INDUSTRY ANALYSIS

*Shanmukha Rao. Padala **Dr. N. V.S. Suryanarayana INTRODUCTION: Industry and competition are the main constituents of the task environment of a business firm. The environmental survey will not be complete without industry analysis and competitor analysis. Analysis of macro environment gives rise to common information whereas Industry Aanalysis provides structural realities, specific and unique information, which are required for strategy formulation. Industry analysis brings to light the industry attractiveness and the firms competitive position within the industry. The indusrtys attractiveness is mainly determined by its growth potential and inherent profitability of of the industry. Analysis of industry and competition helps not only strategy formulation but also helps in building competitive advantage. Michael E. Porters book Competitive Strategy propelled the concept of industry analysis into the foreground of strategic thought and business planning. His well defined analytical framework helps strategic managers to understand industry dynamics and to correctly anticipate the impact of remote factors on a firms operating environment. The nature and degree of competition in an industry hinge on five forces: the threat of new entrants, the bargaining power of customers, the bargaining power of suppliers, the threat of substitute products or services, and the jockeying among current contestants. FRAME WORK FOR INDUSRTY ANALYSIS: The following framework, which consists of seven aspects, is helpful to do industry analysis. Basic Conditions: Under general/basic conditions, product categories, performance of the industry in recent years and size of the industry are considered. Before 1980 the Indian passenger car industry was oligopolistic, industry size was small and licensing system was used as an entry barrier. Customer service and quality of vehicles were lesser-known aspects. The industry operated with limited players in a regulated protected environment. In 1980 Maruti entered the Indian passenger car industry. The post liberalization period witnessed the entry of several new players including MNCs. The industry went through growth phase and other players adopted new strategies. The demand for passenger cart was 15,714 in 1960. Within next two decades it increased to 30,989. The Compound Annual Growth Rate rose from 3.50% to 18.60% in 1983. Industry Setting/ Environment: Michael Porter classified industries on the environment. Fragmented industry Emerging industry Transition to maruti Declining industry Global industry

Industry settings must project the industry type to which the firm belongs. With regard to Indian passenger car industry, it is a growing industry and it is likely to have prolonged phase of growth. It employs 4,50,000 people directly and 10 million indirectly and it contributes 4% of GDP currently. Industry Structure: Till 1980, there were only two players in the passenger car industry namely Hindustan Motors and Premier Auto Ltd. In 1980, Maruti entered the scene. With liberalization global car giants such as Suzuki, General Motors, Ford, Daewoo, Hyundai, Honda, Peugeot, Fiat, Mitsubishi, Daimler Benz and BMW entered the Indian market through joint venture route. Before 1980, licensing policy served as an entry barrier. After 1980, huge capital requirement, cost advantages and experience curve effect of early players like Maruti proved to be an entry barrier for new players. Industry structure is concerned with number of players, total market size, market share of players, nature of competition, barriers, differentiation, and cost structure of players. Industry Attraction: Industry attractiveness is mainly determined by: industry potential, industry growth, industry profitability and forces shaping competition. The demand for small car is increasing in India. The l;uxury car is the segment where the demand is slowly on the rise in recent times. The factors that determine profitability in passenger car industry are technology and volume. All players have different models in all market segments. The existing players Premier Auto Ltd., and Maruti put up defensive strategies. Cost reduction, reduction of delivery time, marketing network, auto financing by Citicorp, export orientation, price cutting, aggressive pricing policy, modernization, expansion and after sales service are notified in Indian passenger car industry. Industry Performance: Performance of the industry is studied in terms of sales, profitability, production and technological advancement. The compact car segment has witnessed several challenges Daewoo launched Matiz, and Hyundai launched Santro. Indica launched by Tata Motors proved to be a world class low priced diesel car. Maruti experienced tough competition from Indica and Indica reshaped Indian car market. A price war was unleashed by leading players. Modernization of plants, export thrust, superior after sales service have been observed among all leading players. Now Tata Motors introduced Nano car at world least cost. Industry Practice: Industry practice refers to what majority of players in the industry does with distribution, pricing and R&D. joint venture with MNC is an accepted industry practice to ensure quality in passenger car industry. After sales service centers are established by all leading manufacturers. In recent times, Maruti has lost its dominant position mainly because of the aggressive attitude of new players. However it enjoys the cost advantage as it was established in a regular environment. Emerging Trends: The emerging trends are examined by studying product life cycle, stage of the industry, changes in buyer needs, and innovation in products, process, and growth rate and government policies. McKinsey consultants have predicted 256 per cent growth in industry production. The Ministry of Heavy Industries and Public Enterprises plans to double the contribution of auto industry by promoting exports.

How Competitive Forces Shape Strategy: The essence of strategy formulation is coping with competition. It is easy to view competition too narrowly and too pessimistically. Intense competition in an industry is neither coincidence nor bad luck. In the fight for market share, competition is not manifested only in the other players. Rather, competition in an industry is rooted in its underlying economics, and competitive forces exist that go well beyond the established combatants in a particular industry. Customers, suppliers, potential entrants and substitute products are all competitors that may be more or less prominent or active depending on the industry. The collective strength of these forces determines the ultimate profit potential of an industry. It ranges from intense in industries where no company earns spectacular returns on investment, to mild in industries, where there is room for quick high returns. In the economists perfectly competitive industry, jockeying for position in unbridled and entry to the industry very easy. This kind of industry structure, of course, offers the worst prospect for long run profitability. The weaker the forces, the greater the opportunity for superior performance. Whatever their collective strength, the corporate strategists goal is to find a position in the industry where his or her company can best defend itself against these forces or can influence them in its favour. Knowledge of these underlying sources of competitive pressure provides the groundwork for a strategic agenda of action. They highlight the critical strengths and weaknesses of the company, animate the positioning of the company in its industry,.

MICHAEL PORTERS ANALYSIS: According to Michael Porter, the nature and degree of competition in an industry depends on four forces. The threat of new entrants, the bargaining power of suppliers, the threat of substitute products or services, and the jockeying among current contestants. To establish a strategic agenda for dealing with these competing currents and to grow despite them, a company must understand how they operate in an industry and how they affect the company in its particular situation. The strongest competitive force or forces determine the profitability of an industry and so are of greatest importance in strategy formulation. Even a company with a strong position in an industry unthreatened by potential entrants will earn low returns if it faces a superior or a lower cost substitute product. In such a situation, coping with the substitute product becomes the number one strategic priority. A few characteristics are critical to the strength of each competitive force.

1. Threat of Entry: New entrants to an industry bring new capacity, the desire to gain market share, and often substantial resources. The seriousness of the threat of entry depends on the barriers present and on the reaction from existing competitors that the entrant can expect. If barriers to entry are high and a new comer can expect sharp retaliation from the entrenched competitors, obviously he will not pose a serious threat of entry. There are six major sources of barriers to entry. Economies of scale These economies deter entry by forcing the aspirant either to come in on a large scale or to accept a cost disadvantage. Scale economies in production, research, marketing and service are probably the key barriers to entry. Economies of scale can also act as hurdles in distribution, utilisation of the sales force, financing and nearly any other part of a business. Product Differentiation Brand identification creates a barrier by forcing entrants to spend heavily to overcome customer loyalty. Advertising, customer service, being first in the industry, and product differences are among the factors fostering brand identification. Capital Requirements The need to invest large financial resources in order to compete creates a barrier to entry, particularly if the capital is required for unrecoverable expenditure. Cost Disadvantages Independent of Size Entrenched companies may have cost advantages not available to potential rivals, no matter what their size and attainable economies of scale. These advantages can stem from the effects of the learning, proprietary technology, access to the best raw materials, sources, assets purchased at pre-inflation prices or favourable locations. Access to Distribution Channels The new entrants must of course secure distribution of his product or service. The more limited the wholesale or retail cannels are and the more that existing competitors have these tied up, obviously the tougher that entry into the industry will be. Sometimes this barrier is so high that, to surmount it, a new contestant must create its own distribution channels. Government Policy The government can limit or even foreclose entry to industries with such controls as license requirements and limits on access to raw materials. The government also can play a major indirect role by affecting entry barriers through controls such as air and water pollution standards and safety regulations. 2. Powerful suppliers and buyers: Suppliers can exert bargaining power on participants in an industry by raising prices or reducing the quality of purchased goods and services. Powerful suppliers can thereby squeeze profitability out of an industry unable to recover cost increases in its own prices. Customers likewise can force down prices, demand higher quality or more service, and play competitors off against each other all at the expense of industry profits. The power of each important supplier or buyer group depends on a number of characteristics of its market situation and on the relative importance of its sales or purchases to the industry compared with its overall business.

