Operations management assignment on: Automobile industry

1. Introduction:

The automobile industry refers to a manufacturing industry which manufactures, design; discover new vehicles to be launched in a particular country keeping in mind the various environmental factors. The automobile industry has been growing at an increasing rate. The turnover from this particular industry accounts to 35 billion USD & an employment to approximate 13 million people (Vickery, 1996)

The supply chain for this particular industry is quite effective as compared to the other industries. This industry has set amount of opportunities & threats, operates in an environment which would help to satisfy the customers by delivering them the automobiles on time (Helpman & Krugman, 1985).

The level of technology which has been used by this particular industry has also lead to many changes as well as innovations to produce an automobile which is equipped with high class technology & provides high amount of satisfaction to its customers (Vickery, 1996). The industry is quite volatile in nature. There has been a rise in the per capita income of the all the developing as well as developed countries. This has also lead to a steep growth in the automobile industry. The industry is quite competitive in nature & majorly focuses upon the exports rather than manufacturing or importing it from other countries (Spatz & Nunnenkamp, 2002).The major players in the automobile industry all over the globe refer to Toyota, Mercedes Benz, Maruti Suzuki, Hyundai, Ford, Mahindra & Mahindra, etc.

In order to survive in the overseas market, satisfying & meeting all the requirements of the customers refers to the major reasons. High class labor, capital efficiency, availability of the raw materials, latest technology refers to various ways through which the industry would attain sustainable competitive advantage.

2. Automobile Industry Analysis:

2.1 Porter’s Five Force’s Model:

2.1.1 Threat of new Entrant

2.1.2 Bargaining power of Buyers

2.1.3 Bargaining power of Sellers

2.1.4 Intensity of Rivalry

2.1.5 Threat of Substitutes

3. Players in Automobile Industry:

This report takes into consideration three MNC’s i.e. Toyota (Japanese), Ford (USA) & Mercedes Benz (Germany). The automobile in the three countries i.e. Germany, US & Japan are quite versatile in nature. The automobile industry is quite prominent in the countries mentioned above (Vickery, 1996).The automobile industry in Japan is one of the largest in the world. Japan is majorly known for manufacturing vehicles. Japanese automobile industry are the market leaders in manufacturing ATVs, engines, majorly cars, heavy vehicles used at the time of  construction of big buildings such as malls, hotels, hospitals, etc.

Manufacturing of the automobiles in Japan are of the utmost quality which takes into consideration due approval from the Japanese Government. The major Japanese players prevalent all over the globe are Honda, Nissan, Suzuki, Subaru, Toyota, Yamaha, Kawasaki, Mitsuoka, etc (Spatz & Nunnenkamp, 2002).

The next market focused upon refers to the US market. It is one of the biggest markets referring to automotives & manufactures cars, vehicles on a large scale. The major players in the US market include Ford, Chrysler & General Motors (GM). The US market is the third biggest manufacturer after Japan & China, manufacturing an approximate figure of 5,711,823 every year.

The annual manufacturings of vehicles by the three major players of the US as mentioned above are as under:

General Motors3 382 3141 215 6772 127 06239 576Ford2 965 872783 0532 132 22350 596Chrysler1 652 703325 6321 327 071 NA

The next best market chosen apart from Japan is Germany (Mercedes Benz). There are many upcoming brands from the Germany market. They are BMW AG, Porsche, Opel AG, Ford – Werke GmBH, Volkswagen AG, etc. Germany is the fourth largest manufacturer in the world after US, Japan & China (Vickery, 1996)
.

The automobile industry prevalent in Germany refers to the biggest industry which employs maximum number of employers in the Germany & other parts of the world. Germany is a place which has huge requirement of passenger cars & therefore, large number of cars is being produced with high levels of technology (Spatz & Nunnenkamp, 2002).

4.  Key Drivers:

4.1 Products offered:

The products offered by the companies are different in some respects but the category in which they deal is the same. The companies basically deal in the production, manufacturing of the cars of different range, nomenclature which serve the same purpose (Helpman & Krugman, 1985).

Þ    Toyota

Toyota Corporation commonly known as TMC refers to one of the leading manufacturers headquartered in Japan (Spatz & Nunnenkamp, 2002). TMC refers to one of the largest companies which deal in the manufacturing as well as sales of the automobiles.

The product line of Toyota comprises of the following:

Þ    Electric Technology

Þ    Plug-in-hybrids

Þ    Cars

Þ    SUVs & crossovers

Þ    Electric Vehicles

Þ    Trucks

Þ    Luxury Vehicle

Þ    Mercedes Benz

Mercedes Benz refers to a German manufacture who designs, produces variety of Cars, Coaches, Trucks, Buses keeping in mind the various aspects as well as customers requirements in order to satisfy their needs. Mercedes Benz is a small part of the Daimler AG Group. Mercedes Benz came into existence after a merger of the Karl Benz’s with Gottlieb Daimler (Spatz & Nunnenkamp, 2002). Mercedes Benz is known for manufacturing luxurious cars which are highly priced. Such type of cars caters to the technological as well as various innovations that were imitated by other automobile companies as well. Benz refers to one of the leading & oldest brands which came into existence way back & has a control over the automobile sector all over the world (Kay & Holtz, 1997).

