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Automotive Industry Analysis - GM, DaimlerChrysler, Toyota, Ford, Honda Overview of Automotive Industry Analysis The development of the automobile came from many different people from different countries. The development stated in 1769 in France, with the invention of a three-wheeler that was powered by steam (Gale, 2003). Then in 1800's the first internal combustion engine was created in Belgian and the first gasoline powered vehicle was constructed in 1885 in Germany (Gale, 2003). Henry Ford b
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  Automotive Industry Analysis - GM, DaimlerChrysler, Toyota, Ford, Honda Overview of Automotive Industry Analysis  The development of the automobile came from many different people from different countries. The development stated in 1769in France, with the invention of a three-wheeler that was powered by steam (Gale, 2003). Then in 1800's the first internalcombustion engine was created in Belgian and the first gasoline powered vehicle was constructed in 1885 in Germany (Gale,2003). Henry Ford built the first car in 1896 (Gale, 2003). He then revolutionized the industry with the invention of theassembly line. The assembly line allowed him to mass produce the cars making them more affordable to the consumers. Political  Laws and government regulations have affected this industry since the 1960's. Almost all of the regulations come fromconsumers increasing concerns for the environment and the concern for safer automobiles. The first safety act passed byCongress was in 1966 and was called the National Traffic and Motor Vehicle Safety Act (Gale, 2004). This act forcedmanufacturers to improve the safety for the passengers, the driver visibility, and the braking of the car. It also stated thatmanufacturers had to inform the public when it had a recall on the cars. The motivation for the passing of this safety act wasRalph Nadar's 1965 novel Unsafe at Any Speed: The Designed-in Dangers of the American Automobile. (Gale, 2004) Safetyconcerns were not the only concerns during this period. There was also growing concern for the environment even before theoil crisis. According to the article Motor Vehicles and Passenger Car Bodies , Congress passed acts in 1965 and in the 1970's.The Vehicle Air Pollution and Control Act was passed in 1965. This was the first act to set standards for automobile pollution.Then in the 1970's, Congress passed the Clean Air Act that demanded a 90% decrease in automobile emission within the nextsix years (Gale, 2004).In the 1970's the oil crisis caused another act to be passed. The Energy Policy and Conservation Act of 1975 stated that allautomobiles must meet a certain mileage per gallon. The act demanded that all automobiles had to meet a standard of 20mpgby the 1980 model and then 27.5 mpg for the 1985 model. Then in 1992, the Intermodal Surface Transportation Act requiredthe installation of front airbags. (Motor Vehicles and Passenger Car Bodies, 2004) Demographics  For many years now, the baby boomers generation has been the main target market for just about every product. As theirgeneration is getting ready to retire and spend less money, the automakers are looking at the younger generations. Right now,the focus is starting to turn towards the baby boomers children (Generation X) who are in their mid 20's and 30's andGeneration Y(Winter, 2002). GenYer's are now hitting the age where they are able to buy cars. According to Drew Winter, Analysts say that five years from now Gen X and Gen Y combined will account for at least 40% of vehicle sales. Americans today are choosing to purchase larger vehicles over passenger size vehicles. Today's generations are still buying thetrucks, minivan and especially the SUV's, even with the ridiculous gas prices. It is not only the younger generations either; theboomers who are all reaching the retirement age are more interested in the bigger vehicles (Fetto, 2001). There activities afterretirement are way more active then their parents. They are not just sitting around and playing golf or going on vacations.They are still working in some ways and being more active in their grandchildren's lives. Since the boomers are still active,they want to drive the same vehicles that their children drive in order to make life that much easier. Studies show that trucks,minivans and SUV's report increased sales nearly every year (Fetto, 2001).The manufactures target the sales of their cars to certain people and their geographic location. Convertibles are not marketedtoward people who live in parts of the world that are cold all year round. A good example of targeting markets is in Paris. Anew is trying to be passed that SUVs are not allowed inside the city. They are taking up to much room and the vehicles use alot of fuel. If this law is passed then SUV's will not be marketed toward people who live in Paris. Another example is thatminivans are mainly marketed toward soccer moms . They are marketed toward the moms because they are perceived, asneeded a lot of room to haul kids around and the easy access the minivans provide. Economic  The automobile industry has a huge impact on the U.S. economy. The University of Michigan and the Center for AutomotiveResearch stated that this industry is the major user of computer chips, textiles, aluminum, copper, steel, iron, lead, plastics,vinyl, and rubber. (Gale, 2004) The study also showed that for every autoworker there are seven other jobs created in otherindustries (Gale, 2004). These industries include anything from the aluminums to lead to vinyl. In 2001, the total sales of automobiles were 3.7% of the nation's gross domestic product. This percentage