Toyota: Developing Strategies for Growth

23DEC Toyota: Developing Strategies for Growth In order to have a successful strategy for growth, businesses must first find, evaluate and select a strategy to capture a potential market. Since it entered to American car market in 1967, Toyota has developed a diverse business portfolio with its existing line of cars as well as brands such as Lexus and Scion. It became a successful car manufacturer by having an effective marketing process that allowed it to attract customers and expand its product range to other market segments. When Toyota and other Japanese carmakers entered the American market, they were not considered a threat to the American auto industry because it was believed their cars had no appeal to American consumers. However, in the 1970s, due to problems such as the 1973 Oil Embargo, environmental regulations, and quality control issues with American cars (Ford Pinto), a good number of American car owners began searching for alternatives to their gas guzzling, poorly made American cars. In response to these changes, Toyota and other Japanese carmakers aggressively marketed their cars to Americans as being fuel-efficient, environmentally friendly, and having better build quality than American cars. In addition, Toyota marketed their cars as being hip and fun with memorable slogans like, you asked for it, you got it, Toyota, and with commercials involving young Toyota drivers jumping in the air. As a result, the Japaneses marketing campaign along with continuing problems from the Big Three auto manufacturers, allowed import cars to make up about 20 percent of the US car market by 1980. After successfully gaining a sizable market share in the US, Toyota decided to create the Lexus brand in 1989 to target the luxury-car market segment, which was dominated by Mercedes-Benz and BMW. They decided to create a new brand because of their reputation at the time for being a company that only offered fun and fuel-efficient compact cars and because the introduction of luxury models into their existing lineup would dilute the Toyota brand. Therefore, Toyota marketing strategy was to market Lexus as a separate company with almost no references to Toyota, a heavy emphasis towards quality customer service and it had a separate dealership network from Toyota. This marketing strategy has allowed Lexus to become one of the best selling luxury cars in the US by 2000 and it encouraged Nissan to sell luxury cars with the Infiniti brand.

Despite the successes of both Toyota and Lexus, it began to face a new problem: age. Presently, Toyotas new customer base is 47 years old, which is higher than the industry average of 45 and placed Toyotas average customer base with the likes of Buick, Mercury, and Lincoln. In response to their aging customer base, Toyota formed a study group called Project Genesis to develop a marketing campaign to attract younger buyers to Toyota. The result of Project Genesis was the introduction of sportier and youthful models to the US: the Celica, MR2 Spyder and Echo in 2000. Unfortunately, Project Genesis was a failure because it had a dull marketing campaign that failed to create a common theme for the different cars, sales for each of the models did not reach Toyotas expectations and the entire study group failed to realize that Toyota had developed a reputation for making generic cars. As a result, Toyota Motor Sales USA has decided to phase out the Celica and MR2 Spyder by 2005. Although Project Genesis proved to be a failure, Toyota made another attempt to capture the youth market by creating a third brand called Scion in 2003. Unlike Lexus, which was created to sell luxury cars, Scions purpose is eventually attract American youth into becoming Toyota customers by first introducing them to relatively cheaper and radically designed cars. Scion currently has three cars in its lineup: the xA and xB, rebadged Japanese-only cars whose design does not fit the Toyota and Lexus brand philosophy, and the tC, a newly designed car based on the preferences of American youths. In addition, Toyota focuses mainly on the youth market by advertising through youth-oriented media (Rolling Stone, MTV, latenight programming), creating a flashy website to highlight their brand philosophy, and sponsoring live concerts. Not only does it specifically target the young buyers, but they also simplified their sales tactics by offering no-haggle pricing, which means that Scion dealers will not be allowed to negotiate prices or pressure a potential customer into buying, and giving their customers a high degree of vehicle customization. Because of these marketing tactics, Toyota was not only able to bring in younger customers but it also encouraged Honda and Nissan to consider introducing youth-oriented cars into their lineup. Toyotas successes are due largely to its ability to identify growth opportunities and develop market strategies to capture them. First, they achieved greater market penetration by marketing their cars as fuel-efficient, well-built alternatives to the gas-guzzling, problem-prone American cars, which eventually allowed them and other Japanese companies to take a sizable market share away from the Big Three carmakers. Second, Toyota was also able to identify new opportunities for market development and spent time on product development to tap into these markets. The results of Toyotas product development were the creation of Lexus and Scion,

brands that both offer a unique lineup of cars, a unique brand philosophy, and services that target the luxury and youth market. Third, in spite of their successes in capturing new markets and achieving greater market penetration, Toyota occasionally downsizes their products such as the Celica and MR2. To sum up, Toyota is a great case study on how a company should develop, identify, and evaluate market opportunities and how to develop the right products and marketing tactics to capture such markets.

