Michelin Fleet Solutions: Evaluating a Shift to Service-Based Model

This case study examines Michelin Fleet Solutions' attempt to transition from a product-driven tire company to a service-driven provider of comprehensive tire management solutions for large European transportation companies. Launched in 2000, the Michelin Fleet Solutions (MFS) initiative aimed to sell kilometers instead of tires, offering a unique opportunity for differentiation. However, after three years, the company faced disappointing growth and profitability, prompting a critical decision point. The analysis recommends modifying the new business model, focusing on better communication of the service's value, refining pricing strategies, and expanding the target customer segment. By addressing these issues and improving marketing efforts, Michelin Fleet Solutions can potentially unlock new markets and customer bases, solidifying its position in the tire industry. Desklib provides a platform to explore similar business case studies and solutions.

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Michelin was the most famous business organization in the tire industry since its launch
in 2000. The company offered comprehensive tire management solutions for large European
transportation companies and was named Michelin Fleet Solutions (MFS). Since its launch, the
company has been selling tires but thought of changing the business model from being product-
driven to service-driven. The new business model provided an opportunity for Michelin Fleet
Solutions to distinguish them in the market, as the transition seemed distinctively appealing.
However, after 3 years the expected rate of growth and expansion was far below expectation.
The company encountered huge loss in terms of revenue in spite of seeking help from an external
consulting firm. In order to compensate the encountered loss, Michelin Fleet Solutions is now
thinking whether to pursue, modify or abandon the undertaken business model.
Based on the given case study, modifying the new business model is recommended for
Michelin Fleet Solution (MFS).
Q3) Would you recommend pursuing/ modifying/abandoning Michelin’s solution offer?
Increased number of business organizations providing similar product or service in the
market leads to market saturation. This is because the customers get the opportunity to verify the
alternatives before purchasing the product. Moreover, the customer opts for the different
business organization if they are not satisfied with the credentials of the product or service
offered by one company. As commented by Wang (2015), market saturation leads to highly
competitive business environment thereby, leading to difficulty for the business organizations to
sustain. Market saturation limits the business expansion opportunity of the company thereby,
restricting business growth. According to the given case study, it can be seen that Michelin Fleet
Solution (MFS) was the unsurpassed business organization in the tire industry since its launch in

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2000. However, with time there was a rise in the similar type of business organization in the
market selling the similar product that is tiring to the customers. Thus, considering the future of
the business organization, the Michelin Fleet Solution (MFS) changed its business model from
product driven-firm to service-driven firm. Changing the business model allowed Michelin Fleet
Solution (MFS) to distinguish them from the existing market. Thus, implementing the new
business model was surely a positive decision for Michelin Fleet Solution (MFS).
As mentioned by Wei, Liu and Mei (2015), the business organizations need to identify
and analyze the demand of the market before conducting any business. This provides an
opportunity for the business organizations to fulfill the demands and needs of the customers
thereby, maximizing their own revenue and sales. However, as argued by Wu (2013), business
organizations need to conduct business in the field of their expertise. This allows the business
organizations to use their existing resources appropriately and reach the pioneer of the market.
According to the given case study, it can be seen that the tire business accounted up to 99% of
the revenue the company acquired. This highlighted the demand and need for the tire business in
the market, as well as the expertise Michelin Fleet Solution (MFS), possessed that helped them
in incurring such profits. Thus, the tire business conducted by the Michelin Fleet Solution (MFS)
was a wise choice, as being expert helped them to be a leader in the tire industry business.
As commented by Hazen et al. (2016), as the company has to change their business
operations strategy completely it makes it difficult for the business organizations to sustain the
business transition. According to the given case study, Michelin Fleet Solution (MFS) offer
highlighted the concept of charging the monthly fees to the customers based on the number of
kilometers driven by the individual vehicle. As a result, the customers were allowed to turn the
tire related cost to variable cost that was linked directly linked with the use of the vehicle

