Strategic Management Assignment
By Sreenesh L Bhat-u112113
The report gives a brief snapshot of the country Morocco and its PESTEL analysis. The industry chosen is the Tyre manufacturing industry. Porter’s Five Forces analysis is carried out for the tire manufacturing industries in The United States of America and India.
and Western Sahara to the south. and of a multi-party system. whereby the Prime Minister of Morocco is the head of government.550 sq. The official language is Literary Arabic. Legislative power is vested in both the government and the two chambers of parliament.
PESTEL Analysis of Morocco
Political: Morocco is a parliamentary constitutional monarchy. It has Atlantic and Mediterranean coastlines. and on recommendations from the latter. the King of Morocco still retains few executive powers whereas those of the prime minister have been enlarged. Since Morocco controls most of Western Sahara. On the west.The Country: Morocco
Morocco. its de facto southern boundary is with Mauritania. appoints the Prime Minister from the political party that has won the most seats in the parliamentary elections. With the 2011 constitutional reforms. Algeria to the east. The King is formally the chief of the military. Berber and French are also spoken. known officially as the Kingdom of Morocco. Berber (indigenous African) and also other African and European influences. and a rugged mountain interior. The political capital is Rabat. km. It is bordered by Spain to the north. Moroccan Arabic. Morocco has a population of over 32 million and an area of 446. the Assembly of Representatives of Morocco and the Assembly of Councilors. appoints the members of the government. although the largest city is Casablanca. Morocco has a coast on the Atlantic Ocean that reaches past the Strait of Gibraltar into the Mediterranean Sea. Some of the facts and figures are: Total tax rate (% of commercial profits) Rounded 2010: 49%
. is the most westerly of the North African countries. The Moroccan Constitution provides for a monarchy with a Parliament and an independent judiciary. Morocco has a history of independence not shared by its neighbours. The constitution grants the king honorific powers. The main religion is Islam. Its rich culture is a blend of Arab. he presides over the Council of Ministers. The current government is headed by Abdelilah Benkirane. Executive power is exercised by the government.
consumer prices (annual %) 2011: 0%
. this is typically offset by substantial services earnings from tourism and large remittance inflows from the diaspora. Since 1993. net inflows (BoP.
Taxes on goods and services (% of revenue) Rounded 2010: 36% Taxes on income. Industry and mining contribute about one-third of the annual GDP. Agriculture accounts for only around 14% of GDP but employs 40–45% of the Moroccan working population.2% growth for 2013. and tourism. The World Bank forecasts a rate of 4. current US$) 2011: -7999606285 Exports of goods and services (% of GDP) 2011: 34% Imports of goods and services (% of GDP) 2011: 48% Foreign direct investment. total (% of GDP) 2010: 50% Current account balance (BoP. current US$) 2011: 2521364644 Inflation. Morocco’s economy depends heavily on the weather. a typical characteristic of thirdworld countries. phosphates. Although Morocco runs a structural trade deficit. the country has followed a policy of privatization of certain economic sectors which used to be in the hands of the government.6% (in 2008) Ease of doing business index (1=most business-friendly regulations) 2011: 93 Cash surplus/deficit (% of GDP) 2010: -2% Central government debt.2 billion GDP growth (annual %) 2011: 4% GDP per capita 2011: $ 3053 Unemployment rate: 9. Government reforms and steady yearly growth in the region of 4–5% from 2000 to 2007 helped the Moroccan economy to become much more robust compared to a few years ago. and the country normally runs a small current-account surplus. The major resources of the Moroccan economy are agriculture. Sales of fish and seafood are important as well. profits and capital gains (% of revenue) Rounded 2010: 25% Taxes on international trade (% of revenue) Rounded 2010: 5% Tax revenue (% of GDP) Rounded 2010: 23% Military expenditure (% of central government expenditure) Rounded 2010: 11%
Economic: Morocco's economy is considered a relatively liberal economy governed by the law of supply and demand. Some of the facts and figures are: GDP 2011: $ 100. The services sector accounts for just over half of GDP.
