International Journal of Applied Mathematics and Statistics,

Int. J. Appl. Math. Stat.; Vol. 38; Issue No. 8; Year 2013,
ISSN 0973-1377 (Print), ISSN 0973-7545 (Online)
Copyright © 2013 by CESER Publications

Performance Analysis of Automobile Industry in

Taiwan with Data Envelopment Analysis

Maritz, Alex
Faculty of Business and Enterprise
Swinburne University of Technology
PO Box 218 Hawthorn, VIC 3122, Room AGSE 304
Email: amaritz@swin.edu.au

Shieh, Chich-Jen
Department of International Business, Chang Jung Christian University
396 Chang Jung Rd., Sec.1, Kway Jen, Tainan 71101, Taiwan, R.O.C
Email: charles@mail.cjcu.edu.tw
(Correspondence Author)

ABSTRACT
The development of automobile industry in a country represents the industrial standard of
the country that the quantity of automobiles in a country could be treated as the indicator of the
living standard. It is why the industrial countries would commit to the development of automobile
industry. With the automobile industry performance in 2007-2009 as the research bases, this
study integrates Data Envelopment Analysis (DEA) and Malmquist Productivity Analysis to
measure the total efficiency (TE), pure technical efficiency (PTE), and scale efficiency (SE) of
nine automobile businesses in Taiwan for the manufacturers to further improve the operating
efficiency. The empirical results show the average total efficiency being 0.89 in the three years,
when Kuozui Motors presents the best performance on total efficiency, pure technical efficiency,
and scale efficiency, while Sanyang Industry the worst. With Sensitivity Analysis and Slack
Variable Analysis, this study proposes several suggestions for the rest automobile businesses
to improve the operation toward the permanent optimal scale.

Key words: Data Envelopment Analysis, Performance, automobile industry

Mathematics Subject Classification: 86A32

Computing Classification System: J.4




$XWRPRELOH LQGXVWU\ KDV EHHQ FDOOHG DV /RFRPRWLYH LQGXVWU\ DV LW LV DQ LQGXVWU\ ZLWK

LQWHQVLYH WHFKQRORJ\ DQG FDSLWDO DQG SUHVHQWLQJ ODUJH LQGXVWU\ OLQNDJH HIIHFWV 'HYHORSLQJ

FRXQWULHVWKHUHIRUHRIWHQUHJDUGLWDVWKHOHDGLQJLQGXVWU\0RUHRYHUWKHLPSOLHGGHPDQGRQ

VSDUHSDUWVFRXOGHQKDQFHWKHRYHUDOOGHYHORSPHQWLQWKHLQGXVWULHVRIPDFKLQHU\HOHFWURQLF

SODVWLFV SHWURFKHPLFDO JODVV DQG SDLQW )RU WKLV UHDVRQ WKH PRUH SURJUHVV RI DXWRPRELOH

www.ceser.in/ijamas.html
www.ceserp.com/cp-jour
www.ceserpublications.com
 International Journal of Applied Mathematics and Statistics

