Case

Service Tyre and Tube Division: Asian Journal of Management Cases

16(1) 51–75, 2019
Strategic Capabilities for © 2019 Lahore University of
Management Sciences
Business Growth Reprints and permissions:
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DOI: 10.1177/0972820119825981
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Kamran A. Chatha1

Abstract
The case describes the growth challenges faced by Service Industries Limited (SIL) in the year 2014.
There were a number of strategic growth options available to the firm, some related to product
diversification and some related to product extension, and SIL had to devise the best plan in order to
tap into these strategic growth options.
  Since 2011, SIL was continuously on the growth path where its domestic and international sales
had increased. This had been made possible through improving virtually every aspect of its value chain
as well as activities in the market and product development sides. However, recently, the domestic
sector which gave the lion’s share of its sales was undergoing a stagnation, and thus SIL was exploring
new avenues of growth in both the domestic and the international markets. These avenues included
venturing into tractor tyres and tubes business, auto spare parts business (in which SIL had already
embarked) and export business. Each of these growth options had its own peculiarities and implications
on various sections of its value chain. This might disturb the very recipe of its internal systems that had
given SIL significant growth since 2011 in the first place. Arif Saeed, Managing Director of SIL Tyre and
Tube Division had to take steps in a careful and cautious manner in order to further grow.

Keywords
Business strategy, market strategy, operations strategy, innovation management, capability, technology
management

One fine morning of April 2015, Arif Saeed, director for the Tyre and Tube Division at Service Industries
Limited (SIL) arrived at his office in Lahore, Pakistan, to discuss the business performance of his division
with the management team. The agenda of the meeting was to brainstorm the enablers of its success and
the challenges faced ahead in achieving any future growth plans. The business had shown significant
growth since 2011, considering the challenging economic conditions of the country but had still missed
the targets set by the board of directors. The board had set goals related to growth in sales, exports and
newer business lines for the next 5 years.
After receiving a positive response from the markets in Africa, the Far East and Europe, the exports
division increased the production of the products in the current line. Arif had to decide how this momentum

1
Suleman Dawood School of Business, Lahore University of Management Sciences, Lahore, Pakistan.

Corresponding author:
Kamran A. Chatha, Suleman Dawood School of Business, Lahore University of Management Sciences, Lahore 54792, Pakistan.
E-mail: kamranali@lums.edu.pk
52 Asian Journal of Management Cases 16(1)

could be maintained to enter new markets and strengthen its position in the domestic market. The option of
entering the agri-tyre business to leverage existing tyre manufacturing and channel capabilities was also
under consideration. SIL had recently started manufacturing motorcycle spare parts to supply parts, under
the Servis brand name. They were selling to the parts replacement market and motorcycle manufacturers
by sourcing completely designed and manufactured spare parts from vendors. Arif wondered how SIL
could ensure quality and avoid any negative impact on the SIL brand.
Tyre and tube manufacturing was a capital-intensive business, and high growth rate required invest-
ments in equipment to ensure not only larger production capacity and superior quality product but also
investment in developing brand recognition. Arif had been able to convince the board to invest in equip-
ment and the brand in the past 8 years. Now Servis was the number one brand in the domestic motorcycle
tyre and tube market. The revenue of the tyre division had risen to 7.25 billion in 2014 from 4.2 billion
in the year 2011. More recently, the growth in the local motorcycle business had slowed down, whereas
the bicycle tyre and tube business was gradually falling.
Arif thought about the various growth options before he went to the meeting. He was not sure
which option he should follow at this point in time or did it make more sense to pursue all of them
together.

Service Industries Limited1

The foundation of the Service Group was laid by a group of young college friends2 who set up Service
Industries in 1941 in Lahore as a small-scale business of manufacturing handbags and sports goods.
During the Second World War, Service supplied boots to the British Army. In 1953, the friends started a
small tannery named Halal Tanneries. Subsequently, in 1954, the group installed a shoe manufacturing
plant in the industrial area of Gulberg, Lahore. This plant started production of various types of shoes in
the same year. Later, the group shifted the factory from Lahore to Gujrat. In 1959, the group acquired a
place for Service Factory Gujrat to set up Pakistan’s first organized shoe factory.
SIL Gujrat was established in 1964. In 1965, they decided to start their own marketing unit rather than
base their manufacturing on only contracts. Hence, they made a retail company with the name Service
Sales Company (SSC). According to Arif Saeed:

SSC took shops on rent and decided to put a shop of Service parallel to every shop of the multinational brand
Bata. Now [in 2015] where there is a Bata shop there is a Service shop.

Between 1968 and 1984, a number of start-ups and acquisitions brought the group’s portfolio of
companies to include Service Textiles and other businesses. During 1988–1989, four more factories
were started: SIL Muridke, Dar Es Salaam Textile mills, a motorcycle tyre factory located at SIL
Gujrat and a gas mask manufacturing factory. Muhammad Hussain and Nazar Muhammad continued to
work together in business for more than 70 years. In 2007, SSC grew to have higher sales than Bata and
became the largest retail company in Pakistan.
By 2010, SIL flourished; the company was manufacturing shoes, tyres and tubes. It even had rubber
production facilities in Gujrat and Muridke. SIL was also the leading exporter of footwear in Pakistan.
Similarly, SSC was Pakistan’s leading footwear retailer by revenue and had also diversified into other
businesses such as pharmaceutical retailing. SSC had more than 450 retail outlets and a dealer base of
more than 2000 in Pakistan.
Chatha 53

In 2011, when the group’s ownership and control went to the sons and grandsons of the founders, the
owners decided to split the group’s assets into two equal portions so the two families could manage it
independently. According to Arif Saeed:

Servis is among the top three big brands of Pakistan. We are superior in shoes and tyre industry and the Servis
brand can be used for businesses in other industries as well. Though it took more than seventy years, our elders
started from scratch. In 2015, again, we are on the verge of starting new things—for example in the tyre division,
the spare parts, tractor tyres, and export businesses. We should learn from our history that our company has the
potential to become number one in every field that it operates in.

