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Strategic Management : US Car-Makers

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Question:

Describe about the Strategic Management for US Car-Makers.

 

Answer:

After a detailed discussion of pestle analysis, trends affecting the US carmakers can be highlighted quickly as per the “U.S. Autos: Adding new routes” case study article. To begin with, an economic trend is evident from the busy scene at River Rouge, where the North America auto industry is performing extraordinarily well, both at sales made from old-fashion and petroleum-fueled cars (Wright, 2016). In the last year’s marketing, carmakers sold 17.33 vehicles, sports utility, and trucks close to all time recordings. Specifically, Ford, the second largest car-making company in the United States, sells more than 60,000 F-150s consistently (Wright, 2016). Economically, this sale makes the best sales in North America. To brush over economic trend further, Ford specifically is facing some long-term economic challenge in which it declined steadily over the past 15 years concerning the number of cars sold per individual in the United States (Wright, 2016). For example, Ford and General Motors experiment with the public transportation services party, as reflected in the present vehicle sales figures. In details, besides the current high recovery, 17.33 million cars were sold in 2015.

Technological factors are also trending among the car-makers. For instance, Ford’s engineers have shifted from driving company cars around the institution to calling up a GoRide Shuttle using an appropriate smartphone application. This initiative among others is part of the ways in which the carmakers in the United States are surging interests within the motor industry from technology organizations such as the Google, ride-hailing start-ups i.e. Uber all the way to electric carmakers for example Telsa. All in all, these technologies are aiming at transforming how cars are owned or driven. In the same line of technology trend, Ford Company together with its longtime close competitor, General Motors, are struggling to develop self –driven Motors (General Motors Company, 2016). Such cars are technologically advanced in that, not only can they drive themselves but are also connected to electricity and the internet.

Technology trend is also manifested through the General Motor’s battery lab located at the company’s Center in Warren. An example of an electric-vehicle that the firm sold this year is Chevrolet Bolt. While the car’s battery is two-timed heavier than the one powered the hybrid Volt this year, it can provide around 60 kWh, an indication that it is four times stronger than the older battery. On the other Ford Company together with General Motors are taking a different move along the technology trend (Wright, 2016). These technology trends have advantages and social trends alike. For example, an example of a shortcoming of the technology cars was pointed out when a driver of one of the Tesla’s vehicles operating on an “autopilot” died following the failure of the technology to recognize risk from a truck which was crossing the path. Political trend is also observed between the car-makers. For example, a federal law was introduced in 2012that obliged the companies making cars boost the average of their fleet’s from 27.5 miles in each US gallon at the beginning of the period to 54.5 mpg (Wright, 2016). In respect to this rule, Ford has to provide a wider range of cars with significant help from electric power to catch up with the fuel economy target.

 

Extrapolation of Trends in the US

Extrapolating the trends happening in the US to overseas markets like the United Kingdom and others has no dangers. Instead, gaining knowledge such patterns is advantageous because it enables a firm to adjust accordingly in the line of business. For example, when a company realizes the technology trends proffered by most customers within the US market it would become much concerned and develop its cars along similar technology to attract huge market like the rest and at the same time retain the already acquired consumers.

Excelling is the aim of each organization seen around. Therefore, extrapolating the trends in another market such as the United Kingdom can be of great help to the car-making companies for the formulation of marketing strategies. For example, the dangers that can arise along the technology cars such as failure of the vehicles to detect threats laying ahead, and use such information to improve their products. This adjustment will not only benefit the firm to produce all-around vehicles but also save lives (Indian retail industry strategies could potentially disrupt competitor business: PwC, 2015). Also, further extrapolation can enable the U.S carmakers to know the strengths and weaknesses of other firms in the UK markets and formulate strategies for overcoming them (Bee-lan, Draw, and Runeso, 2010).

Provision of All-round Transport Services

Ford and General Motors are describing themselves as providers of all-around transport services because of the unusual nature of vehicles produced by these two car-makers. The companies make all types of car, starting from manual, old, new, electrified and self-driven motors. Some of the vehicles produced by these businesses are also advanced in the line of technology. As indicated in technological trends above, both Ford and General Motors are the top-selling carmakers in the United States, which offers cars that are capable of driving themselves (Baker, 2015).

