INTERNATIONAL INSTITUTE OF PLANNING AND MANAGEMENT

SALES MANAGEMENT

PROJECT TRIMESTER

SUBMITTED TO SUBMITTED BY:-

Prof. Maninder Singh GROUP F497 FW/08-10

Ashutosh Patney

Ankush Garg

Karan Ramesh Dudani

Naveen Kumar

Prakhar Aggarwal

Robin Jain

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EXECUTIVE SUMMARY

The Rs.20,000 crore Indian Tyre Industry, is highly raw material intensive and predominantly a Cross Ply (or Bias) tyre manufacturing industry. It is highly concentrated wherein 10 large manufacturers account for over 95% of the total tonnage production of 11.35 lakh M.T. It produces all categories of tyres, except Snow Tyres and Aero Tyre for which there is no demand domestically.

Our research involves an in-depth study and analysis of two established tyre brands in terms of sales and distribution network: MRF and JK.

The data collected for the research involves the use of both primary and secondary sources. Primary data is based on the findings from the dealers of MRF and JK with the use of tools like Questionnaires and Discussions. This data is further substantiated by the use of appropriate secondary sources like Internet, Websites etc.

In this project we interviewed the Dealers and customers of MRF and JK.

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ACKNOWLEDGEMENT

We are grateful to our esteemed Prof. Maninder Singh, for giving us an opportunity to do an in-depth study on the project and gain a practical exposure. We are also grateful to him for his help, guidance and support. We are also grateful to International Institute of Planning and Management for designing such a course structure so that we can gain a practical exposure before actually going to the field.

We are also thankful to all the Dealers of MRF and JK TYRES who provided us with the information required and help us in completing our project report.

At last, we would also like to thank all the customers of JK tyre and MRF tyres who helped us in filling the questionaires and cooperated with us in completing the survey.

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CONTENTS

Executive Summary

1. Acknowledgement………………………………...…………………………………………

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2. Methodology…………………………………........................................................................

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3. Indian Tyre Market and Sector

Details………………………………………………........7

4. Company Background (MRF)

…………………………………………………………….13

5. Distribution Network………………………………………………………………….......15

6. Selection of Dealers…...

…………………………………………………………………....16

7. Company Background (JK Tyres)………………………………………………………..17

8. Distribution Network………………………………………………………………....…...21

9. Selection Of Dealers……………………………………………………………………….22

10. Analysis…………………………………………………………………………………….23

Annexure

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METHODOLOGY

The business sector chosen for this purpose is the Tyre industry, and the players chosen for study from this sector are:

MRF

JK TYRE

In this report we have mainly concentrated on the sales of tyre specifically for Cars.

INFORMATION SOURCES

PRIMARY DATA SOURCES -

MRF Dealers

LG Dealers

SECONDARY DATA SOURCES -

THE INTERNET

www.mrftyres.com

www.jktyre.com

www.google.com

DATA COLLECTION TOOLS

Data for the report is collected by interviews and discussions with the dealers and Surveys of the consumers. Interview Schedules and Questionnaires were used to record data.

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SAMPLE SIZE USED

Customers surveyed were 150 in number.

PROBLEMS FACED:

The basic problem that we faced was at two levels. Firstly at the level of the company representatives and the other at the level of the consumers.

The company representatives were hesitant about disclosing the financial facts about the company, and the weakness in distribution of the company.

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COMPANY MRF JK TYRES

Company Representatives - -

Channel Partners 6 6

INDIAN TYRE INDUSTRY

OVERVIEW OF THE INDIAN TYRE INDUSTRY:

1.1 An Introduction to the Indian Tyre Industry

The Rs.20,000 crore Indian Tyre Industry, is highly raw material intensive and predominantly a Cross Ply (or Bias) tyre manufacturing industry. It is highly concentrated wherein 10 large manufacturers account for over 95% of the total tonnage production of 11.35 lakh M.T. It produces all categories of tyres, except Snow Tyres and Aero Tyre for which there is no demand domestically.