After the ownership and management was handed over to the next generation, Omar Saeed, Harvard
MBA graduate and third-generation family member emerged as the Chief Executive Officer of SIL in
March 2011. Prior to leading SIL, Saeed had run SSC as Chief Operating Officer from 2001 to 2010.
In 2001, when Omar joined SSC, double-digit growth was a challenge. Omar took up several initiatives.
Young managers between 30 and 35 years of age were hired to improve the average manager age of
53 years in 2002. SSC started holding an annual conference to recognize high-achieving employees.
SSC adopted the policy of introducing 55 per cent new styles every year as opposed to the traditional
mix of 70 per cent old and 30 per cent new. Major changes were made throughout SSC’s supply chain
and retail management by launching the project ‘Project Giant Leap’ and engaging an international
consulting company. SSC introduced a new format of retail stores called the Shoe Planet, where SSC
displayed its own collection as well as shoes from different brands. As a result, in 2009, SSC opened a
shoe store every week leading to 24 per cent annual growth in SSC’s business.
After joining SIL in 2011, Omar decided to arrange a 3-day exercise for the senior management of
SIL to mutually create and set the goals for SIL’s leadership for the next 3 years. SIL sent forty senior man-
agers to Murree (a hill station) for a 3-day exercise facilitated by a consultant who came up with a set of
objectives and action plans to achieve them. The following goals were set by the end of the 3-day activity,
and they were to be achieved by SIL in the next 3 years:

1. Tyre division sale to increase from PKR5 billion to PKR11 billion,

2. Shoe division exports to increase from PKR2 billion to PKR7 billion,
3. Shoe division domestic sale to increase from PKR3.8 billion to PKR7 billion.

It was also decided that in order to achieve these targets a number of new initiatives would be under-
taken. Table 1 provides details of the initiatives along with specific targets in different areas.

Table 1.  Interventions to be Taken for Achieving Targets Set in 2011

Tyre Division
1. We will start total capacity (14,000 tires and 52,000 tubes/day) by April 2012.
  We will break the distribution area and go for brand-building activities to achieve the following sales revenue.
2. We will enter into the new segment by June 2013 to generate additional revenue of PKR 1.5 billion up to 2014.
3. We will transform the local sales force and induct our dedicated sales team for new products, for both local
and export markets by January 2012.
4. We will establish R&D wing for product development, engineering and innovation for local and export
markets by January 2012.
(Table 1 continued)
54 Asian Journal of Management Cases 16(1)

(Table 1 continued)

5. Cost calculation for current wastages (process wastages, floor rejections, market claim, energy & fuel,
manpower downtime etc.) will be provided till 31 October 2011.
6. Plan for cost reduction in wastages and its implementation will be done till December 2011.
7. We will provide feasibility of coal fire boiler plus turbine till 31 October 2011 to GEC for study & approval.
Shoe Division—Muridke
Sales: Exploring five new customers by 30 June 2012 and two new customers on board by 30 September 2012
to achieve a sale of PKR 100 million by December 2012.
Production: Increase our export capacity by 20% by the end of March 2012, and it will be done by having 10 per
cent increase in efficiency and a 10% increase in physical capacity.
Model room: Achieve 300 pair capacity/day by the first week of December 2011.
Cross-functional teams (CFT): CFT for work simplification and cost control in place by 30 October 2011.
Organizational culture: Start monthly review meetings from October 2011 to analyse organizational behaviour and
make function strategies by the end of November 2011 to change organizational culture and behaviour.
Inventory: Raw material inventory days to be reduced to 45 days by 31 December 2011
Quality: Zero customer complaint by March 2012.
MRP: MRP implementation by 31 December 2011.
Shared Services
Capacity enhancement
•  We must start SIL’s third production unit by 30 June 2012.
•  We must start SIL’s product development centre by 31 December 2011.
Sales organization
•  We must start sales values as our corporate language for all reports format by 30 September 2011.
Culture
•  We must identify our desired behaviours of leadership (during strategy session).
•  We must identify an evaluation criteria process by 31 December 2011.
Performance measurement/development
•  We must complete employees’ objective for all executive staff by 31 October 2011 (every year) and start
monthly tracking of objectives on a monthly basis.
Productivity
•  We must identify the top five productivity improvement targets for SIL by 30 September 2011.
•  We must start measuring them on a monthly basis from October 2011 (top five productivity targets may
change on a quarterly basis).
Procurement excellence
•  We must ensure on-time delivery of all complete materials & services improvement to be measured on a
monthly basis from 1 October 2011.
•  We must ensure that input price increase does not exceed SIL output price increase.
Integrated planning (SIL master plan)
•  We must prepare a quarterly master plan and develop a review process on a continuous basis from
30 September 2011.
Working capital management
•  We must ensure working capital management required to achieve all targets from 15 September 2011.
Source: Company records.
Chatha 55

Table 2a.  Six-Year Financials

Service Industries Limited

Six Years at a Glance
Years 2014 2013 2012 2011 2010 2009
Sales 16,495 14,686 12,167 11,549 9,421 7,680
Gross profit 2,712 2,367 1,546 1,569 1,293 1,594
Profit before tax 944 747 192 535 488 936
Profit after tax 773 619 127 433 328 661
Share capital 120 120 120 120 120 120
Shareholder’s equity 2,964 2,447 2,020 2,013 1,700 1,522
Property, plant and equipment  2,985 1,901 1,649 1,611 1,425 1,024
Total assets 8,866 6,992 6,422 5,639 4,543 3,651
Net current assets 998 1,093 837 727 727 820
Market value per share (PKR) 975 545 167 195 240 266
Dividend
Cash—interim 100 75 – 25 75
Cash—final 150 100 75 100 75 125
Profitability (%)
Gross profit 16.44 16.12 12.71 13.59 13.73 20.75
Profit before tax 5.73 5.09 1.58 4.63 5.18 12.19
Profit after tax 4.69 4.22 1.05 3.75 3.48 8.6
Return to shareholders
ROE before tax (%) 31.86 30.54 9.53 26.56 28.71 61.49
ROE after tax (%) 26.09 25.31 6.3 21.53 19.3 43.42
EPS after tax (PKR) 64.28 51.49 10.59 36.03 27.28 54.94
Price earnings ratio 15.16 10.58 15.78 5.41 8.8 4.84
Activity (times)
Sales to total assets 1.86 2.1 1.89 2.05 2.07 2.1
Sales to fixed assets  5.53 7.72 7.38 7.17 6.61 7.5
Inventory turnover ratio 5.35 5.27 4.98 5.81 6.04 4.85
Interest coverage ratio 3.85 3.44 1.6 3.25 3.75 6.83
Liquidity/leverage
Current ratio 1.22 1.29 1.26 1.26 1.31 1.46
Break-up value per share 246.40 203.44 167.93 167.34 141.3 126.54
Total liabilities to equity 1.99 1.86 2.18 1.8 1.67 1.4
Debt equity ratio 27:73 20:80 18:81 14:86 16:84 14:86
Source: Company records.

