Customer Value Proposition of Toyota and General Motors - Case Study Example

 Customer Value Proposition Table of Contents Abstract 2 1.Introduction 3 2. Assessment of current Customer Value Proposition 4 2.1 Introduction 4 2.2 Toyota 5 2.3 General Motors 6 3. Improving Customer Value Proposition 8 3.1 Introduction 8 3.2 Toyota 9 3.3 General Motors 10 4. Conclusion 13 References 14 Bibliography 16 Abstract The project is concerned with Customer Value Proposition (CVP) in the automobile multi national corporations like that of Toyota and General Motors. The objective of this project is to know about the concept of CVP, company profile of both the companies with emphasis on CVP for both the companies. The key objective is to find out a way for improving value proposition in both the company. This project analysed all the strengths and weaknesses of both the companies. It also tries to find out the past performance of those companies to get a clear picture where these companies are actually lagging behind and what techniques they had taken to improve the deficiency. This project also provides suggestion to improve the value proposition in both the companies. The term CVP denotes some added value of a product or service towards its targeted customer by the company. The customer value proposition should be an ongoing process. The company should bring some changes to the existing composition and always try to come up with new innovative ideas to gain competitive advantage. A well-designed CVP always gain a special attention of the customers. This research paper deals with the various aspects of CVP of Toyota and General Motors. 1. Introduction The value proposition of the two leading multinational companies are analysed in this paper namely Toyota and General Motors. Customer Value Proposition is the process which creates greater value for a particular product towards its targeted customers over competing alternatives. It indicates the overall benefits that a customer derives from a product or service. Value proposition not only referred the basic factors as price but also related factors like after sales service, promptness, quality etc. CVP is another area that facilitates competitive advantage. The factors included in the value proposition process always try to attract customers. These elements always try to serve their customer in a unique and different manner that the product and service can not be easily available from any other competitive alternatives. Setting up customer value proposition is a difficult task. Because the elements which should included in it is depended on the industry and the nature of the competition offer by them. It means the composition of the value proposition should be such that the company offers a little extra than the availability from the competitor (Wise Geek, n.d.). At the time of preparing the value proposition the following points should be kept in mind What should be the core offer for the company What factors differentiate the company from its competitor What the requirement and of the target group of customer How can the customers be better served (London Metropolitan University, 2005). 2. Assessment of current Customer Value Proposition 2.1 Introduction After General Motors and Ford, Toyota stood third among the world’s automobile manufacturer in 2000. Toyota’s history goes back to1973 when Sakichi Toyoda diversified his business into the handloom machinery business. He founded Toyota Automatic Loom Works (TALW) in 1926. In 1933, Sakichi established an automobile department. It is within TALW. The first passenger car model was developed in 1935 (ICMR, n.d.). Toyota has near about 56 manufacturing plants in all over the World. It has speeded their business across 6 countries. It employs over 200,000 people across the world. It uses to produces 5.5 million vehicles per year. Its annual sales are around $ 120 billion (Toyota, n.d.). US - based General Motors (GM) is the largest automobile company in the world. Mission of this company is to create a business environment which is based upon the understanding, mutual respect and responsibility. It was founded on 1908. It has its global head quarter in Detroit. Since 1931, it was the global automotive sales leader. GM has their business over 200 countries with 204,000(approx) people around the world. GM and its strategic partners has cars and trucks production house in 32 countries. GM has technological collaboration with Daimer, Toyota Motors Crop, Chrysler and BMW AG. GM also has major stake in GM Daewoo Auto & Technology Co. Edward E. Whitacre, Jr is the CEO of GM and Vice Chairman of GM is Thomas G. Stephens. It also provide financial services in the forms of extended service contracts, full service leasing, vehicle and homeowners insurance, consumer vehicle financing etc (General Motors, n.d.). 