Apollo Tyres Ltd: SWOT analysis

Table of contents

Company overview

Apollo Tyres Ltd (Apollo or “the company”) manufactures and markets tyres, tubes and flaps. The company provides tyres for trucks and buses, light trucks, passenger cars, jeeps, and farm vehicles. The company primarily operates in India, South Africa, the Netherlands and Zimbabwe. It is headquartered in Gurgaon, India, and employed around 16,000 people as of March 2012. The company recorded revenues of INR121,532.9 million ($2,515.7 million) during the financial year ended March 2012 (FY2012), an increase of 37.1% over FY2011.The operating profit of the company was INR8,405 million ($174 million) during FY2012, an increase of 21.3% over FY2011. The net profit was INR4,099 million ($84.8 million) in FY2012, a decrease of 6.9% as compared to FY2011. Note: Operating profit excludes other income and finance cost.

Key facts

  • Head Office

Apollo Tyres Ltd
Apollo House
7 Institutional Area
Sector 32
Gurgaon 122001
Haryana
IND

  • Phone

91 124 272 1000

  • Web Address

http://www.apollotyres.com

SWOT analysis

Apollo Tyres (Apollo) manufactures and markets tyres, tubes and flaps. The company provides tyres for trucks and buses, light trucks, passenger cars, jeeps, and farm vehicles. Apollo has a strong brand recall. A strong brand recall allows the company to enter new markets with ease and also enables it to launch new products. However, intense competition could force the company to reduce prices, which could impact the bargaining power of the company and strain its margins.

Strengths/Weaknesses

  • Strong brand recall
  • Robust inorganic growth
  • Involvement in price fixing allegations impacts the company’s reputation
  • Lack of presence in two and three wheelertyre segments
  • Labor unrest and lockouts hits financials and production

Opportunities/Threats

  • Poised to benefit from growing automotive manufacturing industry in India
  • Expansion into Sri Lankan automobile market through tie-up
  • Fierce competition
  • Threat from cheap Chinese imports

Strengths

Strong brand recall

Apollo has a strong brand recall. Brand diversity is one of the company’s strengths. The company sells a range of tyres under various brand names in India, Africa and Europe. Manufactured in India, South Africa and the Netherlands, the company’s product portfolio covers the entire range of passenger car and 4×4 (summer and winter tyres), light truck, truck and bus, agriculture, industrial, off-the-road and bicycle tyres, and also includes retreading material, retreaded tyres and alloy wheels. Apollo, Vredestein and Dunlop are the company’s three flagship brands. Other brands include Regal and Kaizen (truckbus tyres), and Maloya (passenger car). The presence of strong and established brands in the company’s portfolio, in each of its country operations, lends credence to its growth plans.

Furthermore, according to the industry experts, Dunlop, which is sold in 32 African countries, emerged as one the leading brands in the tyre category in South Africa’s iconic brands in FY2011. Therefore, strong brand recall allows the company to enter new markets with ease and also enables it to launch new products. In addition, it also provides competitive advantage to the company over its peers and helps in attracting new customers.

Robust inorganic growth

Apollo focuses on acquisitions to expand its business and to earn more revenues. For instance, the company acquired Dunlop Tyres International (Proprietary) (now renamed as Apollo Tyres South Africa), South Africa, in 2006. Following this acquisition, Apollo now holds brand rights for the Dunlop brand across 32 African countries. Additionally, in FY2009, the company acquired 100% stake in the European tyre manufacturer, Vredestein Banden (VBBV), a Netherlands based tyre manufacturing company with a production capacity of 5.5 million tyres per annum. This acquisition marks Apollo’s efforts towards realizing its goal of becoming a global player. The acquisition of VBBV benefits Apollo by providing access to the high-end passenger car radial technology and a well established distribution network for entry into Europe. The acquisition also helps the company’s combined operations through reduced raw material costs as a result of consolidated purchase and access to cost competitive manufacturing base.

Hence, these acquisitions favorably position the company as a one of the key players in a highly competitive market and helps in improving profitability.

Weaknesses

Involvement in price fixing allegations impacts the company’s reputation. Apollo is involved in price fixing and price hike allegations which attracted heavy fines. For instance, in January 2012, the South African Competition Commission imposed a penalty of INR300 million ($6.2 million) on Apollo for indulging in price fixing and price hike in South Africa in 2008 when the company was managed by Dunlop. The penalty represented 4.8% of the company’s 2008 total turnover. The fine impose came as a result of South African Commission’s investigation against South African Tyre Manufacturers Conference (SATMC) and four local tyre manufacturers and suppliers including Apollo, Goodyear South Africa, Continental Tyre South Africa and Bridgestone South Africa.