Strategic marketing process The strategic marketing process involves three crucial phases. These phases include: planning, implementation and control. Although the planning phase is often referred to as the most important, each of the steps is equally responsible for the success of a firm's marketing strategy. Planning The planning phase is the most crucial stage in a firm's strategic planning process. The first step is to perform a thorough SWOT analysis. It will help the organization determine its own situation in relation to the market. This analysis is key in fully understanding the internal and external factors that are favorable or unfavorable to the organization's activities. This is done through analyzing a firm's strengths, weaknesses, threats and opportunities. The results from this analysis should directly help in the formation of a firm's strategy which will aim to minimize threats while maximizing on opportunities as well as reveal new product and market opportunities. This information will also be the basis for setting a firm's marketing mix or plan as well as setting realistic and attainable goals and objectives. The second step in the planning phase takes a market-product approach and involves goal and objective setting (Kerin-Hartley-Rudelius, 2007). This begins with understanding the consumer's wants and needs and involves conducting market research. From a strategic marketing perspective it is important to identify critical issues and attitudes related to the product amongst other things. The

specific information to be gathered in the research process must reflect the individual needs of the product, and the external and internal competencies of the organization (article). This will include and analysis of the organizations special capabilities, points of difference, skills and technologies that set it apart from its competitors (Kerin et al, 2007). Once collected, this data can also be used to set measurable objectives and goals for the marketing plan which can later be used as benchmarks for comparison in the control phase and will help in the development of goals and objectives. A business portfolio analysis would be a good tool to use in order to determine whether a new product or SBU would be advantageous or not, and also to evaluate market share and growth potential. The results yielded will provide performance measures and growth targets for an SBU. This data is invaluable when an organization is trying how to allocate its resources. Also during the planning phase you must identify the target market of the product or service. This involves identifying the segment of consumers who will potentially purchase your product, or those who the strategic marketing process will be aimed at. Another good tool that would be useful would be a market product analysis which would yield results with regards to the attractiveness of the potential product and the market in which it would exist. This would tell a firm which direction is has to go as in such areas as market and product development as well as market penetration and diversification. This will also help to decide on the positioning of your product or service. This is the process of deciding how to position your product in the minds of your primary and secondary audience (how they will perceive it). This will take careful analysis of how the public views your product or idea. (McFarland, 2001). The planning phase is crucial for gathering data to set benchmarks which can later be measured against in the following stages. The third and final phase of planning would be to decide on the marketing process. In this step the marketing mix will also have to be set. This step involves deciding on strategies the product, price, place and promotion (4 p's). The end result of the planning phase is to set measurable and attainable goals which can be measured in the control phase. The market research completed earlier in the planning phase will provide the necessary data to organize the marketing mix. Strategies need to be analyzed and combines to properly set the marketing mix. The product is very important and must be desirable to the market segment specified during the

planning stage. Price, promotion and placement must also be worked out bases on the data supplied through the planning phase. Implementation The next step would be the implementation phase in which all the planning begins to turn into action. Here the firm obtains resources and designs the market organization which is then put into action. Schedules are developed and the marketing programs are executed (strategy and tactics). The product or service will now be available to the public, at the places and prices decided upon in the planning stage. The implementation phase also requires close monitoring to make sure necessary changes occur if internal or external contingencies are affected (McFarland, 2001). Control The control phase involves comparing results against the goals and benchmarks set in the planning phase. This is where the organization evaluates its process, outcomes and consumer satisfaction (McFarland, 2001). This will allow the firm to view the planning gap to see where the results deviated from the plan. The organization can then act on the data to exploit positive deviations while correcting the negative. This analysis and is necessary for a firm to ensure that their marketing plan is moving in the directions set out in the planning phase and critical for success in measuring whether objectives were met. Strategic planning models
Strategic planning can be very important to the success or failure of a company. However, there is no one model that can be used for every for every company. When choosing a strategic planning model, companies need to take into account which model fits best with what they are trying to accomplish, then modify if need be to better suite their specific needs. Here are the five strategic planning models, as well as what they are best used for. Basic Strategic Planning This basic process is often utilized by small companies who are simply too busy to engage in other kinds of strategic planning. It is also common with companies who have not engaged in this kind of planning previously. Basic strategic planning involves identifying a purpose, often referred to as a "mission statement," then identifying the goals that must be met in order to achieve this mission. Strategies are then put in place to achieve the goals, along with action plans that can be followed. The overall plan is monitored and updated as needed, until success is achieved.

