Sector Analysis (Automotive)

SECTOR ANALYSIS (AUTOMOTIVE) 11

SectorAnalysis (Automotive)

Japanautomotive industry is among the largest and noticeable industriesinternationally. Japan has remained among the top three countries inthe world with its most vehicles manufactured since 1960s. Theindustry has rapidly increased since 1970s to 1990s. During thisperiod, Japan automotive industry was focused on worldwide export anddomestic use. In 1980`s and 1990`s, Japan overtook United States andbecame a leader by manufacturing 13 million cars every year. Aftermassive change by China in 2000s as well as fluctuating United Statesoutput, Japan has now dropped to third position worldwide with yearlyproduction of about 9.9 million automobiles. Japanese investment inautomotive has helped many countries to grow in last few decades(Odaka et al., 2008).

Japanis a home to several companies that manufacture constructionvehicles, cars, engines, and ATVs. Japanese automotive manufacturersare Honda, Toyota, Nissan, Daihatsu, Mazda, Subaru, Mitsubishi,Kawasaki, Isuzu, Suzuki, Mitsuoka, and Yamaha. Passenger cars exportsincreased with about two hundred-fold in sixties in comparison withthe previous decade, and currently the export is 17 percent of anentire production. Rapidly growing domestic demand as well asexpansion of car manufacturing companies into international marketsin 1970s accelerated the growth. The effects of Arab Oil Embargo in1973 stimulated exports of vehicle as well as exchange rate ofJapanese yen to UK Pound, West German Deutsche Mark, and U.S. Dollar.Japanese cars became famous with British buyers during early 1970sthe Nissan’s Datsun was the most famous and earned respect inBritain because of their low running cost and reliability. Japanesemanufacturers started to compete for a domestic market. The rivalrywas demonstrated by “CB-war” between Nissan’s bluebird andToyota Corona. In the beginning, this competition led to consumers’benefits but later research and development expendituresswelled(Yang, 2005).

During1960s, the Japanese automakers started a mass of modern kei cars in adomestic market motorcycles and scooters remained dominant. Thesesmall automobiles featured small engines (below 360 cc) to keep taxeslower than the larger cars. During that period, many Japanese wereable to buy a car that boosted sales radically, and jumpstarted autoindustry to what it is currently. The most widespread economy carsegment during 1960s was 700 to 800 cc class, exemplified byMitsubishi Colt 800, Toyota Publica, and original Mazda Familia.However, at the end of 1960s the two-stroke vehicles were replaced bycomplete one-litre vehicles with four-stroke engine(Odaka et al.,2008).

InJapan, the automotive industry comprises of 20,000 to 35,000 partshowever, the largest manufacturing companies cannot producethemselves. Therefore, automakers either purchase finished productsor outsource production. The imported components volume increasesevery year. Thus, automotive manufacturing is an integrated industrysince it depends on supporting industries to manufacture highdiversity of parts and materials it requires. Trends in thisindustry, which invest heavy in equipment, as well asresearch-and-development undertakings, are considered the barometerof an economy. Automotive industry is a core industrial sector inJapanese economy. In year 2010, the automotive shipmentsapproximately 16.4 percent of an entire value of the countrymanufacturing shipments and 37 percent of machinery industries valuecombined purchases. The automotive purchases both export and domesticincluding auto parts and motorcycles valued at 47.5 trillion yen inyear 2010. Each about 1,000,000 used cars is exported to differentcountries from Japan. These used cars are well serviced, highquality, low mileage when compared with other markets, and reasonablypriced(Yang, 2005).

StrategyExploration of Toyota Company

ToyotaCompany applies the following three strategies:

Differentiationstrategy

Itis an approach that is applied by companies with the aim ofdeveloping and marketing unique products to different customersegments. Mostly it is employed where a company has a competitiveadvantage and can maintain expensive advertising campaign.

Low-coststrategy

Thisis a strategy where a company offers low price to encourage demandand achieve market share. It is usually employed in areas product haslow competitive advantage or when economy of scale can be reachedwith high production volumes.