Besides the self-driven motors, the cars are connected to the internet through various smart-phone apps. These types of cars are convenient in the transportation line, especially regarding the line. For instance, the vehicles are capable of getting notification alerts from clients located in various parts of the nation through smartphone apps. The two companies are struggling to transform the transportation services. For example, Ford Motor Company has invested approximately $ 1.4 billion in building 10-speed automatic transition. Coincidentally, General Motors have dedicated # 343 million towards the same transmission. Tentatively, this may appear as a surprise to many, but the two companies are working together to provide all-round transport services. Back in 2013, General Motors and Ford announced jointly that they are teaming up to come up with new automated Motors (General Motors Financial Company, Inc, 2016). According to the two companies, such transmissions are characterized with a 9-speed, in the front wheels, and 10-speed for the rear wheels. To sum up, General Motors and Ford companies provides all type of cars to the public hence, qualifying as providers of all-round service vehicles.

Pestle strategy can be applies by the two companies in tracking their operating environment. According to PESTLE Analysis of Saudi Arabia 2012 (2013), pestle strategy is one of the mechanisms to control the changes. This tool is much simpler than any other tool used to analyze the economic, political, technological and sociocultural variations in the businesses’ working environments (Kuwait Country Profile, 2015). The analysis can thus, be summarized in the diagram bellow;

Economic Factors

The whole continent has been experiencing recession especially in 2008. This experience resulted into curtailing of all businesses components including customers and suppliers of raw materials, which made market conditions even tougher for the automobile industries. Besides being merchandisers, GM and Ford companies are also main consumers of metals, rubber, plastics, computer chips and vinyl. Apparently, the recession conditions experienced by the enterprises reduces consistence purchase habit by potential consumers. Basically, this condition means that consumers only buy useful and economical commodities. Notably, these deflections and inflations in the market as experienced by GM and Ford marks a direct blow to the costs of services and products. Unfortunately, these circumstances can make customers to divert from the two companies to other affordable and economical companies.

Political Factors

In respect to GM and Ford, political environment entail all governmental aspects that affect their purchase and sales directly or indirectly. Rules of the state have been against the companies’ ignorance towards the safety regulations since 1961 as well as towards the environment. Specifically, GM has been ignorant in response to safety equipment such as ABS and environmental friendly products such as catalytic converters. However, trend in global norms heavily took a toll on the organization. Historically, the antagonistic picture of the U.S. A G.W. Bush led to the boycott of American produced vehicles. This condition intensified with conflict between Iraq and U.S.A., worsening the sales figures of the two companies across the world. To some extent, the rules of the new government promote local sales in the state by reducing imports and promoting local companies, playing a major role in persistence of Ford and GM Group through crucial market conditions. 

Technology Factors

Technology develops with time and it is a dominating element in firms’ performance.  As a matter of fact, businesses should be flexible enough to meet all types of need of customers, which often change with advancement of technology. These automobile enterprises nod only utilizes the evolving technology but also applies it to reach more customers in the most effective way. For GM specifically, the aspect of technology is analyzed through raw materials.  Newly advanced products formulated from fiber glass and plastic are not only economical but also reliable. Therefore, technology creates additional opportunity for the companies. For example, the enrolment of the internet to the company’s systems enables consumers to place their orders online and also get solutions to their queries hence, technology makes the companies’ deals effortless.

 

Special Factors

The social aspect of the environment have been a boom to Ford and GM as they have existed for many decades. Being leaders of provision of all-round vehicles it is a social factor, giving the companies’ status and identity. Therefore the companies are treated with endurance and respect. However, the companies still suffer seatbacks because of different values and attitude of consumer. Fortunately, Ford and GM have adaptive abilities to stay in the market. Due to this aspect, the companies had replaced the consuming engines with fuel efficient high technology ones like the hybrid.

Advantages and Strength of Pestle Method

According to the analysis of the North American Advanced Features Market and Optional/Standard Strategy of OEMs 2014-2020 (2012),  pestle analysis can help companies to reduce threats by examining the social, political, technological, economic and environmental factors that exist within the U.S market. Pestle also generates useful ideas on how to develop the product, and better ways of launching it. This ideas may be utilized by the two companies and become very competitive. The generated ideas are also important in suggesting effective marketing strategies and other factors that add value to the success of the firm (PR, 2016). Kazakhstan PESTLE Country Profile (2015) states that the analysis is also straight forward in terms of the quantity of time taken, the rate of doing the analysis, and the amount of the required research. However, the cost of performing each analytic level is not prone o fluctuation.