Moreover, during 2011, the Competition Commission of India (CCI) investigated the possibility of cartelization in the Indian tyre industry based on a report submitted by its Director General earlier in the year. According to the investigation, it was concluded that five Indian tyre makers including Apollo, MRF, JK Tyre and Industries, Birla Tyres and CEAT along with Automotive Tyre Manufacturers’ Association (Atma) had acted in concert, violating section three of the Competition Act that deals with cartelization. However, in October 2012, CCI acquitted all the five companies, including Apollo, of cartelization charges.

Therefore, such activities results in imposition of heavy penalties on the company, which in turn adversely increases the operating costs of Apollo and ultimately impacts its profitability and brand image.

Lack of presence in two and three-wheeler tyre segments

Apollo does not have presence in the two and three wheeler tyre segments, especially in India where it is a high growth segment. In comparison, the company’s competitors such as CEAT and MRF, sell tyres to the two wheeler product segment. The Indian two wheeler market has witnessed a strong growth in the recent past and the trend is likely to continue in the future. According to Society of Indian Automobile Manufacturers (SIAM), sales of two wheelers would register a growth of 6-8% in 2013-14. Thus, absence in two and three wheeler tyre segments deprive Apollo an opportunity to capitalize on this market and expand its revenues and profits. Labor unrest and lockouts hits financials and production

The company has been involved in labor issues. For instance, in October 2012, the company faced a 19-day strike at its Waghodia plant in Gujarat. Production was disrupted after an agitation by 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 due to lockout and labor unrest due to long-term settlement negotiations, in 2010. As a result, the company incurred a loss of around INR6,000 million ($124.2 million). In another such incident, two of the company’s units in South Africa faced labor unrest thereby completely disrupting production.

Such labor issues disrupt operations which can hinder the reputation of Apollo. Further, the company also has to incur higher expenses to meet the expectations and demands of the workforce which could strain its revenues. Thus, frequent lockouts such as these in the near future would have an adverse impact on the company’s overall production output and also its revenues.

Opportunities

Poised to benefit from the growing automotive manufacturing industry in India

The Indian automotive manufacturing industry has experienced strong double digit growth for the 2010 – 2011 period. The industry is expected to maintain positive levels of growth from 2012 through to the end of the forecast period in 2016. According to MarketLine (a unit of Informa plc), the Indian automotive manufacturing industry grew by 11.8% in 2012 to reach a value of $77.6 billion. Moreover, MarketLine estimates that in 2016, the Indian automotive manufacturing industry would have a value of $109.1 billion, an increase of 40.6% since 2012.

Furthermore, it is estimated that in another 40 years, the Indian automobile sector will top the world in car production and around 611 million automobiles will be running on the Indian roads. The economic liberalization in India that happened in 1991 brought in an increase in competitiveness and a relaxation in restrictions. Post 1991, the Indian car market has been displaying steady growth. Many Indian automotive majors like M;M, MSIL and Tata Motors expanded their base both in India and abroad. The Indian automobile sectors healthy and financially viable growth led to the internal development and also gave rise to noteworthy India-specific investments by multinational car makers. Major global players like General Motors, Ford, Mercedes-Benz, Volkswagen, Suzuki, Honda, Fiat, Hyundai, Porsche, Audi and more are active in the country, so does in all other segments of the automotive industry.

Apollo is a dominant player in the automotive tyre market in India. Therefore, the growing automotive manufacturing industry in India would increase the demand for new tires and replacement tires, which in turn could
drive the demand for the company’s products.

Expansion into Sri Lankan automobile market through tie-up

The company is focused on expanding its operations geographically to strengthen its global presence. In this context, in 2011, the company entered the Sri Lanka market through a tie-up with Ideal Motors, the automobile distribution and marketing arm of the Ideal Group of Companies. The Ideal Group is one of leading automobile companies in Sri Lanka with a focus on assembly, distribution of automotive spares and accessories with multiple outlets throughout the Island. Ideal has also formed a new company, Ideal Wheels & Tyres, for the distribution and retailing of Apollo tyres. Initially Apollo would focus on passenger vehicle and cross-ply truck and light truck tyres. This will be gradually expanded over time to include the company’s entire range currently sold in India, including truck bus radial, agriculture and off-highway tyres. The $50 billion Sri Lankan economy is at a critical inflection point in its growth, spurred by large scale development projects, and is expected to grow at a healthy 7% to 8% over the next few years. With its entry at this point in time, Apollo is looking to partner Sri Lanka in this growth phase of construction of key infrastructure projects, with tyres that can meet the country’s evolving transportation needs.This in turn would enable the company to expand its revenues.

