Bridgestone proposes launching run-flat motorcycle tires called Battlax RF in Thailand. Battlax RF provides safety, comfort and fuel efficiency. They allow riders to continue traveling after a tire pressure loss. Thailand has many unpaved roads and motorcycle accidents, creating a potential market. Financial projections show the 5-year NPV is $57.8 million and 10-year is $125.5 million. Battlax RF faces minimal competition and leverages Bridgestone's existing production and distribution in Thailand. The proposal concludes Battlax RF is a lucrative opportunity in line with Bridgestone's mission.

1. BATTLAX RF
Safe and Fuel-Efficient Run-Flat Motorcycle Tyres
Bridgestone
Prepared for
PROFESSOR KAPIL R. TULI
Proposal Submitted
by
Chan Chun Yin Glen (S8851261H)
Group 1
29 February 2012

2. Executive Summary
Bridgestone is the world’s largest tyre and rubber company with a global reach. It can
leverage on its reputation of being a reliable leader in the tyre industry, and its existing
research and technology to launch Battlax RF in Thailand. Battlax RF caters to street
motorcycles. It has the desirable attributes of comfort, fuel efficiency and safety. In the event
of a tyre pressure loss, these tyres can enable the rider to travel to the nearest service centre to
seek assistance; eliminating occurrences of riders being stranded by the roadside.
In Thailand, the increasing span of treacherous unpaved roads is coupled with the rise in
motorcycle numbers. This brings about potential prospects for Bridgestone. Income
projections are promising, with the 5-year NPV at $57,834,989 and 10-year NPV at
$125,531,521. More importantly, costs are lowered due to existing tyre production platforms
present in the company. This project holds future prospects of expanding into neighboring
markets such as China, where high motorcycle death rates and bad road conditions are
prevalent. To sum it up, Battlax RF is a lucrative venture that is in line with Bridgestone’s
mission of providing quality products to consumers.
Introduction
Bridgestone has the vision of being the top tyre and rubber company worldwide. To stay
ahead amongst stiff competition in the tyre industry, Bridgestone needs to move beyond
serving its existing markets and cater its products to fulfill further needs.
Thailand’s Treacherous Roads
Recent statistics from the World Health Organization (WHO) has shown an alarmingly large
number of road fatalities globally.1 In Thailand, 70% of road fatalities are motorcyclists
(Exhibit A1). The main cause for fatal accidents is the loss of control of the motorcycles.
This stems from tyre blowouts and traction-loss. The occurrence of such incidents increases
1
http://www.who.int/gho/road_safety/en/index.html

3. drastically when road conditions are bad.2 Thailand’s roads have failed to keep up with rising
vehicle ownership, thus leading to rapid road deterioration. As a result, motorcyclists are
more vulnerable to accidents. Regrettably, the span of such roads has increased over the
years (Exhibit A2).
Solution for a Safer Ride
Bridgestone now has the best ever opportunity to take the elements of safety and convenience
to the next level by introducing Battlax RF- motorcycle tyres which are safe, efficient and
provide users with added convenience, in the event of a motorcycle breakdown. The
successful launch of this innovative product will allow the company to present itself as being
passionate about bringing quality products to their consumers and ensuring their safety.
Therefore, Bridgestone needs to seize this opportunity to benefit from the first-mover
advantage and this can be achieved by launching Battlax RF in Thailand.
Body
Product- Motorcycle Run-Flat Tyres
Battlax RF is Bridgestone’s new generation of motorcycle tyres which provide safety and
convenience to motorcyclists. This will be the first-of-its-kind sold commercially and it will
cater to street motorcycles. Previously, motorcycle run-flat tyres were only manufactured for
security forces, such as the United States of America police department’s motorcycle fleet.
These tyres boast of the ability to prevent blowouts and can enable the rider to maintain
control in the event of a tyre pressure loss. Stability is of utmost importance to motorcyclists
when navigating roads which are not well-maintained. Moreover, the tough sidewalls of the
tyre increases the tyres’ rolling capability. In turn, it increases fuel efficiency. Bearing in
mind that fuel prices are forecasted to increase in the future, we can foresee motorcyclists
seeking fuel-efficient products.
2
http://motoring.asiaone.com/Motoring/News/Story/A1Story20101231-255764.html

