Research Korner: General Motors Case Studies

SLEPT Analysis- Spain and the British Clothing Company Barbour

SLEPT analysis of Spain   Social/ Cultural In a society as static as that of Spain, the surge of modernization that has overtaken the nation during the past three decades has had an impact more akin to that striking post-colonial societies of the Third World than the rate of evolutionary change common elsewhere in Europe. Spain is an old country that feels new, it transformed in a few years from a backward almost third world nation to a powerful state. Spain's greatest writers, composers, artists and architects of today, like their predecessors, exist within the European mainstream. It was only when one moved down from the level of high culture into that of popular culture that one found what was distinctively Spanish. To a large extent, this is still the case. Ordinary Spaniards continue to pass time in a variety of ways that are peculiar to their country (Griffin & Ortiz-Griffin 2003). Still, the passing of time has accelerated in the last quarter of the twentieth century. Traditional activities have been changed by the demands of expediency, the intrusion of novelties, and the loosening of long established restraints. The archetype of Spanish recreation, bullfighting, no longer occupies the central place in the nation's sporting life, an honor now largely conceded to soccer (Griffin & Ortiz-Griffin 2003).    The ever multiplying means of passing his increasing amount of leisure time now tempt the average Spaniard with a host of publications ranging from the romantic to the pornographic as well as mass-appeal television and cinema that offer a global array of trivia. With the passing of time, the nature of popular pastimes could draw the Spanish people into a homogenized Euro-culture (Griffin & Ortiz-Griffin 2003).The society of Spain is a mixture of various cultures. Spain is known for its culturally diverse heritage. The state was influenced by various countries and individuals throughout its history. Spain is an industrial and highly developed country, and most of its inhabitants live in an increasingly modern urban society.  Almost all people live in urban areas, while farmers and agriculturalists live in the rural villages or small towns.  About 76% of Spaniards belong to the Roman Catholic religion; 2% identify with another religious faith, and about 19% as non-religious. Most people in Spain still follow a number of age old traditions in addition to the latest fashion and cultural trends. The society would not be the cause of more problems for any company but the society due to its religious upbringing would be cautious to any advertisements that they would deem to be unacceptable.  Any advertisements made by companies would be closely monitored by certain members of society. The culture of Spain is a combination of different races, nationalities and religion that has stayed in the country. The country has combination of the different cultures of people that have stayed in the country, each culture has a distinct characteristic which one person may or may not like.  Each culture is sensitive to various issues and any disrespect to the culture may cause a company more problems and negative image to society. A company who wants to enter the Spanish market can make use of the various cultures as a way to determine further innovations that they can still make to their products. The various cultures will also help the company in having a better image in its industry because it can serve all types of culture.   Legal The evolution of the Spanish Constitution seems to prove the assertion that Spain considers itself a social and democratic state, though this does not mean that everything has been done nor that The evolution of the Spanish Constitution seems to prove the assertion that Spain considers itself a social and democratic state, though this does not mean that everything has been done nor that there are not areas that could be improved (Hesse 1995). In general, however, it can be said that constitutionalism has taken root, despite the doubts which existed while it was being established. This uncertainty was the consequence of a turbulent history and the many years of dictatorship which the country experienced. That the Constitution has rooted itself firmly can be appreciated from the frequent repetition of the popular phrase 'this is unconstitutional', used on the streets when there is a possible infringement of human rights, or when state policies are unpopular. The Constitution has become the property of the people and has helped to create a political consciousness which was sadly lacking before (Hesse 1995).   Nevertheless, there is still much to be done as far as constitutional development is concerned, giving special attention to those areas pertaining to basic human rights, economic rights, the improvement of the system of autonomous communities, and achieving full conformity of the administration and the courts to a new legal reality. These are issues not only for which it is necessary to provide further theoretical guidelines, but which also need to be made more applicable in practice. This means full conformity with the existing constitutional reality, and alignment with socioeconomic, political, and constitutional evolution in other European countries. It is, perhaps, also necessary to make the political class more aware of the problems which affect other sectors of society (Hesse 1995).The sources of law in Spain include the law, customs and general principles of law. The supreme Spanish law is the Spanish Constitution of 1978. The constitution serves as the primary consultant with regards to creating new laws. The constitution regulates the functioning of public bodies. It makes sure that the fundamental rights of the Spanish people are respected. It also makes sure that the rights of organizations and the competencies of the different autonomous communities are given proper reverence. The Constitution enjoys a material supremacy that determines the rest of the laws in Spain. All laws enacted must be declared compatible with the Constitution. A public body has been created; they make sure that they regulate the fulfillment of this rule. The laws of Spain were enacted to give freedom and restriction to the people and businesses operating in Spain.  The laws of Spain provide assistance in distinguishing what are the things that the people can and cannot do. It brings a situation of order in the democratic state. The laws of Spain should and will not be a hindrance to the growth of any company operating within its territories. It will provide the much needed help in making sure that the company will achieve its goals. The laws of Spain give guidance to the organization so that the company can achieve its goals without major issues from the government.   Economic Since the 1950s, the country has undergone a transformation from conditions of backwardness, with the share of industry increasing over that period. While the share has declined in more recent decades it remains of fundamental importance. Within industry, there has been some shift towards sectors with a higher technological content, particularly motor vehicles, with Foreign Direct Investment (FDI) playing an important part in consolidating activities. Yet overall, there continues to be real competitiveness issues, due substantially to problems of technological weakness, which have become more acute as the economy has become more internationalized. While foreign investment has led progress in some sectors, there is still a lack of domestic innovative capacity. As a result, there is still a high dependence on foreign technology even if there is a higher capacity for absorbing foreign technologies as a consequence of the upgrading of local technological effort and capabilities (Mcgowan, Radosevic & Tunzelmann 2004).   The role of FDI and the ways in which it connected with Spanish institutions and firms changed substantially. To summarize these changes four types of links can be differentiated: property relations, technological activities, participation in public policies and those derived from the economic activity of the foreign companies themselves (Mcgowan, Radosevic & Tunzelmann 2004). Spain’s economy is considered to be one of the most successful in the world. The Spanish economy is credited for having avoided the virtual zero growth rates of some of its largest partners in the EU. The country's economy has created more than half of all the new jobs in the European Union.  The Spanish economy has thus been regarded lately as one of the most dynamic within the EU, attracting significant amounts of foreign investment. During the last four decades the Spanish tourism industry has grown to become the second biggest in the world. More recently, the Spanish economy has benefited greatly from the global real estate boom. The downside of the real estate boom has been a corresponding rise in the levels of personal debt; as prospective homeowners struggle to meet asking prices, the average level of household debt has tripled in less than a decade. Ever since the 1990s some Spanish companies have gained multinational status, often, but not only, expanding their activities in culturally close Latin America. As Spain enters the second term of its current Prime Minister Rodríguez Zapatero, it has been seriously hit by the world liquidity crisis stemming from the American sub prime mortgage crisis. The American credit crunch became worldwide by the second half of 2007 and it is now affecting the rest of Western economies, especially predating on Spain by means of the burst of the Spanish property bubble, which used to account for much of the Spanish growth. The Spanish banking system has been credited as one of the most solid and best equipped among all Western economies to cope with the worldwide liquidity crisis, thanks to the Spanish banking rules and practices that oblige banks to have very high provisions.   The government of Spain believes that it can withstand the financial crisis the world is facing. It believes that it made use of all strategies to avert the damaging effect of the crisis.   