Bridgestone SWOT and PESTLE Analysis

Strength

1. Solid global footprint: Bridgestone has a solid global footprint with business existing in 150 countries with more than 180 Production and Development in 26 countries. It is largest tire and rubber manufacturer in the world. It has 180 manufacturing plants globally which helps in localization. It procures some of its raw materials like synthetic & natural rubber, steel, etc. from international operating regions like Russia, US, Russia, etc. and optimizes costs. Its net sales grew by 8% in the Americas, by 13% in Russia, Africa, Europe and Middle East in 2017 as compared to 2016. The sale of tires rose because of the launch of new products and services globally and swift response to change in demand.

2. Diverse product portfolio: Its diversified product lineup includes passenger and light truck tires, motorcycle tires, commercial truck and bus tires, aircraft and mining tires, industrial products, and sports goods like premium golf balls, clubs & business solutions to capture demand in mining, fleets and agriculture through targeted packages. Many of these products are used in everyday consumption and serve various industries which make the business sustainable in long term. The strong momentum in the segment’s growth is reflected in the increase of 7% from FY2016 to ¥627.8 billion in FY2017. The group is adding more products in this segment like HosePower through acquisitions like with Industrial Rubber Co. New Jersey. This will increase its earnings as it caters to demand across more segments like Firestone with the Firestone FR500 for cars and Firestone Destination LE02 for SUVs, Dayton which is an affordable & economical tire range for small to the mid-sized cars, premium tires Blizzak LM-001 for the BMW X3, etc.

3. Leveraging R&D to strengthen innovation and increase productivity: Bridgestone is constantly developing new products for aligning its products and services with global demand. It adds sophistication and improves quality. The NanoPro Tech which uses design technology at molecular level has increased the safety and efficiency of its tires. The development of “Air Free Concept” for inflating bicycle tires without air, Smart Siphon drainage system for water supply equipment, etc. has added value to its brand. This improves productivity, increases asset value and optimizes costs. The aircraft tires are developed after broad based studies like basic polymer synthesis research, structural theory study, stress distribution analysis, vibration reduction, etc. This is seen through the increase in R&D by 4.6% in 2017 and a subsequent 6.5% growth in total assets.

4. Strong performance of tire segment through years: Tires compose 82.9% of Bridgestone’s net sales. It is the market leader in this segment because of its philosophy of “safety and peace of mind” in tire production. It has developed efficiency through asymmetric pattern for high performance on icy roads. It is the high quality of the tires that is assured through tire-assembling system ‘Examation’, a combination of AI which increased tire sales. The international demand is also growing in this segment especially for passenger cars and light trucks. In international zones such as North America and Europe, the tire segment sales recorded a 10% growth to $26.8 Billion in 2017.

5. Focused strategy for efficient business execution: Bridgestone has focused its strategies to build its brand value further through innovation, continuous Kaizen, human resource acquisition and development, better governance and expansion of its diversified product basket. Their Mid Term Management and Strategic Business Unit organization plan give it a competitive edge in products and services in international markets by ensuring global consistency. The group has adopted risk management activities such as evaluation, monitoring and identification, corrective measures to mitigate various operational risks and avoid interruptions in business during emergencies. This is seen through its consistently sound financials over years. Its net income grew by 10.8% to $32,242,726 & 12.5% growth in ROE in 2017.

Weakness

Opportunity

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Threat

1. Risk of natural disasters: The globally dispersed business exposes Bridgestone to variety of risks due to vagaries of nature and related disasters like earthquake, fire, floods, etc. can cause supply disruption and adversely affect sales & earnings. Japan is an earthquake prone country and Bridgestone has key operations here. In the case of failure of quick response and swift restoration of operations, can also reduce the scale of its operations. Damage control and repair may be expensive and affect the group’s financial performance.in regions like Southeast Asia where most of raw material procurement is concentrated are also vulnerable to disasters which can disrupt the group’s supply, may call for order cancellation, breach of supply contracts which will affect its brand image (due to inability of fulfilling orders) and may lose clients.