Table 2b.  Profit and Loss for Tyre Division

2014 2013 2012 2011

Sales—thousands of PKR 7,251,517 6,566,508 5,481,644 4,219,127
Profit allocated expenses—thousands of PKR 968,390 1,006,093 729,619 260,031
% Profit in allocated expenses 13.35% 15.32% 13.31% 6.16%
Source: Company records.
56 Asian Journal of Management Cases 16(1)

Table 2c.  Stock in Trade as on

CATEGORY 31-Dec-14 31-Dec-13 31-Dec-12

Stock In Trade
Raw Material 195,989,230 231,528,772 231,528,772
Packing Material 14,475,576 11,688,198 11,688,198
Goods In Transit 69,874,874 42,134,042 54,860,835
Receiving Inv A.c 39,938,366 17,189,604 8,148,016
Slow Moving Provision (5,041,139) (4,438,679) (3,327,626)
Inventory Total 315,236,907 298,101,937 302,898,195
Work In Process 60,075,233 68,342,010 84,210,814
Finish Goods 404,833,639 397,518,372 192,571,030
Stock In Trade 780,145,779 763,962,319 579,680,039
Stores & Spares
Loose Tools 8,805 11,618 11,618
Machinery Spares 23,363,999 15,189,371 15,189,371
Store & Spares 54,988,514 68,470,566 68,470,566
Slow Moving Provision (4,667,109) (4,667,109) (4,244,214)
Stores & Spares 73,694,209 79,004,446 79,427,341
Grand Total 853,839,988 842,966,765 659,107,380
Source: Company records.

Four Years Later: A Snapshot of Service Industries Limited in 2015

SIL, a public limited company listed in the Pakistan Stock Exchange, was Pakistan’s premium
footwear manufacturer and exporter. It generated annual revenues of about PKR 16.5 billion (company
financials are available in Tables 2a–2c) and was the largest manufacturer of footwear, tyres and tubes
for two-wheelers and had also been the largest footwear exporter in the country for the last 10 years.
The company employed more than 8,764 people in the facilities located in Gujrat and Muridke and
exported its products to many destinations around the world. With a strong emphasis on product quality
and innovation, SIL had built both domestic and international recognition. SIL’s vision and mission
statements and organization chart are provided in Table 3 and Figure 1, respectively.

Shoe Division
SIL’s shoe division was the largest footwear exporter in the country. Annual revenues of the shoe division
exceeded PKR 8.3 billion of which 45 per cent came from exports primarily to EU countries—namely,
Germany, France and Italy. SIL’s in-house manufacturing covered all aspects of the shoe manufacturing
value chain. The Gujrat plant manufactured shoes mainly for the local market (80% production by
volume for the local market), and the Muridke plant manufactured mainly for the international market
(80% production by volume for international market). Over time, SIL had developed a niche in the
female footwear market. A total of 80 per cent of its exports comprised female footwear.
Chatha 57

Table 3.  SIL’s Vision and Mission Statements

SIL vision was ‘To become a global, world class and diversified company which leverages its brands and its people’.
The mission statement read:
•  to be a result oriented and profitable company by consistently improving market share, quality, diversity,
availability, presentation, reliability and customer acceptance;
•  to emerge as a growth oriented company, ensuring optimum return and value addition to its shareholders;
•  to ensure cost consciousness in decision-making and operations without compromising the commitment to
quality;
•  to create efficient resource management and conducive business environment and evolving an effective
leadership by creating a highly professional and motivated management team fully equipped to meet any
challenge;
•  to keep abreast with modern technology and designs to optimise production and enhance the brand image
to attain international recognition for the company’s product and
•  to set up highly ethical business standards and be a good corporate citizen, contributing towards the
development of the national economy and assisting charitable causes.
Source: Company records.

Tyre Division
SIL’s tyre division mainly produced tyres and tubes for motorcycles, bicycles and rickshaws. The tyre
division reported revenues of PKR 7.3 billion in 2014, with an average growth rate of about 14 per cent
in the last 3 years, and employed a workforce of about 2,500 employees. In the last 4 years, SIL had
become the market leader in the tyre and tube business and a holder of majority market share of about
42 per cent. In addition, SIL was a major supplier of tyres and tubes to OEMs of motorcycles including
Honda and Yamaha and other local motorcycle assemblers in Pakistan.

Tyre and Tube Business Value Chain

Research and Development

Design and development of tyres was a complex process and required considerations in tyre design
and its subsequent development. The success of a tyre was measured in terms of its performance
parameters of abrasion resistance,3 wobbling and road grip,4 which in turn depended upon tyre design
and its formulation. Tyre design determined its shape according to established international standards.
Besides, a tyre had to be produced in the most economical manner (because of the commodity nature
of the product). For this purpose, an economic analysis of the tyre was essential that considered
factors such as disposition of material in the tyre, bead wire construction, tyre construction, material
composition and selection (these terms will be elaborated on in the tyre production section) as well as
market claims.
In the past few years, the R&D process had formalized at SIL, and a number of new testing equipment
had also been added. The R&D team underwent a few trainings, too. Abdul Qayyum, Manager R&D,
had over 15 years of work experience in R&D of tube and tyre sector, especially mould making. He had
Figure 1.  Organizational Structure
Source: Company records.
Chatha 59

been associated with SIL for 6 years, and his addition to the R&D team was good for the company.
Under his supervision, they launched new product designs and improved product features like road grip,
traction and product life. Qayyum reported directly to the tyre division GM.
The R&D department followed the tyre design standards of brands like JATMA5 and ETRTO6 to
ensure good product quality and latest design features in Servis tyre and tube product range for the local
and the export market. In the case of market claims, R&D would analyse the returned product to deter-
mine the root cause of a problem and introduce changes in the design or the production process in order
to prevent the same problem from reoccurring in the future.
The R&D department had the latest testing lab but did not have prototyping equipment and they were,
therefore, dependent on the production plant for testing and validation of the new developments. At the
same time, fundamental R&D in tyre design and engineering was absent, and most tyre developments
were being carried out by a hit and trial method. In 2015, R&D housed three full-time employees includ-
ing Qayyum. The R&D staff was being trained on the job. Qayyum reflected on the competition in the
international market:
In the export market, if our tyre price is at $13, China will be able to produce the same tyre at $12. Similarly,
MRF tyres—an Indian brand has better dimensions and quality than our tyres; however, ours is probably slightly
cheaper. If we want to improve our tyre, my only resolution would be the continuous training of the R&D staff.
Besides, an exposure of international firms will help them develop an understanding of how things need to be
done and help create mental benchmarks.

