OPERATION MANAGEMENT
Case Study of Automobile IndustryGeneral Motors vs ToyotaUS vs
Japan
Satrio Haryoseno 09/296071/PEK/14677
MASTER OF MANAGEMENTFACULTY OF ECONOMICS AND BUSINESSGADJAH MADA
UNIVERSITYYOGYAKARTA2010Case Study of Automobile IndustryGeneral
Motors vs ToyotaUS vs JapanABSTRACTThe global automotive industry
is one of the largest industries in the world and one of the prime
drivers of international economic development and social
improvement too. It manufacturers around 65 million cars and trucks
a year, and employs millions of people around the world. The
industry accounts for about 10% of GDP in developed countries.For
the past 20 years, carmakers round the world have been trying to
emulate the success of Japanese carmakers in lean manufacturing.
Especially, Toyota has been seen as the benchmark for ensuring
quality and efficiency. Most car factories have now been revamped
more or less along Japanese lines, lessening the gap between
Japanese and Western producers.This paper shows what makes the
General Motors became the number 1 automotive industry in the world
and how Toyota could surpassed them.Toyotas key cultural trait that
distinguishes it from other automakers is the Toyota Production
System that ensures Toyotas status as the worlds most efficient
automaker and has allowed the company to expand rapidly into new
markets without overreaching. Even before the present economic
slowdown, the US carmakers were losing headway to Japanese rivals
because of a shift in tastes among American motorists from pickup
trucus and sports utility vehicles to smaller, more fuel-efficient
cars. Thats why the rapid change in innovation and technology, and
of course the techniques of operations management are so important
to keep the companies sustainable and become the leader in the
market.
OVERVIEWThe global automotive industry is one of the largest
industries in the world and one of the prime drivers of
international economic development and social improvement too. It
manufacturers around 65 million cars and trucks a year, and employs
millions of people around the world. The industry accounts for
about 10% of GDP in developed countries.A century ago, the industry
more or less invented modern industrial capitalism. The history of
the automobile industry goes back to the 1900s, when the industry
began to develop in France. But it was only in the US that
automobiles came of age, when Henry Ford innovated the moving
assembly line that marked the birth of mass production in the
1920s. Though GM and Ford had revolutionised the auto industry
through modern car manufacturing in the mid-1920s, Toyota refined
the process in the 1960s with its lean-manufacturing (Just In Time)
techniques.For the past 20 years, carmakers round the world have
been trying to emulate the success of Japanese carmakers in lean
manufacturing. Especially, Toyota has been seen as the benchmark
for ensuring quality and efficiency. Most car factories have now
been revamped more or less along Japanese lines, lessening the gap
between Japanese and Western producers.In spite of being over 100
years old and having pioneered the forms and weathered the storms
of 20th century capitalism, the industry is still struggling.
Graeme Maxton and John Wormald wrote in their book, Time for a
Model Change, It is becoming a sunset industry, a has-been in
financial terms a flagrant contrast with its continuing social
role, its share of employment and its political influence. Average
profit margins have declined from around 20% in the 1920s to around
10% in the 1960s and, to less than 5% now. Even a few carmakers are
in losses.The Big Three: General Motors, Ford and Chrysler have
lost a combined $11.3 billion in 2006 and together their US market
share has fallen from 72.7% two decades ago to 55.1% in 2006.1 Many
analysts expect a further decline for the Detroit carmakers. These
three automakers, once domestic behemoths, are now downsizing
themselves. All the three are in various stages of reorganisation.
According to auto industry analysts, GM will be reduced to the size
of Ford by 2008 in terms of capacity, and Ford will shrink to
Chryslers size. GM and Ford are halving their workforce and
Chrysler is planning to cut costs by $1,000 per unit.According to
analysts, because of the continuous changes in the industry,
consolidation has been taking place almost since its inception. In
the late 1920s, there were 270 car companies, mostly in the US.
But, after the Big Three started acquiring the small manufacturers,
the number of big independent manufacturers came down
drastically
Research on General Motors
Description of Automobile Industry: Automobile industry is the
modern manufacturing industry including commercial vehicles (CVs),
cars, three-wheelers and two-wheelers segments. The automotive
industry has been playing a leading role in spurring growth in
economies throughout the world since the industrial revolution. It
is a sector characterized by not only tremendous potential growth,
but also very high profile trade disputes, and intense competition.
In the 21st century, the automotive industry confronts greater
challenges as the industry undergoes fundamental changes. Research
on GM: General Motors is the world's largest automotive corporation
(before being overlapped by Toyota) operating in over 70 countries
with a presence in more than 200 countries, more than 260 major
subsidiaries, and a total of 395,000 employees worldwide which
translate into global opportunities that span the planet. Founded
in 1908, GM has been the global automotive sales leader since 1931.
GM today has manufacturing operations in 32 countries and its
vehicles are sold in more than 190 countries. General Motors is
involved in Telecommunications, Aerospace, Defense, Financial and
Insurance Services, Locomotives, Automotive Systems and Heavy Duty
Automatic Transmissions. In all GM does, their philanthropy and
commitment to the environment in which they live, is unsurpassed in
the industry. GM Brands: GM's automotive brands are Buick,
Cadillac, Chevrolet, GMC, Holden, HUMMER, Oldsmobile, Opel,
Pontiac, Saab, Saturn and Vauxhall. In some countries, the GM
distribution network also markets vehicles manufactured by GM
Daewoo, Isuzu, Subaru and Suzuki. GM Vision: To be the world leader
in transportation products and related services. In 2002, GM sold
more than 8.5 million cars and trucks, nearly 15 percent of the
global vehicle market. GM's global headquarters is at the GM
Renaissance Center in Detroit. GM set industry sales records in the
United States, its largest market, for total trucks and sport
utility vehicles. GM became the first manufacturer to sell more
than 2.7 million trucks in a calendar year and the first to sell
more than 1.2 million SUVs. GM also increased its market share in
the North America, Asia Pacific and Latin America/Africa/Mid-East
regions.