2. a new law passed encouraging Moroccans to look for ways to diversify the energy supply. and to eventually export electricity to Europe.000 beds are available for 6 million patients seeking care each year. Environmental: In 2008.6 million in 2010 to 16. In 2011. The health budget corresponds to 1. Technical: Science and technology in Morocco has significantly developed in recent years.
Sreenesh Bhat u112113
. Morocco’s own evaluation of its national research system – carried out in 2003 – revealed that the country has a good supply of well-trained high quality human resources and that some laboratories are of very high quality. GDP deflator (annual %) 2011: 1%
Social: According to the United States government. including 3 million emergency cases.1 percent of gross domestic product and 5.400 health centers. The industry remains dominated by the public sector.0 per 1. the country does have major assets that could transform its R&D sector into a key vehicle for development. Some of the facts related to the technical environment of Morocco are as follows. including more renewable resources. Morocco has one of the lowest rankings in the world in terms of Education. Some of the facts and figures are as follows.7% for females and the ratio of female to male primary enrolment (%) in 2011 was 94%. Patent applications in 2010 were 882 and high-technology exports as a percentage of manufactured exports were 7% in 2010. Morocco has embarked upon the construction of large solar energy farms to lessen dependence on fossil fuels. Number of internet users increased from 15.4 million in 2011 and the number of secure internet servers to 4 from 2. and polytechnics dispersed at urban centres throughout the country.5 per 1. The estimated illiteracy rate for the country in 2004 was 30.000 people) and poor access to water (82 percent of the population) and sanitation (75 percent of the population). with the universities employing 58% of researchers.000 people) and hospital beds (1. institutes of higher learning. However.8% for males and 54. but they are poorly maintained and lack adequate capacity to meet the demand for medical care. Life expectancy at birth of female and male was 74 years and 69 years respectively. Morocco has more than four dozen universities. The Moroccan government has launched a project to build a solar thermal energy power plant and is also in looking into the use of Natural Gas as a potential source of revenue for Morocco’s government. The Moroccan government has been implementing reforms to encourage scientific research in the Kingdom. as forecasts indicate that energy requirements in Morocco will rise 6% per year between 2012 and 2050.
Inflation. about 56% of the electricity source of Morocco came from coal. The health care system includes 122 hospitals. Only 24. Morocco has inadequate numbers of men physicians (0. While research has yet to acquire the status of a national priority in Morocco. Education in Morocco is free and compulsory through primary school.5 percent of the central government budget. and 4 university clinics.
Goodyear (US). and constitutional. Continental (Germany).
Porter’s Five Forces Model
Porter five forces analysis is a framework for industry analysis and business strategy development formed by Michael E. carbon black. Civil Law originates from Continental Europe and it consists of an actual written code. social. appellate courts and a supreme court.
Forest area as a percentage of land area in 2010 was 11% Alternative and nuclear energy as a percentage of total energy use in 2010 was 2% Combustible renewables and waste as a percentage of total energy in 2010 was 2% Energy imports. This article describes the components assembled to make a tire. the various materials used. $80 billion of tires were sold worldwide. net as a percentage of energy use in 2010 was 94% Methane emissions (kt of CO2 equivalent) Rounded 2010: 11777
Legal: Morocco's legal system is a mixture of several from around the world. administrative. The secular system includes communal and district courts.72 billion tires are expected to be sold globally. in 2010 it was $140 billion. It is estimated that by 2015. It is a rational (based on reason) code that is universal (applies to everyone). the manufacturing processes and machinery. Morocco's legal system is a combination of both Muslim Law and Civil Law. 1. correctional (civil) appeals. Porter of Harvard Business School in 1979.