Less the companies uses pestle analysis, the environmental factors that affect their business may influence the market for a longer time without being noticed. For instance, a Ford may overlook customer laws and safety while enhancing the prototype of products. On the other way, the General motors may not be in a better position of realizing the type of technological gaps faced by consumers located in rural areas, compared to customers in urban locations. In general, the analysis enables a firm to take the analysis of many distinct and factors that are influential to the business concerning success of the launched products. Therefore, it provides easiest ways of understanding the business better.

Disadvantages and Weakness of Pestle Analysis

Despite the above advantages, pestle analysis also has some disadvantages and weaknesses. To begin with, external factors highlighted by the tool are prone to change over time therefore, needs consistence viewing and attention. Because the external factors are based on the assumption larger economic situations, such situations may be significant barriers to the transparency of pestle analysis making the tool vulnerable to discrepancies. Businesses might require an outsourced expert or to employ research and the development of workforce-bound to the analysis. Apparently, this nature increases costs and expenses. It can also increase capital resources and weak or wrong analysis. Furthermore, while applying the pestle analysis, firms must invest highly in R&D to realize the expected outcome as per the analysis.  

Strategy Mapping

Strategic mapping can also be used by the companies to describe and communicate their operation strategies. This map provides the base for the development of financial and non-financial balanced scorecards to monitor the performances of strategies. Therefore, it can be used as a potential tool of depicting strategies applied by either Ford of General Motors or any other company. Below is an example of a strategic map that can be used by the companies to monitor the performance of their strategies to ensuring that they maintain the lead of provision of all-round motors.

Financial

                                                                                         

Consumer

                                                                

                                                                                                    

Internal

                                                                                                                                 

Growth and learning

                                                                                                    

                                                     Ttraining

 

Competition Strategies

The U.S car-making industry has experienced tremendous changes which should be considered by all enterprises participating in the market. Presently, being part of the automobile industry is an exciting time; the expectations of customers regarding the quality of vehicles, safety, reliability and utility have risen. As evident from the case study, leading car-makers in the U.S competing in line with technology. Therefore, a competitor in the U.S. carmaker has to adopt all aspects that have brought by technology changes to overweight fellow competitors (Koski and Majumdar, 2002).

First, the company should improve its products technologically to ensure the safety of customers. As evident in the current market, connectivity and the internet are working hand in hand to transform the world of motors, a suggestion of new changes in the same line in future. To this respect, the company can make more innovative cars that can share information between one another, by giving notification alerts to a head or behind vehicles of possible halts, advising the drivers to adjust their speeds appropriately. When this mechanism is adopted by a competitive U.S carmaker, all consumers that are concerned with safety will be diverted to the company. Fortunately, virtually all customers are very sensitive especially when it comes to the security of a product. Therefore, coming up with cars that are capable of sharing information will enable the compactor to match the rest (Hyundai Plans U.S. Luxury Car, 2009).

Another general strategy that would be equally beneficial to the competitor in the U.S. carmaker is developing a comprehensive car tracking. Currently, insurance organizations in conjunction with related state governments are regulating fees regarding some cars within which a car can be tracked. By coming up with cars containing comprehensive tracking systems that are capable of providing full tracking irrespective of the distance covered, the company will appeal effectively to the market. To put many impacts on the products, the competitor can also equip its cars with active window displays that enable the drivers to alerts other operators on the full nature of turn located at a given miles ahead. To advance further in the line of innovation, the competitor can develop personalized in-vehicle marketing that makes it capable enough to provide marketers with the most robust merit sets that enable users to customize their messages. It is no doubt that personalized and location-based ads displayed in the cars can even attract more customers as it is beneficial to all range of clients and businesses alike. 

Another general strategy that a competitor in the U.S. carmaker can adopt if it creates an innovative new product for the transportation market is making a biometric car access, making it easier for most customers to lock and unlock their personal cars by use of fingerprints. While the process is much easier, it can also help in ensuring the safety of the vehicles by reducing the chances theft. Fingerprints are unique body features that differ from one person to another. Unless the owner unlocks the car, nobody else can do the same. Therefore, it minimizes chances of theft. To sum up, the highlighted general strategies are unique generic traits. If adopted by a competitor that creates an innovative new product for the transportation market, they can boost the competitiveness of the business.