A companys choice of suppliers to buy from or buyer groups to sell should be viewed as a crucial strategic decision. A company can improve its strategic posture by finding suppliers or buyers who possess the least power to influence it adversely. Most common is the situation of a company being able to choose whom it will sell to in other words, buyer selection, Rarely do all the buyer groups a company sells to enjoy equal power. 3. Substitute Products By placing a ceiling on prices it can charge, substitute products or services limit the potential of an industry. Unless it can upgrade the quality of the product or differentiate it somehow, the industry will suffer in earnings and possibly in growth. Substitutes not only limit profits in normal times, they also reduce bonanza an industry can reap in boom times. 4. Jockeying for Position Rivalry among existing competitors takes the familiar form of jockeying for position using tactics like price competition, product introduction, and advertising. Intense rivalry is related to the presence of a number of factors: Competitors are numerous or roughly equal in size and power; Industry growth is slow, precipitating fights for market share that involve expansion minded members; Fixed costs are high or the product is perishable, creating strong temptation to cut prices; Exit barriers are high. Exit barriers keep companies competing even though they may be earning low or even negative returns on investment. The rivals are diverse in strategies, origins and personalities. They have different ideas about how to compete and continually run head on into each other in the process.

EXPERIENCE CURVE AS AN ENTRY BARRIER: In recent years, the experience curve has become widely discussed as a key element of industry structure. According to this concept, unit costs in many manufacturing industries, as well as in some service industries decline with experience of a particular companys cumulative volume of production. The cost decline creates barrier to entry because new competitors with no experience face higher costs than established ones, particularly the producer with the largest market share, and have difficulty catching up with the largest market share, and have difficulty catching up with the entrenched competitors.

Adherents of the experience curve concept stress the importance of achieving market leadership to maximise this barrier to entry, and they recommend aggressive action to achieve it, such as price cutting in anticipation of fallings costs in order to build volume. The height of the barrier depends on how important costs are to competition compared with other areas like marketing selling, and innovation. The barrier can be nullified by product of process innovations leading to a substantially new technology and thereby creating an entirely new experience curve. New entrants can leapfrog the industry leaders and alight on the new experience curve, to which those leaders may be poorly positioned to jump. SWOT ANALYSIS: SWOT or WOTS is an acronym for strengths, weakness, opportunities and threats underlying strategic planning process. The purpose of strategic planning is to discover future opportunities and threats so as to make plans to exploit or avoid them, as the case may be, in the crucial step of strategy formulation. Though SWOT analysis should be undertaken as an integrated process in strategic management, it has been broken into two parts because of the different nature of information requirement for each. The first part is the environmental analysis for identifying opportunities and threats, and the second part is corporate appraisal for identifying strengths and weaknesses. SWOT analysis begins with the appraisal of external environment so that the organisation can analyse the various opportunities and threats offered by it and the organisation can relate itself in the light of its strengths and weaknesses. From this point of view, managers should appraise the various organisational factors through which it can cope up with its environment. Such a process is known as corporate appraisal. Corporate appraisal is the process through which managers analyse the various factors of their organisation to evaluate their strengths and weaknesses so as to meet the opportunities and threats of environment.

USEFULNESS OF INDUSTRY ANALYSIS: The basic purpose of industry analysis is to assess the relative strengths and weakness of an organization relative to other players in the industry. It tries to highlight the structural realities of a particular industry and the extent of competition within that industry. Through industry analysis, an organization can find whether the chosen field is attractive or not and assess its own position within the industry. Industry analysis helps firms in the following ways. Industy Attractiveness: Industry analysis helps to find out: the growth potential of the industry, the profitability of the industry and the relative ability of player in that industry.

Where the growth prospects are good and profit potential is great, the firm can safely conclude that the field is attractive and offers enough room for others to enter and explocit the field. At this stage firm needs to answer certain questions like: is it a growing industry? if yes, at what pace the industry is growing? are there any limits to growth in the industry? does it offer good returns consistently etc.

Competitive Position: Where does the firm stand in comparison to other in a particular industry. Finding answers to such a question is important for various reasons. First, it helps the firm to find its own advantageous/disadvantageous place. Second, it enable the firm to know whether it is able to deliver value for money when compared to others in the industry. Third, it can think of effecting improvements in its product and service offerings in an attempt to defend and improve its standing in the market place. SUMMARY: Industry analysis brings to light the industry attractiveness and the firms competitive position within the industry. The nature and degree of competition in an industry hinge on five forces: the threat of new entrants, the bargaining power of customers, the bargaining power of suppliers, the threat of substitute products or services, and the jockeying among current contestants. The framework, which consist of seven aspects viz., basic conditions, industry setting/environment, industry structure, industry attraction, industry performance, industry practice and emerging trends are helpful to do industry analysis. The basic purpose of industry analysis is to assess the relative strengths and weakness of an organization relative to other players in the industry. It tries to highlight the structural realities of a particular industry and the extent of competition within that industry. According to Michael Porter, the nature and degree of competition in an industry depends on four forces: the threat of new entrants, the bargaining power of suppliers, the threat of substitute products or services, and the jockeying among current contestants. The experience curve has become widely discussed as a key element of industry structure in recent years. According to this curve, unit costs in many manufacturing industries, as well as in some service industries decline with experience of a particular companys cumulative volume of production.

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 built the first car in 1896 (Gale, 2003). He then revolutionized the industry with the invention of the assembly 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 from consumers increasing concerns for the environment and the concern for safer automobiles. The first safety act passed by Congress was in 1966 and was called the National Traffic and Motor Vehicle Safety Act (Gale, 2004). This act forced manufacturers to improve the safety for the passengers, the driver visibility, and the braking of the car. It also stated that manufacturers had to inform the public when it had a recall on the cars. The motivation for the passing of this safety act was Ralph Nadar's 1965 novel Unsafe at Any Speed: The Designed-in Dangers of the American Automobile. (Gale, 2004) Safety concerns were not the only concerns during this period. There was also growing concern for the environment even before the oil 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 next six 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 all automobiles must meet a certain mileage per gallon. The act demanded that all automobiles had to meet a standard of 20mpg by the 1980 model and then 27.5 mpg for the 1985 model. Then in 1992, the Intermodal Surface Transportation Act required the 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 their generation 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 and Generation 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 the trucks, minivan and especially the SUV's, even with the ridiculous gas prices. It is not only the younger generations either; the boomers who are all reaching the retirement age are more interested in the bigger vehicles (Fetto, 2001). There activities after retirement 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 marketed toward people who live in parts of the world that are cold all year round. A good example of targeting markets is in Paris. A new is trying to be passed that SUVs are not allowed inside the city. They are taking up to much room and the vehicles use a lot of fuel. If this law is passed then SUV's will not be marketed toward people who live in Paris. Another example is that minivans are mainly marketed toward "soccer moms". They are marketed toward the moms because they are perceived, as needed 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 Automotive Research 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 other industries (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. A study was conducted by J.D. Power and Associates in 2002 and involved more 27,000 new vehicle buyers. The study showed that 60% of the buyers referred to the internet before making their purchases and out of that 60%, 88% went to the auto websites before going and taking a test drive. Business-to-business marketplaces have given the industry many opportunities because of the internet, such as more efficiency and lower cost. Ford, GM, and Daimler Chrysler announced in 2000 their plans to create a global online exchange for suppliers and the original equipment manufacturers. The exchange was originally called NewCo, and then it was changed to Convisint. According to Motor Vehicles and Passenger Car bodies, "In August 2002 General Motors announced it was about to begin sending requests for quotes to suppliers through Covisint using a tool called Quote Manager." Concerns for the economy and global warming have caused the automobile industry to develop alternate fuel vehicles. In the beginning, 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. The automakers