LQGXVWU\ LV PDGH LQ D FRXQWU\ WKH KLJKHU LQGXVWULDO VWDQGDUG LV SUHVHQWHG 7KH TXDQWLW\ RI

DXWRPRELOHV LQ D FRXQWU\ FRXOG EH WUHDWHG DV WKH LQGLFDWRU RI OLYLQJ VWDQGDUG WKDW LQGXVWULDO

FRXQWULHV KDYH FRPPLWWHG WR WKH GHYHORSPHQW RI DXWRPRELOH LQGXVWU\ 7KH SURGXFWLYLW\ RI

DXWRPRELOH PDQXIDFWXULQJ KDV WR PDVVSURGXFH D FHUWDLQ TXDQWLW\ LQ RUGHU WR DFKLHYH WKH

HFRQRPLF VFDOH 6LQFH WKH GRPHVWLF PDUNHW LQ 7DLZDQ LV UHVWULFWHG LW LV UDWKHU GLIILFXOW WR

FRPSHWHZLWKLQWHUQDWLRQDOPDQXIDFWXUHUV$IWHUMRLQLQJLQ:72PDQXIDFWXUHUVLQ7DLZDQKDYH

IDFHG HYHQ ILHUFHU FRPSHWLWLRQ WKDW WKH DXWRPRELOH LQGXVWU\ LQ 7DLZDQ LV IDFLQJ D PDMRU

VWUXFWXUDO FKDQJH $FFRUGLQJ WR WKH GDWD LQ 7DLZDQ 7UDQVSRUWDWLRQ 9HKLFOH 0DQXIDFWXUHUV

$VVRFLDWLRQWKHUHDUHQLQHGRPHVWLFDXWRPRELOHPDQXIDFWXUHUVLQFOXGLQJ<XORQ0RWRUV)RUG

/LR+R0RWRU&0&0RWRU6DQ\DQJ,QGXVWU\,68=8.XR]XL0RWRUV$XWR)RUPRVDDQG

+RQGD 7DLZDQ ,Q VXFK D KLJKO\ FHQWUDOL]HG PDUNHW DXWRPRELOH PDQXIDFWXUHUV VKRXOG

RXWSHUIRUPRWKHUVLPLODUPDQXIDFWXUHUVDQGUHLQIRUFHWKHFRPSHWLWLYHQHVVLQWKHGHWHULRUDWLQJ

RSHUDWLQJHQYLURQPHQW8QGHUVXFKDUHVRXUFHUHVWULFWHGVLWXDWLRQDXWRPRELOHPDQXIDFWXUHUV

WKHUHIRUH VKRXOG FKRRVH WKH RSHUDWLQJ IRFXV IRU D SHUPDQHQWO\ FRPSHWLWLYH DGYDQWDJH KROG

WKH VSDFH LQ WKH DXWRPRELOH LQGXVWU\ V\VWHP DQG DFTXLUH WKH RSSRUWXQLW\ IRU VXVWDLQDEOH

PDQDJHPHQW ,Q RUGHU WR DFKLHYH VXFK REMHFWLYHV DXWRPRELOH PDQXIDFWXUHUV PLJKW DSSO\

GLVWLQFWWDFWLFVPHWKRGVDQGVWUDWHJLHV+RZHYHUWKHNH\OLHVLQWKHPDQDJHPHQWEHLQJDEOH

WRHIIHFWLYHO\LPSOHPHQWWKHVHWDFWLFVPHWKRGVDQGVWUDWHJLHV&RQVHTXHQWO\WKLVVWXG\WHQGV

WRDQDO\]HWKHSHUIRUPDQFHRISUHVHQWDXWRPRELOHLQGXVWU\LQ7DLZDQDQGSURSRVHFRQFOXVLRQV

DQGVXJJHVWLRQVIRUDXWRPRELOHEXVLQHVVHVIRUPXODWLQJVWUDWHJLHV

6LQFHWKHHFRQRPLFWDNHRIILQVWKHOLYLQJVWDQGDUGKDVEHHQSURPRWHGLQ7DLZDQ

EHVLGHVZLWKWKHSURPRWLRQRIJRYHUQPHQWDOSROLFLHVDXWRPRELOHVZKLFKXVHGWREHUHJDUGHG

DVDOX[XU\KDYHEHFRPHWKHFRPPRQWUDQVSRUWDWLRQIRUIDPLOLHV2ZLQJWRWKHFORVHGWUDGH

85
 International Journal of Applied Mathematics and Statistics

DQG KLJK WDULII DQG TXRWD UHVWULFWLRQV IRU LPSRUWHG DXWRPRELOHV GRPHVWLF DXWRPRELOHV ZHUH

HYHU\ZKHUHWKDWLWZDVDPRQRSRO\PDUNHW1RQHWKHOHVVZLWKWKHIUHHHFRQRP\DQGLQFRPH

HQKDQFHPHQW LPSRUWHG DXWRPRELOHV EHFDPH DQ RSWLRQ IRU D ORW RI SHRSOH WKDW GRPHVWLF

DXWRPRELOHVZHUHGHFOLQHGSDUWLFXODUO\ZKHQWKHJRYHUQPHQWDOSROLFLHVLQSURWHFWLQJGRPHVWLF

DXWRPRELOHVZHUHUHPRYHGDIWHUMRLQLQJLQ:72)XUWKHUPRUHDVWKHWHFKQRORJ\DQGEUDQG

PDQDJHPHQW RI GRPHVWLF DXWRPRELOH EXVLQHVVHV FRXOG QRW EH SURPRWHG EHFDXVH RI WKH

SURWHFWLRQ LQ WKH SDVV ILIW\ \HDUV DQG WKH NH\ WHFKQRORJ\ EHLQJ UHVWULFWHG E\ RYHUVHDV

PDQXIDFWXUHUVGRPHVWLFDXWRPRELOHEXVLQHVVHVFRXOGPHUHO\EHWKHIRXQGULHVLQFRPSDULVRQ

WRWKHLQWHUQDWLRQDOPDQXIDFWXUHUVLQWKH86$(XURSH-DSDQDQG.RUHD7LOO<XORQ0RWRUVSXW

RXW WKH VHOIUHVHDUFKHG DQG GHYHORSHG DXWRPRELOH LQ $XJXVW  WKH SURPRWHG EUDQG

UHFHLYHG PRUH WKDQ  RUGHUV LQ D \HDU %HVLGHV LW HPSKDVL]HG WKH LQWHUQDO HOHFWURQLF

GHYLFHV ZKLFK GLG QRW DSSHDU LQ WKH PDUNHW VR WKDW WKH EUDQG SUHVHQWHG EHWWHU

FRPSHWLWLYHQHVV$VWKHVXSSO\FKDLQIRUDXWRPRELOHLQGXVWU\LVZLGHFRYHULQJWKHLQGXVWULHVRI

VWHHO UXEEHU DQG PHFKDQLFDOHOHFWULFDO HTXLSPHQW WKH HPSOR\PHQW RSSRUWXQLW\ DQG WKH

QDWLRQDOHFRQRP\DUHODUJHO\DIIHFWHG3UHVHQW(FRQRPLF&RRSHUDWLRQ)UDPHZRUN$JUHHPHQW

(&)$ZLWK0DLQODQG&KLQDSOD\VWKHFULWLFDOUROHLQWKHGHYHORSPHQWRIGRPHVWLFDXWRPRELOH

LQGXVWU\

%RWK SURILW DQG QRQSURILW RUJDQL]DWLRQV H[SHFW WR UHFHLYH WKH PD[LPDO RXWSXW ZLWK WKH

PLQLPDOLQSXW7KHSURFHVVWRPHDVXUHWKHSHUIRUPDQFHEHWZHHQLQSXWDQGRXWSXWLVUHJDUGHG

DVSHUIRUPDQFHHYDOXDWLRQ.DR+XDQJ 6XH\RVKL&KRX :DQJDSSOLHG)LYH