Institutional Challenges Confronting Traditional Carmakers

Like any other company that deals with car making such as Toyota, Ford and General Motors are faced by many challenges, some of which are institutional. Evidently, it is reported that the two companies have been institutionally challenged by mass production of the latest state-of-the-art truck. Societies are not able to manufacture motors in large numbers to meet the market demand (General Motors Company SWOT Analysis, 2015). Specifically, Ford Company faced some problems in its manufacturing process of all the all-aluminum F-150. The company’s engineers were not curtained on the ability of the tracks to appeal conveniently to the conservative buyers. It was a high gable which affected the company’s annual earnings immensely. Still, on the manufacturing of F-150, the company was forced to alter the outlay of the factory and plant.

The two companies are also faced with quality issues. Despite the production of vehicles with modern improvements, the cars are being knocked in quality survey. Apparently, the doubt in the quality of the products offered by the companies is being initiated by individual deals. For instance, Ford has faced problems with the launch of new products. To a better extent, this institutional challenge can be linked to the company’s suppliers (Ford Motor Company SWOT Analysis, 2016). Despite providing a solution regarding the faulty parts, the issues still hurt the companies. Alongside this challenge, there is difficulty inexperienced by customers regarding some of the products offered by the enterprise i.e. MyFord Touch System.

While coming up with MyFord Touch System, the company aimed at taking SYNC to the next level. Originally, it composed of a touchscreen control for many functions (Reich et al., 2016). In contrary, this aim is not transformed in the user interface. Besides, the system is invaded by glitches. Fortunately, the company is capable of updating the software to fix all the risen issues. However, this cannot make the system fully capable. Therefore, existing as a long-time quality problem. As a result, most customer that purchase their cars from the company visit dealers to seek for help. Another institutional challenge facing the companies is safety; recently, it is reported by consumers from the companies that the touch system destructs the customers on the roads. These problems reduce the reliability of the products offered by the enterprises.

 

Strategic Group Analysis vs. Blue Ocean Strategy

There are two original analysis that can be used by Ford and General Motors to determine who its competition is within the transportation industry. However, the appropriateness of the analysis depends on the nature and effectiveness of the study. For instance, strategic group analysis enables a business to check on the positions occupied by players in a particular working environment (Rouwette, Bastings, and Blokker, 2011). It is also essential in determining an enterprise’s underlining factors that shape the organization’s profitability as well as its competitiveness (Murthi, Rasheed, and Goll, 2013). In detail, the analysis attempts to group the competitive strategies as per the entire significant players. Therefore, it enables the company to differentiate competitors according to distinct the structure, profitability, and the possible projected issues that are being addressed.

According to Johnson e al. (2011), strategic group analysis covers a broad range of area including specialization, identification of the brand, pull vs. push, selections of channels and much more. In summary, this strategy enables a firm to assess strategic shift and dynamics within the enterprise. The analysis is critical; not only does it helps a firm to define the nearest competitors, but also capable of formulating mechanisms of evaluating the deferent strategies that exist in the company (García-Ochoa Mayor and Bajo Davó, 2016). Furthermore, the company also helps in assessing both the current and potential movement of competitors. Despite these advantages, the analysis may be invalid as it may incur trial and error. Besides, the study does not state goals and strategies of the firms clearly hence, accompanied by wrong dimensions that cannot differentiate groups usefully into relevant categories.

Gochhait and Tripathy (2014) states that companies lead only because of working systematically by creating ‘blue oceans’ (Moon-Soo, 2016). By representing the simultaneous pursuit of high products, low costs, and differentiations, the analysis makes competition irrelevant. While creating blue ocean strategy, a new and attractive business is established (Kamal and Dionne-Odom, 2016). This approach implies that there is no rivalry and the bargaining power is significantly reduced. Furthermore, it results in high profitability. Unlike the strategic group analysis that can provide wrong analysis, the blue ocean strategy is valid (Barbero and Vieira, 2015). Besides, it gives analysis based on 30 industries over more than 100 years, providing a broad range of area which minimizes the chances of errors. Therefore, blue ocean strategy gives a full analysis, making it suitable for Ford or General Motors to determine who its competition is within the transportation industry.