Technical
The role of the technical department included: (a) testing of materials at various stages of the production
process, raw materials, work in process and finished goods and (b) development of new material
formulations (or compositions) for different applications. In order to carry out the physical testing of
goods or materials, the technical department was equipped with state-of-the-art testing equipment.7
Mr Ghazanfar who was head of the technical department proudly mentioned his involvement in the
development of rubber pads for the chains of Al-Khalid tank. He recalled:

These rubber pads had to be subjected to the toughest road conditions—very high road friction, uneven surfaces,
high load, and required significantly high abrasive, tensile and fracture strengths. We were able to successfully
develop the pads, and SIL produced and supplied these pads to the Pakistan Army.

Ghazanfar received his undergraduate degree from the University of North London. He had two
engineers in his team and on average the department had more than 30 years of work experience. The
role of the technical department in the tyre design was to determine the number of nylon plies, their
direction and the angle, as well as control on ash content, specific gravity and abrasion resistance. The
specific gravity, in turn, was controlled by adjusting the quantity of carbon and other materials in the
rubber compound. These materials had different costs and different specific gravities of their own which
made a tyre bulky or light. A blend of these materials would result in desired specific gravity and cost
targets in an application.
Ghazanfar recalled an instant when the management gave him a target of reducing tyre cost by
PKR 5 million per month. He reflected:

When we accepted this challenge, we made an analysis of high cost materials within the tyre. We made several
changes in the material formulation and achieved the cost reduction targets. This was not possible if we did not
60 Asian Journal of Management Cases 16(1)

have an in-depth understanding of the chemistry of the materials and testing equipment. Other organizations do
have engineers and specialists as well but they do not think to the extent we think.

Ghazanfar also commented on the improvements needed in his department:

There is a need for teamwork in the department. If an individual knows something, he tends to hesitate telling it
to others. People do not trust each other; however, the development work requires sharing and bouncing ideas
within the team in order to develop a better understanding and reach a decision quickly. We are facing scalability
and sustainability issues, and in order to address these, staff members need to be trained—two people should go
for a year-long training program to learn rubber technology.

According to the General Manager (GM) of the tyre plant Mr Cheema:

Our technical department can make changes in formulations and in curing parameters in order to adjust for slight
changes in raw materials.

Production
The tyre and tube plant had two sections, one for producing tyres and tubes for two-, three- and four-
wheeler automobiles (motorcycles, auto rickshaw, wheelbarrows and light trucks) and another for
producing tyres and tubes for bicycles. Each section was divided into two lines, one for tyre manufacturing
and the other for tubes. The auto tyre section had a production capacity of 24,500 tyres a day and 80,000
tubes per day. Both production lines were operating at full capacity.
The tyre production process consisted of the following steps: tyre production process consisted of five
major steps, namely manufacturing the cord, mixing and tread stock extrusion, beading, building the tyre
and vulcanizing as shown in Figure 2. The process began with spinning and weaving the nylon cord and
converting it into a band or carcass by passing it through rubber coating and calendaring processes.
In the second step, rubber and other raw materials were mixed in varying proportions depending on the
type of product. The materials were heated to soften in the warming process and then turned into sheets
during extrusion. Thus, a tread was formed using nylon fabric and rubber in four-ball calendaring. In the
third step, the bead that would make the sides of a tyre was formed. In the fourth step, the construction
of a tyre (a green tyre) was completed by putting together the carcass, the tread and the bead produced
in the previous steps. Finally, the vulcanizing process passed the green tyre through a heated mould
under a specified pressure and produced the final tyre. The tyre went through a finishing and inspection
process before sending it to packaging.
The tube production process was much simpler compared to the tyre production process.8 A work-
force of 844 people worked in the auto tyre production and packing facility. A workforce of 740 people
worked in the auto tube production and packing facility. A total of 149 personnel were involved in the
quality assurance and control process.
The bicycle tyre and tube manufacturing process was similar to the auto tyre and tube manufacturing
process, but the machines were less sophisticated in comparison. The bicycle production facility had a
workforce of 116 including tyre and tube manufacturing and quality assurance and control personnel.
According to the General Manager of the tyre plant Mr Cheema:

The greatest strength of the production facility was its trained workforce. Some of whom have been with the
company for over thirty years and their skill and knowledge have played a major role in the success of the
company.
Chatha 61

Figure 2.  Tyre Production Process

Source: http://www.bridgestone.com/products/speciality_tires/aircraft/products/process/#anc02
Disclaimer: This image is for representational purposes only. It may not appear well in print.

The production facility at SIL tyre division had the latest machines, also used by some of the top
European and Japanese manufacturers. Since 2007, the company had invested heavily in upgrading the
production facility to ensure high quality products that would enable SIL to compete in the competitive
export markets (refer to Figure 3). To ensure that the product quality was consistent and met quality
62 Asian Journal of Management Cases 16(1)

Figure 3. Capital Investments Since 2006

Source: Company records.

standards, the tyre division had one of the most advanced testing labs in the tyre and tube industry in
Pakistan. Products were tested at various stages during the production, gauges were installed in various
equipment and a monitoring and control system was in place.
Key personnel in the tyre and tube plant were able to bring about improvements in the production
process. As an example, de-bottlenecking of the calendaring operation was carried out by the tyre
division staff themselves in a very short period of time and increased its capacity from 22,000 to 27,000
units per day. However, the engagement of foreign consultants for this project would have consumed
substantial money and time. The tyre division productivity figures, as well as its rejection rates, were
better than its main competitors as shown in Table 4. With respect to continuous process improvements,
Raja Imran, Production Manager Tyre Division, elaborated:

In the past, we have carried out a number of projects that caused substantial improvements in the processes.
For example, there was a problem in the motorcycle tube production process which was causing a 5%-6%
rejection rate and the production process was very slow—three moulds were being handled by one operator.
We made a slight change in the nozzle design of the tube by converting it from Z-type to L-type, removed
one production process step and adjusted production process parameters in such a way that a very less skilled
operator could now operate the equipment, the production process became quicker and the rejection rate
decreased. In another project, we refurbished the rice husk boiler resulting in lower energy cost. Though we
have carried out these projects either by taking self-initiative or by higher management’s orders but the process
improvements in our plant are not being done in a structured manner. We currently lack a structured process
for continuous improvements which is absolutely important to protect our competitive advantage against the
competitors. We do not have quality circles.
Chatha 63