1.2 Key Influencers

The level of economic activity, performance of domestic automotive industry, and the faring of the transport sector directly influence the performance of the tyre industry in India. With the replacement segment dominating the overall tyre demand, the industry remains inherently vulnerable to economic cycles. While radialisation has become the norm in the passenger car segment, in the bus and truck tyre segment, its acceptance is still limited. Bus and truck radialisation could emerge in the long term as the quality of roads improves and the restrictions on overloading are better enforced. The practice of re-treading, which is gaining increasing acceptance, could pose a challenge to replacement demand in the medium term. The ability of the re-treading sector to capture potential replacement demand would depend on the awareness among customers (of the benefits of retreading) and also the quality of retreading done. Given the low levels of penetration of two-wheelers and passenger cars in the country, OEM demand is likely to increase, which in turn would push up replacement demand with a lag. Slowdown in automotive industry and global economy in general negatively impacted the Indian tyre industry in 2009. The industry tonnage growth was only 2.19% during first nine months of FY 2009, compared to 7.38% growth experienced during the same period last year. Demand side was also severely affected as almost all auto manufacturers were forced to adjust their production last year. A major relief for tyre manufacturers was provided by the government by reducing the excise duty on tyres from 14% to 10% in December 2008, and further to 8% in February 2009

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1.3 Role of Marketing

Over the years, tyre manufacturers have developed a vast marketing network using dealers and depots and as such all types of tyres are now easily available even in the remotest corners of the country. No doubt, international auto majors in India now roll out their vehicles using Indian manufactured tyres.

1.4 Sales and Profitability

The Indian Tyre Industry produced 821 lakh units of tyres garnering approximately Rs. 21,000 crore in FY 2009 -2010. The top players are now focusing on branding their products and strengthening their distribution network so as to increase their market share. The industry derives its demand from the automobile Industry. While the OEM (Original Equipment Manufacturers) market off take is dependent on the new vehicle sales, replacement market demand depends on the total population of vehicles on road, road conditions, vehicle scrapping rules, overloading norms for trucks, average life of tyres and prevalence of tyre retreading.

1.5 Trends in the Past Years

As the economy in general; and automobile industry in specific slowed down in FY 2009, the tyre demand too came under pressure. The industry production registered a 5 year CAGR of 6.44% between FY 04-09. The largest category of Truck & Bus tyres recorded a 5 year CAGR of 2.96% (slower than the industry average) while Light Commercial Vehicle (LCV), motorcycle and car tyre categories grew at 6.07%, 10.70% and 6.90% respectively (relatively faster than the industry average). Off the Road (OTR) tyre category (customized tyres) which fetches a higher margin compared to other tyre categories, was the fastest growing. The OTR tyre category had registered a 5 year CAGR of over 8.85% in the last five years. Most of the top players increased their capacity for the production of OTR tyres so as to improve their product mix, this being a high margin product. Also in the face of global slowdown and stiff Chinese competition, the export market off take declined by 9.82% during this period. On the face of demand-side pressures, the tyre industry saw production adjustments from all the major players in the last couple of months. The government too tried to provide external stimulus by effecting 6% excise duty cut across industries (the excise duty for tyres was brought down from 14% to 10% w.e.f. December 7, 2008, and then further reduced to 8% w.e.f. February 25, 2009).

In all the gloom; one silver lining for the industry was the easing of the raw material prices from September 2008 onwards. However, their future movement still remains uncertain. Based on data from the Rubber Board, natural rubber prices have risen about 50% in the last 6-7 months. In fact, prices in the Indian market are presently ruling 5-6% higher than the same in international markets. As a result, tyre makers are facing significant rise in cost production. This has forced the industry to begin hiking prices in an attempt to keep the already thin margins intact.

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Tyre majors have already hiked prices. Moreover, due to shortfall in domestic supply and increasing gap between domestic and international prices of rubber, the tyre manufacturers have increased the import of natural rubber. According to estimates by Automotive Tyre Manufacturers Association (ATMA), tyre producers are likely to import 50% of their total natural rubber consumption due to tight domestic supply. With profitability of tyre companies having a strong correlation to raw material prices and as these companies operate on thin margins, this would remain an area of concern.

