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 - – cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation, increasing commodity prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption,
increasing energy prices, there is increasing trade war between United States & China, 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 -
Analytics focus
– Tyres Apollo is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Varun Dawar, Rakesh Arrawatia can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Tyres Apollo are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
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.
Learning organization
- Tyres Apollo is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Tyres Apollo is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Apollo Tyres: Investment Decision Dilemma Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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.
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.
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.
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.
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 -
Workers concerns about automation
– As automation is fast increasing in the segment, Tyres Apollo needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
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.
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.
High bargaining power of channel partners
– Because of the regulatory requirements, Varun Dawar, Rakesh Arrawatia suggests that, Tyres Apollo is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
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.
High operating costs
– Compare to the competitors, firm in the HBR case study Apollo Tyres: Investment Decision Dilemma has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Tyres Apollo 's lucrative customers.
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.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Apollo Tyres: Investment Decision Dilemma, in the dynamic environment Tyres Apollo has struggled to respond to the nimble upstart competition. Tyres Apollo has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
No frontier risks strategy
– After analyzing the HBR case study Apollo Tyres: Investment Decision Dilemma, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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 -
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.
Better consumer reach
– The expansion of the 5G network will help Tyres Apollo to increase its market reach. Tyres Apollo will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
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.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Tyres Apollo to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Tyres Apollo can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Apollo Tyres: Investment Decision Dilemma, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Tyres Apollo can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Tyres Apollo can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Building a culture of innovation
– managers at Tyres Apollo can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Finance & Accounting segment.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Tyres Apollo is facing challenges because of the dominance of functional experts in the organization. Apollo Tyres: Investment Decision Dilemma case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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 -
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.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Tyres Apollo can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
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.
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.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Technology acceleration in Forth Industrial Revolution
– Tyres Apollo has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Tyres Apollo needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Increasing wage structure of Tyres Apollo
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Tyres Apollo.
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.
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.
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.
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.
