Takata Air Bag - Case Study Example

Takata air bag Case study Table of Contents Table of Contents 2 Introduction 3 Business and Industry Overview 3 Vision 3 Mission 4 Situational Analysis 4 CPM Matrix 4 EFE Matrix 8 SWOT Matrix 9 Recommendation 10 Expected Result 10 Conclusion 11 References 11 Introduction The study is based on the competitive position analysis of vehicle airbag business of Takata Corporation. The study will focus on the intensive and in-depth situational analysis that will illustrate the internal as well as external competitive position of the organization in the current scenario. Hence, the study will emphasize on appropriate recommendations to neutralize the potential current and future threats while efficiently utilizing the opportunities in the market. Finally, it will discuss the expected impacts of those recommendations on the current business situation of the organization. Business and Industry Overview The airbag industry has been witnessed as one of the high growth industry worldwide. The rapidly developing market of airbag includes South America, South-East Asia, Eastern Europe, China and India (Prasad, 2015). Since 2009, various safety measures taken by National Highway Traffic Safety Administration’s (NHTSA) has guided the automobile companies in the US to properly pass the side crash test which has further influenced the utilization of airbag safety equipment in the manufactured vehicles. The major manufacturers of the airbags within the global market include Autoliv, TRW, Delphi, Takata etc (Mattsson, 2015). Takata Corporation is a Japanese automotive parts manufacturer company which is one of the leading suppliers of vehicle airbag systems across the world. Apart from airbags the organization also deals in seatbelts, steering wheel system and child restraints system for a number of automobile companies. The organization was founded by Takezo Takada in 1933. Their major clients include Honda Motor Company, Toyota Motor Company and Nissan Motor Company. The organization has recorded annual revenue of approximately $4.5 billion by the end of 2014. Currently, the organization is recalling a large number of vehicles which as using Takata-made airbag system due to the recently found defective functions of the product. According to the current data the organization is recalling near about 34 million vehicles to replace their defected airbag system (Klayman, B. 2015). Vision The vision statement of the organization defines their motivation towards the continuous development and innovation. The vision of the organization provides immense importance towards the preciousness of life while developing and designing any safety product (Takata Corporation. 2014). Mission The mission statement of the organization describes its intention towards: Developing innovative products as well as providing superior services and quality to achieve customer satisfaction. Respecting different cultures and personalities while keeping associates motivated to pursue common goals (Takata Corporation. 2014). Situational Analysis Situational analysis can be described as the collection of different methods that can be utilized by the management of different organizations to analyze their external as well as internal environment. This analysis allows the management to assess the strength and weaknesses of the organization along with the opportunities and threats of the external market (Hollensen, 2015). CPM Matrix Competitive profile matrix (CPM) is an important tool to compare any organization with other major competitors of the industry. Hence, the utilization of CPM matrix will assist the organization to clearly assess their strength and weaknesses in comparison to the immediate competitors. The CPM matrix utilizes the basic critical success factors of the organizations. All of the competitor organizations need to be compared and ranked as per the weight of those critical success factors. This analysis enables the management to properly understand their strengths and weaknesses in comparison to the external environment and market competition (Chang & Huang, 2006). Key Success factors Takata Autoliv TRW Market size and experience Takata is one of the oldest automotive companies which have established in 1933. The organization has scattered its business across the world through 50 facilities. Autoliv has started their business during 1997 and the organization has their 80 business facility in 29 countries. TRW is comparatively new company in comparison to its competitors. The organization was established in 2002. It is currently serving 26 vehicle producing countries through 200 facilities. Financial strength and profitability By the end of 2014, the organization has demonstrated $4.5 billion of revenue. In the current year, the largest automotive recall has caused 10.2% shares decline of the organization. During February, the US regulators have imposed $ 14,000 fine per-day for their failure in the investigation of airbag defects. By the end of 2014, the organization has recorded $9 billion revenue. The organization acquires 40% market share worldwide. During current year the organization has contracted 25 million airbag replacement of Takata. This