Anthony Abiad

Case study: New United Motors Manufacturing Inc.

Questions

1. Why did Toyota want to enter a joint venture with GM?

Toyota wanted to gain experience with the American unionized labor, American suppliers
and help diffuse the trade issue between the United States and Japan (Community Relations
Department, 1990). But actually they wanted to enter to the American market and as this was
an uncertain territory for them a joint venture with GM was going to lower any risk and help
to overcome any potential problem they might face.
Toyota gained its first manufacturing base in North America and a chance to implement its
production system in an American labor environment, avoiding possible import restrictions.
Toyota’s primary objective in beginning manufacturing in the United States was to protect
and increase its market share. It had a long-range goal of surpassing General Motors as the
world’s leading manufacturer of automobiles (Armstrong, 1985). It had earlier overtaken
Nissan to become Japan’s largest automobile manufacturer, and did not want to have its
position in America eroded. Toyota preferred to manufacture only in Japan and export their
cars to world markets (Duerr et al., 2005). However,with the VRA, and Honda and Nissan
now producing cars in the United States, Toyota felt that it also had to establish
manufacturing facilities there. A US plant would be Toyota’s first overseas manufacturing
facility, and the company had many concerns. A joint venture was viewed as an approach
that would lower the risk while providing help in overcoming difficult potential problems.

2. Why did GM want to enter a joint venture with Toyota?

To achieve first-hand experience from the Toyota production system (which was known to
be extremely efficient and cost effective) and to obtain high quality automobiles for its
Chevrolet division. They wanted to build small cars but were unable to compete with
Japanese models in terms of quality and price.
GM saw the joint venture as an opportunity to learn about lean manufacturing from the
Japanese company
General Motors had two major objectives in entering the joint venture: ‘to gain first-hand
experience with the extremely efficient and cost-effective Toyota production system’ and to
obtain high-quality automobiles for its Chevrolet division (Community Relations Department,
1990). GM hoped that it could apply what it learned at NUMMI in its other plants, and thus gain
great benefits company-wide. The car to be produced at NUMMI, the Nova, was one of a family
of GM subcompacts. It was to be priced so as to enable GM to compete more effectively in that
part of the US market.

3. Does the willingness of Japanese workers to devote their lives to a company make it
impossible for American companies to achieve similar levels of productivity and
quality?
Nothing is actually impossible, but the Japanese devotedness to their jobs gives them a huge
advantage over American companies. They are so committed to their companies because
they are assured that if bad times comes, the company won’t get rid of them (you’re loyal to
the company, and vice versa), unlikely American corporations /employees that are only
looking for their own benefits. Also, unions in USA many times slow the efficiency of
companies.

4. Why did Toyota use a higher level of automation in their Kentucky plant than
NUMMI had?
They used the productivity they had in NUMMI (high productivity and quality with a
moderate level of automation) as a reference and decided they could do better if they
invested in a higher level of automation for their new plant.

5. Why did GM use a lower level of automation in their Saturn plant than NUMMI
had?
They opened up the doors of this new project to any GM employee that desired to work for
Saturn and relied on the fact they were getting higher labor management from GM. Compared
the productivity they had at NUMMI, with just an average level of automation, and choose to
scale back the level.
NUMMI, Toyota learned that it could work effectively with American unionized labor. It has
made some adjustments to the approaches it used in Fremont while keeping others the same:
• Its next factory was established as a wholly-owned subsidiary, and located it in Georgetown,
Kentucky where it could hire a non-union workforce
. • Having found that it could achieve high productivity and quality with a moderate level of
automation, it decided that it could do even better by investing in a higher level of automation
for its new plant.
• Its favorable experience in Fremont has been followed with the implementation of similar
policies in selection, training, sharing of information, and the use of the team approach in
Georgetown. (Duerr, 1991)
 6. What basic factors kept Saturn from becoming profitable?
-They set it up as a separate company from GM.
-Lack of models diversity, advertising and poorly designed models.
-They kept the same employees from GM instead of strategically selecting their personnel.
-They used a lower automation system and relied on their work force.
-Their managerial environment was on continuous disputes.

Case study: Ebay

 1. Evaluate eBay’s marketing strategies to date. What changes, if any, would you
suggest?
 Ebay grew rapidly for several years based upon its original marketing strategy. However,
growth in its original online business in the US slowed in spite of adding product categories
and sites. Competitors have emerged in both domestic and international markets. The
company’s continued growth has become increasingly dependent upon acquisition of related
services, not all of which have been as successful as hoped. The company needs to continue
to monitor and evaluate the development of present and potential competitors, and new
approaches, features, and policies they may introduce. Their domestic marketing strategies
have been largely successful to date, but need continual evaluation in the rapidly-changing
market.Ebay’s international strategies need continued attention and re-evaluation. The company
receives 48% of its earnings from abroad, but has encountered problems in some countries.

 2. Evaluate its technical and personnel strategies. What changes, if any, would you
suggest?
 The founder acted quickly as growth indicated the need for professional management,
something many entrepreneurs fail to do. The company added appropriate managers and
personnel as problems and opportunities indicated increasing needs, keeping technological
leadership a key strength of the company. In the future, the company must continue to
quickly recognize emerging needs and new opportunities, and to adjust strategies as
appropriate.
 3. Has eBay really created a new type of market?
 Yes. Ebay is the first to create an effective and efficient large-scale method for bringing
together large numbers of potential buyers and sellers who otherwise would not have been in
 contact. (A market consists of the potential buyers and sellers of a product(s) who are in
contact with each other.) They did so by entrepreneurial exploitation of technological
changes.
 4. Are eBay’s efforts to improve interactions with its members worth the cost?
 Key strengths of eBay that have enabled the company to grow so rapidly are its interactions
with customers and potential customers, and its facilitating of interactions among the
members. Continual development of these key strengths does need to be carried on.
 5. Is continued rapid growth desirable for eBay?
 Growth is desirable to maintain its market leadership position and to increase the size of the
market. Growth at any cost, without regard to profitability, is undesirable. However, while no
cost–benefit figures are given, increasing profits indicate that present growth rates in the
current markets are not excessive. The company needs to pay particular attention to
developing complete information about its existing and potential foreign markets. It should
then be able to better evaluate the costs and benefits of acquisitions and expansion in specific
overseas markets.
 6. Where does growth appear to be feasible?
 Growth appears to be feasible in overseas markets, and also in getting more people in the US
involved if continued training programs are offered, and as the system is made easier to use.
Careful evaluations of potential acquisitions are essential.