Competitive Advantage in the Car Industry

According to George (2006) competitive advantage is the business concept that allows a business organization to offer the same services or products as its competitor but at a lower price or create greater value than its competitor through differentiation and charge higher prices. Most leading car companies like Toyota, Mitsubishi, Ford, GM, Chrysler, Honda and Nissan have used these strategies to attain a huge market share and thus generate more revenue and eventually more profit which is the ultimate goal of every company. This essay is going to discuss the strategies that these companies use to outdo one another at the market.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

The car companies use emergent or prescriptive strategies or a combination of both to gain an advantage over each other. Prescriptive strategy is the one that has defined objectives and whose main elements have been developed before the strategy starts. On the other hand, emergent strategy is the one whose final goal is uncertain and whose elements are developed during the course of its implementation as the strategy continues (Miles, 2008). According to the Porters generic model the company can have competitive using three strategies which are cost leadership, differentiation and focus which are the ones that the car companies use to have a competitive edge over their rivals (Porth, 2008).

The first strategy that the companies use to effectively compete in the industry is market research. According to Porter (2007), the knowledge about the target market is crucially important for every business worldwide. Toyota Company before releasing any new model, does research on the countries that are most likely to accept the model and the market prospects of the model. Then it develops the model that will sui the target market, for instance, the Toyota Land cruiser Pickup has a higher demand in African countries than in the west. This ensures optimal customer satisfaction. In a recent report in the motor industry Toyota and Ford tie in customer satisfaction way above their rivals and this gives the two companies a competitive advantage in this motor industry (Porth 2008)

The demand for luxury has grown over the recent years. The companies are manufacturing luxury cars that are cheaper than the models that are made by their competitors. For example, in 2013, Mercedes released the CLA which is a luxury car that could be bought at around $40000. The Audi A3 model released by Volkswagen Company was released after the CLA model. Bothe the Audi A3 and the CLA models have increased the sales for the two companies (Miller, 2015). The companies have greatly automated their production. The massive use of advanced technology in the production, marketing and even accounting in these companies has reduced the cases of theft by the staff. At the same time the automation of the manufacturing process has greatly reduced the labor intensity in the companies and this has reduced the labor costs and the aggregate costs. A company that is able to maximize the difference between the revenues and the costs incurred is guaranteed of higher profits than the one that does not (Gamble, 2010).

The companies have also developed very cost effective cars in terms of fuel consumption. A good example is the Toyotas Probox model that consumes very little fuel. Another example is the Volkswagen Passat which has a good horsepower and very low fuel consumption. The demand of such vehicles is increasing with every purchase of new cars.

In conclusion, the competitive advantage of the car companies can be found in all the stages of the vehicle production and marketing. This paper has highlighted the cost effectiveness of the vehicles, the low production costs through automation of the manufacturing process and the market research as key elements in the competitive advantage of the car company. The car companies and other companies that can fully and efficiently utilize the strategies can grow significantly.

References

Gamble, AA, &Strickland C 2010, Crafting and Executing Strategy: The Quest for Competitive Advantage, McGraw-Hill, and Irwin.

George, K, 2006, The Advantage in The Market: Rethinking Market strategy, Cambridge University Press, Cambridge.

Miles, 2008, Car and Competition: A Handbook on the Competition in the Car Industry, Oxford University Press, and Oxford.

Miller, JL, 2015, The New Marketing Advice: The Third World Market. Hoboken Publishers, New Jersey.

Porter, ME, 2007, Competitive Strategy: Techniques for Analyzing Industries and Competitors, The Free Press, New York.

Porth, SH, 2008, Strategic Management: A Cross Functional Approach, Prentice Hall Publishers, New Jersey.