MRF Tyres

2010

Sonam Aggarwal

PGPM/0911/045

2009-2011

International

Academy

of

Management

&

Entrepreneurship

2 | P a g e

MRF Tyres About Company

Title : Public

Founded : 1949(chennai)

Headquarters : Chennai, India

Industry : Manufacturing

Products : Car tyres, Motorcycle tyres

MRF is India's largest tyre manufacturing company, and among the dozen largest worldwide. It exports to more than 65 countries.

MRF received the highest rankings in the study in four of the five Factors Determining overall satisfaction with tyres

1) Appearance 3) Traction

2) Durability 4) Handling

History

MRF Ltd. India‟s largest manufacturer of automotive tyres and tubes, as incorporated as private limited company in1960 to take over the business of a partnership firm called the Madras Rubber Factory, started by late Sri. K. M Mammen Mapillai. The company was converted into public limited company in April 1961. MRF entered tyre manufacturing in 1962 through a technical collaboration with Mansfield, USA. Over the years, the company has established its own R&D center and currently functions independently.

Present

It is also involved in a range of other activities via subsidiaries. Funskool India, a Joint venture between Hasbro and MRF, is a major toy manufacturing company in the country. MF Pretreads offers world class precured tyre retreading service, and MRF Muscleflex is involved in making conveyor belts. It is presently under the leadership of Vinoo Mammen, son of the late K.M. Mammen Mappillai.

3 | P a g e

Mr. Arun Mammen - Managing Director of the Company w.e.f April 1, 2004.

Other Activities

MRF has been involved in the development of cricket through its sponsorship of many cricketers and MRF Pace Foundation. At one point of time, MRF was the bat sponsor of world-class batsmen including Brian Lara, Sachin Tendulkar and Australian captain Steve Waugh.

Sachin now uses Adidas bats, and MRF are currently sponsoring Gautam Gambhir and Rohit sharma two other members of the Indian cricket team.

Recent Forays

tested to weather the toughest conditions on any road. With more than 85 tyre variants, MRF holds the highest market share of 22% in terms of sales volume in the tyre industry.

MRF also manufacturers its MUSCLEFLEX brand of conveyor belting at one of the most at the most advanced “ State of the Art”, facilities in India.

MRF pretreads is yet another innovation from MRF industries which is the most advanced procured retreading system in India.

Become the first domestic company to venture into the niche area of developing and manufacturing of aviation tyres branded “ Aero Muscle” for helicopters and aircrafts which targeted the defense sector.

Competitors

Apollo tyres JK tyre and Ind Ceat TVS Srichakra

4 | P a g e

Comparison With Competitors

Companies Last price Market cap

(RsCr)

Sales

Turnover

Net Profit Total

Assets

MRF 5802.95 2461.11 5672.845 253.02 2082

Apollo 53.05 2673.85 4071.55 108.12 2051

JK 172.05 706.43 4922.00 18.89 1677

Ceat 133.40 456.81 2555.99 -16.12 949

TVS Srichakra 184.90 141.58 576.35 8.97 222

Ratios Analysis for the year 2008

Liquidity Ratios Current Ratio(times) = 1.31

Quick Ratio(times) = 0.67

Turnover Ratios Average collection period(days) = 37

Average creditors(days) = 61

Average Inventory(days) = 69

Solvency Ratios

Long term debt equity ratio(times) = 0.65

Interest coverage ratio(times) = 3.82

• The long term debt equity ratio is pretty healthy. • The raw material costs form a major chunk of overall operating

expenditure and so any fluctuation in that area could effect the company‟s overall prospects adversely.

• This is also visible from the fact that the operating margin is very low as can be deducted from the PAT/ total income percentage.

• The current ratio and Quick ratio are pretty decent. • The intense competition in the sector has also had its impact on the

company going by its PAT/ Total Income percentage.

5 | P a g e

SWOT Analysis

Strengths

Established brand name(key in the replacement market)

Extensive distribution network.

Good R&D initative

Weakness

Cost pressure

Pricing Pressure

High Capital Intensive

Core Competencies

Undisputed market leader

* Recall

Its leadership position, coupled with its strong brand recall and high quality, MRF commands the Price Maker status. MRF has strong presence in the T&B segment, the largest segment of the tyre industry and commands around 19% market share in the segment. It holds second place in the passenger cars.

