Michelin (0OFM) SWOT Analysis / TOWS Matrix / MBA Resources
Tires
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Michelin (United Kingdom)
Based on various researches at Oak Spring University , Michelin is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%, geopolitical disruptions, increasing government debt because of Covid-19 spendings,
competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Michelin can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Michelin, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Michelin operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Michelin can be done for the following purposes –
1. Strategic planning of Michelin
2. Improving business portfolio management of Michelin
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Tires sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Michelin
Strengths of Michelin | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Michelin are -
Strong track record of project management in the Tires industry
– Michelin is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Michelin is one of the most innovative firm in Tires sector.
Cross disciplinary teams
– Horizontal connected teams at the Michelin are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Sustainable margins compare to other players in Tires industry
– Michelin has clearly differentiated products in the market place. This has enabled Michelin to fetch slight price premium compare to the competitors in the Tires industry. The sustainable margins have also helped Michelin to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy of Michelin comprises – understanding the underlying the factors in the Tires industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Learning organization
- Michelin is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Michelin is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Michelin emphasize – knowledge, initiative, and innovation.
Digital Transformation in Tires industry
- digital transformation varies from industry to industry. For Michelin digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Michelin has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Low bargaining power of suppliers
– Suppliers of Michelin in the Consumer Cyclical sector have low bargaining power. Michelin has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Michelin to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Michelin has one of the best training and development program in Consumer Cyclical industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Effective Research and Development (R&D)
– Michelin has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Michelin staying ahead in the Tires industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to recruit top talent
– Michelin is one of the leading players in the Tires industry in United Kingdom. It is in a position to attract the best talent available in United Kingdom. The firm has a robust talent identification program that helps in identifying the brightest.
Superior customer experience
– The customer experience strategy of Michelin in Tires industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of Michelin | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Michelin are -
Slow to strategic competitive environment developments
– As Michelin is one of the leading players in the Tires industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Tires industry in last five years.
Products dominated business model
– Even though Michelin has some of the most successful models in the Tires industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Michelin should strive to include more intangible value offerings along with its core products and services.
Increasing silos among functional specialists
– The organizational structure of Michelin is dominated by functional specialists. It is not different from other players in the Tires industry, but Michelin needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Michelin to focus more on services in the Tires industry rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of United Kingdom, Michelin needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ less understanding of Michelin strategy
– From the outside it seems that the employees of Michelin don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
High cash cycle compare to competitors
Michelin has a high cash cycle compare to other players in the Tires industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High dependence on Michelin ‘s star products
– The top 2 products and services of Michelin still accounts for major business revenue. This dependence on star products in Tires industry has resulted into insufficient focus on developing new products, even though Michelin has relatively successful track record of launching new products.
No frontier risks strategy
– From the 10K / annual statement of Michelin, it seems that company is thinking out the frontier risks that can impact Tires industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Need for greater diversity
– Michelin has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High bargaining power of channel partners in Tires industry
– because of the regulatory requirements in United Kingdom, Michelin is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Tires industry.
Slow decision making process
– As mentioned earlier in the report, Michelin has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Tires industry over the last five years. Michelin even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Michelin Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Michelin are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Michelin can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Developing new processes and practices
– Michelin can develop new processes and procedures in Tires industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Use of Bitcoin and other crypto currencies for transactions in Tires industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Michelin in the Tires industry. Now Michelin can target international markets with far fewer capital restrictions requirements than the existing system.
Building a culture of innovation
– managers at Michelin can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Tires industry.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Michelin can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Michelin has opened avenues for new revenue streams for the organization in Tires industry. This can help Michelin to build a more holistic ecosystem for Michelin products in the Tires industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Michelin in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Tires industry, and it will provide faster access to the consumers.
Leveraging digital technologies
– Michelin can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Michelin is facing challenges because of the dominance of functional experts in the organization. Michelin can utilize new technology in the field of Tires industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Using analytics as competitive advantage
– Michelin has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Tires sector. This continuous investment in analytics has enabled Michelin to build a competitive advantage using analytics. The analytics driven competitive advantage can help Michelin to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help Michelin to increase its market reach. Michelin will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Buying journey improvements
– Michelin can improve the customer journey of consumers in the Tires industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Learning at scale
– Online learning technologies has now opened space for Michelin to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Threats Michelin External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Michelin are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Michelin in Tires industry. The Tires industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Michelin can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Michelin prominent markets.
High dependence on third party suppliers
– Michelin high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Michelin needs to understand the core reasons impacting the Tires industry. This will help it in building a better workplace.
Increasing wage structure of Michelin
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Michelin.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Michelin may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Tires sector.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Michelin.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Michelin business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Michelin needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Tires industry regulations.
Technology acceleration in Forth Industrial Revolution
– Michelin has witnessed rapid integration of technology during Covid-19 in the Tires industry. As one of the leading players in the industry, Michelin needs to keep up with the evolution of technology in the Tires sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Environmental challenges
– Michelin needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Michelin can take advantage of this fund but it will also bring new competitors in the Tires industry.
Weighted SWOT Analysis of Michelin Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Michelin needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Michelin is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Michelin is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Michelin to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Michelin needs to make to build a sustainable competitive advantage.
