By Onkar S. Kanwar, Chairman, Apollo Tyres Ltd.*
The year 2011-12 has been one of laying a strong foundation to pursue Apollo Tyres’ growth strategy for the next five years. It seemed the perfect time to undertake this exercise, given the uncertainty in the global economy. However, the global and the Indian economy will both recover soon. Growth will be back and so will job opportunities.
Overall, Apollo Tyres’ revenues have grown by 37 per cent during the year over the previous one, with profits continuing to remain depressed due to higher input costs. On an operational level, the company’s manufacturing bases in India, Netherlands and South Africa have undergone substantial investments and product expansion. There has been a restructuring in the critical area of research and development to create greater focus and customer-centricity. Business Quality as a process has been deployed across geographies to create higher efficiencies and to ensure that the customer’s voice is heard and suggestions implemented.
There are four strategic directions Apollo Tyres is globally pursuing with vigour – deepening its presence in the home markets, expanding into new markets, a clear focus on the environment, green technologies and society, and finally growth to achieve these objectives.
Deepening presence in home markets
Through a combination of the right products and focus on specific categories, the company plans to further consolidate its position in each of its home markets of India, South Africa and the European Union. This would be balanced with a focus on profitable segments of the tyre market. For example, in India where the company is already the No.1 tyre manufacturer and a leader in both passenger car and truck-bus radial tyres; the focus would be on widening the gap between the company and its competitors with a larger and more meaningful portfolio for customers. This would include the entry of the Vredestein brand to take on a leadership position in the ultra-high performance tyre and car segment. This would also include a higher penetration of mining and specialty tyres in South Africa.
In Europe, the focus for the next two years will continue to be on strengthening the passenger car tyre brands of both Apollo and Vredestein. Currently in Europe, demand outstrips supply. Therefore, the company is actively looking at ways in which it can meet this increasing European demand for passenger car tyres.
To lend greater focus to these markets, the company’s commercial vehicle Research Centre is being recreated in Chennai, while the entire passenger tyre Research and Development Centre has been relocated to Netherlands. This reorganisation will enable the company to address evolving car and customer requirements more effectively. As hubs, they will work with country-level research centres to further customise product ranges to address local needs actively.
Expanding into new markets
In each of the home markets, Apollo is growing at a rate higher than the local industry rate, especially India. Currently Apollo tyres are sold in over 118 countries. The company has been seeding many of these markets through exports for some years now. But over the course of the past year, it has identified the specific geographies of the Middle East, South-East Asia, Australia and Brazil as potential future home markets, some with manufacturing bases.
This presupposes a firm commitment to further expand the product range, sales and service network and also to a substantial capital expenditure to create fresh infrastructure of new manufacturing bases and people. Over the short term, the capital outlay might put further pressure on margins. However, this is a much-needed expenditure to enable the company to build a future of growth.
The company investments in community development, education and skill building of young people have increased 150 per cent during the year. The company has also started setting up driver training schools for commercial vehicles in India to create a strong pool of safety and health conscious drivers.
The company core duty is to aggressively pursue business growth, tempered with a keen eye on the society’s well-being. This involves appropriate investments in people, processes and plants for future business needs. And, of course, Apollo Tyres is ready to move to the next level in its journey around the world.