Michelin case
Étude de cas : Michelin case. Recherche parmi 299 000+ dissertationsPar Giulia Terragnoli • 28 Octobre 2018 • Étude de cas • 1 469 Mots (6 Pages) • 613 Vues
Michelin is one of the world’s most known technological players in the tire industry and the leader company in Europe, the market where it operates. It produces quality, durability and highly energy efficient tires with reduced fuel consumption and has two principal markets to sell its products: the “Original Equipment Market” also known as OE for the automobile manufacturers and the “Replacement Market” known as RT for the individual car drivers.
This French company has been always working under family management and had retained its original status of a partnership limited by shares. It is known as a company that offer innovative and quality products and this is due to the investment they constantly do in Research and Development. It has two main world competitors that are Bridgestone which operates in Japan, and Goodyear that operates in the United states, and others such as Continental (Germany), Pirelli (Italy) or Sumitomo (Japan).
In this case we are going to study in detail the Michelin Energy range, which targeted the European low and mid-range vehicles market. It was started with the idea of a “Green tire”, characterized by improving a tire’s energy efficiency for avoiding the reduction in grip on dry and wet surfaces.
The objective of the analysis we are going to do is seeing which should be the priority of “Energy 4”, OE or RT.
1. To what extent do the OE and RT markets differ and which one is more important to Michelin?
| OE | RT |
Customer | Carmakers | Drivers: private individuals or companies with corporate fleets |
Reason to buy | New vehicle | Replacement |
Number of purchase for one vehicle | one | Every three years |
Bargaining power | Tire manufacturer were dependent on carmakers who and impose strong constraints on suppliers for ale specifications: product performance, quality, delivery time and price | They don’t have any power, they have to buy tires at price imposed by tire manufacturer |
Price | Lower than the price for the RT market, because the price pressure is particularly intense and for the major series aimed at carmakers on the OE market enabled manufacturing and logistic costs to be reduced | Upper than the price for the OE market because they haven’t bargaining power because of their lack of knowledge about tires. |
Development | controlled vehicle development, manufacturer and careakers were engaged in a collaborative development process | They aren’t involved in the development process |
Requirements | Each one had specific requirements based on the features with which they wished to impress upon their customer. | Safety, Price, quality tire brand, dealer’s advice, good value for money, replaced brand |
Choice | They have to choose the tire for | They have to choose tire among the different tire brand that the carmakers said |
Importance of tire | They want the minimum standard | They want the best |
Purchase | Directly to the tire manufacturer | Distribution channel |
Volume | 89 million | 245 million |
Manufacturers’ sales | 2.65 billion | 10 billion |
Average price per tire | 30 | 40 |
The most important market is the OE market even if the tire manufacturer sells tires with a price that is lower than the price imposed to the final customers. This because the loyalty rate when replacing original equipment tires was estimated at over 50%. In general, the distributions channels suggest to replace the tires with the same model of the same brand. The customer in general choose the same because the original equipment shall enjoy the fact that it is a model approved by the manufacturers and this is important for the majority of consumers. However, we think that they can’t only focus on the OE market; the carmakers ask Michelin a lower price of the tire that is under the real value of it. As a consequence, Michelin sells the tire in the RT market in a higher price to get benefit so this market gives them more revenues.
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