Michelin (MICP) SWOT Analysis / TOWS Matrix / MBA Resources
Tires
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Michelin (France)
Based on various researches at Oak Spring University , Michelin is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, increasing energy prices, increasing inequality as vast percentage of new income is going to the top 1%, challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, wage bills are increasing, technology disruption,
increasing commodity prices, central banks are concerned over increasing inflation, 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 France
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 -
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.
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.
Organizational Resilience of Michelin
– The covid-19 pandemic has put organizational resilience at the centre of everthing Michelin does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
Highly skilled collaborators
– Michelin has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Tires industry. Secondly the value chain collaborators of Michelin have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Tires
– Michelin is one of the leading players in the Tires industry in France. Over the years it has not only transformed the business landscape in the Tires industry in France but also across the existing markets. The ability to lead change has enabled Michelin in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High switching costs
– The high switching costs that Michelin has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
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.
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.
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.
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.
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.
Weaknesses of Michelin | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Michelin are -
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.
Lack of clear differentiation of Michelin products
– To increase the profitability and margins on the products, Michelin needs to provide more differentiated products than what it is currently offering in the marketplace.
Compensation and incentives
– The revenue per employee of Michelin is just above the Tires industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High operating costs
– Compare to the competitors, Michelin has high operating costs in the Tires industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Michelin lucrative customers.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Michelin supply chain. Even after few cautionary changes, Michelin is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Michelin vulnerable to further global disruptions in South East Asia.
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.
Workers concerns about automation
– As automation is fast increasing in the Tires industry, Michelin needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Aligning sales with marketing
– From the outside it seems that Michelin needs to have more collaboration between its sales team and marketing team. Sales professionals in the Tires industry have deep experience in developing customer relationships. Marketing department at Michelin can leverage the sales team experience to cultivate customer relationships as Michelin is planning to shift buying processes online.
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.
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.
High bargaining power of channel partners in Tires industry
– because of the regulatory requirements in France, 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.
Michelin Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Michelin are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Michelin can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Michelin to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
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.
Manufacturing automation
– Michelin can use the latest technology developments to improve its manufacturing and designing process in Tires sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Tires industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Michelin can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Michelin can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Loyalty marketing
– Michelin has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
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.
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.
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.
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.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Michelin to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Michelin can use these opportunities to build new business models that can help the communities that Michelin operates in. Secondly it can use opportunities from government spending in Tires sector.
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.
Threats Michelin External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Michelin are -
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.
Stagnating economy with rate increase
– Michelin can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Tires industry.
Shortening product life cycle
– it is one of the major threat that Michelin is facing in Tires sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
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.
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.
Easy access to finance
– Easy access to finance in Tires industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Michelin can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Michelin will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
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.
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.
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.
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.
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.