1.6 Current Status & Future Trends

As regards to the demand scenario, the poor demand growth in FY 2009 - 2010 was primarily on account of decline in OEM production. Continuation of poor volume growth could affect the profitability further. Despite these challenges, according to CARE (Credit Rating & Research) Ltd., while the industry may register a low tonnage growth in FY 2009, the long term prospective seems to be bright. They expect the industry to experience a CAGR of approximately 8.21% between FY08 to FY13. Automotive companies have started experiencing increasing sales and raw material prices are stabilizing which will boost tyre sales over the coming months. However, experts suggest there will be some time lag before profitability picks up as tyre manufacturers are still carrying high cost inventories. Though the outlook in the immediate term is uncertain, the long term outlook for the sector remains positive.

1.7 Towards the Future – “Radialisation” in India

Radialisation in India though in its infancy in T&B tyre category; is making inroads. Most manufacturers have capex plans for radial T&B tyres with no new capacity being added for bias tyres. This indicates that the industry foresees radialisation to take further hold in the T&B tyre category. "Rate of radialisation is actually an index of the status of road development, vehicle engineering and the economy in general". Notwithstanding the problem areas, constraints and limitations, the tyre companies have kept pace with the technological improvements that radialisation signifies and offer state-of-the-art product (tyres), comparable to the best in the world.

Radialisation can be aptly classified as the most important innovation in tyre technology. Despite its several advantages (additional mileage; fuel saving; improved driving) radialisation in India earlier did not catch on at a pace that was expected, since its introduction way back in 1978. This could be attributed due to several factors, viz. Indian roads generally not being suitable for ideal plying of radial tyres; (older) vehicles produced in India not having suitable geometry for fitment of radial tyres (and hence the general, and wrong, perception that radial tyres are not required for Indian vehicle; unwillingness of consumer to pay higher price for radial tyres etc.

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However, the situation has radically changed in recent years, especially for the passenger car tyre segment where radialisation has crossed 98% mark and is expected to reach 100% in two to three years. In the Medium and Heavy Commercial vehical segment current level of radialisation is upto 8%, and that in the LCV segment is estimated at 18%.

A few years back a beginning was made in Radialisation of truck and bus and LCV tyres and this process is gaining momentum.

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Swo t A n al y s i s f o r t h e T yr e I n du s t ry

Strengths

Established brand names (key in the replacement market)

Extensive distribution networks - For example, Apollo Tyres has more than 118 district offices, 12 distribution centres and 4,250 dealers.

Good R&D initiatives by top players.

Weaknesses

Cost Pressures - The profitability of the industry has high correlation with the prices of key raw materials such as rubber and crude oil, as they account for more than 70% of the total costs.

Pricing Pressures – The huge raw material costs have resulted in pressure on the realisations and hence, the players have been vouching to increase the prices, although, due to competitive pressures, they have not been able to pass on the entire increase to the customer.

Highly capital intensive - It requires about Rs 4 billion to set up a radial tyre plant with a capacity of 1.5 million tyres and around Rs 1.5-2 billion, for a cross-ply tyre plant of a 1.5 million tyre-manufacturing capacity.

Opportunities

Growing Economy leads to Growing Automobile Industry leads to Increasing OEM demand that in turn leads to Subsequent rise in replacement demand

With continued emphasis being placed by the Central Government on development of infrastructure, particularly roads, agricultural and manufacturing sectors, the Indian economy and the automobile sector/ tyre industry are poised for an impressive growth. Creation of road infrastructure has given, and would increasingly give, a tremendous fillip to road transportation, in the coming years. The Tyre industry would play an important role in this changing road transportation dynamics

Access to global sources for raw materials at competitive prices, due to economies of scale.

Steady increase in radial Tyres for MHCV’s and LCV’s.

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Threats

Continuous increase in prices of natural rubber, which accounts for nearly one third of total raw material costs.

Cheaper imports of Tyres, especially from China, selling at very low prices, have been posing a challenge. The landed price is approximately 25% lower than that of the corresponding Indian Truck/ LCV tyres. Imports from China now constitute around 5% of market share.

