MANTISSAASSIGNMENT COVER

Student Name PRISCA BANGO

Student ID BBA - F1308 - 0322

Programme BBA PGSM

Module Subject: HOW TO SET UP BUSINESS IN ASIA

Module code: MG 433

Name of Lecturer: MAUREEN

Assignment title: SETTING UP BUSINESS AND MODE OF ENTRY

Assignment Submission date

Name of Group Members

Extension date agreed (Written approval from Mantissa office)

Actual Late submission date

04 - 07 - 2014

Explanation for Late submission (if applicable)

Interim mark awarded

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Table of Content

Topics Pages

Introduction 2

Company Profile 3-4

External Analysis

Political-Legal Factor 6

Economical Factors 6

Socio-Cultural Factors 6-7

Technological Factors 7

SWOT Analysis

SWOT Matrix 8-9

Locally Source resources 9

Pricing 9-10

Corporate social Responsibility 10

Mode of Entry 10

Conclusion 11

References 12

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INRODUCTION

The purpose of this analysis is to evaluate Bridgestone tyres opportunities and

threats that lies both in the internal and external environment in India before setting

up their operations.

The analysis used are SWOT, PESTEL, Industry Based View, Market Entry Mode

and other similar evaluative tools to reach an understandable and valid conclusion

that India provides varied opportunities for expansion that can be exploited by Tasty

Fried Chicken

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COMPANY PROFILE

The roots of the company dream date back to the establishment of Bridgestone Tire

Co., Ltd. in 1931. Anticipating the future potential of tires for passenger cars and the

international development of the business, founder Shojiro Ishibashi used an English

translation of his surname for the name of the company. Even then he may indeed

have been dreaming of the future of the Bridgestone Group.

As Japan's automobile industry grew, The Bridgestone Group expanded its business

to become Japan's largest tire manufacturer. The company also actively expanded

overseas, particularly in Asia. In 1988, the company acquired The Firestone Tire &

Rubber Company, a well respected global corporation with a venerable history of its

own. This transformed Bridgestone into one of the world's largest tire and rubber

companies and created a global team dedicated to serving customers worldwide with

the highest level of quality, service and technology.

Today, the company is worth US $23.2 billion with its headquarters at Tokyo. It

controls 18.2% of global market and sells products in over 150 nations. The

company has 47 tyre plants and 93 non-tyre plants, 3 technical research and

development centres and 10 proving grounds. Bridgestone has a worldwide work

force of more than 110,000 employees. It is a global tyre manufacturing company,

which emphasizes on Japanese traditions. It is still growing and expanding and

aiming at increasing its share in the world tyre and tubes, industrial rubber products

like belts, hose, chemical products, sporting goods, automotive parts, electro

materials and marine products.

Based on the company's financial report for 2013 fiscal year, the company net

income was US $33, 856,038 indicating an improvement of 17.4% and with a

forecast of 10% in the subsequent year. However, despite the continuous increase

in market share and profits the company is enjoying, Bridgestone tyres still want to

serve society with superior quality and to become a truly global enterprise.

Bridgestone announcing its presence to the world, India has been chosen as their

next hub. It will conduct a general evaluation on the country both in the area of

competition, suppliers, consumers and the broad environment will determine

Bridgestone mode of entry to India.

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Vision

At Bridgestone, our dream is to become a truly global enterprise and to establish the

Bridgestone brand as the undisputed world No. 1 brand in both name and

substance. Across the globe, our entire team is focused on achieving this goal

Mission

The Bridgestone Group's mission is based on the words of its founder: “Serving

Society with Superior Quality.” To fulfil this mission, Bridgestone Group has used the

concept of “foundation” to demonstrate the sustained commitment of employees to

provide its customers with world class products and services and to serve the

communities where Bridgestone does business. “The Bridgestone Essence” is

composed of the above words, integrated corporate culture, and diversity that

today's company has inherited and a shared sense of values that can be embraced

by Bridgestone employees around the world.

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EXTERNAL ENVIRONMENTAL ANALYSIS

External environmental factors are events that take place outside of the

organization and are harder to predict and control. Some of these factors are

Political- Legal, Economic, Socio - Cultural, and Technological factors

Being a raw-material intensive and a derived-demand product, tyre sales are highly

dependent on external factors that lie outside the purview of the manufacturers. A

number of raw materials go into the making of a tyre.

