University of Applied Science Bremen

Industry Analyses and Strategies Automotive Industry

Author: Orlin Malinov, Marius Albers Registration number: 205540, 205133 Course: AWS Japanese 7. Semester Subject: International Management Lecturer: Mr. Fischer Date: 19.11.2009

Table of contents

1. Executive summary 2. Automotive Industry overview 2.1. History 2.2. Present time
3.

Analysis-Methods (theoretical) 3.1. SWOT 3.2. PEST 3.3. Porters 5 forces

4. Analysis of the Automotive Industries (incl. crisis) 5. Toyota 5.1. Analysis of Toyota 5.2. Strategy of Toyota 6. General Motors 6.1. Analysis 6.2. Strategy 7. Chery Automobile 7.1. Analysis 7.2. Strategy Conclusion 9. Future
8.

10. Sources

Orlin Malinov, Marius Albers

International Business

1. Executive summary
Let us face reality; the automobile industry has gone a long way from its start about 2 centuries ago. Today having a motor vehicle is not just about getting from place A to place B it is about showing prestige, it is about style, it is also a way to express yourself. Many people could not be able to imagine life without their cars, holding the steering wheel and driving on the fast lane. But not many of us really know what happens inside the big corporations and what will be the future of the automobile industry. What will happen in 100 years will cars be replaced by flying jets? Here we will try to do the necessary research in order to bring you the facts about the automotive industry, today. Our term paper focuses on the automotive industries. The automotive industries are the car companies and suppliers who design, develop, produce and sell vehicles to the world. We will start with the history of the automobile, pointing out the global players of today and try to describe the influence of the economic crisis which started to occur in 2008. After explaining theoretically the analyse methods SWOT, PEST and Porters 5 Forces, we will examine carefully using these analysis in praxis to the two global car producer Toyota and General Motors as well as the Chinese newcomer Chery Automobile Co. LTD. Toyota comes on focus, because already for the last few years is a global leader in motor vehicle production, GM is its greatest competitor for the moment and Chery Automobile is a representative of the quickly emerging Chinese automobile market. Toyota succeeded in becoming number one motor vehicle producer in the world few years ago. One of the biggest problems for US manufacturers is that unlike Toyota and its future plans, companies like GM still have difficulties moving forward from its heyday from the past. Chery Automobile suffers some problems because of its Chinese origin, but in the same time has great opportunities for the future as the company has been established some 10 years ago. Today in the automobile industry is not necessarily important who you are, but who your partners are.

2. Automotive Industry overview

The first automobiles originate from the 19th century. The first internal combustion engine was created in 1806 by the Swiss inventor Francois Isaac de Rivaz, but at that time the design of his motor vehicle was not very successful, so the car could not gain wide popularity. 1885 was the year when Karl Benz invented an automobile which was powered by his own gasolineengine. He started his company Benz & Cie in 1883 which quickly became the largest automobile company of that time with 572 units produced in 1899. But the real turning point in the automobile history will be the production-line. It is fair to say, that Henry Ford was among the first to implement some type of strategy in his motor vehicle production. Before his time the automobile industry was built up of a large number of very small companies with equal to none competition. The craftsmen in the separate companies were able to assemble not more than 1000 units worldwide, altogether. As customer group were seen only the rich and wealthy. Mostly because of his rural background H. Ford realized the farmers as a potential group of customers. He expanded the concept of production-line manufacturing thus he was able to produce cars on a scale larger than ever before and this made the automobile affordable The division of labour, the interchangeability of parts, and the moving assembly line, together were responsible for the cut in cycle time performed by one worker from one day at the introduction of the Model-T in 1908 to 1.2 minutes in 1913 [ ] Within several years after the introduction of the Model-T, Ford was dominating the American car market with a market share of around 50% [] Ford did not invent all the new methods and techniques. His achievement lays in weaving together elements of existing technologies into an efficient mass production system.1 At that time an assembly line worker could afford to buy a Model T-car with just 4 monthly wages. With the cutting down of the production costs and cycle, Henry Ford could gain great advantage over his competitors, becoming the biggest motor vehicle company of its time. Because of his great success in the US, Henry Ford opened his branches in Europe during the 1920s. Citroen was the first European company which used the production line principle, but many others failed to compete with Ford: companies had either to introduce the assembly line method, or to go broke. The result was that till the end of 1930s more than 250 companies faced bankruptcy. Before the WWII the USA didnt face any notable competition in the automotive industry, however after 1950s demand on vehicles grew more and more and towards the beginning of the 80s several other
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Evolution of Organizational Structure and Strategy of the Automobile Industry Orlin Malinov, Marius Albers 3 International Business

