Safeguarding Of Competitive Advantage between Chrysler and Honda
Safeguarding Of Competitive Advantage between Chrysler and Honda
In business, competitive advantage refers to possessing advantage over competitors (Porter, 1986). This advantage is that which comes as a result of smart and conscious strategic plans as compared to other factors. Success and failure of a company is highly dependent on competition and this implies that he way competition is handled is very crucial to the business process. When an organization creates and sustains profits that exceed the average among competitors, it is said to possess competitive advantage (Alan, 2009). The architect of this term is seen to be Michael Porter (1980) who described a scheme consisting of three strategies that business firms use to create and maintain competitive advantage. According to him, two types of advantages exist namely, cost and differentiation advantage (Kearney, 1992). Business firms today are keen on developing strategic plans that will efficiently give them advantage to their competitors. In this study, three companies that are the leading automobile companies in North America are assessed with an aim of analyzing the strategies they use in their competitive business area. The automobile associations considered in this study are Toyota, Ford and General Motors.
Chrysler
Chrysler is an automaker company from the United States, the founder of this company was Walter P. Chrysler on 6th June, 1925, after the Maxwell motor was re-organized to for Chrysler Corporation (Moore, 1995). He launched the well received Chrysler automobile in 1924. It was a six cylinder automobile designed with the purpose of providing consumers advanced car which is well engineered at an affordable price beyond their expectations (David, 1989). In 1925 Walter Chrysler became the president. The company was eventually integrated under the Chrysler name. From 1998 to 2007 Chrysler has been part of Daimler Chrysler a German based automobile company. On 14th May, 2007 Cerberus capital management firm bought 80.1% shares of Chrysler from Daimler Chrysler, although Daimler still hold the 19.9 % shares. In December 2008, Chrysler announced to be out of cash and was to file for bankruptcy status (David, 1989).
For Chrysler to maintain the competitive advantage has identified more opportunities, which will help in costs structure reduction as part of major restructuring. It plans to cut on the structural costs by 29 percent from 2007 to 2009. The improvements realized are mainly determined by aggressive reductions in remunerated headcount. On capacity utilization, the company considers the reduction of production capacity by 1.3 million units in order to react to a miserable global auto market and sustain their lost competitive advantage. The production capacity will be eliminated by closing down five engine plants and two assembly plants in a period of 5 years (2009-2014). About wage rate rationalization, the company plans that the hourly wage rate will be benchmarked by 2010. This is based on the assumption that the ongoing negotiation will be finalized. Another strategy of Chrysler is to improve on their product quality, which over the years has lagged behind affecting their competitive advantage (Kearney, 1992).
The company is facing major challenges in sustaining competitive advantage. It cannot afford to offer enough research and design to each of their product podium in order to sustain competitiveness, experiences a lesser supply procuring base and repays its significant fixed expenses over a much lesser base of automobiles than its competitors like Honda. The current product quality scores of Chrysler considerably lag its competitors. Unfortunately, improving on the product quality is a long term process and will take a number of years. Product mix is another challenge that this company is struggling with, it lacks the product pipeline which covers smaller vehicles which are predicted to grow in the overall automobile market and is fighting to meet the planned fuel efficiency requirements (David, 1989). Geographical concentration is yet another factor that is challenging the forward progress of Chrysler Company. Unlike a number of its competitors, its auto business is heavily concentrated in the United States, which makes it susceptible to domestic economic variations and incapable of taking pro of developing markets.
Whereas, it has made significant alterations to its cost structure over the last years, the amalgamation of an essentially disadvantaged operating arrangement and a limited set of enviable products make impartial capability for the business extremely challenging. However, a joint venture with another automobile company, such as Honda or another potential partner, which tackles a lot of these issues, could show the way to viability for Chrysler.
Honda Motors
The company is headquartered in Japan, has a long history of manufacturing quality cars. Has the world sixth largest research institute of technology and is the biggest engine builder in the world today. It builds more than 14 million combustion engines each year. Honda is a world major manufacturer of motorcycles, scooters, jets, trucks, automobiles, electrical generators, marine engine, and aeronautical technologies. Soichiro Honda was the establisher of Honda Company in the year 1946 in the town of Hamamatsu, Japan. His objective and sole goal was to make a two cycle motorcycle engines. Its first automobile production was the T360 mini truck in 1963, and the first car to be produced by Honda was S500 sport's car. Recently, Honda has surpassed Chrysler as the fourth largest manufacturer of automobiles in the United States, is the 2nd largest producer in Japan after Toyota and ahead of Nissan Motors (Edmunds' answers, 2009).