situation has allowed the organization to capture a sound portion of the market of Takata. The profit of TRW rises 23% in 2014. The annual revenue of the organization is $ 4.4 billion for 2014. The organization is targeted towards increase their production facility to 25 million to fulfill the deficit of airbag requirement due to the recall of Takata. Product quality The huge recall of the airbags has demonstrated the reduced quality of the product of Takata. The organization provides high quality of product that has allowed them to acquire huge portion of the global market. TRW also demonstrate good quality of products that has enabled them to acquire 8% of the global market share. Consumer loyalty The customer loyalty is high for Takata due to its long presence in the market. Currently, the detection of product defect is hampering their market position The organization possesses high consumer loyalty across the globe. The consumer loyalty is moderate due to the late arrival in the market. They are focused to increase the consumer loyalty by a loyalty program sponsored by TRW KFZ Ausrüstung GmbH. Price competitiveness The huge recall of the organization can highly affect their price competitiveness. The price of products of Autoliv is quite high that reduces their price competitiveness. The price competitiveness is high for the organization. Innovation/ research and development The organization is highly focused towards the innovation and research and development of its product. The organization is opening a new research and development location in Berlin where they are investing approximately $20 million The last year research and development investment of the organization was approximately $126 million. The organization is planning to expand their research and development facility. The organization recorded an investment of $36 million last year. High entry and exit barrier Exit barrier is high for the organization due to high capital investment in the market. The exit barrier is quite high for the organization due to its technical know-how and capital investment. The market exit barrier is moderately high for the organization. (Source: Autoliv. 2014; TRW. 2014; Takata Corporation. 2014) Takata Autoliv TRW Key Success Factors Weight Rating Weighted Score Rating Weighted Score Rating Weighted Score Market size and experience 0.1 4 0.4 4 0.4 4 0.4 Financial strength and profitability 0.15 3 0.45 4 0.6 4 0.6 Product quality and variety 0.2 1 0.2 3 0.6 3 0.6 Consumer loyalty 0.2 3 0.6 3 0.6 2 0.4 Price competitiveness 0.15 2 0.3 3 0.45 3 0.45 Innovation/ research and development 0.15 3 0.45 4 0.60 3 0.45 High entry and exit barrier 0.05 2 0.10 2 0.10 3 0.15 Total 1 2.5 3.35 3.05 (1- Major weakness, 2- Minor weakness, 3- Minor strength, 4- Major strength) The CPM matrix has described the decreasing competitive position of Takata in comparison to its major competitors in terms of price competitiveness, product quality and market exit barrier. EFE Matrix The external factor evaluation matrix (EFE) is a strategic tool of organization that assists the management to properly evaluate the external treats and opportunities. The external attributes of the opportunities and threats listed in the EFE matrix generally carry a weight as per their importance. Hence, the company needs to be ranked as per its response towards the threats and opportunities (Chang & Huang, 2006). Opportunities Weight Rating Weighted Score 1. The global presence of the organization and its facilities is one of the major opportunities of the organization. The business is present in all the major cities across the world. 0.1 4 0.4 2. The business relationship of the organization with a huge number of leading automobile manufacturing companies has also provided them the opportunity to secure competitive advantage. 0.1 3 0.3 3. The economic growth within the developed and developing countries has increased the disposable income of consumers. Therefore, it has provided immense opportunity to the organization to expand their business. 0.15 3 0.45 4. The increasing regulation regarding the maintenance of vehicle safety has provided the organization the opportunity to improve market competitiveness. 0.15 2 0.3 Threats       1. Government restriction in terms of the supply of defected airbags has increased threat for the organization. 0.15 4 0.6 2. Decreasing consumer loyalty due to the detected defects of the airbags has imposed threats to the organization 0.2 3 0.6 3. The increasing competitiveness and decreasing profitability has enhanced threat to the organization. 0.15 2 0.3 Total 1   2.95 (Source: Morgan & Klayman, 2015). (4 - Superior response, 3 – Above average response, 2 – Average response, 1 –Poor response) The result of the EFE matrix in terms of the responses towards the opportunities and threats of the organization has demonstrated 2.95 score. It depicts that the organization is providing above average response to the threats while utilizing opportunities. SWOT Matrix The SWOT matrix, also known as SWOT analysis, is a structured plan to properly evaluate the potential internal strength, weaknesses of the organization. It also details the external threats and opportunities of the organization. The SWOT matrix will provide a clear idea about the helpful as well as unhelpful internal and external attributes of the organization. Therefore, it will assist the management to design their future plan fort market development (Hollensen, 2015). (Source: Morgan & Klayman, 2015; Takata Corporation. 