Productdevelopment

Itis a strategy of modifying current products or developing newproducts and offers them to new or current markets. The strategyrequires intense attention to customer needs and competitors, abilityto finance manufacturing processes and prototypes, as well ascreative marketing plans(Freeman et al., 2007).

Differentiationstrategy

Formany years, Toyota Motor Company has used both low cost anddifferentiation as universal strategies to achieve a competitiveadvantage on its competitors in an automotive industry. Market scopeis broad and encompasses different types of customers available inthe car market. Toyota has managed to target a broad market since thecompany has something for everyone. The company has SUVs andfour-wheel trucks for outdoor people or people who live in locationsthat experience harsh weather conditions, the hybrid models such asPrius for eco-friendly people interested in safeguarding environment,together with standard cars for everyday use.The companydifferentiates at various levels from its competitors. Toyota hassuccessfully managed to differentiate on the basis of superiorquality and design. As a result, Toyota has managed to make a brandimage, which is very durable and make potential customers view it asa quality and long lasting car. The company has also managed todifferentiate in technology(Weiss, 2014).

Low-coststrategy

Toyotahas also used low cost to gain competitive advantage over itscompetitors. Toyota was at one time the lowest cost producer in theautomotive industry. The company has managed to achieve the costleadership strategy through adopting careful choice, lean production,efficient distribution, low servicing costs, and control ofsuppliers. Through research, there is an indication that ToyotaCompany remains low-cost company in the automotive industry(Yang,2005).

Productdevelopment strategy

Currently,Toyota uses product development as a grand strategy for industryleaders. It is an important strategy for Toyota because it mustdevelop innovative ideas to remain competitive in the automotiveindustry. In case Toyota fails to make a new design for its products,the company will continue behind. Toyota has been successful inproduct development. In 2012, the company managed to produce carsthat use batteries with idea of eliminating fuel consumption (Freemanet al., 2007).

StakeholderRelationship Analysis

Employees

Thecompany has formal communication structures that ensure employees areinformed, and they can give their feedback freely. Variety ofactivities such as company annual presentations, workers’newsletters and bulletins, as well as company’s president regularteam meetings supports these structures. Toyota Altona productionfacility comprises of seven shops that operates shifts daily.However, before every shift start there is production meeting. On amonthly basis, the company holds detailed briefing session, whichbrings together all employees. Different operating arms havedifferent structures for consistent communication meetings. Employeesmust attend every quarter production where directors address thembetween the shifts. There are employees’ focus groups, which wereestablished to make sure that the intended message is understood(Odaka et al., 2008).

Customers

Thecentral contact point for our clients is network of dealers all overthe world. These dealers receive support from the center of Toyotacustomers’ experience as well as Lexus customer help center, whichoffer customers interface on issues such as vehicle recalls and newvehicle launches. The company has customer satisfaction program thatsurveys customers who service or purchase their cars at the Toyotadealership. Through advertising and marketing presence or messaging,the company can interact with wider customer base. Toyota aim is tocomply with relevant laws, as well as voluntary codes includingFederal Chamber of the Automotive Industries and Competition &ampConsumer Act 2010(Freeman et al., 2007).

Dealers

Althoughthe dealer networks are independently owned, they are still anextension of the company and integral part of success, offering aninterface between customers and company. Toyota dealers are all overthe world, and they provide job opportunities to many people. Thesupport given to dealers include assisting dealers to understandenvironmental responsibilities, acknowledgment exceptional customerservice through customer service distinction awards during nationalskills competition, as well as providing dealers with development andtraining opportunities. Toyota has established formal structure tomake sure that dealers are updated and engaged. There are regionaloffices that coordinate meetings with the dealer principles on amonthly basis. Dealers can also access information through Internetportal(Weiss, 2014).

Suppliers

Besidesthe extensive program of suppliers’ development, the company hasregular interaction with suppliers on various issues. The company hasother formal engagement such as supplier awards and supplierconference. The company believes in establishing mutually beneficial,lasting relationships on a basis of mutual trust with its suppliers.To enhance that commitment, Toyota employs close and broad-rangingcommunication to ensure they share business knowledge and improve thecompany relationship with suppliers. The company has outlinedexpectations of social and environmental responsibilities of theentire supply chain. Through working with suppliers, the company aimsto enhance its commitment to stakeholders and environment. The jointefforts have reduced risks of the company’s ability to manufacturesuperior quality cars for its customers(Muller, 2011).