technologically advanced nations such as Germany, France and Japan even started to import cars in the US. A really remarkable growth in the automobile industry was shown by Japan. While in some European countries and the U.S. the beginning of the automobile industry had already started towards the end of the 19th century, Japan first opened their borders for the outer world in 1868. Nevertheless the Japanese Government had the ambition to become in short time one of the leading forces in the automotive industry nowadays it is the Japanese to thank for many of the inventions they implemented in the Automotive industry, such as: Lean Production, JIT- principle. The current situation in the automotive industry differs a lot from what it had used to be for example 10 years back than. Many developed countries are suffering stagnation in their own automobile industry, while developing countries are gaining momentum and are threatening to surpass already established automotive forces like France and Italy. It is impossible to name all the automobile brands which have been created as many companies have been on the market for just few years. Especially in the beginning of the 20th century many small firms were created and soon later they collapsed. Just to mention, only for the years from 1896 to 1930 there have been about 1800 brands only in the USA. Thats why it is fair to say that counting all brands is rather impossible. What is important is that as of the beginning of the 21st century the number of the biggest motor vehicle producers can be reduced up to about 40. Most of the newest companies established in the last years come from the Middle and Far East. The Chinese economy is undergoing very high growth rates, and so also the automotive industry is becoming more and more important. The biggest automobile producers in the world for the 2008 were Japan, China and US (fig.1). For the first 9 months of 2009 China was the largest automobile market and manufacturer in the world.2 Figure 1: Biggest Motor Vehicle Producing Countries in the World

As the automotive industry deals with the design, development, marketing and sale of automobiles it is not only the motor vehicle producers, who are many other companies from the steel or plastic industry for example, play an important role in the automotive industry. In accordance to an annual report of the ILO in 2004 there were more than 8.4 million people worldwide who were employed in the field of automobile production4 which contributes to the fact, that approximately one out of 10 workers in the industrialized countries is employed by the automobile industry. The most people employed in motor vehicle production are living in Europe, followed by China and North America.
2 3

http://en.rian.ru/world/20090206/120007709.html 17.11.09 http://oica.net/category/production-statistics/ 14.11.09 4 http://www.ilo.org/wow/Articles/lang--en/WCMS_115469/index.htm 15.11.09 Orlin Malinov, Marius Albers 4 International Business

The situation on the motor vehicle market changes rapidly, but nevertheless for the last few years the top 3 motor vehicle producers remained the same. Japan has proved itself as the leading automobile manufacturer. Together with Toyota there are 3 other renovated Japanese companies who belong to the top 10 motor vehicle manufacturing groups. 1. Toyota Motor Corporation 2. General Motors Company 3.Volkswagen AG 4. Ford Motor Company 5. Honda Motor Company

6. Nissan Motor Company

7. PSA Peugeot Citroen S.A.

8. Hyundai Motor Company

9.Suzuki Motor Corporation

11. Fiat S.p.A.

It is being said that manufacturing industries tend to be oligopolies. This is certainly the case in the USA where the Big Three (GM, Ford and Chrysler) have long time undisputed leaders on the market . However this is not always the case and on certain local markets fierce competition can be observed. There are a few companies who are aiming for the same customers group, still there are also producers, who have found their own niche in the automotive industry and have specialized for certain types of automobiles: Porsche sports cars; MAN, Kamaz Trucks, Orion (Mercedes Group) busses, Smart small cars, JEEP SUVs. Because of the rapid changes on the market it is always more and more difficult for one to know what is owned by one company or by another. In the automotive industry the relations between suppliers and producers are more important than almost anywhere else. Some of the prominent suppliers are Bilstein and BOSCH for different component of autos and also trucks or busses, for tires Continental and Good Year stay on top of the sales. For the electronic system of the cars are responsible brands like Osram, Hella and Philips. Because of the cut down sales the supplier Industry also suffers a lot from the economic crisis. Thus the whole Supply- Chain management is put at risk. If the chain ruptures then the bad consequence will affect everyone involved. 500 Tier 1 auto suppliers, or 40% that industry segment, are at a high risk of going bankrupt in the next 3 months due to the massive drop in manufacturing in December/January (which is the period they are currently being paid for by auto makers) and the credit crunch.5 In the last 10 years also different electronic companies have became partners with motor vehicle producers, as the cars today and even more in the near future become dependent on hightechnologies. Almost all new cars are equipped with a board computer, GPS etc. It is expected that the development of the new technologies in the future will help the automotive industry to deal with some of its major threats. The oil reserves on our planets are becoming scarce; no one knows for how many years from now there will be enough oil to be burnt by engines. Another thing is the increasing CO2 emissions in the atmosphere and the green house effect which threatens our environment. The results from the economic crisis are worse than most of the car producers have placed on the market. imagined. In 2008 there were more than 70 million cars sold in the world; in 2007 their number was about 71.2 millions, while because of the economic crisis in 2009 the sales reached only 56 millions. Auto-experts predict that the high sales from 2007 will not be reached again until 2012-2013 (Berger, 2009). . In some countries the number of purchased cars has dropped to 50% compared to 2007. Experts from the International Labour Organisation fear that if companies should fire personal according to the slump in sales, more than 1 million people worldwide would lose their job. Many companies had to reorganise their business plan in order not to go bankrupt. The economical crisis hit the most the luxury cars, first because of their high price to purchase and second, because with the oil prises rising,
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http://www.supplyexcellence.com/blog/2009/03/13/toyota-tier-1-auto-supplier-bankruptcies/ 18.11.09 Orlin Malinov, Marius Albers 5 International Business

people are anxious not to buy cars with high gasoline consumption;similar is the case with SUVs (Sport Utility Vehicles). Only compact cars producers succeeded in achieving record sales as for the first months of 2009. Volkswagen expects February sales to reach 120,000 cars, more than ever before. Opel, which is struggling to survive as its parent company GM sinks further into economic woes, experienced its best month in five years this February, selling 40,000 cars. And the Romanian auto manufacturer Dacia has even had to boost production lately to keep up with high demand in Germany.6

