Strategies of Michelin Fleet Solutions

Michelin in Bus and Truck industry and selling tires

They took this industry as their opportunity to growth as also they have lion’s share in European
transportation market. So they give their first emphasis on this field. That’s why they took
several strategy to adapt and get succeed with this problem. First of all they observed that the
transportation business started to change their business model to ensure door to door service.
They also look that many e-commerce and retail business started to buy their own fleets to
ensure customer satisfaction. But these business prefer longevity quality for their tires. And
Michelin have this quality. In fact, it is their main quality that differs them from other tires
business. They also think Asian market as their opportunity as well as threat. They analyze that
there are two types of usage or sales reason of tires have. First one is “original equipment” the
second one is “replacement”. If they want to keep customers for these two type of buying
practices they have to reach and motivate the distributors and end users. They took promotional
activities and ensure that distributors and end users of the tiers have a positive image about their
tires. That strategy lead to increase their market share in original equipment to 65%. Secondly,
they face another challenges because of transportation business who adopt multiple-source
strategy, buying different brands for their vehicles and sourcing them from different distribution
networks. For overcome this challenge, they take decision to constantly justify their price
premium along with quality service as they are the most expensive tire on the market. They again
try to implement their key selling point ‘longevity’ and try to make ensure that all the distributor
have their products. But the longevity will ensure only when it maintain perfectly. For this
reason, they design an ideal roadmap entitled’4-lives program’ to maximize tire performance
through optimal maintained performance Michelin’s tire cashing are specifically design to allow
both regrooving and retreading. Which will make tires life 2.5 times more than the average tire
lifecycle and no longer expensive on the market. They also think about their service performance
because whenever service jobs are poorly performed, transportation companies don’t get the
most of their tiers and won’t be want to pay premium. But mastering this process in real
operations in real however was quite difficult. Because how people will know the exact time of
repair is uncertain. They also facing a major challenges about environmental issues as tires
originate and consume a huge amount of CO2. They still couldn’t find out any solution for this
problem.

Michelin in Selling Kilometers

After getting a few success and invitation as service consultant in transport and tire business,
Michelin take this most critical and crucial decision about their business. They start to change
their business form from manufacturer to service consultancy. Despite being an industry leader,
they are continuously facing trouble. Top on that they take this challenging decision with a
confidence that they may end up making more money from tire-related services than from their
traditional business. They started with making a new business model as well as a new division.
The objective was to promote this new business model in Europe. They offered large European
fleets the complete management of their tire assets during a three to five year period. A customer
could decide to contact only a part of its fleet with MFS, thus granting Michelin exclusivity for
the equipment of these vehicles. To expand new promising model throughout Europe, Michelin
added dedicated sales teams to the existing traditional product sales force and for geographical
expansion they decided to a new approach for service operation. Instead of managing fleets with
its own employees the transportation companies they took the strategy of collaborating with
service provide provider networks to deliver the service to customer. But that strategy and
business model has fall distractedly. Within three years, they o signed 50 contacts in 10 different
countries, generating 70 million euros in annual revenue which didn’t meet their expectation and
was less than their tire business. Because they fall to make the customer understand their
business policy and the value of their service. They also fail to give proper training and
knowledge to their sales team and other employees as it was their first time to switch their job
aspect.
To solve this problem ISC, an i9nternational strategy consultancy firm was assigned to
investigate the reason of poor performance of MRS in 2002. The consultancy firm identified
four important marketing issue which they strategical mistook to plan and implement. The four
factors are customer segmentation, selling, contracting, and managing the relationships with third
parties. ISC design some strategy and solution MFS in this factors.
Clint segmentation: ISC encourage MFS to capture more value from customers by implanting a
needs-based segmentation scheme. They also addressed that willingness to pay greatly varied
according to the segments.
Sales Force Support: The consultancy firm conducted a massive training campaign, providing
the sales force with new tools such as consisting contracting process and a new client focused
logic, shifting away from a historically strong product orientation.
Contracting Process: As the consultancy firm had found different version of contact contain
different content, they advised MFS to streamline its contract structure around a small set of
simple and compressive standards, with free estimates which could be complemented by
additional option. Also able to the remove the confusion.
Turn distributors into close service providers: the firm also recommend MFS fostering, strong
relationship with distributors to motivate them to cooperate with MFS as true service providers.
As they were afraid and against Michelin entering in service domain and losing their clients. So,
MFS should make clear about their business strategy to their stakeholder at first. And also make
strong relation with them.