing facility or distribution network – Apollo is using same criteria it applied when acquiring Dunlop.

Acquisition of Dunlop has given Apollo an edge over other players for which they are able to cater to the western market and South African market with those products and Apollo brand products have conventionally catered to the Asian market. PRESENT STATUS The current scenario in the tyre market for both passenger and commercial vehicles considering the economic slowdown that has affected the automobile industry in a big manner. The passenger car segment has been badly impacted. As car sales have plummeted, tyre sales have also gone down proportionally.

Apollo Tyres however has managed to maintain a growth of 22 per cent despite the overall scenario as exports have helped in tiding over this period so far. In terms of the commercial vehicle tyre segment, Apollo witnessed a growth between 22- 23 per cent in the first two quarters of 2008-09 however the last quarter saw a serious drop. Looking at the last quarter, Apollo have witnessed a rise in raw material cost by 35 per cent as compared to the same period last year. OEM demand has fallen by 43 per cent in terms of value.

All this has impacted tyre costs and though they have absorbed some of it, there is still an amount passed on to the buyer. Exports however have registered a growth of 37 percent as compared to Quarter 3 of last fiscal year. About exports Measures taken by Apollo to counter the market slowdown They have constantly benchmarked themselves with the best tyre manufacturers in the world. They look at their practices and system processes in order to learn and implement the best practices at their facilities.

The slowdown has resulted in tightening the belt and building on their efficiencies. They have had to downsize on some contract and casual labor at some of their facilities, but other than that they intend on riding through this phase by enhancing their efficiencies. Their growth plans are on target and that too will boost their capabilities in the coming years. Their plants are working on a 24 X 7 basis as well. Apollo growth plans Apollo has faced another setback in December when the Kalamassery plant had to be locked down.

The current situation on this front is: Apollo acquired the plant in 1995. They have invested over Rs 100 Crores in the facility however they have been unable to change the culture of the people. They want to modernize the facility and for that they needed to expand. The facility lies in such a location that expansion is not possible; however the Kerala Government has allotted us land about 1 hour away from the city where we can set up the plant. They promised the workers no loss of job and requested them to relocate, but this has remained a major hang up.

They also wish to manufacture specialty tyres and that the expansion would also result in creation of more jobs, however the Union does not seem to understand this. There is a need to change with the times and we hope that sense prevails and Apollo can restart operations there and also save the jobs of over 1000 employees at the plant. New products can also help boost the sales charts at a time like this. Does Apollo have any new products lined up Apollo Tyres has had plans for the European market for sometime now.

They have already tested our products on testing tracks in Europe and the results show that they are more than capable of making great tyres for that market. The tyres will be branded as Apollo Tyres and this will mark their foray into the European market in a big way. They are bullish of the prospects. Incidentally Volkswagen has already appointed them as their global supplier for tyres. Even the new Polo which will debut in India sometime in the future will come on Apollo Tyres.

SWOT of Apollo Tyres Strengths – Heavy range of products

Brand awareness Best promotion by display Advertisement WEAKNESSES – SVS depended on APOLLO No proper replacement of damage Low margin for shopkeeper No proper inspection of salesman OPPORTUNITIES – addition of outlet Improve the market of APOLLO TYRES by giving some more advantages THREATS – More satisfaction from local wholesale market, they can deduct the number of outlets. Dissatisfaction due to improper handling Without proper inspection, salesman may be careless.

BCG MATRIX {draw:frame} Stars Apollo Tyres Ltd (APL) is the market leader in truck & bus tyres and light truck tyres in India. Cash Cows The company enjoys significant market share in the passenger car tyre segment. Question Marks In international markets APL has presence in South Africa, and to further augment its international presence the company has recently acquired Vredestein Banden BV, a high-end passenger car tyre manufacturer in Netherlands. Alloy wheels: Acelere Wheelz Dog Off- the – road tyres ANSOFF MATRIX OF APOLLO TYRES {draw:frame}

Market Penetration

The company will be focusing on becoming a complete solutions provider for the commercial vehicles segment, encompassing trucks, light commercial vehicles, jeeps Apollo Tyres is also in the process of finalizing a tie-up with KOTAK MAHINDRA, through which credit would be provided to truckers to finance new tyres with their trucks as collateral. The company has also tied up with TVS TREADS for re-treading truck tyres The truck segment, the company is getting ready for the MANUFACTURE OF RADIAL TYRES.

