Brief Background

Viewpoint: J.D Powers & Associates - produces quality ranking for automobiles in the US
rankings.
Time Context: 2008- Present

I. Statement of the problem -

II. Objectives

Short term- To lower the fixed cost, labor cost, Transformation cost, lean production
Long Term – How to create hybrid cars that can compete to global market that
promote sustainability development

III. Areas of Considerations

A. External
a. Demographic
b. Industry Profile
c. Economic Situation
d. Socio Cultural Background
e. Political/Government/Peace and Order
f. Technology

Outcome
 Threats
 Opportunities

B. Internal Environment (Corporate Appraisal)

a. Marketing Operations
b. Production Operations
c. Organization
d. Financial Analysis

Outcome
 Company’s Strengths
 Company’s Weaknesses

IV. Alternative Course of Action

A. General Statements as possible solution
B. Each alternative /possible solution can stand alone and totally independent of the
other alternatives

V. Recommendation
A. State your recommended solution
B. Define your objectives
a. Short run (1-5 years)
 b. Long run (beyond 5 years)
Invest on Research and Development – lifeblood

Your objectives must specify your market, market share, sales volume, and profit target
(21%), most specially on your short term run objectives

c. Functional strategies

Strategy
Objective
Plans/Programs

Example: Marketing

VI. Plans/Program for Implementation

VII. Projected Financial Statements

https://www.statista.com/statistics/269872/largest-automobile-markets-worldwide-based-on-
new-car-registrations/

https://www.investopedia.com/articles/markets-economy/090616/6-countries-produce-most-
cars.asp

What type of automotive business are you marketing? Who is your typical
customer?
The prospective customers have drastically different concerns, questions,
wants and needs when it comes to investing in a new car.
 A. Internal Environment (Corporate Appraisal)
a. Marketing Operations

In the early days of the industry, cars were sold directly from the
factory or through independent dealers, who might handle several
different makes.

In the United States the restricted franchise dealership became the

uniform and almost exclusive method of selling new cars. In this
system, dealers may sell only the particular make of new car specified
in their franchise.

But in 2008 Global Financial Crisis, demand of automobiles declined

which have been a norm in the developed nations, there is different
story in developing nations. 543
Because in all of these countries, relatively low levels of automobiles
ownership, coupled with underlying economic growth rates.
For example, the GM and Chrysler, so 2 factors made the sharp sales
decline – which are the high level of fixed costs and sharp drop in
demand. Both companies were forces to seek government aid to
attempt to stave off bankruptcy.

b. Production Operations

The emergence of the modern industry dates back to 1913 and Henry Ford’s
first implementation of the production technology – the continuously moving
assembly line – that would revolutionize so much of industrial capitalism
over the next few decades. Ford quickly became the master of mass
production. 540
Mass production dramatically lowered the cost of building cars and
paved a way for the emergence of mass consumer market.
After years of experimentation, by the 1970s, a new production system
emerged at Toyota started to tweak the mass production system first
developed by FORD – LEAN PRODUCTION

Lean Production was based on innovations that reduced set up times for
machinery and made shorter production runs economical. When coupled with
the introduction of just-in-time (JIT) inventory system, flexible work
practices, an organization-wide focus on the quality, and the practice of
stopping the assembly line to fix defects, the lean production system yielded
significant gains in productivity and product quality.
In turn, lowered the costs, improved brand equity, and gave Toyota a
competitive advantage.

During Changes in Operations

Retooling their factories to reduce costs and make them capable of producing several car
models from the same line.
More money was saved by a decision to base the care on a common platform architechture called
KAPPA (PLATFORM). Which would be used for small rear-drive cars.
So according to the General Motors, the company can make an almost unlimited number of
bodies on the Kappa architecture, and each vehicle would be profitable with a volume og 20,000
to 25,000 a year.

a. Organization
Alfred Sloan – the CEO of General Motors, who in the mid -1920s realized
that the key to successs in the industry was serving customers by offering them “a
car purse and purpose”. Under Sloan, Gm segmented the market, producing a
differentiated range of models to consumers.

b.Financial Analysis
By the 1960s, General Motors, Ford, and Chrysler dominated the
United States market, by far the world’s largest.

The decline of America’s big three auto producers has been

ongoing for decades.
**90% of all cars and trucks sold in the United States by the mid
1990s had fallen to 75%, and today it is about 44%.
** In total, the United States government had committed $17.4
billion in aid to GM and Chrysler by 2009.
** In contrast, Ford who had raised significant capital from private
investors in 2007, decline government aid and signaled that, despite
of operating losses, it would be able to survive the recession.
Despite the aid both Chrysler and GM, were forced into
bankruptcy.543
-Among the American manufacturers, Ford seems best positioned to
come out of the 2008-2009 recession in the industry who raised
some $23.5 billion in cash in 2006 before the recession hit.