Company Culture of GM GM has defined six core values for the
conduct of its business The 6 core values define what GM wants to
achieve and what GM wants to stand for as a company. They are not
only the road map for corporate social responsibility: they are the
drivers of all their decisions and activity in all countries. They
are, in essence, GM's code of conduct. Every GM employee around the
globe is aware of these six core values. Integrity: We will stand
for honesty and trust in everything we do. We will say what we
believe and do what we say. Continuous Improvement: We will set
ambitious goals, stretch to meet them, and then "raise the bar"
again and again. We believe that everything can be done better,
faster and more effectively in a learning environment. Customer
Enthusiasm: We will dedicate ourselves to products and services
that create enthusiastic customers. No one will be second-guessed
for doing the right things for the customer. Teamwork: We will win
by thinking and acting together as one General Motors team, focused
on global leadership. Our strengths are our highly skilled people
and our diversity. Innovation: We will challenge conventional
thinking, explore new technology and implement new ideas,
regardless of their source, faster than the competition. Individual
Respect and Responsibility: We will be respectful of the
individuals we work with, and we will take personal responsibility
for our actions and the results of our work. General Motors is also
proud to have played a key role in drafting the Global Sullivan
Principles. These principles serve as a guide for companies of all
sizes all over the globe, particularly in developing countries. The
focus is respect for employees as well as health, safety, and
dignity. By endorsing them, companies become a model for other
companies in each country to follow. In May 1999, GM announced its
support of the Global Sullivan Principles as being consistent with
GM's internal policies and principles, including its Winning With
Integrity guidelines. The Global Sullivan Principles, which were
developed by the Reverend Leon H. Sullivan and have their roots in
the 1977 Sullivan Principles for South Africa, provide guidance to
companies across the globe regarding core issues such as human
rights, worker rights, the environment, community relations,
supplier relations and fair competition. GM Training GM believes in
investing in its employees. As a result, GM offers a variety of
continuing education opportunities to further your career. The
formal training program consists of five components, of which the
first three are available through GM University, which is one of
the largest corporate educational programs in the world. General
Motor has established a learning organization and cultural for its
employees across the entire enterprise. Called GM University, it's
designed to align the company's training investment with its
business needs, and disseminate best practices and core value. 1.
Foundation skill training (i.e. computer software, GM history and
business orientation)2. Functional specific skills and techniques3.
Leadership and professional development4. On-the-job training
within each department In addition, GM supports advanced education
and certification through tuition assistance, Cardean e-MBA
program, and technical education programs. New Hire Mentoring - GM
New Hire (GMNH) is the unique support system for new GM team
members. Simply put, GM new hires are paired with our experienced
GM team members with the primary objective of professionally
transitioning and developing new hires into the GM culture.
Providing and enabling them to experience professional growth,
corporate culture, new ideas and perspectives, while driving for
business results. Mentoring is critical as move into the future.
The new hires of today, will be our leaders for tomorrow.
Accomplishments over the Years of GM 1920s: First anti-knock
gasoline additives - led to high-performance fuels 1930s: First
non-flammable, low-pressure refrigerants, which made vehicle and
home refrigerators practical 1940s: First high-compression,
internal-combustion engines 1950s: America's first turbine-powered
car; forerunner of present-day computer operating systems 1960s:
Pioneering work on experimental powerplants: gas turbines, steam,
free piston, and Stirling engines; electric drive; and hybrids;
first comprehensive data on human injury tolerance 1970s: Zirconia
exhaust gas sensor - led to the successful use of three-way
catalysts; pioneering work on atmospheric chemistry; first computer
simulation of an automobile crash 1980s: Magnequench rare-earth
permanent magnets; industry-leading computer vision systems for
manufacturing; computer-based structural and acoustic analysis for
vehicle design 1990s: Integrated chassis control; series of modern
experimental vehicles: advanced electric, diesel-electric hybrid,
turbine-electric hybrid, compressed natural gas-fueled and fuel
cell-electric vehicles; Partnership for a New Generation of
Vehicles (PNGV); magneto-rheological fluids; Adaptive MagnaSteer
Variable-Effort Steering The Cultural Revolution in the Marketplace
The concept of marketing has been changing from products-oriented
to customer-oriented over the years. In the traditional automobile
industry, the important part is machine process, but nowadays, the
high technology creates more and more added values for automobile
products. Establishment of General Motors diversity and related
corporate initiatives is a key business consideration, as GM leads
a corporate-wide cultural revolution. GM Chairman, Jack Smith, is
emphasizing four goals--globalization, growth, lean manufacturing,
and using common practices wherever possible. Reclaiming a
'Position of Excellence' Customer enthusiasm is General Motors'
overarching goal and is the road to reclaiming a position of
excellence in the marketplace. Establishing that perception is not
an easy task, but the right mix of technology and a diverse work
force has produced corporate agility and an aggressively managed
corporation. General Motors is executing a complex
counter-offensive to enhance its corporate brand image as an
umbrella for its divisional and vehicle brands. General Motors is
moving aggressively to make its toughest sale of all -- itself, by
intensifying the way it markets its divisional and vehicle brands
to customers. Traditionally, GM has emphasized its individual
brands, but has also taught customers those brands come from
General Motors. Although GM was there, it was in the background.