4. Product- Support Network
At present, Thailand has an excellent run-flat tyre network for its car tyres, situated in 63
locations around the country. Bridgestone can utilize these networks to provide support for its
motorcycle run-flat tyres. In the event of a tyre pressure loss, these existing support networks3
will be within range for motorcyclists to seek assistance.
Place
Battlax RF will be available at all 142 Bridgestone distributors in Thailand. 4 These
distributors are spread throughout the entire country, and are mostly located along major
transport networks. Hence, it facilitates availability and visibility for Bridgestone’s new
product.
Promotion
Advertising channels include the use of social media, traditional mass media and billboards to
create awareness. Free trials of Battlax RF can be given to brand champions to generate hype
and word-of-mouth. This can be coupled with the promotion of allowing motorcyclists to
exchange their existing tyres with a brand new set of Battlax RF tyres, at a discounted price
of $200 (Annex B).
Battlax RF will also be promoted to motorcycle manufacturers such as Honda. The adoption
of these tyres will add value to their motorcycles. They can be seen as offering motorcycles
which are equipped with the latest tyre technology.
Price
Battlax RF is compatible with all street motorcycle models available in Thailand.5 The
average price for a standard set of tyres (both front and rear) is $350. In order to encourage
motorcycle manufacturers to adopt this new product, a 15% discount is given. They are able
to procure the tyre sets at an average pricing of $300.
3
http://www.bridgestone.co.th/th/service_network/service_network_result_rft.aspx
4
http://www.bridgestone.co.th/th/service_network/service_network_result_cockpit.aspx
5
http://www.motorcycle.in.th/wiki/doku.php/motorcycle/motorcycle_brands_available_in_thailand

5. Financial Analysis
The following analysis is based on a conservative outlook. Thailand’s market indicates
potential annual sales of 132,240 tyre sets, in the first year (Annex C). This translates into
$43.9 million worth of sales. With the launch of its next generation tyre series, Bridgestone is
expected to have a breakeven on its investment within two years (Exhibit D1). Moreover, this
project has an astounding five year NPV of above $57 million (Annex D). Bridgestone’s
prevailing brand power and technological advantage will drive demand for its tyres, with end-
user demand forecasted to grow by 0.5% yearly. Consequently, a 194% return on investment
can be anticipated in year 5.
Operational Risks
The integrity of Battlax RF tyres must be of utmost importance. As the product will be
marketed to ensure the riders’ safety on treacherous roads, care must be taken to ascertain
that they fulfill the value proposition. Otherwise, Bridgestone will lose the trust of its
consumers and suffer a loss of credibility. In the recent years, there have been lawsuit cases
against tyre companies. These cases stem from incidents of defective tyres causing fatal
accidents or serious injuries to motorcyclists.6
Therefore, intensive product testing is necessary. Battlelax RF will be put through
internationally recognized testing procedures to verify the capabilities and safety of the tyres.
This will be carried out in laboratories under controlled conditions and adhering to the strict
guidelines of ISO 10230:20037.
The product will also be accompanied with guidelines for proper usage to ensure that
consumers are aware of the product’s thresholds (Annex E). Distributors will also be
educated to install the appropriate tyres onto motorcycles and to provide advice to end-users
6
http://www.unsafemotorcycles.com/motorcycle_crash_news.html
7
http://www.iso.org/iso/iso_catalogue/catalogue_tc/catalogue_detail.htm?csnumber=37790

6. regarding usage. This warrants optimal performance of the tyres. Consequently, it also
protects the company from any legal action, should the product fail due to misuse.
Lastly, Bridgestone can maintain an open channel to receive feedback and handle complains
for its product. This way, the company can show that it is proactively connecting with its
customers, resulting in high brand resonance. Studies have shown that this instills customer
loyalty.
Competition
At present, Bridgestone does not face any competition in terms of street motorcycle run-flat
tyres. Dunlop has tried developing run-flats (Dunlop Special D402 PT) for Harley Davidson
police motorcycles in United States of America. However, their tyres compromised
efficiency and comfort for safety. Hence, it was not sold to the mass market.
Bridgestone’s competition in Thailand will mainly originate from the normal street
motorcycle tyres which are being sold by popular brands such as Dunlop, Pirelli, Michelin
and Continental. Thus, it is important to aggressively market Battlax RF to encourage trial.
Customers will then be convinced of the benefits which Battlax RF provides. An analysis of
Bridgestone’s competitors (Annex F) revealed that the average USD$350 price tag for a set
of tyres is very competitive, considering the benefits and quality which customers are getting
from their purchase.
Conclusion
With the introduction of Battlax RF, Bridgestone’s next generation of motorcycle tyres, the
company can show the world that Bridgestone is fulfilling its mission of serving society with
superior quality products. Bridgestone will generate returns beyond the tangible amounts of
above $57 million and it has the potential to break into the China market thereafter. With the
use of creative pioneering, Bridgestone will also be one step ahead of all its competitors in
terms of providing convenience to users and ensuring their safety.