Analysis-Method SWOT
SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. The SWOT analysis headings provide a framework for reviewing strategy, position and direction of a company or business proposition or any other idea.7 The SWOT-Method is an analyse system which can be used for business planning, strategic planning, competitor evaluation, marketing, business and product development and research reports. Using SWOT as an analyse system it is important to clearly identify the subject. In case of our term paper SWOT is used for analysing the companies, or rathe their position in the market. ??? SWOT analyse External analysis Strengths Opportunities Internal analysis Weaknesses W-O strategies overcome weaknesses to pursue opportunities W-T strategies establish a defensive plan to prevent the firms weaknesses from making it highly susceptible to external threats.

S-O strategies pursue opportunities that are a good fit to the companys strengths. Threats S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats http://www.berifar.com/matrix.html

In the external, Opportunities/Threats analysis the focus is on the technical, social and ecological environment of a company. The strategy is the reaction of the environmental change. In the internal, Strength/Weaknesses analysis the focus is on the company itself. It is the result of the internal organized process. It is also to say that, what might be a threat in one category can turn into an opportunity or became a new strategy in the future.

Analysis-Method PEST
PEST is an acronym for Political, Economical, Social and Technological. It is a useful tool for understanding market growth or decline. The PEST analysis headings are a framework for reviewing a situation, and can also be used to review a strategy or position, direction of a company8 The PEST factors are, compared to SWOT, only external analysis and they include competitors. Before a company creates a business plan or a new strategy it should scan the external environment. A SWOT analysis measures a business unit, a proposition or idea; a PEST analysis measures a market.9 The results of PEST analysis are often used for the external part of the SWOT analysis.
6 7

http://www.spiegel.de/international/business/0,1518,610076,00.html 17.11.09 http://www.businessballs.com/swotanalysisfreetemplate.htm 14.11.09 8 http://www.businessballs.com/pestanalysisfreetemplate.htm 14.11.09 9 http://www.businessballs.com/swotanalysisfreetemplate.htm 14.11.09 Orlin Malinov, Marius Albers 6 International Business

The PEST analysis can be converted as necessary. Political: Government policies, Government Stability, International Pressure Groups, Trading Policies, Freedom of Press, Rules of Law, Bureaucracy, Corruption, Regulation/De-Regulation Trends, Social/Employment Legislation, Likely Political Change Economic: Growth, Home Economy Situation, General Taxation Issues, Seasonality/Weather Issues, Market and Trade Cycles, Specific Industry Factors, Market Routes and Distribution Trends, Customer Drivers, Interest and Exchange Rates, International trade/Monetary Issues, Inflation Rate, Unemployment, Labour Supply, Labour Costs, Globalization, Likely Economic Change Social: Lifestyle Trends, Demographics, Consumer Attitudes and Opinions, Media Views, Law Changes Affecting Social factors, Brand, Company, Technology Images, Consumer Buying Patterns, Fashion and Role Models, Major Events and Influences, Buying access and Trends, Ethic/Religious Factors, Advertising and Publicity, Press, Public Opinion, Attitudes and Taboos, Lifestyle Choices, Likely ScioCultural Change. Technological: Competing Technology Developments, Research Funding, Associated/Dependent Technologies, Replacement Technology/Solutions, Maturity of Technology, Manufacturing Maturity and Capacity, Information and Communications, Consumer Buying Mechanisms/Technology, Technology Legislation, Innovation Potential, Technology Access, Licensing, Patents, Intellectual Property Issues, Global Communications, Impact of Emerging Technologies, Impact of Internet and Reduced Communication Costs, Impact of Technology Transfer, Likely Technological Change

Analysis-Method Porters 5 forces

The method is used to analyse the competitive position, the rivalry among competitors. Therefore this method can not be used to analyse one company. It is always referred to a whole industry. But when using the Porters 5 forces method a company can notice the power of supplier and buyer as well as the product and technology development of an industry. The Porters 5 forces method can help creating a good strategy of a company. In the Porters 5 forces model the following forces are shown.

New Market Entrants, eg: Supplier Power, eg: brand reputation geographical coverage product/service level quality entry ease/barriers geographical factors incumbents resistance new entrant strategy routes to market Buyer Power, eg: buyer choice buyers size/number change cost/frequency product/service

Competitive Rivalry, eg: number and size of firms industry size and trends 7

Orlin Malinov, Marius Albers

International Business

relationships with customers bidding processes/capabilities

fixed v variable cost bases product/service ranges differentiation, strategy

importance volumes, JIT scheduling

Product and Technology Development, eg: alternatives price/quality market distribution changes fashion and trends legislative effects

http://www.businessballs.com/portersfiveforcesofcompetition.htm

Analysis of the Automotive Industries (incl. crisis)