Now, the corporate brand push proclaims GM's quality, safety, and
innovations, before directing customers to the individual car
divisions they have known for decades. Cultural Revolution GM's
setback in the early '90s led to a still unfolding cultural
revolution in which senior executive encourage risk-taking and open
debate in the name of selling more cars and trucks to a diverse
customer group. As a result, the recently adopted brand management
structure identifies diverse markets with high sales potential for
specific brands and develops strategies to focus those brands
against those markets. These highly focused brands, including the
"all new" Pontiac Grand Prix, Chevrolet Malibu, Oldsmobile
Intrigue, Cadillac Catera, Buick Century, and GMC Yukon are being
received enthusiastically by the marketplace. Developing Effective
Strategies Changing buyer demographics drives General Motors
efforts in identifying new non-traditional ways to reach different
customer groups. As a result, GM's fresh image is starting to
emerge on a variety of fronts and with a series of alliances aimed
at rebuilding the corporate brand image in highly targeted
activities. GM is striving to connect with customers in a variety
of promotions and venues. For an example, the exclusive automotive
sponsorship of the WNBA, the professional women's basketball league
formed by the NBA, is a powerful way to connect with women and
crystallize a new type of relationship. GM's sponsorship of the
basketball league will likely be joined with Concept Cure, GM's
partnership with the fashion industry that has risen over $700,000
toward the fight against breast cancer. In this way, GM will
continue to reach women through causes that matter to them. In an
intensely competitive market, GM leads a cultural revolution to
reclaim a "position of excellence." Our goal is to reach every
customer on their terms and provide them reasons to buy their next
car or truck from General Motors. GM's sustainable development
efforts are focused on four areas:Products - Work includes using
advanced technology to develop vehicles with cleaner emissions and
better fuel economy. Plants - GM has reduced pollution from its
North American manufacturing operations by 24 percent over the last
two years. Partnerships - General Motors is co-chairing a research
project which studies sustained mobility needs and methods of
transportation, as well as future land transportation systems. The
World Business Council on Sustainable Development coordinates the
three-year project. People - The strongest asset of GM,
well-trained and competent employees are essential to sustainable
development. "We strive to have the best-trained environmental
engineers in the world" For industrial companies, 'sustainable
balance' is a term loaded with vast complexities, emotions and
implications as we struggle with the balance between our growing
global economy and our basic human needs, "General Motors
understands the issues surrounding sustainability and is actively
engaged at all levels of the company to create the balance between
sustained economic and environmental needs. Not only do we see the
moral issue, we agree that the economic upside to sustainability is
considerable," "Sustainabillity is a balance of environmental,
social and economic objectives, how that balance is achieved will
change from time to time as the make-up of the objectives change.
But we people must maintain the equilibrium." Dealer Network -- The
Key to Success For nearly three decades, General Motors has been
committed to growing a diverse and financially successful dealer
network. GM was the first U. S. automaker to institute a structured
minority dealer initiative in the industry. By today's standards,
minority-owned dealerships are becoming more prominent. The path,
however, was completely uncharted for those early pioneers who
faced incredible odds in obtaining a retail automotive dealership.
Those pioneers found that owning a piece of the "American Dream"
and running it successfully presented an even greater challenge
than imagined but it laid the groundwork allowing us to realize the
significant growth today. Since 1972, GM has provided industry
leading training opportunities to qualified minorities to help
prepare them to become future dealers and to help them succeed once
they become dealers. GM has increased the number of minority-owned
dealerships to the highest number since the program began. Today,
of the 332 minority dealerships GM includes in its ranks, nearly 70
percent own their dealerships outright. As significant, GM has
dramatically improved the quality of dealership opportunities. The
selection process for identifying new dealerships has been
standardized, and factors such as size, location, demographics,
complexity of operations and investment are considered when
matching candidates to dealerships. The result is that new
minority-owned dealerships are more profitable than ever before.
The result is a "win-win" combination for everyone because managing
dealer diversity increases opportunities for others while
strengthening GM's competitive global advantage.
CompetitionCompeting All Over The World In Europe, America and
Japan the three developed areas, the automotive leaders like GM,
Ford, Fiat, Volkswagen, Honda, Toyota, etc...not only try for keep
their market share domestically and occupy as much as the market as
they can, but also at the same time compete with emerging countries
like Korea and Mexico at lower price products. In dealing with new
growing markets like Asia-Pacific, East Europe and South America,
those leading companies actively start to look for collaboration
with local national industries while they still have to compete for
more market share. They are like to abandon the traditional way
which is to transfer outdated automobile to developing countries'
markets, instead of that, exporting new technology and new concept
automobiles to improve the local level of car industry become a
mission statement of those who are leading the automotive industry
localization. Besides that, the impact from developing economic
countries on medium or lower price products can become a positive
influence to the world leaders. Although it is impossible to avoid
the multilevel structure of world auto industry, up to date, US,
Japan, Germany, Italy and France are still playing important roles
with their competitive strength and advanced technologies. In
competing with other automotive giants all over the world, GM has
many competitive advantages: Across five continents, seven oceans,
and twenty-four time zones, General Motors operates twenty-four
hours a day building transportation for the world. This means the
global opportunities at GM for talented people are as wide as the
world. From the design and engineering of new state-of-the-art
plants in Argentina and China, to developing new marketing programs
for all of Europe, you can go as far as your hard work and
determination will take you. Throughout North America, GM builds,
designs and markets some of the worlds most famous and most
successful automotive nameplates. International operations in
Europe, Asia Pacific, Latin America, Africa and the Mid-East build
and market vehicles under the Holden, Isuzu, Opel, Saab, Subaru,
Suzuki and Vauxhall brands. GM operates one of the world's largest
and most successful financial services companies, offering a
variety of automotive financing and home mortgage services. GM
produces advanced-technology electronics systems, products and
services for the world's telecommunications, automotive
electronics, aerospace and defense industries. Trend of Automobile
Industry Worldwide Overtime Cooperation and acquisition the
international merger and acquisition in automotive industry has
never stopped since a long time. All big companies have been trying
for approaching their objectives by dedicating on competitive
strength and taking out or merging competitors. In the late 20th
century, there was powerful strength among those leading companies,
the concept of competition changed in some ways. The main
objectives are not to beat their competitors, but to collaborate in
order to share a high expense on the new technology research of
high-tech automobiles, thereby to minimize the risk of independent
development. Partnerships: GM's global partnerships include
product, power train and purchasing collaborations with Fuji Heavy
Industries Ltd., Isuzu Motors Ltd. and Suzuki Motor Corp. of Japan,
and Fiat Auto Spa of Italy. GM, Suzuki and China's Shanghai
Automotive Industry Corp. are partners in GM Daewoo Auto &
Technology Co. of South Korea. GM also has technology
collaborations with Toyota Motor Corp. and Honda Motor Co. of
Japan, and vehicle manufacturing ventures with Toyota and Renault
SA of France. Partnership timetable: 1993: GM, Ford, and the
then-Chrysler Corporation enter into an agreement with U.S.
government to develop a production prototype vehicle by 2004 that
gets up to 80 mpg while maintaining today's affordability and
features. The program is called the Partnership for a New
Generation of Vehicles. GM unveils its PNGV prototype, the Precept
at the North American International Auto Show in January, 2000.