Goal-Based Planning Goal-based planning is often the second step a company takes after initially working with basic strategic planning. This kind of planning explores specific goals in a more in-depth fashion, and is often used to identify and prioritize some of the major goals within an organization. Strategies and action plans are then devised, and the necessary roles and responsibilities required for implementation are established. While similar in many ways to basic strategic planning, goal-based planning is generally more formalized and structured in its approach. Alignment Model Planning The alignment model is often by companies in order to fine-tune and adjust strategies that are already in place. It can be very useful for determining why certain strategies are not working for a company, and what should be done to remedy the situation. This method can be very effective when dealing with internal efficiency problems. The process involves outlining the overall mission, evaluating the programs that are already in place, the resources that are currently available, and the need for any additional support. The existing problems are identified, then adjustments are devised and incorporated into the strategic plan as needed. Scenario Planning Scenario planning can be very useful to determine "what-if" situations. This kind of planning is often utilized to evaluate the effect that external forces may have on an organization. For each possible scenario, strategies are developed which can be used to help a company respond to the potential changes. Organic Planning This style of planning is more ongoing in nature, as it focuses less on specific methods and more on "lessons learned." Using this planning method, an overall vision is determined, then there is an ongoing dialog about what processes may be necessary in order to achieve the vision. By its very nature, this style of planning often returns slower results, but it can also be quite effective when used properly.

Although no two businesses run an entirely similar strategic outlook, many share similarity in planning models for long term growth and success. Most of the variation in outlooks come from financial histories, experience, or additional information on consumer satisfaction, yet simple staples are the core components of companies both large and small. These models serve as a simple means of core values for the expansion of a business, and while they can fit in most company interests, will often require some sort of specification in order to properly attain greater market share. Basic strategic planning models for smaller businesses must begin by addressing a mission statement, a purpose, or an intended goal. Why does this particular business exist? Does it provide customers with goods, services, advice, or

opportunities? Can it have more than one function while retaining efficiency and profitability? These are very generic questions and the answer can change periodically -- indeed for smaller businesses, can change on a day to day basis -- but remain at the core of a strategic business model. Identify a very specific goal, whether it be customer satisfaction, market share, revenue, or employee output. With a goal in mind, the smaller details must be hammered out. How does your business intend to approach this goal? Over how long a time? With what budget? How many employees will be required to meet the projects needs? For many companies, these various questions require an entire department to answer, monitor, and keep in equilibrium. As a result, an accounting department handles budgets while a marketing department is responsible for promotion. On a smaller scale, these tasks may be taken care of by a few people -- perhaps even one person -- but these functions of strategic planning require much greater numbers as a company expands and develops new lines of products or services.

