First let me introduce Michelin company. Michelin was founded May 28, 1889 in Clermont-ferrand in France by Edouard and André Michelin. The two brother, ran a rubber factory. One day, a cyclist whose pneumatic tire needed repair turned up at the factory. The tire was glued to the rim, and it took over three hours to remove and repair the tire, which then needed to be left overnight to dry. The next day, Edouard Michelin took the repaired bicycle into the factory yard to test. After only a few hundred meters, the tire failed. Despite the setback, Edouard was enthusiastic about the pneumatic tire, and he and his brother worked on creating their own version, one which did not need to be glued to the rim. Today, Michelin is a World No. 1 in tire with 19% of the market, the Michelin Group, vehicle manufacturers, is a global company with headquarters in Clermont-Ferrand, which employs nearly 111,000 people.
Michelin is present throughout the world as shown in the following map on the positioning of Michelin subsidiaries. Particularly in western Europe and North America
On May 26, 2006, Michel Rollier succeeded Édouard Michelin (the second), as chief executive officer of the Michelin tire company. Rollier is a distant descendant of Michelin founder Édouard Michelin. Announcing his retirement "in the next 18 months", he officially passes the baton to Jean-Dominique Senard, currently co-managing partner of the group. They are assisted by an Executive Council, comprised of eleven executives responsible for Product Lines, Corporate Services, Performance Divisions and growth regions.
In the early 20th century, the leadership style was paternalistic => creation for workers of: nurseries, clinics, schools, sportive associations…) Today, this paternalistic side has given way to a more participatory style => strong corporate culture, social cohesion, motivation, respect for people.
To better understand its market, and meet its customers’ needs, The Michelin Group is organized into product lines, each one dedicated to an area of activity with its own marketing, production and development resources. In this organization we can see: 8 products lines: in which we have truck product line, specialty product line (aircraft, agriculture…), other activities (Michelin travel partner, Michelin lifestyle limited), each with its own marketing development, production and sales resources5 Technology centers in charge of research, development and industrialization (5 bases located in Europe, Asia, North America)8 geographical zones ensure that the group service orientations are deployed consistently in the different regions, provide the means necessary to support the product lines and accompany the geographical development of group activities (Japan/Korea, Europe, Africa/India, N and S America…)13 departmentsgroups in charge of support with 4 performance departments (public affair, security, information system, personnel, corporate development, finance…)2 integrate Distribution and service network: euro master and tire centers Incorporated.
The main Sector of activity for Michelin is Mobility. Michelin develops many products related to this sector: tire, Maps guides, travel products, Global positioning systems
Michelin performed a segmentation of strategic business units. We can identify a specific business, tire. We notice that the art of tires can be divided into 3 strategic business units or products lines
To conclude with this introduction part we can say that Michelin specializing on a trade (mobility) developed several strategic areas while remaining 92% on the tire. Then, let’s move on to the second part of my presentation
The development of the automotive industry after the war supported expansion of the tire industry, which has increased its capital investment, expanded its production lines and grown steadily since the 1970's.Technological innovation of the radial tire has allowed the French Michelin to improve the quality of its tires and to expand abroad by imposing a standard.
Let’s have a deep view on type of tire production rates. We can see that Michelin production of tire is 51% on Private vehicle, 32% trucks and just 3 and 1% respectively for agriculture vehicles and airplane tires.
This is a view on tire fabrication process. There are 4 steps to make a tire:Mixture, dovetailing, tire mould curing and tread pose
In this tire fabrication process, raw materials are very important particularly rubber, natural or synthetic one. At the bottom of this slide you can see the percentage of natural rubber used for different type of vehicle. The writing is in French but roughly, aircraft tires contain 100% of rubber against 95% for tractors, 50% for trucks and only 5% for cars
I made different diagnostic on Michelin and its strategies. First let’s see Michelin internal diagnosis: financial resources and its forces and weaknesses
This is a picture of the evolution of various items of Michelin. We found that Michelin had a setback during the 2009 financial crisis. Notably in 2009, Michelin has released 412 million € to pay for restructuring costs (quits and closing the Ota factory in Japan); In 2010 Michelin had a record turnover and a less debt ratio. The Net debt is 1 629 Million €. Despite a significant level of debt, the business situation is quite good because of good incomes.
