Within the automobile industry, it is vital that companies adequately compete for consumer sales. With the industry struggling due to the current economic conditions, as well as a push for environmental sustainability, companies have to come up with new competitive strategies. There are 6 major ways that a company can give themselves an advantage over others. They are cost, quality, service, brand, innovation, and convenience. (McCrimmon, 2008) Three automotive companies are compared in terms of their strategies to compete against one another. Ford’s main strategy is on product development and efficient leadership. They use a low-cost strategy to help give a pricing advantage to consumers as well as centralized strategic leadership.(Hopkins, 2010) General Motors focuses on innovation of great quality products, and uses decentralized control in terms of making decisions.(Hopkins, 2010) Toyota’s strategy is in quality and product differentiation. This is obtained by focusing on the development of the process of building automobiles, rather then the development of automobiles themselves.(Hopkins, 2010)
Competitive Advantage Within The Automotive Industry
The North America automotive industry continuously competes for the business of consumers. With the industry struggling due to the current economic conditions, as well as a push for environmental sustainability, it is ever so important that automotive companies compete in a way that will give them an advantage over others. One would ask, how do these companies compete and what strategies do they use? Three major automotive companies; Ford, General Motors, and Toyota, will be comparatively analyzed in the ways that they attempt to gain advantage over one another, in such a volatile market.
Competitive advantage is defined as the ability of an organization to produce goods or services more effectively than its competitors do, thereby outperforming them. (Williams & Kinicki, 2009) There are 6 major areas in which businesses use to differentiate themselves from one another. They are cost, quality, service, brand, innovation, and convenience. (McCrimmon, 2008)
The underlying decision in a consumer buying a product or service from a company is how the purchase price will make a dent in their wallet. A common way for companies to try and outcompete each other is by making the price of the product or service lower than the price of their competitors, while still being able to turn a profit. Automotive companies try to outcompete each other by having the best quality products for the lowest prices.
If you were to go in to buy a new vehicle from a dealer, you have the option to bargain on your price. If you are not satisfied, dealers are willing to lower their prices in order for you to buy their product, rather than someone else’s. Dealerships have large sales and incentive programs in order to make their products seem more attractive and to encourage a buyer to look at their products rather than a competitors. Packaging and bundling can also be a deal breaker on a sale; however, adding on the “little extras” can help make the deal worthwhile.
One way a company can lower the costs of their products or services is to try and cut production costs and other internal costs within the company. This is the reason why so many companies will manufacture their products outside the United States, because cost of labor and materials is marginally cheaper in countries such as China or Taiwan. With lower costs, companies can then lower the prices of the products for the consumers and still make a profit, creating a pricing advantage for the consumers. The automotive industry is a little different however, because people take pride in where their vehicles are made, which can play a factor in whether or not they buy the product. Automotive companies strive to lower...