Roadmap for CEAT Tires Entry Strategy in OTR Market USA

1. Submitted by:
Team Tri-Us
IIM Ranchi
Varun Jaiswal || Sayan Kar || Snehal Vasant Madne

2. Global Demand
U.S.A
Market
Competitive
Scenario
STP
Marketing
Mix
Buying
Behavior
Launch
Strategy
OTR
Distribution
Target
Financials
OTR Tires major industry applications – Construction, Mining, Agriculture, Manufacturing
Global Chart
Source: World Bank.org
World Economy Driver
Countries by GDP
Legend:
Global Mining Activities
• USA, Europe, China &
Japan drive over 65% of
the world economy.
• Mining & Agriculture
based industry is growing
globally, which opens up
opportunities for market
expansion.
• Mining Equipment
Market Growth – 8.6%
CAGR by 2018
• Globally Farm Machinery
Equipment Market
Growth – 9.2% CAGR till
2022
Units
- Steady or up
Raw Material Costs
- Lower
Price Control
= Improved Margins
Net Result
Positive
Takeaway: Replicate the proven strategies of the brand leaders in the global market
segments. Formulate the short + long term geographical penetration strategies in
the economies mentioned for OTR tires. Strategic Markets: Asia & Oceania, Latin
America

3. Global Demand
U.S.A
Market
Competitive
Scenario
STP
Marketing
Mix
Buying
Behavior
Launch
Strategy
OTR
Distribution
Target
Financials
• Falling Natural Rubber
Prices globally
• Growth in replacement
segment coupled with
product mix
• Structural Shift
technology: cross ply to
radial tires
• Better trade relations,
after cheap Chinese tire
industry increased tariffs
Growth Drivers
• US Market GDP growth is poised to stabilize as per industry standards
• Industry growth around 6.4% with OEM segment, while Replacement targeted to grow at 9% CAGR
• The tire industry is highly sensitive to fluctuations in raw materials prices
• Raw materials constitute 75% of the operational costs, 70% of the sales turnover
• Manufacturing Setup – India, since low cost labor and natural rubber input material availability for production vis-à-vis Brazil
• As per forecasts, margins will expand on account of decline in rubber prices. (INR prices by 5-7%)
Takeaway: OEM demand expected to remain under pressure in short term whereas replacement demand would continue to remain the
growth engine in near term for US market.
31%
25%
16%
13%
8%
7%
Raw Material
Natural Rubber Synthetic Rubber
Fillers Chemicals
Steelcord Textile
Source: Michelin

4. Takeaway: Firestone, BKT, Michelin & Goodyear are the major competitors in
the Farm Equipment Tire Industry
32.8
26.8
10.2
8
6.6
6
0
10
20
30
40
50
60
70
0 5 10 15 20 25 30 35 40
Agri.-ProductMix
Market Share by Value
Strategic Groups
BKT
Firestone
Goodyear
Titan
Michelin
Alliance
Global Demand
U.S.A
Market
Competitive
Scenario
STP
Marketing
Mix
Buying
Behavior
Launch
Strategy
OTR
Distribution
Target
Financials
Source: MTD Facts Issue 2015
• Titan has extensive focus on the farm equipment tires offering
• Goodyear focuses on safety & fuel efficiency
• Alliance provides customized solutions, heat & cut resistant thread compounds
• Firestone has a strong distribution presence in the US, via the Bridgestone network
• BKT has a large product mix for the farm equipment sector, and a strong M.S by value

5. Global Demand
U.S.A
Market
Competitive
Scenario
STP
Marketing
Mix
Buying
Behavior
Launch
Strategy
OTR
Distribution
Target
Financials
- The $3 billion U.S. OTR tire market
breaks down as follows:
• 69%, or $2.07 billion, for small
OTR (rim diameters of less than 25
inches)
• 15%, or $450 million, for large
OTR (rim diameters of 26 to 49
inches)
• 10%, or $300 million, for giant
OTR (rim diameters of 50 to 63
inches)
• 5%, or $180 million, for repair
materials (products used for the
repair of OTR tires)
Source: IBIS US Market Statistics Source: Tire Industry Association
Consruction
43%Mining
24%
Exports
23%
Agriculture
6%
Others
4%
OTR tire U.S - Revenue
Consruction Mining Exports
Agriculture Others
• Agriculture production is concentrated on a small number of large, specialized farms in rural areas where 15% of the U.S. population lives
• Tractor Sales in U.S Market is consistently better than the 5 Yr Average (2010-2014) figures
• Equipment sales in other relevant industries is not so robust
Source: Association of Equipment Manufacturers (September, 2015)
Target:
- Value Segment (Many Indian Players in Low End Segment, same Macroeconomic Factors for Indian players)
- Product: Small & Large OTR Segment [84% of the OTR market]
- Industry Focus: Construction, Mining & Agriculture
Positioning: Providing quality value products, timely service and reliable collaborators