)RUFH $QDO\VLV WR WKH RSHUDWLQJ GLDJQRVLV RI WKH LQWHUQDO HQYLURQPHQW LQ HQWHUSULVHV DQG

HYDOXDWHGWKHIXQFWLRQVRISXUFKDVLQJSURGXFLQJPDUNHWLQJORJLVWLFVILQDQFHDQGSHUVRQQHO

IRU DQ RYHUDOO LQYHVWLJDWLRQ /L  .XR  PHDVXUHG RUJDQL]DWLRQDO SHUIRUPDQFH ZLWK

)LQDQFLDO3HUIRUPDQFHLQFOXGLQJUHYHQXHJURZWKUDWHQHWLQFRPHJURZWKUDWHDQGPDUNHW

86
 International Journal of Applied Mathematics and Statistics

VKDUH2SHUDWLQJ3HUIRUPDQFHFRQWDLQLQJSURGXFWTXDOLW\GHJUHHRILQQRYDWLRQDQGYDOXH

DGGHG DQG %HKDYLRU 3HUIRUPDQFH FRYHULQJ VWDII WXUQRYHU HPSOR\HH PRUDOH WDOHQW

DWWUDFWLRQHPSOR\HHSURGXFWLYLW\DQGHPSOR\HHVಬRUJDQL]DWLRQDOFRPPLWPHQW/L /LX

GLYLGHG EXVLQHVV SHUIRUPDQFH LQWR 2UJDQL]DWLRQDO HIIHFWLYHQHVV LQGLFDWRU VXFK DV IOH[LELOLW\

UHVSRQVHVWDELOLW\FRQWUROFRPPXQLFDWLRQDQGFRKHVLRQ)LQDQFLDOLQGLFDWRULQFOXGLQJVDOHV

DPRXQWFDVKIORZSURILWDQGUHWXUQRQLQYHVWPHQWDQG6WUDWHJLFLQGLFDWRUFRQWDLQLQJPDUNHW

VKDUH DQG PDUNHW JURZWK UDWH %\ DQDO\]LQJ VHYHUDO VWXGLHV RQ HQWHUSULVH SHUIRUPDQFH

0XUSK\HWDOIRXQGWKDWWKHFRQFHSWRIPXOWLPHDVXUHKDGEHHQDFFHSWHGDQGDSSOLHG

E\ UHVHDUFKHUV DQG WKUHH GLPHQVLRQV ZHUH RIWHQ XWLOL]HG LQFOXGLQJ )LQDQFLDO HIILFLHQF\

*URZWK DQG 3URILWDELOLW\ +XQJ &KHQ  /LQ  GHYHORSHG WKUHH LQGLFDWRUV IRU QHZ

EXVLQHVV SHUIRUPDQFH QDPHO\ 2UJDQL]DWLRQDO HIIHFWLYHQHVV LQGLFDWRU VXFK DV IOH[LELOLW\

UHVSRQVHVWDELOLW\FRQWUROFRPPXQLFDWLRQDQGFRKHVLRQ)LQDQFLDOLQGLFDWRUFRYHULQJVDOHV

DPRXQWFDVKIORZSURILWDQGUHWXUQRQLQYHVWPHQWDQG6WUDWHJLFLQGLFDWRUFRQWDLQLQJPDUNHW

VKDUH DQG PDUNHW JURZWK UDWH '\HU  5HHYH  FODVVLILHG WKUHH RXWSXW PRGHOV IRU

RUJDQL]DWLRQDO SHUIRUPDQFH LQFOXGLQJ +XPDQ UHVRXUFH RXWSXW FRYHULQJ UDWHV RI

DEVHQWHHLVP WXUQRYHU UDWH DQG JURXS RU LQGLYLGXDO SHUIRUPDQFH 2UJDQL]DWLRQDO RXWSXW

VXFKDVSURGXFWLYLW\TXDOLW\DQGVHUYLFHDQG)LQDQFLDORUDFFRXQWLQJRXWSXWFRYHULQJUHWXUQ

RQ DVVHWV DQG UHWXUQ RQ LQYHVWPHQW 2X  7VHQJ  LQGLFDWHG WKH VDWXUDWLRQ RI WKH

DXWRPRELOH PDUNHW LQ 7DLZDQ DQG WKH GHFOLQDWLRQ RI VDOHV DPRXQW WKDW WKH RSHUDWLQJ

HQYLURQPHQW IRU DXWRPRELOH LQGXVWU\ EHFDPH FKDQJHDEOH WKH GHDOHUV ZHUH IRUFHG WR

FRQWLQXRXVO\ SUHFHGH SURPRWLRQV WKDW WKH SURILWV ZHUH UHGXFHG :X  SRLQWHG RXW WKH

ODUJH LQGXVWU\ OLQNDJH KLJKO\ LQWHQVLYH FDSLWDO DQG KLJK YDOXH DGGHG RI NH\ FRPSRQHQWV LQ

DXWRPRELOHLQGXVWU\WKDWERWKGHYHORSHGDQGGHYHORSLQJFRXQWULHVFRQVLGHUHGLWDVWKHPDMRU

GHYHORSPHQW5HVHDUFKRQDXWRPRELOHLQGXVWU\ZDVQXPHURXVEXWWKHSHUIRUPDQFHDQDO\VLV

ZLWK '($ ZDV LQVXIILFLHQW ,Q FRQVLGHUDWLRQ RI WKH SURGXFWLRQ WKHRU\ FRPSOHWHQHVV RI FRVWV

LQFOXGLQJGLUHFWDQGLQGLUHFWFRVWVDQGDFTXLVLWLRQRIGDWD1XPEHURIHPSOR\HH2SHUDWLQJ

87
 International Journal of Applied Mathematics and Statistics

FRVW DQG *URVV DVVHW ZHUH VHOHFWHG DV WKH LQSXW YDULDEOHV DQG 2SHUDWLQJ LQFRPH DV WKH

RXWSXWYDULDEOHIRUPHDVXULQJWKHSHUIRUPDQFH

:KHQ SURFHHGLQJ HIILFLHQF\ HYDOXDWLRQ ZLWK 'DWD (QYHORSPHQW $QDO\VLV HDFK

LQSXWRXWSXWLWHPZRXOGUHGXFHWKHGLVFULPLQDWLRQRI'DWD(QYHORSPHQW$QDO\VLV:KHQWKHUH

DUHIRXULQSXWDQGILYHRXWSXWLWHPVWZHQW\RXWSXWLQSXWVFDOHYDOXHVZRXOGEHLQGXFWHG,QWKLV

FDVHDWOHDVWWZR'08VDUHUHTXLUHGIRUWKHGLVFULPLQDWLRQRIWKHPRGHO*RODQ\ 5ROO

IXUWKHU SURSRVHG WKH UXOH IRU 'DWD (QYHORSPHQW $QDO\VLV WKDW WKH QXPEHU RI HYDOXDWHG

GHFLVLRQPDNLQJXQLWVVKRXOGEHDWOHDVWWZLFHWKHVXPRILQSXWDQGRXWSXWLWHPV

)RXULQSXWRXWSXWYDULDEOHVDQGVL['08VZHUHVHOHFWHGLQWKLVVWXG\WKDWLWFRQIRUPHGWR

WKHUXOHIRU'DWD(QYHORSPHQW$QDO\VLV

$OO YDULDEOH GDWD XWLOL]HG LQ WKLV VWXG\ ZHUH DFTXLUHG IURP WKH LQFRPH VWDWHPHQW

SURVSHFWXVDQGDQQXDOUHSRUWVRIWKHOLVWLQJPDQXIDFWXUHUV

'HILQLWLRQRIYDULDEOHV

,QSXWYDULDEOHV

 1XPEHU RI HPSOR\HH UHIHUV WR WKH VXP RI HPSOR\HHV LQFOXGLQJ PDQDJHUV 5 '

