Strategic Management of Ford and Honda - Case Study Example

Strategic Management Executive Summary The paper discusses on one of the world’s biggest industries, the automobile car manufacturing industry. It highlights the magnitude of the industry in encompassing the global market and standing the test of times. The discussion highlights on major automobile companies like Ford and Honda and understands their strategic initiatives. The industry is analyzed based on five forces model and political, economic, social, technological, legal and environmental grounds (PESTLE). Finally, critical success factors aiming at enhancing industrial performance are also dealt with. Structure of the Global Automobile Car Manufacturing Industry Nations, which dominate the steering of the Global Automotive Industry, constitute Europe, United States, Japan and other Asian countries like China and India. Research reveals that by the end of 2006 the automobile manufacturers in the United States like Ford, General Motors and Daimler Chrysler were losing their shares to the Japanese car manufacturers like Toyota. (Gopal, n.d., pp.3-4) The automobile industry of the Triad regions comprising of North America, Japan and Western Europe suffered problems owing to factors like overcapacity, increasing costs and diminishing profit lines. North America however reflected a buoyant market in the light of the above scenario by the close of the 1990 period. Consumer demand was observed to counter a shift during this period in purchasing light trucks rather than passenger cars. The increased competition of the Triad nations in the automobile industry triggered the concentration in assembly points. Regional companies as stated contributed greatly to the worldwide production and sales of automobiles. The amount of concentration led to a million automobile units being produced by only 13 companies in the year 2001 accounting for an 87 percent stake in the global automobile production. (Humphrey & Memedovic, 2003, pp.2, 5) The PESTEL analysis Political: Political factors have been playing a significant role in the decisions of automobile companies. For instance, Honda decided to construct an assembly factory for producing passenger cars under the pressure from US government (Law, 1991, p.105). Economic: Consumer demand was observed to counter a shift during this period in purchasing light trucks rather than passenger cars. The increased competition of the Triad nations in the automobile industry triggered the concentration in assembly points. Regional companies as stated contributed greatly to the worldwide production and sales of automobiles. Moreover rising cost of fuels and tax on imported items reduced customer interest declining sales. (Humphrey & Memedovic, 200) Social Observation suggests that the automobile industry is one of the largest global industries owing to its diversified manufacturing base by leading regional companies. In regards to the above fact, the automobile industry earns more recognition in regional than in global context Technological: The automobile industry of the Triad regions comprising of North America, Japan and Western Europe suffered problems owing to factors like overcapacity, increasing costs and diminishing profit lines. North America however reflected a buoyant market in the light of the above scenario by the close of the 1990 period. Legal and environmental: Evaluating the environmental impact of the automobile industry in terms of harmful emissions is a legal binding for the respective companies. Fuel friendly cars are not only economical but also environment friendly. (Ganguly, n.d.) Porter’s five forces In regards to the threat imposed by new entrants to the market, it is observed that factors like existing brand loyalty or loyalty to major brands, scarcity of resources leading to increased production costs and government regulations constantly discouraged entry of new firms. The supplier power was dual faceted in regards to automobile manufacturing. Substitutes being unavailable raised supplier power while if the company decided to switch to other suppliers it meant a loss to the former supplier. It was observed that buyers were interested mainly in foreign models. (Gopal, n.d.., pp. 23-24). The following illustration depicts the life cycle of automobile industry and the stages passed during the cycle: Demand Embryonic growth shakeout maturity decline death Time (Automotive Industry Life Cycle, 2009) Ford The Ford automobile company came into being in 1903 and occupied national importance in automobile production in the American context. However, during the end of 1990 the automobile industry of America was badly affected by factors like increasing costs and diminishing profits. This Ford to end up in closures of many plants and shift to the production of light trucks from the sector of consumer cars. (Rubenstein, 2002, pp.1-2) The assembly line installed in Ford’s Michigan factory helped the automobile company in reducing the cost of production. A fact states that the T-model one of Ford’s famous models was assembled in a time span of only 93 minutes owing to its assembly