Question

Describe Michelin company. Use Porter's Five Forces to evaluate Michelin's strategy to gain a competitive advantage (600 words)

No plagiarism please.

Note: Michelin is a French multinational tyre manufacturer based in Clermont-Ferrand, France.

Answer 1

MICHELIN

Michelin is a French multinational manufacturer of tyres and other rubber products. It is based in Clermont-Ferrand, France. Founded in the year 1889. It got patent for removable pneumatic tyres. The company has made many innovations in tyres like radial tyres. Michelin designed a tyre which runs even if punctured.

Porter's Five Forces model can be used to evaluate Michelin's strategy to gain a competitive advantage.

The Five forces as per Porter are:

1. Threat of new entrants : In tyre industry, achieving economies of scale is difficult. Because the cost of production is higher. Apart from this, huge capital requirements, need of strict licensing and legal requirements, essential for product differentiation etc led to less no of new entrants to the industry. Michelin has economies of scale and product differentiation to tackle the problem.
2. Threat of substitute products : Michelin faced this issue by focusing on product quality and product differentiation. When the customers feel that the products are unique, they will always prefer Michelin's products.
3. Buyer's bargaining power : Michelin tackled this issue also by focusing on product quality and product differentiation. Thus it could make a large customer base. It can reduce the price by taking the advantage of large scale economies of scale.
4. Supplier's bargaining power : Bargaining power of suppliers is the another factor. Michelin always preferred to buy raw materials at lower costs. If not, it will switch to another supplier. Since Michelin always keeps healthy relationship with suppliers, it has an efficient supply chain.
5. Rivalry in industry : Michelin always tries to win the hearts of the customers in the industry, especially new customers'. By conducting market research, the demand and supply can be analysed. And if necessary, it will focus on product differentiation.