Marketing Strategy of Apollo Tyres

Editor's Notes

• #3: CompanyApollo Tyres Ltd is the world's 17th biggest tyre manufacturer and was established in 1972. A turnover of USD 2.34 billion as of FY 12-13.Over 16,000 employees and manufacturing presence in Asia, Europe and Africa. Available in over 100 countries with 9 manufacturing facilities.6 Key brands: Apollo, Dunlop, Kaizen, Maloya, Regal and Vredestein. Consumer Increasing sales of passenger and commercial vehicles in developing countries and a strong demand for replacement tyres is driving factor. Consumers generally are interested in mileage offered, price, type of technology used, product presence in market and services like Re-treading and tire balancing.Deciding Factor is cost v/s benefit and generally based on word of mouth purchase. Tire buyers are “typically” the primary decision maker, and they often are married, educated and skew only slightly maleTire buyers are looking for durability and price, they research on the go, and they usually buy within a week. People also use online or digital means to research about the product but mainly it is on the basis of word of mouth recommendation of family and friends. The main consumers of Apollo tyres are in heavy vehicles sectors where the main deciding factor is durability and tyre buying decision is influenced by transport companies. In passenger vehicles the technology factor plays a huge role and hence Apollo tyre is stressing on technological upgradation in continuous manner with their India’s most technologically advanced manufacturing unit in Chennai. Also their latest product “4G” is one the most advanced products in the Indian market competing with global brands like Michelin, etc.ContextImport duty on natural rubber is as high as 20% but import duty on finished tyres is as low as 10%, thus affecting Competitiveness.Increasing sales of passenger and commercial vehicles in developing countries Govt policies like Local Body Tax (LBT) and other factors like decrease in rainfall reduces demands in agricultural sector vehicles also increase in natural rubber costs in last few yearsSocio economic factors like high disposable income drives salesTechnological advancement like self inflation, Green Tyres, Run Flat tyres is influencing the market.Collaborators It has a network of over 4,000 dealerships in India, of which over 2,500 are exclusive outlets. Apollo operates through a network of branded, exclusive or multi-product outlets. In South Africa the branded outlets are called Dunlop Zones, while in India they are variously named Apollo Tyre World (for commercial vehicles) and Apollo Radial World (for passenger cars). Partners for raw material : Aditya Birla,Exxon Mobil,Styron,Arcelor Mittal,Performance fibres USA COMPETITORSMRF –Market leader for 21 years, First Indian Tyre company to reach turnover of 50 Billion ,Strong association with sports , Good Brand Image.CEAT - by RPG group ,most visible face of Indian Tyre industry, it reached 10 billion export benchmark in 2012,strong advertising campaigns leads to good brand image.JK Tyres : market leader in truck/bus segment ,all radial plant coming up in Chennai . Other competitors include Bridgestone,Continental,Goodyear ,Pirelli
• #5: DECISION MAKING UNIT:Initiators: The need to replace tyres is perceived by the driver/owner of the vehicle.Information gatherers: Case 1: Sudden requirement – Considering the constraints in time to reach out to other sources who could assist with the information seeking procedure, The buyer alone gathers the information Case 2: Planned replacement by a passenger car vehicle owner – The buyer himself as well as his friends and family members.Case 3: Planned replacement in case of commercial vehicles – Majorly, the decision is taken by the firm/person owning the vehicle. The driver could also have high involvement in the decision making process.Influencers: Two situations are possible:-Sudden requirement of tyre replacement: Majorly, information is obtained via the person servicing the vehicle at the time of breakdown. Information can also be sought over long distance communication or via online searches. Typically, the time available to acquire information before taking a decision is constrainedPlanned Replacement of Tyres in passenger car vehicle owner: Involves an extensive research before deciding on which brand of tyres to go with since this is a high involvement decision. Sources of gathering information are friends and family members who have replaced their tyres before, extensive online searches that includes reading numerous reviews, blogs etc, consultation with a trusted service engineer at a trusted automobile service center.replacement in case of commercial vehicles: Consultation from Technical teams could be sought; the driver of the vehicle and the firm/person owning the vehicle could also be influencers in the decision making processDecision Makers: Typically, is the person owning and/or driving the vehicle. In case commercial vehicles, the final decision makers could be the technical team responsible for the vehicles.Purchasers: Does the person/firm own the vehicle.Users: Person driving the vehicle; could be others involved as well as in case of passenger car (family and friends) and public transport vehicles. Consumer Buying Behavior:The consumer decision in case of purchasing a tyre for an automobile is typically a high-involvement decision. Depending upon the circumstances in which a customer decides to buy a tyre, the consumer buying behavior could vary. In a planned decision to replace a tyre a consumer puts forth a Complex buying behavior as his or her decisions are backed by extensive research wherein even the consumer might have delved even into the minutest details of the brands.In unprecedented situations that call for urgent replacement of tyres, the customer exhibits a dissonance reducing buying behavior since he does not have much options to choose from, is satisfied with the basic functional benefits of the tyre being replaced with, without willing to differentiate between tyres based on the minute differences between brands, the consumer.  CONSUMER INSIGHTSBRAND PERCEPTIONThe Brand Image of Apollo Tyres is that of Value for Money. Brand Equity for International brands like Michelin and Bridgestone was higher compared to that of Apollo.Consumers consider that they provide performance, reliability and quality at a price that is not very high but affordable. Given a choice, consumers are more likely to choose Michelin and MRF over Apollo. They would prefer Apollo to Ceat and Good Year CONSUMER BEHAVIOURMost of the consumers consider 4k to 5k to be an optimum amount to invest in replacement of tyres. Only 19% have the willingness to pay above 5k. This indicated a lack of awareness of the fair price of the product.Consumers tend to purchase tyres either in sets of even multiples or in single units, as in case of an emergency.The primary reason leading consumers to replace their tyres was treads of tyres being worn out or insufficient grip of tyres making wear and tear of tyres the main reason for its replacement.Only 7% of the respondents changed their tyres proactively, indicating that the consumers see it as a forced expense.Our primary research reinforced our understanding of tyre purchase being a high involvement decision with 85% of the respondents agreeing that their tyre purchases are highly based on their own judgment.At the same time, the consumers also try their best to make a highly informed decision by sourcing information from friends, family, service center owners etc.The main criteria for consumers making a purchase are Durability of the tyre (cost-per-km) followed by quality, reliability and traction.Consumers are most comfortable buying the products from authorized tyre shops of their preferred brand.   
