Why Bridgestone believes its new European structure takes it closer to the market

In the final quarter of 2010 Bridgestone announced that it was reorganising its European operation into key “regions“. At the start of 2011, this plan entered its second phase with the establishment of the North Region (consisting of the UK, Denmark, Norway, Finland, Ireland and Sweden). As a direct result of this, there were a number of promotions for executives at the company’s UK headquarters.

On 1 January 2011 John McNaught became North Region managing director with Sam Enya as the North Region deputy managing director and also sales administration director. At the same time John Folliss became North Region commercial sales and marketing director with Andy Lane taking the position of North Region consumer sales and marketing director. Six months into his new role, Tyres & Accessories met with Andy Lane and learnt details of how the company sees the UK and other North Region markets progressing or otherwise this year and how the new approach positions the company to deal with this.

As Tyres & Accessories reported when the initial stages of the strategic adjustment were first announced in September 2010, the North Region countries will now form one region in the European branch of the global Bridgestone organisation. But what does regionalisation mean for those involved and customers alike? In short more product focus and an overall streamlining of the company’s efforts, Andy Lane explained, adding that the idea is to make the business “faster, smarter and brighter.”

When Bridgestone started out in Europe a couple of decades or so back, the number of different national markets considered part of the continent was much smaller. During the ensuing years Europe’s geographical market count has swelled to include more than a dozen more nations than initially envisaged. So, while the company was originally set up to manage the product and market needs of its customers and brand across those 12 territories, the reality is that now the company has twice as many countries and twice as many languages to adapt itself to. And this all means that reorganisation has become increasingly necessary in order to speed up interaction, communication and faster decision making. As we have seen the decision to make this move was formalised some time ago with the roll out starting last year with central region (that is Germany, Switzerland and Austria).

A common approach regionally adapted

Before, with so many countries represented and many differing views and priorities within each market, the system was said to have been less efficient with the obvious tendency for the lowest common denominator to win out when so many apparently different priorities were represented in the same room. Now the philosophy is said to be more a question of a “common approach, regionally adapted.”

Before 25 representatives were trying to achieve the best results for their area. Now it is six, each with responsibilities for (and therefore an interest in the success of) the respective regions. “No good idea came out of a big meeting room,” Lane observed, confident that the reorganisation will result in mutually beneficial results for the manufacturer and its customers alike.

In the case of the North Europe region it is true to say that a number of the former UK management team have become region-wide directors, but that’s doesn’t mean that the UK will get any less attention. “Brett Emerson remains the director responsible for sales of consumer products in the UK,” Lane told T&A pointing to the stability that the consistency of leadership will bring. Another implication is that with this permanent role the UK market’s customers will both benefit from its own variation on the “common approach” while also having a structure in place to respond to their particular needs and feedback.

According to Lane the practical results of the reorganisation should be “more training, more advice and more support.” One example of this is Bridgestone’s plans to launch a pro-winter tyre initiative later in the season aimed at communicating the complex messages associated with high quality products to the masses.

Market uncertainty could result in double digit drop in UK market volumes

The last few years have been tough for the economy in general, but the effect this background has had on the tyre business has been quite mixed rather than the outright awful some expected. Could this be because the UK passenger car replacement market hasn’t quite bottomed out yet? The economic downturn of the last few years represents Andy Lane’s third recession in the tyre business. From this vantage point his view is that tyres tend to flow behind other products when it comes to market recovery. Now as in the past Lane believes the business is experiencing something of a “last in, last out” trend.

The current position, as a result of this, is said to be decidedly uncertain. Various sources, including respected third party marketing companies, have suggested that unit sales in the few months since April saw dropped “significantly” compared with last year. At the same time fuel purchasing is said to be down some way too (around 15 per cent at the last count). This is clearly indicative of a reduction in miles driven and is roughly equivalent to one in six cars being taken off the road – all of which should make those in the tyre trade sit up and take notice.

As a result there is now, says Lane, a significant risk that the UK market will experience a high single digit to low double digit drop in sales at the end of 2011. In a mature market like the UK everyone is used to fluctuations of one or two points in either direction every year, but it has been some time since the market witnessed changes of this magnitude outside of the truck OE sector recently.

Will the UK tyre market experience a double digit drop this year?

This trend is different to what is taking place in the Nordic and mainland European countries. Here sales are reported to have increased in the region of 10 per cent due to increased consumer confidence and stronger economies (Greece, Spain and Italy aside). When asked how Bridgestone’s UK results are holding up in this context, Lane reported that sales of its eponymous premium brand are holding up. However, talking about the market in general, he observed that there are signs that the mid-range is being squeezed by an expanding budget sector. That said, supply constraints are described as a bigger issue than demand. Globally demand is continuing to increase, even pan-European demand, but really the challenge is “getting the right tyres to the right customers at the right time.”

Wholesale changes?

Referring to the recent spate of sales and acquisitions in the UK tyre distribution sector, Andy Lane stated his view that “there is still potential for a new retail entrant into the market despite recent consolidation.” And in spite of the growth of online retailing and mobile fitting “high street outlets” will always remain.

Bridgestone considers Europe to be the most competitive market in the world. Likewise the UK market is amongst the most competitive (particularly considering the mature nature of the wholesale sector) in Europe. Therefore in light of the challenges presented by the economic situation, supply pressures and the changing face of the market, manufacturers, retailers and wholesalers have to become even more professional and have to think in terms of partnerships. Partnerships, says Lane, can focus on three fronts: the fact that the market is more uncertain than it has been in the past; that consumer messages are complex; and the reality that this is all set against a highly competitive context.

In addition there is increasing evidence that the UK market is experiencing a trend towards the separation of owner and executive. Whereas before many companies were founded, owned and run by the same people, for a variety of reasons this is now changing. Instead UK tyre companies are increasingly owned by shareholders, private equity and other investors thereby altering the priorities of those actually running the businesses. Historically, well-run family businesses have been cash-rich and happy to concentrate their businesses in areas of success. Relatively free from debt, these businesses have expanded at the rate and on the timing that they deemed appropriate. Firms backed by outside financing, on the other hand, often feel pressure to deliver rapid expansion and return on investment to their backers. They need to be able to deliver “added value”, which Lane points to as another reason for working in mutually beneficial partnerships within the market.

And finally, if indeed the full-year 2011 UK tyre market size does fall in the 5 to 10 per cent range that Andy Lane predicts compared with 2010, there will be an increased need for everyone in the market to maximise their margins on the tyres they do sell. As Lane says, in times such as these, partnerships within the market – not to mention internally streamlined operations – count.