* Complete Market Coverage

Over the years MRF has created a formidable product line, length, breadth to serve every segment. Its complete market coverage is one of the reason why it is undisputed market leader today.

Brand Recognition And Brand Recall

When it comes to top of mind brand recall , MRF beats rest of the competition hands down. MRF has for long concentrated on aggressive brand promotion. Sports celebrities and event endorsements have been a major vehicle for their brand promotion activities.

Strong Exports :-

6 | P a g e

Exports account for around 12% of the gross sales in MRF. The company exports to over 65 countries worldwide. Its largest tyre exporter in South Africa. Over the past decade, MRF has improved its technologies and tyre quality significantly, to compete effectively with other players in the International Market. Most of its exports are non-radial, nylon cross ply trees, are exported to other developing countries such as Sri Lanka.

Dealer Relations

MRF has aggressively pursued a PULL Marketing Strategy to sell its tyres.

In a pull strategy the manufacturer uses advertising, promotion and other forms of communication to induce the consumers to demand the product from the dealers.

MRF therefore almost exclusively concentrates on Brand awareness exercises, such as advertisements and endorsements.

Compared to other tyre manufacturer, MRF pays a little attention to incentivizing the dealers.

Yet dealer are motivated to stock MRF tyres simply because they have high brand retail recall and so the customer demands it.

Collaborations

MRF had collaborated with automobile OEM‟s who source their tyres from MRF India are:-

Maruti Mahindra and Mahindra Tata Motors General Motors

Basis for Segmentation – Vehicle type

There is very little direct interaction between the company and the customer. Tyre companies sell mostly to dealers in the replacement market and to OEM‟s

7 | P a g e

MRF :- The complete Market Coverage Approach

M1(cars) M2(Trucks) M3(2wheelers)

P1 Touring Tyres Economy High grip

P2 Sports Tyres Mileage Touring

P3 Economy Tyres Endurance Best-fit Tyres

Target Customers

The Indian passenger car owner OME‟s- Original Equipment Manufacturer Tyre dealers

Business Model

Business to business Partner

Differentiation and Positioning Strategies

Being a homogeneous product, there is not much difference in products offered by competing tyre manufacturer. However, companies do try to differentiate themselves by outdoing one another in some points of Parity such as Quality, safety, tread design, economy etc.

* Establishing category membership :-

MRF Tyres with muscle : The MRF muscleman, clearly states the category membership MRF subscribes to MRF communicates to the customer its superior endurance and strength. The Co sponsors, a number of sports such as cricket and rlly racing, to position its tyres as high endurance and sporty. Its slogan “ Tyres we Race, are Tyres you Buy „‟ stands testimony to their membership.

* Value Proposition :- Value proposition are a set of benefits that companies offer to satisfy customer needs. It answers the customer‟s question,- „‟ What is in it for me?”

8 | P a g e

* MRF- Endurance guarateed:-

MRF prides itself in making tyres that go into some of the most trying conditions on Indian roads. Consequently, MRF offers a compelling value proposition to heavy vehicle owners as well as passenger car and two wheeler owners. Quality Tyres that endure in the worst conditions. It drives home this macho message through its mascot, the MRF muscleman.

Pricing Strategies

MRF – Price Leader

MRF have long been leaders in the passenger car tyre segment. By the virtue of their market share, they have traditionally been price makers.

MRF using the Mark UP Pricing Method

The tyre industry being a very raw material intensive industry, the input costs mainly decides the price of tyres. Infact, 90% of a tyres cost comprises of its raw material costs. Marup pricing is the common pricing method followed across the tyre industry. This involves adding a standard markup to the tyre‟s production cost.

Financials of MRF Quarterly Annual

Income Statement (Dec '09) (Sep '09)

Net Sales 1656.30 5672.84

Other Income 6.04 25.36

PBDIT 254.94 716.72

Net Profit 119.41 253.03

Balance Sheet

Total Share Capital 4.24

Net Worth 1361.42

Total Debt 292.79

Net Block 933.56

Investments 148.57

Net Current Assets 285.84

Total Assets 1654.21