decided that electric cars would be the best way to meet the legislation demands. "Early models were unpopular because of slow cruising speeds and lack of performance, but by the end of the century, electric car production began to be practical."(Motor Vehicles) At the end of the 1990's manufacturers was coming up with the technology to produce internal combustion 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 Company come together to create a new trade association created the Alliance of Automobile Manufacturers (Gale, 2004). The organization 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 industry information and data, and seek consistent global regulatory standards (Gale, 2004). The manufacturers also started merging in the late 1990's. American companies started buying foreign manufacturers created some of the largest foreign takeovers. In 19998 Daimler-Benz A.G. merged with Chrysler Cooperation to form DaimlerChryler A.G (Gale, 2004). Some other big mergers were 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 is perceived as a soccer mom. This is because the manufactures target mini vans to mothers. Anyone who drives a nice vehicle is thought 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 about themselves. Another aspect of the sociocultural is the environmental concerns for the need of fuel-efficient vehicles. Many environmentalists are worried about the impact that the gas cars have on the environment. There is even legislation that requires 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 reached economies of scale. In order to compete in this industry a manufacture must be able to achieve economies of scale. For this to occur, manufacturers must mass-produce the automobiles so that they are affordable to the consumer. Another barrier to entry is that it takes an incredible amount of capital to manufacture the automobiles. 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. Access to distribution channels is another high barrier to entry. A company must find a dealership to sell

their automobiles or have their own dealership. Space in the dealerships lots is very limited making it difficult to have a wider variety of inventory. Bargaining 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 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. Bargaining Power of Buyers The bargaining power of the buyers is moderately high. The buyers being consumers purchase almost all of the industries output. The manufacturers depend on them to stay in business. The buyers also are a significant portion of the industries revenue. If they can not keep their buyers happy then they risk losing them to their competitors. The buyers have low switching 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 why the power is not completely high is that the buyers are not large and few in number. The buyers do not have the ability to integrate 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 car is not as necessary. In cities such as those, the subway is the most effective means of transportation. However, in most places a 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 increases the 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 other aspects of different manufacturers are greatly taken into consideration when deciding what type of vehicle to purchase. When the different manufacturers advertise they even compare their products to their competitors. For example, the commercials will 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 into another. For example, what might be a threat in one category for General Motors, can turn into an opportunity or become a new strategy for General Motors in the future. One of the major strengths that General Motors possess is the global awareness and

presence it holds in today's market. General Motors today has manufacturing operations in 32 countries and its vehicles are 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 concentrate on its core competencies. For example, automakers are trying to drive down costs by sharing costs through their own global alliances, or in joint ventures or partnerships with other companies (Harbour, 2001). This has become one of Europe's strategies 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 15 percent of the global market (Company Press Release). Leading the industry in sales enables General Motors to spend time and money in its' R&D department. One of General Motors' current projects is releasing two Hybrid cars in China and hopefully more in the United States in the year 2007 (Stein, 2004). Troy Clarke, president of Asian-Pacific, claims that developing Hybrid cars is the new strategy for General Motors (Stein, 2004). One reason that General Motors is sitting at the top of the industry could be due to the fact that it also lead the industry in ad spending. Last year, General Motors spent close to $2.12 billion on advertising in the United States alone. This large amount of spending has reached customers through the first internet coupons worth $500 towards a Buick Regal (Halliday, 1999), and is another method of how General Motors' innovation strategies enables 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 into opportunities 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 recover from the war. Another threat of losing "safety professionals" due to retirement at General Motors has been turned into an opportunity 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-Business strategy and technology for the Asian automotive industry, and turned this threat into an opportunity. It is crucial for every company 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 three years ago would still be going on. This has caused General Motor's market share to fall in the past year (Welch, 2004). The main problem with General Motor's plants in the United States is that they have too much capacity, which in turns causes them to 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 production due to lack of two essential parts that are usually provided by the German plants (Three, 2004). As one can see, a strike at one plant or factory can have a domino affect on other plants or factories. In this particular case, the strikes of one plant in Germany, causes other plants in Europe to lay-off close to 12,000 jobs across the continent. This demonstrates the importance of keeping each plant happy. Nationally, General Motors has plans to make 10,000 temporary layoffs (G.M., 2004). What General Motors needs to do is make sure that the people who are laid off are treated with respect. This entails helping them find other jobs, or promising them the opportunity to come back work when it is available, and keeping this promise. This is crucial 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 constant strikes throughout the corporation. Managers have been battling with employees and unions on keeping wages, hours, and retirement plans fair. General Motors is currently spending a large proportion of their earnings on health care for their retirees as 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 time has 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 Hybrid cars. However, General Motors is first in line when it comes to the HydroGen3 fuel cell prototype. Recently, General Motors has sped up the pace of innovation with the successful completion of a trans-Europe endurance run for its HydroGen3 fuel cell prototype (Kisiel, 2004). Although General Motors is just now releasing a Hybrid car in China, it hopes to be the leader in the future with hydrogen fuel. As dynamic as General Motors is, it must have multiple strategies being implemented at the same time to keep up with the fast, changing pace of the industry. One of the major strategies which General Motors is changing is the switch from producing seventy percent light trucks to producing seventy percent cars. General Motors does not plan on letting the production of light trucks slip away however. Gary Cowger, president of GM North America, still believes there is a strong market for trucks, but America 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 the customers want with one of General Motors' slogans: 'A car for every purse and purpose' (Greensberg, 2003). General Motors has realized that it can make the add-ons, such as CD and DVD players, affordable for those who desire them. Another add-on which has become the most popular add-on and almost a standard for General Motors vehicles is the OnStar feature. OnStar has expanded its premium services to let the customer check his or her E-mail as well as trade

stock via different voice commands (Galvin, 2001). General Motors has started licensing the technology of OnStar to other companies which might erode 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 General Motors' main weaknesses, it is imperative that the managers and executives review the policies and procedures which the lower employees must abide by and determine if these rules are fair or not. With every strike that General Motors goes through, the competition gains a little bit of ground on the leading corporation. Open communication and open minds between the managers and the unions' needs to become a must in the General Motors Corporation. If the money to pay for the rising health care costs cannot be found by cutting costs, then management needs to find other ways to give benefits and incentives to the employee staff that will keep everyone happy. Implementing the process of improving customer satisfaction is a timely and excruciating process. The major advantages of improving employee satisfaction are higher worker morale, higher productivity, 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, which increases stakeholders' satisfaction and everyone, becomes more loyal to General Motors. The disadvantages of trying to improve employee satisfaction are that it cost a lot of money to have external consultants work with the corporation to figure out what exactly is wrong, and it takes a lot of time. However, in the long run scheme of things, increasing worker satisfaction will 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 as well as sales. Although General Motors might be the leader in hydrogen fuel in the future, currently the competition is way behind the rest if its competitors in Hybrid automobiles. It has been recommended by critics across the globe that General Motors should pick up the pace and not let the competition gain an edge in the next few years with the Hybrid cars. General Motors needs to be extremely careful on how far in the future it is looking ahead. It would only seem wise to be at the same level, 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 see the customers adapting to Hybrid cars then it might be making a good decision on jumping ahead to the next level of fuel efficiency. It would be extremely difficult for General Motors to catch up with Honda, Toyota, and Accura, and their manufacturing of Hybrid cars. The advantage of doing so however is that in case Hybrid cars are the future of the automobile industry and not hydrogen fuel, General Motors will still be able to contend with the rest of the industry. Hopefully, the technology on how to produce Hybrid cars with economy of scale will be shared throughout the industry, enabling General Motors to compete at the same level as its competitors. The disadvantage of waiting for the improvement of technology and for it 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's McNamara 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 racing cars, to hats and t-shirts with its most popular automobiles on them. With sales on average of $2,000 a day, this retail store is a perfect template for General Motors to use in other cities where General Motors manufacturing is a large part of the community. By targeting cities that have large manufacturing plants, General Motors will continue to sell to its employees who take pride in where they work. Also, large cities with high tourist rates will have more flow in the shops and will in turn have higher 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 is essential that much research be put into the location selection. If a store enters into a market place and fails miserably, the consumers in the market may in turn form a negative view about General Motors. This would come about through the association of the store failing to survive and the lack of quality decision General Motors produces. The opposite effects however is what General Motors would like to see. General Motors already leads the industry in advertising and by offering the public 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 for General Motors. DamilerChrysler SWOT Analysis As the number two auto manufacturer in total revenues DaimlerChrysler has positioned itself as an industry leader, with this come 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 these brands DaimlerChrysler also has wide variety of automobile products that span all price ranges and model types, from economy cars to luxury models. Brands such as Jeep are recognized worldwide for off-road and SUV vehicles, while Mercedes Benz is one of the highest quality luxury car makers in the industry. DaimlerChrysler is even represented in the realm of ultra luxury 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 well known for category breaking models such as the PT Cruiser and Plymouth Prowler. The Dodge Viper is a vehicle that broke away from the mold of other American sports cars to drive the imagination of car buyers, and increase the connection of style and image with DaimlerChrysler vehicles.

