Strategic Management Management Research Paper (Research Paper Sample)

Strategic Management
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Abstract
Strategic management refers to the formulation and implementation of major goals in the company. This process is carried out by the top management of the company. The process starts by defining the broad goal of the company as defined by the mission and vision statements. This is a continuous process that requires constant reviews to ensure that any deviations from the set goals are corrected in time. This paper looks at two major companies in the automobile industry: Toyota from Japan and General Motors from the United States of America. The report looks at their respective existing business strategies, their domestic and global business environments, and internal abilities. The conclusion will be the determination as to whether the operations of the two companies are in line with their respective mission vision statements. The analysis of these two companies’ strategies can best be done using Porter’s Five Forces Model.
Introduction:
Recent years have been rough for automobile manufacturers. Skyrocketing fuel prices and growing environmental concerns have shifted consumers' preferences away from fuel-guzzling pickup trucks to smaller, more fuel-efficient cars. Some automakers embraced the change by expanding their small-car portfolios and diversifying into the production of hybrid electric motor vehicles. Other automakers were more reluctant to shift their focus from big to small cars, expecting the price of fuel to contract eventually, bringing consumers back to the big-car fold. When fuel prices did fall during the second half of 2008, it was due to the US financial crisis ripping through the global economy. This had a domino effect throughout the developed and emerging worlds, with many Western nations following the United States into recession. Industry revenue fell about 15.4% in 2009. Pent-up demands however helped the industry improve revenue by about 2.1% in 2013, thus bringing overall revenue to an estimated $2.3 trillion. Throughout the past five years, growth in the BRIC countries (Brazil, Russia, India and China) supported production. Rising income in these countries led to an increase in the demand for motor vehicles. Also, Western automakers moved production facilities to BRIC countries to tap into these markets and benefit from low-cost production. Over the next five years, the emerging economies will continue their growth, and demand for motor vehicles in the Western world will recover. Industry revenue is forecast to grow an annualized 2.5% to total an estimated $2.6 trillion over the five years to 2018.
Analysis of Existing Models Using Porter’s Five Forces:
Rivalry between Existing Competitors: Rivalry occurs, because one or more competitors either feels the pressure or sees the opportunity to improve position' (Porter, 2004). Additionally, 'The strategies pursued by one firm can be successful only to the extent that they provide competitive advantage over the strategies pursued by rival firms.' (David, 2011). General Motors was the global market leader in the automobile industry. However, things changed in the 1970s and 1980s when competition from foreign rivals hit the US market. Models like Honda, Toyota and Nissan became popular because of their lower pricing. Competition forced a change of strategy at General Motors with smaller cars like the Chevrolet Optra being produced. Toyota has been able to keep competition at bay by constant technological innovations which have kept production costs lower than its competitors. This translates into lower prices of Toyota brands.
Barriers to Entry: According to Porter, new capacity may be brought to an industry by new entrants. Furthermore, gaining the market share, and getting high proportion of resources can be achieved by new entries. Meanwhile, the presence of new corporations in any industry can push the prices down and may decrease the profitability. With the barriers to new entrants being lowered by each passing day, General Motors has had to relook its production to ensure that manufacturing cost do not eat it into its margins as competition boils down to price. Toyota has managed to have exclusive technologies that may not be available to the new firms. This gives the company competitive advantage in terms of quality. The new entrants may also find it costly to train employees, and may resolve into poaching from the established firms like Toyota and General Motors at very high costs. The strategies used by the veteran firms in the automobile industry is constant technological innovations that keep them ahead of the new entrants.
Pressure of Price from Substitutes/Complementaries: Substitutes are alternatives products while complementaries are products that are used together with the product manufactured by the company. The use of substitutes like motor cycles in countries like India ate into General Motors’ market. Similarly, the cost of complementary products like tires and gas have also pushed the cost of production higher. This high cost must be shouldered by the consumer through higher prices.
Bargaining Power of Buyers: Buyers compete with the industry by forcing down prices, bargaining for higher quality and more services, and playing competitors against each other, all at the expense of industry profitability'(Porter, 2004). Through consumer unions, buyers can use various means to push for lower prices. The most common applicable means include lobbying manufacturers, and in worst case scenarios, product boycotts have been used to force manufactures lower prices.
Bargaining Power of Suppliers: Suppliers of an industry plays a significant role for their businesses. They may reduce the quality of the products, or may raise the prices up. For the motor industry, raw materials and machine parts suppliers' threat is very low, because there many suppliers for those sections (NY times, 2011). However, the powerful labor union, United Auto Workers (UAW), is a potential threat to GM's economical capability and endurance. For example, the liability of pension and health-care costs acquired an additional 1,400 to the cost of every vehicle comes from GM place compared with competitor products (The Economist, 2008). This is a magnificent amount and GM needs to search ways to cut this liability, therefore, GM may get more economical improvement and the growth of the company.
SWOT Analysis
Strengths:
General Motors
General Motors derives its strength from its large global market. The company has operations in more than countries including the US and Canada. GM enjoys a large market share in China which is home to about 2.5 billion people. GM also boasts of a wide range of brands therefore giving its customers options within its fold. Therefore, General Motors, with its global experience and its huge market share in the world, is still keeps the professional place in the automobile industry.
General Motors Corporation uses OnStar Satellite Technology. This technology provides its customers security and safety facilities. For example, in the event of emergency, the system allows the driver to communicate with OnStar personnel by just clicking a button. GM has been controlling the costs by alliance and partnership with corporations like Shanghai Automobile Industry Corp., Toyota Motor Corp. and Daimler AG. This has enabled the company maintain lower costs by having a stronger bargaining power with suppliers
Toyota:
Toyota has a strong market position in different geographies across the world. The company's market share for Toyota and Lexus brands, (excluding mini vehicles) in Japan was 45.5% in FY2012. Similarly, Toyota has a market share of 12.2% in North America, 13.4% market share in Asia (excluding Japan and China), and 4.3% market share in Europe. In addition, the company holds a 7% share of the Chinese market and a significant market share in South and Central America, Oceania, Africa and the Middle East regions. Such strong market position allows the company to gain competitive advantage and also expand into international markets. In addition, Toyota holds a portfolio of strong brands in the automotive industry. Thus, the company's strong market position gives it significant competitive advantage and helps it to register higher sales growth in domestic and international markets.
Toyota has a strong focus on R&D to expand its product portfolio and improve the functionality, quality, safety and environmental compatibility of its products. The company's R&D efforts are directed at developing new products and processes and improving the capabilities of existing products. The company conducts its R&D operations at 14 facilities worldwide. Strong focus on R&D has helped the company in incorporating newer features to its existing range of products and also in bringing out latest technologies in the varied areas. The company's strong focus on R&D allows it to uphold the technological leadership in most of its product segments. It also enables Toyota to develop innovative products, leading to strong sales.
Toyota has an extensive production and distribution network. Toyota and its affiliates produce automobiles and related parts and components through more than 50 manufacturing companies in 27 countries and regions besides Japan. During FY2012, the company produced 7,435,781 vehicles, including 3,940,000 vehicles in Japan and 3,495,000 vehicles across all other manufacturing locations. In addition, Toyota has an extensive distribution network. While the company’s geographically well spread production base diversifies business risks, its extensive distribution network provides a wider reach, thus boosting revenues
Weaknesses:
General Motors
The greatest weakness of GM is its overreliance on the US market, especially in earlier years. This has however improved by taking...