SWOT analysis of Toyota

Toyota Motor Corporation SWOT Analysis

The Toyota Motor Corporation was incorporated in 1937 and has many strengths being one of the industry leaders in the automotive industry. Toyota has three major brands underneath the company umbrella; Toyota, Lexus, and Scion. By having these three distinct brands, it lets the company reach many sectors of the globe in a choice of vehicle for customers. They produce their vehicles and target specific global regions, such as the Carina E for the European segment (Amherst). Toyota has traditionally also been the leader in Total Quality Management or TQM. The belief that no process could ever be declared perfect, and that therefore there was always room for improvement was introduced by Toyota Sakichi (Financial Times). This brought about the Japanese word, Kaizen meaning continuous improvement (Financial Times). By using the Kaizen theory of continuous improvement, Japan caught up the U.S. auto makers during the 1980's (Financial Times). Toyota has also introduced it's newest hybrid power car, Toyota Pirus, at the 2003 New York Auto Show and hit the dealerships in the fall of 2004 (Toyota). In September of 2003, orders for the new and improved Pirus totaled 17,500 which is five times more then the company target of 3000 (MSNBC). With the price of gasoline and oil ever rising, this is a great market for Toyota to exploit. Toyota does have some company traits that are portrayed as a weakness in the industry. The brand Toyota is not perceived as many to be prestigious (Amherst). Another perceived weakness is that it is in the top five of sales but not in the top five in dividend payouts or stock performance (Yahoo Finance). This may put up a red flag to investors around the globe that Toyota is not paying dividends as frequent or as efficiently as they should to their shareholder of the company. In Europe, the Lexus brand sold 18,206 vehicles last year compared with 509,720 BMW's. The reason for this is the Lexus brand lacks the diesel V-8 engine (Bloomberg). In

certain European countries such as Belgium and Greece, diesels make up 90 percent of BMW sales in part to the tax subsidies the consumer receives (Bloomberg). The opportunities for the Toyota Motor Company seem to be endless. Today, Toyota has passed the Ford Motor Company to become the world's second largest automaker in the world trailing only GM (Forbes). Toyota has also rounded out it's product line to suit the U.S. market with the redesigned passenger trucks and SUV, but they have also hit the market hard with eco-crazed society with the introduction of the second generation hybrid car, the Prius (Business week). The company is also being pushed in the right direction for opportunity with the strengthening of the Japanese Yen (Bloomberg). With the yen gaining strength and shifts in other world currency, the operating profits dropped during the April-June quarter by fifteen percent or seventy billion yen (Bloomberg). Because of the saving the company acquired in currency shifts, Toyota has extra money on hand to use possibly in R&D to improve on their vehicles or in several other areas causing great opportunities for the company. Toyota has doubled its market share in Europe in the past four years to 5.1 percent due to import restrictions being dropped in the 1990's (Bloomberg). The opening up of imports in the European market is a great opportunity for Toyota because that enables them to put their luxury line of automobiles Lexus, up against the European BMW and Mercedes Benz. Toyota is considering the idea of introducing a beefy threequarter-ton pickup truck into the U.S. Market (Big News). This model would combat the Ford F250 and the heavy-duty Chevy Silverado and these two pickups typically sell for more than $30,000 (Big News). If Toyota will decide to enter the heavy-duty truck market now it could be very profitable with construction, where the use of heavy-duty trucks are needed, booming all over the United States. Threats to the Toyota Motor Company are an everyday occurrence. A major threat to Toyota is the Hyundai motor company. On average, Hyundai usually has thirty more horsepower in their vehicles, and costs around 3000 dollars less than a comparably segmented Toyota vehicle (Amherst). In the luxury line of Lexus, they are still losing ground to BMW in sedan sales and in SUV sales (Business week). Technology increases in cars today is a major driving force in the automobile industry, and if Toyota can't keep up with its other competitors, they could quickly lose market share in sectors they are involved in. The latest trend in the U.S. market is the ecofriendly vehicle that uses less gas and even more use of electronic power (MSNBC). Toyota has introduced the Prius hybrid vehicle, but Honda also is selling a hybrid car right now and Ford, GM and DaimlerChrlsyer have all announced plans for a soon release of their hybrid vehicles (MSNBC). If the Toyota Company can gain market share before the other big three release their hybrid, this won't become much of a threat, but if the Pirus does not fit consumer's needs in the hybrid sector, they will quickly switch and try the other products on the market. The Toyota Motor Company has a slogan that is plastered across one of its assembly plant; Yoi kangae, yoi shina (Business week). That slogan translates to "Good thinking means good