Though Apollo does not have a presence in the two-wheeler segment, it has tied up with TVS SRICHAKRA to offer the latter’s range of two-wheelers tyres through its outlets.

Product Development Market Development

Apollo acquired Dunlop Tyres International Pty Ltd in South Africa (since renamed as Apollo Tyres South Africa Pty Ltd) and Zimbabwe, taking on southern Africa as the second domestic market. The company holds brand rights for the Dunlop brand across 30 African nations In 2009; Apollo acquired Vredestein Banden B V in the Netherlands, and thereby adding Europe as its third crucial market.

Diversification Competitive Scope of Apollo Tyres

It’s shifting gears to speed up the highway. The Rs 1700 Crores Apollo Tyres, traditionally known for its strength and presence in the huge replacement market is however not sitting back. Faced with a sluggish market situation and squeezed margins in the last few years, it is taking a number of initiatives in a wide spectrum of areas: First, it has taken a major step in the radial market by introducing radial tyres in the tractor market through launch of its farm radials called Farm King.

Second in continuation of this strategy, it is setting up another manufacturing facility in Baroda, this time for truck radials. Third, its export arm Apollo International has identified companies in China which it is negotiating to acquire to meet the planned requirements of not only the Chinese market, but also to serve as an export hub. Fourth, the company has added another 1,000 dealers in the last one year alone, which it believes will give it a better market hold across the breadth country.

The company has achieved an 18 growth in its sales turnover in fiscal 2001-02, especially at a time when the tyre industry has not performed very well. Also consider Apollo’s growth in different segments. For instance, in the commercial tyre segment Apollo grew by 20 per cent and in rear tractor tyre segment while the industry is believed to have experienced a negative growth, Apollo says that it grew by a healthy near 38 per cent.

The company has banked on its strong dealership network of 3,200 exclusive dealers to sell its products. In the last one year, it has added 1,000 such dealers of which 500 have been added between January to March of 2002. Today, it has a strong team with 3,600 dealers (after accounting for the attrition from the earlier figure). Further, it is strengthening the marketing scope of its dealers where they will market a whole range of related products like batteries, tubes, engine oil and a range of other auto products.

Three years back it tied-up with Castrol and Kotak Mahindra Finance Ltd (KMFL) whereby customers were offered superior values on any of products of each of these companies through its campaign Apollo Tyres Super Value Programme (ATSVP). This campaign is now running in its fourth year. It works like this. It is extending these activities. The company is now tying up with Reliance and Telco and some other companies for such tie-ups. Geographical scope

Apollo is evaluating opportunities in newer areas and its thrust on radialisation can be seen from the fact that the company has launched 11 variants of new generation high performance radial tyres. Although the Indian market has still a far way to go as far as the radial revolution is concerned, Apollo has made a beginning in tractors with an initial investment of around Rs 20 Crores. Mr. Neeraj Kanwar says that even though it is early to set a sales target but the product has taken off as they are matching sales to production.

But there could be one catch: the high price of these radials may not universally appeal to the price sensitive middle-class Indian farmers. On the other hand, Mr. Neeraj Kanwar says that the Indian farmer is often forgotten when technological advancement is talked about. “Even though these tyres are 25 per cent more expensive, the efficiency level is higher by 80 per cent translating into fuel saving and lower maintenance costs,” says Mr. Neeraj Kanwar. He also says that the steel belted sturdy radial tyres are more resistant to debris and rocks in the field.