Political It is difficult to argue that Spain constitutes a model for a well-timed move from consensus to competition. The fortunate outcome was serendipity wherein many of the decisions were taken in terms of partisan interest, and the balance of forces, plus the broad support of the population and a bit of luck, secured democracy. Consensus democracy may indeed require a consensual political culture, and a consensual political culture requires social as well as political actors to be willing to engage in negotiation and compromise. Spain is perhaps fortunate that the more intransigent sectors of its political and social elite held off their fire until the most dangerous phases of the transition had passed (Balfour 2005).  Throughout the years since its accession to the European Union (EU), Spain was both an ardent supporter of integration and a major beneficiary of its largesse, largely through the Structural and Cohesion Funds. Entry to the European club was in fact a high point of the long post-Franco transition period, marking the culmination of the reformist aspirations of the previous decade. Membership was to consolidate a process of political and economic modernization envisaged in the principles and aspirations of the Spanish Constitution approved in 1978 (Balfour 2005).     The newly created social democratic state was constructed in part around the notion of the myth of Europe, which epitomized everything that was modern. Among those who shared the myth was the belief that Spain must rejoin Europe, which was critical to the reinvention of a democratic consciousness.  Even before accession to the EU, national political elites identified the national interest with European interests. This particular perception of Spain's interest was reflected in the linkage between national identity and European identity. Subsequently, political discourse centered upon bringing together national identity and European common interests to legitimize domestic policy and the requisite adaptation to European institutional frameworks (Balfour 2005). The politics of Spain takes place in a framework of a parliamentary representative democratic constitutional monarchy, whereby the Monarch is the Head of State and the President of the Government is the head of government in a multi-party system. Executive power is vested in the government. Central legislative power is vested in the two chambers of parliament. The Judiciary is independent of the executive and the legislature. The political pressure groups compose of Business and landowning interests; free labor unions; Catholic Church and other religious organizations and armed rebellion. The political pressure groups contribute in shaping the political reforms the government introduces. The pressure groups serve as a conscience in government decisions. The democratization of Spain has made a big impact with its success economically. The democratization of Spain made sure that businesses can try to venture in that country. A business has to make sure that they were aware of the political situation of Spain and the company has to make sure that it has a reasonable position with regards to political issues. A company must pass tests done on the product before it can be sold in the market. The company must make sure that it correctly places the products contents in its labels so that they will not face penalties.   Technological After the First World War Spain came through its industrial revolution with basic industries concentrated in the Basque country and assembly or transformation industries in Catalonia. There was at this time no significant institutional interest in technology, and so by the 1920s Spain established what would become a heavily dependent relation on foreign expertise in communications technology. This set a pattern of dependence on imported technology that deepened through three national development plans.  By 1978, Spain's dependency on foreign technology in the sector of electronics components, which includes telecommunications, reached an estimated 93 percent (Kinder 1997).  At the same time, Spain was investing less capital in research and development as a percentage of its wealth than any other European country; and it was notably weak in contracting license agreements and even weaker in assimilating the technology it was licensed to use.  Nowhere was the internationalization of capital more clearly expressed than in the communication and information technology sector. This sector is usually divided into professional and consumer electronics goods.  The enormous power held by transnational electronics firms indicates one of the more influential sectors among the business, as well as political, elites (Kinder 1997).    This pressure was played out most decisively in the formulation of Spain's telecommunication policy, and in political efforts surrounding the union of Spain with European Union. In relation to the regional broadcasters, transnational electronics firms were able to expand into new markets when the absolute control of the central government over purchases of communication technology was challenged by the regional authorities (Kinder 1997). Technology is an important factor for a success of a country. The advancement in technology contributes in a state’s achievement of goals. The advancement in technology helps a country be competitive in the global market. The failure to adjust to new trends to technology leads to poorer services to people and businesses. The technology in Spain is vastly improving. The businesses in that country offered new innovations in its technological aspect and introduced new concepts with regards to its industry.  Since technology rapidly changes. Spain makes sure they are updated to what is happening and they can adjust to these changes.  If other companies use new technologies to provide services, Spain and businesses within it has the technology capable of competing with such technologies. A new company can make use of its various technological innovations to have no problem entering the Spanish market. Technology is a big help to Spain, its people and businesses within it. Technology made a huge impact in the way people does their daily activities, it created an impact on how company does its business and it changed the landscape of businesses in Spain. The technology available in Spain will not serve as a hindrance to the growth of any new business in that market, instead it will provide additional means for the company to reach its goal in the newer market. The technologies that will be used by the people and businesses passed international standards and its benefits were proven by various companies.   Opportunities for Barbour An opportunity for the company Barbour is to find out more ways to give a distinctive look and features to their actual stores. The stores of Barbour should be designed in a way that clients will come back over and over again.  The retail stores of Barbour should feature the best of their products and the products that are well patronized by clients. By doing this the company will have competitive advantage over other firms. It will attract clients who have various tastes. An opportunity for the company is to improve the features of their website. By doing this it can attract more markets. The company should focus on the online purchase function of their website. The company should make sure that the online buying function of the website would be working to prevent any problems with the clients There should be less downtime for the website to prevent the loss of loyal or projected clients.  The company should also continue to improve its supply chain so that different issues and problems can be resolved ahead of time.  It should device faster means to deliver supplies to prevent shortages of products in their branches. The supply chain system should have lesser errors so that the operation of the company would not stop. Lastly an opportunity for Barbour is to continue to reach newer territories where it can offer its products and services.  This newer territories may be in a country that has recently just improved its economy. Barbour can try to reach the Asian Region particularly countries like Singapore and Hong Kong.  The company’s product lines will do well in the region because there are some people in the region that has the same taste in fashion as the European and American clients.   Barriers for Barbour A barrier to the growth of Barbour is the high cost of operations. Companies such as Barbour have to consider cost of operations in the domestic market. In terms of cost retail firms can incur more cost than other firms. Materials used by manufacturing firms may be brought in at lower prices but the products being offered in the retail industries cannot be lowered and each personnel have different values for a different kind of service. The manufacturing firms can still lower its operational cost while the retail firms have a limited chance to do that because of personnel costs and product costs.  To manage the barrier of higher cost, Barbour can buy more than one product from the mother company of the products they are selling.  Another barrier to the growth of Barbour is the high cost of personnel hiring and maintenance. Since the personnel cost cannot be reduced, Barbour can minimize the use of expensive ornaments or display in the domestic branch. The company can reduce the use of displays and other attractive without sacrificing the uniqueness of a branch. Ornaments have lesser importance than the quality of service.  A barrier to the growth of retail firms such as Barbour is the tariffs and taxes that the retail companies have in the different countries they operate in, each countries has its own rate of taxes and tariff that creates additional expenses for a retail firm such as Barbour. Lastly a barrier to the growth of Brought is the culture of some clients in other countries they operate in. Some people may not like the new culture that is brought by retail firms and its expansion into newer markets.   Some people may protest against some of the materials used in creating the products.   References Balfour, S (ed.) 2005, The politics of contemporary Spain, Routledge, New York.   Griffin, WD & Ortiz-Griffin, JL 2003, Spain and Portugal today, Peter Lang, New York.   Hesse, JJ (ed.) 1995, Johnson, N 1995, Constitutional policy and change in Europe, Oxford University Press, Oxford.   Kinder, M (eds.) 1997, Refiguring Spain: Cinema, media, representation, Duke University Press, Durham, NC.   Mcgowan, F, Radosevic, S & Tunzelmann, S (eds.) 2004, The emerging industrial structure of the wider Europe, New York.