2014). Recommendation Takata Corporation possesses a strong market reputation as well as wide global presence. The long market presence and strong consumer data base has assisted the organization to create a sound financial profile (Morgan & Klayman, 2015). The organization needs to utilize their financial strength to increase their investment in terms of product quality checking, product development and innovation procedure. The organization must abide and strictly follow all the governmental regulations of its operating countries to eliminate regulatory fines. The huge recall of vehicles due to defective airbags can reduce their market profitability as it requires a large portion of time to replace these products. Therefore, the organization needs to allocate this task to the larger facilities of the developed countries to speed up the process. On the other hand, they must focus on increase the productivity of their product within their other facilities. The marketers of Takata Corporation should provide great importance to the product development strategy which influences organization to penetrate existing market with new product line. Hence, they should influence the marketing and sales process of other product line, such as seatbelt, steering etc, to maintain their financial profitability (Proctor, 2014). The organization also needs to adopt the market development which will allow them to enter new markets with their existing products. As per this strategy the organization needs to explore new markets within developing countries with their existing product range (Proctor, 2014). Expected Result The expected results of the proper implementation of the recommendation includes- Increase in the airbag replacement process- This result will assist the organization to minimize the time limit of product replacement procedure. Hence, it will allow them to invest their time to increase their competitive position in the market. Improvement in the relationship with the government- This result will allow the management to reduce the regulatory fine. It will also assist them to modify the product quality as per government regulations. Improvement in product quality and innovativeness- This result will enable the organization to gain the market trust. Therefore, it will increase their market position. Increase in market radius and product line- This market development strategy and market penetration with new product line will increase the market share of the organization. Therefore, it will improve their profitability. Conclusion The discussion of this study has assisted to incorporate a number of principles regarding the analysis of the internal as well as external competitive position analysis of the organization. The Utilization of CPM matrix has enabled to evaluate the potential strength as well as weaknesses of the organization in comparison to the competitors. The EFE matrix has evaluated the opportunities and threats of the organizations external environment. It also detailed the rate of response of the organization towards the opportunities and threats. The organization has moderately responded to the threats. The organization has utilized its widely distributed facilities to properly indulge in the replacement process. They have also spent a huge amount to improve their research and development. In addition, I have also recommended the organization to indulge in market development and product development process to acquire developing markets and increase profitability. References Autoliv. (2014). Annual Report 2014. Retrieved from http://www.autoliv.com/Investors/Financial%20Reports/AR2014.pdf. Chang, H. H. & Huang, W. C. (2006). Application of a quantification SWOT analytical method. Mathematical and Computer Modelling, 43(1), 158-169. Hollensen, S. (2015). Marketing management: A relationship approach. New York: Pearson Education. Klayman, B. (2015). Takata air bag recall could take years to complete. Retrieved from http://www.reuters.com/article/2015/05/20/us-autos-takata-recall-production-idUSKBN0O521K20150520. Mattsson, G. (2015). Anti-counterfeiting concerns of the vehicle manufacturing sector. Journal of Intellectual Property Law & Practice, 10(4), 280-284. Morgan, D. & Klayman, B. (2015). Takata doubling U.S. recall for defective air bags to 34 million vehicles. Retrieved from http://www.reuters.com/article/2015/05/20/us-autos-takata-recall-idUSKBN0O428E20150520. Prasad, P. (2015). Injury Criteria and Motor Vehicle Regulations. In Accidental Injury (pp. 793-809). New York: Springer. Proctor, T. (2014). Strategic marketing: an introduction. London: Routledge. Takata Corporation. (2014). Takata Corporation: Annual Report 2014. Retrieved from http://www.takata.com/ir/ir_pdf/140924ar_en.pdf. TRW. (2014). 2014 TRW Automotive Annual Report. Retrieved from http://hses.trw.com/2014%20HSE%20Annual%20Report_v9.pdf. Read More