Sreenesh Bhat u112113
. The Supreme Court is divided into five chambers: criminal. Tire factories start with bulk raw materials such as rubber. the tire industry is the major consumer of natural rubber. and chemicals and produce numerous specialized components that are assembled and cured. Michelin (France). and the overall business model. The top five tire manufacturing companies by revenue are Bridgestone (Japan).
The Industry: Tyre Manufacturing
With over 1 billion tires manufactured worldwide annually. and Pirelli (Italy). The dual legal system consists of secular courts based on French legal tradition and courts based on Jewish and Islamic traditions. courts of first instance. In 2004.
with average margin of 3.
. An "unattractive" industry is one in which the combination of these five forces acts to drive down overall profitability.37% which is lower than industry average of 4%. It also has highest profit margin of 10. This is because it operates in Offthe-Road tyres.68 Cr. Other major players are Apollo Tyre. CEAT and Goodyear India. Its Net Sales has grown strongly with a 5 year CAGR of close to 18%. A very unattractive industry would be one approaching "pure competition".
Tyre Manufacturing Industry: India MRF is a market leader in the Indian Tyre Industry with a market share of 30%. Three of Porter's five forces refer to competition from external sources.3% CAGR over the last 5 years. Balkrishna Industries Ltd. Its Net Sales has grown strongly with a 5 year CAGR of 27.
Porter’s Five Force Analysis
1) Bargaining power of supplier Bargaining power of suppliers can be segregated in two parts according to the demand of industry. Attractiveness in this context refers to the overall industry profitability. 8589. is far ahead from other industry players.55% (5 year average) in the industry. in which available profits for all firms are driven to normal profit. JK Tyre & Industry. a niche segment. in terms of net sales growth and highest profit margins. However.87%. The remainder are internal threats. It has total turnover of Rs. It also has one of the highest Net Profit growth rates with a growth of 68.It draws upon industrial organization economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market.
its main raw material. This cheaper option. The reason being.Rubber: There are two reasons behind this being low first one is most of the tyre firms get150 days credit for buying the rubber from international market which is not the case if they buy it from domestic rubber growers. The benefits are given to them as they are buying in bulk and the relation gives the tyre firms something called brand association. And this is heading towards strong position here in India too. OEM's: The OEMs are always in strong position when the bargaining power of buyers is concerned. 3) Threat of substitutes It is moderate or as the industry is facing opposition from re-treading sector all over the globe. which is the London Inter-bank Offered Rate. Other Petro chemical based material (Carbon black. this credit is being offered at LIBOR. Replacement: The scene in replacement segment is quite reverse as the bargaining power for the replacement segment is moderate due to the fact that the buyers are not that strong as compared to OEMs. this better can be defined as high. is present in developed countries since some decade back. And the second reason is. global tyre industry is already seeing mergers and acquisitions in order to restructure. And as of now India and China going to be the hub of activities as far as tyre industry is concerned due to low production cost as
. But if we see from domestic (Indian) industry's point of view. around 20-25% of the original tyre cost.): The power of suppliers is high in this category as India is limping back in case of Petro based raw materials like carbon black and chemicals which account low in quantity terms but are high cost generators. Also the price of NTC fluctuates in line with the prices of Caprolactam (a petroleum derivative). Nylon tyre cord etc. 2) Bargaining power of buyers This can be segregated into two parts as follows according to the customers of tyres. The demand in buses and truck segment is always high because of Indian poor road conditions apart from this the purchase is made in small units. 4) Threat of new entrants The threat of new entrant is moderate or can be described as low because the industry is highly capital intensive and the level of technological expertise required is also highly specific. The reason behind this is most of them are having contract with their relative tyre manufacturer under which the prices of tyre remains stable for this OEM irrespective of market price. It is the rate of interest at which banks borrow funds from other banks. The prices of these materials are beyond control of tyre industry.