SLEPT Analysis- Spain and the British Clothing Company Barbour

SLEPT analysis of Spain Social/ Cultural In a society as static as that of Spain, the surge of modernization that has overtaken th...

General Motors

General Motors Multidivisional Structure             The multidivisional structure represents an opposite structure to functional structure. In a multidivisional structure organizational activities are grouped on the basis of products, services, customers, programs, technical process, or geography. All or most of the resources necessary for the accomplishment of specific objectives are set up as a self-contained unit headed by a product or division manager (Sims 2002).             General Motors chose the multidivisional structure because it supports diversification of products. Each product line has its own divisional hierarchy complete with support functions.             The advantages that General Motors can reap from adopting a multidivisional structure are: 1. Increased Effectiveness – because of the division of labor between divisional managers and corporate managers. Divisional managers are responsible for day-to-day operations while corporate managers are responsible for long-term planning. 2. Increased Control – managers can monitor the performance of divisional managers. 3. Profitable Growth – allocation of corporate resources can be strategically planned since each division can be viewed as its own profit center. 4. Internal Labor Market – corporate managers can be hired from the pool of divisional managers, providing an incentive for effective behavior among divisional managers (Riahi-Belkaoui 1995; Volberda 1999).   Matrix Structure             A matrix design is based on multiple support systems and authority relationships, whereby some employees report on two supervisors rather that one. Every matrix organization contains three unique and critical roles: the top manager who heads and balances the dual chains of command; the matrix bosses (functional, product, or area) who share subordinates; and the two-boss managers who report to two different matrix bosses. Each of these roles has it own unique requirements (Sims 2002).   The matrix structure is used by General Motors in areas where there is string environmental pressure and  there are large amounts of information to be processed. The benefits that General Motors can gain from Matrix structure are: 1. Enhanced organizational flexibility 2. High motivation and increased organizational commitment 3. Team members have opportunity to learn new skills 4. Promotes decentralization (Riahi-Belkaoui 1995; Volberda 1999)   Potential Communication Problems Multidivisional Structure             Communication problems occur in tall hierarchies. Multidivisional structure is considered the tallest hierarchy. There are a number of potential communication problems. 1. Distortion of Information by Divisions – each division does not communicate with others because they are concerned with the hierarchy of their own division. As the hierarchy gets taller, the chance for unintentional information distortion is greater. 2. Possibility for Conflict and Misinformation – since divisions compete for resources, they may not cooperate cause coordination problems. Also, divisional managers may not always present a true picture of the sate of their division in a bid to attract more resources. 3. Transfer Pricing – problems between divisions often revolve around the transfer price such as the price at which one division sells a product or information about innovations to another rdivision. Matrix Structure 1. Unclear Roles – due to the lack of a clear control structure, expectations are not stable across teams. People resist change and they avoid conflict, or role ambiguity. 2. Group Behavior – the dynamics of group behavior may lead to slower decision-making, one-person domination, compromise decisions, or a loss of focus. The lack of a clearly defined hierarchy of authority can lead to conflict between functions and product teams. 3. Relationships – Employees are uncertain about reporting relationships. The member so the team are called ‘two-boss employees because they report to two superiors.   Degree of Centralization Multidivisional Structure             The multidivisional structure is partly centralized and partly decentralized. Although each division manager is allowed to decide for day-to-day activities, strategic and long-term planning remains the role of the top management. Matrix Structure             The matrix structure is highly decentralized. There is no clear control structure.     References   Riahi-Belkaoui, A. (1995). The Nature and Consequences of the Multidivisional Structure. Westport CT: Quorum Books.   Sims, R. (2002). Managing Organizational Behavior. Westport CT: Quorum Books.   Volberda, H. W. (1999). Building the Flexible Firm: How to Remain Competitive. Oxford England: Oxford University Press.

General Motors

General Motors Multidivisional Structure The multidivisional structure represents an opposite structure to functional stru...

