Tire Companies, Better to Take a Diversified Road

www.chinaspv.com: In the international market, there are quite a lot of tire companies taking a diversified development strategy. Usually, they prefer to develop all fields of business together, and sometimes, some companies become a huge diversified “empire”, typically Michelin, whose business involves the map and guide, fashionable life products and catering in addition to tire business. Also, Bridgestone recently announced to set foot in solar power industry.

In China, there are some tire companies taking a diversified road. For instance, Xingyuan Group, whose leading field is tire manufacturing, steps into such fields as combined heat and power generation, international trade, new building materials, fine chemical, catering and amusement, R&D of new products, and so on. 

Should a tire company take a diversified road or work hard to specialize in one field? In order to answer this question, an investigation lasting for 4 weeks is made. The respondents are mainly insiders of tire or automobile related industries.

In answering the question “Is diversification is a future trend for tire companies”, over 60% choose “No”. They believe most companies will remain to focus on the leading business as the competition is increasingly fierce, and if companies pay some efforts and capital to new business, they probably fall into a dilemma—none of the business is good; 26% choose “Yes” and they believe a company should develop in many fields because this will avoid risks brought by single business, which means, “all eggs shouldn’t be in one basket” (if the basket is broken all eggs are broken). For others, 10% says they don’t know this subject.

As we all know, the current situation of tire industry is a huge number of companies but small and scattered across the country. Should local tire companies follow the example Bridgestone to develop other business to make profits? Different people, different views.

21% respondents choose to follow the example because new business could contribute to company’s overall strength. 37% choose not to follow because most Chinese companies leg behind overseas companies in terms of technology, capital, management model and size. 42% say to be diversified or not is relying on company’s own situation, and Chinese companies shouldn’t follow blindly.

Regarding the question “which field tire companies can choose if they take a diversified road”, 68% believe the upstream and downstream of tire industry should be on the top options because it can optimize disposition of resources; 11% support to develop hot business of the time; and 21% say any business is worth trying so as to find one fit for the company if efforts and capital are sufficient.
 

China Special Vehicle Adivsor

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