POLITICAL FACTORS

Import Restrictions

Government has imposed a restraint on the import of used tyres into India,

occasionally there are reports of import of such tyres in a secret manner, sometimes

as new tyre at low value, since there is no restriction on import of new tyres or any in

this category. The Indian tyre industry is suffering intense competition from low

priced tyres from China and other South East Asian countries.

According India Transport Portal (March 23, 2013) published that for imports from

China, the anti-dumping duty is to be $1.12/kg for tyres produced by Hangzhou

Zhongce Rubber Co. Ltd and anti-dumping duty has been fixed at $1.31/kg for all

other Chinese imports.

Government Stability

If there is one thing that business leaders and entrepreneurs hate that is instability in

the macro environment. Businesses operate according to forecasts and scenarios

about the future that comprise surprises as well as certainties. However, as much as

businesses factor in uncertainty, the one thing that wants to avoid at all costs is the

instability in the macro environment that results from political gridlock, extremism,

and political dysfunction. As the case of India, businesses flock to its regions and

states where there is political stability.

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ECONOMIC FACTORS

These are set of fundamental information that affects a business or an investment's

value. Various economic factors need to be taken into account when determining the

current and expected future value of a business or investment portfolio. For a

business, key economic factors include labour costs, interest rates, government

policy, taxes and management.

Increase in Tax

The issue of inverted tax structure, where the import duty on natural rubber is as

high as 20% but import duty on finished tyres is as low as 10% still remains

unaddressed. Other taxation issues have also been denting the competitiveness of

Indian tyres. Operational inefficiency and taxation issues have being denting the

competitiveness of India Tyres (Business Insight, Sept. 2009).

Inadequate Roads and Infrastructure

While poor road conditions have a positive impact on replacement demand, by

reducing the life of the tyre, improved roads can act as a catalyst to increased

purchase and use of personal vehicles, thus driving up the demand for tyres. Also,

poor road and support infrastructure act as a barrier to radialisation in the

commercial vehicle segment.

S O C I O - C U L T U R A L E N V I R O N M E N T

I n c r e a s e i n n u m b e r o f n u c l e a r f a m i l i e s

As the joint-family system crumbles and the number of nuclear families explode,

more small families seem to be demanding a two or four wheeler for themselves and

considering the population of India, it will direct impact on sales of tyres.

H i g h e r c a r d e n s i t y p e r f a m i l y

The number of upper-class and upper-middle class families with more than one car

per family seems to be increasing exponentially. This is especially true in cities

where working couples find it difficult to survive without more than one car for

transportation. With higher disposable incomes, these families are finally able to

afford this need.

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Shifting Away From EMI(Equated Monthly Instalment) Culture

Another notable trend that seems to be fuelling car sales and therefore affecting tyre

sales, is the shift in the middle-class consumers saving habits. The Indian middle-

class family has long been known for its savings frenzy. But with a younger

workforce, higher disposable incomes, lower unemployment and the influence of

globalization, the average Indian middle-class family is slowly warming up to the idea

of EMI and buying on credit. This has helped in furthering the sales of passenger

cars significantly.

TECHNOLOGICAL ENVIRONMENT

External factors in technology that impact business operations. Changes in

technology affect how a company will do business. A business may have to totally

change their operating strategy as a result of changes in the technological

environment.

Improved Capacity Utilization Techniques

India known as an information technology hub with well experienced engineers is

changing its industrial modes of operation. However, this is will give Bridgestone

because it adopted the system long time ago in Japan. In the face of increasing input

prices, and competition, existing Indian tyre companies are just searching for ways to

cut costs and improve their production efficiencies.

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SWOT ANALYSIS

A SWOT analysis is a structured planning method used to evaluate the strengths,

weaknesses, opportunities, and threats involved in a project or in a business

venture. A SWOT analysis can be carried out for a product, place or industry.

Strengths

Capital Availability

Brand Awareness

Technological Know-How

Weaknesses .

Expensive

Opportunities

Population Size

Threats

High Competition

STRENGTH

Capital Availability:

Bridgestone tyre has enough investment portfolio to capture the whole India tyre

industry. As a result of high market share and see a stable increase in profit will

solely fund its campaign in India and necessary awareness will be created.

Technological Know-How:

Bridgestone will benefit from its technological uniqueness in India by introducing the

passenger radial tyre, which none of the existing Indian tyre companies had no

knowledge about.