2.2 Toyota Just in Time The Toyota Production System (TPS) intended to produce world-class quality automobile at competitive price. It was based on two broad principles. One of it is Just in Time (JIT) production and another is Jidoka. In the early 1970s, Taichi Ohono implemented JIT in Toyota’s manufacturing plants. In Toyota, this system was aimed to avoid waste, reducing inventories and increasing production efficiency. JIT not only used for manufacturing but also in product development and supplier relation. The early implementation of JIT principle is proven to be as the great success for the company. This way the company is able to respond to the changing need of the customer and offers high quality products at low costs thus increasing customer satisfaction. Quality and Reliability Toyota has been the quality leader in the auto mobile segment for more than two decades. Analysts felt that other leading automakers like that of Honda, Dimler Chrysler that excelled in engineering techniques and styles; did not match Toyota in quality and reliability (Toyota, n.d.). After Sales Service The company provides warranty of 3 years / 1 lac kilometers. They also started Smiles programme which is an annual pre-paid maintenance programme for Toyota customer that offer labour for repairing at no cost, discounted packages on maintenance bills, priority in service appointments (Toyota, n.d.). 2.3 General Motors Brand Recognition General Motors sell their vehicles through the bands like Chevrolet, Buick, GMC, GM Daewoo, Vauxhall Holden, Wuling , Opel and, Cadillac. Convenience United States is the largest market for General Motors. Also, the company have prominent market presence in China, Brazil, Germany, the United Kingdom, Canada, and Italy. Environmental Commitments GM has environmental commitment towards its community. Starting from the production system to the vehicle that is on the road, GM always tries and abides by the environmental factors. Regarding safety of the customers, GM tries to assist the drivers with their technologically improved control system. GM has an electronic stability control system which is helpful for maintaining vehicle control (General Motors, n.d.). Employee Relationship GM is also committed to their employees. They offer Employee Vehicle Allowance (EVA). They also provide incentives and preference to their employee (General Motors, n.d.). Innovation of New Product GM strives to improve their fuel efficiency by utilising numerous innovative technologies. While doing this they did not give up the power output and smoothness. GM has clean diesel technology and active fuel management. On fuel cell technology, GM uses hydrogen to create electricity. The Chevy Equinox Fuel Cell is the most advanced fuel cell propulsion system till today. GM offers a wide range of hybrid cars. They are confident that no other company car offers such verity. 3. Improving Customer Value Proposition 3.1 Introduction Identifying customer value proposition is the key step for controlling the business, market and customer of a particular company. Few things can help the company to identify the correct marketing strategy, development of the business and serving their customer properly, those are as follows: Differentiate the type of customer A structured plan for product development and for improving performance To provide preference to that step which the company should take at first Comparative study with the competitor (London Metropolitan University, 2005). For better understanding of Customer value Proposition, reference of “Winning Customer Value Framework” model can be consulted with. This is a value proposition model. (Elmo, n.d.). This model included 16 major activities that have contracted data. And determines four primary dimensions which implicated in creating a value proposition. 3.2 Toyota The President of Toyota, Mr. Akio Toyoda, recognised the requirement for innovative design. He stated that Toyota should provide their customer cars which can be exciting to drive. Quality and reliability are the two strong pillars of Toyota’s value proposition. Even, TPS supports its value proportion (Balridge, n.d.). Analysts feel that though other leading automakers like Mercedes-Benz, Honda and Daimler Chrysler excelled in advance engineering technique styling, they did not match Toyota in quality, productivity and efficiency. Even the executives of rival company also appreciated the company’s manufacturing and product development system. Many of the officials are of the view that in manufacturing and product development field, Toyota is the benchmark. Toyota is proved to be an “environmentally friendly” company. It is also appealing for those customers who are concerned about the gasoline price. The value proposition of this company put stress on technology aspects also. According to analysts, Toyota’s success in both the local and global markets was mainly because of state – of - the – art facility. The company had continuously focused on gaining competitive advantage through implementation of innovative and path breaking ideas on its production floor (OP Papers, n.d.). Toyota should develop new competencies in customer engagement and design. Toyota always strives to set a standard in terms of quality in the automobile industry and tries to sharpen its core competencies Apart from it; Toyota should make its value proposition clear and concise. They should have a periodic brainstorming session to identify the needs of the targeted customer. Value proposition is one of the greatest strength of Toyota which creates differences for its competitors. So, Toyota must try to expand their business utilising this and try to increase its market share. For the purpose, it can go through an executed market channels. 