Product Designing through Conjoint Analysis and Curve Fitting of Financial Data: A Case of Birla Tyres

This case study focuses on the product designing of domestic bias tyres of trucks and bus. There are some attributes of tyres by which potential customers are focusing on these attributes but by taking the most significant attributes like “Application”, “After sales service” and “Rim size” and using the conjoint analysis technique the best combination has been selected. For financial data the curve fitting method of least square of straight line parabolic curve methods are applied for forecasting for the next 10 years and the comparative study also carried out for managerial implication of this company.

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Keywords: product design, conjoint analysis, utility, curve fitting, straight line, parabolic curve

Journal of Business and Management Sciences, 2015 3 (1), pp 32-44.
DOI: 10.12691/jbms-3-1-5

Received March 10, 2015; Revised April 02, 2015; Accepted April 13, 2015

Cite this article:

Pattnaik, Monalisha. "Product Designing through Conjoint Analysis and Curve Fitting of Financial Data: A Case of Birla Tyres." Journal of Business and Management Sciences 3.1 (2015): 32-44.

Pattnaik, M. (2015). Product Designing through Conjoint Analysis and Curve Fitting of Financial Data: A Case of Birla Tyres. Journal of Business and Management Sciences, 3(1), 32-44.

Pattnaik, Monalisha. "Product Designing through Conjoint Analysis and Curve Fitting of Financial Data: A Case of Birla Tyres." Journal of Business and Management Sciences 3, no. 1 (2015): 32-44.

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1. Introduction

From the financial point of view it is observed that the financial drives of Birla tyre that is sales, gross profit, net worth and EPS are not in stable position. By applying forecasting techniques with comparative studies it can be suggested that whether straight line or parabolic curve fitting of least square is more appropriate for the company. It has been approved the formation of an internal group to “develop the strategies and tools necessary to accomplish Birla Tyres vision of sustainable sourcing.” As described in its latest Report and internal documents, Birla Tyres envisioned a sustainable supply chain of the product “we continue to operate in certain sectors where our customers trust our strategic vision. Cement and tyres, the two significant business of Kesoram have seen a mixed year. To meet the challenges of these dynamic markets and to continue on our journey of success, we have necessary foresight, strategy and preparedness.” They believed that Birla Tyres’ existing product and its design efforts led the tyre industry; however, it also identified many issues Birla Tyres still needed to address in order to achieve its vision.

The company declares that from motorcycles to farm tractors, millions of people rely on Birla tyres for their everyday needs. So the product designing of Birla tyre focuses the system of designing with the best combination of significant attribute of appropriate levels by which it can satisfy the potential customers’ demand. Ultimately the financial fluctuations of the company can be retrieved to stable in competitive globe. The product designing constitutes a very pivotal role for the effective functioning of the financial fluctuations of the company. Selection of design of the product depends upon the nature of the product, target customers, supplier base etc. The product design should always be selected carefully based on the strategy the company wants to follow and the risks it wants to take. Operation control of production of these products may be executed by Company’s own staff or by hiring professionals.

Birla Tyres had successfully influenced many of its suppliers to improve their social, environmental, and economical impacts. This will ensure a beneficial experience for all their stakeholders, customers, employees, bankers’ dealers and suppliers. So that Birla Tyres has built a solid reputation for quality and is now recognized as one of the best tyre manufacturers around. In the process, Basant Kumar Birla CEO (see Exhibit-3), and his worldwide team would have to answer some difficult questions:

• How should Birla Tyre prioritize for product design of domestic bias tyre (e.g. providing the right thing at right time and minimizing cost) with the most significant attributes like “Application”, “After sales service” and “Rim size”? What should be the best combination out of different levels of these three significant attributes.

• How should Birla Tyre frame and revise the financial fluctuations which can be predicted or forecasted by different techniques and which curve fitting is the best for different financial data like sales, gross profit, net worth and EPS so that the optimum production can be achieved with minimum cost which impact the global brand?

2. Company Profile

Kesoram Industries Ltd. is a Public Limited Company promoted by Late G.D. Birla in the year 1928 having its Corporate Office at Kolkata. Under the Company’s Banner first a textile business (manufacturing of textiles) was started. Thereafter in course of time different units were developed and inducted. Presently, the company is controlling the business of cement, tyres, rayon, chemical, paper etc. with an annual turnover exceeding Rs.7000.00 Crores (see Exhibit-2).

