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MRF to focus on exports - Views on News from Equitymaster
 
 
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  • Jun 16, 1999

    MRF to focus on exports

    MRF has decided to focus on exports and is eyeing new markets in this regard. This decision has been taken in order to make up for the slump in tyre demand following the recession in the Indian economy over the past couple of years.

    MRF is India's largest tyre manufacturer. It's market leadership (appx. 22%) results in economies of scale in the low margin tyre industry. The company derives 95% of its revenues from its tyre business.

    Exports currently constitute 6% of total sales at MRF. The company's plans involve increasing exports to 30% of total truck tyre production from the current 20-25%. The company currently exports to 65 countries and plans to expand in the Brazil and later the Latin American market. This move would enable the company to hedge its business by operating in various markets across the globe. This would also help the company overcome the slump in tyre sales that it is facing in the domestic market.

    However, the company may be spreading itself too thin by exporting to 65 countries. The costs that will have to be incurred to have a significant presence in 65 counties would be very large. Moreover, once the domestic demand picks up, the company would have to set priorities, as with its existing capacity it will not be able sufficiently serve 65 markets. Also, given the competition from South East Asia, the company will find it extremely difficult to earn above average margins.

     

     

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