Strategy is the method through which an organization or an individual will conduct his actions in order to achieve the desired results. Organizations employ unique strategies in order to beat their competitor and also in order to gain competitive advantage. In most cases companies normally keep their strategies as a secret that is known to a few individuals who are responsible for implementing the strategy (Burke 2011, p.45). Strategies are normally kept as a secret because if an organization’s strategy is known by a competitor, the competitor may commence employing measures to counter the effectiveness of the strategy thus the business may not achieve the desired competitive advantage. It is important to highlight that during the implementation of a strategy the staff of the organisation is normally briefed on the implementation process. This would facilitate effective and efficient implementation of the strategies in the organization. The implementation process of a strategy is as vital as the process of formulation of a strategy.
Strategies can be made at various levels of a commercial entity. A corporate strategy is concerned with the efficiency and effectiveness of a commercial entity as a whole. This strategy takes care of the various stakeholders that are involved in the commercial activities of the business. A corporate strategy usually forms the basis of strategic decision making in the entire organization (Yannopoulos 2011, p.1). The corporate strategy is normally stated on the mission statement of an organization. It puts into consideration all the aspects that affect the organization as a whole. The corporate strategy is comprised of the long – term corporate strategy and the short – term corporate strategy. The short – term corporate strategy is concerned with the factors that affect the entire business for a period less or equivalent to one year. On the other hand, the long – term corporate strategy is concerned with the factors that affect the entire business for a long period exceeding one year. The corporate strategy is normally formulated by the board of directors in consultation with the various stakeholders of the business.
Sales and Marketing
Michelin is a Tyre manufacturing company that was founded in the year 1888 in France. It is among the major players in the tyre manufacturing industry, and it has operations in different countries globally. It is a company that has managed to develop its brand and reputation, and as a result of this it has been able to introduce various products and related brands into the market successfully (Harp 2003, p.274). Examples of brands that the company owns include the following: Uniroyal, BF Goodrich, Tiger, Kleber, Kormoran and Riken.
Over the years, Michelin has been able to display a lot of top notch innovation with regard to Tyre manufacturing business. The company has also concentrated it resources in the construction of production and distribution facilities in the countries which it operates in. It also invests heavily in the advertisement and marketing of its products around the world. This is in order to create, brand recognition, brand awareness and to enhance brand loyalty. The Tyre manufacturer has also put significant efforts to develop products for special purpose use. It has developed high quality special Tyres for motor vehicles that take part in formula one racing challenge (Harp 2003, p.274). As a result, the organization has been able to build a reputation for itself with regard to production of Tyres for high performance vehicles. This has enabled it to attract millions of customers around the world thus increasing its market share and consequently improving the levels of profitability for the organisation. The organisation also produces Tyres for large trucks and they position them as being durable as well as effective at propelling these trucks. Recently this car Tyre manufacture has introduced a new business model which it refers to as Tonne Kilometre Business Model.
Economic Factors
Kurt Lewin Change Model
This theory or model was advanced in the year nineteen fifty two by a gentleman known as Kurt Lewin. This man explained that change is a process that entails three key stages which are unfreezing, change, freezing. During the first stage which is unfreezing, the organization usually prepares for change. It does so by assessing the external factors in order to evaluate and determine changes that are required within the organization (Burke 2011, p.67). The organization also conducts various meeting in order to determine the kind of change that will be effected within the organization. During this stage, the management of the organization determines the techniques that will be employed in order to effect change within the organization. The management usually holds meetings with the members of staff in order to explain to them the nature of change that is desired within the internal environment of the organization as well as how the desired change will be realized.
The second stage of this three stage model is changing. During this stage, the members of staff of an organization are tasked with the responsibility of effecting the desired change within an organization. In order for them to effect the desired changes in a manner that is efficient and effective, the members of staff usually follow guidelines that are provided by the management (McGregor 2005). These guidelines serve to ensure that the change being effected is uniform, effective and efficient within an organization. It is imperative to note that the members of staff are the ones that are responsible for implementing the desired changes As a result of this if they detest the changes, the desire changes will be poorly implemented, or the implementation process may be hampered by a lot of resistance.
