Saturday, November 29, 2008

The Art of tyres

Using the passenger tyre as a reference point, I feel the need to just talk about how the tread designs of tyres have since evolved into a form of art, but the art of selling and marketing however seems to be lacking way behind.

Design evolution
What used to be simple ribs and blocks, is now an abstract concoction of slits and slash, tapered corners and flowing lines. The traditional design for commodity sizes used to center around the “wave” pattern, which is good for mileage and promotes low rolling resistance, and most importantly gives a good ride quality and facilitates rotation. The traditional design for good wet and dry performance used to be the “directional” pattern which prevents aquaplaning, is reasonably good in the dry albeit compromising on the comfort level. In the recent decade, we saw the emergence of the “asymmetric” tread design, an in between of the wave and directional design. It combines the comfort factor of a commodity tyre, and the performance factor of a directional tyre.

Tyre design is a maze
If you combine the number of brands available in the market, with the number of patterns available from each brand, it is quite a maze for consumers who suddenly have to buy tyres once every few years. In Asia, it is made worst because tyre retailers do not have prices labeled, and also because recommendations are usually centered on what they have in stock- which could be heavily bias.

A good friend of mine, Gerald Wee who is in the legal profession, in a recent conversation demonstrated this point perfectly. He had issue with a European asymmetric make of tyre, compared to a present set of Japanese directional make of tyre. He claims that not only is the European make much higher in price, it does not even grip as well. My first few questions naturally was whether he drives hard and had encountered issue with the tyre on a wet day. His profile in the end naturally does not blend with an asymmetric design- which is suppose to give reasonably good performance in wet and provide a good comfortable ride. These factors in an asymmetric tyre naturally were not what he wanted.

Matrix for consumer tyre requirement
I suppose the art of tread design has progressed tremendously, and I believe each new design, pushes the performance of tyre further. What is lacking is however the education of our end consumers, and the professionalism of the tyre retailers. If only we can have retailers understand the need and characteristic of our consumers, and tie in a brand/design/budget to their requirement. Better still, if only manufacturers in the tyre industry can come up with a matrix to profile the consumer based on his or her characteristics and budget so that the best option of tyre is presented to him or her.

This is article 5 by Ler Hwee Tiong, Managing Director at Tyrepac Pte Ltd in his 7 part-series on Selling and marketing tyres- How difficult can that be?

Saturday, November 22, 2008

The Business of tyres

The study of business is a combination of studies in the field of accounting, marketing, economics, human resource management and etc.- basically, a field of study which aims to equip someone with the capability to be in business, or manage a business. What then, are some of these relevant “business” related matters, a young executive joining the industry, or a senior executive from another industry should be aware of?

I always claim that the tyre business is probably akin to many other businesses except that the product is tyre. Wee Kok Wah of Stamford Tyres Singapore used to say he is attached to the tyre business because he has tyre dust in his blood. His rational for saying that is probably the fact that, at an average of five percent net returns on investment (optimistically), it is not a sexy industry. Compare it to the Microsoft and Google of this world; it may not even make any business sense to be in the tyre business.

Financial aspect
In recent years, I have met and gotten to know many senior executives with finance background running tyre companies- Lawrence Seawell, President and CEO of Hercules Tire in US, being one. The experience he since had managing Hercules Tires would make the tyre business an acceptable business. But I am sure there were many others, particularly from other industries, who fell off their chairs looking at the financial figures of a tyre company. That is when unusual decisions are made to make the figures better.

How could an industry, which demands so much in capital investment, particularly in stock and logistics, make so little profit? The case is amplified for manufacturing of tyres, which calls for investment anywhere between USD 15 million to USD 100 million for a new plant- depending on the product category to be manufactured. This would bring us to lesson one of knowing the tyre business- managing expectations of a tyre company.

A look at how most of the listed manufacturers and distributors have performed in 2007, practically makes it a fact that net earnings hover in the 5% region (optimistically). I would say there are exceptions, but these exceptions probably operate the tyre business slightly differently. A friend I got to know recently, Michael Welch of, an internet based retailer in the UK registers net margin in excess of 10%.