1994: The Coalition for Environmentally Responsible Economies
(CERES) and GM mutually endorse each others' Environmental
Principles. GM is the first Fortune 50 Company to endorse the CERES
Principles. That same year, GM is the first automobile manufacturer
to join CERES. 1994: GM and The Nature Conservancy sign commitment
to work together on sustainability programs and initiatives. 1994:
GM joins the President's Council for Sustainable Development 1997:
GM forms a Supplier Environmental Advisory Council to ensure
environmental awareness, pollution prevention and compliance from
its suppliers 1999: GM & Toyota announce a 5-year collaboration
to speed development of advanced technology vehicles manufacturing
and assembling modularization. Modularization is a systematical
integration of automobiles' accessories or sub-system according to
its structural organization. Manufacturing & assembling
modularization is that automotive accessories manufactures produce
modularized systematical products, and then the car producers will
finalize automobiles by simply assembling those modularized
products. M & A modularization will lead to a great transform
in car producing mode, this also includes discarding the
traditional assembling lines and equipments, so as to reducing the
amount of car accessories, cutting down the cost of management and
operation, and improve the reliability of the products.
Car companies nowadays have many possibilities for sourcing raw
materials, parts, and components, and assembling them into final
goods to serve world-wide markets. GM parts and accessories are
sold under the GM, GM Goodwrench and ACDelco brands through GM
Service and Parts Operations. GM vehicle engines and transmissions
are marketed through GM Powertrain. Environmental Auto-products
protecting environment and developing persistently are being
realized and taken into account by more and more countries. The
21st century products will try for present a harmony between
automobiles and our environment by developing new power, choosing
raw materials, producing modularized accessories, and finalizing a
whole car. In order to reach the standard and to save natural
resources, new type of cars that are using electric, hydrogen and
mixed power in the future will be well concerned. Meanwhile, some
advanced designing concepts such as green design and whole life
design are widely used. Almost 10 years ago, GM reaffirmed their
long commitment to the environment with the adoption by the GM
Board of Directors of environmental principles. These apply to
their operations worldwide. They cover a number of areas:
Environmental preservation and restoration Reducing waste and
pollutants Conserving resources Working with governmental entities
for development of sound environmental regulations And assessing
the impact of plants and products in the communities in which we
live and work. GM is committed to environmental preservation and
restoration. However, GM believes both the economy and the
environment can flourish. And that belief is being embraced more
widely. GM Environmental Principles General Motors Board of
Directors adopted the Environmental Principles on March 4, 1991.
They are intended to serve as a guide for all GM employees
worldwide, encouraging environmental consciousness in both daily
conduct and in the planning of future products and programs. As a
responsible corporate citizen, General Motors is dedicated to
protecting human health, natural resources, and the global
environment. This dedication reaches further than compliance with
the law to encompass the integration of sound environmental
practices into our business decisions. GM Research Leadership: In
1955, GM became the first auto company to begin conducting
atmospheric research. In 1962, GM became the first auto company to
construct a smog chamber for analyzing the content and effects of
smog. Also in 1962, GM became the first auto company to build a
mobile laboratory to sample air pollutants. 1967: GM developed the
industry's first sealed enclosure (SHED) test technique for
measuring evaporative emissions. This technology was later adopted
by the U.S. Environmental Protection Agency (U.S. EPA) as its
official test for evaporative emissions. GM was the first auto
company to set up emission research laboratories in the two areas
of the U.S. with the most severe pollution problems (at the time):
Los Angeles and Denver. Unleaded Gasoline: In 1970, GM became the
first auto company to announce that it would manufacture all of its
passenger cars and light trucks in the U.S. to run on unleaded
fuel. Reformulated Gasoline: GM proposed the idea of reformulated
gasoline, which burns cleaner than traditional unleaded gasoline,
in 1989. 1989: GM leads the formation of the Auto-Oil Air Quality
improvement research program which led to cleaner reformulated
gasoline In March 1991, GM endorsed the use of reformulated
gasoline in all of its vehicles. Electric-powered Vehicles: In
1990, GM announced the development of the Impact (EV1), the first
zero-emissions vehicle to be developed for commercial production in
the U.S. *In 1996, GM was first to market an electric vehicle, the
EV1, available for lease in selected markets. Variable-fueled
Vehicles (FFVs): 1991: The Chevrolet Lumina flexible fuel vehicle
(FFV) is the first methanol FFV certified by the U.S. EPA FFV's
operate on 85 percent methanol, ethanol, or gasoline, or any
mixture of them. Elimination of Chlorofluorocarbons (CFCs): GM
spearheaded the auto industry's efforts to phase out the use of
CFCs, which have been proven to damage the earth's ozone layer. In
1990, all GM dealerships, assembly plants, and fleet garages in the
U.S. and all dealers in Europe which service conditioning units
were equipped with machines that recover AND recycle CFCs used in
air conditioning. Waste Reduction (Plants): In 1991, GM and the
United Auto Workers (UAW) jointly implemented a program called "WE
CARE" (Waste Elimination and Cost Awareness Rewards Everyone), with
focus on prevention and elimination of potential waste before it
becomes a matter of recycling, treatment, or disposal. GM's vehicle
manufacturing and assembly complex in Ramos Arizpe, Mexico, was the
first plant in the world to use a system of microbiological
filtering to treat both industrial and sanitary wastewater.