low realizations from growing OEM segment where the vehicle manufacturers are not ready to share the burden of tyre firms.High
Tyre Manufacturing Industry: The Unites States of America The US tire manufacturing industry consists of about 100 companies with combined annual revenue of about $15 billion. Apart from the aforementioned reason. Demand is driven by sales of new vehicles and the need for replacement tires. Because tires are largely a commodity. the portion of replacement pie continuously taken away by the re-treading sector which is slowly but firmly rising its head and that to in high realization segment of Bus-Truck tyres and last but not the least the unorganized sector is always there to give head ache to these established players like CEAT.High
Threat of new entrants High
Industry Rivalry .well as other relevant benefits. The industry is concentrated: the top four companies generate more than 70 percent of revenue. So for any of the global big shot Indian company will be a good option to go for. Michelin. the industry is seeing high competitive scenario at present because of various reasons like rising input costs.
Bargaining power of Supplier .High
Threat of substitutes Low
Bargaining power of Buyer . and Cooper. JK. Bridgestone.
Sreenesh Bhat u112113
. 5) Industry rivalry High. Major companies include Goodyear. like ERP and SCM. Apollo and MRF etc. because gradually the overseas players are expanding their wings over Indian tyre industry and also a limited and every player is moving towards automated technology.
Porter’s Five Force Analysis
1) Supplier power The bargaining power of the suppliers is high. According to Porter.profitability depends on cost-efficient operations. Also initial costs of entry (creating a manufacturing capability) are medium-high. each of the major players differentiates itself from its competitors in unique ways relating to diversification (Continental). footprint (Bridgestone). Moreover they not only want to keep their existing customers but also want to acquire their competitors' customers. Tires are a necessity. it is easy for the customers to switch brands without incurring much loss. 3) Threat of substitutes Tire as a product is hard to differentiate. Switching cost: As there are quite a number of players in the tire industry and the prices between two or more brands differ less.000. Raw material suppliers can exercise high pressure on the prices for their input materials in tire manufacturing due to strong competition in a rather commoditized market. Buyer concentration: Buyer concentration is very high in the U. That said. tire industry in US and the market is quite huge. Small companies can compete by producing tires or tire-related products for niche markets. technologically advanced materials and can invest in improving production efficiency. The industry is capital-intensive: average annual revenue per employee is about $315. However. Thus buyers can exercise high power which keeps prices low. 4) Barriers to entry Requirement of high investment is an essential component in entering the industry as well as to convert factories to produce different type of tires as radials. which already has impacted the threat of the new entrants-pressure structure. Threat of substitutes is low which is favorable for the existing players. new competition is seen in growing markets such as China.S. And companies have to spend in huge number to make their products identifiable to the customers. Still there are some variations under different brand names. 2) Buyer power It refers to the bargaining power of the customer. then the attractiveness of the industry goes down.
. Large companies can afford the research to develop tires from new. if the bargaining power of the buyers' is strong. Threat of new entry is medium since new entrants are rather not attracted due to the commodity nature of the environment. premium brand (Michelin) and overall reputation and reputation for new product development (Goodyear). such as bicycles or farm equipment.
Firestone.tireindustry. five is quite a good number. Uniroyal. As huge amount of investment is required to set up a manufacturing plant and to shift to new business. Tire is almost a necessary product but not quite frequently bought.org/ http://www. it is extremely difficult to exit from the tire industry.us-tra.atmaindia.
Supplier Power . Again.wikipedia.org/
. if the number of players in an industry is large. the tire industry seems to be quite unattractive. From the perspective of number of players.High
Barriers to entry Medium
Competitive pressure High
Threat of substitutes Low
Buyer Power .5) Competitive Pressure According to Porter.org/ http://www. BF Goodrich and General Tire. then attractiveness of that industry goes down.org/ http://www.maroc. Goodrich had to merge due to high exit barriers.High
http://www.ma/PortailInst/An/ http://www. Companies like Uniroyal. The Tire Industry in the United States was dominated by five major companies: Goodyear. foreign competition and import of passenger tires made the industry quite competitive. In such an industry.