Multinational Companies in the Context of Globalization

CHAPTER 1: Introduction   Multinational Companies in the Context of Globalization               The proliferation of multinational companies is attributed to the process of globalization. Globalization is an evolving, continuous and multi-faceted process covering political, economic and socio-cultural changes driven by technology (, 1983). In international relations, the United Nations established in 1945, embodies the cooperation of states towards a standard for political and economic development (2001). The establishment of venues for cooperation resulted to the conduct of political and economic activities of states and other entities in the context of international relations ( 1998). In international economics, production and trade is no longer limited to a country. International political cooperation led to agreements for the opening up of economies to accommodate the international flow of goods and investment from other economies. ( 1999) The General Agreement on Tariff and Trade 1947 is an agreement that facilitates free trade among the signatory countries under the capitalist system. (2005) Countries engaging in trade related agreements are considered as contracting parties with the freedom to stipulate the provisions of the agreement subject only to the limitations of the laws of the contracting states and international law. In international relations, businesses conducting international operations or multinational companies are accorded legal personality to contract with other companies or states.              Globalization translates in economic terms as capitalism, liberalization, and privatization. Capitalism is an economic system where most, if not all, resources are privately owned and where prices and the mode of production is determined by the free market. Liberalization refers to the process of relaxing state restrictions or regulation in certain activities. Privatization covers the transfer of the control and management of resources from the government of the private sector. (2003) Globalization means that the private sector control and direct economic activities. These activities are not only limited to the state but to other countries. Multinational companies emerged segmenting production in different parts of the world where production resources are competitive making production more profitable. This situation led to the competition of states for international investments, especially countries with underdeveloped economies that depend on foreign investment to sustain the economy. (1998)               Developing countries, that are not industrialized and overflowing with human resource, compete to provide investment opportunities to companies who want to engage or expand into other economies.  States who have resources but unable of efficiently manage their endowments become dependent on foreign investment as a source of revenue for the government and a source of finances for private businesses. This situation melts the economic restrictions and barriers in economic relations because the basis of dependence is need. While developing countries are dependent on large companies for investment, the large companies are in turn dependent on these countries for more profitable conditions for production. The private characteristic of the parties in the relationship of dependence excludes the control of the government over private transactions. The government exercise restrictions only to the extent of the limitations of laws but then again laws are changeable. (2002)   Multinational Companies in the Global Market   It is in the context of globalization that multinational companies developed and persisted and it is also in the context of capitalism, liberalization and privatization that the strategies of multinational companies are based. Multinational companies are business firms that controls and managers manufacturing processes in two or more countries. Multinational companies are multiplant firms operating in more than one state. (1996) Multinational companies are large firms operating in two or more countries through subsidiaries. Subsidiaries are companies controlled by a larger corporation. Control and ownership of the company may be shared with other companies. If the larger corporation fully owns and controls the subsidiary then the latter is a wholly owned company. (2001)   There are different categories of multinational corporations. One type is the horizontally integrated multinational corporation involved in the production activities located in more than one country for the manufacture of similar products. Another is the vertically integrated multinational corporation engaged in the production or manufacture of products in one country to be used in another production activity in another state. In the second category, the company produces or manufactures raw or processed materials in one country to be used in the production of a final product produced in another country. Still another category is the diversified multinational corporation involved in the management of production firms in different countries that are related neither horizontally nor vertically. (2003)               Multinational companies developed into competitive forces in the world economy. The focus of the operations of multinational corporations is on the coordination of the allocation of resources in its international operations in order to minimize production cost and maximize revenue. However, before companies can operate as multinational businesses, these firms also have to develop market-entry strategies to become competitive forces in a foreign economy. There are different strategies that multinational corporations may utilize to enter into a foreign market. The common strategies used in market entry are either marketing or operational. Marketing entry strategies include exporting and licensing where the company does not have to establish a physical base in the new market. Operational entry strategies include franchising, joint venture and foreign direct investment. After all these considerations, the multinational company can now concern itself with building a business structure, actual production, direct marketing as well as financial planning. Globalizing or Internationalizing a Business               The endeavor of entering and developing a foreign market is not easy because at the start of the process, the company is like starting a business and there are no sales or marketing structure in place and there is limited knowledge of the market. There is also a difference between domestic and international operations due to the difference in the operating environment and the strategic requirements for success. Although there is no actual difference between domestic and international operations in relation to marketing and operations theories, there are factors in global operations that affect management decisions. ( 1996)             Penetrating an international market involves a process with zero-base because the business does not have an existing business in the market, there is limited knowledge on the market and lack of managerial competence to operate in the new market. This situation implies that the business introduced in a foreign market is likely to experience a greater rate of change than the change in the business environment because there are many internal adjustments to be made by the business organization. The company has several options to address the situation. One option is entering into partnerships with local firms for the distribution of products. Another option is speeding up the process of changing the marketing strategy through a new product or expanding distribution or changing the marketing organization by acquiring sole distribution of products. (1996)   Globalizing a business involves the development of a multi-market network because of the influence of its previous experience in its businesses in other countries. The more international businesses that a company has, the more that operations will be done in an aggregate level. In terms of price, the company may apply a uniform price for its products with minimum influence by the domestic market or it may also vary price in the different markets especially in cases where one business is incurring increased sales and another suffering losses. International operation influences decision-making in different way than in domestic operations. (2003)   International business operations involve rapid changes in marketing strategy as the company grows or fails. Decision-making on strategies is affected by market factors as well as organizational development. Thus, in studying the strategies applied by existing multinational companies, market factors and organizational characteristics are the two major points to be considered. These two factors co-exist in the process of entering and developing an international market. In determining the strategies that contributed to the success of international businesses, the common experiences of these businesses are important to learn the evolution of marketing and organizational strategies from the initial entry until the successful introduction of the company. (2002) Justifications for Global Business Operations                         There are several justifications that support the strategy of some companies to enter the global market. First is to find cost-effective sources of raw materials that support the increasing production needs of the company. The domestic economy may not be able to provide the requirements of the company for raw materials and labor or the cost of raw materials and labor is too high making it not rational for the company to depend on the domestic economy for its raw material needs. When cost-effective sources of raw material and labor are available in other economies, companies expand into other economies to take advantage of cheaper raw materials and labor. One of the first companies to operate as multinational companies are those engaged in oil exploration such as British Petroleum and Exxon. (, 2003)               Second is to find new markets for their products. There are companies that experience decrease sales due to market saturation. Market saturation refers to the extent that a particular product is diffused or distributed into the market. The extent of distribution determines the remaining portion of the market for business expansion. Market saturation depends upon the following market factors: 1) the purchasing power of consumers; 2) competition; 3) prices; and technology. In the case of television, almost all of the households in industrialized countries such as the United States and Britain own television resulting to a very high diffusion rate. Companies manufacturing televisions are forced to compete based on innovations to attract households to purchase new television sets. Most companies selling televisions are multinational companies offering their products to new markets in developing countries. (, 2003)               Third is to rationalize the firms operating cost. Business firms with seeking to achieve cost-efficient production are attracted to expand their operations to other countries not only to lessen the cost of raw materials and labor but also to minimize cost required in production such as taxes and policy restrictions. In minimizing cost, the business firm is able to remain as cost competitive. Multinational corporations consider cost minimization in terms of its internal operations as well as the external factors that affect production. High business taxes and strict industry standards or restrictions are the most salient business environment features that repel business firms. Less tax and less stringent policy restrictions are the factors that multinational companies look for in choosing a country to expand its operations. Business firms that primarily became multinational companies to minimize operating cost are Texas Instruments, Intel and Seagate Technology. (, 2003)   Objectives of Global Business Operations               The justifications of business firms in internationalizing their operations are related to their objectives for growth and expansion. The most common manner of market entry is commenced through product distribution through local businesses or partners to gain entry in a short period. After introducing the product to the market, the business firm takes a more involved action by producing and marketing the product through a subsidiary. This is applied because it enables products to gain easy entry into the market even before the company has established its operations in the market. This also involves minimum risk since the company is given time to assess the acceptance of the market to its products. The reasons for market entry and development are to gain access to cost-effective sources of raw materials and labor, create demand or market for products and services and minimize cost.               