works out to be $375 billion dollars in sales. Technology  The internet has affected just about every industry in the world and has also had a huge impact on the automobile industry. Astudy was conducted by J.D. Power and Associates in 2002 and involved more 27,000 new vehicle buyers. The study showedthat 60% of the buyers referred to the internet before making their purchases and out of that 60%, 88% went to the autowebsites before going and taking a test drive. Business-to-business marketplaces have given the industry many opportunitiesbecause of the internet, such as more efficiency and lower cost. Ford, GM, and Daimler Chrysler announced in 2000 their plansto create a global online exchange for suppliers and the srcinal equipment manufacturers. The exchange was srcinally calledNewCo, and then it was changed to Convisint. According to Motor Vehicles and Passenger Car bodies, In August 2002 GeneralMotors announced it was about to begin sending requests for quotes to suppliers through Covisint using a tool called QuoteManager. Concerns for the economy and global warming have caused the automobile industry to develop alternate fuel vehicles. In thebeginning, automakers did not want to look into the development because of the high cost and the many risks involved.Because of new legislation, they had no choice but to come up with the technology to make the fuel-efficient cars. Theautomakers decided that electric cars would be the best way to meet the legislation demands. Early models were unpopularbecause of slow cruising speeds and lack of performance, but by the end of the century, electric car production began to bepractical. (Motor Vehicles) At the end of the 1990's manufacturers was coming up with the technology to produce internalcombustion engine with an electric motor. Toyota and Honda were both selling the hybrid vehicles at retail value in 2001.  Global  General Motors, Ford Motor Company, Daimler Chrysler, BMW, Volkswagen, Volvo, Toyota, Mazda, and Nissan Motor Companycome together to create a new trade association created the Alliance of Automobile Manufacturers (Gale, 2004). Theorganization was to replace the American Automobile Manufactures Association that only consisted of American manufacturers,the goals of the associations were to work together on public policy matters of common interest to provide credible industryinformation and data, and seek consistent global regulatory standards (Gale, 2004). The manufacturers also started merging inthe late 1990's. American companies started buying foreign manufacturers created some of the largest foreign takeovers. In19998 Daimler-Benz A.G. merged with Chrysler Cooperation to form DaimlerChryler A.G (Gale, 2004). Some other big mergerswere Ford with Volvo, and General Motors and Saab (Gale, 2004). Sociocultural  Today's society judges people on the type of car you drive. Society does not like to admit to this but it is very true.Manufactures know this happens and targets their markets by these thoughts. For example, anyone who drives a mini van isperceived as a soccer mom. This is because the manufactures target mini vans to mothers. Anyone who drives a nice vehicle isthought to be wealthy. No one wants to be seen driving an unattractive piece of junk because of what other people will think of him or her. Consumers also just feel better when they are driving a nice or new car, if makes them feel better aboutthemselves.Another aspect of the sociocultural is the environmental concerns for the need of fuel-efficient vehicles. Manyenvironmentalists are worried about the impact that the gas cars have on the environment. There is even legislation thatrequires cars to average a certain miles per gallon. Automotive Industry Five Forces of Competition Model   Threat of New Entrants  The threat of new entrants is very low in the automobile industry. The industry is very mature and it has successfully reachedeconomies of scale. In order to compete in this industry a manufacture must be able to achieve economies of scale. For this tooccur, manufacturers must mass-produce the automobiles so that they are affordable to the consumer. Another barrier toentry is that it takes an incredible amount of capital to manufacture the automobiles. It takes an extreme amount of capital notonly to be able to manufacture the products but also to keep up with the research and development that is necessary for theinnovation requirements. Access to distribution channels is another high barrier to entry. A company must find a dealership tosell their automobiles or have their own dealership. Space in the dealerships lots is very limited making it difficult to have awider variety of inventory. B argaining Power of Suppliers  The bargaining power of suppliers is very low in the automobile industry. There are so many parts that are used to produce anautomobile, that it takes many suppliers to accomplish this. When there are many suppliers in an industry, they do not havemuch power. There are so many suppliers to this industry; manufactures can easily switch to another supplier if it isnecessary. B argaining Power of  B uyers  The bargaining power of the buyers is moderately high. The buyers being consumers purchase almost all of the industriesoutput. The manufacturers depend on them to stay in business. The buyers also are a significant portion of the industriesrevenue. If they can not keep their buyers happy then they risk losing them to their competitors. The buyers have lowswitching cost if they are not happy. All the buyer has to do is sell the car they own and purchase a new one. The reasons whythe power is not completely high is that the buyers are not large and few in number. The buyers do not have the ability tointegrate backwards into the industry. If they want a car then they have to purchase it from a dealership. Threat of Substitute Products  There are not many substitute products for automobiles. Some of the substitutes are walking, riding bike or taking a train.Substitutes products all depend on the geographic location of the consumer. In some cities such as New York or Chicago, a caris not as necessary. In cities such as those, the subway is the most effective means of transportation. However, in most placesa person must have access to an automobile in order to get around.  