Comparison and Contrast of General Motors and Toyota Motor

This paper seeks to compare core and enabling technologies of two organizations in the automobile industry. General Motors Corporation experienced a crisis that recorded another operating loss of $7,668 million during the fiscal year of 2006, while Toyota Motor Corporation recorded an operating income of approximately $19 billion during the fiscal year of 2006, an increase of 19. 2% over 2005. The net profit of Toyota was approximately $13.

9 billion in the fiscal year of 2006, an increase of 19. 8% over 2005. It is interesting to understand why one company is struggling to survive with such losses, while the other is generating profits every year. This paper further analyzes contrasting strategies of core and enabling technologies between two organizations that may result in profit or loss. General Motors? problems are significant beyond those directly involved.

If GM fails, it will not only have a huge social, psychological, and economic impact in the US, where it is an iconic automobile manufacturer, but such a failure would also have a negative impact on the US economy and adversely affect other economies. Thus, the failure of General Motors would have world-wide repercussions. Comparison and Contrast of General Motors and Toyota Motor General Motors Corporation History General Motors (GM) was founded in1908 in Flint, Michigan, as a holding company for Buick, then controlled by William C.

Durant, and acquired Oldsmobile later that year. Durant brought in Cadillac, Elmore, Oakland (later known as Pontiac), and several others. In 1909, General Motors acquired the Reliance Motor Truck Company of Owosso, Michigan, and the Rapid Motor Vehicle Company of Pontiac, Michigan, the General Motor and Toyota Motor predecessors of GMC Truck. Alfred Sloan was chosen to take charge of the corporation 3 and led it to its post-war global dominance. This unprecedented growth of GM would last through the late 70's and into the early 80's.

The company continued its international expansion through the establishment of General Motors Overseas Operations in 1938, which oversaw all vehicle manufacturing and marketing outside the US and Canada. The company continued its growth in the 1990s. GM Core Business General Motors Corporation (GM) is primarily engaged in the development, production, and marketing of cars, trucks, and automobile parts, and it is also engaged in finance and insurance operations.

GM primarily operates in North America and Europe where headquarters are located in Detroit, Michigan, and employs 280,000 people worldwide (Marketline, 2007). Marketline reports that GM recorded revenues of $207,349 million, however the operating loss of the company was $7,668 million during the fiscal year of 2006. GM Core Technologies Each of the GM automotive divisions are targeted to specific market segments and despite some shared components, each distinguishes itself from its counterparts with unique styling and technology.

The GM strategy for core technology is to share components and common corporate management to create substantial economies of scale while the distinctions between the divisions create an orderly upgrade path, with an entrylevel buyer starting out with a practical and economical Chevrolet and eventually moving through offerings of the different divisions until the purchase of a Cadillac (Fine, & Whitney, 1999). General Motor and Toyota Motor Manufacturing Automation Protocol (MAP) is an open-systems interconnection standard for programmable devices of different vendors in a factory environment.

The specification is sponsored by General Motors. MAP enables high-quality Computer 4 Integrated Manufacturing (CIM) in each individual "cell", improves information flows at all levels within a company, and allows flexibility to add and remove automated plant from a network without complex hardware and software alterations (Saunders, 1989). Through the technology leadership initiative, set forth in 2006, GM emphasized energy and environmental leadership as a critical element of GM's ongoing turnaround plan and a key part of its business strategy.

In order to reduce the world's dependence on oil, as well as meet the growing demand for cars and trucks around the globe, GM is embracing a policy of energy diversity as its core technology that offers vehicles that can be powered with many different sources of energy (Marketline, 2007). GM continues to improve the efficiency of the internal combustion engine, as it has done for decades, and is also redoubling its efforts to displace traditional petroleum-based fuels by building vehicles that run on alternative fuels such as E85 ethanol and electricity (Marketline) GM Core Competencies

GM's theory combined, in one seamless web, assumptions about markets and customers with assumptions about core competencies and organizational structure. Internally, these market assumptions went hand in hand with assumptions about how production should be organized to yield the biggest market share and the highest profit. GM's core competencies are reflected in the long production runs of mass-produced cars with a minimum of changes in each model year, resulting in the largest number of uniform yearly models on the market at the lowest fixed cost per car (Drucker, 1994).