Human resource management
Often enough, I hear and have personally encountered issues with hiring and retaining young executives in the tyre industry. The fact is that it is not attractive to be seen in the tyre industry- being associated with the dark and greasy garages. Of course, over the years, this association has gotten better, but I remember how as a fresh graduate, armed with a reasonable degree, I had my ego beaten to pulp by the retailers I was trying to sell tyres to. Through the years, I understood that tyre is a product in a business, like computer hardware is a product, like mobile phone is a product. It is the intricate knowledge of the skills involved in managing the tyre business which differentiates a good from the average manager or proprietor. How I wished this fact could have been pointed out to me from day one.

Terry Smith, owner of Exclusive Tyre based out of Queensland Australia, would be the epitome of a great proprietor cum manager. A true lover of the Australian outback- he changed my perception of a 4x4 tyre. The knowledge he has, and the simplicity that he is able to convey in selling 4x4 tyres, makes him stand out from others. An educational road trip we made together to Fraser Islands on 4x4 vehicles left me with an impression of someone who loves a product he is selling and marketing. How I wish I was around more people like him.

The point is this, the tyre industry is not for everyone, and there is no point hiding this fact. Appreciate the veterans in this business; the wealth of knowledge accumulated in them will assist in riding the tough times. Appreciate the ones who love to be in, and shorten the agony for those who would rather be out. And when he is in, and has the potential, educate him, and expose him.

Marketing of tyres
I know this segment will generate the wrath from marketers of the world, particularly the experienced marketers who join the tyre industry aiming to be unique. I am the last to claim a wealth of knowledge in marketing. I simply hope to reflect the mindset of a typical motorist.

Tyres unfortunately have its importance placed rather low in priority in the minds of many motorists (enthusiasts excluded). How can we blame them when a tyre change typically happens once every one to three years? It is expected to perform the simple task of containing air pressure, and carrying the weight of the vehicle and its content- goods or passengers. This brings me to the first point, the reason why marketing should first and foremost be to educate the tyre sales channels- the traders, distributors, and retailers. It is only when these channels are well educated, that the consumers, when they do need to be educated, can be. Marketing in this instance is therefore no magic- training and educational literature, point of sales material, product literature, etc.

I would say some of the relevant media and events for motorists include automotive magazines and publications, automotive events and shows, and car showrooms. In recent years, the internet is becoming a critical channel for communicating to the consumers. The importance of the internet channel definitely deserves an independent research. But beyond the show cars, pretty models, and fireworks, what is important would still be educational literature, point of sales material, product literature, and etc.

I would say motorsports peaks as the pinnacle of tyre marketing. It enhances development, and pushes the limits of tyres. It serves as an excuse to further splurge on more show cars, more pretty models and more fireworks. Given that there are still marketing money left at the end of these, keep them flowing back to the sales channels.

Marketing unfortunately is marginalized in my context, but my only intention is only to highlight the importance of getting down to the basics- build the channels of tyre sales, invest in relevant advertising media and literature to educate the public, and hopefully have some cash left for extravagance- motorsports. It sounds simple enough, but often, I see marketers creating news through the strangest ideas. This is not to say that imaging and positioning a product or brand, and all the textbook principles of marketing is not important.

This is article 4 by Ler Hwee Tiong, Managing Director at Tyrepac Pte Ltd in his 7 part-series on Selling and marketing tyres- How difficult can that be?

Saturday, November 15, 2008

The Economics of tyres

The basic of Economics states that demand should equate supply to maintain price stability, and any deviation from this principle creates imbalances resulting in price instability.

Case of OTR tyres
Take the case of Off The Road (OTR) tyres used primarily for mining and other industrial uses. Back in the late 80s and early 90s, prices of minerals and raw material were low primarily as a result of poor demand. Mining activities were also minimized since further harvesting of raw material and minerals would put downward pressure on prices. OTR tyre prices then were concomitantly under downward pricing pressure. Many of us would also remember how manufacturers and distributors struggled to profit from manufacturing or distribution of this product category.

The reverse of this scenario was true over the past five years when raw material and mineral prices were at its peak, and mining activities were at full momentum. Demand for OTR tyres push prices never witnessed in the past decade. Law of demand and supply came into force and we witnessed the speed existing and new Chinese manufacturers, in a plethora of OTR production. We all know the technically demanding nature of OTR production would mean many of these manufacturers will be short-lived. I could be wrong.

