1. Michelin GROUP 6 Erik Bronger Dimitrios Koufos Uday Mudholkar
Julien St Girons
Rachelle Topacio
Patrick Wiebusch

2. 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

3. 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!

4. 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”

5. Major Products
Maps
Tires
Guides

6. Passenger Car & Truck Tires
BCG Matrix
Relative Market Share
High
Low
High
Maps & Travel Guides
STARS
QUESTION MARKS
Industry Growth Rate
Passenger Car & Truck Tires
Low
CASH COWS
DOGS

7. Product Range
Michelin manufactures 28,000 different tires, from bicycle to space shuttle tires
Planes
Space shuttle
Agricultural
Trucks
Cars
Bicycles

8. Research & Development Engineering Excellence
Business Model
Number 1
Radial Tires
Boss Mistress
Innovation
Intelligent Tires
Research & Development
C3M Process
Engineering Excellence
5% of Sales
“Gerance”
Competitive Advantage
“Young Edouard”
Family Business
Strategic Planning
Welfare of Employees
Centralized & Secret

9. Porter’s 5 Forces

10. 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

11. 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

12. Potential Entrants High capital requirements
Need for economies of scale
Limited access to distribution channels
Governmental and legal barriers

13. Substitutes Growing refurbishment market
No viable substitute for natural rubber
Emergence of nanoparticle technology

14. 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

15. Highly Technologically Sophisticated
Industry Paradox
Products are...
Commodity
Customers
Highly Technologically Sophisticated
Industry
Differentiate
Through:
Branding
High Quality

16. Branding Strategy Brand Trio Strategy
MICHELIN
BF GOODRICH
UNIROYAL
“best”
“better”
“good”
Cover all segments with different brands
Offer a full range to dealers

17. High Quality
Michelin proves its products’ quality through supplying top Formula 1 and Rally teams

18. SWOT Analysis STRENGTHS WEAKNESSES Highly reputable brand
Technical reputation
Innovativeness
Not dependent on home market
Weak Asian Markets
Subsidiary brands not well-known
Slow reaction time
Slow implementation of own innovations
Product driven company
No MBAs!!

19. 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

20. Recommendations GROWTH STRATEGY 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
Diversify
route planning, displaying maps
traffic and weather information
finding hotels and tourist places…
GROWTH STRATEGY
Car navigation systems
Internet, Mobile Phones, PDAs
Alliance research for nanoparticle technology BASF or Degussa Huls

21. Recommendations OPERATIONAL STRATEGY Review inventory policy
Optimization of entire Supply Chain
Upgrade Marketing & Finance
OPERATIONAL 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

22. Updates
2000
2001
2002
2003
2004
In 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
In 2001
The European Commission fined Michelin nearly $20 million, claiming the company engaged in anticompetitive behaviour by abusing its dominant position in Europe
In 2002
Michelin launches travel portal :
In 2003
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

23. Questions &
Answers