Michelin Offshoring in China

Topics: Finance, Debt, Corporate finance Pages: 4 (1127 words) Published: March 12, 2013

About Michelin

Michelin is a tire company that was created by Edouard and André Michelin in 1888 in Clermond-Ferrand, France. The company created the removable tire; the train tire and the green tire that reduce fuel consumption. Today the company has become the biggest tire manufacturer in the world with 20% market shares and an annual revenue of€17.89 in 2010. There headquarter are still based in Clermont-Ferrand but the company has become international. Its main factories are based in Europe and in the United States and its products are sold all around the world. The problem is that it’s becoming more and more difficult for the company to keep its place of leader on this constantly growing market.

The Michelin Company is starting to close factories and lay off employees in France because the factories are not enough competitive. Its production activity has always been principally based in France but today with the evolution of the market it is very difficult for the company to continue like that and stay competitive. A lot of new producers are appearing on the tire market and are basing their production in countries like China or India where labor and production costs are a lot lower than in France. If Michelin wants to stay competitive and keep its position of leader in the tire market it is imperative that it starts exporting its production activity in one of those countries.

It’s been decided that the company should build a factory in China. There are many reasons that influenced our decision to do it in this country. First China has very good infrastructures and a cheap labor. Building a factory in China is also way cheaper and faster than in European countries because there are fewer regulations to take into account. Another good reason for building it in China is because it is the new big market that we have to occupy with many of the other developing Asian countries. China is developing very fast and is...
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