Comparative Study of Toyota and GM Strategies:
Over the recent years, more efforts have been concentrated on strategic management in business which is justifiably so since global corporate managers have become aware of the necessity to apply and adhere to critical business and corporate level strategies, and concepts that could make or break the companies they run. A critical analysis of the international strategies and internal business environments of both GM and Toyota will help in completing this study and even determining which company has a relatively better strategy (Roll, 2014).
Internal business environment comparison:
Toyota’s internal environment:
In the recent past, Toyota Motor Corporation has established itself as a global case of near perfect management involving continuous improvement, innovation, lean manufacturing and emphasis on quality. The core competence area of Toyota is its ability to produces quality automobiles at great prices thus providing consumers with value for money. In this case, the quality factor is attributed to innovative production practices which have revolutionized the automobile industry and encouraged competition with other companies trying hard to improve the quality of their products. The company thus pursues a cost leadership strategy that has been built upon over the years (Nkomo, 2013).
The distinctive competence of Toyota is the Toyota Production System (TPS) which is based upon lean manufacturing concept that incorporates various innovative practices such as Kaizen, Six Sigma, and Just in Time. This distinctive competence has been worked on for several years thus making the company stand out since no other company has done it as well as Toyota. This has created a competitive advantage for Toyota making it a sustainable brand name and a market leader. A SWOT analysis of Toyota reveals strengths such as brand recognition, focus on research and development, and an extensive production and distribution network. Weaknesses include several product recalls which could affect brand image and declining sales in some regions such as North America and Europe.
The opportunities available for Toyota include a growing global automotive market, a considerably growing partnership with BMW in R&D, and an increased global outlook in the new car market. The threats faced by Toyota include intense competition from other automakers such as GM, appreciation of the Japanese Yen against the US dollar and Euro, and natural disasters in Japan which could impact on the production structure (Nkomo, 2013).
The internal environment of GM:
The General Motors Company has several divisions such as finance and investment and automobile production. The internal strengths include the continued increase in earnings for the General Motors Acceptance Corporation (GMAC) which is the largest sub-investment grade finance company with assets totaling $315 billion as at 2005. In fact, the total earnings of GM are highly reliant on this subsidiary which provides for most of the cash flow. In fact, GMAC made up 79.6% of the total earnings in GM for the year 2004. GMAC mainly deals with the lending, borrowing and management of risk (Eavis, 2005).
GM has also consolidated in marketing strategy and limited its product portfolio to focus on brands such as Cadillac and Chevrolet, and positioning its wider portfolio such as Saab and Hummer as small niche brands. This strategy is designed to prevent product overlapping and focus on a line of superior brand vehicles. The GM Asia Pacific and GM Latin America, Africa and Middle East (GM LAAM) market regions are also surging and in 2004, vehicle unit sales for increased to a point where the profits from these regions significantly impacted GM’s bottom line profit (GM Annual Report for 2004).
The weaknesses in GM’s internal environment include rising health care costs for employees, a weak product mix consisting of products with little identity, overlapping products, and lack of flexibility due to reduced sales in Europe and North America. In fact, GM’s major income is from its GMAC subsidiary (GM Annual Report for 2004).
GM and Toyota International Strategy:
In 2007, the Toyota Motor Corporation, Toyota rose to become the world’s largest automaker having sold 9.66 million vehicles as compared to GM which sold 9.69 million. In fact, GM had held the top spot for 76 years in terms of annual sales (Ireland, Hoskisson and Hitt, 2006).
According to the White (2014), Toyota has a cautious international strategy for a new series of fuel efficient cars and has taken a leading role in the auto industry in terms of global sales. Toyota thus enjoys a cleaner and sustainable brand image based on its Toyota Prius, gasoline-electric hybrid model. In terms of technology, the corporation has put much research into determining the possibility of delivering affordable vehicles with better fuel efficiency.
Toyota’s emerging markets such as Africa and Latin America have grown significantly in the period 2000 to 2011 with a growth change from 18% to 45%. If the noted trend continues, then the emerging markets might surpass the already developed markets. In order to capture these new markets, Toyota has continuously focused on successfully observing and responding to the needs of the growing middle class population in emerging markets. It is though localization initiatives that Toyota produces cars to meet unique consumer needs in these markets (Nkomo, 2014).
On the other hand, GM aims to offer competition by challenging Toyota’s efforts and aims to become the number one automaker by capturing a wider market for fuel-efficient vehicles (White, 2014). The automotive sector of GM is experiencing an extended period of decreased sales and profitability and in order to regain its position as market leader and ensure growth, the company is embracing three strategies which include a retrenchment strategy to focus on product redevelopment and brand re-invention, a growth strategy to enter emerging markets, and finally a restructuring strategy which explains ways of increasing long term profits by revising current pension and health care plans for its employees.
References:
Eavis, P. (2005). GM Lending Arm Pumped Up. The Street. Retrieved 7 June 2014, from http://www.thestreet.com/story/10218485/1/gm-lending-arm-pumped-up.html
General Motors Annual Report 2004. (2004) (1st ed.). Retrieved from http://www.motorsliquidationdocket.com/pdflib/GM_2004_AnnualReport.pdf
Ireland, R., Hoskisson, R., & Hitt, M. (2006). Understanding business strategy (1st ed.). Mason, OH.: Thomson Higher Education.
Nkomo, T. (2013). Analysis of Toyota Motor Corporation (1st ed., pp. pp. 5 - 7). Cambridge, Massachusetts: Harvard University. Retrieved from http://scholar.harvard.edu/files/tnkomo/files/analysis_of_toyota.pdf
Roll, M. (2014). Crisis leadership: Toyota and GM brand lessons - Martin Roll. Martin Roll. Retrieved 7 June 2014, from http://www.martinroll.com/resources/articles/strategy/crisis-leadership-toyota-general-motors-brand-lessons/
White, J. (2014). Toyota's Cautious Green Strategy. The Wall Street Journal. Retrieved 6 June 2014, from http://online.wsj.com/news/articles/SB119304912491266963