SHUVRQQHORSHUDWLQJSHUVRQQHODQGPDQXIDFWXULQJVWDII

 2SHUDWLQJ FRVW UHIHUV WR WKH H[SHQGLWXUH IRU EXVLQHVV RSHUDWLRQ VXFK DV SHUVRQQHO

DIIDLUPDLQWHQDQFHPDWHULDOVDQGRWKHUV

 *URVVDVVHW$VVHWVDUHWKHHTXLSPHQWIRUEXVLQHVVRSHUDWLRQQRWIRUVHOOLQJ*URVV

DVVHWUHIHUVWRWKHVXPRIFRVWVOLVWHGLQWKHVWDWHPHQWRIILQDQFLDOSRVLWLRQLQFOXGLQJ

ODQG KRXVHDQG EXLOGLQJ PDFKLQH DQG HTXLSPHQW RWKHU HTXLSPHQW FRQVWUXFWLRQ LQ

SURFHVV DQG DGYDQFH SD\PHQWV DSSUHFLDWLRQ RI SURSHUW\ HYDOXDWLRQ DQG

DFFXPXODWHGGHSUHFLDWLRQ

88
 International Journal of Applied Mathematics and Statistics

 2XWSXWYDULDEOHV

2SHUDWLQJLQFRPHUHIHUVWRWKHLQFRPHUHFHLYHGIURPVHOOLQJSURGXFWVRUSURYLGLQJODERU

VXFKDVVDOHVODERUEXVLQHVVDQGRWKHUV

7DEOHVKRZVWKHUHODWLYHHIILFLHQF\LQDXWRPRELOHLQGXVWU\,QWHUPVRIWRWDOHIILFLHQF\WKH

DYHUDJH HIILFLHQF\ LQ WKUHH \HDUV DSSHDUHG  ZKHQ <XORQ 0RWRUV DQG .XR]XL 0RWRUV

SUHVHQWHGWKHEHVWSHUIRUPDQFHIROORZHGE\)RUG/LR+R0RWRUDQG6DQ\DQJ

,QGXVWU\ WKH ZRUVW  LQ  <XORQ 0RWRUV SUHVHQWHG WKH EHVW SHUIRUPDQFH  DQG

6DQ\DQJ ,QGXVWU\ WKH ZRUVW  LQ  DQG .XR]XL 0RWRUV SUHVHQWHG WKH EHVW

SHUIRUPDQFHIROORZHGE\<XORQ0RWRUVDQG6DQ\DQJ,QGXVWU\WKHZRUVWLQ

 $SSDUHQWO\ .XR]XL 0RWRUV VKRZHG WKH EHVW SHUIRUPDQFH LQ WKH WKUHH \HDUV ZKLOH

6DQ\DQJ,QGXVWU\WKHZRUVW

,QUHJDUGWRSXUHWHFKQLFDOHIILFLHQF\WKHDYHUDJHHIILFLHQF\LQWKUHH\HDUVDSSHDUHG

ZKHQ.XR]XL0RWRUVSUHVHQWHGWKHEHVWSHUIRUPDQFHIROORZHGE\<XORQ0RWRUV

DQG6DQ\DQJ,QGXVWU\WKHZRUVWLQ<XORQ0RWRUVDQG.XR]XL0RWRUVSUHVHQWHG

WKH EHVW SHUIRUPDQFH  DQG 6DQ\DQJ ,QGXVWU\ WKH ZRUVW  LQ  DQG .XR]XL

0RWRUVSUHVHQWHGWKHEHVWSHUIRUPDQFHDQG6DQ\DQJ,QGXVWU\WKHZRUVWLQ

,QWKLVFDVH.XR]XL0RWRUVGLVSOD\HGWKHEHVWSHUIRUPDQFHLQWKHWKUHH\HDUVZKLOH6DQ\DQJ

,QGXVWU\WKHZRUVW

5HJDUGLQJ VFDOH HIILFLHQF\ WKH DYHUDJH HIILFLHQF\ LQ WKUHH \HDUV DSSHDUHG  ZKHQ

<XORQ0RWRUVSUHVHQWHGWKHEHVWSHUIRUPDQFHDQG6DQ\DQJ,QGXVWU\WKHZRUVWLQ

.XR]XL0RWRUVSUHVHQWHGWKHEHVWSHUIRUPDQFHDQG6DQ\DQJ,QGXVWU\WKHZRUVW

LQDQG.XR]XL0RWRUVSUHVHQWHGWKHEHVWSHUIRUPDQFHIROORZHGE\<XORQ

0RWRUV  DQG 6DQ\DQJ ,QGXVWU\ WKH ZRUVW  LQ  2EYLRXVO\ .XR]XL 0RWRUV

89
 International Journal of Applied Mathematics and Statistics

UHYHDOHGWKHEHVWSHUIRUPDQFHLQWKHWKUHH\HDUVZKLOH6DQ\DQJ,QGXVWU\WKHZRUVW

7DEOH5HODWLYHHIILFLHQF\RIDXWRPRELOHEXVLQHVVHV

3XUHWHFKQLFDO
$XWRPRELOHEXVLQHVVHVLQ7DLZDQ 7RWDOHIILFLHQF\ 6FDOHHIILFLHQF\
HIILFLHQF\

$YHUDJHLQ   

$YHUDJHLQ   

)RUG/LR+R
$YHUDJHLQ   
0RWRU
$YHUDJHLQ
  
WKUHH\HDUV

$YHUDJHLQ   

$YHUDJHLQ   

.XR]XL0RWRUV $YHUDJHLQ   

$YHUDJHLQ
  
WKUHH\HDUV

$YHUDJHLQ   

$YHUDJHLQ   

&0&0RWRU $YHUDJHLQ   

$YHUDJHLQ
  
WKUHH\HDUV

$YHUDJHLQ   

$YHUDJHLQ   

6DQ\DQJ
$YHUDJHLQ   
,QGXVWU\
$YHUDJHLQ
  
WKUHH\HDUV

90
 International Journal of Applied Mathematics and Statistics

$YHUDJHLQ   

$YHUDJHLQ   

<XORQ0RWRUV $YHUDJHLQ   

$YHUDJHLQ
  
WKUHH\HDUV

$YHUDJHLQ   

$YHUDJHLQ   

+RQGD7DLZDQ $YHUDJHLQ   

$YHUDJHLQ
  
WKUHH\HDUV

$YHUDJHLQ   

$YHUDJHLQ   

7RWDO $YHUDJHLQ   

$YHUDJHLQ
  
WKUHH\HDUV

7KH LQSXW DQG RXWSXW YDULDEOHV ZHUH JUDGXDOO\ GHOHWHG IRU '($ WR XQGHUVWDQG WKH

VHQVLWLYLW\ WR WKH HIILFLHQF\ 7DEOH  VKRZV WKDW WKH QXPEHU RI '08 ZLWK UHODWLYH HIILFLHQF\

UHPDLQVWZRZKHQ)L[HGJURVVDVVHWDQG2SHUDWLQJLQFRPHZHUHGHOHWHGUHYHDOLQJWKDWWKH

YDULDEOHVDSSHDUHGOLWWOHHIIHFWRQHIILFLHQF\:KHQ1XPEHURIHPSOR\HHDQG2SHUDWLQJFRVW

ZHUH GHOHWHG WKH QXPEHU RI '08 ZLWK UHODWLYH HIILFLHQF\ ZDV UHGXFHG SUHVHQWLQJ WKH

LPSRUWDQFHRIWKHWZRYDULDEOHVZKLFKFRXOGDIIHFWWKHUHODWLYHHIILFLHQF\LQ'($PRGHO

91
 International Journal of Applied Mathematics and Statistics

7DEOH6HQVLWLYLW\$QDO\VLVZLWKWKHGHOHWLRQRILQSXWDQGRXWSXWLWHPV

2ULJLQDO 'HOHWLQJ 'HOHWLQJ 'HOHWLQJ 'HOHWLQJ

'08 UHODWLYH 1XPEHURI 2SHUDWLQJ )L[HGJURVV 2SHUDWLQJ

HIILFLHQF\ HPSOR\HH FRVW DVVHW LQFRPH

)RUG/LR+R0RWRU     

.XR]XL0RWRUV     