General Motor and Toyota Motor Communication is traditionally fragmented with different departments of an organization having goals based on functional views in GM, and communication aims seem to fall around three broad areas: corporate image, products and services, and workforce motivation. Too many managers of GM disseminate corporate information which does not serve the productive interests of individual people in the organization (Harrop, & Varey, 1998). 5 GM Enabling Technologies

GM is more interested in developing cars for old-aged people, rather than the general population, using enabling technologies. For example, GM is to refine the design of existing vehicles and add enabling technologies that make these vehicles easier and safer for an aging population to use. These design changes have been targeted based on the three major physical changes that aging people encounter: 1) decreasing range of motion and strength, 2) decreasing ability to manipulate fine controls, and 3) lessening visual acuity (Ehrenman, 2003).

GM has developed an Enterprise Demand Sensing Research Program to investigate methodologies and drive a collaborative decision-making framework. The program aims to improve the decision-making of the enterprise in procurement, manufacturing, marketing, sales, and logistics (Truss, Wu, Saroop & Sehgal, 2006). To enhance enabling technologies, GM places considerable importance on internal communication. GM launched some major efforts to communicate throughout the organization. These included roundtable discussion groups, and the training of managers

General Motor and Toyota Motor 6 and employees in reception skills and linguistics to help them with their articulation. GM also tries to take time to communicate with unions (Harrop, & Varey, 1998). GM Technology Development Part of GM's creative approach is the "Innovation Zone" which fastcompany. com describes as a "12-person team that focuses on how to make GM's best new ideas an engineering reality. " As well as the cultural aspects of creativity, GM invests in the technology with which to drive new ideas through the system.

Focus on innovation has led to the introduction of cutting-edge computer-modeled crash-testing and the accurate simulation of car performance. Today's GM is forming an alliance between creativity and technology that provides lessons for any organization wishing to get ahead through product innovation (GM and the future, 2003). General Motors plans to increase production of flexible fuel cars through material technology using plastics to reduce the weight of car. General Motors is also working on hybrid technology strategies in order to produce ethanol-powered cars and trucks.

However, ethanol fuel production is still in its infant stage, and the production cost is much higher than current gasoline combustion engines production (Lowery, 2007). Since 1997, General Motors Die Center has been working jointly with a software vendor to develop and implement a parallel version of simulation software for mass production analysis applications (Gress, Xu, Wang, & Paul, 2005). The Customer-Driven Quality Methods program at the General Motors Research & Development Center is developing a suite of analytical tools for balancing market appeal and technology innovation in new vehicle concepts.

A naturalistic approach to General Motor and Toyota Motor research on decision-making is currently emerging from psychology and is beginning to affect the practices of engineering design (Frey & Lewis, 2005). GM Strategy 7 General Motors attempted to generate cost savings by fostering vigorous supplier competition and maintaining arm's-length relationships. GM pushed suppliers to reduce prices by renegotiating contracts and opening up parts to competitive bidding— sometimes going through more than 5 rounds of bidding (Dyer, Cho, & Chu, 1998). GM?

s dealing with outside suppliers is by short-term contracts-usually one yearthat creates the fierce competition among outside suppliers for the automakers' continued patronage contrasted sharply with the comfortable position of the inside suppliers, who are usually guaranteed some or all of the business for an indefinite period. There is little communication between the internal components divisions and either the central engineering groups, who designed the parts produced by the divisions, or the assembly plants they supplied (Helper, 1991).