Threats

Fierce competition

Competition in the tyre industry is very intense particularly in India. The primary factors under which the company competes with other tyre manufacturing companies include price, quality, availability of raw materials, and strategic location of production facilities, among others. Some of Apollo’s competitors include MRF, JK Tyre ; Industries, CEAT, Goodyear, among others. Further, the entry of multinational companies (MNC) such as Goodyear, Bridgestone and Michelin into the domestic market may also create an intense pressure to Apollo margins. MNC tyre makers have cornered a higher market share in India in the past few years due to their international relationships apart from superior technology.

Since Honda, Hyundai and Toyota have an international sourcing agreement with Bridgestone; it is also the preferred supplier in India. Similarly, Goodyear is preferred supplier for Ford India. Therefore, intense competition from regional parts manufacturers and MNC tyre makers may reduce the revenues, profitability and cash flow, and also lead to pricing pressures, which could adversely impact Apollo’s profitability.

Threat from cheap Chinese imports

The Indian tyre manufacturing industry is facing a threat due to cheap import of tyres from China. The replacement market in India for truck and bus tyre is very price-sensitive and there is a very low brand and quality awareness. Chinese tyres, though low on the quality scale, have been competing in the Indian market on the basis of low prices. This is because Chinese tyre manufacturers enjoy the benefits of lower manufacturing costs and higher employee productivity. Besides being a price-sensitive segment, these tyres find acceptance in the domestic markets on account of their price competitiveness. According to industry estimates, the Chinese products are 15-30% lower than the rates quoted by local players.

Hence, the rising threat from cheap Chinese imports could negatively impact the demand for the company’s products and its financial position.

Calculate the price
Make an order in advance and get the best price
Pages (550 words)
$0.00
*Price with a welcome 15% discount applied.
Pro tip: If you want to save more money and pay the lowest price, you need to set a more extended deadline.
We know how difficult it is to be a student these days. That's why our prices are one of the most affordable on the market, and there are no hidden fees.

Instead, we offer bonuses, discounts, and free services to make your experience outstanding.
How it works
Receive a 100% original paper that will pass Turnitin from a top essay writing service
step 1
Upload your instructions
Fill out the order form and provide paper details. You can even attach screenshots or add additional instructions later. If something is not clear or missing, the writer will contact you for clarification.
Pro service tips
How to get the most out of your experience with MyStudyWriters
One writer throughout the entire course
If you like the writer, you can hire them again. Just copy & paste their ID on the order form ("Preferred Writer's ID" field). This way, your vocabulary will be uniform, and the writer will be aware of your needs.
The same paper from different writers
You can order essay or any other work from two different writers to choose the best one or give another version to a friend. This can be done through the add-on "Same paper from another writer."
Copy of sources used by the writer
Our college essay writers work with ScienceDirect and other databases. They can send you articles or materials used in PDF or through screenshots. Just tick the "Copy of sources" field on the order form.
Testimonials
See why 20k+ students have chosen us as their sole writing assistance provider
Check out the latest reviews and opinions submitted by real customers worldwide and make an informed decision.
Sociology
THANK YOUUUUU
Customer 452591, March 18th, 2021
Human Resources Management (HRM)
excellent work
Customer 452773, July 3rd, 2023
Human Resources Management (HRM)
excellent
Customer 452773, June 25th, 2023
Philosophy
Thank you
Customer 452811, February 17th, 2024
English 101
great summery in terms of the time given. it lacks a bit of clarity but otherwise perfect.
Customer 452747, June 9th, 2021
Business and administrative studies
great job as always
Customer 452773, February 26th, 2023
Marketing
excellent work
Customer 452773, September 25th, 2024
Human Resources Management (HRM)
excellent
Customer 452773, July 11th, 2023
Business and administrative studies
Excellent work ,always done early
Customer 452773, February 21st, 2023
ACC/543: Managerial Accounting & Legal Aspects Of Business
EXCELLENT JOB
Customer 452773, January 10th, 2024
Business and administrative studies
Thank you for your hard work and effort. Made a 96 out of 125 points Lacked information from the rubic
Customer 452773, October 27th, 2023
Business and administrative studies
excellent paper
Customer 452773, March 3rd, 2023
11,595
Customer reviews in total
96%
Current satisfaction rate
3 pages
Average paper length
37%
Customers referred by a friend
OUR GIFT TO YOU
15% OFF your first order
Use a coupon FIRST15 and enjoy expert help with any task at the most affordable price.
Claim my 15% OFF Order in Chat
Close

Sometimes it is hard to do all the work on your own

Let us help you get a good grade on your paper. Get professional help and free up your time for more important courses. Let us handle your;

  • Dissertations and Thesis
  • Essays
  • All Assignments

  • Research papers
  • Terms Papers
  • Online Classes
Live ChatWhatsApp