Intensity of Rivalry among Competitors  Rivalry among the competitors is very strong is this industry. The major competitors are so closely balanced that it increasesthe rivalry. In order to gain market share in the automobile must gain market share by taking it from their competitors. One of the other reasons there is such high rivalry is that there is a lack of differentiation opportunities. All the companies make cars,trucks or SUV's. The competitors are compared to one another constantly. The price, quality, durability, and many otheraspects of different manufacturers are greatly taken into consideration when deciding what type of vehicle to purchase. Whenthe different manufacturers advertise they even compare their products to their competitors. For example, the commercialswill focus on areas where the company outperforms its competitors.   General Motors SWOT Analysis  The strengths, weaknesses, opportunities, and threats, are quite dynamic for General Motors and each can be integrated intoanother. For example, what might be a threat in one category for General Motors, can turn into an opportunity or become anew strategy for General Motors in the future. One of the major strengths that General Motors possess is the global awarenessand presence it holds in today's market. General Motors today has manufacturing operations in 32 countries and its vehiclesare sold in 192 countries (www.gm.com). To gain a better idea of General Motors position in today's market, refer to table 1.By having such a strong presence globally, General Motors can integrate its operations so each manufacturer can concentrateon its core competencies. For example, automakers are trying to drive down costs by sharing costs through their own globalalliances, or in joint ventures or partnerships with other companies (Harbour, 2001). This has become one of Europe'sstrategies for the problem where small vehicle continue to dominate the market and provide only small profit margins for  General Motors. Through global alliances, General Motors can stay in business in Europe and continue to satisfy its' customers.Another strength for General Motors is having the largest amount of annual sales at $185,524.00 million, reaching about 15percent of the global market (Company Press Release). Leading the industry in sales enables General Motors to spend time andmoney in its' R&D department. One of General Motors' current projects is releasing two Hybrid cars in China and hopefullymore in the United States in the year 2007 (Stein, 2004). Troy Clarke, president of Asian-Pacific, claims that developing Hybridcars is the new strategy for General Motors (Stein, 2004). One reason that General Motors is sitting at the top of the industrycould be due to the fact that it also lead the industry in ad spending. Last year, General Motors spent close to $2.12 billion onadvertising in the United States alone. This large amount of spending has reached customers through the first internet couponsworth $500 towards a Buick Regal (Halliday, 1999), and is another method of how General Motors' innovation strategiesenables them to remain at the top of the industry.The opportunities for General Motors globally are almost endless and the ways in which General Motors turns threats intoopportunities proves why they are number one in the industry. With sales growing at 60 percent in the Middle East last year,General Motors would like to institute a dealership network in Iraq (Ridder, 2004), which would help Iraq's economy recoverfrom the war. Another threat of losing safety professionals due to retirement at General Motors has been turned into anopportunity of developing the recruiting and training program at General Motors (Minter, 2002).In terms of taking a threat, such as losing any global market share, General Motors has made advances in the E-Businessstrategy and technology for the Asian automotive industry, and turned this threat into an opportunity. It is crucial for everycompany to try and turn threats into opportunities for improvement and development.However, not all threats can be turned into a positive. General Motors CEO never thought that the price war he launched threeyears ago would still be going on. This has caused General Motor's market share to fall in the past year (Welch, 2004). Themain problem with General Motor's plants in the United States is that they have too much capacity, which in turns causes themto make bad long-term business decisions. Other major threats have to deal with worker dissatisfaction. The dissatisfaction of the workers is not only in America, but is occurring globally. A strike in Germany has squeezed some of European productiondue to lack of two essential parts that are usually provided by the German plants (Three, 2004). As one can see, a strike atone plant or factory can have a domino affect on other plants or factories. In this particular case, the strikes of one plant inGermany, causes other plants in Europe to lay-off close to 12,000 jobs across the continent. This demonstrates the importanceof keeping each plant happy. Nationally, General Motors has plans