Table 4.  Tyre Plant Productivity Compared to Competitor

Parameters SIL Competitor

Curing times 5%–10% shorter than a competitor –
# of moulds run per person (Tyre) 6 6
# of moulds run per person (Tube) 6 4
Time—motion studies 10%–15% faster than a competitor –
Daily production (CD tyre) 15,000–16,000/day for 15,000–16,000/day
160–170 moulds for 200 moulds
Tyre Plant Reject and Claim Ratios Compared to Competitors
Parameters SIL (%) Competitor (%)
Rejection rate (Motorcycle Tyre) 1.5 2.5
Rejection rate (Motorcycle Tube) 1.75 2.5
Rejection rate (Bicycle Tyre) 1.75 ?
Rejection rate (Bicycle Tube) 1 ?
Claim ratio (Motorcycle Tyre) 0.3 1
Claim ratio (Motorcycle Tube) 0.3 1
Tyre Plant Process Step-wise Rejections and Overall Process Waste
Process step-wise rejection rate Overall process waste (calculated in terms
(calculated in terms of # of rejected of the total value of waste material in the
pieces/total # of units produced) process/total value of input material.
Extrusion = 0.5% This is a non-rework-able waste)
Bead wire = 0%
Motorcycle tyre = 0.5%
Nylon cord pasting = 0.05%
Motorcycle tube = 0.55%
Bias cutting = 0%
Tyre building = 0.05% (this waste was recycled to produce B, C, D category
Curing = 0.9% units in the ratio of 80%, 10% and 10%, respectively.
(however, these units were reworked and eventually These units were sold at 70%, 50% and 0% of the price
about 20–25 units/day were unrecoverable) of an A category unit)
Source: Interviews with production and quality managers.

While emphasizing the need for future planning, Raja Imran emphasized on making a 5-year plan for
capacity enhancement. He also wanted to carry out seasonal planning for inventory build-up which could
be used in high-demand seasons. He also emphasized the need for management training for managers.
This was important to understand the role played by various functions like production in the overall
scheme of things at SIL. At the same time, it was considered important to better manage the production
workforce and cost control. This would also develop professional management skills in individuals, and
thus the relationships among different departments would be more professional. Another issue faced
by production management was that their job descriptions had not been reviewed for quite some time.
During this time, the roles of the management staff had evolved that needed to be accorded.
High turnover of production workforce was another issue which was important for plant manage-
ment. This was not only causing SIL management the hassle of looking for new workers but also affected
the quality of output and productivity. The plant management was contemplating testing a female
workforce on some production operations under the belief that managing women would be relatively
less demanding. HR policies of SIL with regard to worker welfare and social security were good;
64 Asian Journal of Management Cases 16(1)

however, there were concerns regarding the cooling systems on the production floors. The regulated
cooling system would help workers feel less fatigued at work.

Quality Control
The tyre division had established a strong system for quality control and assurance. There was a quality
inspection before and after each major step of the production process, that is, raw material, production,
packaging and pre-delivery. The purpose of this inspection system was to control defective units to
be passed to the next stage in the production process. On the other hand, the purpose of the quality
assurance system was to ensure that no defective units were produced in the first place. For this purpose,
control gauges and instruments were installed on each piece of the equipment in order to control process
parameters that were known to affect the quality of the product at the respective processing step.
The quality control department at the tyre plant employed 102 personnel9—50 per cent each for quality
control and quality assurance purposes, 4 executives and 12 quality supervisors. These people carried out
their duties in three shifts of operations of the tyre plant. The quality assurance individuals were respon-
sible for taking readings of different parameters on equipment and helped to adjust the equipment. The
quality control staff inspected the outcome from each process step, allowed passing the correct parts to the
next step and recirculated the defective parts to the previous stages for reprocessing (where possible).
Quality Manager, Mr Faisal, was quite satisfied with the performance of his department. He reflected
on the quality system:

The actual implementation of a quality system depends upon, (1) top management commitment which provides
resources, (2) the immediate boss who delegates authority to make decisions and establish procedures, and
(3) objective criteria to assess and control quality.

He also reflected that 30–35 per cent of the causes for defective units were uncontrollable, while the
remaining causes were controllable. The controllable factors included: material compound problems,
worker operations and worker turnover.
Faisal reflected that a major challenge to ensure quality at the plant was high employee turnover.
Some of the reasons might include tough working conditions—high temperature, especially in the sum-
mer season, low salary and too many checks. The system needed to be further improved, and managers
and supervisors needed to be given training on the latest quality and safety management systems such as
total quality management. The production and quality managers admitted that there was a dire need to
implement quality circles and 5S methodologies in order to establish a continuous improvement system
in the organization. They also concurred that:

Quality should not be the responsibility of a few individuals in the organisation. Quality is a way of life, a disci-
pline that everyone in the organisation should follow. The need and urgency of quality have to be inculcated in
the minds of the workers and the managers alike so that a quality culture could be developed.

Human Resources
The total number of employees at the tyre plant was 2,266. A total of 76 executive and 249 non-
executive personnel worked in the head office in Lahore. Some of the HR functions were performed
Chatha 65

by the production department—payroll, compensation and HR planning were managed by the GM of

production. Shop floor workers were permanent employees, and SIL offered attractive benefits—annual
profit sharing, group life insurance and social security coverage were all part of the package.
Shop floor worker retention was a challenge at the tyre and tube plant owing to tough working
conditions in some of the processes as well as socio-economic issues. The company paid a 10 per cent
heat allowance for the summer months and had worked with the staff and management to improve the
working conditions such as adjusting the cool draft of air on workstations where workers had to work in
front of heated moulds. The HR department worked closely with line managers and the production
supervisors to come up with policies that would encourage employees to stay associated with the tyre
and tube plant for a longer period of time.
At the managerial level, a number of departmental managers at the tyre and tube plant identified
challenges that hampered their ability to function well in the organization. They felt that these issues
needed to be addressed. They are summarized in Table 5.
According to Mr Noman Faisal—head of the HR department:

A major goal for the HR department was to turn SIL into a progressive organisation hence the decentralisation
of resources and functions was important. Bringing transparency and accountability to each role in the organisa-
tion was also important. People were receptive to change and new ideas and various interventions from the HR
department were taken positively such as mandatory safety trainings for the supervisors, performance appraisals,
standardised entry level test at the time of recruitment.

Experienced workers are promoted to supervisor rank without any managerial training. There is a high employee
turnover at the worker level. At the same time, training and retention of workers coming from other organisations
is a challenge.

For the managerial ranks, SIL provides a compensation structure. SIL offers medical insurance, leave fare
assistance (LFA), performance bonus, 10%–12% increase in salary every year, and a stable (or permanent) job.

Table 5.  HR Issues at the Tyre Plant

HR Issues: Capacity related

•  The unfamiliarity of plant people with head office functions such as marketing and finance
•  Training of managers—strategic issues
•  Exposure, outward look—how other industries operate
•  Development plans for managers are not shared—lack of planning
•  Need HR systems to assess employee performance.
HR Issues: Behaviour
•  Lack of ownership of work and teambuilding
•  Lack of problem-solving approach
•  Openness to new or different ideas
•  People management skills such as negotiation, politely say ‘no’, etc.
•  Project management skills
•  Communication skills
Source: Interviews with various managers in the tyre division.
66 Asian Journal of Management Cases 16(1)

Hassan Shahid, an HR executive expressed his dismay in general about the production plants:

There is a difference in approach to recruitment policies between plants and the HR department. Plant people
do not want change in structure and practices, they want to employ experienced and local workers whereas HR
wants to employ relatively young people. Appraisal feedback is not provided to employees, there is hardly any
succession planning, and no career paths are discussed with subordinates.

