Strategies of General Motors and Toyota Motor Corporation - Case Study Example

Strategies of General Motors and Toyota Motor Corporation Introduction The global car industry is becoming a more competitive market as players continue to improve their operations in order to battle for larger shares. An essential feature of the more intense rivalry among competitors is their creation and implementation of different strategies in order to pursue their goals and objectives. While others improve their operations by reducing cost to offer more competitive prices. Meanwhile, other players concentrate on improving their product lines and differentiating their offerings. However, it is notable that these changes in strategies are mainly mechanisms to cope with the fast paced environment of the industry players. Strategies are usually tailored to take advantage of the various opportunities in the firm's environment while harnessing its strengths and competencies. Currently, General Motors Corporation (GM) leads the automotive industry with total revenue of US$192.60 billion during 2005. This is amidst the US$2.6 billion loses incurred during the same year which is due to the weak demand in the North America. Following GM is Ford Motor Corporation (US$178.10 billion), Daimler Chrysler AG (US$177.37billion), and Toyota Motor Corporation (US$162.92 billion). Even though smaller in terms of revenue, it is notable that Toyota recorded the largest net income at US$10.61 billion during 2005 (Yahoo Finance 2006). It is apparent that there is an intense competition between the four largest players in the industry. Toyota was able to dislodge the Ford during 2003 and is widely regarded to as having the aspirations to become the future industry leader next to GM. From here, we can see a struggle between the companies as they are both challenged to devise winning strategies. For GM, the challenge is to craft and implement an efficient strategy to maintain its position in the global market, while for Toyota a strategy to battle head-on with GM and increasing its market share. The Market Leader: General Motors General Motors Corporation is involved in the design, manufacture, and marketing of cars and light trucks worldwide. The company was founded in 1908 and is headquartered in Detroit, Michigan. GM also has partnerships with Fiat Auto SpA of Italy; DaimlerChrysler AG of Germany; and Fuji Heavy Industries, Ltd., Isuzu Motors, Ltd., and Suzuki Motor Corp. of Japan. The company has a wide array of product line under the brands Chevrolet, Pontiac, GMC, Oldsmobile, Buick, Cadillac, Saturn, and HUMMER. The company's marketing arm is supported by retail dealers and distributors in the United States, Canada, and Mexico as well as dealers overseas. GM is recognized as the largest vehicle manufacturer selling 8.5 billion cars in 2001 while its sales in 2002 accounts for 15% of the trucks and vehicles sold globally (Yahoo Finance 2006). Traditionally, GM's approach in marketing its products is targeting a specific market segment for a specific brand so that the company's products do not compete with each other. These was profitable for the automotive firm as the brand's shared components and common corporate management gave way to a substantial economies of scale while the distinctions between the brands created an "orderly upgrade path." Before 1995, the company has a full range of products ranging from Chevrolet which is offered to an entry level buyer who is more concerned on a more practical and economical vehicle to the upscale Cadillac which is targeted to the elite market as it is regarded as the "standard of luxury (General Motors 2006)." Nevertheless, this strategy did not persist as the GM started to implement a gradual blurring of its divisions during 1995. This strategy leads to cannibalization in the market share of GM as each division competes with each other (General Motors 2006). During 2004, the company has announced a new strategy for its product lines which is apart from the traditional marketing and positioning it employs. This shift in brand strategy is targeted in "building sales, cutting costs, and bolstering brand identity (Garsten 2005)." For Chevrolet and Cadillac, GM is planning to maintain its present strategy of making them high volume brands that offers vehicle in every major segment by having a broad product line up. Buick, Pontiac and GMC will be combined into a single sales channel which offers trucks, premium and near-luxury vehicles and performance models. In addition, these product lines will be trimmed as GM plans to drop some models in this category. Saab is seen to offer exclusive European styled and engineered sedans, crossover and SUV models. HUMMER will continue to manufacture exclusive, premium SUVs and trucks. Lastly, Saturn will be upgraded as this division will offer more upscale models which are styled and engineered to European standards. This product line will be slotted between Chevrolet and Buick (Garsten 2005). Complementing these marketing strategies are three global