line. (The History of the Automobile, N.D.) In 2008, Ford recorded a 14.2 percent share in the automobile market of America. During the same period in Europe, the company had a share of 10 percent. (Sustainability Report 2008-09, 2009) Some of the automobile brands produced by Ford include Aston Martin, Ford, Jaguar, Land Rover and Volvo to name a few. Ford has innovated the 2011 explorer, a sports utility vehicle that would increase the economical use of car fuel. (Ford introduces 2011 explorer SUV, 2010). Further, the company made an investment of $200 million in the Kentucky plant for retooling purposes. (New era of flexible manufacturing begins at Ford’s Kentucky plant in Louisville, n.d.). Honda Honda in regards to automobile manufacturing symbolizes innovation. The company aims at enhancing the feelings of enjoyment and satisfaction of the consumers. Honda continuously enhances its capability of innovation to ensure better customer comfort and safety, which makes increases its demand. (Honda and Technology, 2010). In the Asian market, Honda recorded the highest sales figure for its brand Honda City. (Asia, Oceania, n.d.). Catering to the European market Honda introduced its environment friendly car model of CR-Z Hybrid in June 2010. (Europe, Middle East, Africa, n.d.) The North American market for Honda is found to encourage the production capability of the firm and in strengthening its local base. (Global Honda, n.d.) In regards to automobile sales Honda has ranked sixth in global sales. The sales on unit basis have increased by 95,000 units from 2002-03 periods. Again from 2003-04 the sales of Honda have recorded an increase of 259,000 units. (Bradley, Bruns, Fleming, Ling, Margolin & Roman, 2005, p.10) Honda has also diversified itself to the production of engines. Engines built by Honda are tough and require skillful labor. (Anna Engine Plant, n.d.). Honda encountered a strong rivalry in regards to three United States automobile firms viz. Daimler Chrysler, Ford and General Motors. Honda has a very strong supplier power, which contributes greatly to help it meet customer needs and expectations worldwide. (Supplier Diversity, 2010) The treat from buyers and substitutes in regards to Honda constitute that the firm enjoy a number of suppliers in trying to sell auto components. (Peng, 2008, p.42) In regards to technology, Honda aims at providing a greener environment through low carbon emission technology. (News Center, 2010). The “Critical Success Factors” driving the Global Automobile Car Manufacturing Industry’s Performance The identification of “Critical Success Factors” helps the management body of a company in getting needed information for taking managerial decisions. In regards to the automobile industry “critical success factors” underlined stand out to be enabling style of operation, efficient dealer network and a control on cost and profitability of the company. (Rockart, 1979, pp. 84-85)  Success factors behind Toyota’s growth are its solid synchronization activities between labor and manufacturing process, which helps in reducing the cost of production and enhancing quality. The company focused mainly on four brands, which helped the company to augment its brand equity. (Teslik, 2007) Success factors of the Korean automobile industry entail huge investment in the manufacturing facilities, which helps produce 200,000 to 300,000 cars per year. This huge production being enabled reduces the cost of production of the plant. (Chu, 1997, p.2) The integration of plastics in the designing of cars help in designing light weight and fuel efficient vehicles. Moreover, the enabling of technology like Global Positioning System (GPS) in the cars has helped the commuters in locating traffic and other local amenities. This is regarded as a value addition to the car designs. It is seen that due to rise in petrol prices demand for car decreases. To this end petrol to electric conversion hybrid technology is being used in cars to make the vehicles more fuel-efficient. This has helped promote a greener environment and also has augmented the car sales. (Car and Automobile Manufacturing, 2010).  Conclusion The global automobile car industry is seen to be one of the largest industries competing in the global sphere. The reason for its expansion counts on the assembly functions being outsourced to many regional and global countries. Owing to the practice, the cost and efficiency parameters of the sector rest on controlled hands. Moreover, the industry also focuses on meeting increased demands and expectations thereby being flexible in regards to the changing climate. Appendix (Anna Engine Plant, N.D.). References 1. Asia, Oceania”, Honda. (n.d.). Available at: http://world.honda.com/profile/globaloperations/asia-oceania/ (accessed on October 19, 2010) 2. Anna Engine Plant, (n.d.) Honda. Available at: http://ohio.honda.com/manufacturing/aep.cfm (accessed on October 19, 2010) 3. Automotive Industry Life Cycle (2009), Car Freaks, available at: http://www.carfreaks.info/automotive_industry_life_cycle (accessed on October 16, 2010) 4. 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