Sourcing Raw Materials

Tyre and tube production was dependent on rubber as the main raw material. Rubber formed about 60 per
cent of the total cost of the tyre and tube and all of it was imported. Rubber, being a commodity, faced
price fluctuations throughout the year and posed a major source of variability in the planning process of
the tyre division. There were twenty people in the commercial department responsible for procurement,
imports and vendor development. The commercial department worked in close coordination with
production planning and finance departments.
The rubber purchase decisions were mainly taken by Arif Saeed, director of the tyre division. He had
15 years of experience in the cotton industry primarily focusing on commodity purchase and sale. He
was known to have an instinct about when to buy or not to buy a commodity based on fluctuations in
dollar value and other economic indicators. He said:

We have beaten our competition a number of times by taking positions in buying commodities, i.e., spot or
forward buying.

Sales and Distribution

SIL took pride in its long-term relationship with its distributors, which was based on mutual trust.
SIL competed with local and international brands, and the channel relationship was very important. In
2014, SIL had twenty-one distributors10 for motorcycle tyres and eleven distributors for bicycle tyres.
Other tyres were sold through dealers’11 network. SIL had a wide sales network with over 7,000 wholesale
and retail outlets in Pakistan. It had worked with its channel partners to improve their processes and
systems. According to Salman Riaz, Deputy Manager of Distribution:

SIL’s main strength is its distribution network. Its distributors stand with SIL through thick and thin. SIL also
ensures their profits are paid. There are distributors who are with SIL for more than fifty years and they are
treated like family members of the founders.

SIL had audit teams whose role was to provide trainings to distributors and dealers as well as to check
adherence to company policies. Distribution was completely a credit market with 30 days of credit terms,
and distributors had to fill a 15-day inventory.
The bicycle tyre market had faced a decline in sales in the last few years because the customers were
now preferring locally assembled motorcycles. SIL faced stiff competition in this segment with four to
five major players besides the smaller players. This was because bicycle tyres could be manufactured in
the cottage industry, and there were many producers in Pakistan. Bicycle tyre manufacturing was a PKR
2.5 billion market in 2014, and SIL had the second highest market share (25%), after Ghauri (35%).
Ghauri, on the other hand, worked on the dealership network.
Chatha 67

In 2007, SIL had a 58 per cent share in Motorcycle OEM market and provided tyres and tubes to
foreign brands (Honda, Yamaha, etc.,) and local assemblers. The only other player was Panther. According
to Atif Khatana, Manager of OEM sales:

In 2009, Diamond Tyres entered the market and focused on establishing itself in the OEM market. For OEM,
price and credit facility was very important. To enter the market Diamond offered the lowest prices. As a response
Panther started offering credit facility.

In the OEM motorcycle market, Honda Atlas had a major market share and brand recognition. Honda
purchased 48 per cent of tyres from SIL, and SIL was also an exclusive supplier for some of the local
assemblers like Ravi, SuperAsia and Ali Raza. In 2014, SIL had a market share of 47 per cent in the
OEM motorcycle tyre segment, while Panther had 37 per cent and Diamond 16 per cent (Figure 4a).
The OEM business worked on 36 days of credit. SIL closely monitored the financial health of its OEM
customers and the economic conditions of the country before deciding on the specific credit policies for
its customers. Motorcycle production had been stagnant for the past few years; the market showed only
1–2 per cent increase which meant that the tyre sales to OEM were also stagnant. This meant that SIL
had to maintain its goal to retain its current market share for the next few years.
Motorcycle tyre sales in the replacement market formed a significant part of SIL’s business. In this
market, SIL leveraged its distributor network, superior product quality and brand recognition. SIL was
able to sell at a 5 per cent premium over the competition. It enjoyed a market leadership position, and its
share increased from 41 per cent to 48 per cent in the past year.
SIL was also exporting its products to Africa, the Far East and European markets. Chinese firms
posed the biggest competition because of their low cost. Thus, SIL was trying to establish its brand in
these markets with its superior quality. The export business improved from PKR 243 million in 2011 to
PKR 399 million in 2014.

Marketing
Marketing efforts in the tyre division had increased significantly in recent years. Since 2007, SIL had
been investing in ATL and BTL advertising activities to increase company profile, brand perception
and product value, and the current leadership position in the face of competition was a result of it.
The marketing budget increased from PKR 2.5 million in 2007 to PKR 150 million in 2014.
SIL started advertising in the media in 2012, a first in the motorcycle tyres market. There were 10,000
retailers of SIL tyres and tubes of which 7,500 were distributors’ own retail shops. These shops were
used for branding. Similarly, vulcanizers who were the major opinion builders of the end consumer were
engaged in branding activities such as the provision of water coolers, sunglasses, P-caps, tools and tags
bearing Servis logo as well as advertisement posters. Talking about the challenges faced by SIL,
Muhammad Ejaz, the Country Manager (Marketing) said:

The major challenge faced by SIL is the unethical practices of competitors who are involved in tax evasion.
SIL with a history of giving tax since its inception continues with ethical practices and thus faces challenges
in the marketplace. Besides, our marketing and branding strategy needs to improve and marketing budgets and
resource needs should drive from there.

There was limited coordination among production, R&D and procurement, which caused delays with
regard to response to customer queries and claims.
68 Asian Journal of Management Cases 16(1)

Figure 4a.  Motorcycle Tyre and Tube Market Share Analysis

Source: Company records.

Figure 4b.  Tyre Industry Trends in Pakistan

Source: Pakistan Business Council, 2015.
Chatha 69

Competitive Situation for Tyre Division

With bicycle tyre and tube businesses not growing, SIL had set its focus on the auto tyre (tyres other
than a bicycle) and tube market for growth. SIL was the market leader in motorcycle and rickshaw tyre
segments in Pakistan according to the market share analysis conducted by the SIL marketing department
(Table 6). With only five major players, the industry was concentrated. Long-time competitor Panther
was in the second place in both these segments.
SIL was the first choice vendor for major motorcycle OEMs like Honda Atlas, Yamaha and local
assemblers. It was the brand of choice in the replacement market and was sold at a premium of 3–5 per
cent on price though it had a 10 per cent premium on quality. No price premium was charged on the tube.
The motorcycle tyre and tube markets in Pakistan had not seen major growth in the past few years,
and the competition in this segment was going to be tougher in the future (Figures 4a and 4b). This meant
that SIL had to actively look for other avenues of growth.

