Innovation, similar to communication, which I touched on in the previous issue of Tyre Trends, is a somewhat elusive subject as far as modern organisations are concerned. My intention here is not to delve into the subject’s intricacies but to share my experiences and views with the readers.

I do not know if I am the best person to touch on customer psyche from a marketing perspective. However, on thinking widely and looking at the big picture, I feel I am not very far from the truth that we are all engaged in putting our ideas across and understanding, or very often misunderstanding, relationships and dependencies throughout our lives, be it in family or social and business circles. In other words, we are marketers in the sense that we seek agreement to our views and expect a positive response from those with whom we associate. The Buddha, in one of his discourses, has indicated that the world depends 100 percent on relationships. This is equally applicable to all phenomena in nature, including human relationships. The quality of the relationships is the key determinant of the success or failure of the quality of any human activity. On thinking broadly, quality is a rather evasive term with a wide variety of interpretations, reminding us of the proverbial ‘seven blind men and the elephant’. 

My experience with the ISO certifications naturally prompts me to seek information from the ISO standards. A widely accepted and general definition of quality is the level to which requirements are fulfilled. According to the ISO 9001:2015 QMS, the customer requirements are broadly categorised as: (a) stated requirements, (b) implied requirements and (c) compliance obligations dealing with statutory and regulatory, and other legal requirements. Requirements stated by the customers are apparently straightforward but may need careful evaluation, while the implied requirements need to be invariably derived using the available information and the experience of the supplier or the manufacturer.

At the very beginning, the ISO 9001:2015 standard gives top priority to understanding the context of the organisation, which takes in to account the external and internal issues as well as the expectations of the external and internal interested parties while assessing the business risks and opportunities associated with the same. It is rather discouraging to note that many companies do not pay the due attention to Clause 4.0 in their quality management systems.

The concept of ‘internal customer’ is another important area that is apparently taken for granted in many companies despite the complex dependency and the independency between the processes and the process owners. The several ‘meetings’ that the managers are frequently engaged in – to the level of becoming a malady – could be the outcome of not paying attention to the ‘internal customer’. Habits 4, 5 and 6 of Stephen Covey’s ‘The 7 Habits of Highly Effective People’, namely Think Win/Win; Seek First to Understand, Then to Be Understood and Synergize, can be of valuable guidance in interpersonal relationships. Not understanding the requirements of the ’internal customer’ or the next in line in the value adding process has created closed domains and ivory towers within organisations.

As I have mentioned in one of my previous articles, ‘social distancing’ cannot be considered as post-Covid addition to our vocabulary. Its origins can be traced back to the post industrial revolution, when the traditional craftsmanship and cottage industries gave way for mass production system, which simultaneously resulted in mass de-personalisation. Individual craftsmanship was the norm in my native village in Sri Lanka (then Ceylon) in the fifties. I presume that some of the surviving ‘baby boomers’ can recollect similar experiences in their own countries. Pride of ownership and personal reputation were considered in high esteem – sometimes even at the expense of a little extra profit..

Notwithstanding the tremendous benefits accrued by way of increasing the agility and responsiveness with tools and conveniences of modern communications in the modern organisations, the distancing of relationships has introduced new problems. The importance given to the ‘personal touch’ appears to be the hallmark of an extinct species.

On the same lines, I remember an episode from my days in Nairobi, Kenya in the early nineties, how the owner of a well-known chain of hotels got his Harvard MBA son to work in a hotel kitchen as his first job and set a practical example of humanely understanding the customer psyche. Similarly, when I joined the Bata Shoe Company in 1969 as a management trainee, the first training we were given was to work in the retail shops for one week, irrespective of whether we are going to end up in marketing, purchasing, finance, technical or quality control. I still possess the leaflet we were given on the first day we joined the company, the contents of which goes as follows:

WHO IS A CUSTOMER

• A customer is the most important person ever in our business…in person or by mail.

• Customers are not an interruption to our work…they are the purpose of it.

• We are not doing them a favour by serving them…they are doing us a favour by giving us an opportunity to serve them.

• Customers are not dependent on us…we are dependent on them.

• A customer is not an outsider to our business…but a part of it.

• Customers are not cold statistics…they are flesh and blood human beings with feelings and emotions like our own, and with biases and prejudices. 

• A customer is not someone to argue…and match wits with. Nobody ever won an argument with a customer.

• Customers are people who bring us their wants. It is our job to handle them profitably, to them and to ourselves.

