Background - Toyota overtakes GM, now world No. 1.
The Toyota Vs GM battle reflects a classical example of how it’s business strategy rather than the actual business activity that determines the winner in the battle of champions.
GM being the world’s leading car marker for decades lost out to Toyota – a one time underdog which emerged from the woods to put brakes on GM dream run and re write history – using business strategy and efficient operations management to beat GM at its own game.
It all can be traced back to a critical strategic decision by GM to discontinue it’s focus on hybrid electric cars, taking into account the low demand, huge overheads and lack of visible profits. Toyota on the other hand played the long term game-realizing that this hybrid car segment was where the future lies. Toyota aggressively pushed Prius, which not only went on to be a super seller as well as created a environment friendly and technologically savvy image of Toyota – but more importantly beat GM at its own turf – the U.S.A. It was this strategically diverse paths adopted which symbolizes why Toyota has become profitable in the United States while GM has been loosing its shirt in its home market!
GM in the process has not only lost out market share, but also market reputation. It is seen as a technologically laggard, a short term quick fix seeker, while Toyota has proven itself to not only be environmentally friendly and operationally efficient – but also a market savvy risk taker and a true champion.
While GM was shutting down its plants in the states in favor or other low cost manufacturing destinations – Toyota chose to setup a huge plant in the heart of Texas. This again was more of a strategic decision than a purely operational one – setting up camp at the heart of the consumer’s territory helps them relate to the brand and connect to it.
While Toyota was always focusing on its Toyota Production System, GM was busy finding quick fixes or imitating best practices – this reflects in the cost advantage of $ 1800 per car that Toyota enjoys over GM
While GM gave away almost $73 Billion as benefits to its workers over the last decade – Toyota invested its resources into R&D – resulting in Toyota having the trendiest and most up to date portfolio of cars, while GM struggles to come out with any innovation in the last decade. Toyota’s recently launched pickup truck Tundra helps Toyota shed the image of a toy carmaker – and pull’s in the Ford and GM loyalist!
GM’s game plan of dumping cars at airport car rentals just to keep production moving, Resulted in after sales value of the GM cars going down drastically as they retain only 43% of their initial value vis-à-vis 52% of Toyota cars.
It’s GM’s quick fix approach and flawed strategic direction that resulted it in loosing out to Toyota. Toyota has a stock market value of $200 Billion, almost 12 times that of GM. Its proposed acquisition of the money losing Chrysler would probably be another flawed strategic decision – as it would lead to critical issues in driving synergies between the two culturally diverse automakers. Such an acquisition rather seems to be another quick fix desperate bid by GM to retain it’s world’ leading car maker status.
The one time leader now finds itself in an uncomfortable position as an underdog. As rightly said, now GM can now afford taking higher risks and being more aggressive. However it’s no surprise if GM fails to ever regain its lost glory.
Tokyo, June 12: Toyota Motor Corp. edged past
General Motors Corp. to become the world`s biggest automaker by sales volume in
2006, reports said.
The Toyota Vs GM battle reflects a classical example of how it’s business strategy rather than the actual business activity that determines the winner in the battle of champions.
GM being the world’s leading car marker for decades lost out to Toyota – a one time underdog which emerged from the woods to put brakes on GM dream run and re write history – using business strategy and efficient operations management to beat GM at its own game.
It all can be traced back to a critical strategic decision by GM to discontinue it’s focus on hybrid electric cars, taking into account the low demand, huge overheads and lack of visible profits. Toyota on the other hand played the long term game-realizing that this hybrid car segment was where the future lies. Toyota aggressively pushed Prius, which not only went on to be a super seller as well as created a environment friendly and technologically savvy image of Toyota – but more importantly beat GM at its own turf – the U.S.A. It was this strategically diverse paths adopted which symbolizes why Toyota has become profitable in the United States while GM has been loosing its shirt in its home market!
GM in the process has not only lost out market share, but also market reputation. It is seen as a technologically laggard, a short term quick fix seeker, while Toyota has proven itself to not only be environmentally friendly and operationally efficient – but also a market savvy risk taker and a true champion.
While GM was shutting down its plants in the states in favor or other low cost manufacturing destinations – Toyota chose to setup a huge plant in the heart of Texas. This again was more of a strategic decision than a purely operational one – setting up camp at the heart of the consumer’s territory helps them relate to the brand and connect to it.
While Toyota was always focusing on its Toyota Production System, GM was busy finding quick fixes or imitating best practices – this reflects in the cost advantage of $ 1800 per car that Toyota enjoys over GM
While GM gave away almost $73 Billion as benefits to its workers over the last decade – Toyota invested its resources into R&D – resulting in Toyota having the trendiest and most up to date portfolio of cars, while GM struggles to come out with any innovation in the last decade. Toyota’s recently launched pickup truck Tundra helps Toyota shed the image of a toy carmaker – and pull’s in the Ford and GM loyalist!
GM’s game plan of dumping cars at airport car rentals just to keep production moving, Resulted in after sales value of the GM cars going down drastically as they retain only 43% of their initial value vis-à-vis 52% of Toyota cars.
It’s GM’s quick fix approach and flawed strategic direction that resulted it in loosing out to Toyota. Toyota has a stock market value of $200 Billion, almost 12 times that of GM. Its proposed acquisition of the money losing Chrysler would probably be another flawed strategic decision – as it would lead to critical issues in driving synergies between the two culturally diverse automakers. Such an acquisition rather seems to be another quick fix desperate bid by GM to retain it’s world’ leading car maker status.
The one time leader now finds itself in an uncomfortable position as an underdog. As rightly said, now GM can now afford taking higher risks and being more aggressive. However it’s no surprise if GM fails to ever regain its lost glory.
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