Strategy:
The Automobile producers and suppliers aim to save up to $8 billion annually by reducing the raw material costs in the production and assembly of cars. Outsourcing to cheap labour countries like China and India - outsourcing of the automobile parts production plans. Also taking advantage of the currency differences when considering position of future plants: Between early 2006 and mid-2008, the strength of the euro relative to the dollar compelled a number of non-American automobile manufacturers to consider establishing production sites in the United States.10

Analysis
In the following we analyse the automotive industry using 3 analysis methods SWOT, PEST and Porters 5 forces. Because of the latest financial crisis 2008/2009 the automotive industry, in particular Japan, USA and Europe are experiencing a dramatically decline. The automotive market in emerging countries like China or India, also because of their resources, is growing continuously even though there is a slow down noticed. Strengths: High technology JIT Supply chain management Weaknesses: A strike at one plant or factory can accelerate and stop the production. Consequences are dramatically losses. Opportunities: Electronically vehicles Global warming
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S. Schmid, P. Grosche, p. 12 Orlin Malinov, Marius Albers 8 International Business

Threats: Global warming (high production costs, increase R and D costs) Oil problems (increase R and D costs) Switch to public transportation (Flugzeuge, Bahn) SWOT analysis External analysis Strengths Opportunities Threats Internal analysis Weaknesses W-O strategies overcome weaknesses to pursue opportunities W-T strategies establish a defensive plan to prevent the firms weaknesses from making it highly susceptible to external threats.

S-O strategies pursue opportunities that are a good fit to the companys strengths. S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats

Analysis-Method PEST
Political: Automotive Industry has a strong lobby because if were to have problems a lot of workers would lose their jobs. This would lead to governmental and political problems. The automotive industry is an international Pressure group. In many countries the government and state have their roots deep in the automobile industry in their country. Now in the time of crisis it was again the government to boost GM in the US. Because of the conditions given by president Obama, GMC had to give up the future production of one of its signature brands for the past decades Pontiac. Another point is the laws concerning the regulations on CO2 emissions in the atmosphere. This obliges all companies to invest a lot of capital in R&D. Phasing-in of requirements: in 2012, 65% of each manufacturer's newly registered cars must comply on average with the limit value curve set by the legislation. This will rise to 75% in 2013, 80% in 2014, 11 and 100% from 2015 onwards. The political regime in a country also is very important for the cars produced in the country The motor vehicles in the former Eastern Block had to conform to the philosophy of the Socialism. ??? Government policies, Government Stability, International Pressure Groups, Trading Policies, Freedom of Press, Rules of Law, Bureaucracy, Corruption, Regulation/De-Regulation Trends, Social/Employment Legislation, Likely Political Change Economic: Customers are most important. low power of Supplier The Supply in most countries exceeds the Demand, thats why producers need to create new designs investing heavily on marketing, also. For the design and launch of a new model on the market is needed about $1 billion main reason for establishment of Joint Ventures or acquirement of smaller companies by the bigger corporations. From the 20 really big global players it is expected in the future to remain just 5 6 greater empires. Unemployment is a very important issue regarding the current economical crisis which struck the world in 2008. Growth, Home Economy Situation, General Taxation Issues, Seasonality/Weather Issues, Market and Trade Cycles, Specific Industry Factors, Market Routes and Distribution Trends, Customer Drivers, Interest and Exchange Rates, International trade/Monetary Issues, Inflation Rate, Unemployment, Labour Supply, Labour Costs, Globalization, Likely Economic Change Social:
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http://ec.europa.eu/environment/air/transport/co2/co2_home.htm 18.11.09 Orlin Malinov, Marius Albers 9 International Business

Customers want safer automobiles since 1960s, Customers want environment friendly cars since 1970s, society judges people on the type of their car, people feel better when they drive a good, new car, For many people brand name and model is crucial for them to show social status. Second to owning a nice house , the expensive and luxury car makes its way to the dreams of many people. Advertising is very important and influences customers. The Formula One series also helps a lot for the commercialism of the automobile industry. There are different trends on the market to be observed. People liking sports cars, retro cars, SUVs, The film industry also influences the customers choice in a lot of ways. There are many emblematic cars from certain movies who have later become to a top seller model. In the industrialised countries relative high salaries for qualified employees.12 Lifestyle Trends, Demographics, Consumer Attitudes and Opinions, Media Views, Law Changes Affecting Social factors, Brand, Company, Technology Images, Consumer Buying Patterns, Fashion and Role Models, Major Events and Influences, Buying access and Trends, Ethic/Religious Factors, Advertising and Publicity, Press, Public Opinion, Attitudes and Taboos, Lifestyle Choices, Likely ScioCultural Change. Technological: In the last 5 years more and more people show courage in purchasing cars from the internet. ustomer buy via internet, fuel-efficient cars, electric and hybrid Small and medium-sized auto companies have been acquired by larger rivals simply because they lacked necessary volume over which to amortize the costs of developing new models13 Different automobile manufacturers, also rivals make R and D together. High innovation potential. Licensing and Patents is very important because Global communications is essential because almost all automobile manufacturers are global player. There is a big technological change since the last 15 years from diesel and gasoline to hybrid, electro and other new technologies. Competing Technology Developments, Research Funding, Associated/Dependent Technologies, Replacement Technology/Solutions, Maturity of Technology, Manufacturing Maturity and Capacity, Information and Communications, Consumer Buying Mechanisms/Technology, Technology Legislation, Innovation Potential, Technology Access, Licensing, Patents, Intellectual Property Issues, Global Communications, Impact of Emerging Technologies, Impact of Internet and Reduced Communication Costs, Impact of Technology Transfer, Likely Technological Change