• #6: CONSUMER BEHAVIOURConsumers tend to purchase tyres either in sets of even multiples or in single units, as in case of an emergency.The primary reason leading consumers to replace their tyres was treads of tyres being worn out or insufficient grip of tyres making wear and tear of tyres the main reason for its replacement.Only 7% of the respondents changed their tyres proactively, indicating that the consumers see it as a forced expense.Our primary research reinforced our understanding of tyre purchase being a high involvement decision with 85% of the respondents agreeing that their tyre purchases are highly based on their own judgment.At the same time, the consumers also try their best to make a highly informed decision by sourcing information from friends, family, service center owners etc.The main criteria for consumers making a purchase are Durability of the tyre (cost-per-km) and followed by quality, reliability and traction – Safety Parameters.
• #7: BRAND PERCEPTIONThe Brand Image of Apollo Tyres is that of Value for Money. Brand Equity for International brands like Michelin and Bridgestone was higher compared to that of Apollo.Consumers consider that they provide performance, reliability and quality at a price that is not very high but affordable. Given a choice, consumers are more likely to choose Michelin and MRF over Apollo. They would prefer Apollo to Ceat and Good Year
• #8: Tyre supplies are divided into the broadly to the following segments:Replacement Market (aftermarket)Original Equipment Manufacturers (OEMs), i.e. vehicle manufacturersExportState Transport Undertakings (STUs) (primarily for Bus tyres)Government PurchasesThe tyre market can be segmented in terms of the product categories:Truck/ BusPassenger Car/JeepLight Commercial VehicleSmall Commercial VehicleScooter/MopedTractor FrontTractor RearTractor TrailerMotorcycleOff the Road Industrial
• #12: Brand Architecture1)House of Brands / Branded House / Sub brandsIt is a house of brands. 6 key brand names under its umbrella.Apollo (primarily in Asia)Dunlop (in 32 countries of Africa)Vredestein (major player in Europe)Kaizen (specifically for truck-bus segment)Maloya (Specifically for passenger vehicle segment)Regal (specifically for truck-bus segment)PoPs -Diverse product portfolio.Huge distribution network and selling across all major markets.Great performance at affordable pricing.Various sub-brands created over different geographies of the world.PoDs - Strong product brands in its specific markets like AMAR in bus-truck segment and Amazer in Passenger car vehicles.Constant innovation in products, changing ahead of market trends.Major part of sales coming from OEM with major automobile companies like Audi, Skoda, Fiat, etc.Focussed on consumer’s safety and comfort.4) Brand CommunicationApollo tyres with “YOU-FIRST” technology. Go the Distance.Their brand communication is mainly about “YOU FIRST” which clearly depicts that their primary focus is on consumers and their safety. Also it shows that it goes a long way, i.e. providing great performance.5) Brand ImageThe perception of Apollo tyres in people’s mind is that of a not-so-expensive brand that provide latest and performance-oriented solutions.Building Brand Identity:The focus on brand identity by Apollo is in line with their vision of creating long term bond with their customers. Three major factors helping Apollo build up its brand image are:1) Providing world-class quality standards.2) By lasting much longer.3) By providing customers with best value for money, and by providing a smooth comfortable ride. Also they primarily focus on awareness spreading through word of mouth as consumers discuss with their friends and relatives before making a purchase of tyres.
• #13: Product Life CycleLike any other product, tyres have low demand in the beginning part of the cycle, and then with the advancement of cycle it gains momentum with incremental sales. After reaching a stable growth peak, it usually stays in the market for a while and then the declining stage begins. Generally the total lifespan is around 3 years, however few classic products are there in market for more than a decade with small improvements now and then.