Government

AllToyota Company branches in various countries have government affairsdepartment that maintain regular discussions with state or federalgovernments on a broad range of the public policy issues. The companyapproach is to engage with government through industry association(Federal Chamber of the Automotive Industries) or directly. Theintention of Toyota approach is to make sure those issues unique to acompany and the automotive industry is included in the public policydecisions. Updates are regularly provided to Board with detailedbriefings as demanded. Government affairs team offers a presentationof Toyota Company branch head after every two weeks(Weiss, 2014).

Community

ToyotaCompany respect culture, people, as well as traditions of everycountry or region where it operates. The company works to supportprosperity and economic expansion of the countries it operates. Whiletargeting on corporate longevity and development, Toyota strives toplay its role as excellent corporate citizen. It does this to providea foundation for corporate activities and to ensure that lifestylesof employees are pleasant(Muller, 2011).

(Impact on)

Strategy I

Strategy II

Strategy III

Customers

Low

High

Average

Employees

Average

Low

High

Community

High

Average

High

Government

Low

Average

Low

Dealers

High

Low

High

Suppliers

Low

High

Average

StakeholdersImpact Analysis Table

Themost important stakeholder relationship to Toyota Company is customerrelations. Customers are the backbone of the company because if theyare not satisfied by the products, they will buy them, therefore, thecompany with not grow. Due to this, the company has employed customersatisfaction program that surveys customers who service or purchasetheir cars at the Toyota dealership(Muller, 2011).

Competitiveposition analysis

Asmentioned in this paper, Toyota has become a leader in low cost in anautomotive industry. Current events have indicated that the companyhas focused mainly on low cost thus, losing market share as well asits market positioning of quality and superior design, whichhistorically Toyota has used as a differentiation strategy. Thegreatest thing that Toyota should do is to ensure that its strategyof low cost does not compromise its quality and superior design.Toyota desire to remain ahead of its competitors so that it can takeadvantage of weaknesses that might arise, and exploit them to gaincompetitive advantage (Freeman et al., 2007).

Conclusion

Theproduct development strategy that is also referred to as LeanManufacturing was implemented to integrate technology, process, andpeople. It procedure is different from the manufacturing process. Thecycle time of product development is longer than hours. Mostly, ittakes about weeks or months. Production chains are multi-directionaland non-linear. Workers in production chains are not referred to asmanufacturing workers but experts with high different technology.Product development strategy suits the company well because it helpsToyota to lengthen the current product’s life cycle. For example,Toyota Camry is very efficient current product with a prolonged life.The strength of the company’s brand image was experience in recentyears through recalls as well as problems faced when dealing withrecalls. Toyota has managed to survive the problems because thecompany has a long recognized track record of superior and qualitydesign. Toyota Motor Company has used both low cost anddifferentiation as universal strategies to gain the competitiveadvantage over its competitors in an automotive industry.

References

Freeman,R. E., Harrison, J. S., &amp Wicks, A. C. (2007). Managingfor stakeholders: Survival, reputation, and success. NewHaven: Yale University Press.

Muller,C. (2011). Casestudy and comparative strategic analysis of Toyota and Ryanair: Thekey differences in the operations strategy of manufacturers andservice firms in terms of process design, supply chain, humanresources, capacity, innovation and quality management.Munchen: GRIN Verlag GmbH.

Odaka,K., Ono, K., &amp Adachi, F. (2008). Theautomobile industry in Japan: A study of ancillary firm development.Tokyo: Kinokuniya.

Weiss,J. W. (2014). Businessethics: A stakeholder and issues management approach.NewYork: W.H. Freeman.

Yang,X. (2005).Globalizationof the automobile industry: The United States, Japan, and thePeople`s Republic of China.Westport, Conn: Praeger.