Multinational Corporations
General Motors, Toyota and Ford are some of the companies. The emerging economies of Asia like china and India offer the best mining ground for the companies and a look at their strategy will offer an insight into what the formula of their success has been. Diversifying into the Asian market is a worthy investment for any multinational company especially the motor industry. For instance general motors made a loss of over 10 billion in its North American operations while it made over a billion in profits from its Asian operations. That alone underscores its strategic importance of Asia.
Auto industry
Toyota, General Motors and Ford control a big share of the global auto market. Toyota for along time overtook general motors as the preferred car maker in the U.S. General Motors and Ford on the other hand has ventured into Toyotas backyard in Asia. The only common factor is that all of them are car makers. Other factors vary significantly. All the three companies manufacture pick ups, private cars and commercial vehicles. They come in different names which correspond with the cars features and markets. All the companies have shown great innovation but Toyota seems to be a head of the pack.
There a close competition between the three as reflected by their sales figures. The graph below shows the market share that each control in the Asian region.
Asian operations
Asia auto industry is still young with a lot of potential. One factor that any business considers, especially auto makers is the fact that Asia has one of the largest populations in the world. Both china and India whose populations are bigger than any other countrys in the world are located in the continent. Its important to note that due to its population, India is the second fastest growing car market in the world after china. Chinas market is the most promising. Less than 20 in 1000 Chinese young stars drive compared to 900 in 1000 Americans. Forbes estimated in 2007 that the purchasing power of the Chinese will grow by 10 while that of Indians will increase by 5 (Butcher ,1). These sections of the populations have been the target of the auto makers. They represent the middle class whose strength is growing in Asia by day. Therefore it makes a lot of sense to court them and produce tailor made products that they can easily afford.
Asian car makers led by Toyota have been eating into American car manufacturers markets for quite sometime now. And the trend does not show signs of abetting. Toyota hybrid model like the Prius have had huge success in the United States. The same has been replicated elsewhere in Europe and Asia. Like Toyota, Ford motors has done exceptionally well in the production and sale of hybrid vehicles globally. In 2004 its hybrid sales stood at 24,000 globally. The figure was projected to be 250,000 by the year 2010. But it still needs to cave a niche as big as Toyotas and general Motorss in Asia. Toyota has taken advantage of this technological gap to up its business in the Asian region. General motors Operating in Asia is a tricky affair fro general motors and ford considering there are a host of Asian auto makers who offer nearly the same quality products. General Motors has dominated the North American market for along time while Japan has dominated the Asian market.
The following graphs represent their total yearly sales in the United States in the last three years.
Graph showing yearly sales of the three auto makers in the united states(figures in 000,000s).
General motors has been the market leader in north America but in the year 2009, that position was taken by Toyota amid General motors and fords financial woes.
Strategies
The low cost of labor in Asia is one attractive factor that has enabled the companies to carry out successful operations in Asia. China Thailand and India seems to be the launch pads for the American auto makers, in Asia. . In 2005 ford president Bill Ford announced that the company had long-term expansion plans in Asia and Thailand was going to be the main engine of that growth (business in Asia, 1).
Manufacturing or production capacity seems to be the determinant factor in how successful operations of car makers in Asia are going to be. All the companies have announced plans to build more manufacturing plants in the countries while Toyota has an advantage in its native Japan. General motors have relied on its manufacturing capacity as a plus in Asia. A series of manufacturing plants have been set up in Asia to serve the growing market. In 2008 GM chairman announced a new manufacturing plant in Bangkok Thailand (Fuller T, 1). Ford on the other hand has split its manufacturing in Asia by establishing two manufacturing plants in the Philippines and in Thailand. A third plant is due in 2010, the company announced in 2009
Partnership with regional car maker is the main strategy that the American car makers as well as the Japanese one have used to penetrate in the region. Ford has also upped its Asian niche through some acquisitions like the 1979 acquisition of Japanese car maker Mazda. Through Mazda ford also acquired a stake in the South Korean car maker KIA.
Though some of the technology is sourced from the United States, most of it is obtained with collaboration from the Asian partners. General Motors makes use of its original technology as well as from its partners in Asia. It has a research center in bungalow in India with over 800 engineers and 100 scientists. In 2003 Toyota opened a quality and deign center in Melbourne Australia. The center employs 150 people and is used to fine-tune other models for the Asia pacific region (I start, 1). There is still a Toyota technical center that is based in Thailand and employs 290 people. It serves the region by designing and modifying spare parts made in Japan and meant for the region.