Analysis-Method Porters 5 forces

New Market Entrants, eg: High capital necessary, mass production is necessary otherwise the cars are to expensive for customers you can not compete (you can not start with low capital and grow slowly), It takes an extreme amount of capital not only to be able to manufacture the products but also to keep up with the research and development that is necessary for the innovation requirements.
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http://www.rwm.org/rwm/articles/automotive-careers.html 18.11.09 R.Grant, p. 229 Orlin Malinov, Marius Albers 10 International Business

Access to distribution channels is another high barrier to entry Manly from emerging economies, hybrid and electronic cars, small cars, Strategy: new customer group, market entrants as a affiliate Routes to market: bonus, discount, it is hard to entrants the automotive industry because the industry is already very mature. entry ease/barriers geographical factors incumbents resistance new entrant strategy routes to market Supplier Power, eg: Supplier power is relatively low brand reputation geographical coverage product/service level quality relationships with customers bidding processes/capabilities The bargaining power of suppliers is very low in the automobile industry. There are so many parts that are used to produce an automobile, that it takes many suppliers to accomplish this. When there are many suppliers in an industry, they do not have much power. There are so many suppliers to this industry; manufactures can easily switch to another supplier if it is necessary. Competitive Rivalry, eg: Rivalry is very strong among competitors, All manufacures produce the same or similar products cars, trucks, SUVs sport utility vehicles, The largest 20 motor vehicle manufacturing groups are: Toyota Motor Coproratioin, GMC, Volkswagen AG, Mord Motor Company, Honda, Nissan, PSA Peugeot Citroen, Hyundai, Suzuki, Fiat, Renault, Daimler AG, Chrysler Group, BMW AG, Kia, Mazda, Mitsubishi, OAO Yvto VAZ, Tata Motors Ltd., First Automotive Group Corporation (China) (evt. Tabelle einfgen) Extremely cost pressure, new competitors from emerging markets number and size of firms industry size and trends fixed v variable cost bases product/service ranges differentiation, strategy Buyer Power, eg: Power of buyer is high because cars are not existential necessary.(?) buyer choice: switch to environment-friendly, buyers size/number: getting bigger in emerging markets, stagnation in industrialized nations, change cost/frequency product/service importance volumes, JIT scheduling

Product and Technology Development, eg: Customer buy via internet, fuelefficient cars (electric and hybrid), Small and medium-sized auto Orlin Malinov, Marius Albers 11 International Business

companies have been acquired by larger rivals simply because they lacked necessary volume over which to amortize the costs of developing new models14 Low cost cars, environmentally friendly technologies (cars) alternatives price/quality market distribution changes fashion and trends legislative effects

5. Toyota
Strategy As the first industrialized Asian country, Japan copied a lot behaviour patterns and techniques from Europe and the US. Also in the automotive industries most notably Toyota copied and improved western production, management and leading systems. These improvements lead to disciplined and successful business strategy. For instance was Toyota the first company which introduced the just-intime system. Moreover Toyota created new words like kaisen, a principle of continuous improvement in manufacturing activities or jidoka, - in case of problems the production line stops immediately and prevents defect goods from being produced. The first 2 decades after WW2 the TPS, Toyota Motor Corporations vehicle production system was created. The main fundamentals of this system are lean manufacturing system and Just-in-Time principle. After many years of continuous improvements TPS became the most successful production system and was and is studied all over the world (www.toyota.co.jp). The idea behind TPS is "making the vehicles ordered by customers in the quickest and most efficient way, in order to deliver the vehicles as quickly as possible.15" Also in the present time Toyota is continuously improving the TPS. To overcome the globalization the most important thing for Toyota is quality assurance which means that whereever a Toyota vehicle is made, it has the same quality as if it was produced in Japan. That means the so called Toyota Way spread to all overseas production locations. Also it is necessary that every base is as less as possible independent from the headquarter Japan???? (www.toyota.co.jp). Based on the basic philosophies of jidoka and Just-in-Time, the TPS can efficiently and quickly produce vehicles of sound quality, one at a time, that fully satisfy customer requirements. list of cars Bottom up system Analysis
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R.Grant, p. 229 http://www2.toyota.co.jp/en/vision/production_system/ 17. 11. 09 Orlin Malinov, Marius Albers 12 International Business

