Franqois Michelin, the head of the company has put his son, Edouard Michelin, in control and started to make cutbacks in all sites including the US, and European manufacturing operations in Belgium, Britain, Germazty Italy, Netherlands, Spain and its home base in France.
Some of Michelin’s problems grew from the need to keep quality uniform during the expansion. French systems, that were transferred to US plants, were simply not understood by US employees. Eager for discipline, the company sometimes hired former military people in the US. To protect what it considered superior technology and process methods, it guarded secrets even from employees. Many decisions were centralised, which made it difficult to control costs. Big customers had trouble getting Michelin’s highly structured manufacturing plants to respond to unexpected orders.
On 21 February 1997 Michelin announced redundancies of 1445 jobs in France which brings the total decline in the tyre-maker’s workforce since 1990 to 25,000 or almost one job in five. Some 700 of those who lose their jobs will be given part-time work, or work at other Michelin factories. However, this will not save the reputation of the firm that once took pride in looking after its workers from cradle to grav. After seven difficult years, Michelin understands that it must turn itself from a smug and lumbering national champion into a general multinational firm.
Tyres are made up of over 200 components and worldwide about 700,000 tyres are produced per day. There are about 10,000 references to finished products. In addition to tyres, the company also makes some of the wheels and, of course, publishes the famous Michelin Guides, although these two segments only constitute about 2 percent of the business. Michelin has large research facilities, and road circuits for testing tyres in France and the USA. A new technology process, C3M, is a machine for making tyres that will also reduce both labour and inventory levels, two areas in which Michelin currently outspends its competitors. Michelin is very vertically integrated, making everything including the synthetic rubber, the steel bands in the tyres and even the machines which are used to assemble the tyres. It also owns some of the rubber plantation plants in Brazil and Nigeria. For tyres that are used in heavy service about half the rubber is natural.
Michelin serves every market segment, including agricultural machinery, two-wheeled vehicles, aeroplanes, heavy earth-moving equipment, trucks, cars, buses and all tourist vehicles. Tyre sales enter into two markets, first-mounted and replacements. First-mounted are on new vehicles and this constitutes about one third of the business. For this, the market clients are the automobile constructors (Renault, Ford, GM, Groupe PSA, etc.) Replacements, approximately two-thirds of the business, are sold through distributors, such as Carrefour, Intermarché and LeClerc in France as well as specialized auto stores. After-sales service is very important in tyre sales. This includes advice on technical information, communication, stock levels for future sale, and billing.
Required
1 In 1997, what would be an appropriate corporate strategy for the Michelin Group?
2 Based on the information given, what should be some of the- major strategic elements for the company?
3 Analyse the internal and external strengths and weakness of the firm.
4 What are some of the operating characteristics for Michelin that must support its strategy?