products", and that sums up what Toyota is all about as a company (Business week). There combination of speed and flexibility is world class with the 30 plants they have worldwide with some of them able to produce up to eight models of on the same line (Business week). Toyota also lives by the word Kaizen which translate into continuous improvement (Financial Times). Toyota introduced TQM and Kaizen to the world with the help of Edwards Demming to take the world by surprise and focus on quality and improvement constantly instead of just the bottom line and this focus has helped the Japanese company to become one of the leaders in the auto manufacturing industry (Financial Times). Toyota, to be as profitable in the future as they are right now needs to keep their focus on the hybrid sector when selling in the U.S. market. Toyota has also launched a joint program with it's suppliers to drastically cut the number of steps it needs to make cars and car parts. Over the past year, the company chopped out 2.6 billion dollars out of its 113 billion dollar manufacturing costs without any plant closure of layoffs (Business week). They are also putting the finishing touches on a plan to create a more flexible manufacturing system. In this new plan, plants Indonesia to Argentina will be designed to make more customized cars that fit the demand in the local markets and Toyota believes that by doing this at their plants the can save 1 billion dollars normally needed to build a new factory (Business week). These are the recommendations that the Toyota Motor Company needs to take into consideration to keep their company moving in the right direction globally. The advantage that Toyota would have by being the leader in the hybrid car sector is unknown right now. Nobody knows for a certain fact if the "green trend" will be a large factor in the future. In the U.S. market, it appears that having a marketable hybrid car in their line up of automobiles will be a good plan for Toyota in the future. The advantage of producing automobiles customized to a certain market is a good plan to keep a competitive advantage over the competitors in the same geographic region. The hybrid car market could be a failure in the U.S. market and others in better technology increases before Toyota's Pirus begins to turn profits for the company. If this happens, Toyota could have a huge failure with all of the R&D and advertisement they have put into their new hybrid vehicle. Toyota also has an advantage over their customers today using the TQM model of operations. If the rest of the industry begins to implement this also, and Toyota fails to keep improving, this could prove to become a disadvantage for the company.

Overview of Automotive Industry Analysis

The development of the automobile came from many different people from different countries. The development stated in 1769 in France, with the invention of a three-wheeler that was powered by steam (Gale, 2003). Then in 1800's the first internal combustion engine was created in Belgian and the first gasoline powered vehicle was constructed in 1885 in Germany (Gale,

2003). Henry Ford built the first car in 1896 (Gale, 2003). He then revolutionized the industry with the invention of the assembly line. The assembly line allowed him to mass produce the cars making them more affordable to the consumers. Political Laws and government regulations have affected this industry since the 1960's. Almost all of the regulations come from consumers increasing concerns for the environment and the concern for safer automobiles. The first safety act passed by Congress was in 1966 and was called the National Traffic and Motor Vehicle Safety Act (Gale, 2004). This act forced manufacturers to improve the safety for the passengers, the driver visibility, and the braking of the car. It also stated that manufacturers had to inform the public when it had a recall on the cars. The motivation for the passing of this safety act was Ralph Nadar's 1965 novel Unsafe at Any Speed: The Designed-in Dangers of the American Automobile. (Gale, 2004) Safety concerns were not the only concerns during this period. There was also growing concern for the environment even before the oil crisis. According to the article "Motor Vehicles and Passenger Car Bodies", Congress passed acts in 1965 and in the 1970's. The Vehicle Air Pollution and Control Act was passed in 1965. This was the first act to set standards for automobile pollution. Then in the 1970's, Congress passed the Clean Air Act that demanded a 90% decrease in automobile emission within the next six years (Gale, 2004). In the 1970's the oil crisis caused another act to be passed. The Energy Policy and Conservation Act of 1975 stated that all automobiles must meet a certain mileage per gallon. The act demanded that all automobiles had to meet a standard of 20mpg by the 1980 model and then 27.5 mpg for the 1985 model. Then in 1992, the Intermodal Surface Transportation Act required the installation of front airbags. (Motor Vehicles and Passenger Car Bodies, 2004) Demographics For many years now, the baby boomers generation has been the main target market for just about every product. As their generation is getting ready to retire and spend less money, the automakers are looking at the younger generations. Right now, the focus is starting to turn towards the baby boomers children (Generation X) who are in their mid 20's and 30's and Generation Y(Winter, 2002). GenYer's are now hitting the age where they are able to buy cars. According to Drew Winter, "Analysts say that five years from now Gen X and Gen Y combined will account for at least 40% of vehicle sales." Americans today are choosing to purchase larger vehicles over passenger size vehicles. Today's generations are still buying the trucks, minivan and especially the SUV's, even with the ridiculous gas prices. It is not only the younger generations either; the boomers who are all reaching the retirement age are more interested in the bigger vehicles (Fetto, 2001). There activities after retirement are way more active then their parents. They are not just sitting around and playing golf or going on vacations. They are still working in some ways and being more active in their grandchildren's lives. Since the boomers are still active, they want to drive the same vehicles that their children drive in order to make life that much easier. Studies show that trucks, minivans and SUV's report increased sales nearly every year (Fetto, 2001).