 

References

Analysis of the North American Advanced Features Market and Optional/Standard Strategy of OEMs 2014-2020. 2014. M2presswire.

Bee-lan, O, Drew, D, and Runeson, G. 2010. Competitor analysis in construction bidding. Construction Management & Economics, 28, 12, pp. 1321-1329.

Baker, CR. 2015. Organizational change at Ford Motor Company in the face of international financial crisis.  Recherches En Sciences De Gestion, 110, pp. 23-35.

Barbero, E, and Vieira, B. 2015. Estratégia do oceano azul: Relato de implantação em um setor em crise. Revista Ibero-Americana De Estratégia (RIAE), 14, 4, pp. 135-148.

Ford Motor Company SWOT Analysis. 2016. Ford Motor Company SWOT Analysis, pp. 1-10.

General Motors Financial Company, Inc. 2016. General Motors Financial Company, Inc. Marketline Company Profile, pp. 1-12.

Gochhait, S, and Tripathy, P. 2014. Blue Ocean Marketing Strategy: A Study of refractory industries in Odisha. IUP Journal of Entrepreneurship Development, 11, 3, pp. 49-61.

General Motors Company. 2016. General Motors Company Marketline Company Profile, pp. 1-44.

General Motors Company SWOT Analysis. 2015. General Motors Corporation SWOT Analysis, pp. 1-10.

García-Ochoa Mayor, M, and Bajo Davó, N. 2016. Competitive advantages of the mobile phone operators in the Asia Pacific region: analysis from the strategic groups approach. Technology Analysis & Strategic Management, 28, 5, pp. 541-554.

Hyundai Plans U.S. Luxury Car. 2009. Wall Street Journal - Eastern Edition, 13 August, Academic Search Premier, EBSCOhost, viewed 18 October 2016.

Indian retail industry strategies could potentially disrupt competitor business: PwC. 2015. FRPT- Retail Snapshot, pp. 5-6, Business Source Premier, EBSCOhost, viewed 18 October 2016.

Johnson, A, Johnson, H, Devadoss, S. and Foltz, J. 2011. Strategic Group Analysis of U.S. Food Businesses Using the Two-step Clustering Method.  International Food & Agribusiness Management Review, 14, 2, pp. 83-102.

Kuwait Country Profile. 2015. Provides a PESTLE Analysis of a Country's Business Climate' 2015, M2presswire, Newspaper Source.

Kazakhstan PESTLE Country Profile. 2015. M2presswire, Newspaper Source, EBSCOhost, viewed 18 October 2016.

Koski, H, and Majumdar, S. 2002. Paragons of virtue? Competitor entry and the strategies of incumbents in the U.S. local telecommunications industry. Information Economics & Policy, 14, 4, p. 453.

Kamal, A, and Dionne-Odom, J. 2016. A Blue Ocean Strategy for Palliative Care: Focus on Family Caregivers. Journal of Pain and Symptom Management, 51, 3, pp. e1-e3,

Murthi, B, Rasheed, A, and Goll, I. 2013. An Empirical Analysis of Strategic Groups in the Airline Industry using Latent Class Regressions. Managerial & Decision Economics, 34, 2, pp. 59-73.

Moon-Soo, K. 2016. A Techno-Economic Analysis with Blue Ocean Strategy for New Technology: Case of an RFID System. Journal of Emerging Issues in Economics, Finance & Banking, 5, 2, pp. 1912-1921.

PESTLE Analysis of Saudi Arabia 2012. 2013. M2presswire, Newspaper Source, EBSCOhost, viewed 18 October 2016.

PR, N 2016. Maternity and child care (MCC) hospitals market in India 2015 – 2020.  PR Newswire US, 30 May, Regional Business News.

Rouwette, E, Bastings, I, and Blokker, H. 2011. A Comparison of Group Model Building and Strategic Options Development and Analysis. Group Decision & Negotiation, 20, 6, pp. 781-803.

Reich, D, Shi, Y, Epelman, M, Cohn, A., Barnes, E, Arthurs, K, and Klampfl, E. 2016. Scheduling Crash Tests at Ford Motor Company', Interfaces, 46, 5, pp. 409-423.

Wright, R. (July 11, 2016). US autos: Adding new routes. Financial Times (online) (cited 11 July, 2016)

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