These justifications are related to the objectives of investment decisions. First objective is to learn in lead markets (, 2001). There are business firms who incur cost in market entry primarily to learn from market conditions and secondarily to earn profit. Koc a Turkish conglomerate sought to enter Germany, considered as the leading global market for refrigerators, freezers, dishwashers and washing machines in terms of product specification and consumer sophistication. At the start of the endeavor, the company recognized that its brand is unknown in the market and great effort is needed to penetrate the market. However, the company also recognized that if its market entry strategies work it would gain great insight into the marketing situation in Germany and global market entry as well. The lead market differs in different countries. Software is the lead market in the United States, electronics and telecommunications in Japan and fashion in France and Italy.             Second objective is to pursue a competitive attack or competitive defense ( 1994). The investment decision to penetrate a market is a response to the earlier move of a competitor to enter a new market. The business firm takes the position of a follower. This is done when the company that previously entered a market is a major competitor and the entry is deemed as giving the competitor a great advantage. Apart from the great advantage that the competitor is expected to experience in terms of revenue, the company also perceives that leaving the company to operate alone in the new market will eventually lead to inequality in status to the disadvantage of the business firm. Another scenario that influences the decision to enter a new market is a defensive stance against the move of a major global competitor to enter the domestic market where the business firms are based. The business firm enters the domestic market of the competitor to force the competitor to incur increased cost in an intensified competition in the same way that it incurred cost in responding to the earlier move of the competitor.                Third objective is to take advantage of opportunities offered by a new marketing environment through incentives from domestic and foreign countries.  There are countries that encourage businesses to export by providing different kinds of support making it easier for business firms to expand into the global market. There are also countries that give incentives for foreign investments paving the way for the smooth entry of business firms into the market. (, 2000) CHAPTER 2: REVIEW OF RELATED LITERATURE   Entry Strategies in the Global Market               Entering another economy requires the transfer of financial resources, management skills and technology to another market. There are several ways of gaining market entry for multinational firms, which are exporting, franchising, licensing, joint venture and foreign direct investment. Foreign direct investment provides greatest control of production by the foreign company but requires the greatest use of resources. Franchising and joint venture involves moderate degree of control as well as a moderate infusion of resources. Licensing offers the least level of control because it also involves the least utilization of resources. The entry strategy of a multinational corporation depends upon its business objective and the availability of resources.               Exporting refers to the process of marketing and distributing products to a foreign market. This activity involves the interaction between the exporter, importer, transport provider and the government of the foreign country. The goods distributed are not produced in the foreign market so that there is no need to establish a physical structure in the new market. Costs involved covers marketing activities of the company. This market entry strategy is ideal for business firms with limited knowledge and experience on international operations. ( 2003)             Piggybacking is an exporting arrangement that involves taking advantage of the channels of distribution in the global market instead of targeting a particular market. A company that successfully used this strategy is F&P Gruppo, an Italian rice firm that owns the Gallo brand. The company entered the Poland through its subsidiary in Argentina because the Argentinean air force was sending empty air freighters to Poland that comes back with imports. Food companies took advantage of the cheaper way of exporting products.  Another manner of piggybacking is the joining of two companies to take advantage of a channel of distribution. This is applied by IBM and Minolta with the latter taking advantage of the established distribution channels of IBM and the former welcoming a firm to share the cost of distribution. (2003)               Franchising is a market entry strategy as well as a hybrid manner of organizing the business by establishing a relationship of agency with the franchisees ( 1988). Franchising involves the convergence of a parent company and several small businesses. The parent company sells to the smaller businesses the right to distribute its products or use its trade name and processes. The agency relationship established between the parent company and the franchisee is governed by a contract ( 1992). The franchise contract defines the conditions of the agency and the duration of the relationship. ( 2004).               McDonalds celebrated its 50th anniversary in April 15, 2005 and remained true to the statement "As far as I can tell, the only place you can't get a Big Mac is in outer space." ( 1990, ) The company operates as a global business through franchising. In 2004, the company reported to have established 30,000 local restaurants located in 115 countries across five continents. It is the biggest fast food retailer conquering markets worldwide. In almost every country in the world, there is a McDonalds restaurant and in a single state or region, there are several branches. The company has spread so widely that the term “mcdonaldization” ( 1998,) was coined to describe the organization and culture of the company. The term has evolved to refer to the general business strategy of expansion.               Licensing is the process of permitting a local company to use the property of the licensor in exchange for a fee. The property refers to intangible things such as patents, trademarks as well as production techniques. This arrangement involves the infusion of little resources enabling the licensor to obtain a high return on investment. However, there is a risk of revenue loss because the licensee produces and markets products and collects revenue. ( 1999)   Licensing also refers to the market entry of business firms with a distinct legally protected asset that constitutes their distinction in the market. Distinct protected assets covers brand name, technology, product design and manufacturing or service process. Licensing is not an exclusive strategy in global marketing. (  2004) Disney is a company renowned for licensing cartoon characters to manufacturing and other firms within and outside the United States. The central activity of Disney is its media productions while marketing is done by the business firms permitted to use Disney cartoon characters. In department stores cartoon characters are found in children’s clothing, shoes, bags, pens and toys  while in supermarkets Disney characters are used in shampoos, soap, diapers, milk, cereals and a wide array of other products.               Joint venture refers to the management arrangement that involves the partnership of a foreign company and a local company based on the sharing of capital, technological resources and other benefits. The foreign company benefits from the relationship by gaining entry into the market and taking advantage of the expertise of the local company on the political and economic environment while the local company benefits from enjoying the infusion of capital and technological innovations into its operations. The extent of control of the foreign and local firms in the joint venture depends upon the agreement and the legal limitations. ( 1999)                The New Corporation by its strategic joint ventures became a multinational company. Its corporate projects started out as a drive to expand its reach to other countries apart from Australia. It ventured into the UK purchasing newspapers both national and local and then it set foot in the United States to introduce his company as a potent competitor to existing companies. The most recent venture is developing its business in Asia particularly in China and Hong Kong, India, Indonesia and the Philippines which catered not only to the English speaking locals but also accommodated and aired the local events and locally produced movies and television programs. In countries where there are established broadcasting companies the strategy of The News Corporation is to gain control of the channels of distributing televised news by gaining controlling interest in  influential cable companies through joint ventures. When satellite television was introduced, it also acquired interests in satellite corporations. After being assured of the means of showing its programs, the company had the freedom to create and develop its shows. The company is known for hit movies Titanic and Independence Day and the kids channel Fox Kids. ( 2006)                         Foreign direct investment (FDI) is “a category of international investment that reflects the objective of a resident in one economy (the direct investor) obtaining a lasting interest in an enterprise resident in another economy (the direct investment enterprise)” ( 2003). Foreign direct investment implies the development of a lasting interest in the establishment of a continuing relationship of the direct investor with the enterprise including influencing the management of the firm to a certain degree (1996). Foreign direct investment allows the direct investor and the direct investment enterprise to experience certain economic benefits from the relationship. On one hand, the direct investor is able to engage in new ventures or expand into other economies by sharing capital, management expertise and technology to the direct investment enterprise (2003). On the other hand, the direct investment enterprise benefits from capital infusion, technological transfer and management skill acquisition necessary for growth. (1998) International business firms that fared well through foreign direct investment include General Motors that established a plant in the Philippines as well as Coca-cola and Pepsi with processing plants in every geographical region for cost-efficiency.   Operational and Marketing Strategies of Multinational Corporations               The success of the marketing strategy of multinational corporations depends upon the manner that the company takes advantage of the different opportunities and tools to improve its gain a place relative to its competitors and the market. Marketing efficiency means creating a market in the local economy by introducing and promoting products with the objective of extending product life cycle or introducing products that reached high levels of saturation in other markets. Strategy in global marketing considers the first mover advantage of the company. The multinational company may also take advantage of the higher price that people expect from new products. Risk as a strategy consideration refers to the benefits that the multinational company gets by spreading the operational and macroeconomic risks in different economies. Learning is a benefit achieved by the multinational company because management is able to expand its experience by operating in different economies and markets. Reputation is the benefit experienced by the company in increasing its brand equity in the global market through the influence of crossover customers. ( 1998)               Operating in the global market requires strategies based on accurate information about the marketing environment worldwide. The company can utilize marketing and operations theories but it should apply these in the context of the local environment. Operating strategies revolve around diversity. The company needs to consider and integrate three sources of information: firm-specific knowledge or information on the local market environment, country specific knowledge or information on the political and economic characteristics of the local environment, and knowledge of global environment to determine trends that affects decisions on business operations.  (, 1999)               Marketing strategy should focus on mass-marketing competence and establishing marketing channels. Mass-marketing competence is an important because this is the strategy demanded by the emerging market and it is the best way of fulfilling the objective of the business firm to develop a market for its products. Companies seeking entry into new markets initially price their products higher than local counterparts in order to maintain global price consistency and to prevent parallel importing threats. This results to their products accessible only to the elite segment of the market. In the long run the company does not obtain projected sales and it also allows local companies time to develop their products and brands. Establishing marketing channels is an important factor in market penetration because this strategy links the offer of the company to the demands of the customer. ( 2001)                         Kellogg, a cereal firm in the United States had trouble in marketing its products because it failed to consider the distinct marketing demand in India. The company wanted to increase its profit through the potential of developing a global market for its breakfast products. In 1995, Kellogg introduced its cereal products by exporting to India and selling it at its standard global price. After three years of marketing the product, the company was still unable to reach its projected sales. Kellogg has gained a measly $10 million in sales after three years. The company later found out that the low sales was attributed to the higher price of its products compared to other alternative breakfast and the market did not relate to the convenient breakfast advertising claim because people prefer to buy biscuits and tea in roadside stalls. In the next years, the company introduced varieties of biscuits in convenient packaging at an affordable price in roadside stalls. Kellogg’s is still in the Indian market and it has entered other markets through both exporting and foreign direct investment. ( 2003)               Unilever is a multinational company that succeeded in market development through mass-marketing and marketing channel competencies. When Unilever unveiled its new global brand in 2004 in South Africa, the company stressed that its objective is to stay relevant to consumers. Thus, the company launched a campaign to illicit funds for its HIV/AIDS advocacy based on the rationale that healthy and economically empowered people constitute a vibrant market. The advocacy program includes livelihood program for the community. The company also utilized mass distribution channels such as supermarkets and department stores. Unilever is present in almost every region in the world. Consumers belonging to different income groups buy its products. ( 2004)               Globalizing business firms may also consider transferring their brands to the local market or acquiring local sources of advantage. The decision is based on the objective of the company to compete either with other foreign companies or with local business firms or both. Transferring company assets into the market is done by marketing a brand in different markets or using the company name in the different physical structures. ( 2003) Coca-cola and Pepsi transfer company assets to different markets by introducing uniform brands and products worldwide.   Localization is the process of taking advantage of marketing opportunities in local markets. This is done by either taking an international brand or product and fitting these into the demands of the local market or acquiring local brands or products and integrating this into their brand and product portfolio. (, 2003)  The first strategy was used by Kellogg’s in India, when it introduced biscuits but marketed the products in smaller packages at a lower price in roadside stalls to become a significant breakfast supplier in the market. The second strategy was implemented by Coca-cola in Japan by acquiring the local brand Georgia iced tea to meet the demands of the local market. Heineken also utilized the second aspect of localization through the strategy of selling a combination of local brands and international brands, but maintaining Heineken as the flagship brand. Heineken also achieves broader positions and remain in the top or secondary positions in any market of local beer. ( 2005)   Another aspect of localization is taking advantage of distribution assets in the local market. Procter & Gamble earns $50 billion dollars a year in global sales. When the distribution channels of Eastern Europe collapsed during the transformation from communism to democracy, P&G developed local channels of distribution by funding several distributor businesses by providing vans, training and information technology capabilities. (, 2003) Palm, Inc. is a global computing company that succeeds in market entry through the acquisition of local computing companies and their products and merging these into a strong business firm so that the company takes advantage of the channels of distribution of these local companies. The firm is also engaged in innovations and product development to differentiate its products in the global market. ( 2003)   CHAPTER 3: METHODOLOGY   This study will be conducted to determine the success factors of most multinational companies and organizations in internationalizing their business operations in other countries/continents. In this study, the interview method of data gathering will be utilized, with a combined total of 50 employees from both Palm, Inc. and Heineken as participants. The research plan will proceed guided by the following conceptual framework:                                               Research Methods       The research will utilize the descriptive method in learning the strategies and techniques utilized by Palm, Inc. and Heineken in their international operations. The purpose of employing this method is to describe the nature of a situation, as it exists at the time of the study and to explore the cause/s of particular phenomena (, 1994). The researcher opted to use this kind of research to obtain first hand data from the respondents as basis for formulating rational and sound conclusions and recommendations for the study.   To come up with pertinent findings and provide credible recommendations, this study will utilize two sources of research: primary and secondary. Primary research data will be obtained through the questionnaire survey and in-depth interview. Secondary research data will be obtained from books, journals and studies on the same topic. Secondary data include raw data and published summaries, as well as both quantitative and qualitative data (2003). Research Design In order to come up with the most suitable research approach and plan for the study, the “onion” research process will be utilized. According to (2003), in order to come to the central issue of how to collect the data needed to answer one’s research questions, there are important layers of the onion that need to be peeled away: the first layer raises the question of the research philosophy to adopt, the second considers the subject of research approach that flows from the research philosophy, the third examines the research strategy most applicable, the fourth layer refers to the time horizon a researcher applies to his research, and the fifth layer is the data collection methods to be used.             Figure 1 shows how the researcher conceptualized the ‘onion’ research approach to be applied in this study. The first layer involves the application of the research philosophy of positivism where the researcher works in an actual observable environment (1998) and acts as an objective and independent analyst ( 2003) using a highly structured methodology (1997) to arrive at valid generalizations. Meanwhile, the second layer involves the deductive approach that has five sequential stages: deducing a hypothesis; expressing the hypothesis in operational terms; testing this operational hypothesis; examining the specific outcome of the inquiry to either confirm the theory or indicate the need for its modification; and finally, modifying the theory in the light of the findings whenever necessary (1993). Instruments to be used A self-administered questionnaire, or the type of questionnaire that is usually completed by respondents (2003), was constructed by the researcher to gather data. A survey questionnaire using the Likert Scale was prepared asking respondents to rate given statements according to their level of satisfaction.             Range                                                Interpretation                          3.50 – 4.00                                       Very Satisfied             2.50 – 3.49                                        Quite Satisfied             1.50 – 2.49                                        Quite Dissatisfied                               0.00 – 1.49                                        Very Dissatisfied             The survey-questionnaires contain open-ended questions to be used in a semi-structured interview. Interviews will take one and two hours. The questions that will be used in the interview are based on the research questions that have been reviewed, refined and approved by the project supervisor. Validation and Administration of the Instrument For validation purposes, the researcher will initially submit a sample of the set of survey questionnaires and after approval; the initial survey will be conducted to the 50 respondents.  After the questions are answered, the researcher will ask the respondents for any suggestions or any necessary corrections to ensure further improvement and validity of the instrument.  Afterwards, the researcher again will examine the content of the interview questions to find out the reliability of the instrument. The researchers then will exclude irrelevant questions and change words that would be deemed difficult by the respondents, to much simpler terms. The researcher will also tally, score and tabulate all the responses in the provided interview questions.             Apparently, there have been issues on the validation on using self-assessment as against an observer rating. The use of either one will significantly change the result of the findings. This study will opt to use both. While there are strengths of the approach, scholars have also presented future impediments and limitations of using this type of methodology.             Furthermore, the researcher will adopt the three-stage process devised by (2003). The first stage is assessing the overall suitability of data to research questions and objectives. In this stage, the researcher will pay particular attention to measurement validity (measuring / estimating whether the secondary data will result to a valid answer to the research questions and objectives) and coverage (this includes ensuring whether or not the data is wanted and can be included, as well as making sure that sufficient data remain for analyses to be undertaken once unwanted data have been excluded). The second stage is evaluating precisely the suitability of data for analyses needed to answer and meet the research questions and objectives. In this stage, the researcher will ensure the validity and reliability of the secondary data by assessing how it was previously gathered, who are its sources, and the likes. In addition, the researcher will be cautious not to commit measurement bias (which can occur due to deliberate distortion of data or changes in the way data are collected). Finally, the researcher will judge whether to use data based on an assessment of costs and benefits in comparison with alternative sources. Data Representative and Reliability             To ensure the reliability of interview results, test-retest will be conducted, or the administration of the same test to the same set of interviewees on two different occasions will be conducted.  This approach assumes that there is no substantial change in the construct being measured between the two occasions.  Thus, two tests will also be conducted: a pretest or a pilot test shall be done and a post-test.  Interviewees will be questioned twice. Furthermore, the proposed approaches, structured interview and telephone questionnaire will be interview-administered.  This part will encourage credibility and accuracy in the interviews. Ethical Considerations             In keeping with the procedures and in the interest of maintaining the integrity of the proposed research, the researcher will make every effort to ensure that the ethical guidelines in research will be strictly followed.  All data collected from the respondents will be kept in confidence. The names of the respondents and their answers will not be revealed. The appropriate measures of the data will be obtained with the selected statistical instruments, and all results of the study will be open to the respondents and the public.

