Ford and Toyota SWOT Analysis - Research Paper Example

?Ford Toyota SWOT Analysis Ford & Toyota SWOT Analysis Shaneka Dauley A Paper Presented in Partial Fulfillment of the Requirements of MGT 680 Global Strategic Management February 2013 Introduction The analysis of SWOT has helped many upcoming business executives and owners to make better management decisions. The analysis, an acronym for strengths, weaknesses, opportunities and threats, has also helped large companies make proper decisions in terms of budgeting, human resource management, production costs and expansion. Motor vehicle production is one of the biggest multi-national industries in the world. It contributes to the income of many countries in terms of taxes and foreign exchange, and employs a whole lot of people in numerous countries of the world. With that in mind, this paper is meant to carry out a SWOT analysis of two members of the larger Motor vehicle manufacturing fraternity, namely, Toyota Motor Corporation and Ford Motor Company. It is also meant to evaluate, compare and contrast the current positions of the two companies on major issues affecting them, the industry in general and the world as a whole. The Toyota Motor Corporation Kiichiro Toyoda founded the Toyota Motor Corporation (TMC) in 1937 with its headquarters at Toyota, Aichi, Japan. Being the largest automobile manufacturer, both by sales and production, Toyota employ more than 320,808 people throughout the globe. Here is its SWOT analysis. Strengths TMC is the world’s largest motor vehicle manufacturer by both sales and production. It is also a part of the “Toyota Group” which is one of the biggest conglomerates in the world. Toyota is well known for their environmentally safe, good quality, durable, reliable, convenient and value for money cars. Toyota, in 1997, began manufacture of the world’s best-selling car to date, the Toyota Prius. This was in the bid to provide the world with an environmentally friendly, cheap to maintain car (Liker, 2004).  The Toyota Motor Corporation exhibits principles and a culture of continuous improvement and respect for people. Toyota has strong marketing and distribution efforts focused mainly on meeting the diverse needs of their clientele, close involvement of customer’s views in production and high quality sales and services. . TMC maintains a 16 percent market share in the US. In 2005, it was ranked 8th on the Forbes 2000 directory of the world’s leading companies. Toyota sales also rose by 9.2 percent mostly due to the demand for Camry and Corolla sedans. Weaknesses TMC, in the last quarter of 2009 through to the first quarter of 2010, recalled more than eight million cars and trucks in many recall campaigns and even stopped production and sales temporarily. Japanese car producers have numerously criticized the Toyota Motor Corporation as being more of foreign importers than local producers. Due to the numerous large- scale re-calls, Toyota faced a lot of criticism in 2005. The issue of the quality of their cars was also mentioned at a worrying level (Pershing, 2006).  Toyota was also hit badly by the global economic crisis of 2008. In the same year, Toyota recorded its first annual loss in its 70-year history. The Toyota Motor Corporation, in May 2009, reported a record yearly net loss of US $4.2 billion. This was a major blow to the company especially because it had also recorded a loss the previous year. While its competitors offer most of their brands worldwide, Toyota concentrates most of its brands in Japan and the US thus does not achieve global efficiency. Opportunities Due to the joint ventures with the French motoring companies Peugeot and Citroen, opportunities for Toyota to produce cars in France have risen. When the State Bank of India decreased interest rates on automotive loans citing decreased production as its reason in 2009, a major opportunity was created for Toyota. Due to the rise in gas prices and the growing need to conserve the environment, consumers in North America, mostly, shifted to more fuel efficient, eco- friendly and high quality cars from Europe and Japan. The ability to produce fuel-efficient, high quality and smaller automobiles that entice more customers is also an opportunity for Toyota. The government of China reduced taxes on automobiles to support the declining sales. This created a major niche for Toyota. Threats The financial crisis resulted in massive liquidity deficit in the larger U.S banking system. This decreased the wealth of consumers and may lead to the decline of sales in the future. The rising international concern on the use of gas and the conservation of the environment has led to the creation of regulations and apprehensions that may increase production costs. The fluctuation in foreign currency rates is also causing major harm to the industry. The threat from competition and market saturation is very real. Forceful marketing and pressure from the competition is also a major threat. The increase in vehicle maintenance cost and gas prices as well as the alternating preferences of customers poses a major threat. Remedy to weaknesses The major weakness for Toyota has to do with the massive and numerous recalls. The company has to do more in the sense of increasing inspection criteria for newly produced cars as well as testing. The company should also invest more on research to enable them to make informed decisions as far as production is concerned. The Ford Motor Company It is an American company founded by Henry Ford in 1903. Ford manufactures or distributes automobiles across six continents and employs 159,000 people in its 70 plants around the world. Strengths Ford is the pioneer of large-scale production of cars and supervision of an industrial personnel using moving assembly lines and advanced manufacturing chains. It is the 2nd biggest manufacturer of automobiles and 4th in the world based on automobiles sold annually. Ford has a strong global presence with the ability to manufacture and distribute in six continents. Ford is also one of the heaviest investors in research and development in the automobile industry. Based on worldwide revenues, Ford was the 7th ranked America-based Corporation by fortune 500 catalogue with revenue of $146.3 billion in 2008. The Ford distribution network is one of the biggest in the world with 45 distribution centers and 9500 dealers worldwide (Thompson & Martin, 2010). Weaknesses Its revenue decreased by 19% approximately in 2009 as compared to 2008. Ford was forced to recall 527,000 Escape sport automobiles due to engine fires caused by its anti-lock foot brake connectors. This was a main safety risk for consumers. The Ford market share declined continuously in the US in the last few years. Ford is not also able to handle competition from European and Japanese manufacturers. Ford was also