7. Annex A
Road conditions in Thailand
Exhibit A1
Exhibit A2

8. Annex B
Product Trial & Awareness Campaign
Advertising channels which create awareness will revolve around two themes.
1) Superior tyre quality and efficiency
Advertisements will portray Battlax RF as the choice of professional Thai motorcycle racers
due to attributes such as riding comfort, safety, road grip and rolling capability.
2) Safety
Shock advertising will be used to great effect. They will show realistic scenes of crashes due
to tyre blowouts. These graphic scenes depict loss-of-control resulting in serious injuries.
According to psychological studies, such advertising ought to be accompanied by a solution,
so as to avoid viewers going into the state of issue avoidance. Bridgestone’s Battlax RF tyres
will be shown as the solution. In addition, the advertisement will also feature the attribute of
convenience.
Product trial will be carried out in two stages.
The first stage begins five weeks before product launch. A selection for brand champions will
be publicly announced and interested parties are invited to apply Applications are to be
accompanied with reasons explaining why they should be selected for the trial. Bridgestone
will then select 500 people, who have wide social networks, vast digital footprints or
influence, for the trial. This way, there is a higher probability that word-of-mouth regarding
the product, is spread to an extensive audience. Word-of-mouth is expected to spread through
friends and via social media (blogs, Facebook, forums).
The next stage begins after the product is officially launched in Thailand. The first 5000
motorcyclists will be able to exchange their existing tyres for a brand new set of Battlax RF
tyres at a price of $200. This promotion creates awareness and reduces consumers’ costs of
trial.

9. Annex C
A-T-A-R Model
Market Size 13,000,000
Awareness 60%
Availability 60%
Affordability 9%
Trial 20%
Assumptions and ATAR Derivation
i) Market Size: 13,000,000
- Number of motorcycles registered in Thailand: 16,581,174 (refer to Exhibit C1)
Exhibit C1
- Since there are 18,822,000 households (refer to Exhibit C2) and 16,581,174 registered
motorcycles. We assume that one household has an average of one motorcycle, for
households with annual disposable incomes of USD$2500 and above.
* In order to account for the households who do not wish to equip their motorcycles with
tyres that account for more than 40% the overall vehicle cost, the estimate was conservatively
multiplied by a factor of 0.8 and rounded down (to the nearest million).
Exhibit C2

10. ii) Awareness: 60%
- Thailand’s has effective advertising channels. Television alone has 93% consumer
penetration daily and cable television has 30 million viewers.
- Word-of-mouth regarding new motorcycle products is also likely as Thailand is known
as a country which has a motorcycle culture. Moreover, there are multiple online
forums in Thailand dedicated to motorcycles.
iii) Availability: 60%
- There are 142 Bridgestone distributers spread throughout the country.8
iv) Affordability: 9%
- Households with monthly disposable incomes of USD$2500 and above will consider
this product affordable.
- The segment for households with monthly disposable incomes of USD$2500 and
above form 10% of Thailand’s 2011 population.9
- On top of product costs, switching costs and commitment costs are taken into
consideration. Hence, affordability is adjusted downwards by 1%, resulting in an
estimate of 9%.
v) Trial: 20%
- A new set of tyres can last up to one year (depending on usage). Hence, it requires
commitment to the product.
- The concept of run-flat tyres for motorcycles is relatively new. Consumers might defer
trial to see reviews before committing to the change.
- Normal motorcycle tyres are cheaper.
8
http://www.bridgestone.co.th/th/service_network/service_network_result_cockpit.aspx
9
http://www.portal.euromonitor.com.libproxy.smu.edu.sg/Portal/Pages/Statistics/Statistics.aspx

11. Annex D
Financial Analysis
Revenue Summary
Year
Revenue 1 2 3 4
sources (USD)
End users 29.484,000 29,926,050 30,075,500 30,225,650
Motorcycle
18,000,000 18,270,000 27,405,000 27,541,800
manufacturers
Total 47,484,000 48,196,050 57,480,500 57,767,450
Revenue Breakdown
Year 1 2 3 4
End-users demand
84,240 85,503 85,930 86,359
(ATAR estimates)
Growth Rate - 1.5% 0.5% 0.5%
Average price for 1
350 350 350 350
set of tyres
Revenue 29.484,000 29,926,050 30,075,500 30,225,650
Year 1 2 3 4
Motorcycle
manufacturers 60,000 60,900 91,350 91,806
demand
Growth Rate - 1.5% 50% 0.5%
Average price for
300 300 300 300
1 set of tyres
Revenue 18,000,000 18,270,000 27,405,000 27,541,800
Assumptions and Derivation (Revenue)
Revenue stream is derived from two sources: end-users and motorcycle manufacturers.
End-Users
- For year two, growth rate is based on the average growth rate of motorcycles in Thailand.
However, the original value (2.5%10) has been multiplied by a factor of 0.6 to conservatively
account for the growth in demand.
10
See Exhibit D2