Birla Tyres, under the Kesoram’s umbrella was born in the year 1988 at Chhanpur, Balasore, Odisha. After the demise of Late G.D. Birla, Syd. B.K. Birla took over the charge of the company and under his initiation Birla Tyre was established. Originally, the unit was started for manufacturing of automobile tyres, tubes and flaps with installed capacity of 120 M.T. per day. Commercial production was started in the year 1992. Since then the unit has increased its capacity by adding machines at different times. Presently, the installed capacity has been increased to 272.5 M.T.

In the year 2008, a second tyre plant was established by the same promoter at Laksar, Uttarakhand, Haridwar with installed capacity 320 M.T. per day to manufacture automobile tyres, tubes and flaps. In the year 2010 the 3^rd unit was set up for the manufacture of truck radial tyre with capacity 150 M.T. Subsequently, a 4^th unit has also started simultaneously for two wheeler/three wheelers with capacity of 80 M.T. In the year 2011 passenger car radial was under construction at Balasore with installed capacity 70 M.T. per day. At present the same is under project stage and likely to be completed by 2013. Birla Tyres has an annual turnover Rs.3800.00 Crores from all units. It spends about Rs.34.00 Crores towards inbound logistic and Rs.74.00 Crores for out bound logistic. For different channel function and operation Birla Tyre is spending about Rs.58.00 Crores.

Birla Tyres a unit of M/s. Kesoram Industries Ltd. was set up to manufacture Automobile Tyres, Tubes and Flaps in the District of Balasore, Orissa started commercial production with effect from 01.03.1992. The plant was set up in Technical Collaboration with “M/s. Pirelli Ltd., U.K.” A subsidiary of International giant Pirelli group of Italy being one of the largest manufacturer of tyres in the world. Birla Tyres, part of Kesoram Industries Limited, was founded in 1991. Birla Tyres manufactures tyres for automobiles, trucks, buses, motorcycles, heavy machinery vehicles, tractors and other farm machinery. Birla Tyres set up its first tyre manufacturing plant in Balasore in the Indian state of Orissa in 1991 alongside Italian tyre manufacturer Pirelli.

In a span of two decades, Birla Tyres has become one of the most well-known tyre manufacturers in India. With its new manufacturing plant in Laksar-Haridwar, Uttarakhand, the company has surged ahead in the tyre business. Built within a record time of a mere 10 months, Birla Tyres plans to invest a total of approximately INR 2300 Crores in the state-of-the-art Haridwar factory which has a production capacity of 44,00,000 truck tyres per annum. Birla Tyres exports to more than 50 countries and reported a turnover of over INR 350 Crores earned from exports alone between 2009 and 2011. On the domestic front, Birla Tyres has a 3200 strong network of dealers spread across the length and breadth of the country to cater for the Indian tyre market. Birla Tyres employs over 170 sales officers and engineers, stationed at strategic locations to offer round the clock Claim Settlements and unparalleled customer services. Birla Tyres has earned various national and international accreditations including the ISO 14001 certification. It has a broad product range, with the Victus series for truck and bus radials and Road Maxx series for motorcycles being the latest offerings from the company.

Birla Tyres had to face difficulties as well such as the increase in natural rubber prices or labour unrest in the manufacturing plant in Balasore. The profits too have taken a severe toll in 2011. Compared to a profit of about INR 237 Crores in 2010, Birla Tyres has suffered losses to the amount of 210 Crores in 2011. In a move to correct the situation, the company is in the process of revamping and reorganizing its management operations. With a new management strategy that intends to focus on better usage of the capacity of manufacturing plants together with aggressive marketing and an altered product mix with a shift towards the more profitable passenger car and two-wheeler tyres products, Birla Tyres hopes to recover from the losses in the near future.

The Indian tyre market for truck and bus radials is set to grow at a tremendous rate owing to the infrastructure development in India. In a bid to enter and win the Indian radial tyre market segment, Birla Tyres is set to increase the production of truck and bus radials by a whopping 85 tonnes per day in the manufacturing plant at Haridwar in a move that would require an investment of INR 350 Crores. The tyre manufacturing plant in Balasore is slated to receive an investment of INR 450 Crores to increase the output of passenger car radials by a figure of 80 tonnes a day.

The plant is equipped with best and sophisticated advanced machineries from world leaders of tyres machinery manufacturers such as Berstorff, (Germany) C.A. Litzler, (U.S.A.), Comerio (Italy), Pirelli (Italy), Mitsubishi (Japan), Spadone (U.S.A.) along with indigenous machineries from L&T McNeil, Farrel Anand and Alferd Herbert etc.

The Company has been awarded the ISO 9001 Certificate in December, 1994 in recognition of its Quality Management System. It is the first tyre Company in the history to be awarded ISO 14001 Certificate in recognition of its Environment Management System in the year February, 1998. The Company has also won QS 9001 Certification in March, 1999. The Company has started Total Productive Maintenance (TPM) activities for further strengthening the quality of product and personnel increasing efficiency and controlling cost and awarded the Certificate in October, 2001.