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Toyota Motor Corporation which first was established 1933 as Toyoda Automatic Loom Works, Ltd., is today owner of Daihatsu, Hino, Lexus and Scion. (www.toyota.co.jp) Daihatsu is operating worldwide except in North America and Australia, Hino in the Asia Pacific, North America and South America. Lexus globally, except India and Scion only in North America. Toyota itself merchandises all over the globe. Because of its Japanese origin, Toyota has different principles compared to western car manufacturer. Despite the fact that Japanese culture is changing, the main principles regarding the Japanese management life-long employment and the principle of seniority, still remain firmly anchored in Japanese companies. This explains the trend why Toyota is always anxious not fire people as fast as western rivals and has their own working conditions. SWOT Strengths: The Toyota Motor Corporation does business in 170 countries and has manufacturing operations in 27 countries (http://www2.toyota.co.jp/en/vision/globalization/index.html). Therefore one of the most notable strengths is the market leader position. Toyota produced and sold 9 Mio vehicles in 2008 (http://www.oica.net/wp-content/uploads/world-ranking-2008.pdf). As a pioneer in regards to the JIT principle and Lean production, Toyota till today shows best results in regards to motor vehicle productions efficiency. TPS Because of its continuous and successful R&D strategy, Toyota can be proud with Another strengths is because of a continuously and successful research and development Toyota launch regularly new car models. For example Toyota has introduced the Prius hybrid power car. First in Japan in 1997 and worldwide in 2001. It was the first mass production hybrid vehicle (www.toyota.co.jp). Other new models like the Sai, which is planned to go on sale in Japan on December 7. 2009 are following. The Sai is based on a concept derived from the Japanese word sai which means "talent" [ ] as a hybrid-only sedan combining advanced talent and multi-color sophistication17". It could be said that Toyota Motor Corporation is also the leader in developing new models. However this is of course also a good opportunity in the future. Lets not forget the huge market share as the market leader. Weaknesses: To show some weaknesses, Toyota is leader in sales figures but not under the top dividend payout automobile manufactures. Lets face only the last 5 years. The dividend payout was except 2009 under 1 Dollar. GM for example had a dividend payout in this period for at least 1 Dollar (www.finanzen.net). This may lead to a conservative behaviour of investors and shareholder all over the world. Another point is that it takes relatively long time to make decisions. This is due to the Japanese culture. This is also a threat. If competitors can implement a strategy or plan for example in the innovation sector faster than Toyota it maid be difficult to compete. On the other hand a long-time-

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http://en.wikipedia.org/wiki/Automotive_industry http://www2.toyota.co.jp/en/news/09/10/1020_1.html Orlin Malinov, Marius Albers 13 International Business

decision can become an opportunity because it maid be several times reconsidered and not overhasty. Opportunities: Another opportunity is high savings which probably used in research and development and leads to strong competitiveness in innovative, safety and well designed vehicles. This was and is always an immense opportunity for Toyota. As already mentioned the hybrid sector is a good opportunity to keep the leader position. Threats: Because of the changing to environmentally cars Toyota has to keep up with their competitors. This is a dramatically change in producing and placing the new vehicles on the market. A successful strategy and implementation can also lead to a great opportunity. Because of lifelong employment and the principle of seniority Toyota might be not flexible enough in the modern fast-changing market. This can also be an opportunity because of high quality and knowledge elder workers are to offer.

SWOT analysis External analysis Strengths Opportunities New models R and D Hybrid cars Market leader

Internal analysis Weaknesses It takes a long time to make decisions W-O strategies overcome weaknesses to pursue opportunities

Threats

S-O strategies pursue opportunities that are a good fit to the companys strengths. If competitors use TPS, JIT, lean manufacturing, TQM etc. which more or less were first introduced at Toyota, more efficiently. S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats

Low dividend payout W-T strategies establish a defensive plan to prevent the firms weaknesses from making it highly susceptible to external threats.

6. General Motors
Strategy & Analysis General Motors Corporation was founded in 1908. http://www.gm.com/corporate/about/company.jsp Alfred Sloan, a long time president and chairman in the early times of General Motors explained his famous market segment strategy in 1924 "a car for every purse and purpose" http://wiki.gmnext.com/wiki/index.php/1924,_%22A_Car_for_Every_Purse_and_Purpose%22 to shareholders of GM. The strategy forwarded by Sloan was to divide the US automotive market into 2 segments by price range. Chevrolet was to be focused at the low end and Cadillac at the high end. http://wiki.gmnext.com/wiki/index.php/1924,_%22A_Car_for_Every_Purse_and_Purpose%22 The present headquarter is in Detroit. 244,500 people are working for General Motors and the sales figures of 2008 are 8.35 million cars and trucks all over the world. Besides the largest national market the United States, GM also has a huge market share in China, Brazil, the United Kingdom, Canada, Orlin Malinov, Marius Albers 14 International Business

Russia and Germany. http://www.gm.com/corporate/about/company.jsp For most of the 20th century from 1931 to 2008, GM was the biggest company in one of the most important industries in the world. In the 1960s, GM owned half of the United States car and truck market. In the following decades GM started a series of strategic and cultural missteps including less and unsuccessful innovations. In the 1990s GM created a program that workers were paid even if the plants were not running. But the cars and trucks could only be sold with big incentives. In the following years GM was spending millions to launch new vehicles on the market; argued with product developers but they failed because of less and unsuccessful advertising. By 1994 the market share decreased to 33 percent. In 1999 GM took his EV1 electric car after only 3 years from the market. That is why it can be deducted that GM lost its interest in vehicles that needed long time to find costumers. In 2007 GM cut his production by 10 percent. By July 2008 the sales figures in the US fell to just 20 percent from the whole market share. Also because of the high gas prices and strong competitors the downward spiral moved on. And finally the tip of the iceberg is the financial crisis. The government support became irreplaceable for GM and other American automotive producers. Since 2009 GM is majority owned by the Canadian and US government and started a reorganization which is called chapter 11 with fewer employees, plants and dealerships. http://topics.nytimes.com/top/news/business/companies/general_motors_corporation/index.html? inline=nyt-org

