The Economic Impact of the Emergence of China and India - Assignment Example

Running Head: [short [institute of affiliation] a. Refine the analysis of the forces and trends you completed for theWeek Two assignment. The Automobile Industry today is becoming increasingly competitive, with the shift in global economies, the continuously rising fuel prices leading to a simultaneous rise in consumer preferences towards fuel efficient cars, the coming of age of Western economies and the emergence of Asian super powers such as India and China. These external environmental factors along with certain significant global issues such as, growing concern for environmental protection, and the trends towards greener and cleaner cities, governmental initiatives to reduce carbon emissions, and issues concerning protection of the ozone layer, the need for an efficient and cost effective human resources etc are driving the industry to adopt appropriate measures for sustaining their competitive market positioning. These trends and forces are playing significant role in changing and reshaping the industry. b. Utilize a macroeconomic forecast of economic indicators that will affect your chosen organization in the future and should be considered part of strategic planning. The main macroeconomic variable that toys in the global economy’s shift is the emergence of India and China as new super powers. This emergence certainly has a number of implications, but among the most relevant are: disruption of the equilibrium of the global economy which results in a rising demand of goods, giving way to world wide inflation; the attractiveness of outsourcing to these countries due to low cost but high talent workforce of these countries for cheaper operations. The growing middle class of China and India results in booming demand as for the automobile industry. This increase in demand, with the increasing purchasing power of these countries’ people, is not limited to automobiles but more apparent in the commodities. This rapid rise in demand for commodities pushes the prices of oil and food to skyrocket across the world, leading to a worldwide inflation. Of course, once this inflation sets in, the ripple effect to the global economy is evident in most industries. This rapid inflation can influence the prices of inputs and materials that are part of Toyota’s operations—the supply side of the automobile industry. The effects of this inflation do not stop in the supply side of the automobile industry which could significantly impact a firm’s cost structure. With the rising fuel prices, demand for automobiles is threatened too, as fuel is a complementary product of automobiles. At least in order to address the threat in the demand, Toyota put on the initiative to create a hybrid car which has saved its operations from this. The other economic impact of the emergence of China and India is its low-cost labor strategy that makes outsourcing to these countries attractive to automobile manufacturers. This can give a company the cost advantage it needs by availing highly talented but lower cost workforce that leads to a more effective and efficient operation. The attractiveness of this should be incorporated into the company’s long-term macroeconomic forecasts in order to utilize the cost advantage that it can bring to operations. c. Analyze the non-economic factors in the remote environment: (1) Social and Cultural The shift in the peoples’ attitudes toward the environment has created a huge wave of changes in countries across the world in terms of consumer preferences as regards the choice of buying or not an automobile, or what type of automobile to buy. The issue on the environment is in consideration, coupled with the rising fuel prices that make it less attractive to own an automobile that costs a lot to operate, gives way to a demand in cost-efficient and environmentally-friendly automobiles. Growing concerns in the environment which include concerns about the thinning of the ozone layer, the global warming, depletion of non-renewable natural resources, etc have been the driving force in this change of attitude of consumers. The rise in environmental activism, as supported by the media, has made these times a more demanding time for corporations to act responsibly and come up with more environmentally-friendly products. Never in our time has consumers been more aware than these times about their actions in relation to environment. Similarly, due to economic concerns about the rising fuel prices, the choice of owning or not an automobile opens up more opportunities for corporations to address this growing concern. The choice, which is shifted from the owning or not, to choosing what to buy in order to save gas for economic and ecological reasons, gives way to a market of hybrid cars as one of the solutions. Those who could give the consumers an automobile that addresses their economic as well as ecological or environmental concerns definitely has the advantage. (2) Political The growing environmental concerns lead to addition in provisions and laws of manufacturing of corporations. More environmental laws are passed in order to address the growing sentiments of the people around the globe as regards environmentalism and caring for natural resources. (3) Technological The advancement in information technology opens a lot of opportunities for a company in the automobile industry. These advancements can lead to innovation in many areas of operations of the business. The utilization of information technology can give a company competitive advantage both from the outside-in and inside-out