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Strategic Management in Automobile Industry around

the World

Subject:
Strategic Management

Submitted To:
Sir Mustabsar Awais

Submitted By:
Aneeka Niaz

Roll No:
MBK-M-12-04
MBA (B&F) Morning
6thsemester

Alfalah Institute Of Banking And Finance

Bahauddin Zakariya University
Multan

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Strategic Management in Multinational companies around the

World
Strategic management is the highest level of managerial activity, in general performed by the
chief executive officer (CEO) and executive team of a company, used to specify objectives of the
organization by developing policies and plans to achieve these objectives and reach the
companys goals. Also its a process of distributing resources of the company so as to pursue the
plans. Strategic management supply overall direction to the entire enterprise. An organizations
strategy should be suitable for its resources, situations, and objectives. The process takes in
consideration to join the companies strategic advantages to the business environment the
organization faces. The important objective of an overall strategy is to make the organization into
a position to do its mission effectively and efficiently. A best corporate strategy must include an
organizations goals, policies, and tactics into a cohesive whole. Strategic management can be
considered as combination of strategy formulation and strategy implementation.

1. Strategy formulation:
First Doing a situation analysis, both internal and external and both micro-environmental
and macro-environmental. Secondly, alongside with this assessment, targets are set. This
includes crafting vision statements (long term), mission statements (medium term), overall
corporate objectives (both financial and strategic), strategic business unit objectives (both
financial and strategic), and tactical objectives. Finally, these objectives have to, in the light of
the situation analysis, propose a strategic plan. The plan gives details about how to reach
these goals. This three-point strategy formation process determines where you are now, where
you want to go, and then how to get there. These three questions are the basics of strategic
planning.

2. Strategy implementation:
Is affectation of adequate resources (financial, personnel, time, and computer system support),
developing a chain of command or some alternative structure (such as cross functional teams),
and posting responsibility of specific tasks or processes to specific individuals or groups. It
also involves managing the process. This includes observation results, comparing to benchmarks
and best practices, evaluating the efficacy and efficiency of the process, inspection for variances,
and changing to another process if necessary. When execution specific programs, this involves

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having appropriate resources, developing the process, training, testing the process,
documentation, and integration with (and/or conversion from) legacy processes.

Globalization in Automobile industry:

Global mean that the world is one complex linked system. Global market can exist if the
local market of any country can be influenced by foreigner market. This means that the local
market is influenced by development (technology for example) in other nations. in this case
global define the ultimate level of worldwide integration, so this kind of globalization is the
process of increasing international interconnectedness and it make pressure on the automobile
company to pursue a global synergy. The enterprise operating in many countries is always
looking for a process to organize itself to solve the problem of how to manage multiple firms
unit. So as solution the company organizes all operation in each country but let every country
unit autonomous as possible. To have cross border synergies the company uses the 3 essential
integration mechanisms by including it on her international management:
i.

The automobile company does the same thing in each country with no adaptation to
the local market, same product, same way of running the business, same resources

ii.

employed in the production this procedure is standardization.

Secondly, the coordination is to create relation between the country unit to serve the
client in the same way in every country also to respond or attack Competitors

iii.

Company to grab part of market for the company.

Finally, centralization is when the company regroups some of her activity in one
specific location (company home country, or somewhere else), so as the company
take advantages from this particular country such as the car seats will coast lower
than produce it in other country or the quality will be better or to take advantages
from taxes facilities. However the automobile company cannot maintain a sustainable
synergy across border because of the local responsiveness make pressure on the
company too.

The company cannot negligee the specific demands of each local market and country, every
market has particular characteristics, each country is different from another, this difference
between countries press a lot on the organization of the company.

The Auto Industry Today:

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The auto industry as a whole is an extremely competitive market place. Each automotive
company is fighting for the largest market share of the worlds number one automotive market.
The Big 3, which includes GM, Ford, and Chrysler have been losing the fight to keep a dominant
hold over the auto market. Prior to 1985, the Big 3 controlled a vast majority of the market share,
approximately around 80%, but since then they have seen their share decline to below 43%.
These importers are gaining market share because they seem to produce more dependable and
more efficient cars.
Consumer Report listed the top 3 most reliable cars in these 6 separate categories which include,
Family cars, Small cars, large cars, Minivans, Midsized SUVs and Small SUVs. Of the 18 cars
listed, 14 were Japanese engineered, and of those 14 cars, 12 were made by: Toyota, Honda, or
Nissan. Overall Japanese firms account for 78% of the most reliable automobiles while the US
automakers account for only 22%.
However, in the past few years with the housing bubble destroying and the economic contraction
that followed, auto sales as a whole have been declining rapidly, due heavily to credit markets
shrinking and the abrupt drop in consumer spending. This tightening up of money has greatly
impacted the major players in the automobile market, causing a dramatic decrease in sales from
the year before. GM sales are down 33.1% from April 2008, Fords are down 31.3%, Chrysler
48.1%, Toyota 41.9%, and Honda is down 25.3%. This drop in overall sales is staggering for the
5 largest market share leaders in the world, and it is having a more devastating effect on the car
companies in the international firms. The automobile market as a whole can be considered a
mature industry structure. Single-company and industry growth have been slowing, due to the
economic contraction as well as the lack of large new markets. International competition has
been growing since the 1970s and the international firms have become major players in the
industry. These new international competitors have eaten away at the dominant market share that
the Big 3 once held. Toyota and Honda have been taking advantage of this mature industry
structure and have been creating new lines, such as the fuel-efficient hybrid models. The hybrid
model cars were introduced in 2001, which was the perfect time for this new technology to be
disclosed. The combination of low pricing and fuel efficiency began to drive US automotive
buyers toward the international companies and away from the old tradition of owning and
driving large SUVs.

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The Big 3 lagged behind the international companies when creating fuel-efficient cars and did
not release one until 2004. The Big 3 are working on refining their products, however they are
still lagging behind the international firms. For years the consensus has been that Japanese
automakers build quality cars while the US automakers build unreliable cars that will break
down quickly. Over the past few years, the Big 3 have begun to increase the dependability of
their cars, which is shown by higher rankings from Consumer Reports Magazine.

PEST Analysis of Automobile industry:

Political:
Laws and government regulations have affected this industry since the 1960's. Almost all of the
regulations come from consumers increasing concerns for the environment and the concern for
safer automobiles. The first safety act passed by Congress was in 1966 and was called the
National Traffic and Motor Vehicle Safety Act (Gale, 2004). This act forced manufacturers to
improve the safety for the passengers, the driver visibility, and the braking of the car. It also
stated that manufacturers had to inform the public when it had a recall on the cars. Safety
concerns were not the only concerns during this period. There was also growing concern for the
environment even before the oil crisis. The Vehicle Air Pollution and Control Act were passed in
1965. This was the first act to set standards for automobile pollution. Then in the 1970's,
Congress passed the Clean Air Act that demanded a 90% decrease in automobile emission within
the next six years.
In the 1970's the oil crisis caused another act to be passed. The Energy Policy and Conservation
Act of 1975 stated that all automobiles must meet a certain mileage per gallon. The act
demanded that all automobiles had to meet a standard of 20mpg by the 1980 model and then 27.5
mpg for the 1985 model. Then in 1992, the Intermodal Surface Transportation Act required the
installation of front airbags.
Economic:
The automobile industry has a huge impact on the U.S. economy. This industry is the major user
of computer chips, textiles, aluminum, copper, steel, iron, lead, plastics, vinyl, and rubber. For
every autoworker there are seven other jobs created in other industries. These industries include
anything from the aluminums to lead to release.
Socio-cultural:
Today's society judges people on the type of car you drive. Society does not like to admit to this

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but it is very true. Manufactures know this happens and targets their markets by these thoughts.
For example, anyone who drives a mini van is perceived as a soccer mom. This is because the
manufactures target mini vans to mothers. Anyone who drives a nice vehicle is thought to be
wealthy. No one wants to be seen driving an unattractive piece of junk because of what other
people will think of him or her. Consumers also just feel better when they are driving a nice or
new car, if makes them feel better about themselves.
Another aspect of the socio-cultural is the environmental concerns for the need of fuel-efficient
vehicles. Many environmentalists are worried about the impact that the gas cars have on the
environment. There is even legislation that requires cars to average a certain miles per gallon.
Technology:
The internet has affected just about every industry in the world and has also had a huge impact
on the automobile industry. The buyers referred to the internet before making their purchases and
most of the people went to the auto websites before going and taking a test drive. Business-tobusiness marketplaces have given the industry many opportunities because of the internet, such
as more efficiency and lower cost. Ford, GM, and Daimler Chrysler announced in 2000 their
plans to create a global online exchange for suppliers and the original equipment manufacturers.
Concerns for the economy and global warming have caused the automobile industry to develop
alternate fuel vehicles. In the beginning, automakers did not want to look into the development
because of the high cost and the many risks involved. Because of new legislation, they had no
choice but to come up with the technology to make the fuel-efficient cars. The automakers
decided that electric cars would be the best way to meet the legislation demands. "Early models
were unpopular because of slow cruising speeds and lack of performance, but by the end of the
century, electric car production began to be practical."(Motor Vehicles) At the end of the 1990's
manufacturers was coming up with the technology to produce internal combustion engine with
an electric motor. Toyota and Honda were both selling the hybrid vehicles at retail value in
2001.
Demographics:
For many years now, the baby boomers generation has been the main target market for just about
every product. As their generation is getting ready to retire and spend less money, the automakers
are looking at the younger generations. Right now, the focus is starting to turn towards the baby
boomers children who are in their mid 20's and 30's. Americans today are choosing to purchase