These are the forces and weaknesses of Michelin -Michelin has a good knowhow: In the tire industry, the radial tire has provided a technological breakthrough, giving Michelin the opportunity to challenge the supremacy of Goodyear and Firestone.- Good Human values; Michelin is moving towards growth and development of people in the exercise of their responsibilities is to say towards the development of diversity and human wealth of the company.- A Strong presence: Michelin can build on its strong local presence to meet the specific market- A diverse Portfolio of activities: With a portfolio of 14 brands, Michelin covers all market segments of the tire and can meet the needs of users and wishes to stress the most diverse.- Patents: In 1891, Michelin develops the detachable tire for bicycles, patent was filed on June 18 In 1946, Michelin patents the radial tire, released in 1949 under the name Michelin X. But Michelin has also weaknesses- outsourcing management; Relocations made in rural areas like Northern Ireland, due to the low cost of labor now have less reason to be, the economic benefits tend to disappear (onset of labor, regulation of conditions work ....)- Its High spending; we can notice a big expansion of firms Michelin and therefore deduce high spending as much as "international charges" and investment (research and development).- Michelin is committed to a general process of transfer of activities in countries where labor costs are lower and where employment conditions are less stringent, they are now products with high added value which are outsourced to countries with low labor costs and then be "repatriated" to the country, low production costs for moving the logistical barriers. If the management of this concept is not properly prepared by Michelin then it can play against him.
We can now have a view on External Diagnosis: within the Micro and Macro environments
Before move on this diagnosis it is important to have a brief view on what’s happened in the past to make this current tire market
The competitive landscape of the tire is highly concentrated since there are three bigger players and seven mid-sized players. Michelin, Bridgestone and Goodyear have 55% of sales of tires and the eight following manufacturers in total 26%. The remaining 19% is provided by local or niche. In 2006, turnover put the first Japanese Bridgestone (19.1 billion), followed closely by Michelin (16.4 billion) and the American Goodyear (15.4 billion euros ). In addition, each of these leaders is the market leader in its geographical historical area: Bridgestone is number one in Asia, Michelin and Goodyear is needed in Europe in the Americas. Continental (German), Pirelli (Italy), Sumitomo (Japan), Yokohama (Japan), Hankook (Korean) and Cooper (American) hold between 2% and 6% market share. These three major competitors face the same opportunities. Their activity is mainly focused on tires development, production, distribution and marketing. They are involved in growth strategies and cost control by increasing productivity, restructuring and strategic acquisitions, we are witnessing a concentration phenomenon. They have each their market area in which they have acquired a long dominant presence. These markets are oligopolistic and segmented: firms can charge different prices in different markets. Gains in market share are their primary objective, but in a very competitive mature industry, the results depend largely on the health of the automotive market, rapid growth can be achieved by successful acquisitions, strategic alliances or joint ventures.
I want tointroduceyou to two of the main Michelin’scompetitors.First Bridgestone: Vying with Michelin to be the world's largest tire maker, Bridgestone makes tires for a variety of vehicle types. In addition to passenger and commercial vehicle tires, the company makes tires for construction and mining vehicles, agricultural machinery, and aircraft. It also manufactures a range of non-tire products, including consumer products like golf balls and bicycles, polyurethane foam for industrial applications, and adhesive film for the solar industry. Bridgestone operates some 180 manufacturing plants in 25 countries and sells its products worldwide
The second one isGoodYear:Goodyear Tire & Rubber Co. is engaged in developing, manufacturing, distributing and selling tires and related products and services worldwide. It manufactures and markets numerous lines of rubber tires for automobiles, trucks, buses, aircraft, motorcycles, farm implements, earthmoving and mining equipment, industrial equipment and various other applications. The company operates its business through four operating segments representing its regional tire businesses: North American Tire; Europe, Middle East and Africa (EMEA) Tire; Latin American Tire; and Asia Pacific Tire. Each of the four regional business segments is involved in the development, manufacture, distribution and sale of tires.