Honestly, I should say that as a freshly joined management trainee in 1969, it took me many years to realise the implications of these time-honoured pearls of wisdom about interpersonal relationships. With the proliferation of online sales and e-marketing, the customer has become an obscure or virtual figure or a non-entity. Going to the bank and exchanging greetings with the counter clerk or having a friendly chat with the vegetable or fruit vendor down the street is a thing of the past and a luxury which only a few retired persons like me can afford to enjoy.

Voluminous studies and research have been done in the past from the time the human relations approach to management which started about 100 years ago. It is still an area that the modern day management thinkers, CEOs and specialists of the many disciplines related to human behaviour are grappling with. New theories and hypotheses are continually emerging. The modern managers are very often overwhelmed by the challenge of discerning the trees from the forest, and I am aware about two companies in my own country that were duped by ‘marketing experts’ – to spend millions on magnanimous customer relations programmes which proved to be failures.

Customer satisfaction is a requirement of performance evaluation under Clause 9.0 of ISO 9001:2015. Some companies have developed rather intricate quantitative methods to evaluate customer satisfaction. Poor response rates are a common trend unless the products or the services are of a high level of importance and the consequences of failures are catastrophic. The cost of not fully comprehending what the customers want can be high and the consequences can sometimes be disastrous.

The behaviour and body language – the genuine vs the artificial smile – can be easily spotted. It could be the glittering front office of a large multinational company or an airline check-in counter or the flight cabin itself. Or it may be a small kiosk or a boutique in a remote village. The underlying principles are the same. The courteous, patient and the enduring etiquette of the saree vendors in many parts of India and the remarkable business success of some minor communities in Sri Lanka provide good examples of staying close to the customers.

Customer satisfaction is the extent to which we strive to meet the needs of the customers. However, the way the modern market promotion and advertising is continuously striving to create new needs and wants with only the financial bottom-line as the supreme priority makes me wonder if we have a ‘hen and the egg’ situation in modern business. It was Mahatma Gandhi who once said, “The world has enough for everyone's need, but not enough for everyone's greed.”

According to a recent market study, some common pitfalls of poor customer experience are enumerated as:

a) Rushing it

b) Losing focus

c) Assuming satisfaction, loyalty, advocacy is the same

d) Letting the stakeholders to influence the customers

e) Making rash decisions

f) Comparing apples to oranges

g) Keeping it as a secret

h) Ignoring the data

i) Thinking short term

j) Standing still

Some important aspects to be considered in understanding the customer behaviour have been identified as follows:

• Marketing positioning and distribution

• Personal factors such as age, gender, education and upbringing

• Psychological factors such as buying motives, perceptions and attitudes

• Situational factors such as physical surroundings, social surroundings and time factor

• Social factors such as social status, reference groups, social media and family

• Cultural factors such as religion and ethnicity

• Lifestyle factors such as status, income and identity

• Geographical factors such as the country, religion, urban or rural

With all due respect to the modern approaches to understanding the customers, I find it opportune to cite a far-reaching teaching from the Buddhist doctrine which has deeper management implications on interpersonal relationships. Once the Buddha noticed a young person called Sigala, from an affluent Brahmin family, worshiping reverently at different directions after having his ritualistic bath at the Ganges. It was found that he was following the death wish of his late father. The Buddha explained to him the real significance of the six directions of worship, which is a lesson for the modern managers on harmonious interpersonal relationships. The discourse covers in great detail the duties and responsibilities of the different stakeholders of the social fabric, namely:

• Parents-children

• Students-teachers

• Husband-wife

• Friends and associates

• Employer-employee

• Individual-religious fraternity

It can be seen how these interactive factors cover every aspect of our lives on a life course approach, irrespective of geographical, national, social and religious boundaries, in a world made complicated by our own ambitions and actions.

Bridgestone Americas announced the launch of Firestone Direct mobile vehicle service for car owners and fleet operators. Firestone Direct brings Bridgestone’s automotive services directly to vehicle owners’ homes or workplaces to offer maximum convenience with safe, contact-free service.

This service uses specially equipped vans operated by certified technicians to perform a wide range of maintenance services, including fluid and filter changes, tire repair and replacement, battery check and replacement, and more. 

Through 2021, Firestone Direct will continue to grow into additional markets across the southeastern U.S., with plans to expand nationwide by 2023. The new service launched first in Nashville and Atlanta and expanded into Orlando and Tampa in March.