With crude prices scaling upwards, added pressure on raw material prices is expected

Ban on Overloading, leading to lesser wear and tear of tyres and subsequent slowdown in demand. However, this would only be a short-term negative.

Cyclical nature of automobile industry.

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MRF

Established in 1946 as a small toy balloon manufacturing unit in a shed at Tiruvottiyur, Madras (now Chennai), MRF ventured into the manufacture of tread rubber in the year 1952. The quality of the product was so high that by close 1956 MRF had become the market leader with 50% share of the tread-rubber market in India. In 1961, MRF entered into tyre manufacturing in collaboration with the Mansfield Tire & Rubber Company of USA. Since then MRF has come a long way towards achieving greater heights in the automotive tyre industry, with 6 manufacturing units in India. It has a huge distribution network of 2,500 outlets within India and exports to over 65 countries worldwide. .

Today, MRF is the market leader among tyre manufacturers in India, with a 24% share terms of revenues. Its leadership position, coupled with its strong brand recall and high quality, MRF commands the price-maker status. MRF has a strong presence in the T&B segment, the largest segment of the tyre industry, and commands around 19% market share in the segment. It is the leader in the two/ three-wheeler segment (including motorcycles) and tractor front tyres, and holds second place in the passenger cars and tractor - rear tyres. Exports account for around 12% of the gross sales in MRF.

Products

MRF is the leading manufacturer of tyres for almost all segments. Being driven by technology and product innovation, every tyre that comes out is of the highest standards and 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.

Apart from tyre manufacturing tyres, MRF also manufactures its MUSCLEFLEX brand of Conveyor Belting at one of the most advanced, 'State of the Art', Facilities in India. Incorporating the latest manufacturing techniques, MUSCLEFLEX-Conveyor Belting has gained rapid acceptance in markets worldwide.

MRF PRETREADS is yet another innovation from MRF Industries which is the most advanced precured retreading system in India. MRF forayed into retreading as far back as 1970. Today, MRF has perfected the art of recured retreading with its extensive knowledge in tyres and rubber. MRF’s diverse business interests also include Paint and Coats, and Toys.

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Recent Forays

Became 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 defence sector. The critical raw materials were sourced from overseas suppliers. It is estimated that the company invested more than Rs 150 crore to set up the new production facility at its existing plant in Medak district of Andhra Pradesh.

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DISTRIBUTIONAL CHANNEL HIERARCHY OF MRF & JK TYRES

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Criteria for selection of channel members

Financial Strength of the dealer Trade of the dealer ( belonging to the same trade) Existing trade experience

Sales network of MRF

MRF have a lot of showrooms in Delhi at places such as Mti nagar, GT karnal road, Najafgarh road, Shahdara and Ghitorini.

Besides the showrooms, MRF also has dealership network across the city.

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JK TYRES

Jk Tyre and Industries is a mega corporate entity that is emblematic of excellence, diversification and pioneering new technologies. A part of JK Organization which ranks among the top private groups private groups in India, Jk Tyre and Industries is committed to self reliance and follows an ethic that views customer satisfaction as an index of achievement. Over the years, the company has expanded and diversified its business portfolio. It has developed into a multi product, multi-location corporate entity comprising of following business divisions: The advent of JK Organization on the industrial landscape of India almost synchronizes with the beginning of an era of industrial awareness - an endeavor for self reliance and the setting up of a dynamic Indian industry. This was way back in the middle of the 19th century. And the rest that followed is history.

CORE VALUES:

JK Organization has been a forerunner in the economic and social advancement of India. It always aimed at creating job opportunities for a multitude of countrymen and to provide high quality products. It has striven to make India self reliant by pioneering the production of a number of industrial and consumer products, by adopting the latest technology as well as developing its own know-how. It has also undertaken industrial ventures in several other countries.

JK Organization is an association of industrial and commercial companies and charitable trusts. Its member companies, employing nearly 50,000 persons are engaged in the manufacture of a variety of products and in diverse fields of commerce. Trusts are devoted to promoting industrial, technical and medical research, education, religious values and providing better living and recreational facilities. With the spirit of social consciousness uppermost in mind, J.K. Organization is committed to the cause of human advancement.