12. - The drop is growth rates for year three is due to the increase in motorcycle manufacturers
factory-fitting Battlax RF tyres onto their newly manufactured motorcycles. This reduces the
need to purchase a new set of Battlax RF tyres, for buyers of new motorcycles.
- Starting year three, growth rates are conservatively assumed to remain constant.
Motorcycle Manufacturers
- For year one, Honda Motor Company is conservatively assumed to adopt Battlax RF tyres
and factory-fit them onto 3% of its motorcycles. Honda’s forecasted output is set at 2.1
million units11 and tagged to the growth in demand by end-users.
- It is assumed that at least two other motorcycle manufacturers adopt Battlax RF tyres in
year three. Hence, growth rate for the year has been increased to 50% to account for the
increase in demand from motorcycle manufacturers.
- Starting year four, growth rates are conservatively assumed to remain constant.
- Battlax RF tyres are sold at a discounted price ($300) to manufacturers.
11
http://www.thefreelibrary.com/-Honda+Motor+Company+aims+to+sell+1.5+million+motorcycles+in+2012.-
a0276792743

13. Cost Summary
Expenses (USD)
Start-up Costs Recurring Costs
(Year 0) (Year 1 onwards)
Factory Expansion13 5,000,000 Utilities & Machinery 1,000,000
Maintenance12
Machinery12 9,000,000 Personnel 336,600
Initial R&D13 3,000,000 Ongoing R&D 200,000
Initial Product Testing13 2,000,000 Product Testing 400,000
Product Trial & 700,000 Marketing Promotions 100,000
Awareness Campaign
Total 19,700,000 Total 2,036,600
Variable
Manufacture
Year 1 Year 2 Year 3 Year 4
Costs (1 set of
tyres)
Cost per unit14 190 190 190 190
Quantity 144,240 146,403 177,280 178,165
Sub Total 27,405,600 27,816,570 33,683,200 33,851,350
Recurring
2,036,600 2,036,600 2,036,600 2,036,600
Costs
Total 29,442,200 29,853,170 35,719,800 35,887,950
Costs Breakdown
Personnel Managerial positions
(Marketing
managers, product Factory workers Support staffs
inspectors,
supervisors)
Average yearly
10,200 3,600 5,000
wage15,16
Number of
8 50 15
personnel
Sub Total 81,600 180,000 75,000
Total 336,600
Product Trial &
Free tyre trial by Tyre-exchange
Awareness Advertisements
brand champions promotion
Campaign
Per unit costs 20017 5018 -
12
http://globalbb.onesource.com.libproxy.smu.edu.sg/web/reports/ReportMain.aspx?KeyID=90647&Process=CP&Report=C
ASHFLOWS
13
http://globalbb.onesource.com.libproxy.smu.edu.sg/web/reports/ReportMain.aspx?KeyID=90647&Process=CP&Report=A
NNUALIS&Sections=
14
Based on fair outlook projections
15
www.gemini.com.hk/assets/doc/survey_thailand.pdf
16
http://www.channelnewsasia.com/stories/southeastasia/view/1149120/1/.html
17
Includes logistical costs of participant selection and costs one set of tyres for the trial
18
Logistical costs and disposal costs of exchanged tyres ($60)
Cost of one set of Battlax RF($190)

14. Number of units 500 5,000 -
Sub Total 100,000 250,000 350,000
Total 700,000
Marketing Promotions Advertisements Coupons
Average unit costs/month 6,000 5,600
Duration (months) 12 5
Sub Total 72,000 28,000
Total 100,000
Assumptions and Derivation (Costs)
- Bridgestone has a manufacturing plant in Thailand with space for expansion. Expansion on
the present site will be cheaper and more cost-effective, as the new factory can harness on the
existing networks and infrastructure. Similarly, machinery investment costs are also lowered.
- Variable cost to produce Battlax RF is estimated to be $190 (30% more costly than the
average Bridgestone tyre).
- Due to the existing platforms for tyre production and existing research by Bridgestone,
Research & Development (R&D) costs have been lowered. Costs are estimated to amount to
30% of the total R&D costs in Bridgestone Thailand.
- Initial product-testing is essential to safeguard against product failure. Hence, a substantial
amount is spent in this area. Subsequently, product-testing is still needed to ensure that tyre
quality is maintained.
Amount to be paid per participant under promotion ($200)
Costs incurred- $200-$190-$60=-$50