OPPORTUNITIES

Population Size:

The size of India has always been a contributing to sales and marketing performance. This will boost Bridgestone tyres simply because there will be more demand for the product either for two or four wheelers.

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WEAKNESSES

Expensive:

Bridgestone always focus much on differentiation and not enough on cost

minimization. This will affect the company in India because of the nature of the

Industry.

THREATS

Competition

The level of competition in the industry is very high and considering the number of

players involved. Different competitive strategies are introduced often which can

pose a big threat to Bridgestone if not properly understood.

LOCALLY SOURCE RESOURCES

Rubber which comprises off almost 70% of the tyre can be sourced in India. This will

reduce cost of raw material for Bridgestone tyres and increase their profitability

PRICING

Bridgestone pricing strategy is to put the price slightly higher than the rest of the

market. This is partially to demonstrate its superior quality and pedigree.

Bridgestone have long been leaders in the Passenger Car tyre segment and well

recognized. By virtue of the market share, the company have traditionally been price

makers in every potential market. As many consumers see price as an indicator of

quality. Bridgestone understands this subtle connection very well. Being world

leaders in quality and reliability, Bridgestone actively tries to remind the superior

quality factor to its customers by pricing its tyres a little higher than the competition.

Consumers are ready to pay this price because they perceive Bridgestone tyres to

be value-for-money. The high prices in turn reaffirm the perception of quality product

in the consumer’s mind. Thus, higher prices induce a continuous cycle of quality

reaffirmation.

Also, Dealer discounts and allowances will be used in keeping its pull strategy of

concentrating on end consumers. Bridgestone has mastered the art of incentivizing

the dealers with heavy discounts and allowances. Some of the dealer discount

schemes that will be used includes Credit discounts for quick credit repayments,

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Quantity discounts on large volumes and Seasonal discounts in the form of sell-in

schemes for the dealers during festivals

CORPORATE SOCIAL RESPONSIBILITY

Within the broad sphere of Corporate Social Responsibility, Bridgestone’s focus is on

establishing systems and on instituting activity programs of increasing efficacy

across a number of fields, including environmental activities, product safety,

compliance, risk management, workplace safety, disaster response and prevention,

internal controls, accounting audit, personnel development, and corporate citizenship

activities.

MODE OF ENTRY

After detailed analysis from the previous sections above concerning the company's

motive to go international, its strengths and weaknesses; evaluating the

attractiveness and risks of the Indian market to decide on the entry mode. There are

various mode of entry suitable for Bridgestone, which includes Franchising, Foreign

Direct Investment, Exporting, Licensing, Wholly-Owned, Direct Investment and Joint

Venture. However, Wholly Owned Subsidiary is the appropriate entry mode.

Wholly Owned Subsidiary

Defined as the company has 100% ownership of the company’s stock. This involves

large capital but give the company full control over its assets, policy making and

direction. A wholly owned subsidiary is a subsidiary company whose parent

company owns 100% of the company's outstanding common stock.

Bridgestone is particular about its technological know-how, therefore decided to

enter India alone.

According to India Act of 1956 says " When an entity which is Incorporated outside

India makes 100% foreign Direct Investment (FDI) in India [ as per Indian FDI policy

few sectors are permitted to 100% FDI in India], the indian company incorporated for

this purpose is said to be wholly owned subsidiary of that foreign entity

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CONCLUSION

After critical assessment of all the important factors by Bridgestone tyres before

setting up in India , it reasonable to conclude that company will thrive in India after

the favourability of the external environment and gaining advantage over its

competitors through its technological know- how, quality, brand recognition and

introduction of new radial tyres that suits India's climatic condition.

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REFERENCES

Das, Gurcharan. India Unbound: The Social and Economic Revolution from

Independence to the Global Information Age. ISBN0-385-72074-2.

Davies, Paul. What's This India Business?: Off shoring, Outsourcing, and the Global

Services Revolution. ISBN 1-904838-00-6.

Friedman, Thomas L. (2005). The World is Flat: A Brief History of the Twenty-First

Century. ISBN 0-374-29288-4.

Kobayashi-Hillary, Mark. Building a Future with BRICs: The Next Decade for Off

shoring. ISBN 978-3-540-46453-2.

Statement on Industrial Policies (1991), Ministry of Industry, Government of India

(Online). Available form: http://saidipp.nic.in/publicat/nip0791.htm( Accessed 27th

June 2014)

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