JK Tyre's No 1 market position

In what is being considered as a landmark decision in the highly competitive Indian tyre industry, the Advertising Standards Council of India (ASCI) has upheld JK Industries Ltd's claim of being India's No 1 tyre manufacturer in the four-wheeler tyre segment, reaffirming JK's leadership position in the market. Expressing his happiness over ASCI's judgement, JK Tyre marketing director T K Banerjee says: ''This is a fabulous example of why all of us need to have faith in bodies like ASCI. We believe that the process of self-regulation in Indian advertising is working for both companies and agencies. We also hope that this would encourage various players to bring superior technology and consumer service standards and claim leadership in a more healthier and competitive manner.''

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The case was started when few competitors filed a complaint with ASCI against JK Tyre's print advertisement, in which JK Tyre announced its numero uno position in the fourwheeler tyre segment, quoting production figures compiled by Automotive Tyre Manufacturer Association and other authentic industry sources.

But the competitors contradicted the claim, stating the fact that market figures from a company's annual report should be used as authentic data to claim one's leadership, not the production figures. But ASCI considered the case at the Consumer Complaints Council on 23 May 2002 and upheld JK Tyre's contention that production figures, as compiled by authentic industry sources and used by JK Tyre to claim its leadership, is a valid and applicable comparison platform. Hence, JK Tyre's claim as No 1 tyre manufacturer in India is a perfectly valid and correct statement. This also reflects ASCI's agreement to JK Tyre's viewpoint that figures, as stated in the one's annual report, could actually be misleading and could include revenues from non-tyre-related businesses also.

JK Tyre, pioneers of radial technology in India, is today India's largest manufacturer of tyres in the four-wheel segment, including tyres for trucks and buses, LCVs, passenger cars, jeeps, tractors, ADVs and OTRs. After 25 years of pioneering world-class technologies in India, JK Tyre has recently launched the country's first eco-friendly coloured tyres as well as steel-belted tractor rear radials.

Mission & Vision

Vision:

To be amongst the most admire companies in India committed to be excellence.

Mission:

a. Be a customer obsessed company

b. No.1 Tyre brand in India

c. Deliver enhanced value at all stakeholders

d. Most profitable Tyre Company in India

e. Enhance global presence through acquisition

f. Motivated and committed team development for high performance organization

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Marketing Strategy

Strategic thinking is key to the evolution of successful marketing strategies of JK tyre.

This involves the following analyses:

i. Understanding markets: Strategic perspective of the market requires skilful analysis

of the trend and how they affect the market size and demand for the firm’s product.

ii. Finding market niches: Price, service, convenience and technology are some of the

niches in Indian market.

iii. Product and service planning: Analysis of the customer’s promotion of the brand,

both of the firm and competitors, besides an analysis of the situation in which the

customer uses the product.

iv. Distribution: Structural changes in inventory management, mobile distribution are

some of the key factors that are going to affect the distribution process in the Indian

market.

v. Managing for result: With pressure on costs, prices, and margins, marketers will

have to make effective utilization of every rupee spent in marketing.

Market opportunity of JK:

Identification of market opportunity is critical before the management of affirm takes a

decision to launch or diversify in any product area. This involves analysis of the

following:

Size of the market

Marketing strategies and the extent and quality of services rendered by other firm in the industry.

Market programmed required to satisfy market wants

Identification of key success factors in an industry and linking them to a firm’s strengths and weakness

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Market opportunity

a. Size of the market

b. How well the market is served

c. Prospective inches

d. Marketing mix required to succeed

e. Core competencies require

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Distribution network of JK tyre in Delhi

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Criteria for selection of channel members

Financial Strength of the dealer Trade of the dealer ( belonging to the same trade) Existing trade experience

ORDERING PROCESS

Channel Member Branch Commercial Warehouse

The channel member places the order, which goes to the branch commercial for further processing. The branch commercial has prior notifications and instructions from the company to react to the order as per the payment credentials of the channel member. The order is further sent to the warehouse for the delivery of the goods.