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larger vehicles over passenger size vehicles. Today's generations are still buying the trucks,
minivan and especially the SUV's, even with the ridiculous gas prices. It is not only the younger
generations either; the boomers who are all reaching the retirement age are more interested in the
bigger vehicles. There activities after retirement are way more active than their parents. They are
not just sitting around and playing golf or going on vacations. They are still working in some
ways and being more active in their grandchildren's lives. Since the boomers are still active, they
want to drive the same vehicles that their children drive in order to make life that much easier.
The manufactures target the sales of their cars to certain people and their geographic location.
Convertibles are not marketed toward people who live in parts of the world that are cold all year
round
Global:
General Motors, Ford Motor Company, Daimler Chrysler, BMW, Volkswagen, Volvo, Toyota,
Mazda, and Nissan Motor Company come together to create a new trade relationship created the
Alliance of Automobile Manufacturers. The organization was to replace the American
Automobile Manufacturers Association that only consisted of American manufacturers, the goals
of the associations "were to work together on public policy matters of common interest to
provide credible industry information and data, and seek consistent global regulatory standards.
The manufacturers also started merging in the late 1990's. American companies started buying
foreign manufacturers created some of the largest foreign takeovers.

Porter Diamond Model:

Factor Conditions:
The automobile industry is one of the largest and most prominent mass-production industries in
World. Nearly every sector of the automobile industry in World operates on a global scale;
characteristics of the industry include:

advanced high-technology design,

product reliability and durability,

And very refined assembly processes, based on knowledge-based manufacturing

techniques.

It requires most experienced automobile labor force, and an educational system that provides
industry-specific, on-the-job training. Skilled workers give a great advantage to manufacturers as

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they have been producing high-quality cars for years and their craftsmanship symbolizes
durability.
Companies expend a substantial amount of money on research and development projects
annually and, as a result, innovation is a key factor in leadership in the automobile industry.
Moreover, BMW open a forum on its web site to solicit innovation from outside users who can
submit ideas about design or additional features for the firms products resulting in a wide range
of ideas to consider. If they pursue an idea that comes from outside the firm, BMW takes the
further step in consulting with the inventor. Both the experienced labor force and research on
innovation have led to manufacturers produce very high quality cars.
Transportation is another factor condition for the automobile industry that is currently a point of
contention between manufacturers and the government. Vehicle manufacturers have relied
heavily on highways to transport finished cars because it is easy and fast. Truck transport is the
quickest way to deliver cars and timeliness in delivery to dealership or docks for export is very
important. As environmental concerns increases, government does not want to let manufacturers
transport cars on highways but rather is pushing them to use existing railroad systems as the
main transportation. Despite this issue, automobile industry has a great advantage with its
transportation system as well structured and maintained railroads connect with a network of ports
and delivery points throughout world.
Demand conditions:
Customers have many different reasons and conditions for buying an automobile which makes
the industry continually diversify its products from small cars to buses to meet these various
demands. The industry is comprised of components including tires, passenger and commercial
vehicles including electric vehicles, utility vehicles, construction vehicles, cranes, forklift trucks,
motor homes, tractors and other agricultural vehicles, trailers, containers, motorcycles, and retail,
distribution, and maintenance of cars. Customers carefully search the best vehicle that fits their
budget, lifestyle, and taste and demand a wide range of choices. Automobile customers really
know what they want and they search for a specific car that meets their needs with a product
range from the Indian Tata whose MSP is $2,500 to luxury cars such as Ferrari, Porsche retailing
for $250,000. Sophisticated customers push automobile companies to innovate and add new
features to the automobiles. For instance, people want to hear their own music in their car and to
satisfy this need manufactures have been trying to install different music kits in cars.