The merger of Chrysler and Daimler Benz which created DaimlerChrysler gave the company a large worldwide presence. This presence is a quality one because DaimlerChrysler is considered to be one of most respected companies worldwide according to a Financial Times survey of world corporate leaders. This presence is further increased by DaimlerChrysler's strategic partnership with Japanese car maker Mitsubishi. This partnership gives DaimlerChrysler presence in the Asian regions which is does not currently enjoy with its current stable of brands. This partnership will not only allow for greater product visibility for DaimlerChrysler in one of the largest automobile markets, but will also allow for sharing of technology between DaimlerChrysler and Mitsubishi. DaimlerChrysler is currently a leader in hydrogen fuel cell technology. Hydrogen, considered to be the next big breakthrough in automobile engines, has the ability to revolutionize the industry. If or when this is the case DaimlerChrysler's commitment to research 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 can arise from the current business landscape and DaimlerChrysler is not immune to these shortcomings. As the automotive industry continues to move in the direction of globalization it is important for manufacturers to be strongly represented in all large and emerging world markets. Although DaimlerChrysler is well represented in the American and European markets they are not strongly represented in the Asian markets. DaimlerChrysler has no brands of its own that command significant market share in either the Japanese or emerging Chinese markets. DaimlerChrysler's partial stake in Mitsubishi was supposed to be an answer to this problem but current drops in Mitsubishi's market share accompanied by other problems has left DaimlerChrysler's future investments in Mitsubishi uncertain, and more importantly with no strong plan to compete in Asian markets. Related to the problem of Asian representation is the reality that none of DaimlerChrysler's brands are truly marketable to worldwide consumers. Brands such as Dodge and Chrysler are strong in the US, but have had limited success in other markets. The Mercedes Benz brand is the most recognizable world wide, but as a luxury car maker it is harder to market to a majority of consumers in different markets. The Jeep brand is well known and respected throughout most markets, but its appeal is limited to the specialized group of SUV and off-road buyers. The growing use of hybrid engines could also cause problems for DaimlerChrysler. There strategy to focus on the entirely new hydrogen technology has left them behind many other major manufacturers in the development of hybrid technology. As other major car companies are preparing to roll out hybrid options for many of there most popular models DaimlerChrysler does not plan to do the same anytime soon. By hitching there wagon to hydrogen power and not trying to capitalize on rising hybrid trends DaimlerChrysler could be missing out.

What has been billed as a merger between America's Chrysler and Germany's Daimler Benz has turned out to be more of an acquisition of Chrysler by Daimler Benz. The result is that most top managers of DaimlerChrysler are from Daimler Benz and many of the leaders of Chrysler choose to leave or retire. Many have speculated this "brain-drain" of Chrysler executives could hurt the innovative reputation of the American brands in DaimlerChrysler's portfolio of manufacturers. Much of the operations of DaimlerChrysler have also been moved to Germany where current wage rates and labor laws have made it hard for DaimlerChrysler to cut costs and bolster its bottom line. With the evolution and changing environment of the Automotive industry DaimlerChrysler has many opportunities to increase its strengths and fix some weaknesses. With DaimlerChrysler's current shortage of Asian market share there Jeep brand could be a bright spot. With the growing trend of consumerism in China it is currently the fastest growing auto market in the world, and the Chinese desire for all things American could provide DaimlerChrysler with a golden opportunity. In Chinese surveys of the most sought after American brands in China, Jeep is in the top 5. DaimlerChrysler has also recently inked deals to build manufacturing plants for Mercedes Benz in Beijing, China. These recent developments provide DaimlerChrysler with more chances to push its products into a hugely coveted consumer market. The decision to focus on hydrogen power research and development could also bode well for DaimlerChrysler if the current prices of oil and gas become a future standard. The high prices will help to put more focus and energy into viable fuel alternatives which could push the demand for hydrogen powered vehicles, as well as provide opportunities for government subsidies for continuing advancement of the technology. As a leader in hydrogen power DaimlerChrysler is poised to be a large benefactor of any of these scenarios. Along with new opportunities come the inevitable threats and opportunity costs associated with any course of action which have the ability to affect DaimlerChrysler. A current major threat is the shaky alliance between DaimlerChrysler and Mitsubishi. The current downturn of Mitsubishi has left DaimlerChrysler in a very vulnerable condition. If they continue in the partnership and hope Mitsubishi can pull out of its slump DaimlerChrysler could still face the consequences of not finding other ways to bolster presence in Asian markets even is Mitsubishi does right the ship. Even worse if Mitsubishi continues to flounder DaimlerChrysler may have to cut its losses and find itself even further behind other manufacturers in the race to sure up some of the largest auto markets in the world. Another great threat is due to DaimlerChrysler's decision to put all its eggs into the hydrogen fuel basket. If the current trend of hybrid engines continues to catch on and grow throughout world markets DaimlerChrysler's reluctance to follow suit could cause loss of market share to

rivals who offer better hybrid engines in more vehicle models. Even worse, if hydrogen proves not to be a viable energy source in the near future than DaimlerChrysler would not be able to profit from recent heavy investments in the technology and be faced with huge sunk and opportunity costs. DaimlerChrysler has embarked upon a strategy of becoming a world wide leader in the automobile industry, representing all vehicle types across all world markets. This is summed up by DaimlerChrysler's four-pillar strategy. The four pillars include: Global presence, Strong Brands, Broad product range, and Technology leadership. DaimlerChrysler, formed by a merger of the American Company Chrysler and the German Daimler Benz in 1998, was instrumental in the achievement of many of these pillars. DaimlerChrysler currently sells products in over 200 countries and manufacturing plants in 17. DaimlerChrysler also has headquarters covering all major geographic regions on every continent except Antarctica. After the merger DaimlerChrysler had ownership of several major car manufacturers with certain geographic presence. Daimler Benz was one of Europe's largest car manufacturers, while Chrysler was a leading American country. This gives DaimlerChrysler a large presence in two of the largest auto markets in the world. They also choose to purchase a 30 percent stake in the Japanese Mitsubishi Motors as a way to penetrate the Japanese markets. These three markets are the largest in the world and gives DaimlerChrysler a strong global presence. DaimlerChrysler also wished to produce strong brands of automobiles with broad product ranges to be offered in these markets. DaimlerChrysler currently lays claim to passenger vehicle brands such as Chrysler, Dodge, Jeep, Mercedes, Maybach, and Smart. They also have ownership of Freightliner, which is one of the largest commercial truck producers in the world. These brand names represent all vehicle types currently offered to consumers. From Dodge and Chryslers cars and trucks covering all price ranges and styles to Mercedes' and Maybach's representation in the luxury market. Even specialized vehicles are represented; Jeep is a top producer of off-road and SUV vehicles, while the smaller Smart brand produces economical urban vehicles for sale in Europe and the Freightliner brand gives DaimlerChrysler a strong share of the market in the commercial shipping and transportation. In the arena of Technology leadership DaimlerChrysler boasts that it is a world leader in the development of hydrogen fuel cell powered automobiles. DaimlerChrysler hopes that its research into the new power technology will result in affordable vehicles powered by the alternative fuel source in the neat future. This Technology has the potential to be the next industry standard for engines and DaimlerChrysler is heavily invested in assuring that if or when it is they will be positioned to offer the best hydrogen engines available. They are also looking in the direction of cleaner, more efficient diesel engines as an alternative to hybrid technology. DaimlerChrysler