The Plant was initially established with 120M.T. production capacity concentrating upon production of Truck and Bus Tyres, Tubes and Flaps. Subsequently the production capacity was increased to 149 M.T. during the year 1999-2000. The Unit also simultaneously established Radial Tyre Plant which started production since November, 2000 with production capacity about5 M.T. per day to produce only passenger car tyres. Presently, our installed capacity is 272.5 M.T. and plant is running with full capacity in both the cases.

The indigenous sale is built up through OEM, DGS&D and replacement market. TELCO, Ashok Leyland, Mahindra & Mahindra & TAFE, are the regular OEM customers. The company has seventy two distribution points spread all over India for direct sales to the replacement market. The export is made to various Countries like, U.S.A., U.K., Canada, Brazil, Sweden, Singapore, Ireland, Norway, Spain, Germany, Bahrain, Algeria, Nigeria, Peru, Philippines, Malaysia, Bangladesh, Nepal & Vietnam.

The prevailing market situation has compelled the Company to concentrate on TPM norms which have helped immensely in cutting down all the hidden losses thereby drastically reducing the cost of production. This has helped to withstand the tough competition and company is constantly striving to sustain the present status.

3. Overview

Kesoram was founded in 1919 under the name of Kesoram Cotton Mills Ltd (see Exhibit 1). From its humble beginnings as a cotton textile mill in Calcutta, Kesoram expanded into the production of rayon. Its first rayon plant was built in 1959, with a production capacity of 4,635 metric tons of rayon yarn per year. The spirit of entrepreneurship did not end there. Kesoram soon entered the tyres and cement industries. A change of name was needed to reflect the company’s increasing portfolio of businesses. So in 1986, it changed its name to Kesoram Industries Limited. Since then, Kesoram’s operations have grown from strength to strength. Its reputation is recognised today by its listings on four global stock exchanges – National Stock Exchange of India, Bombay Stock Exchange, Calcutta Stock Exchange Association, and the Societe de la Bourse de Luxembourg.

To provide unmatched accessibility, Birla Tyres has more than 170 sales depots regionally. With more than 491 sales engineers and 8,831 dealers at major locations, you will always find a Birla Tyre representative to meet your needs. (See Exhibit- 4) for the market position of Birla Tyres.

4. Production Capacity

Birla tyres prides itself on delivering innovation and operational excellence. The state-of-the art factory at Laksar-Haridwar, Uttaranchal, a production capacity of over 44 lakh truck tyres per year. Today, with the integrated plant at Balasore, Odisham, Birla tyre has a combined capacity of 298,669 metric tonnes. With plans to expanded into the production of passenger car tyres, Birla tyres is poised to become one of the most comprehensive tyre manufacturers in this region. (See Exhibit 5) for the production capacity of Birla tyres.

5. Corporate

Birla Tyres was first established in 1991, as part of Kesoram Industries Limited. It then collaborated with world-class tyre manufacturer Pirelli, in the production and development of its tyres. Since then, Birla Tyres has built a solid reputation for quality and is now recognised as one of the best tyre manufacturers around.

6. Growth & Success Point

The First Plant for manufacturing of rayon yarn was established at Tribeni, District Hooghly, West Bengal and the same was commissioned in December, 1959 and the second plant was commissioned in the year 1962 enabling it to manufacture 4,635 metric tons per annum (mtpa) of rayon yarn. This Unit has 6,500 metric tons per annum (mtpa) capacity as on 31.3.2008. The plant for manufacturing of transparent paper was also set up at the same location at Tribeni, District Hooghly, West Bengal, in June, 1961. It has the annual capacity to manufacture 3,600 metric tons per annum (mtpa) of transparent paper.

Birla Tyre has been established with an overall market share of about 16% of the total tyres sold in the Country. Out of total sales made, 50% sale is in replacement market, 30% sale in export market and rest 20% in OE Market. Birla Tyre has been awarded the “Best Company of the year” many a times in its life span from the state of Orissa. It has been awarded “The Tyre Company of the Year” from ATMA. It has received the Chief Minister Award, “Golden Peacock Shield” twice in the year 2001 and 2006. CII, Odisha Chapter also awarded trophy and shield in different occasions. For quality performance also Birla Tyre has been awarded innumerable prizes from different circle. For the highest export from the State it has received trophy twice in its life span (see Exhibit-6).

7. Product Mix of Kesoram Industries Limited

Figure 1. Product Mix of Birla Company

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