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Consumers in World are becoming more demanding about fuel efficient vehicles. Hybrid cars
have been the rising star in this industry as people become more environmentally concerned and
look for the cars that use more electric and alternative fuel sources and less oil.
Firm Strategy and Rivalry:
This automobile market in World has high barriers to entry with high fixed costs; start-up costs
are daunting. Companies in this industry require strong supply chains; new entrants would need
to integrate with one of the existing companies with strong brand recognition as it is hard to
break into the strong existing connection between suppliers, manufacturers, and customers.
Competition is severe as there are many companies competing with each other cruelly in a
shrinking market due to the declining economy. The primary strategy in this market is
innovation. Companies have to come up with new designs or add features or produce different
models to gain market share in every different segment. Innovation in all various product lines
allows manufacturers to serve many different customer groups with different brand names.
Related and Supporting Industries:
Automobile industry has many advantages in terms of related and supporting industries.
Automobile manufacturers have a pool of well qualified candidates to choose from as well as
public and private organizations to collaborate with in research and development.
Steel is the main element of the car manufacturing. Tires are another critical part of the industry
all kind of raw material is available with the industry easily. Interior door paneling, development
of car transmissions, and production of water-based paints are all other examples of related and
supporting industries in the region which helps supply high quality components to the auto
industry. Close connections with these related industries make innovation throughout the supply
chain possible.

Automobile Industry Five Forces of Competition Model

Threat of New Entrants:
The threat of new entrants is very low in the automobile industry. The industry is very mature
and it has successfully reached economies of scale. In order to compete in this industry a
manufacture must be able to achieve economies of scale. For this to occur, manufacturers must
mass-produce the automobiles so that they are affordable to the consumer. Another barrier to
entry is that it takes an incredible amount of capital to manufacture the automobiles. It takes an
extreme amount of capital not only to be able to manufacture the products but also to keep up

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with the research and development that is necessary for the innovation requirements. Access to
distribution channels is another high barrier to entry. A company must find a dealership to sell
their automobiles or have their own dealership. Space in the dealerships lots is very limited
making it difficult to have a wider variety of inventory.
Bargaining Power of Suppliers:
The bargaining power of suppliers is very low in the automobile industry. There are so many
parts that are used to produce an automobile, that it takes many suppliers to accomplish this.
When there are many suppliers in an industry, they do not have much power. There are so many
suppliers to this industry; manufactures can easily switch to another supplier if it is necessary.
Bargaining Power of Buyers:
The bargaining power of the buyers is moderately high. The buyers being consumers purchase
almost all of the industries output. The manufacturers depend on them to stay in business. The
buyers also are a significant portion of the industries revenue. If they cannot keep their buyers
happy then they risk losing them to their competitors. The buyers have low switching cost if they
are not happy. All the buyer has to do is sell the car they own and purchase a new one. The
reasons why the power is not completely high is that the buyers are not large and few in number.
The buyers do not have the ability to integrate backwards into the industry. If they want a car
then they have to purchase it from a dealership.
Threat of Substitute Products:
There are not many substitute products for automobiles. Some of the substitutes are walking,
riding bike or taking a train. Substitutes products all depend on the geographic location of the
consumer. In some cities such as New York or Chicago, a car is not as necessary. In cities such as
those, the subway is the most effective means of transportation. However, in most places a
person must have access to an automobile in order to get around.
Intensity of Rivalry among Competitors:
Rivalry among the competitors is very strong is this industry. The major competitors are so
closely balanced that it increases the rivalry. In order to gain market share in the automobile must
gain market share by taking it from their competitors. One of the other reasons there is such high
rivalry is that there is a lack of differentiation opportunities. All the companies make cars, trucks
or SUV's. The competitors are compared to one another constantly. The price, quality, durability,
and many other aspects of different manufacturers are greatly taken into consideration when

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deciding what type of vehicle to purchase. When the different manufacturers advertise they even
compare their products to their competitors. For example, the commercials will focus on areas
where the company outperforms its competitors.

Value Chain Analysis:

VCA is a strategy tool used to analyze internal firm activities. Its goal is to recognize, which
activities are the most valuable (i.e. are the source of cost or differentiation advantage) to the
firm and which ones could be improved to provide competitive advantage. In other words, by
looking into internal activities, the analysis reveals where a firms competitive advantages or
disadvantages are. The firm that competes through differentiation advantage will try to perform
its activities better than competitors would do. If it competes through cost advantage, it will try
to perform internal activities at lower costs than competitors would do. When a company is
capable of producing goods at lower costs than the market price or to provide superior products,
it earns profits.
M. Porter introduced the generic value chain model in 1985. Value chain represents all the
internal activities a firm engages in to produce goods and services. VC is formed of primary
activities that add value to the final product directly and support activities that add value
indirectly. Below you can see the Porters VC model.