believes that advances in diesel engines are superior to the improvements made by gas/electric hybrids currently offered by many competitors. DaimlerChrysler that strong research into these alternative power sources will facilitate their desire to be a technological leader in innovation among other companies in the automobile manufacturing industry. Not all strategies are implemented seamlessly and DaimlerChryser is no exception to this. One of DaimlerChrysler's biggest current problems is its weak market penetration in Asia. While they do have a strategic partnership with Mitsubishi motors it is apparent that Mitsubishi isn't fulfilling the high expectations DaimlerChrysler expected. DaimlerChrysler is already on the right track with its plans to open manufacturing facilities in China, but a more immediate impact might be needed to ensure DaimlerChrysler doesn't fall behind in the region. A more immediate presence could be achieved through another strategic partner, specifically with one of the Korean builders Daewoo or Hyundai. Both companies have successful small car divisions, which are a need for DaimlerChrysler, and more importantly they come with distribution centers throughout the Asian market. Both companies have been recently seeking a large partner which provides an opportunity for DaimlerChrysler. The addition of a new Asian partner to the DaimlerChrysler stable can prove to be a great advantage through the immediate presence DaimlerChrysler could gain presence in the underrepresented Asian market, but it could also turn out to be a drawback. By taking on another acquisition or strategic partner DaimlerChrysler could face the same problems it is currently experiencing with Mitsubishi. By only being partners with another Asian firm DaimlerChrysler would not have ultimate control of the partner firm leaving more of a liability than if DaimlerChrysler opted to simply acquire of the company. DaimlerChrysler could also hedge its bets on hydrogen engines by investing more in hybrid technology to provide more immediate returns. DaimlerChrysler's resistance to go ahead with full scale implementation of hybrid engines has come from a number of sources, most notably their focus on hydrogen and a belief that other fuels, such as diesel, may hold greater promise than hybrids. DaimlerChrysler believes that hybrid power is only an interim step until the before mentioned technologies are realized. Nevertheless, if DaimlerChrysler's assertions about the future of hydrogen power are incorrect they could face large consequences of not embracing hybrid engines. To fill this gap DaimlerChrysler could purchase plans for hybrid engines to hedge their bets of the upcoming market for more efficient fuels. Many manufacturers have begun licensing their hybrid technologies to other manufacturers, and while this isn't as good as DaimlerChrysler producing there own technology, it will allow them to introduce hybrid engines in there own models quicker and not lose precious market share to rivals. This would be an advantage for DaimlerChrysler because the promises of hydrogen power, while great, are still many years away and the use of hybrid engines and technology is growing exponentially in the present. However, DaimlerChrysler believes that more efficient Diesel technology is the better near-term solution t increase fuel economy. If Daimler were to follow the crowd into hybrid technology they could face a loss of investment in new diesel technologies that may well be a better answer than current hybrid technologies.

Toyota Motor Corporation SWOT Analysis The Toyota Motor Corporation was incorporated in 1937 and has many strengths being one of the industry leaders in the automotive industry. Toyota has three major brands underneath the company umbrella; Toyota, Lexus, and Scion. By having these three distinct brands, it lets the company reach many sectors of the globe in a choice of vehicle for customers. They produce their vehicles and target specific global regions, such as the Carina E for the European segment (Amherst). Toyota has traditionally also been the leader in Total Quality Management or TQM. The belief that no process could ever be declared perfect, and that therefore there was always room for improvement was introduced by Toyota Sakichi (Financial Times). This brought about the Japanese word, Kaizen meaning continuous improvement (Financial Times). By using the Kaizen theory of continuous improvement, Japan caught up the U.S. auto makers during the 1980's (Financial Times). Toyota has also introduced it's newest hybrid power car, Toyota Pirus, at the 2003 New York Auto Show and hit the dealerships in the fall of 2004 (Toyota). In September of 2003, orders for the new and improved Pirus totaled 17,500 which is five times more then the company target of 3000 (MSNBC). With the price of gasoline and oil ever rising, this is a great market for Toyota to exploit. Toyota does have some company traits that are portrayed as a weakness in the industry. The brand Toyota is not perceived as many to be prestigious (Amherst). Another perceived weakness is that it is in the top five of sales but not in the top five in dividend payouts or stock performance (Yahoo Finance). This may put up a red flag to investors around the globe that Toyota is not paying dividends as frequent or as efficiently as they should to their shareholder of the company. In Europe, the Lexus brand sold 18,206 vehicles last year compared with 509,720 BMW's. The reason for this is the Lexus brand lacks the diesel V-8 engine (Bloomberg). In certain European countries such as Belgium and Greece, diesels make up 90 percent of BMW sales in part to the tax subsidies the consumer receives (Bloomberg). The opportunities for the Toyota Motor Company seem to be endless. Today, Toyota has passed the Ford Motor Company to become the world's second largest automaker in the world trailing only GM (Forbes). Toyota has also rounded out it's product line to suit the U.S. market with the redesigned passenger trucks and SUV, but they have also hit the market hard with eco-crazed society with the introduction of the second generation hybrid car, the Prius (Business week). The company is also being pushed in the right direction for opportunity with the strengthening of the Japanese Yen (Bloomberg). With the yen gaining strength and shifts in other world currency, the operating profits dropped during the April-June quarter by fifteen percent or seventy billion yen (Bloomberg). Because of the saving the company acquired in currency shifts, Toyota has extra money on hand to use possibly in R&D to improve on their vehicles or in several other areas causing great opportunities for the company. Toyota has doubled its market share in Europe in the past four years to 5.1 percent due to import restrictions being dropped in the 1990's

(Bloomberg). The opening up of imports in the European market is a great opportunity for Toyota because that enables them to put their luxury line of automobiles Lexus, up against the European BMW and Mercedes Benz. Toyota is considering the idea of introducing a beefy threequarter-ton pickup truck into the U.S. Market (Big News). This model would combat the Ford F250 and the heavy-duty Chevy Silverado and these two pickups typically sell for more than $30,000 (Big News). If Toyota will decide to enter the heavy-duty truck market now it could be very profitable with construction, where the use of heavy-duty trucks are needed, booming all over the United States. Threats to the Toyota Motor Company are an everyday occurrence. A major threat to Toyota is the Hyundai motor company. On average, Hyundai usually has thirty more horsepower in their vehicles, and costs around 3000 dollars less than a comparably segmented Toyota vehicle (Amherst). In the luxury line of Lexus, they are still losing ground to BMW in sedan sales and in SUV sales (Business week). Technology increases in cars today is a major driving force in the automobile industry, and if Toyota can't keep up with its other competitors, they could quickly lose market share in sectors they are involved in. The latest trend in the U.S. market is the ecofriendly vehicle that uses less gas and even more use of electronic power (MSNBC). Toyota has introduced the Prius hybrid vehicle, but Honda also is selling a hybrid car right now and Ford, GM and DaimlerChrlsyer have all announced plans for a soon release of their hybrid vehicles (MSNBC). If the Toyota Company can gain market share before the other big three release their hybrid, this won't become much of a threat, but if the Pirus does not fit consumer's needs in the hybrid sector, they will quickly switch and try the other products on the market. The Toyota Motor Company has a slogan that is plastered across one of its assembly plant; Yoi kangae, yoi shina (Business week). That slogan translates to "Good thinking means good products", and that sums up what Toyota is all about as a company (Business week). There combination of speed and flexibility is world class with the 30 plants they have worldwide with some of them able to produce up to eight models of on the same line (Business week). Toyota also lives by the word Kaizen which translate into continuous improvement (Financial Times). Toyota introduced TQM and Kaizen to the world with the help of Edwards Demming to take the world by surprise and focus on quality and improvement constantly instead of just the bottom line and this focus has helped the Japanese company to become one of the leaders in the auto manufacturing industry (Financial Times). Toyota, to be as profitable in the future as they are right now needs to keep their focus on the hybrid sector when selling in the U.S. market. Toyota has also launched a joint program with it's suppliers to drastically cut the number of steps it needs to make cars and car parts. Over the past year, the company chopped out 2.6 billion dollars out of its 113 billion dollar manufacturing costs without any plant closure of layoffs (Business week). They are also putting the finishing touches on a plan to create a more flexible manufacturing system. In this new plan, plants Indonesia to Argentina will be designed to make more customized cars that fit the demand in the