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The * after the brands name indicates that the brand is being wither sold or has faced insolvency : To point out the strengths of General Motors it has to be said that GM was till 2007 the biggest automotive manufacturer in the world for more than 70 years. This leaded to a renovated and well known image and an enormous capacity of knowhow, experience and technology potential. Another strengths is that GM is holding 11 different car producers as shown in the graph. The market leader in the niche for civilian High Mobility Multipurpose Wheeled Vehicle Hummer which is originally used for military was sold recently to Sichuan Tengzhong, which might weaken GM in the long-term. Also Saab was sold to the Swedish Koenigsegg Group in 2009. However GM has a variety of sub-brands including a Korean, Chinese, German, Australian and English car producer. Toyota for example has only 5 sub-brands,which except Scion are all Japanese. In addition GM has manufacturing operations in 34 countries and does business in 140 nations. (http://www.gm.com/corporate/about/global_operations/) Despite the drop off the leader position to Toyota, General Motors has still a huge market share and belongs to the most successful and most influential car producer in the automotive industry. Weaknesses:
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http://en.wikipedia.org/wiki/Automotive_industry Orlin Malinov, Marius Albers 15 International Business

Let us look at some weaknesses; as already mentioned before, GM made a lot of strategic and cultural missteps in the last decades, which is way they could not hold the leading position in the automotive industry. A relative low production of heavy commercial vehicles and heavy buses compared to for example Toyota or Daimler in 2008 published by OICA, The International Organization of Motor Vehicle Manufacturers (http://www.oica.net/wp-content/uploads/world-ranking-2008.pdf) might be a lack of market control in this branch. Another point is the often used medium strikes. With every strike that GM goes throw, the competitors gain and make up leeway. Furthermore in Asian countries for instance strike is not common and is therefore a strength for Toyota and Chinese newcomer compared to western companies.

Opportunities: One of the most favourable opportunities is the new market in China, India and other emerging economies. If GM can enter these countries with its strong market dominance successfully it would be setting a new strategic direction in the future. The largest market for GM is the United States http://www.gm.com/corporate/about/company.jsp but they are relatively saturated. On the other hand this can be an opportunity in the future if GM can bring new environment friendly cars to the market. Obviously a lot of inhabitants of the United States have great confidence in GM. Why should they not buy also a new, modern and ecological car from GM? Wages in the US and Europe are quite high and rise the production costs. Of course outsourcing is always a possibility and is practiced, but to produce a high volume of cars in the United States or for example in the case of Opel in Germany, it leads to a strong image. If people have secure jobs the association to their working place and company will be good. Also this threat of high costs for wages and losing costumers in the local market can be turned into a great opportunity when the image can be improved through saving jobs - especially for a well known company like General Motors. Threats: Threats are the newcomers especially the Chinese and Indian car producer like Tata or Chery which just entered the market for 10 or 15 years. They also try to copy foreign car and truck designs and often produce motor vehicles due to low wages in their local countries cheaper than entrenched producers. : SWOT analysis External analysis Strengths Opportunities Threats Internal analysis Weaknesses W-O strategies overcome weaknesses to pursue opportunities W-T strategies establish a defensive plan to prevent the firms weaknesses from making it highly susceptible to external threats.

S-O strategies pursue opportunities that are a good fit to the companys strengths. S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats

7. Chery Automobile
Orlin Malinov, Marius Albers 16 International Business

Strategy As a Chinese company Chery is bound to contribute to the local and regional development both in economical and social means, nevertheless Chery Automobile manages also a strong export politic. no stability without domestic market, no strength without overseas market, and promoting the domestic market with overseas market and flexible mode19 Chery Automobile has the vision of producing safe, energy-saving and eco-friendly vehicles. Analysis Chery products are exported in 60 countries http://www.cheryinternational.com/company-overview Ranked 27th in the world auto industry. SWOT Strengths: One of the largest automobile manufacturer in china First Chinese automobile producer with exports Chery is cooperating with renovate western companies. Has the chance to share experience with key people responsible for the creation of some Lamborghini and Ferrari. Shares hands in the teamwork also with leading supplier companies like Bosch, AVL etc. Chery already posseses full set of R&D Weaknesses: The Korean sub brand of GM, Daewoo sued Chery Automobile for 9.7 Mio Dollar because Daewoo found great resemblance between the Chery QQ model and Daewoo Matizs body structure. Furthermore Chery is not allowed to sell some of its models on the European market.20 Opportunities: The local market in China is not saturated yet. Great chance for Chery to expend more and more. Threats: Chery as well as a lot of other Chinese car producer is notorious for copying models from other car brands. This fact, together with the Made in China??? known for cheap, low quality products, makes a lot of people living outside China reluctant to buy a Chinese car in the short-term.