Recent Growth Initiatives

The strategy team for the tyre division was looking for growth opportunities, which could be either
product extension or diversification. The following business development opportunities were being
pursued in 2015:

Agri-tyre Business
To leverage its experience in manufacturing auto tyres and tubes, SIL saw an opportunity in the agri-tyre
business, especially tractor tyres (front and rear) for the local and international markets. Pakistan being
traditionally an agricultural economy meant that the agri-auto sector offered a good source of business
growth in the long term.12
According to a market research conducted by SIL, the agri-tyre was an approximately PKR 12 billion
annual market in 2014. General Tyres and Panther Tyres were the major players in this segment in
Pakistan. General Tyres with the lion’s share of 60 per cent was the biggest and the oldest player in the
market.13 Its product offered reasonable pricing, after sales service, low claims and quick adjustment of
claims. Its brand recognition was the highest, and it was the first choice for the customers. General Tyres
had developed a strong network of dealers across Pakistan and offered a complete range of products
in the agri-tyre business. However, in the agri-tube business, General was not able to develop its reputa-
tion because of quality problems and had thus discontinued that business. It was; therefore, selling
imported tubes under its own brand name. Market communication with customers in this area was
also minimal.
Panther, on the other hand, was able to capture about 7 per cent of the market share owing to its credit
policy. However, Panther suffered from poor quality, high claims and slow adjustment of the claims.
Besides, it did not have service centres. Panther was not offering a full range of agri-tyre products and
was reputed for selling imported tyres with its brand name.
Imported tyres filled the remaining market demand in the agri-tyre market. Imported tyres were priced
higher than those from General and lacked after sales service and warranty. Rana Saeed, Head of
70 Asian Journal of Management Cases 16(1)

Marketing and Sales in the domestic tyre business, felt that an opportunity existed to enter the market.
He reflected:

We would need to keep our prices lower than General Tyres. We already have a reasonable market share in the
Agri tube business and have developed a dealership network. We would leverage our brand value and dealership
network to sell agri tyres as well. If we would ensure our product quality and offer after sales service, we would
have a very good opportunity to grab a reasonable market share. However, we might need to sell on credit at the
start as well as invest in market communication.

Agri-tyre production would require major investment in the plant and equipment. Besides, the dealership
network would have to be rejuvenated, and relationships would need to be further strengthened. SIL
hoped that it would be able to gain about 10 per cent of the market share in the tractor tyre industry in
the first year. Sales projections are shown in Table 7.

Auto Parts
Motorcycle parts replacement market was a PKR 58 billion market in 2014,14 which included functional
auto parts (market size of PKR 23 billion) such as batteries, air cleaners, chain sprockets, brake shoes
and so on, and auto body parts (market size of PKR 17 billion) such as rims, headlights, spokes, fenders
and so on. The remaining was the engine oil market. The wholesalers and retailers of auto parts and
tyres and tubes had merged over the years, and 80 per cent of the retailers sold both auto parts and tyres
and tubes.
Honda Atlas was the market leader in this segment and charged a 10 per cent premium over the
competition. The other major player was Crown Lifan which like Honda Atlas was also a motorcycle
manufacturer. Besides these, there were importers of Chinese brands. All vendors supplying to Honda
Atlas and other assemblers were also marketing the products under their own brands. Auto parts market
share and various brand positions are shown in Table 8 and Figure 5, respectively.
In order to leverage its brand equity and distribution channel in the auto parts business, SIL entered
the market in 2012 with wheels and spokes. The wheels and spokes were a PKR 2.5 billion market in
2012. To further grow this line of business, SIL not only had to develop partnerships with auto part
manufacturers but also develop in-house product design capabilities.
This line of business did not require major financial commitment as SIL was only marketing these
products under its brand without the need of any manufacturing facilities. SIL sourced the products on
a longer credit period and sold them on a shorter credit period. This could also benefit the distributors
because they could use their current resources to increase sales volume. The bargaining power remained
with SIL owing to its brand equity. However, this also posed a risk since the Servis brand would be
at stake if something went wrong. SIL needed to ensure product quality and delivery reliability of its
vendors, and for that matter, systems were needed to be put in place. At the same time, it may perhaps
be important in the future to develop SIL’s own design capability of the auto marts if it were to contract
manufacture parts from suppliers.

Exports
Export markets had been SIL’s focus since 2011, and it had set a goal of doubling exports every year. This
required a major effort from the sales and marketing team. Besides, to compete with other international
Table 6.  Competition and Segment-wise Presence in 2014

Market Size Market Share Analysis

Value /
(Units / Annum Servis Panther General Diamond Ghauri Imported &
Segments Annum) (PKR) Tyres Tyres Tyres Tyres Tyres Misc. Total
MC Tyre Set - Total (Units/) 11.50 8,505 48% 26% 3% 14% 8% 1% 100%
Replacement 8.25 6,346 48% 26% 3% 14% 8% 1% 100%
OEM 3.25 2,159 47% 37% 0% 16% 0% 0% 100%
MC Spare Tubes - Total 45.00 6,254 42% 44% 1% 9% 3% 1% 100%
Replacement 45.00 6,254 42% 44% 1% 9% 3% 1% 100%
OEM No Sales of Spare Tubes in OEM Segment
Rickshaw Tyre Set - Total 2.10 2,693 45% 35% 1% 3% 1% 15% 100%
Replacement 1.84 2,310 45% 35% 1% 3% 1% 15% 100%
OEM 0.26 383 50% 40% 0% 10% 0% 0% 100%
Rickshaw Tube - Total 2.90 434 30% 45% 0% 2% 1% 22% 100%
Replacement 2.90 434 30% 45% 0% 2% 1% 22% 100%
OEM No Sales of Rickshaw Tubes in OEM Segment
Trolley Tyre - Total 1.29 314 45% 30% 0% 5% 15% 5% 100%
Replacement 1.29 314 45% 30% 0% 5% 15% 5% 100%
OEM No Sales of Trolley Tyres in OEM Segment
Trolley Tube - Total 2.36 235 64% 25% 0% 1% 2% 8% 100%
Replacement 64% 25% 0% 1% 2% 8% 100%
OEM No Sales of Trolley Tubes in OEM Segment
Agri Tyre Set - Total 0.65 7,500 0% 7% 60% 0% 0% 33% 100%
Replacement 0.46 5,346 0% 7% 60% 0% 0% 33% 100%
OEM 0.19 2,154 0% 7% 93% 0% 0% 0% 100%
Agri Spare Tubes 2.50 900 28% 45% 0% 0% 0% 27% 100%
Replacement 2.50 900 28% 45% 0% 0% 0% 27% 100%
OEM No Sales of Agri Tubes in OEM Segment
Source: Company records.
Note: *Sales figures are in Million.
Table 7.  Sales Projections for Agri-tyre