local markets and Toyota believes that by doing this at their plants the can save 1 billion dollars normally needed to build a new factory (Business week). These are the recommendations that the Toyota Motor Company needs to take into consideration to keep their company moving in the right direction globally. The advantage that Toyota would have by being the leader in the hybrid car sector is unknown right now. Nobody knows for a certain fact if the "green trend" will be a large factor in the future. In the U.S. market, it appears that having a marketable hybrid car in their line up of automobiles will be a good plan for Toyota in the future. The advantage of producing automobiles customized to a certain market is a good plan to keep a competitive advantage over the competitors in the same geographic region. The hybrid car market could be a failure in the U.S. market and others in better technology increases before Toyota's Pirus begins to turn profits for the company. If this happens, Toyota could have a huge failure with all of the R&D and advertisement they have put into their new hybrid vehicle. Toyota also has an advantage over their customers today using the TQM model of operations. If the rest of the industry begins to implement this also, and Toyota fails to keep improving, this could prove to become a disadvantage for the company. Ford Motor Company SWOT Analysis "Ford Motor Company is a global company with two core businesses: Automotive and Financial Services. The Automotive business consists of the design, development, manufacture, sale and service of cars, trucks and service parts. In 2003, the Company organized its Automotive business as two primary segments, Americas and International. The Americas segment includes primarily the sale of Ford, Lincoln and Mercury brand vehicles and related service parts in North America and Ford-brand vehicles and related service parts in South America. The International segment includes the sale of Ford-brand vehicles and related service parts outside of North and South America and the sale of Premier Automotive Group brand vehicles and related service parts throughout the world" (Yahoo Finance). Ford's chairman and CEO, Bill Ford has a simple strategy, "Our vision for the future is simple: We want to build great products, a strong business, and a better world." Ford's vision is, "To become the world's leading consumer company for automotive products and services" (Ford.com). Ford has been focusing on cutting costs to increase margins more than its competitors. In 1997, Ford cut $1 billion in costs as a result of work suggestions and using standardized parts for different Ford models. As a result of using standardized parts, Ford was able to decrease the number of inventory parts, which decreased the chance of inventory parts not in stock. This meant the assembly plant would be shut down less for out of stock parts, saving Ford money

(Stevenson 548). Ford has used reverse engineering in the development of their products. The Taurus is one example of this tactic. Ford examined the close competitors of the Taurus to see which parts on each car were the best of the group. Ford then designed the same parts as well or even better than the competitions. Since the Taurus had the best parts when compared with its competitors, the Taurus was viewed as the best-in-class car. This tactic allowed Ford to "leapfrog" ahead of the competition in the family sedan category (Stevenson 130). Ford has been an innovator in the auto industry when it comes to technology. "Ford Motor Company has aggressively adopted videoconferencing and computer-assisted design and manufacturing technologies." These innovations have led Ford to staying successful and efficient in the auto industry. Another technology innovation is the "use an online computer network to share ideas, create the actual designs, integrate the designs for the various parts and components, and build and test prototypes via computer simulations" (Thompson and Strickland 157). Ford has recently added Voice over IP phones to help control costs. Ford paid SBC $100 million to install and manage a network of 50,000 VoIP phones. "The immediate benefit is going to be efficiencies in cost and operations related to moves, adds and changes" (Pappalardo 14). Ford is hoping that VoIP phones will become a long term cost saver and help the company save their profit margins. "Ford Motor Co's state-of-the-art F-150 truck-assembly facility, expected to be operational by summer and running at full capacity by year's end, is a body shop and final staging area where trucks are assembled and prepped before being shipped to dealers. It's also Ford's first completely wireless assembly factory." The factory utilizes a flexible body shop, automated-materials-replenishment system, "self-adjusting platforms at each bay station, and software-driven systems that monitor maintenance for tooling, conveyers, robots, and other machines. The wireless infrastructure Ford is deploying for parts replenishment and vehicle tracking comes from WhereNet Corp Inventory replenishment is driven by Ford's Auto Call, part of its synchronous material-replenishment trigger system, with assistance from about 58 antennas around the compound" (InformationWeek 26). This wireless technology will allow Ford to be more effective and efficient in all operations of manufacturing vehicles at this facility. Bill Ford said, "We've made solid progress in the last two and a half years and we're building momentum. We're not going to let up on our efforts to raise our quality, lower our costs, or improve on the fundamentals of our business, and we'll continue the biggest product roll-out in our company's history" (Company News). Ford has been introducing new products to the market which include the all-new Ford Mustang, Ford GT, Ford Five Hundred, Ford Freestyle, and the redesigned F-Series Super Duty; the all-new Mercury Montego and Mercury Mariner; the allnew Ford Escape Hybrid - the world's only hybrid SUV; the redesigned Ford Focus in Europe and Asia; the Land Rover LR3; the Volvo S40 and V50; and the long wheelbase Jaguar XJ" (Company News).

The first quarter of 2004 was a great quarter for Ford Motor Company. Ford reported earning of $1.9 billion. This was "twice as much as the company had told Wall Street to expect and far more than historical rival General Motors, which made only $ 1.3 billion." Ford's management says that "Rather than relying on windfall profits from a couple of hot-selling models that might cool off later, the company showed a mastery of the myriad small but important details that bolster the bottom line. It reduced overheads, cut product expenditures and slashed warranty costs. At the same time, it boosted revenues by targeting incentives and increasing the mix of high-profit vehicles, such as sports utility vehicles (SUVs) with four-wheel-drive packages" (Taylor 10). "Behind the earnings hoopla, something even more interesting is beginning to emerge: Bill Ford's strategy for the company. It is uncharacteristically audacious and sweet in its apparent simplicity. Ford wants to make more money selling fewer cars. In Detroit that makes him a virtual heretic and threatens to turn accepted industry practice on its head. This is a business where the fixed costs are so enormous that bosses like DaimlerChrysler's Juergen Schrempp have staked their company's future on selling more cars, whatever the immediate impact on profits. Pushing fewer cars out of the factory also means accepting lower market share, blasphemous to some ears, particularly since Ford has been losing share since 1995. And prioritizing profits might also threaten brand loyalty, a fragile commodity. Customers who shop elsewhere because Ford's prices are a few dollars higher could be lost forever" (Taylor 10). Bill Ford is taking a very new outlook on the automobile industry. While economies of scale always determined if an automobile was successful or not, Bill Ford wants to make money by selling fewer cars. This viewpoint is an unbelievable stance from the CEO of an automobile manufacturer. Ford has been struggling to maintain consistent sales numbers. Its first quarter numbers were twice what was expected, but the rest of the quarters have been lagging. Ford hopes that the release of the many different new vehicles will revitalize Ford. The financial numbers will turn out decent for the year due to the money made on the financing side. Some critics say that the financing side of Ford is what makes the money. Ford counters with saying that they must sell vehicles before the financing side can make the money. Some recommendations are needed for Ford to maximize profits. Ford needs to capitalize on all the new vehicles coming on to the market. Aggressive advertising campaigns might entice consumers to go to a Ford dealer and look at the new products. The only way Ford can make money from theses new vehicles is to sell a lot of them. Costs need to be reasonable for the appropriate class of vehicles. Along with selling all the new vehicles, Ford must make sure that the new vehicles are what the consumer wants. The consumer won't buy the car if he or she doesn't like its appearance,

performance, and price. If Ford can meet these three needs better than its competitors can, Ford will gain market share. Extensive testing is needed before a new vehicle is launched onto the market. If Ford has not done enough testing and surveys of potential customers, sales might lag causing Ford not to get much return on its investment. Ford needs to stop using reverse engineering on the development of their automobiles. If reverse engineering is used, then Ford is behind its competitors. Ford must stay on the cutting edge for developing new ideas. Stealing its competitor's ideas does not make Ford first to the market with a new concept. Ford appears that it wants to be seen as an innovator. This is seen with the first wireless truck manufacturer facility and using VoIP phones. Ford needs to find ways to cut costs while maintaining or improving efficiency. To be viewed as an innovator, Ford must continue to be the pacesetter for anything new related to the auto manufacturer sector. An advantage for releasing new products by Ford would be the potential profit making opportunity. Humans have a natural tendency to be competitive. This competitive nature carries over to automobiles. One person will usually want a better car or truck than his or her neighbor. If a new car or truck is released on the market, the neighbor with the new car or truck that very few others have will have bragging rights. This explains why brand new vehicle sales are very large immediately after the release date. People want what others don't have. Ford is playing this game. Releasing several new cars and trucks will hopefully entice the masses to purchase a new automobile. The down side of this is the cost to create the new vehicle. Millions and even billions of dollars are put into designing, developing, testing, and producing a new vehicle. In order to make a profit on the specific car or truck, thousands of that type of vehicle must be sold in order to cover the development costs. If that number of sales is not met, the car or truck was not a success. Ford would not make a profit on it and would end up losing money on the project. There are many advantages for Ford to be an innovator in its industry. Costs can usually be saved in the long run. The publicity of the new innovation will help sales. Newer efficient ways of running the company can be found. The major disadvantage of innovation is the initial cost of the innovation. Savings in the long run might be large, but the costs to switch from the old way of doing something to a new way are usually a sizeable amount. If the innovation doesn't work, the company will lose lots of money. They would lose the initial investment to switch and create new costs to switch back to the old way of doing something. Honda Motor Company SWOT Analysis Honda motor company is not your average Japanese car manufacturer. Originally know for motorcycles, Honda has managed to elude the dominate keiretsu system in Japan and become one of the dominant automobile manufactures in the world. There are many strengths to Honda. Honda has a reputation for producing high quality products