Angie Oleson, director of Firestone Direct, said, “Customers are increasingly turning to online shopping and at-home services for convenience and safety, and Firestone Direct is at the forefront of this movement for at-home car care. By bringing trusted vehicle care featuring the latest automotive technologies directly to the customer, Firestone Direct can leverage the expertise of our trained technicians with the ease of online booking and at-home service for maximum convenience.” (TT)

The global electric vehicle (EV) market has taken a tremendous leap forward, with new registrations reaching record market shares in nearly all countries. For the tyre development landscape, the accelerating growth of the EV market means a pervasive transformation.

Boosting circular economy

At Black Donuts, the impact of the EV trend can be seen everywhere, from the tyre designers’ desks to the new practices of tyre testing. Beyond meeting new demands of the EV sector, the procedures and practices are tuned to serve the company’s strategic goal: to spearhead the industry’s shift towards a circular economy.

Black Donuts launched the first EV tyre development projects with its tyre manufacturer customers in 2018. The internal research on EV tyres was initiated even before, at the time of the first EVs entering the market. “The first research project addressed the primary technological challenges: rolling resistance and noise,” says lkka Lehtoranta, Head of Tire and Material Development at Black Donuts.

In tyre design, it is essential to focus on specific aspects to ensure optimal performance for electric cars. Compared to combustion cars, tyres for Evs must carry a heavier load withstand high instant torque – and be efficient and quiet. 

Lately, the focus on tyre technology has shifted towards more comprehensive sustainability. Bio-based materials and compounds are opening new possibilities, and the rapid growth of the EV market accelerates the pace of development. ”The EV trend has highlighted the sustainability of tyres. The demand for bio-based materials and tyre recyclability has significantly increased,” says Jarkko Mällinen, Technology Development Manager of Black Donuts.

In cooperation with its partners, Black Donuts is investigating new possibilities to replace fossil-fuel-based raw materials with bio-based or renewable materials in all products, including studded tyres. The company is currently testing the use of bio-based plastics in stud bodies.

Also, end-of-life tyres are a hot topic in the industry, and Black Donuts is researching how the waste tyres can be recirculated and recycled back into the process. Even the tyre development process is undergoing a renaissance. New design tools for faster tyre development are being introduced, emphasising the key features of sustainable, future proof tyres.

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European PCLT (passenger car and light truck) tyre manufacturing capacity has risen over the past decade to meet increased demand, but there has been a major shift from plants in Western Europe, towards Central Europe and Russia. The move eastwards reflects substantial differences in operating costs between the two regions, specifically in terms of labour costs. Hourly labour rates in Central and Eastern Europe can typically be half to one quarter of those in the highest cost Western European countries. In particular this significant differential has resulted in the transfer of production of lower priced non-premium tyres to larger plants in Central and Eastern Europe. Numerous PCLT plant closures and downsizings in Western Europe have either been announced or enacted during the past 18 months.

In 2019 Cooper Tires ended PCLT tyre production at its small plant in the UK, and Michelin recently closed the PCLT tyre plant in Dundee that manufactured tier-1 brand tyres in lower rim-diameters (≤16”), a shrinking segment of the European market. These closures leave just the two PCLT tyre facilities operating in the country: the Pirelli plants that focus on low volume but high-margin premium tyres.

In Germany, Michelin has announced plans to close its Bamburg plant that also focused on lower-rim -diameter tyres, whilst Goodyear is restructuring operations at its PCLT tyre facilities located in Fulda and Hanau. Total capacity there will fall, but there will be an increase in production of premium tyres.

Pirelli has recently ceased production of car tyres at its Bollate plant in Italy, its only facility in Western or Central Europe that was manufacturing non-premium car tyres. Apollo Tyres plans to downsize PCLT capacity at its plant in the high-cost Netherlands, focusing the facility on high value tyres with short production runs. Management had stated that the company lost money on 70% of the PCLT tyres that it sold from the facility.

Despite these closures in Western Europe, expansion to the east is expected to result in the net addition of 30 million units of PCLT tyre capacity across Europe* by 2026. New plants that have been recently opened, or are currently under construction, are located in either central and eastern Europe or Russia. In 2017, Apollo Tyres opened a greenfield plant in Hungary, with first-phase capacity increasing to 5.5 million PCLT tyres and almost 0.7 million TBR tyres. Supply from the facility has substituted imports from India and now permits the planned downsizing and specialisation of production in the Netherlands.

In 2018, Hankook announced plans to add production of TBR tyres at its plant in Hungary, however this expansion was put on hold in late 2019. In phases, the company has already expanded PCLT tyre capacity until it is now one of the largest such facilities in the world. Meanwhile, Nexen has begun the ramp-up of capacity at its new plant in the Czech Republic; this will have added substantially to the country’s capacity by 2023.