The product line of Mercedes Benz consists of the following:

Þ    Buses & Vans

Þ    Passenger cars

Þ    Electric Vehicle

Þ    Trucks

Þ    Bicycles

Þ    Ford

Ford Motors refers to an American based MNC. Ford has been using various methods which would help the organization in order to manufacture the cars & various other vehicles on a large scale by applying the concept of assembly line. With the help of the various technologies & developments in the market, the organization has led in manufacturing of variety of vehicles apart from Cars & SUV’s.

The various products manufactured by Ford Company have been listed as under. They are as follows:

Þ    Trucks

Þ    Crossover SUV’s

Þ    Variety of Cars

Þ    Chassis

Þ    Ford Escape Hybrid SUV

Þ    Ford Tractors

Þ    Bus Products

In addition to the Ford and Lincoln brands, Ford also owns a small stake in Mazda in Japan and Aston Martin in the UK. Ford’s former UK subsidiaries Jaguar and Land Rover were sold to Tata Motors of India in March 2008. In 2010 Ford sold Volvo to Geely Automobile.[2] Ford discontinued the Mercury brand at the end of 2010.

4.2 Marketing Strategies (Toyota, Mercedes Benz & Ford):

 In order to make the presence felt various marketing strategies should be taken into consideration. It must be noted that though, both the MNC’s come under the same industry i.e. Automobile industry but the places they operate are different in various aspects. Hence, the marketing strategies to be used in order to market the product by the MNC’s would be different (Kay & Holtz, 1997).

Þ    Toyota (Japan)

In order to have fair presence of Toyota in Japan as well as other parts of the world, Toyota’s (Kay & Holtz, 1997) marketing strategies or efforts mainly focus upon the quality of the vehicle as well as the experience or the feeling which the client or the customer would get while driving any of the cars designed & manufactured by the company (Helpman & Krugman, 1985).

Various jingles, slogans have been used by the organization in order to attract more number of customers towards them & incite a feeling in order to buy a Toyota car as compared to the other leading automobile MNC’s in the world (Spatz & Nunnenkamp, 2002). The various jingles & slogans used by Toyota according to the timeline with which Toyota had planned their ladder of success are “You asked for it! You got it!”, “Oh what a feeling!”, “I love what you do for me, Toyota”, “Get the feeling”, “Moving Forward”, many more in the years to come (Kay & Holtz, 1997).

There are various strategies such as:

Þ    Technology Strategy

Þ    Regional Strategy

Þ    Global Motorization Strategy

There are three main strategies which would help Toyota a Japanese MNC in order focus upon other countries of the world. The first strategy which is being used by Toyota refers to the technological strategy i.e. wide range of technology has been used by the company in order to attract more number of customers towards them (Kay & Holtz, 1997). This would help them in order to focus as well as attack upon other markets. The new technologies adopted by Toyota Motors have had an added advantage as compared to its competitors as Japanese technology is one of the world class technologies & the other firms tend to imitate it while launching a new product such has cars, trucks, bus, etc (Helpman & Krugman, 1985).

The next strategy which has been used by Toyota refers to the regional strategy. This strategy majorly focuses upon the reorganization of the sales channel. This would help in the company in order to provide the cars, other products at the right time to the other parts of the world. It helps the company in order to prepare for the changes which would happen in future (Vickery, 1996).

The last strategy which is being undertaken by the company refers to the global motorization strategy. This strategy mainly focuses upon what the company wants to attain in the years to come (Helpman & Krugman, 1985). It keeps into consideration the global vision of the company i.e. what is being expected in the society & how to fulfill it. As the population is increasing the need for the automobiles is also continuously increasing, therefore, Toyota has kept this aspect in mind & planned for future (Helpman & Krugman, 1985).Þ    Mercedes Benz (Germany)

The marketing strategies adopted by Mercedes Benz a Germany based MNC who deals in the manufacturing, designing of the cars, etc. The strategies used by Benz are entirely different as compared to Toyota which is a Japanese based MNC (Mercedes Benz, 2011).