The issues that Honda has handled successfully are vital uncertainties of market strategies. It has been very keen to consider which market to enter, positioning of their products within the markets, and building of cordial relationship with dealers and other automobile manufacturers. It has become one of the proper manufacturers of car worldwide, as it decided on an inventive automobile position and exportation for the reason of creating a niche for itself for competitive advantage on market. The idea of Honda automobile products being practical and fuel efficiency has made it to exploit both the domestic and global market (Honda Environment Annual Report, 2000). The company choose to listen' to the market demand and produces cars according to the demands and desires of the consumers, incorporating factors, such as the current economic recession and environmental factors. The global market exploitation has been catalyzed by the quality of cars the company manufactures, the innovative model of cars, and competitive prices offered by the company (Nikkei Business Publication, 2009). Honda Motors are flexible in product production and they have human centered' approach of working, therefore they are less rigid compared to other automobile, such as Toyota, Chrysler, and Ford Motors. This is to mean the company makes the cars in correlation with the market demand for them to achieve the targeted profits, this ensures the company sustainability of competitive advantage (Liebeskind, 1996).
To increase on their global market share, Honda introduced hyper quality models through dealers unusual from its ordinary Honda models. This facilitated the company to compete favorably with other automakers, such as of Mercedes Benz from European market thus getting a lead in market position. With a better position on a global market, well recognized, and with appreciated brands, it has a competitive advantage over other automakers companies whose brands are perceived to be weaker (Nikkei Business Publication, 2009). Strong brand like those from Honda makes the company to command self space, widen the customer attention, and set higher prices for their products on superiority grounds. An established reputable company, such as Honda, with high product quality remains with positional benefit over the other competitors in the auto market, whose consumers believe that the company is being opportunistic (Thinking Made Easy, 2009). These factors together with others, grants Honda the privilege of enjoying the competitive market advantage. It uses one of the competitive plans and strategies in increasing its market share by having a primary mover's benefit in the expansion of core products by use of their core proficiency in engine technologies.
Many of the alterations and changes that have occurred in the plan field in the company have been an issue of changing of concentration between internal and external scrutiny, and has been an attribute of a good number approaches to plan that they have largely emphasized either an internally oriented outlook or an internally externally oriented outlook (Moore, 1995). The expertise in engine technology has given Honda an ample opportunity in exploiting this proficiency in auto industry, able to come up with a variety of quality products from snow blowers, lawn mowers to automobiles and trucks. Its competency has got the following benefits that ensure competitive market advantage. The competency provides the company with a prospective access to a spacious range of markets. Makes a major contribution to the alleged customer benefits of the ultimate product and finally, competency makes it very thorny and difficult for its competitors to emulate. Geographical concentration is a major factor that is facilitating the successful progress of Honda as an automaker company (Edmunds' answers, 2009). Unlike other auto companies, it has a number of markets and manufacturing plants in many countries, such as Japan, United States, China, and in Europe. This makes the company to resist any economic fluctuation on domestic market, as other markets in different countries will continue to flourish commercially, thus safeguarding their competitive market advantage.
The challenges facing Honda Company towards sustaining the competitive market advantage are very merger. The company is struggling with the climatic changes that are affecting the ecosystems globally, and it is striving to address the problem to support the world environmental conservation. It has a challenge of manufacturing automobiles that will offer less or low carbon dioxides emissions and contributes to sustainable growth in concord with the environment (Thinking Made Easy, 2009). Another challenge Honda is striving to cope up with is the high need of fuel efficient products to maximize on the energy saving. It has to focus more effort towards the market demand by being flexible and meting the requirements of its consumers. Manufacturing highly fuel efficient products and resources conservation is a greater challenge lying ahead of Honda's mandate.
Comparison between Chrysler and Honda
Both Chrysler and Honda operate their auto business in the United States, however, Chrysler geographical concentration depends heavily on the United States. The manufacturing plants of Chrysler are situated in the United States. This makes it vulnerable to economic fluctuation in local market thereby, affecting its competitive advantage compared to other auto companies. On the other hand, Honda has a number of manufacturing plants in many countries of the world, such as China, Japan, and European countries. Therefore its geographical concentration is diversified, unlike Chrysler which has market concentration only in the United States.
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