Thenlet’s 5 competition forces model: the Asian market becomes more and more important and new players emerge in size: it is the case of Shin Cheng (Taiwan), Triangle and GITI Tire (China) corporations. These three regional companies hold, for the first time in 2006, between 1% and 1.2% market share each. These newcomers, mostly positioned on the low end, encourage manufacturers to concentrate on historical quality products, more innovative and more expensive. Nowadays, The tire manufacturers must integrate the regulatory and societal pressure for ecology. Michelin have a bargaining power for both Customers and Suppliers
Michelin has several competitive advantagesAdvantage related to the market: => Important and growing market in the long term Advantage related to the product: => Product innovation holder (eg Michelin Active Wheel) Advantage related to technology: => Constant innovation We can see the definition of these advantages in this scheme on customers brands view. For customers, Michelin is largely viewed as a well branded company
Also the primary mission of the group is to contribute to the progress of goods and people's mobility, facilitating freedom, security, efficiency and also travel pleasure. To do so, Michelin relies on its ability to innovate, its products and services quality, as well as the strength of its other brands. Warrior in China as Uniroyal in America and Kleber in Europe allow Michelin to occupy the mid-range segment. RIKEN his well known in his native Japan, also used as distributor labels. Warrior will experience the same double use.
Michelin is seeking to work with companies committed to achieving progress both in economic and technical areas and in terms of social and environmental issues. Suppliers are selected on the basis of an analysis of their global performance, adapted to the nature and terms of the contract in question, in the following areas:Performance of products or services offered, and of the Company and Management and Corporate ValuesAlso, Michelin implemented a CPFR initiative with another company, SEARS in 2001 with the goal to improve order fill rate and reduce inventory. This practice offers to Michelin opportunities to transform and radically improve its supply chain performance.
Michelin wantto satisfy and anticipate its customers' requirements in all areas of quality. Also, because of its strong bargaining power of customers, Michelin can use pressure tactics and have strong advantagesin price decisions
Michelin can count on its two distribution networks.First euro master in Europe which is a 100% Michelin subsidiary constituted from the progressive acquisition of dealer networks tire specialists. Euromaster distributes tire and equipmentsSecond TCI (Tire Centers Inc.) in North America is specialize in commercial truck tire sales and service solutions. The manufacture of custom-mold and pre-mold truck retreads to the quality and process standards established by Michelin Retread Technologies and the distribution of passenger and light truck tires to independent tire retailers.
I chose to focus on Legal and economic environment which are more interesting in Michelin Macro environment legal environmentMichelin Legal environment provides good opportunities for Michelin because of three items: Regulation that requires manufacturers to lower levels of CO2 emissions from new vehicles, the disappearance of customs banners, and the lower transportation costs and the unification of markets
On the other side the Economic environment is a threat for Michelin. In fact, because of the economic crisis context, Michelin loses its commands and is subject to changes in exchange rates and in the rising prices of raw materials such as rubber. Therefore we can see a mass redundancy in the group and leaders take hasty measures in relocation
I identificate 4 strategies in Michelin Group
First Michelin steps up the specialization strategy to focus on growing market segments and value added. By focusing on the segment of civil engineering specialty tires, Michelin has good prospects offered by a still weak radialization of handling markets and of public works as well as large business customers.
Michelin steps up a diversification strategy to meet the differentiated needs of consumers and distributors, it also has a portfolio of multi-brand quality as we saw previously. To ensure some stability in a difficult market, Michelin opts for a matrix structure organized around product lines. Michelin Lifestyle is responsible for spin-off products development which fall into three broad categories:- Practical products, auto-related and cycle,- Equipment for sport, leisure and work,- Personal accessories, gifts and culture of Michelin.