from cars to motorcycles to lawn mowers. In fact they are the largest manufacturer of motorcycles in the world. Honda has won many awards for initial quality and customer satisfaction. Their automobiles are reliable and generally fuel efficient. Their research has afforded them competitiveness in innovative products. The cutting edge Asimo robot and a successful motor sports programs provide innovations that are passed to consumers as well as press recognition. Honda won the MotoGP manufacturers title and came in second in the F1 constructors' championship. While these race cars and motorcycles are much different than production vehicles, the lessons learned on the track transfer to better performance and engineering of future consumer vehicles. They were a pioneer in engineering low emissions internal combustion and hybrid technology. Honda is the only other manufacturer outside of Mitsubishi to branch out into many other areas outside of automobiles. However there are weaknesses, Hondas products are fairly bland and inoffensive in terms of styling. Their prices are higher for non-luxury vehicles than comparable modes by other manufactures. They do not have a strong offering in a truck line. Their vehicles also have a reputation for being underpowered or pokey econo-boxes. Even for a broadly diversified company like Honda, there exist opportunities. An offering in a pickup type truck would be profitable, even if priced under competitors. These are types of vehicles have among the highest profit margins. Another opportunity would be to continue progressing low emission vehicles and alternative power sources. While they have made progress in this area, the technology is still overpriced for the consumer, and the infrastructure does not exist. Another area of opportunity would be developing nations like china and India. These are large markets, and cheap dependable transportation would be a hot seller. Honda's success has not gone unnoticed by its competitors. Like racing, if you don't come up with something new this year, competitors will beat you with last year's technology. Not that other companies are taking Honda's technology, but for others to catch up is for Honda to fall behind. While once upon a time Honda cut the low emissions trail, now they are no longer at the vanguard. Honda's strategy is to create value through expanded sales via innovation in research and manufacturing. Instead of having one large manufacturing plant Honda uses an idea of "manufacturing products where they are sold". In this way manufacture is increased in areas where sales increase. This practice has led to over one hundred manufacturing plants in over thirty countries, a process they call "globalization". They also are guided by a commitment to the future. This ideal is reflected in several ways. Low emissions vehicles are one example, anther are manufacturing plants that are focused on environmental friendliness as well as efficiency and quality. Honda needs to come out with a truck, which evidently is in the making (the "Ridgeline" coming spring 2005) and progress with efficient low emissions vehicles. It also wouldn't hurt if they

were to come up with some sort of distinctive styling. Research should be continued because that has provided the innovative and competitive products, and Honda's diversification into areas other than automobiles should also be continued as this has been historically and asset by providing synergies in technology and distribution as well as name recognition. Also as mentioned earlier, a simplified inexpensive transportation is it motorcycle or car would sell like hotcakes in China and India. After further review Honda's extensive web site, it appears that they are expanding into India and China. China expansion includes a new plan that will quadruple production by 2006. Meanwhile in India production has started on a motorcycle that will cost less than two thousand US dollars. This appears to be the right move and is in line with Honda's production in the location of sales. These actions should put Honda in a position for much more sales. As far as new low emissions vehicles, they need to put something on the market soon to recapture their image as the green leader. The new hybrid Accord looks to fill that gap on paper. However even higher performance than the regular Accord; the hybrid is well just uninspiring. Yes is quicker and gets better mileage and has more power, but it looks the same, a car your parents would drive. The expansion into China an India will provide increased sales and spread the image of Honda. However caution should be taken. If Honda can put a affordable transportation in the hands of the masses then great, but if instead of affordable they opt for cheap, then the two largest concentrations of people on the planet will know Honda as crap. Regaining the lead of low emissions is a risky proposition. If Honda goes fuel cell and every one else goes electric, then they just rolled craps. But to be the leader, they need to put something out to be recognized. Even though the Accord hybrid has better performance, it still looks the same to the guy on the street. Financial Comparisons of Major Competitors Our competitors' financial ratios from three areas were compared. Ratios in liquidity, asset management, debt management, and profitability were compared. Data for the years 1999 through 2003 was obtained from research insight. While data for the year 2004 is available from various sources, it was not used in comparison because the methods of computation would have been various as well, thus rendering the comparison meaningless. The first area of comparison is liquidity. Historical data for Ford and GM was not available as well as two years of data for Daimler Chrysler. DCX had the highest current ratios and managed to raise them by over thirty percent over 5 years. Likewise DCX also improved their quick ratios to lead the comparison group, but not by a decisive margin. Toyota had the highest cash to

current liabilities, and with all 3 companies with marginal change in this area, TM decreased by almost twenty percent. And lastly DCX led net working capital to total assets, doubling this ratio over 5 years. Generally DCX had the most liquidity of the three firms that were compared in this area, and for the most part their ratios changed in a scale larger than the group (caveat n=3). The second area of comparison is asset management. All companies had data for asset management ratios, so the whole group can be compared in this area. Ford strongly led the group in days to sell inventory in the high teens. After the closest rival TM, other competitors had numbers around the forties. Poor GM had increased its days to sell inventory by nearly eighty percent over five years to seventy one days while Honda had the only improvement decreasing by nearly ten percent. Honda led fixed asset turnover, while Toyota was most improved. DCX made negative progress in this area. None of the companies manage an improvement in total asset turnover with GM doing the worst over all and in change, while HMC kept their turnover higher than competitors. So while Ford had the lowest days to sell inventory, HMC pulled better turnovers to be the winning asset manager. The third area is debt management. GM and Ford lead total debt to total assets by a wide margin. They also lead long term debt to total capital decisively by a wide margin. Toyota and Honda had interest coverage, while the big three had interest coverage between one and one and a half, the two Japanese companies had almost doubled their already high interest coverage to 56 for Honda and 43 for Toyota. So GM and Ford use much more debt. This could be good or bad. They assume more business risk, while the Japanese companies could in theory take more debt to exploit opportunities. The last and arguable most important area of comparison is profitability. Data was incomplete for price to book comparisons, so those will not be used. Toyota holds a whopping fourteen percent, while the big three barely have any margin. The two Japanese companies also have very strong return on assets compared to domestics. Surprisingly GM has double the ROE of Toyota or Honda, with the others in the middle, with all facing declines since 1999. Return on investment has slid for all except GM, who nearly doubles the Japanese returns. Price to earnings run around 15 with the exception of GM at 10 and Toyota at 17, this is the markets reward to Toyota for producing a superior product, and punishment for GM for turning out unexceptional products. Even though efforts were taken to keep these numbers accurate and meaningful, it should be understood that there are several factors working against this effort. The two Japanese companies operate in a different business environment and face different regulations than the domestic firms. Also the effects of Daimler's merger/takeover of Chrysler should have affected numbers in ways that would make data not as suitable for comparison. With companies on three continents doing business in dozens of countries, currency translation also becomes an issue. The five companies have different business models and search out different parts of the market (even

though they compete in areas). They have different regulations to face and varied access to capital. These differences are reflected in the difference in the ratios, as much as management effectiveness is shown.

MACRO-ENVIRONMENTAL FACTORS AFFECTING AUTOMOBILE INDUSTRY Introduction

Tenth largest in the world Expected to overtake China Huge attraction for foreign car manufacturers Dominated by domestic companies Contributes 3.1% to the nominal GDP

Interesting Figures Indias motorcycle market is the second largest in the world Largest three-wheeler market Second largest tractor manufacturer Fifth largest commercial vehicle manufacturer Largest two-wheeler manufacturer Evolution of Automobile Industry Initial Years Manufacturing was licensed

High Customs duty on import Steep excise duties & sales tax 2 Major players:

Premier Automobiles Ltd & Hindustan Motors 1980s

Entry of MUL, better product,

with government support

Sellers Market Long Waiting Periods

Early to mid 90s

Sellers market and long waiting periods Delicensing in 1993 Removal of capacity restrictions Decrease in customs & excise Auto finance boom- more players (foreign banks & non banking companies, better schemes.