perspective. From the inside-out perspective, or the perspective of focusing on the cost advantage: this enables a company to become more efficient in its operations in designing automobiles as well as delivering the products with less costs in its processes. Information technology will give a company more flexibility in terms of coming up with better designs, more efficient engines and lower cost in logistics. From the outside-in perspective, or the perspective that focuses on the market, this advancement offers opportunity for manufacturing; it opens a lot of ways also for functions such as marketing. These advancements, through the internet can give more ways to keep in touch and reach consumers. The outside-in competitive advantage is reached by securing a good foothold in the market. By acquiring a huge market share, and retaining this market share by keeping in touch with the consumers through information technology, competitive advantage in this area too is utilized. Also, this information technology extends its benefits beyond the traditional marketing—it extends up to building brand equity by providing consumers new ways to interact with the company, and new ways for purchasing experience. These are termed as relationship and process benefits that increases brand equity over time, with the use of new ways such as ways provided by information technology. (4) Demographic The demographic of the global market, as discussed earlier is shifting as China and India emerge as super powers. The growing number of people in these countries that could afford to buy and maintain automobiles contributes to the growing market of the automobile industry as a whole. This is the shift in power in the global economy—as economies as huge as China and India, while a huge number of their population consisting their middle class has strengthened their purchasing powers, the global economy’s equilibrium is disrupted. While the population base increases with the purchasing power, a boost in demand for automobile and other goods and commodities are pushed. d. Complete a competitive analysis of your organization’s position from a microeconomic perspective based on the pricing of the organization’s primary product or service line, an assessment of its cost structure, and an assessment of the market in which the organization competes. (Note: This should be a discussion, not a spreadsheet.) Toyota positions itself as an automobile manufacturer that provides what majority of its customers need. This positioning has enabled it to achieve the largest market share even in US alone. By pursuing a strategy of launching products that stimulate market demands, the company is able to achieve its target by focusing closely on its consumers; at the same time, it strives to innovate its production processes in order to cope with their changing needs and preferences. By focusing on its consumers, then giving them just what they want and they need, it has gained a strong foothold in its market. Toyota operates in the automobile industry, with two of its brands serving different segments of the market. Toyota as a brand, caters to all types of consumers for the automobile markets, which focus is more on performance at a level of affordability. Toyota as a brand promises value for money. On the other hand, its Lexus brand is positioned as a premium brand as it competes in the luxury category in the market. Toyota’s positioning of value for money is also apparent in its cost structure. Toyota’s operating income margin is modest enough, as apparent in the trends of its operating income compared to revenues. e. Develop a summary of the organization’s current situation, including its mission or business overview, its current competitive position, and the forces and trends in its industry. Based on this situation, you will identify three to six current opportunities and issues you believe should be addressed through the strategic-planning process. Toyota’s competitive position is supported by its positioning strategy of launching new products that stimulate demand while improving its production engineering processes, as well as its mission statement of providing consumers of what they need. As Toyota operates in an industry that faces challenges during these times of shift of power in the global economy. The main macroeconomic variable that toys in the global economy’s shift is the emergence of India and China as new super powers. This emergence certainly has a number of implications, but among the most relevant are: disruption of the equilibrium of the global economy which results in a rising demand of goods, giving way to world wide inflation; the attractiveness of outsourcing to these countries due to low cost but high talent workforce of these countries for cheaper operations. While its major complementary product—fuel is rising in its prices, the challenge that the automobile industry faces concerns both the supply and the demand aspects of the market. Opportunities and threats to be addressed through strategic planning: Some of the opportunities that can be leveraged for Toyota’s advantage include: growing demand of automobiles because of changes in demographics; utilization of IT for marketing, as well as in manufacturing more fuel-efficient cars; shift in cultural attitude can be a benefit by utilizing the first-mover advantage; and lower costs of operations in China and India. A major threat that can be minimized through strategic planning is the rise in the prices of production inputs as a result of the chain effect of world wide inflation. With the changes in demographics, the increasing