Recycling: In 1970, GM conducted the industry's first pilot test
program for the collection and recycling of abandoned cars in rural
areas and small communities. In 1979, GM Europe's Opel subsidiary
became the first auto manufacturer in Europe to mark all its
plastic parts with internationally standardized material codes. In
1990, GM became the first auto manufacturer to enter the engine
remanufacturing business. In this venture, recycled used engines
are remanufactured for sale through the GM Service Parts Operations
(SPO) unit. In 1990, GM's Saturn division was the first to employ
the lost-foam casting process for engine manufacturing, a process
which results in a significant reduction in the amount of
contaminated waste sand generated in the molding process. The
lost-foam casting process is also used on the new L850 twin-cam
four cylinder engine that is standard on the new Saturn L-series
midsize sedan and wagon (create link). In 1990, GM Europe's Opel
subsidiary was the first German manufacturer to use recycled
plastics in its Calibra model. In 1991, Opel announced that the
1992 Astra sold in Germany would be the first vehicle on the market
with a guarantee that the vehicle will be taken back free of charge
for recycling at the end of its life cycle. 1995: GM publishes
first industry paper on calculating recycle ability of automobiles
Automotive technology digitization. Automotive industry is adapting
the future demand of digitization and intelligentzing. Multimedia
system, auto intellectual security system, comfort management
system, phonetic identify system and multi-digital technology will
be applied. Digitization technology will change automobiles design,
development and manufacturing methods, for example, computer
virtual design technology conducts new model testing under a
virtual environment; new facilities and assembling lines will be
created under the virtual technology, consequently, producing
process will become controllable and precise, target cost will be
rigidly navigated. GM to offer XM satellite radio in most 2004
model lines General Motors is to widen the number of vehicles on
which it offers XM Satellite Radio as a factory-installed option
from 25 in the 2003 model year to 44 for the 2004 model year, more
than three-quarters of its entire fleet of cars, trucks, minivans
and sport utility vehicles. Satellite radio, offered by XM and its
rival Sirius, offers coast-to-coast listening of mostly
commercial-free programmes with a sound quality claimed to be
superior to FM. The fledgling services are, however, about to face
new competition from digital radio broadcasting which gives car
buyers yet another in-car entertainment choice. Service Innovation
The competition among auto industry runs like a battle, at the same
time when each individual car maker endeavor to lower cost,
increase profit and develop new technology, they also come to start
on a brand new concept of marketing and service. The four corners
service and the ceaseless innovation has become a secret weapon to
win target customers and competitive initiation, and it will make
car service the most active one among the 3rd industry, and will as
well direct the car service into individuation, systematization,
intelligentizing and low cost. GM operates one of the world's
largest and most successful financial services companies, GMAC,
which offers automotive, mortgage and business financing and
insurance services to customers worldwide. GM's OnStar is the
industry leader in vehicle safety, security and information
services. GM's other major businesses are Hughes Electronics Corp.,
which provides digital television entertainment and satellite-based
services, and GM Electro-Motive Division, which manufactures
diesel-electric locomotives and commercial diesel engines. GM
offers two new credit cards to boost sales GM teamed with Chase
Manhattan Bank, a unit of J.P. Morgan Chase & Co. Inc., for the
GM Business Card, and with Household International Inc., a unit of
HSBC Holdings Plc, for the GM Extended Family Card. General Motors
planned to offer two new credit cards; this is to reward users with
discounts on new GM vehicles. The new cards do not have limits on
how much a holder can earn each year or apply toward a new vehicle.
The GM Business Card will be available immediately, and could
generate as many as 100,000 new accounts in the short term and few
thousand vehicle sales this year. The vehicle manufacturers use
Internet to manage sales E-commerce is having profound effects on
the car industry. Consumers use the Internet to become better
informed before making a purchase. Online sites like Autobytel
steer millions of car buyers toward specific dealers while the same
sites deliver competing bids for cars, insurance and financing in a
manner that lowers costs and improves satisfaction among consumers.
Meanwhile, auto makers are using the latest in e-commerce methods
to manage their supply chains and replenish their inventories. All
of big car company have their own web site to sell cars. Current
Status of The Overall Industry The automobile industry is evolving
rapidly on a worldwide basis. Manufacturers are merging, component
design and manufacture are now frequently outsourced instead of
being created in-house, brands are changing and the giant auto
makers are expanding deeper into providing financial services to
car buyers. Meanwhile, all of the biggest, most successful firms
have become totally global in nature. At the early age of 21st
century, the world automobile market will present its newer
characteristics with the development of world automobile industry
and the world economy; the automobile market will be formed into a
fresh structure, North America, West Europe and Japan, the 3 major
markets penetrate interactively to seek upgrade. North America,
West Europe and Japan are the three most developed economic areas
which hold the largest automobile sales and capacity in the world.
Due to their early market economy taking off, mature market
growing, plus the three traditional markets will have to penetrate
interactively. Increased trade liberalization will certainly spark
the growth of automotive industry particularly in Asia Pacific
region, which is critical to future growth of the worldwide auto
industry. China's accession into WTO and the implementation of AFTA
will definitely intensify the competition amongst the players in
this industry. The growth in car population and the automotive
manufacturing industry will also stimulate the growth of automotive
components and accessories exponentially. Generally, automakers are
optimistic about the future opportunities in Asia Pacific and
anticipate that, by the year 2006, vehicle sales in Asia Pacific
will grow at a rate greater than that of Europe and North America
combined and it is expected that over the next decade, the
Asia-Pacific is the region with the highest growth potential and it
will remain the most attractive auto market in the world for the
long term. China centered Asia Pacific, South America and East
Europe, the demand for emerging economic areas increase rapidly.