&0&0RWRU     

6DQ\DQJ,QGXVWU\     

<XORQ0RWRUV     

+RQGD7DLZDQ     

(IILFLHQW'08
    
QXPEHU

'DWDVRXUFH6HOIRUJDQL]DWLRQLQWKLVVWXG\

)URP7DEOHLQRUGHUWRUHDFKWKHUHODWLYHHIILFLHQF\WKHLQSXWLWHP1XPEHURIHPSOR\HH

VKRXOGEHUHGXFHGIRU)RUG/LR+R0RWRUIRU&0&0RWRUIRU6DQ\DQJ,QGXVWU\

 RU ,68=8  IRU <XORQ 0RWRUV  IRU $XWR  IRU )RUPRVD DQG  IRU +RQGD

7DLZDQWKHRXWSXWLWHP2SHUDWLQJFRVWVKRXOGEHUHGXFHGIRU)RUG/LR+R0RWRUIRU

,68=8IRU$XWRDQGIRU)RUPRVDWKHLQSXWLWHP*URVVDVVHWVKRXOGEHUHGXFHG

IRU<XORQ0RWRUVDQGIRU$XWRZKLOHWKHLQSXWLWHP7XUQRYHUVKRXOGEHLQFUHDVHG

IRU<XORQ0RWRUVIRU&0&0RWRUIRU6DQ\DQJ,QGXVWU\IRU$XWRDQGIRU

+RQGD7DLZDQ

92
 International Journal of Applied Mathematics and Statistics

7DEOH,PSURYHPHQWRIDXWRPRELOHEXVLQHVVHV

,PSURYHG
,PSURYHGLQSXW
'HFLVLRQPDNLQJ RXWSXW

XQLWV'08 1XPEHURI 2SHUDWLQJ

)L[HGJURVVDVVHW 7XUQRYHU
HPSOR\HH FRVW

)RUG/LR+R0RWRU    

.XR]XL0RWRUV    

&0&0RWRU    

6DQ\DQJ,QGXVWU\    

<XORQ0RWRUV    

+RQGD7DLZDQ    

'DWDVRXUFH6HOIRUJDQL]DWLRQLQWKLVVWXG\

+DYLQJWKH\HDUVaDVWKHGLPHQVLRQVWKLVVWXG\LQYHVWLJDWHGWKHDXWRPRELOH

EXVLQHVVHVLQ7DLZDQDQGVHOHFWHGVL[YDOLGVDPSOHVIRUWKHUHVHDUFK:LWK'DWD(QYHORSPHQW

$QDO\VLVWRHYDOXDWHWKHSHUIRUPDQFHRIWKHDXWRPRELOHEXVLQHVVHVWKHUHVHDUFKRXWFRPHV

VKRZHG WKDW .XR]XL 0RWRUV SUHVHQWHG EHWWHU SHUIRUPDQFH RQ WKH WRWDO HIILFLHQF\ SXUH

WHFKQLFDO HIILFLHQF\ DQG VFDOH HIILFLHQF\ WKDQ WKH RWKHUV LQ WKH WKUHH \HDUV 7KH NH\ OLHV LQ

.XR]XL0RWRUVFRQVWDQWO\HQKDQFLQJWKHSURGXFWTXDOLW\DQGSULFHFRPSHWLWLYHQHVVZKLFKDUH

FRQVLGHUHGDVWKHNH\VXFFHVVIDFWRUVLQLQWHUQDWLRQDOFRPSHWLWLRQ.XR]XL0RWRUVLQWURGXFHV

72<27$3URGXFWLYLW\WRFUHDWHVWDQGDUGL]DWLRQDQGIHZTXDQWLWLHVZLWKYDULRXVGLYHUVLWLHVDQG

WRHQVXUHWKHKLJKHIILFLHQF\SURGXFWLRQOLQHZLWKHQGOHVVLPSURYHPHQWWKRURXJKDXWRPDWLRQ

WLPHO\LGHDVDQGKXPDQLW\PDQDJHPHQW.XR]XL0RWRUVDOVRLQWURGXFHV72<27$3URGXFWLYLW\

WR WKH VXEFRQWUDFWRUV VR DV WR HQKDQFH WKH TXDOLW\ DQG SULFH FRPSHWLWLYHQHVV DPRQJ WKH

93
 International Journal of Applied Mathematics and Statistics

XSVWUHDP DQG WKH GRZQVWUHDP WR PXOWLSO\ WKH SHUIRUPDQFH $QRWKHU IDFWRU LQ WKH

RXWSHUIRUPDQFHRI.XR]XL0RWRUVLVWKDW.XR]XL0RWRUVGRHVQRWSURGXFHGHIHFWLYHSURGXFWV

DQG ZRXOG QRW KDYH GHIHFWLYH SURGXFWV JR WR WKH QH[W HQJLQHHULQJ ಯ&UHDWLQJ TXDOLW\ LQ

SURGXFWLRQHQJLQHHULQJರLVWKHFRPPRQLGHDRIWKHHPSOR\HHVLQ.XR]XL0RWRUV%DVHGRQ6

VWDQGDUGL]HG RSHUDWLRQV YLVXDO PDQDJHPHQW DQG DXWRPDWLF HUURUSURRI GHYLFHV KDYH EHHQ

GHYHORSHGIRUWKHDEVROXWHUHTXLUHPHQWRIಯ1RWSURGXFLQJGHIHFWLYHSURGXFWVDQGQRGHIHFWLYH

SURGXFWVJRLQJWRWKHQH[WHQJLQHHULQJರ,QRUGHUWRDFKLHYHWKHLGHQWLFDOTXDOLW\VWDQGDUGDVLQ

-DSDQ WKH PDWHULDOV DQG FRPSRQHQWV WKH HTXLSPHQW DQG RSHUDWLRQ DQG WKH SHUIRUPDQFH

HQGXUDQFHDQGTXDOLW\LQ.XR]XL0RWRUVKDYHSDVVHGWKHVWULFWTXDOLW\FRQWUROIURPWKHKHDG

FRPSDQ\RI72<27$,WWKHUHIRUHEHFRPHVWKHEHVWRYHUVHDPDQXIDFWXUHURI72<27$DQG

KDVDFKLHYHGWKHWRSTXDOLW\VWDQGDUG

:LWK WKH KLJK REVWDFOH WR DXWRPRELOH PDUNHW DEXQGDQW FDSLWDO DQG WHFKQRORJ\ DQG

FRQWLQXRXVLQQRYDWLRQDQGUHVHDUFKDQGGHYHORSPHQWFDSDELOLW\DUHUHTXLUHG$VWKHGRPHVWLF

PDUNHW RI DXWRPRELOH VDOHV LV FRPSDUDWLYHO\ VPDOO LQ 7DLZDQ WKH EXVLQHVVHV FDQ KDUGO\

DFKLHYH WKH HFRQRPLF VFDOH $XWRPRELOH PDQXIDFWXUHUV WKHUHIRUH KDYH EHFRPH WKH

GRZQVWUHDPIDFWRULHVLQWKHPDUNHWLQJV\VWHPDVWKHDXWRPRELOHPDUNHWLVFRPSHWLWLYHDQG

WKHSURGXFWLRQWHFKQRORJ\GHSHQGVWRRPXFKRQWKHPRWKHUIDFWRU\(YHQZKHQFRRSHUDWLQJ

ZLWKLQWHUQDWLRQDOEUDQGVWRGHYHORSWKHLQGLYLGXDOSURGXFWLRQWHFKQRORJ\WKHNH\WHFKQRORJ\LV

RIWHQ FRQFHDOHG E\ WKH PRWKHU IDFWRU\ 0RVW GRPHVWLF PDQXIDFWXUHUV WKHUHIRUH IRFXV RQ

SURGXFW GLIIHUHQFH IURP GRPHVWLF DQG LQWHUQDWLRQDO FRPSHWLWRUV $V D UHVXOW DXWRPRELOH

PDQXIDFWXUHUVZRXOGFRPSHWHZLWKHDFKRWKHURQSURGXFWVGLVWULEXWLRQSULFHVDQGSURPRWLRQ

,WLVQHFHVVDU\IRUDXWRPRELOHPDQXIDFWXUHUVLQ7DLZDQWRXWLOL]HWKHH[FHOOHQWJHRJUDSKLFDQG