demand in the market of automobiles is an opportunity Toyota can leverage. This addition in customers can be acquired and added in its customer base in order to increase market share, and in turn revenues. Toyota can concentrate its penetration efforts in theses emerging super powers—China and India—in order to boost revenues. Information can also be utilized more in Toyota’s marketing function, which will serve as both acquisition and retention tool for its consumers. By giving consumers a different experience in their way to purchasing a Toyota unit, this will give the brand an advantage too which can be utilized. Because of information technology, retention and acquisition now of customers, through maintaining constant dialog with them is relatively lower in cost. Information technology will also be utilized to increase efficiency in its operations, as it allows more flexibility in coming up with new designs and improved engines for better performance. Of course, this is in response to the changing needs of the consumers. Toyota’s first-mover advantage can further be utilized by promoting its new products in response to growing sentiments in the market concerning the environment. The shift in the peoples’ attitudes toward the environment has created a huge wave of changes in countries across the world in terms of consumer preferences as regards the choice of buying or not an automobile, or what type of automobile to buy. The issue on the environment is in consideration, coupled with the rising fuel prices that make it less attractive to own an automobile that costs a lot to operate, gives way to a demand in cost-efficient and environmentally-friendly automobiles. Being the first to offer the market with these sorts of units, Toyota can further its efforts by penetrating the market and offer more fuel-efficient units to its huge customer base in the future. Another opportunity that can be taken advantage of is the lower cost, high talent labor force in countries like China and India. By moving some of the manufacturing processes in these countries and utilizing the more cost-effective human capital can significantly contribute to Toyota’s efforts toward greater efficiency in operations. Of all these opportunities, there is one significant threat that is relevant to Toyota’s operations. As discussed earlier, the shift in power in the global economy pushes demands which results in world wide inflation. Due to this, the chain effect of the inflation threatens the prices of inputs that Toyota is using, which can significantly increase its operations and weaken to a point its profitability. This is a thing to be minimized through strategic planning, in order to lessen its impact on the company’s operations. f. Identify strengths and weaknesses in the organization’s operating environment that can be leveraged to capitalize on the emerging opportunities or minimize the threats that you identified in items 1-4. Among the strengths Toyota has is the power of its people, or its human capital. These very people who think of innovating the production engineering processes, the people who come up with out-of-the-box ideas to improve their equipment, and the people who takes care of relationships with customers are one of its greatest strengths. As product of its people’s ideas—the innovations on its production engineering processes becomes strength too, which allows flexibility to cater to customization of units. Its state-of-the art equipments, new equipments to further improve the engineering processes are strengths too as product of its people’s ideas. In support of its value-for-money strategy, Toyota utilizes its financial services corporation in order to boost demand and help people in financing their purchases. This is strength of the company that not only keeps it close to its consumers but also makes it faster for them to capture the demand by offering good terms in financing. g. Create three to four strategic long-term objectives that can be measured to determine the success of the strategic plan. Objective 1: To increase shareholder returns by five percentage points. Objective 2: To assume market leadership further by capturing additional ten percentages points, and retain it in five years. Objective 3: To expand the market and push market potential outward by five percentage points venturing into new products that will open up more markets. h. Revisit the mission and vision statements you modified in Week One. If necessary, modify or improve them further to align with your long-term objectives. Mission: To become a world-class and world-wide provider of automobiles that respond to consumer needs before they acknowledge that need, while providing the investors a moderately higher return to their investments. Vision: To assume market leadership in the automobile market, making our company regarded well by many—whether through our products, our business processes, our people and our focus on our customers. Reference List Bartol, K., Martin, D., Tein, M., & Matthews, G. (2001). Management: A Pacific Rim Focus. Australia: McGraw Hill Company. Robbins, S. (2005). Organizational Behavior. Philippines: McGraw-Hill Pickton D., & Broderick A. (2002). Integrated marketing communications. Philippines: Pearson Education Asia Pte Ltd. Toyota (2007). Financial Data. Toyota Annual Report. Retrieved August 6, 2008, from http://www.toyota.co.jp/en/ir/library/annual/pdf/2007/ar07_e.pdf Toyota (2007). Financial Data. Toyota In the World Databook. Retrieved August 6, 2008, from http://www.toyota.co.jp/en/about_toyota/in_the_world/pdf2008/databook_en_2008.pdf Read More