15. Cost - Revenue Projection
Year 0 1 2 3 4
Revenue 0 47,484,000 48,196,050 57,480,500 57,767,450
Expense 19,700,000 29,442,200 29,853,170 35,719,800 35,887,950
Net Income -19,700,000 18,041,800 18,342,880 21,760,700 21,879,500
Cumulative
-19,700,000 -1,658,200 16,684,680 38,445,380 60,324,880
Net Income
NPV (5 year
66,155,085
projection
NPV (10 year
153,130,503
projection)
Assumptions and Derivation (Cost - Revenue Projection)
- Risk-free interest rate is set at 5%.
- 10 year NPV is provided given the long-term nature of the production plant and project.
- Figures based on revenue and expense derivation models.
- Year 0 expense based on start-up cost derived in Expense Summary.

16. Sensitivity Analysis
Optimistic Outlook: Initial demand from manufacturers increases by 20% and demand
growth rates19 for end-users and manufacturers are further increased by 0.5% for each year.
* Increase in tyre output above 180,000 sets, reduces tyre variable manufacture costs by 10%.
Year 0 1 2 3 4
Revenue 0 51,084,000 52,105,680 63,532,577 64,167,903
Expense 19,700,000 31,722,200 32,315,912 35,776,823 36,114,226
Net Income -19,700,000 19,361,800 19,789,768 27,755,754 28,053,677
Cumulative
-19,700,000 -338,200 19,451,568 47,207,322 75,260,999
Net Income
NPV (5 year
85,962,560
projection)
NPV (10 year
185,179,991
projection)
Pessimistic Outlook: Initial demand from manufacturers decrease by 20% and demand
growth rates for end-users and manufacturers are further decreased by 0.5% for each year.
* Fall in tyre output below 140,000 sets, increases tyre variable manufacture costs by 5%.
Year 0 1 2 3 4
Revenue 0 43,884,000 44,322,840 51,671,014 51,820,653
Expense 19,700,000 28,418,480 28,682,299 32,053,828 32,135,061
Net Income -19,700,000 15,465,520 15,640,541 19,617,186 19,685,592
Cumulative
-19,700,000 -4,234,480 11,406,061 31,023,247 50,708,839
Net Income
NPV (5 year
57,834,989
projection)
NPV (10 year
125,531,521
projection)
19
See Exhibit D3

17. $300,000,000
$250,000,000
$200,000,000
$150,000,000
Cumulative Net
Optimistic Outlook
$100,000,000
Fair Outlook
Income
$50,000,000
Pessimistic Outlook
$0
0 1 2 3 4 5 6 7 8 9 10
-$50,000,000
Duration (years)
Exhibit D1
Exhibit D2
Exhibit D3

18. Annex E
Guidelines for Proper Tyre Usage
1) Tyres should be fitted appropriately onto motorcycles, in accordance to the guidelines
provided by Bridgestone.
2) Tyres should be properly inflated, in accordance to the guidelines provided by
Bridgestone.
3) In the event of a tyre pressure loss, motorcyclists should approach the nearest Run-Flat
tyre servicing station20 immediately. Travelling speed should not exceed 65km/h.
Motorcyclists are reminded that Battlax RF tyres have a range of up to 150 miles, in the
event of tyre pressure loss.
4) Motorcyclists should not exceed the recommended loading weight of the motorcycle.
5) Battlax RF tyres should not be fitted for extreme sports (i.e. drifting, motocross).
6) Additional lubricants or sealants should not be used on tyres.
7) Battleax RF tyres should not be retreaded by unauthorized tyre workshops.
20
http://www.bridgestone.co.th/th/service_network/service_network_result_rft.aspx

19. Annex F
Bridgestone and Competitors21
Prices stated are based on purchasing a set of tyres for a street motorcycle in Thailand.22 All
prices have been converted to US dollars.
Brand Average Retail Price (USD)
Bridgestone (Battlax RF) $350
Avon $295
Continental $278
Dunlop $364
Michelin $330
Metzeler $320
Pirelli $280
21
http://www.gt-rider.com/thailand-motorcycle-forum/showthread.php/34283-Tyres-makes-available-in-Thailand
22
http://www.tiresunlimited.com/motorcycle_tires.htm

20. Annex G
Miscellaneous Information
Due diligence (email exchanges)
Bridgestone

21. Dunlop