3.3 General Motors General Motors has been one of the leading companies which had introduced iconic cars to the world e.g. Camaro, Firebird and newly launched Escalade. These cars are fantastic but these cars were unable to create demand among the customers. Because they feel that these vehicles can’t fulfil the environmental and economical problems of the current world. All of this confusion erupted because GM did not concentrate on its engine efficiency. In the US automobile market, GM’s market share had been steadily fallen by 50% in the late 1999. Analysts indicate that there is a probability for GM to fall into vicious circle. GM faces low demand for its car as they did not response to the changing customer preference and need. This leads to higher inventory with their dealers. And to prevent this they offer higher incentives to their dealers which again lead to decrease its profit margin. So, ultimately the poor management of this company makes it fall in the controversial bankruptcy and by utilizing this opportunity the other car manufacturer able to cover a large amount of US market share. The new CEO of GM rightly understood the impotence of the customer value proposition and focused on “Customers, Cars and Culture”. It was GM’s new philosophy. The US auto industry is considered as the buyer’s driven market because of the presence of high competition among the other players of the industry. So, GM had to focus on customers. The foreign and domestic competitors always try to follow the same pattern of taking care of their customers. They use to provide cost effective and technologically reliable innovative design and features. Because of the poor management the company was not able to concentrate on their core activities. They had focused on wheeling and making their showrooms attractive instead of manufacturing a good car. Even their labour contracts were not the best deals. All this happened where other players were still concentrating on reliability and value proposition. They even promote their cars as less expensive to run and own which indicate the higher gas mileage and lower price respectively. GM always concentrates on big cars along with gas guzzling engines. But they were lacking in attractive interior. Now General Motors had to work on value proposition to gain the comparative advantage. So after one year of research in collaboration with Forrester Research, GM launched a division called e-GM. It took the responsibility of company’s website and Onstar communication system. This was an innovative idea for GM to create value proposition. But after taking this initiative also the company incurred losses. It can be said without doubt that the basic strength of every automobile company is their new innovative product line as per customer’s need and requirement. The aspects of quality, reliability, innovative product design, power engines, and range of cars and after sales service are very important. The onus lies on the company to set their priorities. As we know Honda, provides more preference to the quality but GM always concentrates on heavy powered engines and other minor factors discussed in above paragraph. The matter of the fact is that, these are secondary requirements for a customer. So, GM should concentrate more on quality and design. They should launch product as per the customer’s need and choice. For this, they should opt for advanced market research and have to adopt latest new technologies as they can respond to the changing needs of the customer. 4. Conclusion The paper basically dealt with the customer value proposition based upon two companies. It is observed that Toyota is in better condition with respect to customer value proposition compared to General Motors. From the above discussion we have a clear idea regarding strength of both the companies. Toyota always try to come up with new innovative technologies where as GM is dealing with a huge number of brands all across the world. Value proposition is also understood with the help of ‘Value Proposition Framework”. From the point of view of this framework, Toyota was lacking in “Market Structure” Because its market channel is not as good as GM and other competitors where as GM is lacking in 'Customer Mode' as it has been observed that it did not consider the customer’s need and requirement while producing cars. So, both the company should work on that. Also, it has been felt that Toyota should increase its market channels to increase its market share and GM should provide for a proper market research to understand the customer’s choice and requirement. On this note, it is expected that Toyota and GM will be able to improve their customer value proposition and can gain competitive advantages. References Balridge, No Date. Toyota’s Strategic Challenge. Business. [Online] Available at: Management.http://www.baldrige.com/sector/business/toyotas-strategic-challenge/ [Accessed May 21, 2010]. Elmo, D., No Date. Winning Customer Value Framework. Images. [Online] Available at: Management.http://davidelmollc.com/images/Value%20Prop%20Rev%2007%20min%20-%20JPEG.jpg [Accessed May 21, 2010]. General Motors, No Date. Employees & Retirees. Our Company. [Online] Available at: Management.http://www.gm.com/corporate/employees/ [Accessed May 21, 2010]. General Motors, No Date. Corporate Responsibility. 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