Value Chain Analysis for automobile industry:

The global auto industry at the beginning of the 21st century is composed of a number of
different parts. The requirements of these different sections are quite distinct. Assemblers and
global mega-suppliers need global reach, innovation and design capabilities, as well as
considerable financial resources. In the second tier, global reach is not required, even though
there are some tendencies towards internationalization in this sector. The competences needed in
the third-tier are much less, but the returns are much lower. Finally, the aftermarket section offers
a completely different route to customers. The business is much more fragmented and access is
easier. However, this section is very price-competitive. The changing nature of the global
assembly industry in the 1990s was likely to significantly affect the components industries in
developing countries. However, the full extent of this change cannot be understood without
reference to more general changes in auto industry value chains.

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Capability requirements in the global auto industry:

Assemblers:
Increasing scale required to spread costs of vehicle design and branding. Innovation and design
capabilities remain critical as first movers in new markets sections can gain important rents while
other companies catch up. Some companies, such as Ford, appear to believe that core
competences lie more in branding and finance, and they are outsourcing parts of manufacturing.
Others, such as Toyota, maintain an emphasis on manufacturing excellence and competence.
Global mega-suppliers:
These firms supply major systems to the assemblers. They are sometimes referred to as "Tier
0.5" suppliers; because they are closer to the assemblers than the first-tier suppliers.These
companies need to have global coverage, in order to follow their customers to various locations
around the world. They need design and innovation capabilities in order to provide black-box
solutions for the requirements of their customers. Black-box solutions are solutions created by
the suppliers using their own technology to meet the performance and interface requirements set
by assemblers.
First-tier suppliers:
These are firms, which supply direct to the assemblers. Some of these suppliers have evolved
into global mega-suppliers. First-tier suppliers require design and innovation capabilities, but
their global reach may be more limited.
Second-tier suppliers:
These firms will often work to designs provided by assemblers or global mega suppliers. They
require process-engineering skills in order to meet cost and flexibility requirements. In addition,
the ability to meet quality requirements and obtain quality certification (ISO9000 and
increasingly QS9000) is essential for remaining in the market. These firms may supply just one
market, but there is some evidence of increasing internationalization.
Third-tier suppliers:
These firms supply basic products. In most cases, only elementary engineering skills are
required. In the third-tier of the component chain, skill levels and investments in training were
limited. At this point in the chain, firms compete predominantly on price.

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Aftermarket:
A further important segment of the automotive value chain is the market for replacement parts.
This is the sector that many firms in developing countries first moved into, even before local
assembly sectors were developed. Nowadays, there is an international trade in aftermarket
products. Firms in this section compete predominantly on price. Access to cheaper raw materials
and process engineering skills is important. Innovation is not required because designs are copied
from the existing components, but reverse engineering capability and competence to translate
designs into detailed drawings are important.

Strategic Comparison between General Motors and Toyota:

Toyota motors Strategic Analysis:
The Toyota Motor Corporation is a multinational corporation and now the world's largest
automaker in terms of sales, net worth, revenue, and profit according to Fortune Global 500. It
was founded in 1926 as Toyoda Automatic Loom Works, Ltd. and has consistently been more
productive than its competitors. The company has been widely recognized for the quality of its
products and production systems. The company is already onto its third generation hybrid engine
which is incredible given that many manufacturers have not even begun to develop their first
hybrid engine car.

Toyota SWOT analysis:

A Japanese based corporation

Strengths

pioneering culture
Brand repute
Industry leader in production and sales
Strong brand collection
The leader in green cars development

Weaknesses

Large recalls
Weak presence in the emerging markets

Opportunities

Positive attitude towards green vehicles

Increasing fuel prices
Changing customer needs

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Growth through acquisitions

Threats

Fluctuating fuel prices

New emission standards
Rising raw material prices
Intense competition
Natural disasters
Appreciating yen exchange rate

Value Chain Analysis

Toyota's value chain is so well developed that it makes the company more profitable than the
three largest automobile companies in the USA. The main strengths of Toyota's value chain are
in the inbound logistics, due to the usage of Just-in-time production method, because it
minimizes inventory cost. The other most valuable part of the chain is the Human resource. The
employees are supposed as Human Capital. Toyota's HR department is aware that happy
employees translate into better job performance. This equates to the kind of increased production
and quality that renders satisfied customers.

Strategic Group Mapping

Toyota is positioned in the moderately low-price, high volume market. The company has
managed to overcome mobility barriers and entered the luxury market with its Lexus brand,
which is now competing with BMW and Mercedes.

PESTEL Analysis:
Political:
In times of crises the Japanese government is subsidizing Toyota. The adoption of new
regulations in Europe, concerning the emissions of CO2 and reducing the impact of it on the
environment is another issue concerning Toyota. The company continues to exploit its know-how
of developing hybrid cars. Also there is political instability in the main oil-producing countries in
the world, leading to higher oil prices and less demand for cars.