to make 10,000 temporary layoffs (G.M., 2004). WhatGeneral Motors needs to do is make sure that the people who are laid off are treated with respect. This entails helping themfind other jobs, or promising them the opportunity to come back work when it is available, and keeping this promise. This iscrucial to keep employee morale high for those workers who still have a job.The main weakness that General Motors has been battling for the last century is employee satisfaction which leads to constantstrikes throughout the corporation. Managers have been battling with employees and unions on keeping wages, hours, andretirement plans fair. General Motors is currently spending a large proportion of their earnings on health care for their retireesas compared with newer automakers. In the past, General Motors has offered generous plans to attract workers to its plants(Hakim, 2004), but no one thought about what would happen when these workers got to the age of retirement. Well, that timehas arrived and General Motors is facing a difficult future as these costs of retirement continue to rise.Critics have been criticizing General Motors for waiting so long to develop what is now the new wave of vehicles, the Hybridcars. However, General Motors is first in line when it comes to the HydroGen3 fuel cell prototype. Recently, General Motors hassped up the pace of innovation with the successful completion of a trans-Europe endurance run for its HydroGen3 fuel cellprototype (Kisiel, 2004). Although General Motors is just now releasing a Hybrid car in China, it hopes to be the leader in thefuture with hydrogen fuel.As dynamic as General Motors is, it must have multiple strategies being implemented at the same time to keep up with thefast, changing pace of the industry. One of the major strategies which General Motors is changing is the switch from producingseventy percent light trucks to producing seventy percent cars. General Motors does not plan on letting the production of lighttrucks slip away however. Gary Cowger, president of GM North America, still believes there is a strong market for trucks, butAmerica is switching to a more economic commercial car (Guilford, 2003). General Motors also plans on implementing a line of compact pickups which include more car-like creature comforts and style. This change has come about to match what thecustomers want with one of General Motors' slogans: 'A car for every purse and purpose' (Greensberg, 2003). General Motorshas realized that it can make the add-ons, such as CD and DVD players, affordable for those who desire them. Another add-onwhich has become the most popular add-on and almost a standard for General Motors vehicles is the OnStar feature. OnStarhas expanded its premium services to let the customer check his or her E-mail as well as trade stock via different voicecommands (Galvin, 2001). General Motors has started licensing the technology of OnStar to other companies which mighterode its brand name.With everything that General Motors is doing right and with what little it is doing wrong, there is still room for improvement.Recommendations can be given in the fields of employee satisfaction, innovation, and new markets. Being one of GeneralMotors' main weaknesses, it is imperative that the managers and executives review the policies and procedures which thelower employees must abide by and determine if these rules are fair or not. With every strike that General Motors goesthrough, the competition gains a little bit of ground on the leading corporation. Open communication and open minds betweenthe managers and the unions' needs to become a must in the General Motors Corporation. If the money to pay for the risinghealth care costs cannot be found by cutting costs, then management needs to find other ways to give benefits and incentivesto the employee staff that will keep everyone happy. Implementing the process of improving customer satisfaction is a timelyand excruciating process. The major advantages of improving employee satisfaction are higher worker morale, higherproductivity, and an overall sense of corporate loyalty both internally and externally. Employee satisfaction has a domino effect  on the corporation. As the morale of the worker increases, workers tend to be more efficient and profit margins rise, whichincreases stakeholders' satisfaction and everyone, becomes more loyal to General Motors. The disadvantages of trying toimprove employee satisfaction are that it cost a lot of money to have external consultants work with the corporation to figureout what exactly is wrong, and it takes a lot of time. However, in the long run scheme of things, increasing worker satisfactionwill have an overall positive effect on the corporation.Innovation is the backbone for any corporation these days, and it is crucial that General Motors stays a leader in innovation aswell as sales. Although General Motors might be the leader in hydrogen fuel in the future, currently the competition is waybehind the rest if its competitors in Hybrid automobiles. It has been recommended by critics across the globe that GeneralMotors should pick up the pace and not let the competition gain an edge in the next few years with the Hybrid cars. GeneralMotors needs to be extremely careful on how far in the future it is looking ahead. It would only seem wise to be at the samelevel, if not ahead of the competition with what is going to be the new fad in the years to come. If General Motors does not seethe customers adapting to Hybrid cars then it might be making a good decision on jumping ahead to the next level of fuelefficiency. It would be extremely difficult for General Motors to catch up with Honda, Toyota, and Accura, and