Toyota Motor Company (TMC) Vs General Motors (GM) Business Strategies: An Introduction
With the advent of the worldwide economic slump, the automobile sales dropped sharply, causing automobile manufacturers a lot of financial strain. All automobile companies have been much impacted, with the major companies reporting major losses in the last few years. This impacts all the automobile manufacturers comprising of the automobile giants like the General Motors (GM) as well as Toyota Motor Company (TMC).
Comparing both the companies i.e. GM and Toyota, it is noted that they lost considerable sales working independently and had to modify themselves in line with these unanticipated conditions. Particularly, the General Motor’s liquidity dropped sharply to levels below those required to function the company. Similarly, due to Toyota’s well-defined manufacturing processes and their premium production, the company could offer better competition against GM, which helped TMC to realize ascendancy over the General Motors. The following paragraphs deal with the comparison and contrasts of manufacturing, promotion, marketing strategies of the two companies.
TMC’s Continued Success over GM
The Toyota Company entered the car manufacturing market in the USA in 1986, with the creation of a partnership with General Motors. In accordance to Togo and Wartmann (1993) the United Autoworkers Association, an American auto union forced GM to decline the partnership, since Toyota was not a Union company. Moreover, the writers Togo and Wartman stated, “American compact cars of the 1960’s were Detroit’s efforts to drive the foreign competition out of the country” (p. 166). Nevertheless, against strong competition in the automobile business, Toyota became the world’s third leading car manufacturer only behind GM and Ford (p. 181).
TMC has enjoyed a continuous progress for the last couple of years. The company manufactured their automobiles with improved customer and sales satisfaction by giving focus to various manufacturing processes. It constantly launched different pioneering models like ecological-friendly hybrid Cars to develop their automobile range. The growth of TMC marketing sharply resulted in drop of General Motor’s sales in the US market, the leading automobile market in the world. Consequently, it became the global automobile leader by overwhelming the global auto giant, the GM.
Accordingly, GM lost the auto industry leadership to TMC and experienced the worst economic recession throughout the last few years. The consumers have had to cope with complex credit markets, increased joblessness, declining revenues, and the unstable petrol prices.
The auto-industry’s competition led to the GM’s failure. Besides, the strong competition from the other global auto giants after the two economies and industrial recession facilitated a sharp downfall of GM.
GM’s Failure: Its Causes
GM as well, made the following internal blunders:
- Unstylish Design
GM clients were not happy with the car models for the last decade. In fact, the company tried to keep the expenditures low; this resulted in the poor designing of the automobiles.
- High-Cost Auto Production
General Motors has not fully utilized their auto capacity for the maximum advantaged. The other motive was the high labor expenditure as a result of the increased workforce salaries and benefits. GM spent a considerable sum of money for production cost together with the high repair cost of their factories in the USA.
- Wrong Pricing Strategies
Following the economic recession, GM significantly slashed its prices with unlimited discounts, which caused a rise in the sales, however thereafter the amount stayed until the cars’ termination.
Toyota’s Improved Auto Production
TMC’s auto production process helped enormously the company’s progress towards the success. First, it systematically reduced the system time in the auto assembly line and provided training to the workforce. At the same time, the company constantly enhanced the quality of process units independently. Primarily, this quality enhancement method was quite difficult, however, with the appropriate process designing and workers’ expertise the fault rate started to decline considerably.
When the system time and the assembly line were enhanced, the TMC executed JIT to decrease the buffer stocks and supply levels in the manufacturing process. This created acceleration and improved the efficiency of the production assembly line process with no maintenance of spare inventory. To do this TMC continued with an improved supplier base by having a long-term association with the key suppliers.
Initially, TMC intimately collaborated with the suppliers, offering them by sharing engineering and management skills, and the needed money for the new investments. Because of these advancements, TMC could slash the expenditure of production and the high labor production as well the quality which eventually provided competitive advantage against GM and other global automobile manufacturers.
Moreover, TMC focused on the customers’ satisfaction. Accordingly, it frequently carried out customer polls through different techniques; they projected and established the true customers’ preferences. These outcomes were directly integrated with their auto design procedures.
TMC’s Distribution & Global Expansion
TMC’s first successful enterprise with GM, in 2006 comprised of over 50% of the total North America’s automobile sales. Like the US auto market growth, TMC advanced in the European auto market too. At present, the company has surpassed GM and is considered as the leader in the automobile world.
Strategic Alliances & Collaborations
The present business framework supports collaboration as the finest decision instead of competing with various business organizations. Hence, GM should seek collaboration and planning to generate possible and useful collaborations with other companies in the automobile sector.
As stated by Daft (2006), many businesses have many methods to become engaged in global business. The contemporary business firms should seek cheaper outsourcing. Another method to develop their markets is the finished goods away from the home countries. This shows diverse methods to sell goods and services in the overseas markets.
The newly created, technology-based companies often enter global markets have poor resources regarding the competencies, time, and capital. Thus, these companies normally utilize access methods shown by low resource obligations, comprising of strategic alliances.
The researchers Jeannet & Hennessy (2004) have explained the new trends in the growth of diverse alliances and their strategies. Alliances differ from conventional enterprises, in which two companies provide a fixed amount of funds and the business enterprise develops independently. In the alliance, the two distinct firms combine their resources in a partnership that exceeds the limits of enterprise, though a new business may be created, however, it is not a prerequisite. At times the alliance is endorsed by some equity purchase amongst the associates. In the alliance, each associate introduces a specific skill or resource, these are complementary. The partners expect to benefit from the other’s skill. Generally, the alliances entailed supply, the transference of technology amongst each associate which brings about a special aspect to the alliance.