The manufactures target the sales of their cars to certain people and their geographic location. Convertibles are not marketed toward people who live in parts of the world that are cold all year round. A good example of targeting markets is in Paris. A new is trying to be passed that SUVs are not allowed inside the city. They are taking up to much room and the vehicles use a lot of fuel. If this law is passed then SUV's will not be marketed toward people who live in Paris. Another example is that minivans are mainly marketed toward "soccer moms". They are marketed toward the moms because they are perceived, as needed a lot of room to haul kids around and the easy access the minivans provide. Economic The automobile industry has a huge impact on the U.S. economy. The University of Michigan and the Center for Automotive Research stated that this industry is the major user of computer chips, textiles, aluminum, copper, steel, iron, lead, plastics, vinyl, and rubber. (Gale, 2004) The study also showed that for every autoworker there are seven other jobs created in other industries (Gale, 2004). These industries include anything from the aluminums to lead to vinyl. In 2001, the total sales of automobiles were 3.7% of the nation's gross domestic product. This percentage works out to be $375 billion dollars in sales. Technology The internet has affected just about every industry in the world and has also had a huge impact on the automobile industry. A study was conducted by J.D. Power and Associates in 2002 and involved more 27,000 new vehicle buyers. The study showed that 60% of the buyers referred to the internet before making their purchases and out of that 60%, 88% went to the auto websites before going and taking a test drive. Business-to-business marketplaces have given the industry many opportunities because of the internet, such as more efficiency and lower cost. Ford, GM, and Daimler Chrysler announced in 2000 their plans to create a global online exchange for suppliers and the original equipment manufacturers. The exchange was originally called NewCo, and then it was changed to Convisint. According to Motor Vehicles and Passenger Car bodies, "In August 2002 General Motors announced it was about to begin sending requests for quotes to suppliers through Covisint using a tool called Quote Manager." Concerns for the economy and global warming have caused the automobile industry to develop alternate fuel vehicles. In the beginning, automakers did not want to look into the development because of the high cost and the many risks involved. Because of new legislation, they had no choice but to come up with the technology to make the fuel-efficient cars. The automakers decided that electric cars would be the best way to meet the legislation demands. "Early models were unpopular because of slow cruising speeds and lack of performance, but by the end of the century, electric car production began to be practical."(Motor Vehicles) At the end of the 1990's manufacturers was coming up with the technology to produce internal combustion engine with an electric motor. Toyota and Honda were both selling the hybrid vehicles at retail value in 2001. Global

General Motors, Ford Motor Company, Daimler Chrysler, BMW, Volkswagen, Volvo, Toyota, Mazda, and Nissan Motor Company come together to create a new trade association created the Alliance of Automobile Manufacturers (Gale, 2004). The organization was to replace the American Automobile Manufactures Association that only consisted of American manufacturers, the goals of the associations "were to work together on public policy matters of common interest to provide credible industry information and data, and seek consistent global regulatory standards (Gale, 2004). The manufacturers also started merging in the late 1990's. American companies started buying foreign manufacturers created some of the largest foreign takeovers. In 19998 Daimler-Benz A.G. merged with Chrysler Cooperation to form DaimlerChryler A.G (Gale, 2004). Some other big mergers were Ford with Volvo, and General Motors and Saab (Gale, 2004). Sociocultural Today's society judges people on the type of car you drive. Society does not like to admit to this but it is very true. Manufactures know this happens and targets their markets by these thoughts. For example, anyone who drives a mini van is perceived as a soccer mom. This is because the manufactures target mini vans to mothers. Anyone who drives a nice vehicle is thought to be wealthy. No one wants to be seen driving an unattractive piece of junk because of what other people will think of him or her. Consumers also just feel better when they are driving a nice or new car, if makes them feel better about themselves. Another aspect of the sociocultural is the environmental concerns for the need of fuel-efficient vehicles. Many environmentalists are worried about the impact that the gas cars have on the environment. There is even legislation that requires cars to average a certain miles per gallon. Automotive Industry Five Forces of Competition Model

