The global auto industry is, perhaps, one of the most competitive industries in the world. Due to this competition, it has undergone many developments over time. For instance, the players have continuously produced better products for the benefit of their customers. The industry also contributes significantly to the economic growth of the countries in which these businesses are based. In the U.S. alone, the auto industry is among the leading employers. As a result, it has contributed positively to the Gross Domestic Product. However, although the automotive industry has played such a central role, it has not been spared by the global economic situation. The last two decades or so, car manufacturers in North America have seen decline in their market share as well as the prospects that came out of employment. Contrastingly, it is crucial to note that other parts of the world, especially the East, have faced the opposite situation. Specifically, automakers from Japan, Korea and some parts of Europe have continued to export more, thus, gaining more profits. Although, some authorities point out that the U.S. economy has not been growing significantly, others suggest that individual strategies by the manufactures are the key determinants of success in the industry.
This essay seeks to outline some of the strategies and tactics adopted by the automotive manufactures. In order to bring out the regional disparities in market growth or decline, the essay discusses companies from each of the two regions that are North America and Asia. Specifically, the essay analyzes strategies by the American Ford Motor Company against those, adopted by the Japanese Toyota Motor Company. The analysis considers the distinctive competencies of the companies, order qualifiers and order winners, and the strategies adopted by the two companies in the following areas: marketing, operations, pricing, quality issues, customer satisfaction and product differentiation.
Strategies and Tactics adopted by Toyota
Toyota has risen to global leadership in the automotive industry due to various competencies that the company has managed to secure over time. To begin with, Toyota produces a large volume of cars in a year; volumes that ensure that even if there is a global decline in care purchases, the company would still sell more than any other player. In 2011, the Worldwide Hybrid Vehicle Sales reached the 3 million mark (Toyota). This could be attributed to the unique philosophy of production. Only what is needed is ideally produced. In addition, Toyota has evolved to be a popular brand, which is proved by its mentioning in relevant literature and common knowledge. Specifically, the Toyota Production System (TPS) sets the company apart from all other auto makers. In addition, The Toyota Way is acclaimed for its distinctiveness in terms of providing a global manufacturing template for all plants across the world (Shah 14).
Order Qualifiers and Order Winners
Order winners are those company characteristics that lead to the company’s customers to prefer the goods of the company to those of other companies. Put in other terms, according to Khanna (16), these are the competitive advantages of the firm. Order winners are the very unique aspects of a company which no other company can adopt. Even if that company is doing better than the company in question, what makes the two companies successful cannot be the same. However, in order to be viable in market, the company does not apply all aspects of the competitive advantage. Those competitive characteristics applied at the market level are referred to as market qualifiers.
Toyota competitive advantages have successfully made it exert significant pressure in the auto market. Some of the order winners for Toyota are discussed below. The first order winner is the issue of cost leadership. As it will be seen under pricing strategy, Toyota has some of the cheapest vehicles in the world. This makes its customers to prefer Toyota vehicles to any others. Other order winners for Toyota include lean supply chain management, the Toyota Way and market segmentation.
In order to effectively market its products, Toyota has established a global network of outlets. Since other players, such as Ford, also have global networks of marketing, the main question still lingers: how does Toyota manage to lead the cue? Some authorities suggest that the Eastern or Asian way of marketing is integrated with the social life of the people. The result of this approach in marketing is the fact that more clients are able to identify with the product and stick by it even in times of economic recession. In the long run, the company maintains or increases its market share while others decline. Against this view, it then means that the Western approach to marketing may be very transactional and formal.
At Toyota Motor Company, operations are run through a rigorous process of supply chain management. Operations and Supply Chain Management (SCM) have undergone a global evolution. Having existed for long, Toyota began by implementing a system in which all suppliers were located near the production plant. In addition, the operations management implemented a system in which both manufacturing of key parts and their final assembly was done in-house. The next aspect was to reduce set up time from a couple of hours to a few minutes. A set of all these operations and supply activities have come to be referred to as the Toyota Production System (TPS), a worldly acclaimed system of production, operations management and supply chain management.