SWOT analyse External analysis Strengths Opportunities Threats

Internal analysis Weaknesses W-O strategies overcome weaknesses to pursue opportunities W-T strategies establish a defensive plan to prevent the firms weaknesses from making it highly susceptible to external threats.

S-O strategies pursue opportunities that are a good fit to the companys strengths. S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats

In the external, Opportunities/Threats analysis the focus is on the technical, social and ecological environment of a company. The strategy is the reaction of the environmental change. In the internal, Strength/Weaknesses analysis the focus is on the company itself. It is the result of the internal organized process.
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http://www.cheryinternational.com/company-overview 19.11.09 http://news.bbc.co.uk/2/hi/business/4528565.stm Orlin Malinov, Marius Albers 17 International Business

Sources:
Internet: Photos: http://www.scienceclarified.com/images/uesc_02_img0067.jpg 13.11.09 http://sharkride.com/blog/wp-content/uploads/2008/10/audi-concept-rear.png 13.11.09 http://blog.leasetrader.com/images/blog_leasetrader_com/WindowsLiveWriter/ToyotasPriusis LessEfficientandEnvironmen_EA2B/2006.toyota.prius-thumb.jpg 13.11.09 http://www.pictures-of-cars.com/American-Muscle-Car.jpg 13.11.09 Logos: http://www.wfir960.com/buyersmarket/toyota_logo.jpg http://www.foursightonline.com/dojo/4/images/client_logos/gmlogo.gif http://www.caravantrekker.nl/images/logo/Volkswagen.gif http://profile.ak.fbcdn.net/object3/81/3/q22166130048_3790.jpg http://krasses-auto.de/img/cars/Honda/honda-logo-s.gif http://www.streetsource.com/images/makelogos/nissan.gif http://layofflist.files.wordpress.com/2009/02/peugeot.jpg http://www.caravantrekker.nl/images/logo/Hyundai.gif http://www.caravantrekker.nl/images/logo/Suzuki.gif http://upload.moldova.org/auto/FIAT/Fiat_Logo.jpg Links: http://www.mckinseyquarterly.com/Automotive/Strategy_Analysis/Reducing_waste_in_the_a uto_industry_1622 http://www.mckinseyquarterly.com/Automotive/Strategy_Analysis/A_new_segmentation_for_ electric_vehicles_2464

Books: Grant, Robert, Sixth Edition 2008, Contemporary Strategy Analysis, p. 229 Stefan Schmid, Philipp Grosche, Bertelsmann Stiftung 2008, Managing the International Value Chain in the Automotive Industry p. 12
http://www.gm.com

Few people took Chery Automobile seriously when it was established, a little more than a decade ago, in the city of Wuhu, in Anhui Province, China. Chery was a newcomer in a small area that had little tradition of manufacturing and was far from the countrys traditional centers of auto production, in Beijing, Changchun, Shanghai, and Wuhan.
Orlin Malinov, Marius Albers 18 International Business

When the start-up failed to find buyers for a motor engine it had developed, there was little choice but to manufacture a car of its own so that the engine could find a home. After this first car had been built, bureaucratic obstacles prevented the company from selling it. As chairman and chief executive officer Yin Tongyao puts it, Chery kept hitting the wall over the past decade. Every time we hit a wall, we just reoriented and moved on. Chery truly has moved on. In 2007, it sold 381,000 passenger cars, generating $2.86 billion (20 billion renminbi) in sales and ranking fourth in the domestic passenger-car market. (The top three are brands associated with joint ventures between Chinese and foreign automakers; Chery is an independent manufacturer.) The company is among a handful of Chinese carmakers that have proprietary technology to build core... Global carmakers are trying to define a future market for electric vehicles. To reach beyond affluent, environmentally conscious, or technically enamored buyers, these companies will need to develop products that satisfy the consumers main concerngood value for money. Given the current cost of energy storage, that is a considerable challenge. A recent McKinsey study suggests that one way companies can achieve this goal would be to focus on tailoring battery-powered vehicles to the actual driving missions of specific consumersthat is, to the way they use their vehicles. Most existing gasoline-fueled cars, as well as many electric ones now on the drawing boards, are intended for multiple driving missions of differing lengths and speeds. By focusing on specific driving missions of consumers, a company can match a vehicles energy storage requirements to a consumers particular needs and thus design more economic vehicles. It can also shape its brand and advertising messages and go-to-market strategies for such products more efficiently. Our study, which focused on typical driving missions in the United States, examined the factors underlying the energy storage requirements, and thus the costs, of car batteries. We divided energy use into two major categories: the energy required, first, by the vehicles physical characteristics (such as rolling resistance and mass) and, second, by the way the vehicles are used (such as driving distance, speed, and the frequency of stopping and starting). It is well understood that the addition of incremental energy storage increases an electric vehicles cost substantially. (That isnt true for gas-fueled vehicles, since a larger gas tank is almost cost free.) But we found that the energy storage requirements of cars used for different missions could be vastly dissimilar, even if their size and total number of miles driven remained the same. Driving missionsmuch more than the size of vehiclesdetermine energy storage requirements.

Orlin Malinov, Marius Albers

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International Business