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Business Policy MBA Term Project Service Industries Limited - Tyres and Tubes
This document presents a business strategy project for Service Industries Limited, a Pakistani tire and shoe manufacturer. The company was established in 1953 and went public in 1968. It has an annual turnover of around 12 billion Pakistani rupees for 2011. The objective of the project is to devise a strategy to gain and maintain a sustainable competitive advantage for the company. Analyses of the tire industry, company, opportunities, threats, and strategic factors are presented. The recommended new strategy focuses on product differentiation, reducing internal costs, developing export markets, strategic alliances with automakers, and penetration pricing to gain market share.
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Business Policy MBA Term Project Service Industries Limited - Tyres and Tubes
- 1. 1 BUSINESS POLICY TERMPROJECT SERVICE INDUSTRIES LIMITED (TYRES & TUBES) Presented By: M. A. Hanan Rasool 6/22/2012 Presented To: Prof. F. A. Fareedy
- 2. The Company 2 Established in1953 Went Public in 1968 Service Industries Limited Manufacturing Tyres & Tubes Plant Capacity 28,500,000 Tyres per year Annual Turnover around Rs. 12 billion for 2011 Service Sales Corporation Retail Outlets Shoes Distribut ors Wholesal e / Retail 6/20/2012
- 3. Project Objective 3 Devise acomprehensive business strategy for Service Industries Limited (SIL), with a view to GAINING AND MAINTAINING a sustainable COMPETITIVE ADVANTAGE 6/20/2012
- 4. Industry Analysis Market Share 4 60% MCTyres 20% 51% 39% 50% 40% 40% • Panther • Servis • Diamond 46% 44% 0% 2009 Servis 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Average Growth Rate 10% 10% 10% 2010 2011 Panther OEM Tyres Demand 1,040,248 934,534 1,321,186 1,018,108 1,473,722 1,677,100 1928665 (forecasted) Others Growth Rate 25% -10% 41% -23% 45% 14% 15% Note: The figures do not include the production companies who are not members of the Association.
- 5. Internal Factor AnalysisSummary 5 Industry’s Internal Factors Weight Rating Weighted Score Comments Economies of scale and volume based business 0.2 5 1 High level of fixed costs Only a few competitors 0.05 4 0.2 Defines the nature of competition Increasing demand trend 0.1 3 0.3 More motorcycles produced, more tyre demand Higher barriers of entry 0.1 4 0.4 Very high start-up costs Export potential 0.05 2 0.1 Pakistani tyre costs less to produce 0.15 2 0.3 Decreases the chance of survival Limited number of skilled labor 0.1 5 0.5 Increases emphasis on employee retention Capital intensive in nature 0.1 4 0.4 Difficulty in expansion plans Requires Technical Expertise 0.05 5 0.25 Technical staff required to run factory High intensity of competition 0.1 3 0.3 High marketing and promotional costs 1 - 3.75 - Strengths Weaknesses Low profit margins Total
- 6. External Factor SummaryAnalysis 6 Industry’s External Factors Weight Rating Weighted Score Comments Strategic alliances 0.2 4 0.8 Market is yet to be segmented 0.2 3 0.6 Diversification manufacturing 0.05 1 0.05 Concentric diversification - related product Retreading of tyres to save costs 0.05 2 0.1 Save costs on raw materials Government lobbying for tax rebates 0.1 4 0.4 Important incentive to export 0.05 4 0.2 Increasing market competition in industry 0.15 3 0.45 Reducing overall demand from OEMs 0.2 4 0.8 Raises cost of production 1 - 3.4 - Opportunities into car tyres Alliances with OEMs for long-term contracts Opportunity to breakdown the market and position product accordingly Threats Tyre Imports from China Imports of Chinese motorcycles Electricity crisis Total 6/20/2012
- 7. Strategic Factor SummaryAnalysis 7 Weight Rating Weighted Score Comments (O) Strategic alliances 0.2 3 0.6 Alliances with OEMs for long-term contracts (O) Market is yet to be segmented 0.2 3 0.6 Opportunity to breakdown the market and position product accordingly (S) Government lobbying for tax rebates 0.1 4 0.4 Important incentive to export (T) Electricity crisis 0.1 4 0.4 Raises cost of production (S) Increasing demand trend 0.15 3 0.45 More motorcycles produced, more tyre demand (W) Low profit margins 0.1 2 0.2 Decreases the chance of survival (W) High intensity of competition 0.15 2 0.3 High marketing and promotional costs 1 - 2.95 - Strategic Factors Total 6/20/2012
- 8. The New Strategy 8 Marketin gSTP • Product Differentiation • Promotions and Advertising • Need Based Segmentation Strategi c Alliance s– OEM’s New Strategy Reduce Costs Internall y • Pre-Selling • • • • Inventory Re-word Operational Costs COGS Develop Export Markets Penetrat ion Pricing • Put financial Strain on Panther 6/20/2012
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