**Toyota too, reported a loss of $3.6 billion for the financial year in
March 2009, its first ever as a public company, primarily due to the
sharp sales declines in the United States anad Japan. However, with
$19 billion cash on its balance sheet, the result of years of high
profits, Toyota was financially secure.

Outcome
 Company’s Strengths
 Company’s Weaknesses

STRENGTHS
1 Evolving/Growing industry : Automobiles represent freedom
and economic growth. Automobiles allow people to live, work and
travel in ways that were unimaginable a century ago. Automobiles
provides access to markets, to doctors, to jobs. Nearly every automobile
 trip ends with either an economic transaction or some other benefit to
the quality of life.
Across the world, auto is a synonym for development. Automobiles have
been increasing the quality of life for the past century by giving mobility,
comfort, and safety.This industry is also contributing to job creation and skill
development. It brings both direct and indirect employment which directly
connects with economic development. It’s giving facilities in every aspect of
today’s civilized society.

2 Continuous product innovation & technological

advancement : With the advent of E-vehicles & alternative fuel such
as Shell gas, CNG and others, Automobile Companies are increasing R
& D expenditure to drive the next phase of growth through use of
renewable sources of energy which may be solar, wind etc.

A relatively simple concept, no matter your organization’s size or

industry, in order to achieve ongoing success, continuous innovation
is needed.

3 Growth shifting to Asian markets : Although American &

European market is the pulse of this Industry, but the focus is shifting to
developing markets like China, India & other Asian nations because of the rise
in disposable income, changing lifestyle & stable economic conditions.
Growing market: Though the American and European markets are huge, the
development of the Asian market is becoming the new attention of the industry.
Asian countries such as China, India, and others are attracting attention because of
changing lifestyles, stable economic conditions. For example, in 2019 India became
the 4th largest automobile market in the world, surpassing Germany in terms of
sales. Also, big companies like Harley, Volvo, Bharat Benz, etc are making
manufacturing facilities in Asian countries because of their high resource and cheap
workforce which is also one of the reasons for the growing Asian market.
 3 Manufacturing facilities in Asian nations to control cost : In order to
control cost & to manage shrinking margins automobile companies
like Harley, Volvo, Bharat benz etc. are building their manufacturing
facilities in developing nations like India, China because these nations
have cheap workforce, are high in resources & are nearer to developed
economies. These are classic conditions of an emerging market.

4 Cost per mile will drop: This is due to falling driver costs, longer vehicle lives,
new energy sources, technologies and mobility scaling.

5. Consumer trust remains strong: Despite industry disruption, consumers still

prefer to put their families into vehicles made by established carmakers. A recent
Trustpilot report showed that nearly 9 in 10 respondents said the auto
manufacturer’s reputation was also important when choosing a car.

WEAKNESS

1. Cars recalled : Controversies relating to recalling vehicles on

account of some technical dis-functionality or non-abidance to
govt. led rules is becoming very common.
2. Bargaining power of consumers : Over the last 3-4 decades the
automobile market has shifted from demand to supply market.
Availability of large number of variants, Stiff competition between
them, and long list of alternatives to choose from has given power
to customers to choose whatever they like.
3. Growth rate of Automobile industry is the in the hands of the
government due to regulations like excise duty, no entry of outside
vehicles in the state, decreasing number of validity of registration
period & volatility in the fuel prices. These factors always affect the
growth of the industry.

The dependent growth rate: As many derivatives such as the validity of

registration period, no entrance for outside vehicles, fuel prices are in the
hand of the government, it always affects the growth of the industry. Also, it
 is estimated that the global automobile market will witness growth in the
future but it will not be enough to make up for the slump caused by the
coronavirus (Covid-19).
4. VEHICLE REGULATIONS
Regulations licensing of vehicles, registration, tax duty, the validity of the vehicle numbers, and
no entry of foreign vehicles in some states are making it difficult for the automobile companies
to run their business. In fact, they’re resisting its growth.

5.

VIII. Alternative Course of Action

C. General Statements as possible solution
D. Each alternative /possible solution can stand alone and totally independent of the
other alternatives

** Market research- non stop innovation as the world change

**Predict the demand more accurately, they might be able to reduce

the mismatch between inventories and demand

** To be a Global Reach – growing demands

**Segmented the market – Market Segmentation, niche

**Product Differentiated range of models to consumers -Product

Differentiation

**Benchmarking

**Learning – Technological know how / apply best practice

** Assessing possible risk and evaluate each

**Surveys

** Emissions -

Six Tips to Help the Automotive Industry Improve Quality and

Reduce Recalls
1. Create a culture of quality. ...
2. Work with suppliers. ...
3. Use technology to connect the supply chain. ...
4. Demand more than an inspection report. ...
5. Leverage manufacturing intelligence. ...
6. Drill down through data to reduce warranty claims and recalls.