SIL Proposed Production (Units)

Per Day Per
Category Tyre Sizes (26 WD) Month Per Year Year–1 Growth % Year–2 Growth % Year–3 Growth % Year–4 Growth %
Agri 6.00–16 308 8,000 96,000 110,400 15% 121,440 10% 133,584 10% 146,942 10%
Front Tyres 7.50–16 27 700 8,400 9,660 15% 10,626 10% 11,689 10% 12,857 10%
7.50–20 12 300 3,600 4,140 15% 4,554 10% 5,009 10% 5,510 10%
346 9,000 108,000 124,200 15% 136,620 10% 150,282 10% 165,310 10%
Agri 12.4/11–28 115 3,000 36,000 41,400 15% 45,540 10% 50,094 10% 55,103 10%
Rear Tyres 16.9/14–30 19 500 6,000 6,900 15% 7,590 10% 8,349 10% 9,184 10%
135 3,500 42,000 48,300 15% 53,130 10% 58,443 10% 64,287 10%
GRAND TOTAL 423 11,000 132,000 151,800 15% 166,980 10% 183,678 10% 202,046 10%
Source: Company records.
Chatha 73

Table 8.  Auto Parts Market Players and Their Share

Annual Sales
Brands (PKR in billions) % Share
Crown Lifan 10 25
Honda 5.5 14
Future 4 10
ISH 3 8
Road Prince 2 5
Excel 0.5 1
Private label brands 15 38
Total 40 100
Source: Company records.
Note: Engine oil is not included in above figures.

Figure 5.  Brand Positioning of Various Players as of 2014

Source: Company records.

players, SIL had to improve its product quality and increase product range in accordance with market
demands.
SIL already had certifications15 from various markets in order to supply tyres in those markets. SIL
preferred to export under its own brand name or co-branded products to establish its brand recognition
in the export markets. In 2014, SIL was exporting to countries in Asia, Africa, Europe and North America.
The export business comprised about 5 per cent of the total tyre and tube business at the time.
74 Asian Journal of Management Cases 16(1)

However, there existed tremendous opportunities to supply bicycle and motorcycle tyres in many
countries across the world.
SIL also had to increase its production capacity for increasing exports. Quality had to be improved,
for which purpose SIL had imported European machinery to replace and enhance production capabili-
ties. This required major capital investment in the current line of business. As a matter of fact, SIL was
continually investing in state-of-the-art equipment since 2006 in order to ensure consistency and quality
of its products.

Future Challenges
As Arif glanced through the market research data for growth options, he knew that achieving the growth
targets would require developing new strategic capabilities in the value chain. He also wondered how
new capabilities would interplay with the existing capabilities in the value chain and what would be the
course of action for their potential alignment. Besides, he was also unsure about the potential of each
growth option. Should he focus on only one of these options or all of them simultaneously? Convincing
the board to trust him and his team for significant financial investments in the tyre division would not be
easy. With that thought in mind, Arif prepared himself for the meeting.

Declaration of Conflicting Interests

The author declared no potential conflicts of interest with respect to the research, authorship and/or publication of
this case.

Funding
The author received no financial support for the research, authorship and/or publication of this case.

Notes
  1. This history was taken from SIL: Value Chain and Strategic Choices written by M. Shakeel S. Jajja and Syed
Zahoor Hassan.
  2. Ch. Nazar Muhammad (Late) and Ch. Muhammad Hussain (Late) from Gujrat district and Ch. Muhammad
Saeed (Late) from Gujranwala district.
  3. Abrasion resistance: this property indicates how hard it is for a tyre to wear away during operation. Higher the
abrasion resistance, longer the life and better the tyre.
Wobbling: when a tyre joint is uneven, it causes distortion of the tyre that results in wobbling (uneven and
unsmooth) of the tyre during operation
  4. Road grip: this relates to tyre footprint which provides the contact patch of tyre with ground and hence its road
grip would be better.
  5. Two standards were available internationally, namely the JATMA and ETRTO standards that needed to be
followed in order to design a successful tyre. Besides, there were a number of quality standards, most of
which were country-specific, e.g., BIS—Bureau of Indian Standards, SNI—Indonesian National Standard,
INMETRO—National Institute Metrology, Quality and Technology and DOT—Department of Trade, USA.
  6. ETRTO standards were specifications of international interest, including future developments in tyres and rims
issued by European Tyre and Rim Technical Organisation (ETRTO).
  7. The technical lab housed: tensile (strength) tester, abrasion tester, carbon tester, plunger tester, curing tester,
drum analyser and drum tester. Of these equipment, carbon tester, plunger tester and curing tester were the ones
which no other companies had in Pakistan besides General Tyre and SIL.
Chatha 75

  8. Tube production process started with compounding where raw materials were mixed. The material was heated
to make it soft and refined to get a consistent mix. The mix would then be converted to sheets using rollers and
cut into required size. The ends would be joined together and joints would be smoothed out for a consistent
shape and later cured. Curing was a critical and complex process, and temperature in the curing section was very
high. After curing, the valve and nozzle were fitted and the tube was inflated for inspection and testing quality.
Tubes were later sent for packing.
  9. Average salary of quality personnel was about PKR 15,000 per month.
10. A distributor is an exclusive partner of SIL and is given an area that constitutes about 10 per cent of the market
demand. A distributor’s minimum margin is fixed (8%), and he can pass up to 3.5 per cent to its customers. The
distributor provides to its wholesalers, and their margin is fixed (PKR 35/tyre, and PKR 6/tube).
11. A dealer is not an exclusive partner of SIL and is not assigned any specific area. However, their margins are
controlled at 11.5 per cent.
12. According to Economic Survey of Pakistan 2015, the tractor production increased from 24,714 units
(July–March 2013–2014) to 35,753 units (July–March 2014–2015), and the trend was expected to continue.
13. General Tyres produced about 200,000 units of front and 130,000 units of rear tractor tyre in the year 2014.
14. According to a SIL estimate, there were 10 million motorcycles on the road in 2014.
15. Servis got the certification from Department of Transport (DoT) in the USA, BIS in India, SNI in Indonesia and
INTERO in Brazil.

Reference
Pakistan Business Council. (2015). Selected trade and manufacturing data for Pakistan: A brief analysis. Karachi,
Pakistan Business Council.