Compared to its competitors, General Motors and Toyota, Fords presence in Asia has traditionally been much smaller. Its operations have been confined to countries like Malaysia, Singapore, Hong Kong, the Philippines, Taiwan and lately china. In Taiwan, Ford has had a joint venture with Lio Ho since the 1970s. Ford began assembly of cars in Thailand in 1960, but withdrew from the country in 1976, and did not return until 1995, when it formed a joint venture with Mazda called Auto Alliance. By 2002 general motors was registering phenomenal growth and general motors hoped to be one of the biggest auto makers in Asia. Ford initially had problems growing in Asia because they had not focused on the regions two biggest markets India and china. Ford had a slow Chinese operation because of its dealership locations. The underdeveloped western provinces provided little support to customers and spear parts had to be imported eating into profits. Unlike general motors whose plants are located near shanghai. Part of its strategy is moving its headquarters from Thailand to china. Then Ford is now working to consolidate manufacturing in four regions. It also seeks a more cohesive regional approach instead of country-by-country operations, and is working to enhance the Ford brand. Ford has to its customer service complimentary customer service inspection. That ahs a lot of people going for its products compared to its competitors.
All the auto companies discussed here have formed subsidiary companies that help in running their operations in Asia. General Motors operates in Asia through GM Asia Pacific Holdings, LLC. It runs operations through its subsidiaries, designs, manufactures, and markets vehicles. It has manufacturing and assembly operations in Australia, China, Indonesia, India, and Thailand (business week, 1). Toyota on the other hand runs its Asian operations through the Toyota Motor Asia pacific pte ltd (tmap). It is established as a wholly-owned subsidiary of Toyota Motor Corporation (TMC) to coordinate and facilitate Toyota vehicles and vehicle parts, as well as to provide Management Services to related companies in the region. The headquarters are based in Singapore.
The three companies have taken advantage of the free trade areas in Asia to establish market presence. On that front Ford seems to have maximized most. It has declared that Thailand china and India are the most critical elements in its strategy for growth in Asia. Leadership through innovation will steer Ford through the next century in Asia. The Philippines plant manufactures cars while the Thai plant manufactures pickups. This plant manufactures meant for the South East Asia market. The companys strategy was tailored to take advantage of low duties under the ASEAN Free Trade Area (AFTA) scheme. The agreement too allows Thai-made pickups to be exported throughout Southeast Asia (Asia in business, 1). Similar to general motors Ford has seen a decline in sales in the mature markets of North America and Europe while the Asian market has shown real potential for growth. They have too focused on cutting costs as the main strategy in ramping up their profits in the region and the world (business in Asia, 1).
Recognizing the importance that the Indian market has on the overall Asian operations, Ford began production in 1998 with its Ford Escort model. It was later replaced by locally produced Ford Ikon in 2001. The Fusion, Fiesta, Mondeo and Endeavour have been added to its product line.
Marketing
Cost of their products has been the derailing factor in the Asian operations. Boosting production and cost friendly policies seems to be one of the main strategies being employed by the car makers in Asia. Japanese and Korean auto makers like Suzuki and Hyundai have done better in Asian markets that General Motors and Ford because of pricing (MSCNBC, 1). The companies responded by launching a series of affordable cars to the Asian market with India specifically in mind. Ford Motor Co. is the latest to launch its first made-for-India compact car. The Figo goes for 349,900 (7,690), and Fords first car designed and priced for the mass Indian market. Its manufactured by the Indian plant. It will be distributed through out the south East Asian region .General motors too recognized that fact and have since launched mini cars that are price friendly in Asia. General motors launched the mini Chevy car in India while Ford Motors launched the mid-sized Fiesta model in India.
All the car makers have adopted a customer focused marketing strategy that aims at pleasing the customer with almost tailor made products. In its customer service strategy General Motors has numerous service dealers centers like 800 in china while Toyota has 500.
Toyota is a prime example of how customer focused service and marketing can be used to net clients in Asia. The strategy stresses on positive influences of vehicle ownership and quality. On the core of it Toyota has used a marketing principle of targeting the potential customer and the present customer (Guyes, 8). Toyota applies universally the principle of lean production system that has enables it produce efficient cars. USA Today once described Toyota as being a state of the mind much as it is a car maker. It underscores the importance that people have come to attach to Toyota quality.