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(Loorbach and Wijsman 2013). However, Michelin Fleet Solution (MFS) failed to convince the
customers of this business model and service approach. This is because the customers did not
agree to pay for tire management, as they have already paid for the tire while purchasing them.
The experts selling the service to the customers also failed in explaining the benefits of the extra
activities that kilometers selling brought for them. In addition to, the sales experts even faced
difficulties in explaining the price for tire management. Moreover, the Michelin Fleet Solution
(MFS) offer even faced open criticism for their offer. Thus, modifying the new business model
will be beneficial for Michelin Fleet Solution (MFS), as the new offer has potential value and
large scope.
As mentioned by Wilson et al. (2016), marketing is the key technique for creating a
unique image in the eye of the target customers by presenting them distinctively from the
competitors in the market. Thus, marketing the business idea appropriately helps in the business
organizations to increase their sales by maximizing the customer base. The business
organizations need to leave an imprint of the business idea in the mind of the target market and
customers thereby, convincing them (De Mooij 2013). This enables the business organizations to
create a loyal customer base, as the customers solely prefer to undertake the product or service of
the particular business organization instead of the alternatives present in the market (Czinkota
and Ronkainen 2013). According to the given study, it can be seen that Michelin Fleet Solution
(MFS) encountered problems in explaining the larger scope and greater value of the offer
appropriately. Thus, unable to satisfy the queries and criticisms of the customers initially
hampered the execution of the business model.
Modifying the existing business model implemented by Michelin Fleet Solution (MFS)
include explaining the service more appropriately to the customers, explaining the pricing

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strategy, developing new costing as Michelin Fleet Solution (MFS) underestimated the cost and
convince the customers to obtain kilometer sell the process rather than tire sell process. Thus,
modifying the business model will provide an opportunity for Michelin Fleet Solution (MFS) to
invade new markets, increase the customer base and distinguish them in the existing market.
According to Boone and Kurtz (2013), before selling the product or the service to the
target market, it is essential for the business organizations to sell their idea to the target
customers initially. Selling the idea provides an opportunity for the business organizations to
convince the target market and leave an imprint on their mind. Thus, the business organizations
need to ensure that the marketing of the idea is extremely impactful so that the target customers
purchase the new service or product without hesitation. According to the given case study, it can
be seen that the salesman mentioned that difficulty was faced in explaining the customers the
offer of Michelin Fleet Solution (MFS). Thus, it is important for Michelin Fleet Solution (MFS)
to develop ways for explaining the potentiality of their new business model.
As mentioned by Floh et al. (2014), the business organization need to divide their target
customers into smaller groups according to their types thereby, characterizing the sub-groups by
specific attributes. In accordance with the segmented customer group, the business organizations
need to develop and implement relevant marketing techniques in order to maximize the sales.
The customers can be segmented based on the spending pattern, gender, age, occupation and
socio-economic group (Hamka et al. 2014). According to the given case study, it can be seen that
Michelin Fleet Solution (MFS) offered their new business model only to the large European
fleets that are approximately 200 vehicles. This shows that Michelin Fleet Solution (MFS)
narrowed down their customer segment largely during the initial stage of executing the model.
Though the offer presented by Michelin Fleet Solution (MFS) seemed satisfactory to them, the

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customers were not fully convinced. Thus, enlarging the customer segment is one of the
modifications that Michelin Fleet Solution (MFS) need to consider in order make their new
business model successful (Cuadros and Dominguez 2014).
In addition to, the given case study also highlights that the customers were not convinced
of the contract offered by Michelin Fleet Solution (MFS). According to the given case study, it
can be seen that the customer complained, as they have to pay to manage their tires when they
are already paying while purchasing the tire. Thus, modifying the contracting process presently
followed by Michelin Fleet Solution (MFS) is also advisable. Thus, Michelin Fleet Solution
(MFS) can streamline the structure of the contract into a smaller set that is comprehensive and
simple along with fee estimates thereby, making it more appealing and convincing for the target
customers.

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