In addition to further investments across Central and Eastern Europe by Continental Tire, Bridgestone and Pirelli, an expansion of premium tyre capacity in Slovenia has also been announced by Goodyear.

In mid-2019 Toyo Tire announced its intention to build a new tyre plant in Serbia, consolidating the country’s position as the leading location for new PCLT tyre manufacturing capacity in Europe. This follows Linglong’s decision to build its new European plant in the country and Cooper Tire’s plan to double the size of its facility. Based on analysis by Astutus Research of all announced capacity actions (plant opening and expansion net of closures and downsizing), Serbia will account for over 40% of planned capacity additions between 2019 and 2026.

Toyo expects to invest €390 million in its new facility that will have a capacity of 5 million units. It intends to start production in early 2022 and reach full capacity the following summer. Linglong’s facility will have a capacity of 12 million PCLT tyres, alongside truck and radial agricultural tyres, built in three phases and representing a total investment of over €800 million.

Serbia as new hub

Although there is demand for both replacement and original equipment PCLT tyres in Serbia, the domestic market is amongst the smallest in Europe and production will be export focused. The country has already emerged as a key source of budget tyres to the European Union and to Russia, predominantly from Tigar Tyre, Michelin’s low-cost tyre subsidiary, that has significantly increased capacity and production in the past decade.

Geographically, Serbia is well located to supply the major markets of the EU and Russia, and benefits from free trade agreements with both. Labour costs in the country are significantly lower than in the Czech Republic or Hungary, and labour availability is good, with a higher rate of unemployment.

At present Toyo imports tyres to Europe from its facilities in Japan and Malaysia; Linglong utilises its PCLT tyre plants in China and Thailand. Both companies aim to develop their presence in Europe, and local production should help them in this quest, particularly in the original equipment segment where the significantly shorter lead times will improve the competitiveness of their offer. Similarly, the opportunity to increase their share of the OE business was one of the motivations for Nexen and Apollo to replace imports to open a plant in the region.

Whilst the influence of the Covid-19 virus may slow the pace of some planned investment in central and eastern Europe, it has already accelerated the pace of closures in the west. Furthermore, we expect that it will result in further plant closures there, as the decline in European tyre demand dramatically reduces plant utilisation rates.

*Europe refers to Western, Central and Eastern Europe, including Russia and CIS, but excludes Turkey which we include in the Middle East & Africa region.

For capacity data: ‘Western Europe’ includes plants in Germany, France, Spain, Italy, the UK, Portugal, the Netherlands, Finland and Luxembourg. ‘Central Europe’ refers to Poland, Romania, Hungary, Czech Republic, Serbia, Slovakia and Slovenia. ‘Russia and CIS’ refers to Russia, Ukraine, Belarus and Uzbekistan.

• Simon Hodson is Research Director at Astutus Research shodson@astutusresearch.com

The WHO has said that the outbreak is now officially a Pandemic. People/ companies/ organisations are still coming to grips on how to address the situation. Government heads of various countries are trying to curb the situation by restricting entries of people who are affected by countries that are affected the most. Thus, airlines would have only diplomats and other certain levels of people allowed to fly.  Many airlines have suspended a good number of their flights.  Many companies will be looking to take a hair cut on what they take back with them, just to see that business can be sustained during the trying situations. 

The virus has led various markets to crash, courier services have been curtailed in certain countries. All types of cancellations, be it sport, expositions or business, have affected the business world over. The transaction value in the losses may be difficult to gauge currently, however, it could be in the millions. Contracts would have to be reworked, and companies may have to come with new strategies. 

However, in every situation, there would be also a business opportunity, if you work your strategy right. The sale of masks, gloves, hand sanitisers, medical devices would be able to generate good business. Though it is seen that the outbreak is from China, you also got to give to them as to how they are trying to contain the situation by building hospital/s within 10 days. In other countries, this would easily have taken a much longer time period. 

It is a given that the business scenario is not going to be the best for most of the companies; Therefore, companies may have to think and reevaluate the way they are currently running their company. Companies will look to get leaner in every possible way. Cut down on unwanted expenses. Many companies have started asking their employees to work from home. Some may look to have lesser number of people and look to automate some of the work, especially in the factories.  Commercial properties being an expensive asset to maintain, some companies may look to perhaps go on rented co working spaces. Use less of one time use items like plastic and use more renewable/ reusable substitutes. Use of more environment friendly methods going forward will be the mantra. 

This hit on our social system in a way will make us pause, think and have better suggestions as to how to look after ourselves and our environment at large.