theirmanufacturing of Hybrid cars. The advantage of doing so however is that in case Hybrid cars are the future of the automobileindustry and not hydrogen fuel, General Motors will still be able to contend with the rest of the industry. Hopefully, thetechnology on how to produce Hybrid cars with economy of scale will be shared throughout the industry, enabling GeneralMotors to compete at the same level as its competitors. The disadvantage of waiting for the improvement of technology and forit to be shared is of course the waste of time not improving the corporation. And as has been discussed before, time is money,and no one can compete with out money.General Motors has recently entered into the retail industry with its first ever General Motors Collection store in Detroit'sMcNamara Terminal. General Motors Collection store was the third highest in net sales at the McNamara Terminal in August,2002 (Geist, 2002). The retail stores sells merchandise from miniature models of General Motors manufactured cars and racingcars, to hats and t-shirts with its most popular automobiles on them. With sales on average of $2,000 a day, this retail store isa perfect template for General Motors to use in other cities where General Motors manufacturing is a large part of thecommunity. By targeting cities that have large manufacturing plants, General Motors will continue to sell to its employees whotake pride in where they work. Also, large cities with high tourist rates will have more flow in the shops and will in turn havehigher sales. It would also be interesting to see if such retail stores could do as well in foreign markets who might not as ego-savvy as Americans and their possessions. Before General Motors starts putting these collection stores all over the world, it isessential that much research be put into the location selection. If a store enters into a market place and fails miserably, theconsumers in the market may in turn form a negative view about General Motors. This would come about through theassociation of the store failing to survive and the lack of quality decision General Motors produces. The opposite effectshowever is what General Motors would like to see. General Motors already leads the industry in advertising and by offering thepublic the choice of supporting their favorite sports car or any General Motors product, General Motors gains free advertising.Not only will free advertising be gained, but customer's brand loyalty will be increased and more cash flow will be available forGeneral Motors. DamilerChrysler SWOT Analysis  As the number two auto manufacturer in total revenues DaimlerChrysler has positioned itself as an industry leader, with thiscome many strengths. The DaimlerChrysler umbrella covers many well-known brands such as Dodge, Chrysler, Mercedes Benz,and Jeep. This means DaimlerChrysler has strong brands that are recognizable in almost every part of the world. Within thesebrands DaimlerChrysler also has wide variety of automobile products that span all price ranges and model types, fromeconomy cars to luxury models. Brands such as Jeep are recognized worldwide for off-road and SUV vehicles, while MercedesBenz is one of the highest quality luxury car makers in the industry. DaimlerChrysler is even represented in the realm of ultraluxury with its Maybach brand which competes directly with manufacturers such as Bentley and Rolls Royce.In the arena of American car makers the Chrysler brand stands out as a leading innovator in vehicle design. Chrysler is wellknown for category breaking models such as the PT Cruiser and Plymouth Prowler. The Dodge Viper is a vehicle that brokeaway from the mold of other American sports cars to drive the imagination of car buyers, and increase the connection of styleand image with DaimlerChrysler vehicles.The merger of Chrysler and Daimler Benz which created DaimlerChrysler gave the company a large worldwide presence. Thispresence is a quality one because DaimlerChrysler is considered to be one of most respected companies worldwide accordingto a Financial Times survey of world corporate leaders. This presence is further increased by DaimlerChrysler's strategicpartnership with Japanese car maker Mitsubishi. This partnership gives DaimlerChrysler presence in the Asian regions which isdoes not currently enjoy with its current stable of brands. This partnership will not only allow for greater product visibility forDaimlerChrysler in one of the largest automobile markets, but will also allow for sharing of technology betweenDaimlerChrysler and Mitsubishi.DaimlerChrysler is currently a leader in hydrogen fuel cell technology. Hydrogen, considered to be the next big breakthrough inautomobile engines, has the ability to revolutionize the industry. If or when this is the case DaimlerChrysler's commitment toresearch and development of the technology will help ensure the company remains on the top of the automotive world.With all of the strengths that come with being a top auto manufacturer every company must also face weaknesses that canarise from the current business landscape and DaimlerChrysler is not immune to these shortcomings. As the automotiveindustry continues to move in the direction of globalization it is important for manufacturers to be strongly represented in alllarge and emerging world markets. Although DaimlerChrysler is well represented in the American and European markets theyare not strongly represented in the Asian markets. DaimlerChrysler has no brands of its own that command significant marketshare in either the Japanese or emerging Chinese markets. DaimlerChrysler's partial stake in Mitsubishi was supposed to be an
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