FXOWXUDO FRQGLWLRQV DQG WR FXOWLYDWH SURIHVVLRQDO 5 ' WDOHQWV VR WKDW WKH UHVHDUFK DQG

GHYHORSPHQWDQGWKHPDUNHWLQJFDQEHUHPDLQHGLQ7DLZDQ:LWKVHOIEUDQGWKHSHUIRUPDQFH

RIDXWRPRELOHLQGXVWU\LQ7DLZDQZRXOGEHSURPRWHG

94
 International Journal of Applied Mathematics and Statistics

&KRX6KLKFKLQJ :DQJFKLK\XQJ(IIHFWLYHQHVVHYDOXDWLRQRILQWURGXFLQJ(53WR

HQWHUSULVHVZLWK)LYH)RUFH$QDO\VLV,QGXVWU\)RUXP

'\HU/ 75HHYHV ಯ+XPDQ5HVRXUFH6WUDWHJLHVDQG)LOP3HUIRUPDQFH:KDW'R

:H.QRZDQG:KHUH'R:H1HHG7R*R"ರ7KH,QWHUQDWLRQDO-RXUQDORI+XPDQ5HVRXUFH
0DQDJHPHQW9ROSS

*RODQ\%DQG 5ROO<$Q$SSOLFDWLRQ3URFHGXUHIRU'($2PHJD92/SS



+XQJ -XQJKXD &KHQ +VLDQJMX  /LQ +XLFKHQ  $ VWXG\ RQ JOREDO ORJLVWLFV
PDQDJHPHQW PRGHO࿻ $ FDVH VWXG\ RQ DXWRPRELOH LQGXVWU\ DSSOLFDWLRQ 6XQ <DW6HQ
0DQDJHPHQW5HYLHZ

.DR FKLDQJ +XDQJ +VXQDQ  6XH\RVKL 7  3UHVHQW VLWXDWLRQ RI DXWRPRELOH
PDQXIDFWXULQJLQ7DLZDQ,QGXVWU\5HVHDUFKDQG7HFKQRORJ\4XDUWHUO\

/L+DQKVLXQJ .XR6KXFKL$VWXG\RQWKHFRPSHWLWLRQLQDXWRPRELOHLQGXVWU\࿻$

FDVHVWXG\RQ+RWDL6XQ<DW6HQ0DQDJHPHQW5HYLHZ

/L +VLQSLQJ  /LX &KLQJPLQJ  7KH SROLF\ GHYHORSPHQW IRU DXWRPRELOH LQGXVWU\ LQ
7DLZDQDQGWKHIXWXUHGHYHORSPHQW7DPVXL2[IRUG-RXUQDORI(FRQRPLFVDQG%XVLQHVV


0XUSK\*%7UDLOHU-: +LOO5&᧤᧥ಯ0HDVXULQJ3HUIRUPDQFHLQ(QWUHSUHQHXUVKLS
5HVHDUFKರ-RXUQDORI%XVLQHVV5HVHDUFK᧤᧥᧩

2X &KLDMXL  7VHQJ +VLQFKDR  7KH GHYHORSPHQW DQG PHDQLQJ RI DXWRPRELOH
FRQVXPLQJ PDUNHW LQ 7DLZDQ ದ $Q DQDO\VLV RI ILQDQFLDO VRFLRORJ\ -RXUQDO RI 1HWZRUN
6RFLRORJ\&RPPXQLFDWLRQ

:X 7VXQJIDQ  *OREDO SHUIRUPDQFH PDQDJHPHQW᧩7KH DSSOLFDWLRQ RI OHDGLQJ DQG
ODJJLQJLQGLFDWRUVDQGHFRQRPHWULFPRGHO+XD+VLQ)LQDQFH4XDUWHUO\




95
See discussions, stats, and author profiles for this publication at: https://www.researchgate.net/publication/270703660

The Growth of the Automobile Industry : Toyota's Dominance in United States

Article  in  Journal of Research in Marketing · October 2014

DOI: 10.17722/jorm.v3i2.86

CITATION READS
1 16,925

2 authors:

Samarth Anil Uchil Assc. Prof. Dr. Rashad Yazdanifard

Malaysia University of Science and Technology (MUST)
2 PUBLICATIONS   1 CITATION   
274 PUBLICATIONS   1,139 CITATIONS   
SEE PROFILE
SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Strategic Management View project

Future of R&D Outsourcing in Global Enterprises View project

All content following this page was uploaded by Assc. Prof. Dr. Rashad Yazdanifard on 12 January 2015.

The user has requested enhancement of the downloaded file.

 Journal of Research in Marketing
Volume 3 No.2 October 2014

The Growth of the Automobile Industry : Toyota’s

Dominance in United States
Samarth Uchil1 , Rashad Yazdanifard2
Southern New Hamshire University ,Kuala Lumpur, Malaysia.
samarthuchil@gmail.com1
rashadyazdanifard@yahoo.com2

Abstract- During the last decade, the advancement in production and management systems has revolutionized the
automobile industry. The industry has witnessed the opening up and growth of several emerging markets. The
automotive industry is now facing new and pressing challenges. Globalization, digitalization and increasing competition
in the market are changing the face of the industry. Size of the organization is no longer a guarantee of success. Only
those companies that find new innovative techniques to create value can prosper in the future. The purpose of this paper is
to present a short overview of the automotive industry today and highlight challenges that are faced the industry. We are
also going to overview Toyota’s dominance in the US market, strategies used by them and how they were able to overcome
the challenges and competition they faced in a foreign market, and how upcoming automobile companies can use Toyota’s
strategies to grow in the current market.