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Economic:
The collapse of the international economy leaded consequently to the falling of the power of the
yen, which devaluates the prices of Toyota`s shares on the stock exchange. The economic crisis
also diminishes the demand for Japanese electronics and cars. In additions there was a decline in
the world buying power and high prices of the crude oil.
Social:
The population in the world as a whole is aging, which means that less people are interested in
new car models. Also, as a consequence from the economic crises, more people are using
alternative transportation means but cars, and by this again leading to excess production capacity.
Technological:
Toyota is considering building a hybrid-electric system available on every vehicle it sells
worldwide during the 2010s. The company is the most innovative company during recent years,
due to its vastly developing R & D department. Toyota is aiming at zero waste and zero
emissions as an ultimate group goal. The main objective is the continuation of development of
hybrid technology and development of hydrogen fuel cell technology.
Environmental:
Toyota is investing heavily in vehicles with lower emissions, for example, the Prius, based on
technology such as the Hybrid Synergy Drive. It is considered the most widely rolled-out
environment-friendly system in the automotive industry to date.
Legal:
In 1998 the United Nations Economic Commission for Europe adopted the Global Agreement on
Vehicle Regulations, which leads to limitation of the emissions of CO2, that a car can eject in the
atmosphere, from which Toyota Company benefited the most. In addition, some countries
impose restriction on foreign countries to enter their markets in order to try to sustain the export
and adopt new precautions of the competition law.

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Resources and Competences:

Toyota has good knowledge of the car industry and is recognised as being at the front of
innovation. Toyota's skills are clear in everything they do, they have good innovation skills and
are always looking to move with the market and never be behind. They have a dedicated
marketing team who always uses the best selling approach to push the product into the limelight.

Porter's Five Forces:

Toyota's main rivals are Ford Motor Company, General Motors and Honda Motor Co., Ltd.
However, the innovative technology that Toyota offers combined with the very loyal customer
base and the company's consistent, high-ranking quality marks assures a sufficient competitive
advantage.
The segment that Toyota occupies, especially the hybrid segment, is experiencing growth due to
global economic factors. To sustain market position, many brands were encouraged in their own
efforts to bring more hybrids to the market. Yet, new entrants to this segment have tried various
strategies without much success.
Toyota is a leader in innovative technology, environmental initiatives, and quality. Nevertheless,
given the financial situation the threat may come from other non-automobile personal transport
or public transport.

Ansoff Matrix:
a) Market Penetration
Suitability:
The market penetration strategy is most suitable for growing and emerging
markets. But in this case, the car market is already well-established and
penetration would be made much easier if the target market is growing.
Considering that Toyota is such an established name within the automotive

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industry, the risk of opting to penetrate the market is not that significant
barrier.
Acceptability:
Management may worry that targeting the customers of rival car manufacturers may result in
retaliation and it is likely a retention strategy to be considered as a possible and preferable
option. Since a fair amount of costs are involved with implementing this specific strategy, it is
expected that Toyota would need to improve both product quality and levels of service, backed
by promotional spend. However, if the risk of undertaking such a strategy does not pay off, both
shareholders and staff may be cautious. That, on the other hand, would lead to shareholders
losing value in their shares and also the employees possibly losing their jobs as a result of the
failed venture and lost revenues.
Feasibility:
The fact that Toyota's range is one of the largest in the automobile world and already exists in
each segment of the car market is determining factor for potential penetration on the market. This
suggests that Toyota is in a position to go ahead and penetrate any of these existing markets,
where the most likely target market for this strategy would be the small car market which is
predominantly aimed at young people.
b) Product Development:
Suitability:
Given the fierce high competition in the automotive market, it is necessary
for car manufacturers to keep up to speed with the latest developments.
Toyota, like many other car manufacturers is known for spending huge
amounts of money on research and development. It spent the most on
research and development of any company in the world in 2008. The
company spent $8,994million on R&D, which is 4.4% of sales. Toyota was
running an estimated Formula One budget of 190m per season and last

