A SWOT analysis for the Indian Rubber industry

A SWOT Analysis is a situational analysis in which the organisations Strength, Weakness, Opportunities and Threats are critically analysed to examine the current position of the firm. SWOT Analysis’ are conducted by the companies as part of the strategic planning process for the purpose of identifying the organisations’ strengths, weaknesses, opportunities and threats before proceeding to the formulation of a corporate strategy.

The Strength and are the positive and negative aspects of the internal factors. And Opportunities and Threats are the outside factors.

The MRF is the largest and leading company in the Indian Rubber industry which engaged in the production, distribution and as well as the sale of tyres and other related products for different types of vehicle which includes a wide product range of tyres, tubes, flaps, trade rubbers and conveyor belts. Its SWOT Analysis is as follows.

Strength :-

Industrial Prominence and Brand Goodwill :- More than 55 years, MRF is the leader in the tyre manufactures with an average market share of 50% share in the total market in India.

Strong Leadership :- The MRF is founded by a successful business promoter ever found in India Mr.K.M Mammen Mappilai who is also the founder of famous Manorama group in India. The present whole time Manager of MRF Mr.K.M. PHILIP who is also known as the “PATRIARCH of the Indian Rubber” for the contributions he made by his pioneering contributions, effective visions leadership to provide strength, stature and permanence to the industry in its decisive years The present director board of MRF is as follows

Director Name

Designation

K M Mammen

Chairman & Managing Director

Arun Mammen

Managing Director

K M Philip

Whole-time Director

Ranjit Issac Jesudasen

Director

S S Vaidya

Director

S S Vaidya

Director

V Sridhar

Director

Salim Joseph Thomas

Director

Ashok Jacob

Director

K C Mammen

Director

N Kumar

Director

Ravi Mannath

Company Secretary

Experience :- The MRF established in 1946 that means even 1 year before the independence of India. So the MRF grown with the independent Indian industry by knowing all the heart beats of Indian Rubber industry. MRF have seen the all pace and retardness of the industry

Financial :- The Annual Financial report of last 10 years is below

The last year total sale was Rs 8080.45 Crores. In all the years it shows increases in sales, Profit before Taxation, Profit After Taxation, Reserves, Networth and Total Sales. All it shows the capability of MRF to earn the profit.

Manufacturing units and Distribution Channels :- MRF has got 6 Manufacturing units in South India in Goa, Medak in Andhra Pradesh, Tiruvattiyur and Arakkonam in Tamil Nadu, Puduchery, Kottayam in Kerala. For the purpose of distributing the products a well supply system has been established which includes both direct and indirect methods (selling through agents or mediators) of distribution. The sales includes exports too.

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MRF total production vs the Total Industrial Production :- The MRF Tyres has the more percentage of increase in production rather than than compared to the whole industry. By segment wise analysis we can see that in heavy commercial MRF is having 17 percentage as compared to 13 percentage of Total industry. In light commercial vehicle segment MRF is having 30percentage where total industry is having only 10 percentage growth. In Passenger/jeep category MRF’s growth is 40 percentage where total industrial production growth is 39 percentage

Customers :- The Automotive firms which uses the MRF tyres are prominent in the global Automotive industry and they are Audi, Daewoo, Daimler Chrysler, Fiat, Ford, GM, Honda, Hyundai, Maruthi- Suzuki, Renault, Reva, Skoda, Tata, Toyota, Royal Enfield, HHML, Bajaj, HMSI, Yamaha, TVS and Suzuki

Quality: – Every Product has been tested soon after the production also MRF is an ISO 9001 certified Company which ensures the quality for the Product. In 1955 itself MRF collaborated with Mansfield Tire & Rubber Company of USA for the product quality purpose. Also MRF is the only company in India which has got technical collaboration with Vapocure Australia for their curing technology. All of the six plants of MRF is 16949/ISO 9001 certified which is a proof for the quality of their products. All the products are tested indoor and outdoor for checking the quality of the product to attain the tight quality of MRF and also to attain the standards of OEM or by any of the national standards like BIS/JIS/ETRTO/T&RA.

Technology Research and Development:- In MRF a team of 300 engineers and scientists who are in the research of designing tyres as according to the customer needs. MRF uses advance cutting edge technology for the designing.

Tie-ups and Business Diversification :- MRF has been tied up with several other industrial international giants to form new firms for the purpose of diversifying the business. MRF tyres and Hasbro Inc., USA collaborated to form a new firm in India called Funskool which is the current largest toy manufacturing company in India. MRF tyres and Bayer Germany collaborated and formed MRF Speciality Coating which holds the 80% of market share in this sector. MRF opened institutes called Pace Academy for the purpose of training Fast Bowlers in several parts of India. Also the tie up with Vapocare as mentioned above.