Michelin strategic objective on humanresourcesis to search people self-fulfillment in exercising their responsibilities, develop the diversity and richness of an human enterprise.
What is Michelin’s Key success factors?Innovation: 4000 people are dedicated to research and development with the largest R & D budget of the tire sector. Based on its technological edge, Michelin gives to sustainable mobility the center place of its growth strategy.Quality Differentiation: Michelin differentiates from its competitors by commercial and technological meansCommercial means:Environmental management, less CO2 emission; company on quality, Michelin Manufacturing way;Anticipation of the expectations of customers; specialization in tires; international implementationtechnological means: Innovation, service, security;Michelin sustainable technology for heavy trucks;3.4% of the turnover share in research, development and industrialization;6,000 people employed in the service of research and development.we can differentiate the presence of competitors in terms of two dimensions, from the key success factors: innovation and positioning line that is the quality differentiation. Michelin products are in the top of innovation and quality. Goodyear and Bridgestone have recepectively less quality and less innovation.
I madetworecommendations for the Group.
Presentation business michelin
a better way forward Ange Rolyne
1 – Company Presentation1.1. Main Elements1.2. Leaders, Organization and Management style1.3. MICHELIN Trade Guild1.4. Strategic Business Units2 – A strategic business: tires2.1. Tire Production Rates2.2.Production Management2.3. Internal Diagnosis2.4. External Diagnosis2.5. Strategic Objectives2.6. Employee motivation and skills management
1.1. Main Elements• Founded in 1889 in Clermont-Ferrand• Shareholders: The Michelin family and the public• limited liability company• Industrial and Tertiary activities: => tire production => travel assistance services • Implanted in 18 countries => 70 production Facilities
1.2. Leaders, Organization and management styleMichel Rollier, Managing Chairman and Managing GeneralPartner, And Jean-Dominique Senard, Managing General Partner. They are assisted by an Executive Council, comprised of eleven executives responsible for Product Lines, Corporate Services, Performance Divisions and growth regions.
1.2. Leaders, Organization and management style• In the early 20th century, the leadership style was paternalistic => creation for workers of: nurseries, clinics, schools, sportives associations…)• Today, this paternalistic side has given way to a more participatory style => strong corporate culture, social cohesion, motivation, respect for people.
1.2. Leaders, Organization and management styleTo better understand its market, and meet itscustomers needs, The Michelin Group is organizedinto product lines, each one dedicated to an areaof activity with its own marketing, production anddevelopment resources.
1.3. MICHELIN Trade Michelin main sector of activity is mobility • Tires • Travel products selling• Maps (Guides) • Global Positioning System
1.4. Strategic Business Units Tourism andTires (92%) Navigation Tourer Tires MapsHeavy Trucks S.B.U Guides Other Tire Digital products Art of Living Sport Equipments, gifts…
2.2. Internal Diagnosis financial resources - Capital : 289 994 844 € 2006 2007 2008 2009 2010Turnover 16 384 M 16 867 M 16 408 M 14 807 M 17.89 BOperating 1 118 M 1 319 M 843M 450 M 1 695 MincomeNet income 573 M 772 M 357 M 104 M 1 049 MOperating 6.82% 7.82% 5.14% 3,04% 9.47%MarginDebt Ratio 88.35 % 69.81% 85.90% 55.10% 20.66% Net debt 1 629 Million € Despite a significant level of debt, the business situation is quite good because of good incomes.