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year the budget was estimated of $445 million. The company is likely to
continue to build on the technology found with the Prius and other 'new-fuel'
alternatives. Toyota's Global 21 project, better known as Toyota Prius gives
the company first mover advantage.
Considering the rapidly vanishing natural resources and more specifically oil,
future plans of Toyota include development of Camry Hybrid fueled by
compressed natural gas (CNG) which shows that there may be possibilities of
using a whole new fuel in the future. Also, TMC is planning to launch 10 new
hybrid models by the early 2010s, in various global markets. Another key
factor, affecting the market position is the launch of the 'urban commuter'
battery-electric vehicle (BEV) by 2012. And finally, Toyota has a wide range
of small cars already at their disposal that inevitably will continue to enlarge
the niche that Toyota occupies.
Acceptability:
With rising fuel prices, more drivers are likely to be looking for ways to cut the costs of motoring
and to drive environmentally friendly vehicles. Moreover, shareholders and managers will be
interested in maintaining the superior company image by being environmentally responsible.
That is why Toyota continues to spend more on research, in order to fulfill its plan to release
more hybrid cars in the future. It is likely that its good reputation that has stemmed from the
Prius model will meet the consumers' needs. Furthermore, the Government will be satisfied
about Toyota's decision to continue with the research and manufacture of new and innovative
fuel alternatives.
Feasibility:
Toyota is clearly serious about developing this new technology further and perceives it as being
the future in this industry. They have successfully released the Prius model and therefore it is
likely that if they unearth more ground-breaking technology they will be more than capable to
launch it in the correct way. Given that Toyota is already making rapid progress on developing

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new products for the existing car market it is certainly feasible to continue develop in this
market.
Considering the two examined strategic options, most likely the best option for Toyota is Product
Development for existing market. The company has proved itself and exists in each segment of
the car market. Its best option is to continue to develop the brand and the products that are
demanded most. Though consumers are becoming more environmentally conscious which
enforced the excellent ability of the company to research and develop new fuel efficient
technologies. Second, the corporation plans to release 10 new hybrid models in the near future.
Toyota has the first mover advantage with hybrid synergy drive and sufficient expertise when
developing small, fuel-efficient vehicles and there is an increasing demand for these cars.

Strategic analysis of General Motors:

Analyzing the company's internal and external environments, there are many different
frameworks and models exist for companies. By having some strategies enables the firms to get
better understanding of the critical factors for their future success. This is because many firms
today operate both on a national, regional and global basis and as such need appropriate strategy
for each individual environment.
As being a multinational enterprise, GM operates in approximately 57 countries, including
Canada and US, and they serve and operate in variety of services from improvement, marketing,
manufacturing of cars, trucks to economy and insurance services.

General Motors SWOT analysis:

A U.S based corporation

Strengths:

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Global presence
New vision and strategy
Strong brand portfolio
Strong presence in China
Knowledge of home market
4 well performing brands

Weaknesses:

High cost structure

Brand intensity
Bureaucratic culture
Car recalls

Opportunities:

Positive attitude towards green vehicles

Increasing fuel prices
Changing customer needs
Growth through acquisitions

Threats

Fluctuating fuel prices

New emission standards
Rising raw material prices
Intense competition
Exchange rates

Competitive advantage analysis of GM

Porter's Five Forces:
The competitive analysis of a company is an essential element of identifying components which
are a threat to reduce profitability. For assessing over the competitive problems , Michael Porter's
five forces analysis is the one of the most efficient way. Porter (2004) has brought the light of
five such factors:

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1. Rivalry between existing competitors,

2. Barriers to entry,
3. Pressure of price from Substitutes,
4. Bargaining power of buyers,
5. Bargaining power of suppliers,
Therefore, General Motors Corporation's competitive advantage analysis will be done according
to Michael Porter's five forces.
Rivalry Between Existing Competitors:
Rivalry occurs, because one or more competitors either feels the pressure or sees the opportunity
to improve position. Additionally, 'The strategies pursued by one firm can be successful only to
the extent that they provide competitive advantage over the strategies pursued by rival firms.
Therefore, if we look at the GM motors in this section, in the 1970s and 1980s, competition in
the US automobile industry had become much stronger with the increase of foreign rivals such as
Honda, Toyota and Nissan. Although GM was a leader of the automobile industry at that period
of time, its rivals had started to compete with GM providing some different offers. For example,
Toyota started to produce cars with lower price than GM cars, whereas the quality of cars were
high. So that, the competitors of GM became well-known brands ,while GM had difficulties with
competing with them.
Barriers To Entry:
According to Porter, new capacity may be brought to an industry by new entrants. Furthermore,
gaining the market share, and getting high proportion of resources can be achieved by new
entries. Meanwhile, the presence of new corporations in any industry can push the prices down
and may decrease the profitability. Although these entries may seem as a threat, those may
protect the established companies. During the both world wars, GM made a high profit, and it
enlarged its business. Being a leader of the sector and being a well-known brand placed the GM's