II WEAKNESS :-

The weakness refers to the internal factors of the firm which stops the firm to attain its actual performance. The weakness of MRF Tyres is as below

The role of Cost :- As we can see in the financial report the total cost are also increase in the same proportion as the total sales increases. So this shows the maximum level of cost control can attain by the MRF Tyres. The rubber industry has got direct relationship with the cost of raw materials such as the natural rubber, crude oil and so on which covers the 70 percentage of overall production cost.

Huge capital required: – The production processes done by the MRF Tyres requires high capital. Also the research procedures, other charities and other sponsorships required huge amount of money.

Huge Expectation :- As the MRF Tyres is the leader in the Indian Rubber Industry eyes in this industry will be watching them all the time, so they have to work hard to maintain its standard. The pricing decision of MRF is extremely important because in India the price of the rubber depends upon the MRF rubber procuring price.

Product Range: – Although MRF exports their products to foreign countries its product range is mainly concentrated on the Indian conditions.

III Opportunities:-

Opportunities are the favourable situations in the organisation’s environment which can be explained as a usual trend or change of some kind or an overlooked need that increases demand for a product or service and leverage the firm to enhance its position by supplying the same. The Opportunities of MRF is as stated below

Survived the great depression: – Although there was slight change in the market share of MRF Tyres at the time of great depression which came down to 40 percentage it had survived the depression. In the time of great recession also their total sales and profits increased. It shows a wide acceptance for its products and the future of the company is extremely glowing

Tie-ups :- As the MRF is having tie ups with other firms and formed the leading organisations in that particular industries it has a wide scope for more tie ups in the future and also we can expect more further collaboration with others for the diversification of its product range as well for the betterment of quality for their current products

Foreign Trade :- As the MRF is having great experience in foreign trade by exporting and foreign companies’ collaboration it has got a wide scope in foreign market. MRF will get a red carpet welcome in all the foreign countries for their business diversification purposes.

Reserves :- The MRF is having a great reserve amounted INR 1686.44 crores which can be utilised for their future plans. So for all their plans which they are going to establish fund can be collected from the firm itself

Tariff regulations :- The excise duties reduced from 14% to 10% in December 2008, and later to 8% in February 2009. This provided the tyre manufacturers a great scope for procuring the sources of raw materials from outside and help to reduce the production cost to some extent.

Growing economy and its needs:- The Indian economy has projected 8.5 percent growth in the current year and has an average annual growth for the past 5 years which is a great growth and its automobile sector has got growth of 27.6 percentage in the last year all it shows the increase in need of domestic supply of tyres and the export is additional. So it is a great opportunity for MRF.

Indian infrastructure:- The infrastructure of the country is growing along with the economy. Both the Central and state governments are extremely cautious about developing infrastructure particularly roads and agro and faming sectors. So it also provides another great opportunity to MRF.

Development of Foreign Economies:- As the global scenario is changing and new big economies are emerging like Brazil it also create wide scope for MRF.

IIII. Threats :-

The threat refers to the obligations or the problems in the surroundings that are ahead. The threats of MRF can be categorised as under

The ongoing strike:- There is one ongoing labour strike in MRF internally as well as the whole automotive in industry in Chennai which is called as the ‘Detroit of Asia’ due to the presence of large number of automotive and auto component companies there. It had shaken the almost industry. And in MRF two production plants in Tamil Nadu are already dead due to the strike. This ia great threat to the MRF

Increasing price for raw materials:- The price of natural rubber is going on increasing and also the price for crude oil is also increasing domestically and internationally. According to the estimates of global leading rubber bodies like Association of Natural Rubber Producing Countries (ANRPC) and International Rubber Study Group (IRSG) says that the supply of natural rubber will be tight for the next two years which will increase the price. The raw material like these two covers the 70 percentage of the total production cost. This is a threat to the MRF as well as the rubber industry

Cheaper goods from China :- The cheaper tyres are coming from china. Although the quality will be very bad but the price is very cheap as compared to the quality products of MRF. Only because of low price it attained 5 percentage of market share in Indian industry. So this is one another threat for MRF.

Cyclic nature of Automobile industry:- The cyclic nature refers to the use of second hand vehicles in Automotive industry. This will reduce the sales of automotive industry to some extent which will directly effect the sales of their suppliers too. So this is also a threat.