Pricing plays a central role in product sales. Perhaps one of the reasons as to why Toyota has been able to overtake all other players is the fact that it offers cheap products. Toyota has managed to develop products for each segment of population. Through market segmentation and competitive pricing strategies, the company continues to be at the top of the industry (Toyota).
Toyota Motor Company vests a lot of importance on the quality of its products. For this reason a very detailed and descriptive production system was set up. To further manifest how this aspect is important for the company, the company is known for its act of recalling faulty cars back for rectification. Faulty auto parts have been attributed to outsourcing as well as business partnerships. For instance in the 2000’s, the company recalled cars that had faulty tires and brakes. Moreover, although tire companies may have played a role, the company itself emphasizes on internal methods, processes and procedures of quality control. To achieve this, automation has been used as one of the ways.
Product differentiation has to do with variety creation. As far as this aspect is concerned, Toyota scores highly. The company is a global leader in brands and products, even when compared to multinationals in other industries. Toyota has so many products that American automakers find it difficult to match up. This could be perhaps because some of the company’s strongholds have highly segmented populations. In addition, these populations are not only growing rapidly but also changing their tastes and preferences to the benefit of the company. Above all, the company devotes a good chunk of its revenues for research and development. As a result, product delivery is based on information and specific need in an environment of innovation and technological response.
One of the reasons as to why Toyota had to come up with an entire production system was the need to respond to the needs of the customer. This response was not only reactive but also intended to retain the consumers and make them loyal to the company products.
Strategies and Tactics adopted by Ford
Ford Motor Company defines a competency as a set of skills, knowledge, values, personal characteristics and abilities that are agreed upon in order to run the affairs of the company. In coming up with its competency model, Ford Motor Company did not only examine the successful models from other automakers but also reviewed its existing models. The company is worldly acclaimed for focusing its competencies around training, selection and promotion of global salaried workers. With regard to employee selection, the company focuses on the following segments: production and supervision, engineering, sales and marketing and human resources. The company believes that it can only gain competitive advantage over other players by concentrating on its workforce. The core competencies of the company are grouped into the heart (integrity, courage, durability and results drive), relationship (teamwork, development of people, communication and desire to serve) and know how (systematic thinking, quality methods, business acumen and innovation).
Order Qualifiers and Order Winners
Since the launching of its strategic plan in 2000, Ford began a new process of determining order winners and competitive advantage. The order winners were founded on three main goals of the company: increased market share, production of smart cars and increased revenues (Khanna 16). So as to deliver on the objectives, the company adopted an improved communication system that would ensure the company is efficient in its operations. The first order winner was focused on reduced costs which translated to reduced prices for cars. To achieve this, the company had to revamp its production system. Similar to the Toyota way, cars were now being produced in one sequence as opposed to different engineering segments. The second order winner is the production of smart cars. Although they were not very price-friendly as the other brands, smart cars set the company apart; thus customers would prefer them to others. Production of smart cars was an indication that the company had began to be more customer-oriented that it was traditionally. Thirdly, Ford vehicles were preferred by clients because of the technological advancement seen in the installation of the Ford Synch which could connect the driver to many options. The introduction of Ford Sync ultimately became a market qualifier as they uplifted a dwindling image of the company.
All marketing efforts, activities, processes and procedures are coordinated under the Marketing, Sales and Service team. The team is divided into at least five components. The first one is the Global Product Marketing Planning and Strategy. It deals with originating global master plans of distributing Ford vehicles. The plans and strategies of this component are fulfilled and actualized by the Field Operations department. It handles day to day activities of the company. In order to have a well rounded approach, the company has set the third component, the Ford Customer Service Division. It handles all issues to do with customer claims, follow ups and general concerns. The fourth component, the Global Marketing Sales and Service handles all sales-related issues. Lastly, the company’s marketing is also composed of the Ford and Lincoln Marketing and Sales. In a nutshell, the marketing of Ford is well structured. In 2000, the company was ranked the fifth of its kind globally. The fact that sales do not match those of Toyota is a question of historical and long earned loyalties that cannot be changed overnight.