The final stage of the Kurt Lewin three stage models is freezing. Upon the implementation of the desired changes, the organization put effort to regain stability. The organization does this by ensuring that most of the members of staff are supporting the desired changes (Montgomery & Collis 2004, p.99). The management retrains their personnel on how to carry out their activities given the prevailing changes in the working environment. The management also formulates and implements mechanisms that will ensure that the organization is able to assess their level of conformity to changes as well as recommend corrective mechanisms.
One of the main objectives of the present day Michelin Company is to increase its presence in developing economies. It is setting up factories in India, and Brazil. This is because, in most of the developing economies, there are a few numbers of people that are able to afford to own motor vehicles. The reality on the ground is that this is about to change. This change will be brought about is largely by the rise in the number of companies are setting up new basis in terms of factories and offices in these economies (Saee 2007, p.70). The setting up of factories in these economies will lead to an increase in their gross domestic product. With the increase in the gross domestic product, the standards of living in such countries will immensely improve. This is due to the creation of many job opportunities as well as the improvement in the quality of salaries that people will be earning. The rate of unemployment prevailing in these countries will decline significantly. It most prevalent that, improvement of economic conditions in these countries, is more likely to bring about a rise in demand for motor vehicles. The demand for motor vehicles will also fuel the demand for motor vehicles parts and accessories. Michelin will be able to gain strategic advantage if it will have set up shop in these economies.
Social Factors
Michelin is aiming to set up their factories in some of the major hubs of the developing countries. They are in the process of identifying suitable location where they can set up their factories. These locations should enable them to gain access to other developing countries within that geographical region. For instance, they can set up a factory in South Africa in order to be able to meet the demand for Tyres in Africa. If they manage to arrive first in these emerging markets, Michelin will be able to benefit from first mover advantages. Whenever an organisation is able to move first into a market, it is normally able to achieve technological advantage. This is achieved because the organisation has ample time to carry out research and development programs. These research and development programs usually enable the organisation to develop high quality products that are best suited for that particular market (RFID 2013, p.1). As a result of these, most customers in this particular market tend to appreciate the products that have been developed by such organisation. An example of such a company is Procter and Gamble that produces disposable diapers.
Suppliers’ Bargaining Power
Companies that are first movers into a market normally tend to acquire scarce resources, at a very reasonable price. This is due to that fact that, in most cases, the producers of raw materials for such a company normally lack other markets to sell their produce. As a result of this, the organisation tends to be in a position whereby supply super cedes demand (Lynch 2006, p.70). Due to excess in supply the prices of raw materials tends to go down given the economics principles of supply and demand. In order to gain such an advantage, Michelin should aim at constructing their factories in emerging economies that produce rubber.
Early in January, 2013 Michelin decided to invest approximately $200,000,000 in the expansion of Starr Plant. The organisation is doing this in order to increase the supply for rubber for the purposes of producing Tyres in North America. It is essential to note that the organization is not only expanding its operations only in the United States of America (Segrist 2013, p.1). It is expanding its operations in Canada; by setting up a Factory in Nova Scotia. It is also setting up two factories in the Peoples Republic of China. This is a move that aims at increasing it presences in the markets in which they operate in. The increase in their presence, in economies where they operate in, is supposed solidify their position in these countries. Over the years, China has built itself to become as one of the most ideal business destinations in the world. Its large population of over a billion people comprises a large market which most of the companies seek to acquire.
Technology
Michelin is expanding their factories in order to improve the nature of technologies that are being used in their factories. For a company to remain competitive, it has to inculcate modern technologies in the process of production. This is will enable it to produce high quality products, at the minimal cost possible. Investing in modern technologies will enable the company to carry out research and development hence the introduction of leading products in the market. Michelin should make the necessary effort in order to prevent itself from developing incumbent inertia. A first mover can experience incumbent inertia and market uncertainty. With regard to incumbent inertia, a first mover might not be able to adapt to changes in technology, as well as other market changes due to the heavy investments (Abbot 2012, p.1). As a result of this, a competing company is able to venture into the market and gain competitive advantages if it has taken account of such changes in its strategic plan. An organisation that was first to move into to the market need to take account of the existing market uncertainties. Unfortunately in most cases whenever such companies are venturing into a market not much is known about such markets.