6. Product in OTR:
- Strong R&D ability, testing facilities & modern labs
- Business Collaboration with Equipment Manufacturers
- Product Endurance, can work in multiple terrains
Source: CEAT.com
Price:
- Follow a Value Optimized Pricing Strategy
- For exact figure, include margins & an PSM Study
- Due to niche OTR tires, high margins possible
- Value Proposition:
i) Better Margins for Dealers
ii) Enhanced Service Quality
iii) Timely Supply
Place:
- CEAT to have strategic Distribution Centers setup across
the country
- Capitalize on building up relationship with Mahindra,
largest tractor manufacturer globally
Promotion:
- Strong Brand Salience needs to be developed, in the US,
esp. for the industrial companies
- Mix of Push & Pull Strategies
Takeaway:
M.S. needs to be developed by reducing costs and occupying a niche
category set, as a specialized and a business customizable OTR manufacturer
Global Demand
U.S.A
Market
Competitive
Scenario
STP
Marketing
Mix
Buying
Behavior
Launch
Strategy
OTR
Distribution
Target
Financials

7. Global Demand
U.S.A
Market
Competitive
Scenario
STP
Marketing
Mix
Buying
Behavior
Launch
Strategy
OTR
Distribution
Target
Financials
• U.S.A shopper is mostly credit driven, proven historically
• A phenomenal 33.3% of the tire buyers do not specify the tire brand, scope for penetration exists
• Farm Equipment industry is growing in the USA, and the consumer willingness to spend will increase
• The main focus area identified are:
- The equipment depth & load resistance
- Average distance of travel on the work-site
Takeaway: Focus on the credit norm payment period, rather than competing on price in the replacement market for consumers.
• Job-Site Visit by the
Nearest Dealer has to
be implemented
religiously to ensure
the customer business
requirements &
processes are better
understood, the tire
maintenance is smooth
& investments are
value worthy for the
customer.
• Due to quality Value
Added Services (VAS)
the price can be
marginally hiked, and
value price segment
pricing can be justified.
Source: World Tire Report

8. Global Demand
U.S.A
Market
Competitive
Scenario
STP
Marketing
Mix
Buying
Behavior
Launch
Strategy
OTR
Distribution
Target
Financials
• Replacement Market (73%) is a major revenue earner in the tire industry
vis-à-vis the OEM (28%) market
• Focus on obtaining tie-ups with: M&M, John Deere
• CEAT India has strong business relationships with Mahindra. It should be
extended to USA for farm equipment tires, since Mahindra is the largest
tractor manufacturer.
• Introduce efficient packaging, material handling and after-sales service
systems via Training Programs for the handlers
• Make the CEAT tires available in the Service Centers of Mahindra, via a
Service Bundled Offer (discounted retreading rates) during repairs &
replacement of the OE tires.
• Mahindra dealer network would be a helpful source for the procurement
of Specialty Farm Equipment tires. This would help capture the Agriculture
Industry tire requirements faster.
• Supplier as an OEM to one or more among: Komatsu, Escorts
International Tractors, and Caterpillar has to developed in the next phase
• This is needed to break into the lucrative Mining & Construction Industry
• Pitch for Dealers:
- Increased Fill Rate
- Better Warranty/Adjustment Policy & Technical Support
Incremental Planning - Timeline
Time
Goal
Where we
are now?
Farm
Equipment
Tires,
Mahindra
Dealership
Priority Areas
Develop a
more deep
dealer
network in
the country
2017
2016
2018
Increase the
OEM market
share
Total Span: 3 years (2016-2018)
All Activities to be undertaken simultaneously with the
focus on P1, P2 & P3 respectively
P1 P2
P3