2.2. Internal Diagnosis •Knowhow •patents •a strong presence •A portfolio of activities •human values•outsourcing management •the deindustrialization Management of Michelin in France •high spending
Brief History The development of the automotive industry after the war supported the expansion of the tire industry, which has increased its capital investment, expanded its production lines and grown steadily since the 1970s.Technological innovation of the radial tire has allowed the French to improve the quality Michelin tires and to expand abroad by imposing a standard.In the early 70s, the competition between tire manufacturers has increased in theUnited States and Europe, while in Japan, automakers continued to equip theirvehicles with Japanese tires, knowing that they were inferior in quality the world.This support gave the time and resources back to Bridgestone for the learningcurve, improve and achieve international levels of competition. The tire industry has in the 80s and examples of advanced Japanese firms on U.S. and European markets with the acquisition of Western firms known. Western firms face a formidable challenge, while Japanese firms demonstrate their ability to manage foreign branches. Then came a downturn in demand for automobiles and as a consequence the demand for tires slows. In a global market affected by the recession, tire companies can rely on replacement demand and emerging markets, growth through takeovers, the absorption of firms or strategic alliances.
Microenvironment Analysis Concurrence Their activity is mainly focused on tires development, production, distribution and marketing.These markets areoligopolistic and OTHER GOODYEAR HANKOOK 17.4% SUMITOMO 1.8% 18.4%segmented: firms can TOYO 3.7% 1.9%charge different prices indifferent markets. KUMBO 2% COOPER 2.4% YOKOHAMA MICHELIN 3.3% CONTINENTAL 16.4 % PIRELLI BRIDGESTONE 6.8% 19.1% 3.8%
Microenvironment Analysis ConcurrenceKey People Headquarters Japan• Chairman, President, and CEO: Established March 1, 1931 Shoshi Arakawa Paid-In capital $ 26 B• President: Kazuhisa Saikai Employees (consolidated) 139,822• VP Finance, CFO, CIO, and Director Internal Control Division: Koki Takahashi Vying with Michelin to be the worlds largest tire maker, Bridgestone makes tires for a variety of vehicle types. In addition to passenger and commercial vehicle tires, the company makes tires for construction and mining vehicles, agricultural machinery, and aircraft. It also manufactures a range of non-tire products, including consumer products like golf balls and bicycles, polyurethane foam for industrial applications, and adhesive film for the solar industry. Bridgestone operates some 180 manufacturing plants in 25 countries and sells its products worldwide
Microenvironment Analysis Concurrence Key People Headquarters US • Chairman, President and CEO: Established 1898 Rich Kramer Paid-In capital $18.832 B Employees (consolidated) 72 000 • Strategic Business Unit LeadershipGoodyear Tire & Rubber Co. is engaged in developing, manufacturing, distributing and sellingtires and related products and services worldwide. It manufactures and markets numerous linesof rubber tires for automobiles, trucks, buses, aircraft, motorcycles, farmimplements, earthmoving and mining equipment, industrial equipment and various otherapplications. The company operates its business through four operating segments representingits regional tire businesses: North American Tire; Europe, Middle East and Africa (EMEA) Tire;Latin American Tire; and Asia Pacific Tire. Each of the four regional business segments is involvedin the development, manufacture, distribution and sale of tires.
Porters 5 competition forces model Government Role Potential entrants In terms of Competitors arrival in Asian regulations and market security standards, developm ent policySuppliers Sector competitors Customers and distributorsNon-existentthreat, Michelin has Bargaining Powerits own supplynetworks Substitutes non-existent threat
Microenvironment Analysis Competitive advantage of Michelin•Advantage related to the market: => Important and growing marketin the long term• Advantage related to the product: => Product innovation holder (egMichelin Active Wheel)• Advantage related to technology: => constant innovation
Microenvironment Analysis Competitive advantage of Michelin• The primary mission of the group is to contribute to the progress of goods and peoples mobility, facilitating freedom, security, efficiency and also travel pleasure. • Warrior in China as Uniroyal in• To do so, Michelin relies on its America and Kleber in Europe allow ability to innovate, its products Michelin to occupy the mid-range and services quality, as well as segment. the strength of its other brands. • RIKEN Known in his native Japan, also used as distributor labels. Warrior will experience the same double use.
