Last Updated 31 Mar 2020

Why There We Have Winners and Losers in the Automotive Industry

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One reasons that has exposed some automobile companies to severe vagaries of recession while sparing others is the existence of structural differences between the so called auto “transplants” or foreign auto mobile manufacturing in the United States and the major automobile companies incorporated and domiciled in the United States i. e. General Motors, Chrysler, Ford and the like.

The so called ‘transplants’ better represented by Toyota, Hyundai and the like are structured in such a way that they can access credit from their mother countries most of which for instance were not severely affected by the recent recession if compared with the United States (Ohno, 1988). Their deep pocket and this ready pool of credit from their mother countries made them less susceptible to the vagaries of financial meltdown. Another factor that has prejudiced some automakers while favoring others is what analysts have called bad practices of the Big Three United States automakers.

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These ‘bad’ practices are the ones that are responsible for the big cost differentials that have existed for some time now between them and the ‘transplant’. Another tragedy that has benefited the transplants at the expense of the Big Three is the high prices of automobile fuels that have been occasioned by the recession (Ohno, 1988). In this regard the Big Three US automakers known for their SUVs and Pickup Trucks which normally consume more fuel have found themselves uncompetitive due to the avoidance of fuel guzzlers in the United States due to the high oil prices and reduced disposable income due to inflation.

Most of those who have avoided these fuel guzzlers have migrated to the cheaper and more fuel efficient car made from the so called transplant i. e. Toyota, Hyundai, et al. The labor costs have also overwhelmed the Big Three US automakers more than others from foreign countries manufacturing in the United States (McCracken, 2006). This is due to the fact that their workers are unionized and therefore able to press for high salaries while their non-unionized counterparts in the so called transplants do not have such powers (McCracken, 2006).

Importance of the New Product Development for Corporation In regard to Toyota’s New Product Development Process with the launch of the Prius The development of new product whether in form of new innovations, new applications or even completely new goods is a necessary component in business because it enhances the viability of the company. By developing new product the company is able to make a mark in the industry which is one of the best survival strategy that today’s companies have perfected in their bid to withstand cutthroat competition that characterize today’s business environment.

The importance of continuously and consistently developing new product in today’s business world is better captured in the statement “innovate or die” which has of late become a popular catchphrase adopted by both small and large corporate bodies in reference to increasingly knowledgeable consumer demand for the latest and finest products. One of the companies that have embraced the idea of developing new products in an effort to remain competitive while still providing their customers with the newest and finest goods in the respective market is Toyota Corporation.

Toyota which is the second largest automaker globally realizes that in order to maintain its brand visibility as a top automaker worldwide it has keep on innovating and coming up with new and more superior models (McCracken, 2006). All these Toyota models that have been launched in succession by Toyota Corporation are informed by this strategy. This strategy has been employed by Toyota for a long time now. However the most recent product of Toyota’s innovative product development is Toyota Prius. The development of Toyota Prius is in line with Toyota’s management desire to develop newer and more superior cars for this century.

The superiority of Prius as a new and different product from the other is better demonstrated by its superior features that include more spacious cabin space, relatively higher seat position, aerodynamic exterior, a 20km/little fuel economy, and a relatively small engine placed horizontally with a variable automatic transmission (McCracken, 2006). References Ohno, Taiichi, (1988). Toyota Production System: Beyond Large-Scale Production. New York: Productivity Press McCracken, Jeffrey, (2006). Detroit’s Symbol of Dysfunction: Paying Employees Not to Work. The wall street journal online. 06 March 2006

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