According to Shah (7), Ford Motor Company saw the first evolution of SCM while Toyota is acclaimed for having brought about the second wave of SCM; with ramifications. With over 198,000 employees globally, Ford has been able to establish a reliable management system that emanates form the corporate governance structure of the company. Ford is known to have developed the first supply chain and operations management system.
The competitive automotive industry has low to consequent pricing strategies for the leading players. With increasing developments in technology, the manufacturers have been able to automate most of their production processes, thus, cutting down on production costs. This has led to lowering of prices for its vehicles. Recently, Ford has moved to create possibilities of new demand in relation to their reduced prices. By exploring various pricing strategies that exist, it appears that in oder to achieve the desired market share,Ford needs to adopt a ‘penetrating pricing’ (Shah 302). Therefore, the company has reduced its prices in order that it may create a higher demand for its products, hence, increasing the market share.
Like most of the automakers, product quality remains at the heart of Ford Motor Company. It is one of the promises the company perpetually seeks to deliver to the global client. In the wake of intense competition from auto giants like Toyota and Hyundai, Ford had to redo its strategy for quality production. As a result, the company sponsored the Global Quality Research System (GQRS). In 2011, the GQRS report showed that North American products had achieved high quality. The company seeks to roll out this strategy to the rest of the world where it has the market share and where it would establish new markets. To demonstrate how serious Ford is with quality, it was reported that in 2009, the company topped the quality list, thus, overtaking Toyota and Honda. However, the company needs to be more consistent since later surveys placed the same company at position eight. This means that either the company slackened in its quality assurance or the competitors invested a lot in quality production. Moreover, Ford uses the approach of reducing Things-go-Wrong in their cars. The company also improves its quality through rigorous product launches.
The auto industry is so dynamic that variety of products keeps on increasing yearly. Due to the ever changing taste, preferences and technological as well as environmental requirements, Ford has continued to enhance its Ford Global Product Development System. The system, being the latest in manufacturing technologies, seeks to maintain high degree of manufacturing flexibility as well as differentiation of products and brands. The system also provides a policy framework for partnership of Ford and other auto makers. Ford product differentiation and innovation technology focuses on emergence of new technologies. Some of the technologies that support Fords product differentiation are Roll Stability Control System, Hybrid Power Trains, Hydrogen-powered vehicles and all-aluminum body vehicles. The first technology focuses on detection of the possibility of a vehicle to rolling and preventing it by the use of inbuilt computers systems. Secondly, the power trains use on board batteries to generate electricity that powers the vehicle. As seen in the Ford Escape Hybrid, the technology provides for an internal engine for gasoline combustion. The third set of technologies concept is based on the use of alternative fuel in a bid to conserve the environment. This category consists of clean diesel powered vehicles as well as fuel cells. Aluminum body vehicles are lighter that steel ones.
Although, Ford has lately been rated not as highly as in the earlier surveys, it continues to be among the top automotive makers. One of the main sources of lack of customer satisfaction was the fact that the MyFordTouch, MyLincolnTouch and Sync had major technology features. Further, the vehicles increased in ‘what-went-wrong’ faults. To restore its former glory, the company improved its software and voice reception. According to a survey held in 2011, Lexus beat both Ford and Toyota. This survey considered customer satisfaction with regard to in-car user interface. However, it is important to remember that in 2010, Ford had registered the highest customer satisfaction. This satisfaction was specifically reported for Lincoln and Mercury cars. This was an improvement from the previous year, 2009, which also had few ‘things gone wrong’ per vehicle survey. This year, 2012, customer satisfaction in the auto industry has reached the highest point in a period of two decades. This means that each company has individually done well in producing defects-free cars. Lincoln, a brand by Ford, was the leading one with a score of 90 out of 100.
With the increasing competition in global automotive industry, Ford has faced some regional as well as company disparities in terms of market share. It was seen that while the sales for North American companies, the sales continued to decline and sales for Asian giants continued to increase. The essay specifically focused on Ford Motor Company and Toyota Motor Company. From the review of literature, it could be argued that the differences in global market share could be attributed to different marketing strategies and tactics that accord each company’s unique competitive advantage.