The strategies used by Benz could be divided under the following heads. They are:

Þ    Innovation

Þ    Brand Image

The two strategies mentioned above refers to the top most types of strategies through which Benz would be planning to expand its hands all over the world. Mercedes Benz majorly focuses upon innovating their products & give the customers best of the quality products which are at par the cost/price attached to it. In the recent years, Mercedes Benz have innovated their products on various parameters (Helpman & Krugman, 1985). The company has innovated the products on the following basis:

Þ    Compatibility with the environment

Þ    Concept of blue zero

Þ    Hybrid technology

Þ    Design philosophy

Þ    Safety Measures

Benz also takes into consideration the brand image of the organization which would help them in order to create awareness about the brand & make it one of the leading brands all over the globe (Evans, 2000). Mercedes Benz is the first automobile company which had used an acoustic trademark i.e. a sound logo, which would be used in order to enhance the product design. The logo would be used in order to attract as well as focus upon the steel star on the car. The acoustic trademark or the logo resembles the attractive, elegant, stylish look of the expensive car. The innovation of such type of a trademark helps in enhancing the brand image of the organization (Mercedes Benz, 2011).Þ    Ford (US)

As mentioned above the various market strategies formulated & implemented by Toyota & Benz, Ford also designed certain strategies in order to attract more number of customers in their basket. The strategies used by Ford were entirely different as compared to the two companies. They are as under:

Þ    Hybrid Technology (Fuel Efficient)

Þ    Combination of Style, Safety & Power

Þ    Go Green Strategy

Þ    Varied Design

Depending upon the market developments in the US market, the above mentioned market strategies have been designed & implemented in order to better as compared to the other automobile industry mentioned in the report. Ford refers to the first automobile corporation which has come up with a strategy known as “Go Green Strategy”. Under this strategy, the vehicles manufactured by the firm would be environmental friendly & would require less amount of automotive as compared to the normal vehicles.

4.3. Role of innovation:

There have been various types of innovations done by the MNC’s which has helped them in order to make their products different from the other in various respects (Bunkley & Nick, 2008).

Innovations done by the MNC’s i.e. Toyota, Ford & Mercedes Benz are explained as under. They are as follows:

Þ    Innovations done by ToyotaThere are certain guidelines which were undertaken by Toyota in order to make their products different from other competitors available in the automobile industry; some of the guidelines are as under:

Þ    The Art of Ingenuity: The first innovation which has been done by Toyota refers to the art of ingenuity. Toyota has been referred to as the scientist as in such competitive environment, dealing with tough competition requires high amount of innovation. Use of cleverness, images, original ideas, creativity, and skill also results in high levels of innovation (Evans, 2000).

Þ    The (relentless) Pursuit of Perfection: The second innovation done by Toyota refers to the pursuit of perfection. Toyota prefers to be perfect in all the respects. It states that all the cars which would be manufactured by the company should be to the best of quality as compared to the price attached to it (Bunkley & Nick, 2008).

Þ    The Rhythm of Fit: The third innovation which would be done by Toyota would refer to the rhythm of fit which means that high levels of innovations would be done in order to fit in the entire system. Various safety technology measures should be used as well as solid performance, environment friendly as well as the cost of production should be low which would help them to keep the price of car at low price (Evans, 2000).

Þ    Innovations done by Mercedes Benz

The innovations which would be done by Mercedes Benz in order to keep its status high as compared to the other luxuries cars manufactures.  Mercedes Benz, Daimler Chrysler and global change have been cited as the reasons for the pursuit of brand development (Mercedes Benz, 2011). Mercedes has used various brand development methods which would make them to the top in the automobile industry. Innovations are majorly made in terms of design, quality, and display of the product (Dyloco, 2011).

Þ    Innovations done by Ford

The various innovation strategies used by Ford in order attract & retain more number of customers as compared to the other MNC’s mentioned above. Some of the strategies are mentioned below. They are as under:

Þ    Use of new technology: Ford motors have been using various innovative & novel technologies in order to provide their customers with variety of vehicles. The company has installed a hybrid technology into the new models of the cars being manufactured by them. It refers to a trend which has been iml

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6. Challenges:

6.1 Theories used (Toyota, Mercedes Benz & Ford):

Mercedes Benz has been using various theories such as Strategic & contractual alliances, mergers & acquisitions. It could be seen that Mercedes Benz had various subsidiaries alliances. It got into an alliance with Studebaker-Alliance. Under this Benz had an access to take into consideration the dealer network, handle shipments as well as return the defective cars, etc (Bunkley & Nick, 2008).

Benz had various subsidiaries with the Diamler Chrysler group & hence became Mercedes Benz AMG in the year 1999. There are various advantages of the alliance which were undertaken by Benz. Some of the advantages are as under:

Þ    Reduction in uncertainty, risk & costs

Þ    To use the alliances

Þ    To use the assets

Þ    Opportunities to learn

In the strategic alliance, both the partners i.e. Mercedes Benz & Toyota would collaborate with one another commercially. With the help of the strategic alliances, both the companies were able to use the products, technology, and exchange & share the services amongst the services. Both the partners pool in & exchange the business resources (Dyloco, 2011).

There is no such theory which has been used by Toyota to establish itself in the global markets as well.

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