Keywords- Automobile Industry; Industry analysis; Toyota

1. INTRODUCTION
The automotive industry is facing new and pressing
challenges. Globalization, individualizations,
digitalization and increasing competition are pressing
the face of the industry. In addition, increasing safety
requirements and voluntary environmental commitments
by the automotive industry have also contributed to the
changes ahead. Being a large automobile firm does not
guarantee success. Only those companies that are able
to innovate and find new ways to create value are able
to prosper in this market. The purpose of this paper is
to present a short overview of the automotive
industry today and highlight challenges that the
industry is facing. (Jain & Garg, 2007)
2. FACTORS INFLUENCING
AUTOMOBILE INDUSTRY
The global automotive industry is subjected to a range
of factors that are increasing complexity and influencing
the economic options available to automobile
manufacturers. The majority of these factors interacts
with one another and has strong interdependencies.
However, some of these factors are market-induced
and, consequently, cannot be influenced directly by the
automobile manufacturers. These factors include:
2.1 GLOBALIZATION, REGIONALIZATION AND
MARKET CONVERGENCE
Liberalization has made the national markets
increasingly globalized. This gives companies a chance
to expand into new markets, but also poses the threat of
new entrants and increased competition. (Jain &
Garg, 2007)
2.2 INCREASINGLY DIVERSIFIED CONSUMER
AGGREGATE PATTERNS OF BEHAVIOUR
Consumers are no longer accepting standardized
products, but want products that satisfy their individual
requirements. Target groups thus have been downsized
by companies so that customers will be attracted by the
products being offered. However, because of the
increased global competition along with a stronger
focus on price and not on brand loyalty, consumers
generally are not drawn towards companies for their
individualized products. As a result of these factors,
automobile manufacturers have new demanding
requirements within their field of activity. (Jain &
Garg, 2007)
2.3 ACCELERATED MODIFICATION AND
DIVERSIFICATION OF THE PRODUCT
PORTFOLIO
The companies have to shorten the lifecycles of their
models in order to react to the expectations of
individualize and fast changing consumer demands with
innovative products. In the past, an average product
lifecycle in the automotive industry was about eight
years, whereas today auto mobile industry change or
modify their products within two to three years. With
development costs for a new model remaining on the
same level or even increasing, this concurrently means a
shortening of amortization time for the OEM and,
potentially, lower profits. (Jain & Garg, 2007)

©
TechMind Research, Canada 265 | P a g e

2.4 PERVASION OF AUTOMOBILES WITH
DIGITAL TECHNOLOGY
In 2002, digital technology in cars already averaged 22
per cent of the total value of a car, with a forecasted
increase to 35 per cent of the total value in 2010. The
integration of hardware and software into automobiles
might have increased the functionality of the car but has
increased the complexity of the machine. This
complexity results in overstrained car development
departments, product failures, a cost explosion with
respect to guarantee and warranty costs, and impact on
customer satisfaction. (Jain & Garg, 2007)
2.5 INCREASED PRESSURE FOR INNOVATION
AND FLEXIBILITY IN DEVELOPMENT AND
MANUFACTURING
Development departments are not just overburdened by
the complexity of digital technology, but also by the
shortening of product lifecycles. Another aspect is the
increasing number of parallel development projects
since companies develop more and more niche models
for special target groups. This certainly requires the use
of new development techniques such as virtual reality.
For example, this technique enabled BMW to shorten the
development time of its Z4 model to just 30 months.
(Jain & Garg, 2007)
3. THE CHALLENGE OF COMPETITIVE
ENVIRONMENT
The question of how a company can remain
competitive in the face of the unexpected and fast
transformations taking place in the automotive industry is
very important. The only way to succeed is by being
focused, responsive, variable and resilient, which can
be accomplished by converting to an on demand
company. Adapting to the ever- changing environment
has become the core business requirement, having
problem-solving tools and methods to be identified,
selected and implemented as fast as possible. Focused,
responsive, variable and resilient are different behaviours
required to become more adaptable behaviour’s whose
features correspond with the exigencies of the business
objective. Transforming t h i s analogy to business, a car
manufacturer has seven major strategic levers to enable
such adaptive behaviour.
3 . 1 BRAND MANAGEMENT
The function of marketing that implements techniques to
increase the corporate value of a product line or brand
over time. Brand management strategies help the
companies to focus and differentiate its products from
the competitors. (Jain & Garg, 2007)
3.2 CUSTOMER RELATIONSHIP MANAGEMENT
It relates to all aspects of interaction that a company has
with its customer, whether it is sales or service-related.
©
TechMind Research, Canada
Journal of Research in Marketing
Volume 3 No.2 October 2014
CRM helps a company become focused on customer
requirements.(Jain & Garg, 2007)
3.3 CORE COMPETENCY MANAGEMENT
It is the combination of pooled knowledge and technical
capacity that allows a business to be competitive in the
marketplace. Core competency management allows a
company to focus on its internal strengths and become
more variable and resilience by entering into strategic
partnerships with suppliers with competencies in new
technologies or niche operations. (Jain & Garg, 2007)
3.4 SOFTWARE MANAGEMENT
Software management is a key to making a company
focused on software standardization and strategic
partnerships, which helps the business to become
variable and resilient. (Jain & Garg, 2007)
3.5 QUALITY MANAGEMENT
Helps the business become a cross functional and cross-
company concept over the whole value-add chain. This
in turn helps ensure that company will grow to their
maturity in resilience. (Jain & Garg, 2007)
3.6 PRODUCT DEVELOPMENT MANAGEMENT
Managing product development together with a focus on
broadening competencies in new technologies will help
enable organization to become more variable by the
optimization of collaborative engineering. Increased
resilience can be achieved by standardized processes and
the extended use of virtual testing. Decentralized and
regionalized development activities will help to increase
responsiveness to customers’ desires. (Jain & Garg, 2007)
3.7 EXPANSION MANAGEMENT
Management of expansion into new geographies and
cultures require that are focused on the requirements in
these new markets and responsive to changing market
conditions and requirements. (Jain & Garg, 2007)
4. TOYOTA’S ENTRANCE INTO THE
UNITED STATES
This is an exploration of Toyota’s entrance into the U.S.
market during the 1960s-1970s. Toyota’s success was a
result of a significant cost advantage over its American
competitors. Toyota’s cost advantage was the result of its
innovative Toyota Production System (TPS). Detroit
carmakers were unwilling to adapt new manufacturing
techniques and therefore lost tremendous market share.
By 1982, 30% of the cars sold in America were Japanese
cars.
5. A BRIEF HISTORY OF TOYOTA
Toyota began work on small car, a niche that was
neglected by Detroit. Toyopet was introduced in 1947.
They then reinvested profits from small cars into research
266 | P a g e