Not surprisingly, the company expects radials to contribute 20 per cent of the total rear tractor tyres market in the coming two to four years. Similarly, the company is setting up a manufacturing base for truck and bus radial for which the field test is going on with the help of Apollo’s technical partner, Continental AG of Germany. The investment made is Rs 110 Crores and the first tyres are expected to be rolled out in mid-2004. In the first year of production itself, the company plans to produce 500 tyres per day. But the company is making it sure that the product wins the market. And as a precursor, we are selling imported tyres from Continental AG and this will help us customize commercial radials for Indian conditions,” says Mr. Neeraj Kanwar. “We expect radials to contribute 30 per cent of the truck and bus segment once it establishes itself,” adds Mr. Neeraj Kanwar. However, he feels that a simultaneous development of infrastructure will go a long way in making its radial strategy a better success. Considering that eighty per cent of truck tyres in the US and 95 per cent in Europe are made of radial technology, India is far behind.

In passenger radial again, where Apollo has competition from MRF and Ceat, it is increasing its presence through enhanced capacities in its Baroda plant with an investment of Rs 90 Crores. Segment scope Further, Apollo is also looking at further segmenting the market and making products according to market needs. “While for the southern market we have been concentrating on products which give more mileage and which are retreadible for north we specialize on those which can take more load,” says Mr. Neeraj Kanwar. The company recently launched two variants of truck tyres.

While Load Star variety is for taking higher load XT9 is for mileage. Another area that the company plans to focus on for future with greater thrust is exports. For this, it in talks with some Chinese companies for their acquisition. It then believes that once the acquisition is complete, the Chinese outfit will not just cater to the local Chinese market but also act as export hub. This will enhance the company’s export from the current 15-20 per cent. However, Mr. Neeraj Kanwar is clear about the company’s export thrust as far as Indian operations are concerned. We get better margins in the domestic market and will export only when the home market is saturated,” says he. But getting into the Chinese market may be easy as the company will have to face fierce competition not just from a whole lot of Chinese manufacturers but also from global majors like Bridgestone and Michelin. Apollo has understood the psyche of Indian customers well and therefore concentrated in the large replacement market. Almost 90 per cent of the company’s sales come from the replacement market which constitutes two-third of the entire tyre market.

And this is also where the profitability is higher especially in trucks and other commercials vehicles where Apollo dominates. Within this market the company also applied its strategy of further segmentization. “We realized that there exists a diverse need particularly in the heavy vehicle tyre segment and our strategy to position exclusive brands against each customer segment has helped us to emerge as the largest player in the value conscious replacement market,” says Mr. Neeraj Kanwar. Profitability concerns

Apollo Tyres Ltd has announced a turnover of Rs 1700 Crores for financial year 2001-02 which shows a 18 per cent growth from Rs 1455 Crores, the previous year. But profitability this year is one to watch out for. This is important especially in the context that the company didn’t experience a healthy growth in the financial year 2000-01, where net profit was only Rs 25 Crores, against Rs 76 Crores on a turnover of 1369 Crores in the previous year of 1999-2000. The chairman O S Kanwar identifies higher raw material cost, interest burden and lower sales owing to the sluggishness of the market as reasons for the pressure on profits.

However, all this calls for no optimism in the financial figures of 2001-02 either, because market conditions have remained by and large the same with some silver lining being seen only in recent months. The next 3-4 years would also be very critical for the company, as it has made fresh investments in truck, tractors and passengers radial segments. Clearly, as it eyes new opportunities, it also needs to man oeuvre the potholes that could come up in the drive.

Michael Porter’s Five Force Model Suggestions and Recommendations

Some consumer are unsatisfied with the price because competitors product price are less than Apollo, So company should pay attention in their mind on price. Company should provide more mileage of tyres because overloading has been imposed by the government. Company should provide credit facility because customer demands this type of facility. The problem of Apollo consumers are lack of adequate promotional schemes. Dealers don’t provide adequate information in the support of the Apollo brands. They see their margin of profit alone.