Multinational Companies in the Context of Globalization

CHAPTER 1: Introduction Multinational Companies in the Context of Globalization The proliferation of multinationa...

External and Industry Environments' Analysis Report for Toyota

A Report for Toyota Motor Corporation TABLE OF CONTENTS             1 Executive Summary                                                        2             2 Introduction                                                                       2             3 Overview                                                                            3             4 Environmental Analysis and Commentary                 4             5 Organisational Analysis and Commentary                 5             6 Gap Analysis and Strategic Alternatives                      7             7 Strategic Options and Choice of Strategies                 8             8 Implementation Plan                                                       10             9 Evaluation Plan                                                                11             10 Recommendations                                                        12             12 Conclusions                                                                    13             13 Reference List                                                                14             Executive Summary             Toyota has become the leader in hybrid cars manufacturing. The Toyota Prius has long been credited as the car which started it all.             Toyota believed in hybrids because of the superiority of the technology to the internal combustion engine. Such technology allows all powertrain improvements in diesel, gas, electric or hydrogen to incorporate into car production. Thus, hybrid powertrain has the most ability to continuously improve (2005).             As an emerged technology, software bugs are not surprising the automotive sector and even in conventional vehicles, system glitches are becoming more common.             In lieu with this, this report aims at providing the Toyota Motor Corporation the strategic alternatives and options available in the market, the environmental and organisational analysis and proposed sample implementation and evaluation plans. Introduction             A typical passenger car has 70 or more tiny but powerful computers on board that control audio systems, air conditioning, brakes, air bags and scores of other tasks. The software for an average car can have more than 35 million lines of code. Hybrid cars need to control separate gas and electric power sources and doses require a 100 times or more the code needed (2005).             Hybrid cars use multiple computers significantly compared to conventional automobiles. The Toyota hybrid cars, which have been in the global automotive industry since 1997 in Japan and 2000 in the US, are using MULTI IDE and C/C++ compiler to develop engine and transmission control software (2005).             However, many analysts and auto executives are continuously questioning the hybrid technology. Yet, still, why does Toyota continue?             Toyota believed in hybrid cars as well as continuous improvement or the kaizen. Things have changed because of competition and Toyota must always seek to improve in order to get better and thus, compete (2005). Overview             Automakers spend $2 billion to $3 billion a year fixing software glitches (2005). In October 2005, Toyota recalled 75, 000 Priuses in the United States due to a number of reports that the cars were inexplicably stalling on the highway ( 2007). Thirty-two percent of auto warranty claims in the United States are because of software or electronic-related issues (2005).             The owners of the cars were asked to take their vehicles to their dealer in order to fix a potential software glitch. “If the gasoline engine stalls, the electric motor in the vehicles will have enough power to allow the driver to pull the vehicle over and away from the traffic”, according to Toyota.             A “programming error” was found in the computer systems of 23, 900 Prius cars sold. The Prius hybrid cars urge a software upgrade in order to fix a few lines of buggy code. Apparently, the computer system of the cars is needed to be reset. After the procedure, hybrid car drivers complained of the reduced mileage ( 2007).             The software update was provided free-of-charge. Such update is intended for 2004 and 2005 Prius models. The US National Highway Traffic safety Administration investigated the incident. There have been no injuries or accidents reported due to potential software problem. However, potential buyers for the Prius made leery of the car (2005).                Environmental Analysis and Commentary             The mission of Toyota is to attract customers for life. Their ambition – to become the most admired sales finance company for all stakeholders. The vision of the company is not to be no. 1 instead to become the most successful and respected car company in the world.             Externally, the Toyota belonged to the transportation equipment industry and its market is the public companies trading. There are a total of 26 competitors for Toyota. The top three are: Ford Motor, general Motors and Honda. These competitors are also offering a wide array of hybrid cars. By this, we can analyse the hybrid system and environment as below: Remote Environment (factors that originated beyond Toyota company’s operating situation) <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify"> Hybrids have complicated technology that is difficult or expensive to fix</li> </ul>      Every car today has packed with complicated electronics and computer chips. Working on a hybrid cars requires a specialized training for the mechanics. Dealership may only have one or two mechanics trained on hybrids      Expenses-wise, hybrid-specific components have extremely long warranties. <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify"> Hybrids have technical problems like stalling and sputtering</li> </ul>      Such concern stems from the case of the recalled Priuses. The gasoline would sometimes shut-off at the most unexpected times. The problem was pointed as faulty program logic ( 2007). Industry Environment (factors that affect Toyota company’s prospect) <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify"> Hybrids do not pay for themselves to justify their premium cost</li> </ul>      According to Consumer Reports, it would be difficult to justify the process of purchasing a hybrid car for economic reasons. As the report states, for a five-year ownership period, only the Honda Civic Hybrid and Toyota Prius could save the money.      The higher initial cost and fast depreciation were the reasons that hybrid cars don’t save owners money. However, some vehicles will save enough to pay for extra cost as indicated by the new tax incentives.      Through simply accelerating and braking more gently drivers can save more. <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify"> Hybrids do not offer the driving performance needed</li> </ul>      Compared to non-hybrid cars, hybrid powertrains are more fuel-efficient. Such efficiency could mean getting more power out of the same amount of fuel or using a same-sized engine more efficiently while also gaining extra power and quickness.      This can be provided by Honda Accord Hybrid and Toyota Highlander Hybrid only the latter offer more responsive acceleration.      In contrast, the Toyota Highlander Hybrid cannot save as much fuel as they could with smaller gasoline engines unlike Ford Escape Hybrid and Honda Civic Hybrid. These two models offer power that is more adequately for daily use. <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify"> Hybrids will not hold a resale value</li> </ul>      Toyota Priuses have high resale value but are not sold on near-new prices as stories claimed. The factors which affect the high value are the unique, hybrid-only vehicle with eye-catching design and Priuses are produced and sold in low volumes. As a used car, the Prius has more in common with the Mini Cooper than a Ford Escape Hybrid SUV in terms of holding such value ( 2007). Operating Environment (factors that influence Toyota company’s competitive situation) <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify"> Hybrids have limited battery pack life</li> </ul>      Hybrid batteries function without ever being fully charged or discharged. A regular gasoline-powered engine assisted by an electric motor run the hybrid vehicles. During braking and idling, the battery is charged by the gas engine.      Toyota and Ford claim fleet use of hybrid vehicles lasting over 100, 000 miles --- Toyota claims over 200, 000 miles for a few vehicles.      Besides, hybrid components including batteries have extremely long warranties. Toyota guarantees 10 years or 100, 000 miles for all hybrid-specific components on their vehicles. Ford and Honda both guarantees hybrid user with 8 years with 800, 000 – 100, 000 miles. <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify"> Hybrids do not get the level of mileage promised</li> </ul>      All vehicles could have 15 % fewer miles per gallon than the EPA estimate. At any rate, calculating gas spending based on EPA estimates actually underestimating a wide margin ( 2007).   Organisational Analysis and Commentary             The Toyota company is a public company with $202, 864 million 2007 total sales and 299, 394 employees. Toyota is below industry average in both sales satisfaction and customer satisfaction.  There is a need to focus on plant quality and flexibility. This reflects the unusually high number of product recalls over the past couple of years.              Toyota Motor outsold General Motors in the first quarter of this year. Toyota sold almost eight million cars in the world. Toyota’s stock market value is roughly 30% of the value of all global carmakers combined (2007). The target of selling by 2010 is 10.3 million. The Japanese carmaker is currently expanding production throughout Asia, Europe and US (2006). The Toyota’s organisational ethos had helped in penetrating the #1 position:   Strengths <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify"> High level of research and development</li> <li class="MsoNormal" style="text-align: justify"> Firmly committed to hybrid powertrains</li> <li class="MsoNormal" style="text-align: justify"> Committed in launching new products and to lean manufacturing and quality</li> <li class="MsoNormal" style="text-align: justify"> Kaizen, jidoka, muda, munuzukuri and genchi genbutsu as key principles</li> <li class="MsoNormal" style="text-align: justify"> A culture of teamwork, respect, challenge and just-in-time</li> <li class="MsoNormal" style="text-align: justify"> Competitive service price-wise to dealers</li> <li class="MsoNormal" style="text-align: justify"> Very focused segmentation, targeting and positioning</li> <li class="MsoNormal" style="text-align: justify"> Diversified product range</li> <li class="MsoNormal" style="text-align: justify"> Consensus management style</li> <li class="MsoNormal" style="text-align: justify"> Constantly re-engineering and redesigning models (2006)</li> </ul>   Weaknesses <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify"> Retail operations</li> </ul> Ø  Selling approach <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify"> Dealerships ( 2006)</li> </ul> Ø  Poorly-designed showrooms ·         Expensive costs investments on car plants ·         High costs of training and retaining labour ·         Time to accommodate ·         Faulty front suspension systems ·         Software/programming glitches ·         Tend to not wanting to admit a problem publicly ·         Stretched management resources or training new hires to understand Toyota Production System (TSP) ·         Difficult defect-tracking procedures Opportunities <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify"> Emphasis on the importance of quality over cost-cutting or pure design</li> <li class="MsoNormal" style="text-align: justify"> Improve customers’ buying experience</li> <li class="MsoNormal" style="text-align: justify"> Utilize the Internet in making attractive offers</li> <li class="MsoNormal" style="text-align: justify"> Explore to be a one-stop shop for customers’ financial requirements</li> <li class="MsoNormal" style="text-align: justify"> Investment in hybrid R&D ( 2006)</li> <li class="MsoNormal" style="text-align: justify"> Revisit quality measures</li> </ul> Threats <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify"> Cars can be replicated by competitors almost immediately</li> <li class="MsoNormal" style="text-align: justify"> Heavy competitions from traditional banks</li> <li class="MsoNormal" style="text-align: justify"> Fluctuating economic and political conditions</li> <li class="MsoNormal" style="text-align: justify"> Exchange rates movements narrow margins</li> <li class="MsoNormal" style="text-align: justify"> Exposure to any movement of raw materials</li> <li class="MsoNormal" style="text-align: justify"> Product recalls </li> <li class="MsoNormal" style="text-align: justify"> Economic disturbances</li> </ul>                 Gap Analysis and Strategic Alternatives             The global automotive sector has a deepened, growing concern regarding the inadequacy of developing and implementing software models. It is necessary for every automaker to produce efficient softwares for hybrid vehicles’ mission-critical systems.  