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competitors very difficult position to entry the industry. Especially for the smaller firms,
competing with the GM was very hard. In early 20s, GM invented self-starters by differentiating
itself from Ford, later on, in 1970s; Japanese and European companies introduced their fuelefficient models to the industry.
Pressure of Price From Substitutes:
All of the companies are in the competition broadly with the industries manufacturing substitute
and complementary products. In this highly competitive automobile industry, any change in the
prices on substitutes such as gas, tires, could have a important effect on the demand for
automobiles. If we look at the GM, recent rising gas prices are highly to get a bigger effect on
GM. Generally GM's cars are energy inefficient. Therefore, this will have great impact on GM.
Bargaining Power of Buyers:
Buyers compete with the industry by forcing down prices, bargaining for higher quality and more
services, and playing competitors against each other, all at the expense of industry profitability.
As a result of highly improved information technologies, and as well as with globalization,
customers of the GM (like for the other companies) became more aware of what were they
buying and how much were they paying. Furthermore, getting the information the rivals of GM
from the internet increased the bargaining power of dealers of GM.
Bargaining Power of Suppliers:
Suppliers of an industry play a significant role for their businesses. They may reduce the quality
of the products, or may raise the prices up. For GM, raw materials and machine parts suppliers'
threat is very low, because there many suppliers for those sections However, the powerful labour
union, United Auto Workers (UAW), is a potential threat to GM's economical capability and
endurance.

Value Chain Analysis Of GM:

Value Chain is called to add value to the product and remove excess waste of resource
consumption, in other word, to maximize the value of work done by the systematic and asset

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management. Supplier of products and processes that increase the effectiveness of all stages up
to final customers and to maintain, so used to gain competitive advantage. Value Chain, a
Management focuses on the destruction of waste inside the company and also focuses on the
customer's satisfaction inside the company.
Value Chain assist to the companies to identify activities where it may well apply its presence
potentials and also identify which activities to outsource in order to decrease prices by getting
opportunity of country-specific advantages. One of the component of manufacturing is
outsourcing which is congress the features of GM's activities that needs a much more labour to
the other countries where labour costs are cheaper, and this could relieve GM from employment
responsibility. Additionally, recently GM could be able to resolve problems with United
Automobile Workers.
GM, for instance, gives highly importance on its customer relationships. For the theory part,
Service activities are the activities that continue and enhance the product's value including
customer support, repair services, etc. Meanwhile, for the GM strategy, they are using On Star
Technology which enables the customers get in touch with the call center of GM in an
emergency situation.

BCG Matrix Analysis Of GM:

The BCG Matrix method is based on the product life cycle theory that can be used to determine
what priorities should be given in the product portfolio of a business unit to ensure long-term
value creation, high-growth products and low-growth products should be undertaken by the
companies in need of cash inputs and generate a lot of cash respectively.
As I mentioned above, determining the factors of industry and as well as firms' businesses is
playing an essential role for gaining competitive advantage in the global market. Till before the
two decades, oil prices had gone up with high percentages. So, this is the environmental factors
had ousted the automobile sector to the fuel efficiency vehicles. With the consideration of BCG
Matrix applied to the GM, GM should pull off the brands like Pontiac, Hummer which are fuel-

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efficiency and oil-guzzling cars. Furthermore, more investment should put into producing
smaller fuel-efficient vehicles, and also HEVs

Conclusion:
In conclusion, analyzing the automobile industry is done by using some strategically analyzing
methods, such as Porter's FF, Value Chain, BCG Matrix, and Swot Analysis. Searching and
applying the systems into the automobile industry is quite broad because of the industrys long
time history which is more than a hundred years. In to this content, the industry is analyzed in
detail according to factors of competitive advantage, internal and external.

General Motors:
Of course, every single company and firm can make mistake in their business life cycle,
however, minimizing those mistakes is one of the essential area for the firms. If we turn to GM,
they had been really successful in the industry when there were no any other competitors.
However, once GM's rivals entered to the business, GM started loses its market share globally.
Because they overlooked at them, they didnt do many things until they lose their profits. After
that , they changed some system, they started to struggled with their rivals. So that, with
considering all the analyzed strategic forces above and the company, some recommendations
should be done.

Recommendations:

General Motors should describe possible and suitable sector to serve.

GM should concern about arrangement application and differentiation strategy.

They should stay ready for even every hard and difficult circumstance, Such as financial
crisis.

GM should enhance and improve its product development.

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Environmental factors should be considered as well for gaining the high quality of
business.

Recommendations for Toyota Motors:

Toyota should be crueler in utilization of its early leadership in the commercialization of

hybrid systems and electric-vehicle technology.

Toyota has to stop making so many dull cars with all the appeal of household appliances.

The company has to focus more on safety standards, in order to avoid bad publicity.

It can acquire few small companies, to reinforce its market position and expand the
company.

Toyota should separate its hybrid models into a separate brand that will target customers
that are more environmentally friendly.