forced to mortgage its factories as well as its logo to borrow $23 billion in 2006 and 2007. This debt is a huge burden for the company. the high cost of pension and pension for retired workers is another weakness facing the company. The high cost of pension affects the company’s operational cost thus the performance of the company. The high cost of pension reduces the profits made by the company significantly and in the case of losses, it increases the losses (Muller, 2013). Opportunities The purchasing power of many consumers is increasing due to the end of the financial crisis. Shifting manufacturing to those countries where the labor as well as raw materials cost is low is a big opportunity for Ford for it to produce in-demand cars. When the State Bank of India decreased interest rates on automotive loans citing decreased production as its reason in 2009, a major opportunity was created for Ford. The ability to produce fuel-efficient, high quality and smaller automobiles that entice more customers is also an opportunity for Ford. The government of China reduced taxes on automobiles to support the declining sales. This created a major niche for Ford. Economic growth in low income earning nations is another opportunity for the company to expand its business to increase revenue. Technological developments in the field of engineering are an opportunity for the company to produce quality products to suit the needs of its customers. Technology will enable the company to develop its products achieving a competitive advantage over other major producers. Threats The crisis that hit the automotive industry in 2008-2010 has posed a major challenge for companies to recover. The financial crisis resulted in massive liquidity deficit in the larger U.S banking system. This decreased the wealth of consumers and may lead to the decline of sales in the future. Manufactures in the US are facing high gas prices, health care costs for aging personnel, dependence on deteriorating SUV sales and the eroding market share. Major producers like Toyota and the Big Three are offered significant discounts in their production process. The rising international concern on the use of gas and the conservation of the environment has led to the creation of regulations and apprehensions that may increase production costs (Bensoussan & Fleisher, 2008).  Remedy for weakness Ford faces it biggest weakness as the production of cheap, fuel efficient, durable and reliable cars. The company should therefore envision the needs of the consumers and include them in their decision making as far as production is concerned. Issues Ford Toyota Legal, Social and Economic Environments Is a respectable company as concern this issue and is focused on improving the quality and efficiency of its products. Has a strong legal, social and economic environment focused on fulfilling the needs of the consumers. Management Structure Complex and elaborate management structure. Simple and functional management structure. Operational & Financial Issues Has faced major loses in the past that led it to borrow $23 billion by mortgaging its factories and logo. Though it faced tough times during the recession, it has done well to recover debt free. Analysis of Strategic Intent Is looking to improve its models making them more attractive to consumers Is looking to expand its distribution and marketing network worldwide as well as to develop alternative fuel cars. Social and External Challenges Health care for a large and aging workforce as well as government policy in the countries they distribute in. Criticism from Japanese producers and the world at large due to numerous recalls. Changing demands from consumers and government policy in consumer countries Current Manufacturing It focuses mainly on large- scale production in the US however, it has approximately 70 production plants around the world (Dess, 2012).  It manufactures automobiles around the world in the bid to reduce production costs. Facilities & Distribution System It is the pioneer in large-scale production of cars and has distribution coverage in six continents. It is also one of the leading companies in research and development Has invested in new technologies and management systems including the IMV as well as the gasoline-electric car. It is also the first company to create a hybrid car in 1997. Distribution is mainly focused on Japan and the US. Market Demand & Demographics Market demand has dropped significantly due to increased fuel and maintenance costs as well as consumer interest shifting to European and Japanese cars. Market demand has remained steady and has risen in the previous years due to consumer preference of European and Japanese high quality cars. Alternative Fuels & Propulsion Systems While it has created a hybrid car, the Fusion, it is not doing much in the field of alternative fuels rather it is working on making its models more fuel efficient. Has invested heavily in alternative fuels research and is currently producing a gasoline-electric car that had sold over 2 million cars by 2010 Conclusion Evaluation of the internal environment is crucial to the success of any business. the management should understand the potential of the business to ensure that the right strategies are implemented to facilitate its growth. SWOT analysis evaluates the strengths, opportunities to grow, weaknesses and threats facing a business organization. The SWOT analysis covers two major players in the motor industry. Comparison between the two enables management at ford to strategize in order to compete with Toyota, which is the biggest company in terms of global sales, and market penetration. To generate higher revenues/profit while fulfilling their corporate responsibility, both companies should constantly factor their attributes and weakness (S.W.O.T) externally and internally through strategic management and implementation to meet this objective. References Bensoussan, B. E., & Fleisher, C. S. (2008). Analysis without paralysis: 10 tools to make better strategic decisions. Upper Saddle River, N.J.: FT Press. Dess, G. G. (2012). Strategic management: text and cases (6th ed.). New York: McGraw-Hill/Irwin. David, F. R. (2013). Strategic management: concepts and cases. (14th ed.). Prentice Hall Ed Liker, J. K. (2004). The Toyota way: 14 management principles from the world's greatest manufacturer. New York: McGraw-Hill. Muller, Joann. 1/31/2013. Fords Leaky Pension Boat is a multi-billion Dollar Problem. Retrieved from http://www.forbes.com/sites/joannmuller/2013/01/31/fords-leaky-pension-boat/ Pershing, J. A. (2006). Handbook of human performance technology: principles, practices, and potential (3rd ed.). San Francisco, CA: Pfeiffer. Thompson, J. L., & Martin, F. (2010). Strategic management. Andover: Cengage Learning. www.ford.com www.toyota.com Read More