With the economy's continuous developing to Asia-Pacific, South
America and East Europe, these 3 areas are growing into big
important emerging economic markets. The big 5 car producing
countries in the world, US, Japan, Germany, France, Italy all come
to look for opportunities of cooperation, invest or establish car
plants, and excel selling systems and service networks. Among those
developing countries, China is becoming a powerful economy at its
fast speed, the auto market is just at the prophase of the stage
especially cars (home use), a tremendous potential will turn into
an actual demand. Up to date, all big auto companies world based
have found a way to work together with Chinese car companies. Now,
GM is a major player in China's growing automotive market. It has
about 8.6 per cent of china's passenger car market, which will
total about 1.1m vehicles in 2002. And it also has more than 3,800
employees, three joint ventures and two wholly owned enterprises in
China. Those achievements in China market show that GM had a
successful strategy in global expending. They found a new target
market, China car market, which has the largest potential in the
world. China, with its population of 1.2 billion people, abundance
of natural resources and growing economic vitality, its increasing
importance in today's global economy cannot be ignored. From a
commercial perspective, China represents an important emerging
market for a vast array of products and services. In the case of
motor vehicles, China is still a small part of the world vehicle
market (about 7%), but it is projected to account for 25% of the
increase in new global vehicle demand over the next decade.
Therefore, influence by prosperous economic environment, China is
becoming a new attractive target market for automakers throughout
the globe. GM develops rapidly in China market. In 2002, sales are
up more than 40 per cent compared with 2001.The rapid growth in
Chinese sales shows that GM do business very well in China, like
the chairman of GM, Mr. Murtaugh said, "We are already maxed out on
our capacity. We have achieved in five years what a lot of people,
a lot of very smart people, thought would take 10 to 15 years." GM
did a series of positive activities to adapt and hold china car
market. In 1997, GM has a fifty-fifty joint venture automobile
company, with Shanghai Automotive Industry Corporation (SAIC),
built Shanghai GM (SGM)'s plant, which consists of vehicle, engine,
and transmission assembly operations, as well as a marketing and
administration headquarters. Total investment is about US$1.5
billion. It has an annual capacity through its two shifts a day of
100,000 cars, a number that the company has already exceeded in
sales in 2002. Products manufactured at SGM include a family of
four mid-sized sedans, based on the Buick Regal and Century built
in the US; the Buick GL8 executive wagon, also based on a van built
in the US; and, the Buick Sail, a compact car based on the Opel
Corsa, originally designed and built in Europe. The Sail is China's
first compact car intended for the growing middle class. In
cooperation with Chinese partner in SGM, GM established the Pan
Asia Technical Automotive Center in 1997. This is a US$50 million
investment that provides automotive engineering services for its
parent companies and other automotive companies not only in China
but the Asia-Pacific region. These services include design,
development, testing and validation of components and vehicles. The
cooperation with Chinese partner help GM developed in China quickly
and steadily, especially in technology development. GM also helped
China development in other social field. GM established several
partnerships and initiatives in China that create benefits beyond
those of their direct business. For example, GM has been an active
partner with the Chinese government in addressing current and
emerging environmental challenges. This includes a joint research
project with the Chinese and US environmental protection agencies
to sample air quality and determine primary sources of pollution.
In this vein, GM has taken a lead role in advocating the benefits
and use of unleaded fuel in China. GM has also partnered with the
Chinese regulatory and safety community on research and development
of safety and health standards to ensure that the best available
technology is used. Furthermore, GM has sponsored more than a dozen
study trips to the US by Chinese government officials on matters of
health, safety, and the environment. GM is a geocentric automotive
company, all of these decisions and activities in China car market
show that GM thinks globally and acts locally, these positive
activities lead GM adapt and hold China car market quickly.But now
GM face very huge threat from Toyota and Volkswagen. According to
Bloomberg, 2010, China risks overcapacity because of Toyota and
Volkswagen growth in there.Toyota Motor Corp., Volkswagen AG and
Nissan Motor Co. are raising production capacity and sales
forecasts in China, betting vehicle demand will continue to grow
even if the government scraps car-buying incentives. Volkswagen,
the biggest foreign carmaker in China, will invest 4.4 billion
euros ($5.9 billion) in plants and new models by 2012, while Nissan
aims to boost capacity in the nation almost 70 percent, the
companies said April 23 at the Beijing Auto Show. Toyota and
Hyundai Motor Co. are also building new factories in China, the
worlds largest vehicle market. The automakers are competing for
market share as Volkswagen estimates the growing wealth of Chinas
1.37 billion people may raise the nations auto demand as much as 20
percent this year. Nissan predicts growth may slow next year as
China has signaled it may end a tax break for small cars, and
industry consultants JD Power & Associates and IHS Global
Insight say carmakers risk building too many plants. Chinas
motorization is reaching the masses, said Takanobu Ito, Chief
Executive Officer of Honda Motor Co., Japans second-largest
carmaker. Even after the tax break ends, demand shouldnt drop very
much. Chinas vehicle sales growth this year will exceed Hondas
original estimate of 10 percent, Ito said at the auto show. Xu
Changming, a research director at Chinas State Information Center,
said last week demand may rise about 17 percent to 16 million
vehicles, down from 46 percent last year. Tax Break in ChinaThe
government is likely to raise consumption tax to 10 percent next
year for cars with engines no larger than 1.6 liters, after cutting
the rate to 5 percent in 2009 and raising it to 7.5 percent this
year, Xu said. Last years reduction, which helped Chinese auto
demand surge past the U.S. for the first time, resulted in
unsustainable growth, he said. Even if the tax break is phased out,
there is a fear that amid all of this investment and stellar
growth, the vehicle market could start to overheat, Paul Newton, a
London-based auto analyst at IHS Global Insight, wrote in a
research note last week. The carmakers vying for market share in
China may not want to admit it, but this risk is becoming a very
real concern. GM, Toyota General Motors Co., the largest automaker
in China, plans to increase sales in the nation to 3 million
vehicles by 2015 from an estimated 2 million this year. The company
and its local partners sold 1.83 million units in China last year.