and development.In 1957, Toyota performs its first
American road test. The modified Toyopet performed
poorly, failing the road test due to heat and vibration.
Toyota then started from scratch and by 1960 Toyota
introduced a new Toyopet that could withstand American
conditions.After further Research and development
activities Toyota introduced Corona, in 1965 and was able
to sell over six thousand models in the same year. Toyota
then introduced the smaller Corolla in 1968, hoping that
by introducing a smaller car they will differentiate
themselves from Detroit cars, which at the time are big
heavy cars loaded with horsepower and options. By
entering the American market with small cars, they were
able to prevent head-on competition with the leading
American car companies. They had a first mover
advantage in their small cars and were able to achieve
terrific economies of scale in this category.Toyota’s
pricing was geared towards lower to middle class
customers and not the customers who are buying cars
loaded with expensive options.
6. BARRIERS TO ENTRY
One barrier to entry into the U.S. market was the
reputation of low quality Japanese cars.In the 1950s,
American car companies had huge economies of scale.To
overcome these barriers to entry, Toyota hired
manufacturing and quality control consultants from the
United States.By 1964, the Toyota Production System has
resulted in economies of scale. The Japanese car
companies produced cars more cheaply. American car
companies were now suffering from a first mover
disadvantage.(The reckoning, 308)
7. INDUSTRY ANALYSIS
7.1 RIVALRY IN JAPAN
There was rivalry between Nissan and Toyota before even
Toyota had entered the American market resulted in a
great cost advantage for Toyota over American car
companies. The rivalry for market share in Japan was
fierce, with both Toyota and Nissan looking for ways to
cut their costs and make better cars at the same time.
Toyota and Nissan saw increased market share in Japan as
another way of speeding up the learning curve: whoever
produced more cars would learn faster how to produce
better, cheaper cars. (The reckoning,437)
7.2 RIVALRY IN THE UNITED STATES
Detroit attempted to build small cars but was unable to
sell their cars. Ford introduced the Maverick in 1969 and
the Pinto in 1970, while the GM introduced the Vega in
1970. Although American small cars were cheap, they
were not as reliable as the Japanese cars. American car
companies were now seen as getting sloppy about quality.
(The reckoning,437)
7.3 RIVALRY WITH VOLKSWAGEN IN THE
UNITED STATES
©
TechMind Research, Canada
Journal of Research in Marketing
Volume 3 No.2 October 2014
Before Toyota, Volkswagen was the dominant foreign car
supplier in the United States. They had 60% of foreign car
market in America in 1968. The Volkswagen Beetle was
the best-selling foreign car in America until Toyota
Corolla took that spot in 1975 and overtook Volkswagen
exactly how they overcame American car companies
using superior production methods and the great cost
advantage it had from its Toyota Production System.
Volkswagen also stuck with Beetle for far too long.
Whereas, Toyota was coming out with more powerful
cars that did not have the vibration problems some people
experienced with the Volkswagen Beetle.An important
role played by a weak Japanese yen helped Toyota sell
more cars than Volkswagen. At the time of Toyota’s
invasion of the American market in 1965, the Japanese
yen was relatively weaker against the dollar than the
German mark, making Japanese currency and Japanese
goods cheaper in America than German currency and
goods. Increasingly, more of the dealers that sold
Volkswagen were selling either Toyota or Nissan. (The
reckoning,437)
7.4 BUYER BARGAINING POWER
Rental car dealers would have some sway over car prices
when they bought large quantities of Toyota cars but not
enough to affect overall prices. (The reckoning,437)
7.5 SUPPLIER BARGAINING POWER
Hypothetically, if steel was monopolized, suppliers would
extract a lot of the profits from car companies, however
there were many suppliers, so supplier bargaining power
was negligible.
(The reckoning,437)
7.6 SUBSTITUTES
Local transport or mass transit is a substitute to cars if you
live in a big city. Many people still prefer to drive instead
of taking buses, subways, or taxis. (The reckoning,437)
7.7 COOPERATION BETWEEN COMPANIES
There were very few instances of cooperation between car
companies. No instances of collusion to fix prices. The
competition was fierce to lower the car prices and
increase quality.
(The reckoning,437)
8. INTRODUCTION OF ENERGY
EFFICIENT CARS BY TOYOTA AND
HONDA
8.1 OIL CRISES OF THE 1970S
Cheap oil became very important to the Post-War
expansion. Japan was more oil conscious than United
States. They imported every drop of oil it was going to
use, unlike the United States, which had large oil reserves
of its own. Around 1970, Japan had predicted some kind
of oil crisis due to the instability in Middle East and
267 | P a g e
 Journal of Research in Marketing
Volume 3 No.2 October 2014

started gearing economy to conserve and limit their oil [2] Blenkhorn, D. L., & Fleisher, C. S. (2005).
consumption. This is when Japan companies like Toyota Competitive Intelligence and Global Business.Greenwood
started designing energy efficient cars. In 1973, oil prices Publishing Group, 292.
quadrupled and the American car companies did not adapt [3] Banker, R. D., Khosla, I., & Sinha, K. K.
to new oil prices, assuming that the crisis would pass and (1998). Quality and Competition. Management
did not build energy efficient cars like the Japanese. After Science, 44(9).
the second oil crisis of 1978, Detroit was in serious [4] ANDERSON, P. (1986). David Halberstam ,
trouble, with Japanese cars capturing 25% of the The reckoning: The challenge to America's greatness,
American car market. American citizens now preferred William Morrow & Co. Inc., New York (1986) 640
energy-efficient Japanese cars to the gas-burning pages. Journal of The American Academy of
American cars. (The reckoning, 39) Dermatology. doi:10.1016/S0190-9622(86)80064-0.
[5] Hampson, I. (1999). Lean Production and the
8.2 TOYOTA’S UNIQUE DEALER NETWORK IN
Toyota Production System Or, the Case of the Forgotten
THE UNITED STATES
Production Concepts. Economic and Industrial
Toyota saw dealers as true customers of the company. Democracy. doi:10.1177/0143831X99203003
They believed if dealers were strong, the company would [6] Chow, I. (2002). Business Strategies: An Asia-
succeed. So they hired people who were hungry for the Pacific Focus. Prentice Hall.
opportunity and had been around cars all their lives. [7] Garvin David A.Managing Quality: The
These were the type of people who could never have Strategic and Competitive Edge (1988) (The Free Press,
afforded a Ford dealership. Toyota gave these dealers New York)
18%-20% of gross profits to induce them to sell Toyota
cars whereas the American car companies only gave 12%-
13% of gross profits to their dealers. (The reckoning, 39)
9. CONCLUSION
Toyota used the cost advantage of the Toyota Production
System to invade U.S. market. The TPS system used less
of everything- less human effort in the factory, less
manufacturing space, less investment tools, and half the
engineering hours to develop new products compared to
American and European manufacturers. Automobile
industries that have newly entered this market can study
and use Toyota’s entrance, growth and dominance in the
United States as president in planning and implementing
their growth and development strategies. They should
understand the importance of investing in a strong
production system which can cut down labour and other
unnecessary costs. They should study the geo
demographics of the country before they enter their
market, form a strong network in the country they want to
start production and distribution, and develop strategies to
over shadow their competitors. They should also
understand the importance of market forecasting and have
an up-to-date research team that can help make accurate
and bold decisions. These strategies can help upcoming
automobile companies grow rapidly in the early stages of
their business cycle and can improvise on their strategies
once they have a strong platform.
10. REFERENCES
[1] Jain, S., & Garg, R. K. (2007). Business
Competitiveness: Strategies for Automobile
Industry. Indian Institute of Management Kozhikode.

©
TechMind Research, Canada 268 | P a g e

View publication stats