Value Chain Analysis of Michelin Group - Essay Example

Value chain analysis of Michelin group The focal point of this paper is to analyze how Michelin group is positioned in the value chain and in relation to the industry (tire industry) competitive forces. For this purpose the latest annual report from Michelin (2006 report) would be used along with other relevant and related sources. Value Chain Analysis can be enumerated as an important instrument in the hands of the managers to determine the key aspects of the firm.(Lamb, 56) According to Porter Value Chain Analysis is “an interdependent system or network of activities, connected by linkages” (Porter, 41). As per Value Chain Analysis there are specific activities that cumulatively determine the position of the company. These are the primary and secondary activities. Primary activities include inbound logistics, Operations, Outbound logistics, Marketing and sales and Service. The Support activities are Procurement, Human Resource Management, Technology Development and Firm Infrastructure. (Roberts, 134-35) The Value Chain Analysis of Michelin would be based on these criteria. The position of Michelin in the tire industry is very well placed. The main aspect of the success story of Michelin is that they produce quality materials at an affordable price and is wonderfully backed by very efficient team of after sales service. In addition to that Michelin is helped in an extremely positive manner from the field of advertisements. The Michelin Man can be enumerated as a icon in not only the tire industry but the essence has reached beyond that. However, it can be mentioned that the inability to tap the heavy automobile industry in a full extent remains a greater weakness of the company. In this context it should be mentioned that the Annual Report 2006 promises to better this particular sector. In today’s world market of tire business Michelin holds a very prominent presence. With the current market being a $100 billion industry the position of Michelin is noteworthy. (Madhav, 17) As per the manufacturers’ annual bulletin of August 2006, Michelin was found to be at the second position in the world tire market. Leading the position with maximum amount of market segment was Bridgestone with 18.2% market share followed by Michelin with 17.7%. These two leading figures were followed by Goodyear with 17.2% of the market share. (King, 122) The rest of the market segments were divided among other average sized manufacturers with a cumulative amount 28.8% of the market share. Further more, it was reported that an additional 17% of tire sales was instrumented by local producers. (Lock, 245-46) Thus being a huge player if the world tire industry the effective Value Chain Analysis of Michelin becomes more important. The Value Chain Analysis can be enumerated as below: Inbound logistics of Michelin shows that the raw materials and storage and handling charges of materials increased by about 12% from 2005 to 2006. On the other hand it was found that the Operations relating to the production of products was almost at par with the last few years (2002-2006) with an increase of 6%. (Annual report: 2002, 201)The same cannot be said for the operations outbound segment and there was an increase of 5% on the valuation of production channeling. However the Marketing and sales indicated that the company showed an additional usage of 9.6% for the means of promotion and advertisements. The services sector under the determination of Value Chain Analysis showed that the total valuation was raised by about 3% reflecting the developing market structure in favor of the company. (Kar, 201-205) The support activities when taken into consideration also show a similar amount of development in terms of net valuation for the company. The procurement factor reflected the variables that enabled Michelin to get the best possible materials for the lowest price and in this context it ca be summarized as a net gain of 15% in relation to 2005. The evaluation of the Human Resource Management reflected the fact that the company was developing at a moderately good pace with better functions in terms of rewarding, motivating, training and recruitment of workforce. When put into numerical values it yielded an additional growth of 7.5%. Next, the Technology Development criteria has always been a stronghold of the Michelin company and 2006 was no different as it showed a steady growth of 10% with knowledge harvest, training and technological innovation. The control systems and planning formats of the company under the parameters of Firm Infrastructure also showed progress with a total valuation of 6.5%. As a result the overall formulation of Value Chain Analysis of the Michelin Company showed an overall growth of about 11.5% over the previous year and thus it reflected the additional differentiation or cost advantage that the company enjoyed. (Kar, 205-210) The value added potential of the different criteria indicates a proper assessment of the proceedings of the organization. (Annual report: 2006, 87-95) However it should be mentioned that the important criteria such a Firm Infrastructure, Human Resource Management, Services and Operations outbound should be given a positive move to yield better results. It is obvious that there is room for improvement in these sectors and better and keener evaluation would yield better results with greater profit margins by adding higher amount of values to these sectors. This is only possible when motives are directed towards sustaining better amount competitive advantage. (Fletcher, 351) Implementing a more open and understanding method of performance appraisal system should be implemented to achieve the maximum amount of preferred results. References Porter, M. E, The competitive advantage of nations, New York: Free Press. 1990 Annual report: 2006; Michelin Annual report; 2006 Annual report: 2005; Michelin Annual report; 2005 Annual report: 2004; Michelin Annual report; 2004 Annual report: 2003; Michelin Annual report; 2003 Annual report: 2002; Michelin Annual report; 2002 Fletcher, R; Beliefs and Knowledge: Believing and Knowing in Modern Industry; Howard & Price. 2003 Kar, P; An Analysis of Michelin Annual Reports: 2000-2006; Dasgupta & Chatterjee. February 2007 King, H; Tire Industry Today; HBT & Brooks Ltd. 2006 Lamb, Davis; Cult to Culture: The Development of Civilization on the Strategic Strata; National Book Trust. 2004 Lock, D; Perspective and Perceptions of the Tire Industry; Howard & Price. 2006 Madhav, S; The Effective Measures in Thinking into Rubber Market. Business Today; Alliance Publishers. 2006. 3 (6). 17, pare 6 Roberts, O M; Outline of Value Chain Analysis; National Book Trust. 1998 Read More