Threat of New Entrants The threat of new entrants is very low in the automobile industry. The industry is very mature and it has successfully reached economies of scale. In order to compete in this industry a manufacture must be able to achieve economies of scale. For this to occur, manufacturers must mass-produce the automobiles so that they are affordable to the consumer. Another barrier to entry is that it takes an incredible amount of capital to manufacture the automobiles. It takes an extreme amount of capital not only to be able to manufacture the products but also to keep up with the research and development that is necessary for the innovation requirements. Access to distribution channels is another high barrier to entry. A company must find a dealership to sell their automobiles or have their own dealership. Space in the dealerships lots is very limited making it difficult to have a wider variety of inventory. Bargaining Power of Suppliers The bargaining power of suppliers is very low in the automobile industry. There are so many

parts that are used to produce an automobile, that it takes many suppliers to accomplish this. When there are many suppliers in an industry, they do not have much power. There are so many suppliers to this industry; manufactures can easily switch to another supplier if it is necessary. Bargaining Power of Buyers The bargaining power of the buyers is moderately high. The buyers being consumers purchase almost all of the industries output. The manufacturers depend on them to stay in business. The buyers also are a significant portion of the industries revenue. If they can not keep their buyers happy then they risk losing them to their competitors. The buyers have low switching cost if they are not happy. All the buyer has to do is sell the car they own and purchase a new one. The reasons why the power is not completely high is that the buyers are not large and few in number. The buyers do not have the ability to integrate backwards into the industry. If they want a car then they have to purchase it from a dealership. Threat of Substitute Products There are not many substitute products for automobiles. Some of the substitutes are walking, riding bike or taking a train. Substitutes products all depend on the geographic location of the consumer. In some cities such as New York or Chicago, a car is not as necessary. In cities such as those, the subway is the most effective means of transportation. However, in most places a person must have access to an automobile in order to get around. Intensity of Rivalry among Competitors Rivalry among the competitors is very strong is this industry. The major competitors are so closely balanced that it increases the rivalry. In order to gain market share in the automobile must gain market share by taking it from their competitors. One of the other reasons there is such high rivalry is that there is a lack of differentiation opportunities. All the companies make cars, trucks or SUV's. The competitors are compared to one another constantly. The price, quality, durability, and many other aspects of different manufacturers are greatly taken into consideration when deciding what type of vehicle to purchase. When the different manufacturers advertise they even compare their products to their competitors. For example, the commercials will focus on areas where the company outperforms its competitors.

Differences Between Strategy, Plans and Tactics

People use strategy, plans and tactics to accomplish successful outcomes in their business projects and personal goals. The three concepts work together and are, in fact, interdependent on each other. You cannot develop plans without a strategy, or tactics without a plan. A solid competitive strategy helps businesses gain market share.

Strategy
Strategy involves a blueprint for gaining a competitive advantage. For example, eyeglasses had glass lenses for more than 400 years. A company developed a strategy to design plastic lenses that would be cheaper, almost unbreakable and lightweight. This product gave the company a competitive advantage

over other eyeglass manufacturers. Its strategy included all of the complex plans necessary to bring this project to fruition. People use strategies in their personal lives to improve their competitiveness or financial stability. For example, a newly hired college graduate develops a strategy to climb the corporate hierarchy. His strategy includes capitalizing on his strengths and overcoming objections.

Plans
Plans are the second-level goals in the hierarchy. A complex strategy may contain many plans. Using the eyeglass example, the manufacturer had to identify an appropriate plastic that was hard enough for daily use but soft enough for grinding to the correct magnification; locate or design equipment to grind and buff the lenses; contract with suppliers; find outlets to sell the product; and advertise its new invention to the public. Each part of the strategy has a separate plan to accomplish its goal.

Tactics
Tactics are the step-by-step methods you use to accomplish a plan. Continuing the eyeglass example, to complete the plan of identifying an appropriate plastic, the tactics would include: identify all businesses that produce plastics, buy samples of each type of plastic, test samples and record pros and cons, and decide whether one plastic is appropriate or if the company needs a custom formula.