Mid 90s Early 2000s

Buyers market Increase in Indigenization Easy Auto finance Manufactures diversifying into related activities: finance lease, fleet management, insurance and used car market

Segment wise market share CVs Three Wheeler Passenger vehicles Two Wheeler

The industry has not experienced much change in its structure over the last 6 years Two- wheelers form the major share of domestic sales Passenger vehicles lead the exports market(57.4%) 2 wheelers form the bulk of exports as well, but are losing share to Passenger vehicles The growth in the two wheeler market is driven by the motorcycle market and is expected to grow at 14-15 % YOY

 The Key Players Two wheeler Passenger vehicle THE COMPANYS MARKETING ENVIRONMENT The Economy Social Factors Suppliers Demography Distributors & Dealers Company Public Customers Cultural Factors Competitors Political & Legal Technology THE EXTERNAL ENVIRONMENT There is a need to identify the uncontrollable key factors that will impact on the organization's operations. The best known method is the SLEPT analysis. 8 Economic environment Political environment The organisation Social environment Technological environment Legal environment (B) MACRO-ENVIRONMENT Natural Forces Technological Forces Economic Forces Political Forces Demographic Forces Company Cultural Forces It is useless to tell a river to stop running; the best thing is to learn how to swim in the direction it is flowing MACRO-ENVIRONMENT An organizations success depends on the ability of its executives to manage its marketing system in relation to its external environment. These forces (macro-environmental forces) are uncontrollable and pose opportunities and create threats for the company. TODAY YOU HAVE TO RUN FASTER TO STAY IN THE SAME PLACE.

 Brand endorsement by celebrities Region wise distribution of vehicles Buy and sell second hand vehicles THE SMALL CARS DOMINATE Combination of small cars and two wheelers Use of cars as cabs Natural environment Major global concern Use of alternate biofuels Use of eco friendly cars Anti pollution pressures Implementation of Euro norms/Bharat norms Tata Motors is the first Indian Company to introduce vehicles with Euro norms well ahead of the mandated dates.

Use of THE CNG

Indica V2 Xeta LPG is equipped with dual fuel engine having the options of petrol and LPG. This increases the fuel efficiency and reduces the CO2 emissions by 10%. The car meets Bharat Stage III emission norms and can be upgraded to Euro IV norms. Use of electric cars The Reva : Indias first electrically operated car Demographic factors

Population growth in India Population age mix Rural urban ratio

Ratio of rural-urban populations Demographic factors contd Literacy levels Changing income levels Changing family structure Stretch in countrys income distribution since last 20 years will continue Natural environment Shortage of raw materials

Due to inflation , prices of iron ore- the main raw material and coal have risen

Increased energy cost

Rise in oil prices Introduction of electricity and CNG run automobiles

Legal Factors Pre Liberalization Period

Government Protection by use of licenses Heavy Excise duty on cars Price Discrimination by government High Import Duty Liberal policy on foreign participation

Legal Factors Post Liberalization Period

The license raj ceased to exist Continuous rationalization of the excise duty regime Reduction in Import Duties Foreign Direct Investment

Economic Side of the Issue- Current Scenario From a phase when growth rates were more than healthy, the sector has been on a bit of a rocky path now- the industry is in a slowdown phase- sales in the passenger car segment have fallen by 1.71%- from 89250 to 87,724. Dilip Chenoy, director general, SIAM, points out that a combination of factors like high interest rates, rising levels of inflation, lack of easy finance, and global oil prices are staring the auto majors in the face.- raw material prices have increased by about 50% for some players and doubled for the less fortunate ones. Venu Srinivasan, chairman and managing director, TVS Motors- In 2006-07, sales received a boost and saw a growth surge of 19-20% due to unlimited finance availability. At that time, companies chose to finance customers without any questions. Overall this has lead to increased costs on the input side and a fall in customer purchasing power due unavailability of unlimited finance Net Substantial Effects Net effects- passenger car makers have been operating below capacity for a while. Recently, Maruti closed one of its plants for two days. Other volume players like Tata Motors and Mahindra & Mahindra (M&M) have been adjusting production to tide over the lean season. Honda Motorcycle and Scooter India have put off their plans for a second plan Ford Motor India had recently announced a fresh investment of Rs. 2100 Crore, however now that plan is only being carried forward in a tentative manner. Tata Motors profit figures for the most recent quarter (second quarter of FY09) was the worst ever for the company in the last six years. How To Approach the Issue Look towards frontiers out of India- Ashok Leyland recently said quite emphatically- Leaving aside the large demand markets, which also have large manufacturers to support themselves, there are still 45% of developed markets left for our company to explore. This is especially when there is an estimated 1:4 advantage in development cost that Indian greenfield projects enjoy over European ones, Exports to neighboring countries and the Middle East have grown by 20-25% The Jaguar and Land Rover companies owned by the Ford Motor Company was acquired by the Tata Motors Ltd for estimated price of US$ 1.5 billion The Maruti Udyog Ltd has captured nearly 60% of the small car market in Indonesia

Innovation- TATA Motors and M and M. The former, for instance, is closely looking at the option of launching electric vehicles and hybrid versions- Tata Motors is in dialogue with Norway-based Miljobil Grenland to develop an electric vehicle on the Nano platform and with Chrysler for the Ace Overall Economic Outlook Although the Indian Auto Industry is in a slowdown phase- this is part of cyclical cycle and therefore this slowdown is not a great matter of concern according to experts such as T. T. Srinivasaraghavan, Sundaram Finance. High demand should eventually overpower these current forces- this is mainly because Indian consumers are still Demand Hungry and their net purchasing power is on the rise. TECHNOLOGY Greater emphasis on R & D Accelerating the pace of change Innovation Increased regulation of technological change Innovation Fuel Efficiency Common Rail Diesel technology Variable Valve Timing Hybrid Cars Fuel efficient Low emission Quietness Concept Cars i-unit Regulations Safety Technology Wheel lock up Additional breaking force Air Bag FrontSideRear end collision Whiplash Injury lessening Vehicle stability control Acceleration of change Assembly line Product life cycle reduced Better technology at a lower price Research and development auto industry Global auto and component makers invest between 5 and 8% in R&D. Spending on R&D in India up from 243cr to 954cr in past four years. Cost advantage India offers makes more players likely to scale up R&D outsourcing to India. GM, Daimler, Volvo, Honda and Bosch are scaling up R&D investments out of India. Indian engineers are very efficient and have a sense of frugality executive VP(product planning) ,Renault Cost advantage India offers makes more players likely to scale up R&D outsourcing to India. GM, Daimler, Volvo, Honda and Bosch are scaling up R&D investments out of India.

Indian engineers are very efficient and have a sense of frugality executive VP(product planning) ,Renault Research and development auto industry Increasing role of IT in automotive space a) apart from IT support systems like supply chain management , CRM - IT companies are developing solutions for the automotive sector. b)making automobiles more intelligent like building collision avoidance systems ,engine management systems and even entertainment features in cars $1bn auto vertical has the potential to grow to $50 - $60 bn by 2020. This requires the 3 stakeholders global auto firms, their Indian counterparts and IT companies to get into collaborative research. Numbers Speak the Potential The Path Ahead Growth of transport sector will boost automobile industry Automobile Industry on an Investment overdrive Over 30000 crore to be invested by 2010

Hyundai will bring in more than Rs 3,800 crore Tata Motors will be investing Rs 2,000 crore General Motors will be investing Rs 100 crore and Ford about Rs 350 crore Ashok Leyland will be investing over Rs 1,000 crore

Future Perfect India becoming export hub of Automobile Giants will boost employment opportunities Study says Per Capita Income may triple by 2025 Over 100 million households would own a car compared to just 11 million now A dramatic reshape of Automobile demand Aspirers Strivers Globals Challenges Better transportation infrastructure Improved product quality to meet Global Standards Changes in tax regulations The New Giants waiting to hit the Indian Roads The New Giants waiting to hit the Indian Roads