Market strategy for a chinese tyre manufacturing company entering the middle east

Abstract

Sailun is a Chinese tyre manufacturer looking to enter the Middle Eastern market. For this, an extensive research was necessary looking into different aspects. These aspects were: understanding the buying behaviour of the market, the differences and market shares between competitors, the perception of Chinese tyres, the most interesting countries in the Middle East and potential fleets to enter the market as efficiently as possible. To do so, an extensive research had taken place. Interviews with the company itself, tyre centres, distribution centres already currently working with the company and other distribution centres were taken to acquire qualitative data. After reaching a certain degree of saturation, an own research was conducted to acquire quantitative data. By comparing the tyres on the OEM with the used cars market and the actual market in Dubai and Sharjah, the competitive landscape and specific characteristics for the local market could be determined. The research was finally topped off with an extensive online research. For the buying behaviour, clear differences were observed between expats and Arabs. This was largely due to the difference in income level between both groups. As Arabs generally have more wealth, they will prefer convenience over cost-saving. COVID-19 has brought huge opportunity for tier-3 companies to take over lost market share of tier-1 companies. In the OEM, the study found that that, currently, only tier-1 and tier-2 brands are considered. For the used cars market, some exceptions are made to fit a tier-3 tyre to the car. From this research, it appeared that sedans were the most popular type of vehicles, with tier-2 branded tyres dominating the market in the U.A.E. The competition in Dubai and Sharjah is mapped out by extrapolating various samples. By doing so, the main competitors and their respective market share in the PCR- and TBR-market have been mapped out. Dunlop is market leader in this area. Additionally, competitors have been in a broader perspective, in order to create a perception of their global performance. With regards to the country analysis, all potential Middle Eastern countries were reviewed. The review was based on macro-economic factors such as population, GDP (per capita), unemployment rate, household final consumption expenditure and industry indicators such as oil consumption, passenger car sales, commercial vehicle sales and estimated PCR- and TBR-market size. Based on these factors, the countries have been ranked in terms of attractiveness for the country. The top 5 performing countries are respectively, Turkey, Saudi-Arabia, Iran, Egypt and the United Arab Emirates. For the top performing countries, a deeper review has been performed in terms of fleets. Fleets offer a great opportunity for companies to sell large volumes of tyres in both the PCRas TBR-market. Fleets have reported to receive test tyres from distribution centres in order to monitor the quality of tyres, before engaging in a long-term relationship. For fleets, a crucial factor is the cost per kilometre, as these companies are operating in a competitive landscape. For the PCR-segment, from the sample at a car rental company, it was clear that mostly tier-1 and tier-2 tyres were used to ensure quality but also cost-efficiency was taken into account. For Hertz, Dunlop was chosen which strengthens their position as market leader in the tyre industry for the U.A.E. In the TBR-segment, distinctions are made between front and back tyres. Whereas the front tyre is mostly fitted with tier-1 brands for steering purposes, the back tyres are fitted with tier-3 tyres in order to reduce costs. Offering favourable credit situations is not advised in the U.A.E. as there is a lot of fraud happening which can leave creditors empty-handed. Finally, in the TBR-segment, the most popular tyre size appeared to be 315/80R22.5.