9. • Target the top 15 clients in the Farming Equipment, Construction & Mining Industry value-wise
• Provide better deals in the OTR tire purchase segment via a the Reward Redemption Program
• Reach out with customized credit norms, and service delivery mechanisms – for replacement tires
• Pitch For Clients:
- 24-Hour Emergency Roadside Service
- Early Morning Service
- Tire Maintenance Program (includes the Job-Site Service visits)
Marketing Focus
ATL Activities:
- Extensive targeted Advertisements, focus on the industry connect
- CEAT brand history leverage
- Establish endorsements of opinion leaders to drive sales in replacement market
• BTL Activities:
- Participate in Industrial Shows, Auto Expos to build
familiarity
- Ensure participation in ConExpo – Con/Agg,
Agritechnica Trade Shows in the US
- Focus on showing how the selected industrial tires are
a right fit for their business
TTL • TTL Activities:
- The Mahindra brand familiarity can be used to
increase CEAT recall in the US, via making the
consumer aware about the collaborations of CEAT
Global Demand
U.S.A
Market
Competitive
Scenario
STP
Marketing
Mix
Buying
Behavior
Launch
Strategy
OTR
Distribution
Target
Financials

10. U.S.A Map
Global Demand
U.S.A
Market
Competitive
Scenario
STP
Marketing
Mix
Buying
Behavior
Launch
Strategy
OTR
Distribution
Target
Financials
Mahindra Dealer Presence
Legend:
Bridgestone OTR Distribution
Centre
Source:
MahindraUSA.com, Bridgestone
Proposed CEAT – OTR
Distribution Centers
United States – Agri.
o/p
$395,068,677,000
Rank Commodity Cash Receipts Percent
1 California $44,738,132,000 11.30%
2 Iowa $31,985,370,000 8.10%
3 Nebraska $24,465,882,000 6.20%
4 Texas $22,726,067,000 5.80%
5 Minnesota $20,580,696,000 5.20%
6 Illinois $19,649,939,000 5.00%
7 Kansas $16,223,254,000 4.10%
8 Wisconsin $12,110,055,000 3.10%
9 Indiana $12,052,964,000 3.10%
10 North Carolina $11,706,602,000 3.00%
Iowa
California
Pennsylvania
Texas
Georgia
• In accordance with the Central Place Theory, the Distribution Centers are decided by mapping farm
equipment requirement by industry, Mahindra farm tractor dealer presence & OTR DCs by competitors
• There should be an extensive n/w of on-ground dealers to enable timely delivery
• Keeping the investment setup in mind, the OTR DC number has been tried to kept minimal till a
necessary M.S. is captured

11. Global Demand
U.S.A
Market
Competitive
Scenario
STP
Marketing
Mix
Buying
Behavior
Launch
Strategy
OTR
Distribution
Target
Financials
Source: Industry Reports
• The revenue source of 2015 US OTR
market has been used, flat line growth
assumed
• Target goal is assumed to capture 5%
M.S in overall OTR market, in US
• In order to capture the M.S heavy
focus has been given to tap into the
growing market in the farm machinery
sector
• The data points have been considered
over a period of 3 years (2016-2018)
• With a aggressive penetration
approach 2% M.S in the 1st year would
be driven by the Farm Machinery OE
& replacement markets
• Growth estimates has been done
taking in account the maturity of the
US market
Assumptions
(by value) (in Million USD)
OTR 2015 Market Revenue in US 3000
Goal (in 3 years) 5% Market Share 150
Projected Break-up
2016 2% M.S 60.0
2017 3% M.S 90.0
2018 5% M.S 150.0
OTR Revenue Breakup by Industry
Construction 43% 1290
Mining 24% 720
Exports 23% 690
Agriculture 6% 180
Others 4% 120
Forecasted Revenue Breakup (2018)
Construction 34% 51.0
Mining 28% 42.0
Agriculture 35% 52.5
Others 3% 4.5
Net Value 100% 150.0
Industry Size
Construction Machinery US Market (in million USD) 40000
Farm Equipment Market - Global CAGR forcasted growth - 9.2%