2. Stiff competition in domestic and international markets: The stiff competition in terms of price, quality, distribution, technology makes it difficult for the group to perform well in the marketplace worldwide. Bridgestone faces stiff competition from Apollo tires, MRF, Goodyear, Continental, etc. & new entrants who can take away expansion opportunities in underpenetrated regions due to better localization & substitutes. Aggressive price wars to gain market share and retain large clients can affect profit margins and financial results. The group’s efforts to sustain the price pressure to expand and enhance its brand value through new products in new markets can affect its operations if margins fall. Cost recovery of new products can become difficult due to fierce competition.

Political

1. US tariffs on steel to adversely affect sales: US has imposed 10 percent tariff on aluminum imports and a 25 percent tariff on steel. Bridgestone produces steel belted tires at Tennessee plants in Nashville. They will increase prices and may cut production costing $28 million because of the steel tariffs. The shift of price burden to consumer can hit demand passenger cars and trucks which in turn will lower demand for tires used. With around 78% of net sales in diversified products segment tariffs can also affect this segment. This will affect the economy growth and the opportunities for business and independent tire dealers who support free and fair trade.

2. Political stability in major operating zones: Political stability affects macro environment through government regulations on fuel prices, costs of vehicle ownership, import- export policies, etc. Political instability also interrupts raw material procurement, operations and increases price pressures due to risk of poor harvest. Bridgestone has dominant market shares in developed economies like the US, UK, Japan, etc. which are politically stable and minimizes risk of political uncertainty with respect to its peers. The group is now strategically choosing locations to minimize political uncertainty like the offshore center in Costa Rica which is considered to be the most stable country in Central America due to record of peaceful power transitions.

Economical

1. Impact of macroeconomic condition prevailing in operating zones: The business activities depend on various macroeconomic parameters like interest rate, exchange rate, demand, etc. An economic slowdown can adversely impact its sales as demand for automotive products falls. The demand for its products and services relies on the operating region’s aggregate demand trends, fuel prices and local market conditions. An adverse movement in any of these variables reduces the demand for tire replacement or slows the rate of replacement. Industrial slowdown especially in mining, manufacturing and construction reduces sales of large and ultra large road radial tires and adversely affects company’s financial position.

2. Impact of currency fluctuation: Favourable currency movements positively affect sales and EBIT growth. R&D expenses, manufacturing, marketing and sales across the globe exposes them to the currency fluctuations against Japanese yen against the US dollar, euro and other currencies where it operates. Though the group hedges against adverse movements but the magnitude of its exports and imports is too large to be completely covered. The appreciation of yen against leading currencies makes their products and services more expensive which decease their competitiveness and may even lead to loss of market share. Depreciation of yen has a positive impact on its sales. Though depreciation of the yen makes raw material procurement costly but the impact is outweighed by increase in profitability from exports from Japan of high-margin large tires.

Social

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Technological

1. Development of fuel-efficient tire designs: Bridgestone tires are the superior fuel-efficient tire technology named ‘ologic’ to improve the fuel-efficiency by producing new tire designs beyond conventional tire designs. The two features of the new tire design include large diameter and high inflation pressure to reduce rolling resistance & narrow tread to evade aerodynamic resistance, which make them more fuel efficient and also maintain it as they have long wear. There is a 30% reduction in rolling resistance coefficient with 10% enhanced braking on wet roads. It also reduces the energy loss during rotation due to the fuel saver sidewall & NanoPro-Tech in Bridgestone ecopia. It has also added sensing technology to its tires to assess the condition of the roads on which the vehicle is moving in real time using a sensor. These differentiating features give it a competitive edge over others due to added safety measures.

2. Use of ICT in existing services and diversified products: The group has integrated its diversified products and services for more efficiency and to add more value to its brand. The technology used in diversified products and tire is put together to create new services for consumers like in Pilbara Mining Solution Centre & mining solution base where the operation managers get real time information about the tires running through digital solutions and B-TAG (Bridgestone Intelligent Tag). TreadStat software helps in assimilation and analysis of data about tire and rims. This has helped in attracting more US consumers.

Legal

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Environmental

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