Michelin
GROUP 6
Erik Bronger
Dimitrios Koufos
Uday Mudholkar
Julien St Girons
Rachelle Topacio
Patrick Wiebusch
The History
• Founded by Michelin brothers André and Edouard
• Looking for new opportunities in 1889 when a cyclist came in
with a flat tire
– It was a Dunlop rubber tube glued solidly to the wheel
This made it very difficult to repair
• A few years later they convinced carmakers of the utility of
inflatable tires
Bibendum
• At the Lyon Universal Exhibition in 1894, the Michelin brothers
noticed a pile of tires on their stand.
• Edouard said to André: “Look, with arms, it would make a man”
• “Nunc est Bibendum” – Now it is time to drink! Michelin drinks the
obstacles!
The Company
• Family owned
• Special Status – Commandite Structure
• Very closed: “once almost as tough to enter as the no man’s land
between the two Koreas”
Major Products
Tires
Maps
Guides
BCG Matrix
Relative Market Share
High
Low
High
Industry Growth Rate
Maps &
Travel
Guides
STARS
QUESTION MARKS
Passenger
Car & Truck
Tires
Low
CASH COWS
DOGS
Product Range
Michelin manufactures 28,000 different tires,
from bicycle to space shuttle tires
Planes
Agricultural
Trucks
Cars
Bicycles
Space shuttle
Business Model
Number 1
Radial Tires
Innovation
Boss
Mistress
Research &
Development
C3M
Process
Engineering
Excellence
“Gerance”
Family
Business
Centralized
& Secret
Intelligent
Tires
5% of Sales
Competitive
Advantage
Strategic Planning
Welfare of Employees
“Young
Edouard”
Porter’s 5 Forces
Suppliers
Entrants
Rivalry
Buyers
Substitutes
Power of Suppliers
• Highly sensitive to fluctuation of raw materials
– Natural rubber
– Petroleum Derivatives
• Existence of cartels for natural rubber and petroleum
– INRO
– OPEC
• Presence of strong labor unions in European plants
Power of Buyers
• High buying power of car and truck makers in the OE market
• High buying power of independent dealers through group
purchasing
– Large retail chains i.e. Kwik-Fit, Speedy
– Small Dealers
Potential Entrants
• High capital requirements
• Need for economies of scale
• Limited access to distribution channels
• Governmental and legal barriers
Substitutes
• Growing refurbishment market
• No viable substitute for natural rubber
• Emergence of nanoparticle technology
Industry Rivalry
• Highly concentrated industry, with C4 over 60%
• Products not highly differentiated – leading to market consolidation
• 1999 industry-wide over capacity of 30%
• Diverse competitors in terms of national origin, cost strategy and
management style
Industry Paradox
Products are...
Commodity
Industry
Highly Technologically Sophisticated
Differentiate
Through:
• Branding
• High Quality
Customers
Branding Strategy
Brand Trio Strategy
“best”
“better”
“good”
•
•
MICHELIN
BF GOODRICH
UNIROYAL
Cover all segments with different brands
Offer a full range to dealers
High Quality
Michelin proves its products’ quality through supplying
top Formula 1 and Rally teams
SWOT Analysis
STRENGTHS
•
•
•
•
Highly reputable brand
Technical reputation
Innovativeness
Not dependent on
home market
WEAKNESSES
• Weak Asian Markets
• Subsidiary brands not
well-known
• Slow reaction time
• Slow implementation of
own innovations
• Product driven
company
• No MBAs!!
SWOT Analysis
OPPORTUNITIES
THREATS
• Only 20% - 25% of
customers are lowest
price buyers
• Sophisticated and
“intelligent” tires
• Asia is largest growing
segment
• Outsourcing of tire &
brake system
• Travel guides and maps
using the Internet
• Growth of private brands
• Increasing power of
independent dealers
• New processes by other
major players
• Goodyear becoming a low
cost producer
• Continental becoming a
system supplier
• Monopolistic prod’n of
natural rubber in Asia
Recommendations
Enter Asian Market
Joint Venture production agreement
with an Indian local Manufacture
NPV=17.5MUSD (IRR of 20%)
Strengthen brand
marketing strategy
Bibendum balloon (like
Richard Branson)?
NASA Space Shuttle
Supplier and Concorde
Supplier after crash
GROWTH
STRATEGY
Diversify
route planning, displaying
maps
traffic and weather
information
finding hotels and tourist
places…
Car navigation systems
Alliance research for
nanoparticle technology
BASF or Degussa Huls
Internet, Mobile Phones, PDAs
Recommendations
Review inventory policy
Optimization of entire Supply Chain
Upgrade Marketing & Finance
OPERATIONA
L STRATEGY
Faster reaction to
market
Organizational Changes
–Cost Cutting Methods
–Training and Incentive
Schemes for Employees
Attain more OE
accounts
•25% of its replacement
car tire sales were
generated by OE
•Profound impact on the
future replacement
market
Updates
2000
•
–
Michelin stepped up production in the US to meet demand after tire recall by
Bridgestone/Firestone
Michelin revamped its operations in Asia, including a new joint venture in
China with Shanghai Tyre & Rubber
The European Commission fined Michelin nearly $20 million, claiming the
company engaged in anticompetitive behaviour by abusing its dominant
position in Europe
Michelin launches travel portal : www.ViaMichelin.com
In 2003
–
–
–
•
2004
In 2002
–
•
2003
In 2001
–
•
2002
In 2000
–
•
2001
Positive free cash flow for the 3rd year running, even after 30% increase in
total investments
Michelin-Babolat partnership for cutting-edge tennis shoes
Michelin produces digital maps for GPS systems
In 2004
–
Michelin established a joint-venture with “Apollo Tyres”, India’s second largest
tire manufacturer
Questions &
Answers