The cyclical demand of raw material and minerals, which is determined by the global economic situation thus also affect the demand of the OTR tyre. A simple fact, but often overlooked.

Currency fluctuations
The value of money, another topic discussed in depth in the study of Economics, is also reflected through the sales and marketing of tyres. The Asia financial crisis in 1997, saw various countries with currencies in a state of imbalance vie-a-vie other currencies. Indonesia had its Rupiah value halved practically overnight to a low of about Rupiah 12,000 per American dollar. Opportunists and we did see many, descended into Indonesia and practically clean out all tyres from Indonesia- selling them into countries with stronger currencies.

We have also seen how the economic situations in the past nearly drove various global manufacturers like Goodyear, Continental, and Dunlop into dire situations. Goodyear in the late 1980s was the target of takeover, Continental was in the doldrums prior to 2000, and Dunlop since being acquired in 1985 by BTR, has been divested. On the contrary, we have seen how these same manufacturers prosper during the recent past few years.

The present economic situation
The present global economic situations will definitely be reshaping the tyre industry. The general questions we could be asking ourselves are perhaps;
a. How will the excesses in China, way beyond local demand, affect the global supply and pricing situations? This question can be further digested, and an analysis of individual product category is required.
b. How will US tyre market, dominating practically a quarter of global tyre demand evolve? Will SUVs and light truck demand really start to diminish, and if so, how will this mutation pen out? Will this mean better and further penetration of Asian car make in US, and if so, what are the new preferred car models since it affects tyre size mix?
c. What will become of American tyre plants which have skewed production to SUVs and light truck? What is the cost of transforming existing plant structures from producing SUVs and light truck to producing more passenger or even commercial tyres?
d. How will the definite drop in global new automobile demand over the next few years affect tyres required for OEM? Will the excess created by this drop in OEM tyre demand further place more excesses into the replacement tyre market?
e. What will happen to consumer demand over the next two to three years, when economic situations are expected to be at its worst? What will happen to retailers and distributors, particularly the large ones, who have geared themselves to the good times two to three years back?

The understanding of tyre, be it product, category, or companies, is so much intertwined with basic understanding of Economics. The next couple of years will be trying times, and in my opinion will create another round of shake up at least equivalent to the last round of upheavals a decade or so ago.

This is article 3 by Ler Hwee Tiong, Managing Director at Tyrepac Pte Ltd in his 7 part-series on Selling and marketing tyres- How difficult can that be?

Wednesday, November 12, 2008

Partners Meeting

Our convention with our overseas partners on 11th November 2008 turned out to be a great success, with each re-affirming their commitment and dedication to making Tyrepac a success throughout Asia. We also had an opportunity to give a preview to local magazines, Hot Stuff & Torque.

We would like to take this opportunity to thank all that attended and stay tuned as Tyrepac launches around Asia!

Saturday, November 8, 2008

The Sociology of tyres

Let me quote from Wikipedia: “Sociology (from Latin: socius, "companion"; and the suffix -ology, "the study of," from Greek λόγος, lógos, "knowledge" [1]) is by definition the scientific study of society and human behavior. Thus, sociology is used to interpret human behavior using theories to the understanding of human behavior. ”

Manufacturer’s culture
Rest assured this article is not going academic. I bring sociology into the picture because far too often, I see new sales people and distributors heading the direct opposite of what a manufacturer hope to achieve. My point is this, the sales and marketing of a tyre brand or make depends on the culture of the manufacturer i.e., we have to understand the culture and behavior of the manufacturer. I dare say all manufacturers deviate in some ways from each other- culturally. Each distributor or retailer may also then deviate in culture according to the brand(s) undertaken.

We all know Michelin thrives on cultivating a disciplined sales and marketing channel. No distributor or retailer is successful undertaking Michelin overnight. Their capability must be consistent and demonstrated. We know Bridgestone’s determination for a business when they want it. We see growth and success of Cooper’s 4x4 tyre in the replacement market. We see Hankook desire for greater share in the passenger car tyre market. We see Yokohama’s and Maxxis’s patience in their slow and steady growth, but handled with consistency in marketing presence. While I comment on their behaviorism, I am not saying this is good or bad, I am merely saying that for relationships to prosper, all parties involved must share the same “behaviorism”.