Every time the government changes their policy, it will have some
impact, Kevin Wale, president of Detroit-based GMs China business,
said at the auto show. But the underlying demand is increasing at a
very fast rate. At the moment, We dont have enough cars and we cant
build enough cars, he said. Government policy changes are too
unpredictable to be reflected in planning, Toyotas Executive Vice
President Takeshi Uchiyamada said at the show. The speed of changes
to government policies is faster than our development of new
engines and new cars, Uchiyamada said. The company, based in Toyota
City, Japan, is basing its strategy on significantly high demand
for small-engine compact cars, he said. Toyotas 2010 sales in China
may exceed an 800,000-unit target, said Masahiro Kato, president of
the companys local unit. A new Toyota plant in Changchun, Jilin
province, will start production in late 2011 or early 2012 and have
a yearly production capacity of 100,000 vehicles, he said. The new
plant will likely build Corolla vehicles and the automaker may also
introduce a new low-cost car in China, Kato said. Toyota rose 3.4
percent to close at 3,690 yen in Tokyo trading today, gaining the
most in seven weeks after Nikkei English News reported on April 24
that the company may post a full-year operating profit. Also,
General Motors and Ford, are facing a long, hard battle for
survival tonight after Wall Street abruptly lost confidence in
their financial stability in the face of plummeting vehicle
sales.Research on ToyotaIn 1933, Kiichiro Toyoda established an
automobile division within an already successful Japanese company,
Toyoda Automatic Loom Works, Ltd., a manufacturer of textile looms.
In 1935, Toyota had established its first dealership and produced
their first vehicle, the Model G1 truck. In 1937, after many
challenges, the division was spun off and became an independent
company within the group and became known as Toyota Motor
Corporation (TMC). By 1957, they had imported their first passenger
car from Japan into the United States. In the early to mid-60s,
Toyota was clearly in the path to becoming a multinational
corporation by opening a vehicle plant in Brazil and their first
Asian vehicle plant in Thailand. They first showed their
multinational presence in the United States when Toyota created a
joint venture with General Motors Corp to open their first United
States automobile assembly plant. In 2003, they became the worlds
number 2 in terms of annual sales, as they overtook Ford Motor
Company and coming behind General Motor. Today, Toyota has 40
vehicle assembly plants around the world and 12 research,
development and design centers and employs approximately 310,000
personnel. The history behind the Toyota logo is nothing shy from
intriguing. As many have noticed the obvious image of a T for
Toyota, the full meaning behind the logo places the perfect
definition of who Toyota Motor Corporations is. The logo consists
of 3 oval rings. Aside from the letter T that the two perpendicular
center ovals represent, it is also a relationship of mutual trust
between the customer and Toyota. The space in the background
implies a global expansion of Toyotas technology and unlimited
potential for the future. Therefore, the Toyota logo portrays the
companys vision and philosophy and is known worldwide as being
synonymous with quality, reliability and the spirit of innovation.
Toyota, as well as the entire automobile industry, has their
strengths, weaknesses, opportunities and threats. Below please find
a SWOT Analysis for Toyota Motor Corporation.StrengthsInnovation,
advanced technology and their research and development. First to
produce a hybrid automobile (Prius) gaining the attention during a
time of high gas prices.To expand more aggressively into new
segments of the market. The launch of Aygo model by Toyota is
intended to take market share in youth market.To produce cars which
are more fuel efficient, have greater performance and less impact
on the environment.The development of eco friendly vehicles that
respond to social and institutional needs and wants.Global
Expansion; they must continue to penetrate the emerging markets
such as India and China where the demand has increased
significantly.WeaknessesJapanese car manufacturer, which makes them
seen as a foreign importer.Production capacity; they produce most
of their cars in the United States and in Japan while competitors
may be more strategically located worldwide for a competitive
global advantage.Possible issues with quality due to the numerous
recalls that has led to criticism.OpportunitiesInnovation, advanced
technology and their research and development. First to produce a
hybrid automobile (Prius) gaining the attention during a time of
high gas prices.To expand more aggressively into new segments of
the market. The launch of Aygo model by Toyota is intended to take
market share in youth market.To produce cars which are more fuel
efficient, have greater performance and less impact on the
environment.The development of eco friendly vehicles that respond
to social and institutional needs and wants.Global Expansion; they
must continue to penetrate the emerging markets such as India and
China where the demand has increased significantly.ThreatsIncreased
competition and saturation of the market. Shift in exchange rates
that are affecting profits and cost of raw materials.Recession is
here. Household incomes have continued to decrease through these
rough times due to the increased unemployment. This clearly leads
to a decrease in sales especially in the gas guzzling SUVs.
Demographics have shown a decrease in family size throughout time.
Therefore, the need for large vehicles, aside from the gas guzzling
issue, has decreased.Fuel/oil prices have led consumers to use
their cars less allowing it to last longer or choosing not to
use/own a car at all.Toyota creates value to stakeholders in many
different ways. TM is focused in delivering the best customer
service possible. They believe that creating an emotional
attachment between the customer and the brand is just as vital in
the success of the organization. Innovation has also been a key
player in creating stakeholder value. Toyota hybrid is just one
example. They have answered to stakeholders wants of going green.
Consumers who value the clean emissions, fuel efficiency, safety,
comfort and personalized design of such vehicles will eventually
pay more for them as costs for air pollution and climate change
rise. The demand for such vehicles played a major role in Toyota
becoming the second largest automobile manufacturing in the world.
Their approach defines innovation as an incremental process rather
than making huge, sudden leaps. They believe in making things
better on a daily basis, which is known by its Japanese name,
Kaizen- continuous improvement. Toyotas key cultural trait that
distinguishes it from other automakers is the Toyota Production
System that ensures Toyotas status as the worlds most efficient
automaker and has allowed the company to expand rapidly into new
markets without overreaching. One might argue that this is Toyotas
secret weapon! The Companys commitment to teamwork is exemplified
on the factory floor, where workers grab parts from trolleys that
move with the line, one of many timesaving innovations proposed by
the workers themselves. Toyotas philosophy of empowering its
workers is the centerpiece of a human resources management system
that fosters creativity, continuous improvement and innovation by
encouraging employee participation and that likewise engenders high
levels of employee loyalty. Another Toyota competitive advantage is
their suppliers, as they have and still have tight bonds with them.
