Competitive Challenges for Carmakers

The interdependencies of countries can best be illustrated by the global automobile war. There are large number of companies producing innumerable varieties of cars, buses and trucks sold all over the world. The competition is so fierce that no country has a clear competitive advantage in all areas. In executive leadership, the American Lee Lococca of Chrysler is often mentioned. In prestige, the European Mercedes-Benz is frequently cited. The Japanese are considered tough competitors known for high productivity and adaptability. More recently inexpensive Korean cars have entered market including US and India. The beneficiaries of this competition are the car buyers who can choose from a great variety of features such as Japanese reliability, European handling, and the comfort of the traditional American family car.

The car companies, however, face many problems besides competition - overcapacity in the United States and Europe; traffic congestion in metropolitan areas, which may limit the demand for cars; increasing concern about protectionism in Europe as well as in Japan; and other difficulties. Estates. Although it has not yet materialized, there is an enormous expected demand for automobiles in less developed countries.

How, then do the world's carmakers respond to or prepare for such challenges? Each company tries to use its own strength to compete in the world market. Fiat, an Italian car company, seem to have worked out its labour problems and can now focus on beating Volkswagen, the European leader. The strength of VW, on the other hand, is its automated assembly line. Moreover, VW has cooperative ventures with over ten automakers, including the German Daimler-Benz and Porsche, Japanese Nissan, Swedish Volvo, and Spanish SEAT.

Germany has become the second-largest market for Japanese cars (the largest is the United States). The strategy of Japanese automakers in Germany is similar to that in the United States: Get into the market, learn from mistakes and correct them quickly, listen to the customers, and have a flexible production line to adapt to customers' tastes. Carl Hahn, the chairman of VW, admitted that the Japanese cannot be beaten on productivity. The motto underlying a joint project with the Japanese seems to be "If you can't beat them, join them." Thus, Volkswagen and Toyota will produce pickup trucks designed by the Japanese

Listening to the customers was one of the keys to success of Japanese car companies in Germany. They changed their styling to accommodate European preferences, and they equipped their cars with better suspension and steering to make them suitable for the German freeways, which have no speed limit. Similarly, they identified the need for minivans and four-wheeldrive vehicles and offered models to fill those needs.

One reason many Japanese carmakers can respond quickly to changes in the market is the fact that they deal with many suppliers. It has been estimated that Toyota, for example, buys about 80 per cent of its parts from suppliers. The company also strengthened its market position in the United States by a joint venture with General Motors, producing cars in Fremont, California. In-deed, many Japanese carmakers have cooperative arrangements with foreign companies. The exception is Honda, which is quite independent. With its Japanese facilities used to its limits, Honda was one of the first foreign manufacturers (besides VW, which has closed its US plant) to establish itself in the United States. The company's success led to the introduction of a new luxury car marketed under the Acura label.

In the past, General Motor's full model line and its enormous size were considered strengths. But it is now realized that these characteristics can also be weaknesses, hindering quick adaptation to changes in the environment. GM's vertical integration, in which the company produces some 70 per cent of its own parts, may also contribute to its inflexibility. Although GM operates worldwide, there has been little cooperation between the US Company and its foreign subsidiaries in the past. In contrast, Ford Motor Company has become truly international, with close coordination among its design centres in the United States, England, and Germany. Chrysler has enlarged its capacity through the purchase of American Motors. The company tries to stay competitive by adapting to changes in consumer demands through the use of flexible manufacturing techniques.

It is quite clear now that executives of major car companies have to take a global view of their business. While opportunities have been increased by internationalization, threats are always present. A shift in, the director of the interdependent economies or a dramatic change in oil prices can make or break the automobile market. The challenges for the car makers' executives are great indeed.

Questions

Question one

As an operations manager substantiate on the competitive strategies of the American Lee Lococca of Chrysler, the European Mercedes-Benz, the Japanese carmakers and Korean cars. How does their respective strategies work for them? (20marks)

Question two

"Although it has not yet materialized, there is an enormous expected demand for automobiles in less developed countries. How, then do the world's carmakers respond to or prepare for such challenges?" If you were the operations manager of a carmaker, how could you use the cited statement above in line with "capacity" to seize the opportunity? (20marks)

Question three

1. Having gained versed knowledge in the field of operations management. How do you think Fiat worked out its cited problems and now focused on beating Volkswagen and eventually became the European leader? (12 marks)
2. Comment about the Volkswagen assembly line, was it a wise move for the company to use such an assembly line? (08marks)

Question four

1. Throw more light on the supply chain strategy used by many Japanese carmakers, how does it contribute to their business success (10marks)
2. If you were part of the Japanese carmaker team which other supply ingredients would have added in to make it much better (10marks)

Question five

1. Based on the story explain how German and United States became the second-largest market for Japanese cars? (10marks)
2. Which other factors might have contributed to the success (10marks)