"Michelin and its suppliers are inseparable Luc Minguet, Chief Purchasing OfficerMicroenvironment Analysis supply and demand analysis: Suppliers"MICHELIN AND ITS SUPPLIERS ARE INSEPARABLELuc Minguet, Chief Purchasing Officer Practical application Michelin’s values Purchasing code Suppliers Regular exchanges of information Collaborative planning, forecasting, and replenishment CPFR to improve supply chain performance
Microenvironment Analysis supply and demand analysis: Customers strong bargaining power of customers => due to its leading position (leverage over distributors)
Microenvironment Analysis supply and demand analysis: Distribution Two distribution networks complement the operational • Euromaster in Europe • TCI (Tire Centers Inc.). In 100% Michelin subsidiary North America Constitution from the progressive is specialize in commercial truck tire acquisition of dealer networks tire sales and service solutions. The specialists manufacture of custom-mold and Distributes Tires and equipments pre-mold truck retreads to the quality and process standards established by Michelin Retread Technologies, and the distribution of passenger and light truck tires to independent tire retailers.
Macro-environment Analysis legal environmentRegulation that requires manufacturers to lower levelsof CO2 emissions from new vehicles disappearance of customs banners, lowertransportation costs and the unification of markets
Macro-environment Analysis Economic Environment lessening Economic crisis context commands Evolution in increasing raw materials cost exchange rates unemployment (rubber, energy, logistics)Average Exchange Rubber prices: rate: -5000 Jobs Removal $ 1,580 per tonne in 2006 1.24 In 2004 - relocation Asia $ 3,200 per tonne in 2010 1.26 In 2006 1.33 in 2010
Specialization strategy • An attempt of diversification in the early 20th century… => Construction of aircraft, michelines, trailers, of landeaux…etc…Mc Kinsey matrixStar Question Markscivil engineering Tire specialist •A refocusing on tireagricultural tire Truck tire in the 1930s2 wheels tiresCash Cows DogsPassenger and light truck tires Aircraft Tire(winter tires)
Diversification strategy In addition to maps and guides as well as services and electronic travel assistance, the Group is developing spin-off product . Michelin LifeStyle is responsible for developing the new products which fall into three broad categories: - Practical products, auto-related and cycle, - Equipment for sport, leisure and work, - Personal accessories, gifts and culture of Michelin.
Internationalization strategy Since 1906, the Michelin Group internationalize to meet market expectations of the tire. Investments in growth areas: Central and Eastern Europe, South America (Mexico) and Asia (China) Objective: To meet the demand of emerging countries- 450 million € of investment in 2008- Tires produced locally- Increasing capacity of production(Plant construction, purchase of machines ...)production capacity of Michelin in emerging countries are expectedto increase by 2012
Communication strategyMichelin uses competition and sport partnersto ensure global visibility and recognition tothe group Michelin has a policy through a marketing campaign for multimedia communication and placing at the center of its European advertising Bibendum.Michelin has developed a travelingexhibition isNunc Bibendumtracing themajor developments of the charactergraphics from the Michelin Man. Michelin incorporates the environmental objective of sustainable mobility with adhering to a policy for sustainable development.
2.6. Employee motivation and skills managementStrategic objective:Search people self- Cooperation, responsibility and initiativefulfillment in exercising their promotedresponsibilities, develop thediversity and richness of an Important training planhuman enterprise Periodic development assessments =>speed mobility, internal promotion (managers and team leaders) Executive compensation includes a variable related to group performance and individual objectives Plan for executives stockoptions + ESOP (69% of employees)
The key success factors •innovation MICHELIN + Goodyear •Quality Differentiation innovation Bridgestone Pirelli Continentalwe can differentiate the presence ofcompetitors in terms of twodimensions, from the key success factors: - Yokohama Sumitomoinnovation and positioning line that is thequality differentiation. - positioning line +
RecommendationsBy applying a strategy of specialization based segments of wintertires, high performance tire and tire leisure, Michelin couldincrease sales.In the event that Michelin would like to conquer the market ofmanufacturer original equipment, to get that new vehicles be shodwith tires of the brand, it would be interesting to focus onredemptions of auto manufacturers. Michelin could well benefitfrom the synergies between two businesses.