Daniels et al (2007) defines an alliance is a joint business agreement wherein as a minimum one of the collaborating firms possess an ownership status. However, in other cases, each partner takes an ownership position, for example by purchasing others’ stakes or by exchanging some stakes of each other. The aim of the equity rights is to strengthen the contract, in order that it is more complex to collapse, especially if the ownership is found to be large.
Production Based Alliances
In accordance to Jeannet and Hennessy (2004) these alliances form two groups. First, they seek efficiency by means of component links, which may comprise of engines or other key machinery of a car.
Secondly, the companies start to share whole car models by manufacturing joint ventures. It should be noted that US auto companies have been quite dynamic in forming international alliances with associates, mostly in Japan. A number of such alliances are generally production-based.
With the aim to participate more successfully in small auto sector in Europe, Peugeot of France and Toyota of Japan, for example, made an alliance on the creation of a new car plant by investing nearly US $ 1.5 billion for this facility. The two collaborators had the same body design, however utilized exterior changes to differentiate their car models. Both these companies performed their marketing strategies independently, and therefore are expected to vie with each other as a consequence of their own auto sales and delivery networks.
Hence, by the joint partnerships, the auto companies will gain a lot in a highly price-focused market segments. In case, the General Motors partner with a leading auto partner like Toyota, it would likewise be able to realize the competitive advantage as a consequence of strategic automobile manufacturing alliances.
Issues in Alliances
One collaborator may focus more on the collaborative alliance than the other. Hence, if the situation gets worse the dynamic partner holds responsible the less dynamic collaborator for not giving much attention and conversely the less active partner possesses, the more dynamic partner for making the wrong decisions for the alliance.
Though the business organizations enter into collaborative agreements since they have harmonizing capacity, their objectives may develop in a different way with the passage of time. For example, one partner would like to reinvest revenue for development purposes and the other would like to simply get dividends. One collaborator would like to develop the assembly line and sales field, and the other may consider this as a challenge with its wholly owned business operations. A collaborator would like either to sell or acquire from the project, and the other may oppose the prices. For instance, GM has business in Thailand with a Japanese company to manufacture and export automobiles to Germany and Japan. As a result of differences over quality, both the business firms carry out assessments, which is quite a lengthy and an extensive process.
The companies share the assets of each other. One collaborating firm may lose some controls on the amount or value of the asset utilization. Some companies have famous trademarks that they license overseas for the manufacturing of some goods that they have never created or had expertise. In case, when no single business firm has control over the collaborative organization, the business operation may be deficient in direction. Likewise, if one controls, it should still take into view of the other company’s interests.
The companies which are at variance by ethnicity do not understand how they should successfully run their operations. The Japanese firms tend to appraise mainly on how the business operation assists in building its strategic arrangement, especially by honing its skills. On the other hand, the European firms depend more on the stability between profitability and realization of social goals. This disparity can imply that one collaborator is contented whilst the other is not. Despite these potential complexities, enterprises from culturally remote countries endure and those between collaborators from analogous cultures. Nevertheless, an affirmative prior association between two firms does not promise that the collaborators will be compatible in a strategic grouping. The compatibility of business cultures also is essential in strengthening the relationship.
Effective advertising medium for a company in the Automotive Industry
Collier (2006) stated that TMC planned to invest large sums of money for marketing its vehicles. The advertisement campaign is mean to function on a grassroots level, the prospective clients by promoting community activities (p. 1).
As well, Toyota ran ads ran in several nationwide newspapers and periodicals, particularly the ones displaying the amount of money the company contributes to the economy. The ads helped the procedure of generating a conversation with the consumers and displayed facts and information the consumers were not earlier exposed.
The Toyota Company utilized different ads to gain focus on the effects the company have on the economy of the country. These ads helped Toyota to attract the consumers who thought they required to be dedicated to home-made brands that they should feel contented buying Toyota too. TMC used conventional re-branding methods to grow market share and to expand customer base and profits.
Secondly, TMC started a costly and a detailed advertising drive consisted of ads in diverse nationwide newspapers as well as national TV stations.
In accordance with Inous and Komatsu (2007), TMC reported better sales of automobiles than GM in 2007. This shows that TMC campaign has been quite successful so far.
As a consequence of the global economic slump and intense business competition, GM was overwhelmed by Toyota. The secret of Toyota’s success was a result of its clear production procedures and their customer focused manufacturing. In studying the General Motor’s present strengths and prospects, the company has the potential and a distinct competitive advantage to hold the industry leadership using a strategic approach.
Clearly, the paper explained briefly the comparison and contrasting arrangements in the auto industry that should be applied to an organized restructuring process. Notably, this restructuring process needs great sacrifices from all the stakeholders, sellers, suppliers, human resources and the managers of the auto industry.
All over these economic crisis and uncertainty, a proper appraisal and understanding of GM should be made to launch a large number of opportunities for the advanced restructuring procedures and new products growth in the near future. Moreover, the report has also shed light on strategic market entry methods that General Motors can follow to reclaim the industry leadership again from Toyota.
Collier, J. (2006). “Can Toyota keep on truckin’?” Detroit Free Press, November 13.
Daft, Richard L. (January 26, 2006). Organization Theory and Design, 9th Edition. Publisher: South-Western College Pub; 9th Edition.
Daniels, J., Radebaugh, L. & Sullivan, D. (2007). International Business: Environments and Operations, 11th Edition. Prentice Hall. Upper Saddle River: New Jersey.
Inoue, K & Komatsu, T. (2006). “Toyota Surpasses GM in Global Sales in First Quarter.” Bloomberg.com. April 24.
Jeannet, Jean-Pierre & Hennessey, H. David (2004). Global Marketing Strategies. New York: NY, Houghton Mifflin Company, p. xvi.
Togo, Y. & Wartman, W. (1993). Against All Odds. New York: St. Martin’s Press.