Comparison of Toyota & VW:
Volkswagen and Toyota are both dominant and aggressive competitors in the automotive industry. As exceptionally successful firms, they do share certain traits about one another whilst being clearly distinct from each other simultaneously as well. Both companies are essentially large publicly listed companies which have over time developed a strong interconnected infrastructure which is the foundation for their business performance. These two firms approach the industry with the same goal as being the largest car seller and adopt a revenue model to meet this objective. In pursuit of this objective, Volkswagen and Toyota approach it differently. Toyota relies on its competencies in improving their assembly with refinements being made to their processes such as JIT, and Kanban. It aligns these crucial processes with its key resources; employees. They monitor Toyota's supply chain and ensure that these processes are optimised. By doing so Toyota can cater to a broad market and generate income as well by not only selling cars but also their parts and servicing.
Volkswagen operates differently, whereby it develops strong relationships with its suppliers to provide it with necessary components needed to assemble their cars. Volkswagen targets the market more specifically by going as far as allocating significant portions of research & development resources to launch a particular model to cater to the needs and wants of a very targeted customer group. It also includes more financial services such as auto loan financing and insurance that allow it to capture more value from their customer. It thus focuses on providing its customers a more integrated experience of its products and services.
Both firms have created uniques strengths and weaknesses for themselves due to their strategies towards customer acquisition and development of processes and core competencies. Volkswagen benefits significantly from its large portfolio of brands which include Audi, Skoda and Porsche. These brands allow the firm to specifically target customers based on a detailed criteria used to segment them. Using this method it has allowed Volkswagen to cover a wide area of the automotive market. Volkswagen also engages in acquisition of brands to get a stronger grip in one particular segment. An example of this is its acquisition of Skoda. Even though Skoda and Volkswagen cater to the same market segment for low price passenger cars, by acquiring Skoda, VW was able to capture more of the market and used the competition between the two brands to increase business performance of both departments. Another vital advantage of this large brand portfolio is that it enables the firm to lower cost by removing divisions which can become redundant such as legal. Also, it gives the entire firm a platform for synergy to be fostered through shared engineering resources and internal collaborations between brands. Brands are also able to benefit from VW's large size, its infrastructure and its economies of scale. It further improves the firm's diversification efforts which limit the corporation's reliance on any one particular brand or car model.Through the deployment of its new together strategy, Volkswagen plans to strengthen its position by investing resources in R&D for autonomous driving technology as well as commit to not only lower overall emissions but also to launch a fleet of 30 electric vehicles. These decisions will help the firm improve its efficiency and profitability. Volkswagen has also taken steps to increase its role in the chinese market by entering into joint ventures with local automakers in the region. This strategy assists the firm in establish operations in the largest auto market through its two joint ventures; SAIC Volkswagen and FAW-Volkswagen, which helps Volkswagen capture 14.6 by offering 150 different models and become the second largest car company in China behind General Motors. Volkswagen despite its dominant position does experience limitations which arise from its weaknesses. These stem mainly from the diesel gate episode. This event in VW's history highlights how the firm in the pursuit of maximizing revenue through number of car units sold is willing to compromise on its quality control checks and measures. These have surfaced possibly from Volkswagen's operations becoming gargantuan from attempting to meet all the demand it has seen for its numerous car models. Another weakness of Volkswagen is that due to its large size and scope of operations, it is slow in its responsiveness to market changes as the necessary alterations which need to be made in its operations take time to implement and take effect. The firm has been performing poorly in the US market due to high recall rates and has put Volkswagen in an unenviable position in a very large and important automotive market. The diesel gate has rocked the firm, its management and has weakened its highly valued brand. For Volkswagen, there is scope for this incident to have a negative effect on sales as customers maybe more unwilling to purchase cars from Volkswagen. It also faces external challenges in the form of disruption which is forcing itself in the auto industry in the form of ridesharing and the emergence of Electric vehicles. Companies such as Uber and Lyft are aiming to disrupt the conventional way of transport by encouraging individuals to share rides and not go and invest in buying a vehicle. Electric vehicles also pose a challenge for the firm to adapt to as Volkswagen has limited expertise in them and their infrastructure will require time to adapt to the changes necessary to assemble electric vehicles. Despite these threats, Volkswagen does have opportunities to strengthen its position in the auto industry. Volkswagen has effectively incorporated financial services in its business of selling cars. Here it has been able to capture more value from the customer by offering them important services such as auto financing in the form of a loan, auto insurance and complimentary servicing and maintenance of the cars as well. These add on services allow Volkswagen to create an ecosystem where all its value propositions to the customer are integrated so that convenience is prioritised for the customer and the overall experience is flawless. Volkswagen has also invested significantly in R&D over other distinctive features in its cars which build on artificial intelligence. This allows the firm to better direct its operations in the future and offer unique features in their cars which will attract customers. Volkswagen can further build on its position in the market by maintaining its decision of making strategic acquisitions and using them to not only enhance business activities but also improve upon skills and competence development. In comparison, Toyota is also one of the largest car manufacturers in the industry. To achieve this target it has been slowly improving its infrastructure and its supply chain management. This has been done by deepening relationships with suppliers to ensure that Toyota doesn't experience any uncertainties with supply for parts it needs to assemble its cars. Furthermore Toyota has also developed a wide network of dealerships to act as points of distribution for its vehicles and also the first point of contact for prospective customers. Toyota's production system, the TGM which is based on Just-In-Time (JIT) is also one of its greatest sources of core competencies as through this system it is able to eliminate all waste from manufacturing process. This has led to increased production efficiency, decreased manufacturing time and simplified processes. All of which resulted in lower costs and better quality vehicles. Toyota has developed a strong competency in not only research and development but also in hybrid car technology. Toyota's R&D efforts have allowed the firm to adopt modular innovation which it then uses with its marketing division to offer customers a wide range of customization choices while keeping manufacturing costs low.
Toyota, while has created a strong presence in the auto industry, it has done so with a handful of brands and its overall brand portfolio requires significant development. Due to this reason, Toyota has struggled to gain traction in certain key segments in the auto industry; namely the small passenger car segment where, it is has experienced difficulties to compete against Volkswagen, Honda. A stronger brand portfolio would allow Toyota to better target markets such as India where it has struggled.
Toyota as a player in the auto industry, has carved out a robust position for itself in the hybrid car segment with its Prius range. In developing the Prius, Toyota has been slowly incorporating its hybrid technologies and processes into its existing infrastructure. This reduces Toyota's reliance on petrol vehicles and with hybrid, gives its business model an additional leg to stand on. Further gradual R&D in electric car technology combined with hybrid systems and infrastructure puts Toyota in an enviable position to successfully mass manufacture electric vehicles.
The largest potential threat to Toyota is the rapid changes making their way in the auto industry and uncertainty they bring with them. The rising trends of electric vehicles and ride sharing companies such as Uber will put pressure on Toyota's present business model. Toyota's profit formula will have to be restructured if car sharing becomes main stream and leads to causal decline in retail of vehicles. For electric vehicles, Toyota will experience difficulties in finding the right balance between supply and demand of both electric vehicles and gas powered vehicles and this could greatly impact its entire operational infrastructure and supply chain
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