Some schemes should be provided by company. It is good technique for sales promotions. Company should give special attention after sales service of their customers. Make heavy duty tyre according to demand of customer Expand its advertisement

Case Study

Apollo Tyres – staying on track Not so long ago India’s biggest multinational tyre-maker, Apollo Tyres, had ambitious plans to double its turnover to US$2bn by 2010. But as the global economic crisis continues to intensify Apollo has had to, like many others, shift gear. We have attempted to do an exercise to see if this is still achievable,” says Apollo’s chief of corporate strategy, Sunam Sarkar, who remains cautiously positive. While global economic woes have hit the motor industry hard, it is not all doom and gloom for tyre manufacturers. In fact booming automotive growth of both passenger and commercial vehicles over the past few years is a glimmer of hope for companies supplying the replacement market. And Apollo is one of those; about 80% of the company’s revenues are from sales in the secondary market.

Also in Apollo’s favor is that over 70% of revenues are generated in India where growth is expected to exceed 6% this year. In addition 75% of turnover is from the sale of commercial vehicle tyres. With freight still moving, that core growth remains more or less unchanged, says Mr. Sarkar. However, the company still faces challenges. In South Africa and southern Africa, where its portfolio is more evenly spread, growth has slowed. The off-road tyre business, which is supported mainly by the beleaguered mining industry, has been particularly badly hit.

But the current environment is throwing up opportunities for non-organic growth and here Apollo is “taking a long hard look” at firms which are becoming more realistically valued. It recently did a market-mapping exercise to assess the opportunities, ruling out markets where the majors – Michelin, Goodyear and Bridgestone – are well entrenched. “It would be foolish for us to go head-to-head with them,” says Mr. Sarkar. It seems more likely that Apollo will be sizing up players of a similar scale like Yokohama, Sumitomo, Aeolous and Hankook. “We are pretty conservatively leveraged,” says Mr.

Sarkur, “Should the right opportunity arise it will be funded through a combination of internal accrual and debt. ” Ranked 16th by the 2007 Global Industry Tire report and with a turnover of US$1bn it makes sense for Apollo to gain scale in opportunity markets where it can use its natural advantages such as managing diversity and change. Its Dunlop acquisition in South Africa in 2006 is a good example of this. “This was a perfect gateway to Africa, a huge growth market of the future,” says Mr Sarkar. Indeed, the company has already expanded into Nigeria and will be selling Dunlop and Apollo products through its sales office there.

South America too offers similar opportunities. “We are looking at supplying into existing distribution networks but in the longer term we need to consider how we supply this market on a more consistent basis,” says Mr. Sarkar. Its recent foray into Sri Lanka is another recent example of its interest in emerging markets. However, he points out that this market is so similar to India there was simply “no reason for us not to be there”. In considering opportunities for non-organic growth – which could be an entire business, manufacturing facility or distribution network – Apollo is using same riteria it applied when acquiring Dunlop. “We had clear objectives then which are as valid in today’s environment,” says Mr. Sarkar. So it is after firms with a reasonably strong presence in their domestic market, but also an export market from the domestic base. Next, the acquired firm should add to its existing technology basket.

Finally, there should be opportunities for Apollo to improve manufacturing processes or the distribution network of its new partner. But while growth markets may be a key focus, Europe, which leads the way in tyre technology, remains of prime importance. We have tested our products on European tracks with European drivers and they compete with the best in the world so why shouldn’t we be there providing Europe with those products,” says Mr. Sarkar. However, given the consolidation that has already taken place in Europe, acquisition opportunities are somewhat limited. Further down the track, the company would like to either acquire or establish a manufacturing facility to prove its seriousness and commitment to the European market. Eighteen months ago it attempted to do this in Hungary but eventually withdrew because of political opposition.

Luckily, the timing was just right as soon after the global meltdown began. There are good reasons to put European expansion on hold for the time being. Not only has the market contracted significantly, a strengthening US dollar means that any deal now would be very costly. However, current weakness in the Indian rupee is good news for export markets, even though these currently contribute just 12% to revenues, and here there is room for growth. However Mr Sarkur points out that if Apollo started to see significant volumes of exports out of India it certainly look at introducing manufacturing capability in that country.

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