Yokohama Rubber Takes a Flexible Strategy to Expand Its Market Share      

Under the huge weight of the global financial crisis, the tire industry plunged into a depression for a quite long time. But Yokohama Rubber (China) Co., Ltd. (Yokohama Rubber) has successfully run its business to survive the crisis.

Take precautions   

Before the crisis, Yokohama Rubber had already taken some countermeasures. As early as 2007, high oil prices led to a rise in the raw material prices of tires. In response, Yokohama Rubber mobilized its employees to reduce waste in their daily work in order to reduce costs. Because Yokohama entered the Chinese market later than other foreign tire companies, its market share is not high, and its scale is not large. So in face of the crisis, it could adjust its business strategies quickly and suffered relatively smaller losses. According to the company's public report, in the second half of 2008, the company's sales declined slightly, but by the second half of 2009, it emerged from the shadow of the crisis, and most production lines of its third-phase radial car tire plant in Hangzhou of Zhejiang province resumed operation.

Adopt a small-scale investment strategy   

Since the spring of 2009, the Chinese tire market has recovered markedly. Yokohama Rubber predicts that the annual growth rate of China's auto demand will reach 10% and will greatly stimulate the demand for tires. Therefore, the company has decided to expand the capacity of its plant in Hangzhou again. A manger from the company says: "In 2009, we began to implement the fourth-phase expansion plan of our Hangzhou plant. After it is completed in 2011, our annual capacity will rise from 3.0 million tires to 4.1 million tires. We are also considering building new factories in other places in China."
   Yokohama Rubber's unique "small-scale investment strategy" helped it survive the economic crisis.
   In the tire industry most manufacturers generally invest large chunks of capital at a time to build large-scale tire production lines with an annual capacity of several million or even over 10 million tires. It will take them a quite long period of time to get profits from such investments and retrieve their investment capital. However, Yokohama Rubber chooses to take a small-scale investment strategy when it decides to build a tire factory, its initial investment is usually small, and the annual capacity of the factory is only about 1 million tires. The advantages of this strategy are: the initial investment is not high; a small scale of production can facilitate quality management; and once the market demand increases, expansion can be made at any time. And this strategy does not increase the company's burden and can enable the company to adjust and balance its production and sales freely. Yokohama Rubber believes that this approach is a major reason for its success in the Chinese market and it will continue to follow this investment strategy in this region in the future.

Aim for a brighter future   

After a new car is used for about two years, its tires usually need to be replaced. Yokohama Rubber just aims at such a market demand in China.
   The tire industry in China has been increasingly competitive. In recent years, tire giants like Michelin and Goodyear, who have dominated China's low-end tire market, have all introduced high-performance tires into the Chinese market. Michelin even plans to build its largest production base in the world here in China. There are also many locally powerful tire enterprises, such as Warrior Tire Co., Ltd. and Double Coin Holdings Ltd., in China. The competition is very tough. However, Yokohama Rubber aims at the high-end tire market in China and intends to explore the Chinese mid-level tire market in low volumes.
   Yokohama Rubber has extracted oil from orange peel to replace petroleum as a raw material of tires. Tires made from orange peel oil have been sold in Japan and will also be launched in the Chinese market. This saves petroleum while reducing environmental pollution.
   With regard to sales, Yokohama Rubber has established a distribution network in China's 30 provinces and regions. And from 1982 on, it has sponsored car races in China and has had relatively stable cooperation with the Shanghai Volkswagen 333 Racing Team. Yokohama tires have received unanimous praise. Auto racing is a new sport in China. Yokohama Rubber has participated in these racing events since they began in order to increase the influence of its brand in China. Participating in car racing events to open up the market has been one of the most effective means of the brand strategy. Yokohama Rubber said its investment for building tire factories in China is basically to meet the local demands. It has now built factories in Hangzhou of Zhejiang province, Shanghai, Shandong province and Suzhou of Jiangsu province and its products are car tires, truck tires, and passenger car tires, industrial conveyer belts, sealing materials and hose fittings.