Michelin Analysis Essay

Michelin financial analysis Michelin Company Profile Michelin is a tire producing follow created in 1863 by the Michelin brothers. Originally based in Clermont Ferrand, the company is now located in more than 170 countries and owns 84 production site all around the world. Even if their core business is the production of tires they diversify their activities in 1900 with the first Michelin map & guides and extend their knowledge for special sector with saucily type of tires such as plane tire for instance. Michelin is the min leader of tire foodstuff after Bridgestone.In 2010, they had a turnover of 17891 gazillions with an annex of 20% from 2009. Michelin is on the stock exchange food commercialise since 1951 which elbow room the company can increase their equity thanks to investors and at the very(prenominal) time stay secure and independent. In 2010, Michelin launches its biggest increase of equity introducing 27. 2 million of new sh bes for a total amount of 1. 2 bi llion euros helping to finance its development cost estimated at 1. 6 billion euros.They have 3 major products families * Production of tourism tyres * Production of hand truck tyres Others specialties (tyre for airplane, space shuttle, maps & guides, GPS) We can see that their core business is the tire market with more than 86% of their activities. Geographically, their major market is Europe with 49. 9% of their revenues (7. 7 billion euros) followed by North America with 34. 4% and other regions with 22. 7%.Michelins major market which is Europe has been declining by 7. 5% between 2005 and 2010 whereas North America gains 1. 7% and 5. 8% for the others regions as emerging countries. Through the years and to extend their activities widely distributed, Michelin has developed new rands. Michelin and BF Goodrichare the ii worldwide notices, established in many countries. Then, Michelin also developed regional brands such as Kleber, Uniroyal, Warrior with a strong presence one by one in Europe, North America and China. Added to these brands, Michelins created few distribution brands as Euromaster, TCI, respectively in Europe and North America. I. Market analysis Michelin is represented in two different markets * Market of new tire This market is especially dealing with simple machine manufacturer through partnership.For instance, Michelin has an old partnership with Citroen which is buying big quantities of tires in order to be set up directly on their production chain. In this market, Michelin is very dependent from the car manufacturers market and flitter according to the increase or decrease of new car sales. In 2010, this market has been increasing by 15% thanks firstly to the revival of the car fabrication in the Western countries, mostly helped by country states and secondly to the growth of exportation to emerging countries. * Market of replacementThis market is linked with retailers, as they buy and sell tires in stores to replace a defective one. This market is less dangerous for Michelin as it is almost constant and represents ? of tires production market. Concerning the replacement market, products are distributed via dealerships and replacement service centers. This is done either via Michelins own distribution brands (Euromaster in Europe and TCI in North America), but also using brand partnerships and franchises to be present in 27 countries all over the world. Equipment repartition per fraction Car segment Truck segment Original equipment 28. 10% 17. 40% switching equipment 71. 90% 82. 60% In 2010, the replacement market has increased by 9% in the segment of tourism and van tires in Europe with the increase of the demand for special winter tire collect to severe weather condition last winter. II. Competition Michelin operates in a very free-enterprise(a) market with several competitors, either from Europe or emerging countries. The four main producers are Bridgestone, Michelin, Goodyear and Continental which ar e counting for more than 50% in the worldwide market. However, new entrants such as Sumitomo, Yokohama, Hankook and coming from Asian countries have gained market shares rapidly.These emerging countries are developing a middle class with enough procure power to buy either Michelin tires through distribution centers or new cars equipped with Michelin tires. As we can see on the table above, the Asian market is now growing as fast as traditional market such as Europe and North America. The most increasing market is southeasterly America which increases its demand by greatly in 2010. Furthermore, these emerging countries will account for 50% of global automobile output in 2012, showing that Michelin has to be on these markets in order to preserve its 2nd largest producer worldwide rank.Asian market Michelin is already well implanted in the replacement segment with their distribution centers Tyre Plus leading the Asian market with more than 570 local centers in China and a total of 97 0 centers in 9 Asian countries. Michelin has also developed its own brand called Warrior to enter in the Asian market, especially the Chinese market in order to compete with Hankook. To be nigher to the demand, Michelin has already built 3 productions sites and will add a new one in 2011 in Shenyang.Indian market Most of the increase of Michelin on the Indian market was due to new partnership with truck manufacturer such as Tata, the biggest one in India. Michelin became an victor supplier of Tata for tires in the original equipment for truck segment in 2010 helping it to increase theirs sales and to gain brand recognition. Following this path, Michelin opened 6 new truck service centers the same year and plan the opening of a new production site in Chennai in 2011. South American marketMichelin has known a noteworthy progression in 2010 on Brazilian, Chilean, Colombian and Argentinean truck market with a global increase of 41% in the replacement market. Added to that, Michelin d id few partnerships with local truck manufacturers and benefit from the 47% increase of new trucks purchases last year. * Invest in Research & Development Michelin has to face two main issues innovation in the tire market and raw material raising cost. In both issues, R&D is a key solution. During the last years, Michelin has invested 500 million euros per year in R&D to find alternatives solution to rubber issue and keep innovating.Cost of raw material Globally, the tire industry uses nearly 70% of worlds natural rubber production. With more than 60% of production costs depending only on rubber, Michelin is facing difficulties when there is an volley of the price on the market. Since 2009, natural rubber price has increased by 60% and synthetical rubber, as it is made with petroleum, is increasing too. Like oil, which is also apply to make synthetic rubber, nonrenewable raw materials are becoming increasingly scarce and will endure expensive in the years ahead, notably due to strong demand from China and India.Optimizing raw material use is essential if these resources are to be conserved over the long term and if tires are to remain affordably priced. With R&D, Michelin can find alternatives materials to rubber and increase the production of synthetical rubber to replace the natural one on basic tires. Unfortunately, last performance tires will still require natural rubber, whose properties make it irreplaceable, especially for truck, farm equipment and earthmover tires. Innovation In order to compete on the global market, Michelin has to be on first line for innovation.Michelin has started to invest in R&D to create new types of tires, which will have less impact on fuel consumption and smaller eco-footprint. For instance, in 2010, Michelin has released a new truck tire called Michelin X Energy Saver Green. On average it permits the measure family car to reduce fuel consumption by 520 liters per year thanks to a better road holding. This new eco-friendly product matches the demand from trucks manufacturer, states upcoming laws slightly transport and final clients. As several countries are becoming more and more environmental friendly.Michelin has to anticipate the vote of laws to protect environment especially in Europe and North America, its two biggest markets in terms of sales. By increasing the production of eco-friendly tires, they would be able to face the new environmental requirement from government, beingness and even from their car manufacturers partners that are already investing in hybrid and less polluting cars and trucks. Tires companies that are not anticipating these changes would not survive in this highly competitive market.