Partnerships have been the lead strategy that general motors has employed to establish its presence in the market. Besides, there have been acquisitions and merges together with joint ventures with financial services providers. General Motors have acquired stakes in Subaru, Isuzu, Suzuki and Daewoo.
Additionally general motors purchased a manufacturing plant in Vietnam giving it strong presence in the Asian market. (Andrea Wielgat 1). On 4th December 2009 general motors signed a 50-50 joint venture with SAIC Motor forming the General Motors SAIC Investment Limited (PR-Inside, 1). The venture strengthened general Motorss standing in the Chinese market and according to the deal gave the two companies a better footing in leveraging their resources in Asia s emerging markets. The companies already have a strategy in place to rejuvenate sales in India which is poised to be the worlds most populous country.
Ramping up operations especially in emerging markets like India is still a dependable strategy from General Motors in Asia. The company chairman reiterated that as recently as 2008 while launching the mini Chevy car in India. As a way to scale down its manufacturing costs, the company sources its manufacturing equipments from India
Employee organization
Most of the employees are hired locally in the countries where manufacturing takes place. Labor is only imported where necessary to fill gaps on technical expertise but the aim of employing local is to make the companies have a local face rather than being seen as foreign firm. Ford and Toyota are family businesses and though they are run professionally the chairmen and presidents tend to be from the family line. Currently, Bill Ford is the president of Ford Motors Co and Akio Toyoda for Toyota.
In Asia where Toyota rules, general motors has instructed its employees to follow the kaizen principle of continuous improvement. Its Asian workforce is not well compensated like the one in North America safe probably for the top manager. Benefits like medical care have not been extended to the workers to the level of their North American counterparts.
Toyota holds regular training seminars and workshops for its employees and manufacturing affiliates. In 2006 it held in Thailand which was attended by the president of the country.
Criticism
Car makers have recently been in the news for all the wrong reasons. Toyota which was seen as an icon of quality in the market is on the verge of loosing that reputation due to the numerous recalls that were instituted by the car maker. Some aspects of quality were ignores hence compromising safety of passengers. General Motors and Ford are emerging from painful episodes of restructuring and bailouts that have changed the perception of their images among the public. Quality issues had clearly bee overlooked and expansion and spending practices queried. Toyotas motor president has been forced to come out to apologize to the customers over the recall fiasco.
Though not directly, Asian governments have enacted numerous laws that have enabled the companies to do business successfully. Occasionally the heads of government or their representatives attend company functions. When General Motors was launching its mini Spray in India the countrys prime minister was present to witness the occasion. In Thailand the president has been present in many of the GM and Toyotas functions, this shows political favors indirectly given to the Corporations. Although it has been difficult to pinpoint the players involved in corruption scandals in those firms mostly the Multinational companies bribe and coerce policy makers in those countries through middlemen to influence and change policies which favor their companies operations.
Although they are an integral part of the economy in terms of creation of employment the multinationals mostly exploit the labor in terms of wages and in fact they are often accused of tolerating modern day labor slavery by creation of the sweatshops like companies.
The thorny issue of global warming has been blamed on the Auto-Industry by developing cars which pollute the environment and instead of focusing on magnitude of the damage they cause to the environment they are only driven by profits.
Conclusion
Multinational corporations play an important role shaping various countrys economies and peoples lives. They have been accused of misconduct in the past, allegations which some times are true. Because of the interdependent nature that exists between the economies people and the companies a workable framework has to be created so that a win-win situation is achieved. These firms in the Auto industry are without a doubt Multi National Corporations as they do not only operate in two or three countries but their operations span into almost all continents in the world. The Multinational Corporations are financial behemoths taking into consideration the amount of budget and finances they control. Firms like GM and Toyota have bigger budgets than some countries in the world and also the Asian region. With this financial muscle it is definitely easy for the firms to easily control and influence the policies of the country regarding their investment in those countries of operations.
Despite criticism which the Multinational always get which others are mostly justified the influence and their importance into those countries cannot be simply ignored. The firms employ thousands of people directly who in turn support their families economically and improve the social status and their well being and the ripple effect will be felt across the country. The firms contribute a lot in social development in corporate social responsibility. They also do contribute a lot to the economy of the country through taxation which is usual very high in comparison with local firms. As much as important their contribution is to the local economies they operate the Multinational are known to have a tendency of flouting and twisting rules to their advantage and they sometimes cause great damages in pursuit of making abnormal profits. These are tendencies which need to be discouraged and stopped to ensure the firms are positively contributing to the society and economies at large.