Case Study Description of Apollo Tyres: Investment Decision Dilemma
In early March 2012, an investor sat at home in Gurgaon, India examining the latest financial information about Apollo Tyres Limited, India's leading tire manufacturer. Over the past decade, the company had significantly diversified its product and geographic mix through organic investment and strategic acquisitions and had experienced superior growth opportunities. Yet, after almost doubling between 2007 and 2010, its share price had not seen any significant appreciation in the last two years, delivering only 12 per cent return between 2010 and 2012. Would this be a good investment? He decided to use the free cash flow discounting valuation technique to identify and value this high growth but undervalued stock. Varun Dawar is affiliated with Institute of Management Technology, Ghaziabad.
Swot Analysis of "Apollo Tyres: Investment Decision Dilemma" written by Varun Dawar, Rakesh Arrawatia includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Tyres Apollo facing as an external strategic factors. Some of the topics covered in Apollo Tyres: Investment Decision Dilemma case study are - Strategic Management Strategies, Financial analysis, Financial management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Apollo Tyres: Investment Decision Dilemma casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, there is backlash against globalization, wage bills are increasing, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, digital marketing is dominated by two big players Facebook and Google, increasing commodity prices,
geopolitical disruptions, technology disruption, etc
Introduction to SWOT Analysis of Apollo Tyres: Investment Decision Dilemma
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Apollo Tyres: Investment Decision Dilemma case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Tyres Apollo, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Tyres Apollo operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Apollo Tyres: Investment Decision Dilemma can be done for the following purposes –
1. Strategic planning using facts provided in Apollo Tyres: Investment Decision Dilemma case study
2. Improving business portfolio management of Tyres Apollo
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Tyres Apollo
Strengths Apollo Tyres: Investment Decision Dilemma | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Tyres Apollo in Apollo Tyres: Investment Decision Dilemma Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Tyres Apollo in the sector have low bargaining power. Apollo Tyres: Investment Decision Dilemma has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Tyres Apollo to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Tyres Apollo
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Tyres Apollo does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Finance & Accounting field
– Tyres Apollo is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Tyres Apollo in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Tyres Apollo is one of the leading recruiters in the industry. Managers in the Apollo Tyres: Investment Decision Dilemma are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Strong track record of project management
– Tyres Apollo is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Tyres Apollo has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Apollo Tyres: Investment Decision Dilemma HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in Finance & Accounting industry
– Apollo Tyres: Investment Decision Dilemma firm has clearly differentiated products in the market place. This has enabled Tyres Apollo to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Tyres Apollo to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Tyres Apollo has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Apollo Tyres: Investment Decision Dilemma - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy in the Apollo Tyres: Investment Decision Dilemma Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Diverse revenue streams
– Tyres Apollo is present in almost all the verticals within the industry. This has provided firm in Apollo Tyres: Investment Decision Dilemma case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Superior customer experience
– The customer experience strategy of Tyres Apollo in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Tyres Apollo has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Weaknesses Apollo Tyres: Investment Decision Dilemma | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Apollo Tyres: Investment Decision Dilemma are -
Slow decision making process
– As mentioned earlier in the report, Tyres Apollo has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Tyres Apollo even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Products dominated business model
– Even though Tyres Apollo has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Apollo Tyres: Investment Decision Dilemma should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Apollo Tyres: Investment Decision Dilemma, is just above the industry average. Tyres Apollo needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Increasing silos among functional specialists
– The organizational structure of Tyres Apollo is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Tyres Apollo needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Tyres Apollo to focus more on services rather than just following the product oriented approach.
Need for greater diversity
– Tyres Apollo has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Skills based hiring
– The stress on hiring functional specialists at Tyres Apollo has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Tyres Apollo supply chain. Even after few cautionary changes mentioned in the HBR case study - Apollo Tyres: Investment Decision Dilemma, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Tyres Apollo vulnerable to further global disruptions in South East Asia.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Apollo Tyres: Investment Decision Dilemma, it seems that the employees of Tyres Apollo don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
High cash cycle compare to competitors
Tyres Apollo has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Tyres Apollo is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Apollo Tyres: Investment Decision Dilemma can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Interest costs
– Compare to the competition, Tyres Apollo has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Opportunities Apollo Tyres: Investment Decision Dilemma | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Apollo Tyres: Investment Decision Dilemma are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Tyres Apollo can use these opportunities to build new business models that can help the communities that Tyres Apollo operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Tyres Apollo to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Tyres Apollo to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Tyres Apollo can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Tyres Apollo can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Tyres Apollo can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Developing new processes and practices
– Tyres Apollo can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Tyres Apollo can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Tyres Apollo can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Leveraging digital technologies
– Tyres Apollo can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Tyres Apollo in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Learning at scale
– Online learning technologies has now opened space for Tyres Apollo to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Buying journey improvements
– Tyres Apollo can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Apollo Tyres: Investment Decision Dilemma suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Loyalty marketing
– Tyres Apollo has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Using analytics as competitive advantage
– Tyres Apollo has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Apollo Tyres: Investment Decision Dilemma - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Tyres Apollo to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Apollo Tyres: Investment Decision Dilemma External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Apollo Tyres: Investment Decision Dilemma are -
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Tyres Apollo.
Shortening product life cycle
– it is one of the major threat that Tyres Apollo is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Tyres Apollo in the Finance & Accounting sector and impact the bottomline of the organization.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Tyres Apollo will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
High dependence on third party suppliers
– Tyres Apollo high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Regulatory challenges
– Tyres Apollo needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Tyres Apollo can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Apollo Tyres: Investment Decision Dilemma .
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Tyres Apollo business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Tyres Apollo demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Tyres Apollo in the Finance & Accounting industry. The Finance & Accounting industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Tyres Apollo needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Tyres Apollo with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of Apollo Tyres: Investment Decision Dilemma Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Apollo Tyres: Investment Decision Dilemma needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Apollo Tyres: Investment Decision Dilemma is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Apollo Tyres: Investment Decision Dilemma is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Apollo Tyres: Investment Decision Dilemma is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Tyres Apollo needs to make to build a sustainable competitive advantage.