Michelin is absent from the Indian tire market for a number of economic, historic and strategic reasons.
We will first do an external analysis of the tire industry in India in order to better understand the market:
India is a former British colony which explains the presence of British firms in India but it is not surprising that India doesn't have many French firms as the French only occupied a small region of India and did not stay as long as the British did. After the country became independent and grew, many local manufacturers set up shop. This horizontal growth, (increase in purchasing power in India) allowed economies of scale to develop.
The tire market in India is very competitive market where 40 firms produce 70 million tires a year. However, despite the presence of many local firms, four big manufacturers account for more than 75% of the total turnover.
The market for motorcycles and scooters is dominant. City dwellers in India are attracted to these two modes of transport for urban and congested areas where traffic is dense. These two modes appear to have the most appropriate to navigate on crowded streets and meet the consumption patterns of Indians. Michelin manufactures tires and specializes in manufacturing them with the radial technique. However, the "tuk-tuks" or "rickshaws" use bias-ply tires. Using the radial technique to manufacture tires is expensive (more expensive than the technique used to make bias tires) and it does not suit the needs of the Indians.
Tags: Indian tire market; Michelin's absence in India; reasons for Michelin's entry into India
[...] Michelin's entry into the Indian market Explain why Michelin is absent in the Indian tire market . What is the point of entering this market now? Michelin is absent from the Indian tire market for a number of economic, historic and strategic reasons. We will first do an external analysis of the tire industry in India in order to better understand the market: India is a former British colony which explains the presence of British firms in India but it is not surprising that India doesn't have many French firms as the French only occupied a small region of India and did not stay as long as the British did. [...]
[...] There are many opportunities for market integration into the Indian tire market for Michelin. We will look at this in detail in the following sections: Question Conduct an analysis of the tire industry with: A diagram of Porter's 5 forces Segmentation in SAR and FCS to bring up maps or strategic groups Question What strategy does Michelin use for international development? - The key features: Michelin has been manufacturing tires for roughly a century and has based its strategy on two aspects: technological innovation and internationalization. [...]
[...] The remaining segments will be supplied by the factories of Apollo Tires. Indicative bibliography by Oboulo.com http://www.michelin.in/Home/About-Michelin/Michelin-Local/Michelin-in-Local http://www.nistads.res.in/indiasnt2008/t4industry/t4ind13.htm http://indiatransportportal.com/2011/07/michelin-india-current-activities/ New Entrants MODERATE Facilitates entry (40 local businesses) However, need know-how of manufacturing techniques Alternative products FEW or NONE No substitutes Perfect for tire manufacturers Competitive intensity STRONG The tire industry in India Four players account for 75% of sales MRF, Apollo Tyres, Ceat, JK Tyres Bargaining power of suppliers STRONG Length with raw materials: natural rubber and oil May be able to control prices Bargaining power of customers STRONG Customers can easily switch tire manufacturers. [...]
[...] Michelin's priority at the moment is entering the markets of emerging countries; growth in these segments is slower but offers good prospects. The current road network helps the selling prices of tires with diagonal technology advantage and the country's rapid development will necessarily promote and better the road network in India. The explosion of the automotive industry that occurred with the increase of the average standard of living are factors that favor maintaining sustained growth in the various segments of the tire market. [...]
[...] Michelin believes that this segment has great potential and is a priority in emerging markets. Michelin's skill and expertise in radial technology could be of great interest to Apollo Tires. Finally, the distribution network is so, that this company will promote the efficiency of aftermarket sales. • Establish a plant in India: Michelin's industrial presence in demonstrates the need to build a factory in India. It will specialize in the radial and tubeless radial tires for heavy commercial vehicles. Part of the production will be directed to radial tires of motorcycles and scooters. [...]
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