• #14: Product Portfolio & MixIn commercial vehicles,Amar, Anchor and Cargo in Buses-TrucksIn passenger car vehicles,Hawkz for SUVsAcelere, Amazer, Alnac and Aspire for light-medium passenger carsQuantum and Amazer for VansIn Off-highway category,Dhruv, Krishak, FarmKing and Powerhaul for agricultural and Haulage
• #15: 2) PlaceChannel Choice + Distribution IntensityApollo supplies its products directly to the dealers from its warehouse / manufacturing facilities. Also a major chunk of sales comes from sale to OEMs like Audi, Skoda, Volkswagen, etc.It has a network of over 4,000 dealerships in India, of which over 2,500 are exclusive outlets. Apollo operates through a network of branded, exclusive or multi-product outlets. In South Africa the branded outlets are called Dunlop Zones, while in India they are variously named Apollo Tyre World (for commercial vehicles) and Apollo Radial World (for passenger cars). push strategy and/or Pull StrategyPush strategy only applicable for new products in its initial stages. Otherwise Pull strategy comes into force due to the brand image created over a period of time. However for few latest products, even ‘push’ action is not required much as the required ‘pull’ is created by the usage of new and latest technologies itself. channel alternativesThe alternative channel being followed by Apollo is that of direct marketing to large players in Transportation business.
• #18: RECENT STRATEGY: Aims to be amongst top 10 glob al top 10 tire companies by 2015-2016.Challenges: Establish a permanent presence in China.To target at organic and inorganic growth to enter African and Latin American.Need to set up manufacturing bases in China and ASEAN markets as it could not export more than 30% from any location considering the intensive bulkiness of the product.European markets have very stringent safety standards. The only way to access technology to manufacture safety-regulated products was to acquire companies outside India.Increase in demand for green tyres and hence would require dependency on renewable sources rather than oil.Tarnishing of Brand ImageApollo Cooper Deal going off-track :Apollo Tyres Ltd agreed to buy Cooper Tyre and Rubber Co. to gain access to the American and Chinese auto markets. Apollo is having problems with the United Steel Workers’ union in the US and in the Chinese joint venture, where workers are objecting to the deal.Involvement in price fixing allegations impacts the company's reputationFined by  the South African Competition Commission in January 2012 for indulging in price fixing and price hike.During 2011, the Competition Commission of India (CCI) investigated the possibility of cartelization in the Indian tyre industry .This has harmed its image substantially.Competition: Threat from cheap Chinese importsThe Indian tyre manufacturing industry is facing a threat due to cheap import of tyres from China.Price sensitive replacement market in India for truck and bus tyre and hence a very low brand and quality awareness. Chinese tyres, low on the quality scale, competing in the Indian market on the basis of low prices. They enjoy the benefits of lower manufacturing costs and higher employee productivity. MNCs - The entry of multinational companies (MNC) such as Goodyear, Bridgestone and Michelin into the domesticmarket may also create an intense pressure to Apollo margins.
• #19: Supply Chain related Challenges: Integrating IT and Innovation-After-sales toolAbsence of large 3PL players in India(third-party logistics) and the need for structured warehouses.Struggle to locate trucks as GPS is not provided in the supply chain by the service providersThe critical supply chain component where IT can help is fitting RFID tags onto tyres. It will not only track the tyres within the supply chain but will also be helpful as an after-sales tool. People are no longer buying tyres but leasing them. Hence, introduced the concept of cost per-kilometre. People can now use mobility-as-a-service in terms of usage of the tyre and other specs than a pure capex buy of a tyre. This is an initiative started by them which still poses a big challenge ahead.Lack of presence in two and three wheeler tyre segments : Untapped market: ChallengeUnlike CEAT and MRF ,no presence in two wheeler product segment. absence in two and three wheeler tyre segments deprive Apollo an opportunity to capitalize on this market and expand its revenues and profits.Labour unrest and lockouts hits financials and productionIn October 2012, the company faced a 19-day strike at its Waghodia plant in Gujarat, workers demanding the recognition of a new union affiliated to the Bhartiya Mazdoor Sangh (BMS).As well as retract suspension of two employees. Moreover, Apollo's Perambra plant based in Kerala,Southern part of India, witnessed a production halt.Business Challenges:Product lifecycles will be much smaller. Tyre is a grudge buy and never a happy buy, a difficult product from a brand loyalty perspective. When it comes to commercial vehicles (trucks, fleet, and light commercial), performance, and efficiency play a huge role. For passenger cars, on the other hand, it is more of brand recall at least in the Indian market.In the last two years, Apollo Tyres has moved towards a very high degree of customer centricity. Many processes will continue to ensure bringing customers into the process map, understanding their buying patterns, and getting customers closer to the organization. The efficiency of supply chain—including manufacturing and distribution—lies in its ability to influence the customer. Also, once the acquisition of Cooper Tyre & Rubber Company fructifies, the US market will bring its own challenges for the next two to three years with a different set of challenges and solutions.