Rivalry amongst Existing Firms
Development of incumbent inertia by Michelin may turn catastrophic to the organization. This is because, in the 1970s, Michelin ventured into the United States Market. It managed to outshine Firestone Tyre and Rubber Company that had been operating in the region for years. During that time, Firestone was respected in the US just as Michelin was respected in Europe (Rakocy 1999, p.1). However, Michelin had continuously invested in research and development thus the production of products that were deemed to be of higher quality in contrast to those of Firestone. As a result of this, Michelin was able to venture into the US market and outshine the largest producer of Tyres.
Risk of Entry of Potential Competitors
Michelin aims at producing high quality tires for the premium market. In the past, this strategy was effective as it facilitated the success of the company in Europe and the United States of America. However, in the recent past Michelin has been losing its market share and has begun to realise a decline in the demand for its Tyres. One of the essential factors leading to a decline in the success of the company is trying to replicate the strategies it used to capture the European and North American Market in China (Dransfield 2001, p.56). This strategy has been detrimental because Michelin has failed to capture the Chinese market. The Chinese market is characterised by people that prefer buying cost effective products, as opposed to premium products. Michelin has failed to acknowledge this, and this is evidenced by their continued production of premium Tyres in the region. Another mistake that Michelin made was over concentration in acquiring the Chinese market and it failed to realise that other companies were developing in Europe, North America and South Korea that has continuously decreased their market share.
Operations
Michelin also has most of its plants and Factories located in Europe whereas most of its demand for tyres originates from outside Europe. This happened because, during the formative stages, Michelin developed most of their factories in European countries. However, with the increase in demand from outside Europe, Michelin failed to close down some factories as they set up new ones in the areas where there was a lot of demand for Tyres. This has consequently led to a situation whereby the company has to many factories compared to its competitors (Bennet 2013, p.1). This has a negative impact on the company’s level of profitability as well as its market share. Companies such as Bridgestone have fewer factories compared to Michelin, and they have an almost equal market share. This serves as an indicator that Michelin is not operating in a manner that is efficient.
Michelin Future Strategies
In order for Michelin to be successful in the Chinese Market, the company has been carrying out research and development that will enable it to develop cost effective tyres. This is because most of the people within the Chinese market are extremely sensitive to costs (Cool 2012, p. 1). As a result of this, the only way through which Michelin can be able to tap into this particular market is by introducing tyres that are affordable and durable. This will enable Michelin to attract many customers as well as retain them.
Michelin Company is also in the process of restructuring and reorganization, which will facilitate the organization to achieve optimal utilization of capacity. The restructuring exercise has been essential due to existence of many factories in Europe, whereas most of its market is outside the continent (Montgomery & Collis 2004, p. 56). Michelin should consider closing down some of the unutilised facilities in Europe so that it can be able to set up factories in some of their major markets outside Europe. The setting up of factories in some of the major markets excluding Europe will enable the company to offer better services to its customers. This is because it will have a more comprehensive view of the culture of driving and nature of roads that are found within that particular economic region. As a result of this, it will be able to develop products that are more conversant to the needs of the motorist that operate in those roads.
In addition, Michelin has also been establishing strategic partnership with some other companies in the global market to achieve competitive advantage and facilitate entry into such markets. The company should assess whether it can be able to gain competitive advantage by outsourcing the production of some of their Tyres (Burke 2011, p.78). Outsourcing can be very effective at enabling Michelin to lower the cost of production. By lowering the cost of production, Michelin will be able to develop tyres that are affordable to the people found in the emerging economies. This will serve to raise the demand of the Tyres in these regions and this increase in demand will lead to a rise in the level of profits.
In conclusion, it is evident that throughout this study, corporate strategy plays an imperative role with regard to influencing the success of an organization (Burke 2011, p. 30). Companies should develop corporate strategies that suit their companies so as to gain competitive advantage. A good corporate strategy is one which is flexible and takes into account the strengths and weaknesses of an organization. Corporate strategy comprises an essential part of organization’s strategic management through analysis of the internal and external environment as highlighted in the paper. Strategic management can be assumed as the greatest success factor of Michelin in the global market.
References
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