Toyota supports its suppliers with business, while suppliers are
expected to support its technology as well as geographic expansion.
Their complete dominance of its home market in Japan also gives
them a huge advantage over GM and other competitors. Toyota has a
home market share of 40%, which allows them to count on steady
revenue and profits. Toyota is able to use new technology and roll
out vehicles in its home market, then seek additional volume
overseas. The only area that Toyota seems to lag behind in is their
expansion into emerging countries. Toyota must move in aggressive
manners into these fast growing markets such as, China, Russia,
Brazil and India in order to remain a top competitor in the
industry. Some of Toyotas initial barriers dealt with World War II.
As Japan became embroiled in the war, the procurement of basic
materials for automobile manufacturing became more and more
difficult. At one point, they were manufacturing trucks with no
radiator grills, brakes only on the rear wheels, wooden seats, and
a single headlight. Japans economy began to deteriorate and by the
time the war ended in August 1945, most of Japans industrial
facilities had been wrecked and their production plants had
suffered extensively. Once their motor industry as a whole began to
recover, concerns concern that American and European auto
manufacturers would overwhelm the Japanese market with their
economic and technical superiority. They overcame this by focusing
on small cars since the American manufacturers were concentrating
on medium-sized and larger cars and it proved to be a great
decision by Toyota executives in attempts to not directly compete
with the American manufacturers. In 1945, the economy was still in
poor shape and goods and there was a short supply of all goods and
materials and inflation was high. These barriers posed a great
threat for Toyota as the new government policy had discontinued all
financing from city banks and the Reconstruction Finance
Corporation. Toyota began facing a sever liquidity crisis that led
to employees not being paid at their regular payroll, which in turn
led to a reduction in salaries and the possibility of lay offs.
Toyotas Labor Union went on strike and Toyota was on the brink of
bankruptcy. Although Toyota faced several serious barricades, they
were able to overcome all of these factors and become the worlds
largest automaker! In order for Toyota to continue its growth
pattern, they must venture into emerging countries. Toyota has
slowly made there presence known in the so-called BRIC markets
(Brazil, Russia, India and China) however, they still fall well
behind General Motors. Other countries of interest to discus are
Turkey and South Africa. While Toyotas North American sales slipped
by 8,000 vehicles on slowing U.S. sales they were able to make up
for this decline by strong sales in China, Africa and South Africa.
Toyota Motor Corporation- 70 year milestonesYearMilestone
1933Automobile department established within textile loom maker
Toyoda Automatic Loom Works -- now Toyota Industries Corp --
founded by inventor Sakichi Toyoda 1935First vehicle, the Model G1
truck, built. First Toyota dealership established1936Production
starts of its first car, the Model AA1957Crown becomes first
passenger car made in Japan to be exported to the United
States1962First overseas vehicle plant, in Brazil1964First Asian
vehicle plant outside Japan, in Thailand1972Cumulative production
in Japan reaches 10 million vehicles1984Toyota's first U.S. car
assembly plant, a joint venture with General Motors Corp, opens in
California1989Toyota launches luxury Lexus brand in North
America1992First European car plant begins production in
Britain1997Prius, the first mass-produced hybrid car,
launched1998Toyota takes majority stake in minivehicle maker
Daihatsu Motor Co1999100 millionth Toyota vehicle produced in
Japan2001Toyota takes majority stake in truck maker Hino Motors
Ltd2003Toyota makes 6.78 million vehicles and overtakes Ford Motor
Co in annual sales to become world No.2 behind General
Motors2005Toyota takes minority stake in Fuji Heavy Industries,
maker of Subaru cars, for cooperation in vehicle technology
development and use of its U.S. factory2006Toyota takes minority
stake in truck maker Isuzu Motors Ltd to beef up diesel engine
technology2006Toyota's group global sales of 8.808 million vehicles
exceed GM's by 128,000, making it the world's biggest automaker,
authoritative industry magazine Automotive News says. (This figure
excludes cars made by a Chinese joint venture in which GM holds a
minority stake)AnalysisWhy Toyota could surpassed the giant
automotives GM?Toyotas key cultural trait that distinguishes it
from other automakers is the Toyota Production System that ensures
Toyotas status as the worlds most efficient automaker and has
allowed the company to expand rapidly into new markets without
overreaching. One might argue that this is Toyotas secret weapon!
The Companys commitment to teamwork is exemplified on the factory
floor, where workers grab parts from trolleys that move with the
line, one of many timesaving innovations proposed by the workers
themselves. Toyotas philosophy of empowering its workers is the
centerpiece of a human resources management system that fosters
creativity, continuous improvement and innovation by encouraging
employee participation and that likewise engenders high levels of
employee loyalty. Another Toyota competitive advantage is their
suppliers, as they have and still have tight bonds with them.
Toyota supports its suppliers with business, while suppliers are
expected to support its technology as well as geographic expansion.
Their complete dominance of its home market in Japan also gives
them a huge advantage over GM and other competitors. Toyota has a
home market share of 40%, which allows them to count on steady
revenue and profits. Toyota is able to use new technology and roll
out vehicles in its home market, then seek additional volume
overseas. The only area that Toyota seems to lag behind in is their
expansion into emerging countries. Toyota must move in aggressive
manners into these fast growing markets such as, China, Russia,
Brazil and India in order to remain a top competitor in the
industry.But now according to the datas above, Toyota try to
penetrate the Chinas market and if they succeed, it will strengthen
their position as the number 1 automotive industrys leader in the
world.ConclusionsToyotas key cultural trait that distinguishes it
from other automakers is the Toyota Production System that ensures
Toyotas status as the worlds most efficient automaker and has
allowed the company to expand rapidly into new markets without
overreaching. Even before the present economic slowdown, the US
carmakers were losing headway to Japanese rivals because of a shift
in tastes among American motorists from pickup trucus and sports
utility vehicles to smaller, more fuel-efficient cars. Thats why
the rapid change in innovation and technology, and of course the
techniques of operations management are so important to keep the
companies sustainable and become the leader in the market.
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