technology strategies: offering technology which has a real impact and is valued by customer; technology which meets basic objectives of cutting costs to offer competitive prices; and sustainable technology which improves vehicle emissions and fuel economy (GM Global Technology Strategy 2004). Armed with these strategies, GM is geared to conquer the global market in the next decade. Market Challenger: Toyota Motor Corporation Toyota Motor Corporation is recognized as Japan's largest car company and the second largest in the world. Toyota is a multinational corporation involve in the manufacture of automobile. Toyota is headquartered in Toyota, Aichi while its manufacturing plants are dispersed in the United States, Japan, Canada, Australia, Indonesia, Poland, Turkey, South Africa, the United Kingdom, France, Brazil, and more recently Pakistan, India, Argentina, Czech Republic, Mexico and Venezuela. Toyota manufactures under the brand names Toyota, Scion, and Lexus. In addition, the company is a major stockholder of Daihatsu, Hino, and Fujitsu Heavy industries. The company's vehicles are often commended for their relative longevity and reliability (Toyota Motor Corporation 2006). As stated above, Toyota is seen to overtake General Motors in terms of production in 2006. This was first read in the Japanese magazine Nihon Keizai forecasting 9.2 million annual production next year. The company, in its aspirations to become the industry leader is backed by strategies which mostly centered on production efficiency and improvement of product quality. The business model of Toyota is based on a Just-In-Time inventory system which is known worldwide as the Toyota Production System (TPS). The TPS promotes efficiency in production as it advocates a lean manufacturing system that eliminates seven types of "wastes" namely, defects, overproduction, transportation, waiting, inventory, motion, and overprocessing. Due to this strategy, Toyota was able to cut costs and inventory. The company's success is also largely attributed to the TPS and this production philosophy is copied by a lot of manufacturers worldwide (Toyota Production System 2006). One of the current thrusts pursued by Toyota is the design and manufacture of more technologically advanced and sustainable products. The product of its effort is the Toyota Hybrid System. Though the company is not the first to propose and propose a hybrid car, the company is leads in the manufacture and marketing of one in large volume. This car, the Prius is seen as more efficient as it has more computer control, bigger electrical machines, power electronics and an NiMH battery. Up to date, Toyota is now able to sell 45, 000 units of Prius. Though the cost of R&D associated with Prius is not yet recoup in the form of profit, it is expected that demand will expand as consumers are becoming more concerned on fuel conservation due to the continuous hike in oil prices. It is important to note that the Prius' engine runs efficiently at about 9kW for part of the time and is off for the remainder (The Toyota Strategy 2006). Toyota also recognizes the huge opportunities for diversification. The company has proudly announced that it wants more diversification strategy for the 21st century. Toyota's diversity approach is comprised of nine areas of commitment namely Procurement, Advertising, Dealer Representation, Employment, Retail Diversity Development, Community Involvement, Job Training and a Diversity Management Structure (Diversity at Toyota 2006). Conclusion Thomson (2002) stressed that the most essential tasks of business decision makers is the creation and implementation of strategies that could address the needs of the organization and push it to achieve its goals and objectives. In the case of General Motors and Toyota, strategies play a great role in their success and even survival in the industry. The most important consideration, still, is the company's ability to tailor fit their strategies according to the trends, opportunities, threats, and other external factors in the market. References Diversity at Toyota. 2006. Retrieved 24 February 2006, from http://www.toyota.com/about/diversity/2001/newsreleases.html Garsten, D. 2005. GM shifts strategy for brands. Retrieved 24 February 2006, from http://www.detnews.com/2005/autosinsider/0505/19/A01-187008.htm General Motors Company. 2006. Retrieved 24 February 2006, from http://en.wikipedia.org/wiki/General_Motors GM Global Technology Strategy. 2004. Retrieved 24 February 2006, from http://www.gm.com/company/gmability/sustainability/reports/05/400_products/1_ ten/410.html The Toyota Strategy. 2006. Retrieved 24 February 2006, from http://www.thermal.demon.co.uk/Prius%20Presentation%202/Slide%201.htm Toyota Production System. 2006. Retrieved 24 February 2006, from http://en.wikipedia.org/wiki/Toyota_Production_System Toyota Motor Corporation. 2006. Retrieved 24 February 2006, from http://en.wikipedia.org/wiki/Toyota Yahoo Finance. 2006. General Motors. Retrieved 24 February 2006, from http://finance.yahoo.com/q/cos=GM Read More