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Analysis

CUSTOMER QUESTIONAIRE

1. Which brand of Refrigerator do you own? JK TYRE MRF

2. How did you like to have information about tyres? Newspapers Magazines Friends & Relatives Retailers Others (Specify)________________

3. Do you information about various designs in tyres? Yes OR No If yes, then which of the tyres mentioned below you are familiar with? ZVTS ZV2K ZSLK ZIGMA CC

4. From where did you buy your Tyres? A Known Dealer Inquire from other dealer Reason__________________________________________

5. Do you get discount from the dealer? Yes No If yes, then what percentage(Approx)_______________

6. Have you ever faced any problem in your tyres regarding the following? Manufacturing Defect Others ___________________________

7. Rate the services of the dealer on the basis of following;

8. Tick the efficiency of the dealer to make your buying more comfortable?

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CRITERIA YES NO

Availability of the particular product

Behavior

Very efficient Less Efficient Less knowledgeable

Less efficient less knowledgeable Knowledgeable but Less effective

9. Tick one of the following:

DEGREE PRODUCT COMPANY

Fully SatisfiedPartially Satisfied Not Satisfied

If Not Satisfied, which brand in future you would like to buy and why? _________________________________________________________________

10. What tyres dealers prefer?

MRF Apollo JK tyres Ceat

11. Which company provides better after sales services?

MRF Apollo JK tyres Ceat NAME:________________________________________________________________OCCUPATION: SERVICE BUSINESS OTHERS (Specify) _____________________

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1. Which brand of Refrigerator do you own? JK TYRE MRF

2. Do you information about various designs in tyres? Yes OR No If yes, then which of the tyres mentioned below you are familiar with? ZVTS ZV2K ZSLK ZIGMA CC

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3. From where did you buy your Tyres? A Known Dealer Inquire from other dealer Reason__________________________________________

4. Do you get discount from the dealer? Yes No If yes, then what percentage(Approx)_______________

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5. Rate the services of the dealer on the basis of following;

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CRITERIA YES NO

Availability of the particular product

Behavior

6. Tick the efficiency of the dealer to make your buying more comfortable? Very efficient Less Efficient Less knowledgeable

Less efficient less knowledgeable Knowledgeable but Less effective

7. Tick one of the following:

DEGREE PRODUCT COMPANY

Fully SatisfiedPartially Satisfied Not Satisfied

If Not Satisfied, which brand in future you would like to buy and why?

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8. What tyres dealers prefer?

MRF Apollo JK tyres Ceat

9. Which company provides better after sales services?

MRF Apollo JK tyres Ceat

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10. Which is the most profitable brand?

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Questionnaire for Dealers

1) What are the different brands which you keep in stock?

2) Which brand is most asked by the customers

i) MRF ii) JK TYRE ……………………………..

3) What is your average sales/month?

4) Which brand do you recommend to the customer and why?

5) Do you get any credit period from the company?

a) YES b) NO

If Yes, What is the credit period you get:

i) Upto 15 days ii) 15-30 days iii) >30 days

6) What is your average order size?

7) What are the margins that you get from the company?

8) What is the average order cycle time taken by the company?

i) < 5 days ii) 5-10 days iii) > 10 days

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9) Where would you rank the services/assistance provided to you by the company/s

Very

Good

Good Satisfactory Poor Very

poor

Delivery Time

Quality Maintenance

Incentives

Promotional activities

Condition of Product

Ease and Flexibility of

placing Order

Transporter’s Behavior

Customers Orientation

Commercial Terms

Services of Sales Persons

10) How will you rate the efficiency of your sales persons

a) Very Good b) Good c) Satisfactory d) Poor e) Very poor

11) Does company provides you with any assistance by means of promotional activities?

a) YES b) NO

______________________________________________________________________

Person contacted: …………………………………………………………..

Name of dealer: …………………………………………………………..

Address: ………………………………………………………….

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Tel. No.: ………………………………………………………….

THANK YOU

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