However, the industry has no solid means of blending the disciplines of car manufacturing and software development (2005).             The repetitive process of recalling Toyota hybrid cars with software glitches is an indication that there might be something wrong with the quality control of the products company-wide. Toyota did their own software development in-house and thus, having control over upgrades as a clear advantage ( 2005). Further, the prevailing business operation can be described:                               In lieu with the consistent recalls, the Toyota must: a) focus on software quality, b) have an in-house software assessment task force/department, c) facilitate a specialized training for hybrid cars mechanics, d) maximize control over upgrades, e) if necessary, conduct routinely quarter or mid-year software assessment of newly-installed softwares and f) initiate an industry-wide higher-level software standards.             Toyota hybrid vehicles recalls set a basis for building software standards and elevating software quality through the use of off-the-shell requirements and standardized software implementations as a commodity (2005).   Strategic Options and Choice of Strategies             Since the recalls are identified as software glitches, then the solution must focus on developing software programs that are powertrain-specific. The systems affected are engine control and transmission, body chassis and safety systems and infotainments.  For hybrid cars, applications include: 1) engine management software – to coordinate fuel, spark and other subsystems, to meet the legislative exhaust emissions regulations and to provide greater fuel economy; 2) electronic transmission control software – to monitor engine and car speed and to change engine ratios for an easier and smoother driving experience and 3) diagnostics software – to enable carmakers and engineers to test and correct engine management and transmission systems (2005).             The Toyota Motor Corporation, in order to cope up with the costs of recalls, instead of doing all the researches regarding software development in-house, the company could: <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> have an in-house automotive software developers, implementers and assessors,</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> came up with a driver-friendly do-it-yourself manual on automotive software upgrading, if possible,</li> </ul> <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> outsource/hire a company specializing in embedding automotive software and/or even</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> divert in a partnership with an automotive software developing companies that can: overcome severe memory limits, ensure fastest execution and build bug-free applications:</li> </ul> A)   Processors in powertrain application experienced severe memory constraints. The automakers, including Toyota, must avoid buying bigger and more expensive memory parts. The software must add more features with less memory, thus, gaining a competitive advantage in complying with heavy emission requirements. Such software must have small code sizes to allow advanced compilers to shrink an application’s code size. B)   To ensure a faster execution, the software developers must increase complex software algorithms which require more processor speed. The requirements include stringent emissions regulations, advanced cruise control, better fuel-efficiency and anti-knock algorithms among others. C)   Bug-free applications include run-time error detection, mature compilers, MISRA support and automated module testing ( 2005) Implementation Plan             Most Japanese automakers, including Toyota, do their own software development. Japanese always tended to do things on their own. Other automakers like BMW, Mercedes Benz and General Motors do some in-house software development and portion-out the rest of the work (2005).             In effect, the Toyota must admit that the company faces difficulty in addressing recalls. Car manufacturing is the company’s specialty and not software development. So, it is best to have an IT company to do development task and focus on quality of the cars produced.             This could mean an extra cost for the Toyota company since they have to pay rights to use the software ( 2005). More practically, the company would benefit if highly-developed, high-performance automotive softwares will be available. The partnership will be of mutual benefit because softwares can be tested and retested on the hybrid cars. Thus, avoiding the reoccurrence of car recalls due to software breakdowns and the capability of embedded automotive softwares could be maximized since the development is accompanied by actual testing on reliable cars.             Practically, the plan must include the history of partnership, composition and linkages, legal framework and working processes and the process of limited partnership will begin by sourcing and choosing potential business partners, securing partnership requirements/documents, complying with partnership regulations and laying financial concerns including taxes. The key indicators are risk management, output, funding and workforce for both companies. The actual process of development will culminate after the partnership materializes, to illustrate: TOYOTA MOTOR CORPORATION PARTNERSHIP WITH XXX EMBEDDED AUTOMOTIVE SOFTWARE COMPANY What Who When Adopting industry-wide standards Toyota and Company XXX Week 1 Model-based Software development -do- Weeks 2-8 Code-generation Tools and Techniques -do- Weeks 9-16 Automotive Software Architecturing -do- Weeks 16-20 Automotive Software Designing -do- Weeks 21-24 Automotive Software Engineering -do- Weeks 25-28 Quality Assurance, test Strategies, Verification and Compatibility -do- Weeks 29-35 Provisions for Re-testing -do- Following weeks   Evaluation Plan             We can practically say that there will be two evaluation plans: for the partnership and automotive software development. The partnership can be evaluated through needs, outcomes, processes and frameworks: Evaluation Indicator How the Indicator is met Assessment Score Needs (the basis of entering a partnership) ü  Identified gaps ü  Workforce initiatives/demand ü  Specific outcomes that can be delivered ü  The partner is the best placed organisation to deliver the service ü  Service level Agreement           Framework (for working in partnership) ü  A signed SLA ü  Clarity in expectation/outcomes, length of contract/agreed review schedule, where responsibility lies and monitoring requirement ü  A clear work plan ü  Outcomes of the work plan ü  Development of partnerships           Partnership Process (effective maintenance of partnership) ü  Clear demonstration through regular reviews ü  Clear guidance in place ü  Meeting the agreed outcomes and performance ü  Adequate financial management systems in place ü  Meeting the agreed requirements as expressed in code of practice on funding and procurement           Assessing the Internal and External Impact & Outcomes ü  The original partnership objectives are being met ü  Quality of service being delivered as evidence of effective partnership ü  Meeting the wider corporate priorities and community aspirations ü  The cost and resource does not outweigh the benefits ü  Outcomes are promoted and demonstrated to the local community           (Based on: The Partnership Evaluation Tool)               The program should be assessed based on the objectives of adopting industry-wide standards, coding techniques and tools, software architecture, design and engineer and quality control, testing and verifications. The automotive software development program can be evaluated through:                               Recommendations             The abovementioned alternatives, solutions and options are automotive software-specific. Company-wide, the Toyota must also develop clear customer service standards, sustainability strategies and policies-targeted at core products or services. In addition, the preparation of a target-based timeline where performance can be judged and held accountable must be a priority (.).             There should be a progress on external reporting. The company leadership must be vocal and committed. The Toyota can also purport on stakeholder consultations and publication of results. Stakeholders must participate to meet environmental and societal needs related to core business (rady, n.d.). Conclusions             As automobiles become more technologically-advanced, an issue of interest would be the tolerance for the new technology. The hybrid cars performance has been remarkable and predicted by analysts as ‘here to stay’. Currently, the hybrid system was dubbed as the technology of the millennium.             First, the Toyota has to admit that something went really wrong along the process. Software glitches are not a problem solely for the company. It is an industry-wide dilemma that is needed to address immediately. Somehow, it had open opportunities of exploiting the hybrid technology. , Chairman of Embedded Software Standards, believes glitches are of similar features and software quality must be ensured industry-wide (2005).             Second, the Toyota hybrid cars have a pre-existing reputation.  Its presence on the global automotive sector is building intangible brand value. The company has strategized in a long term focus and the Prius is making money for Toyota.             Third, the Toyota has an image that can be easily maintained. Technology can be replicated quickly. General Motors or DaimlerChrysler cal always attempt at counter launching a competing product. The Toyota knows have a counter-relaunch of a more advanced versions and sell more (2005).             Finally, the Toyota company acknowledges shortcomings and work on it privately as much as possible. Such shortcomings are identified and analysed quickly and then communicated with the customers on the basis of time quality.             Quite simply, the Toyota company fosters responsibility and accountability or sustainability aspects in a holistic and principled-approaches ( 2006).

External and Industry Environments' Analysis Report for Toyota

A Report for Toyota Motor Corporation TABLE OF CONTENTS 1 Executive Summary ...