We have to understand what we are selling and marketing, and to do this, we need to understand the culture of the manufacturer, the sociology of the manufacturer.

This is article 2 by Ler Hwee Tiong, Managing Director at Tyrepac Pte Ltd in his 7 part-series on Selling and marketing tyres- How difficult can that be?

Thursday, November 6, 2008

Tyre Service Charges

Passenger Car
Van & Light Truck Tyre Price

Tyre Change
15” and below $20 per tyre
16” – 17” $30 per tyre
18” – 19” $40 per tyre
20” and above $50 per tyre

Puncture Repair
All Sizes $20 per tyre
17” and below $40 per tyre
18” – 19” $50 per tyre
20” and above $60 per tyre

Wheel Balancing
Off Wheel Balancing $20 per tyre
On Wheel Balancing $30 per tyre

All prices recommended by Singapore Motor Tyre Dealers Association
Updated on 1st Nov 2008

Monday, November 3, 2008

What is involved in selling and marketing tyres?

Simply price and specification?
We all know that selling or marketing any product can be a simple function of specification and price? I have to agree that simplistically, selling or marketing tyre can be about specification and price. And when this function is right, a transaction can be concluded. The traditional trading channel thrives on this simple assumption. A good friend of mine, Mike Zhang of SD International in Shanghai, registers sales in excess of USD50 million annually by simply trading. There are many other examples of successful companies who started trading as one of its portfolio of business activities, and still maintain an active portfolio in trading for example Sumitomo, Mitsubishi, Itochu, and Mitsui- just to name a few from Japan. I do not even need to quote the magnitude of their trading activities to demonstrate how trading can be such a successful channel.

I will perhaps write an article talking about the various sales channels in the tyre industry in time to come.

How complex can it be?
If you have the patience to follow me to this stage of my article, I want to show you how it can be a whole lot more than simply price and specification- where Sociology, Economics, Business studies, Art, Engineering, and a whole host of specialized disciplines are involved. In my opinion, it is the combination and understanding of these disciplines in the simplest form, which will truly make a good manager, salesperson or marketer.

This is article 1 by Ler Hwee Tiong, Managing Director at Tyrepac Pte Ltd in his 7 part-series on Selling and marketing tyres- How difficult can that be?

Saturday, November 1, 2008

Selling and marketing tyres - How difficult can that be?

A simplified version of this article was first given as a lecture to a gathering of fellow colleagues in January 2008. My only intention then was to caution against anyone selling or marketing tyre to marginalize its complexity. I say that after 13 years in the tyre industry, a short period compared to some of the veterans I met over the years, and after having witnessed some superiors and colleagues from various other industries join the tyre industry.

Three gentlemen who influenced me immensely regarding veterans in the tyre industry are Edward Readings, formerly VP International Operations of Cooper Tires, Francis Lim- Director of Wah Seng Singapore, and Wee Kok Wah- President and CEO of Stamford Tyres Singapore.

Kindly regard all opinions to be that of mine and not intended for malicious intent. I would appreciate if you could gain my consent before you utilize this article in any way. Should you find any matter discussed in this article to be offensive or contrary to the truth, I am contactable at:

Telephone: +65 6345 7100
Address: No. 12, East Coast Road. Singapore 428723

This is an introduction by Ler Hwee Tiong, Managing Director at Tyrepac Pte Ltd on his 7 part-series on Selling and marketing tyres- How difficult can that be?

Ler Hwee Tiong

About Hwee Tiong, Ler
Ler, 38, graduated with a merit degree from the National University of Singapore in 1995 majoring in Economics and Geography. He worked for four years with a Malaysia listed distributor, of which a year was spent in Myanmar. He subsequently joined a Singapore listed distributor when for a year, he was heading the retailing department, before packing off to Hong Kong for five years to oversee the North Asian operation. His last job was in Shanghai with an American manufacturer as Sales Director of the Asia region. He recently relocated to Singapore with his family and started Tyrepac, an internet based retailing concept, after being captivated by the power of the internet for years.