GM entered the new millennium burdened with high costs, with too many similarly designed vehicle models, and was generally out of touch with its customer base. One of GM? s failures is that, except for the SUV and truck segments, GM models were unexciting and not highly valued or demanded by the consumer to a level sufficient to operate plants at profitable levels. With gas prices on the rise, consumer preference shifted from the SUV to more fuel-efficient, cross-over vehicles. Sales of GM?

s most profitable vehicle, the SUV, declined, as consumers who once preferred "Made in America" autos and trucks switched to foreign car nameplates that offered higher quality, innovative styling and better value (Hass, Pryor & Broders, 2006). General Motor and Toyota Motor GM Information Technology (IT) One of the enabling GM information technologies is OnStar that provides subscription-based comprehensive in-vehicle security, communications, and diagnostics system that available on more than 50 GM models throughout the United States and Canada.

However customers have to pay for services ($13. 99 for 30 minutes) (Marketline). General Motors has also used information technology for aggressive outsourcing and web? based services to increase production time. So, where it used to 8 take up to four years to get a vehicle on the market, it now takes less than two (Alkadi, I. , Alkadi, G. Totaro, 2003). Toyota Motor Corporation History Toyota Motor Company was established in 1937 as a spin-off from Toyoda Automatic Loom Works, a manufacturer of weaving machinery.

Toyota launched its first small car, the SA Model, in 1947. The company began exporting to the US in 1959. Toyota Motor Company and Toyota Motor Sales merged into Toyota Motor Corporation in 1982. The company also established Toyota Motor Manufacturing, Kentucky in 1988. In 2003, the company manufactured its first Lexus outside Japan in the company's factory in Cambridge, Ohio. The company established Toyota Motor Engineering & Manufacturing North America, (TEMA) in April 2006 to carry out Toyota's R&D and manufacturing operations in North America (Marketline, 2007).

Toyota Core Business Toyota Motor Corporation has become a leading auto manufacturer in the world. Toyota sells its vehicles in more than 170 countries and regions worldwide. Toyota's General Motor and Toyota Motor primary markets for its automobiles are Japan, North America, Europe, and Asia. Headquartered in Toyota City, Japan, it employs about 299,394 people. The company recorded revenues of approximately $203. 1 billion during the fiscal year of 2006.

The operating profit of the company was approximately $19 billion during the fiscal year of 2006, and the net profit was approximately $13. 9 billion in the fiscal year of 2006, an increase of 19. 8% over 2005. Toyota Core Technologies 9 Toyota pioneered the Toyota production system that helped to accelerate the "lean thinking" revolution that is finally sweeping all manufacturing operations today. Since the 1980s, Toyota has set the standard for quality and cycle time in developing new models (Hass, Pryor & Broders, 2006).

The customer and speed at which a model is brought to market, combined with its commitment to lean thinking, Toyota has managed to continually increase market share. Its advantage stems from getting a slice of the market first with new features that the consumer wants. Thus, they have been leaders in the market as a result of their popularly priced cars, such as the Camry, and premium brands such as the Lexus (Hass, Pryor & Broders). Toyota? s lean manufacturing and production techniques are designed to reduce inventory and increase competitiveness in the global economy.

Toyota also developed its Toyota Production System or Just-In-Time Stockless Production in the mid-1950s and is continuing to implement lean manufacturing techniques to reduce waste and costs that do not directly add value to the product from the customer's point of view.

The advantage of a lean manufacturing system is that it produces superior-quality products in a timely fashion at the lowest possible cost in a flexible way through a process that generally General Motor and Toyota Motor 10 begins with assembly cells that can change production rapidly, so products can be manufactured in greater variety in an almost customized fashion with no cost penalty for small production (Ndahi, 2006).

Toyota Core Competencies The Toyota Production System embraces four very significant components. Justin-time (JIT) production is a management philosophy aimed at eliminating waste from every aspect of manufacturing and its related activities (Towill, 2006).

The term JIT refers to 1) the production of only what is needed, when it is needed, in just the amount needed; 2) total quality control is a concept of quality operation of the business with all people in all areas of the company's organization involved to meet customer needs;

3) total productive maintenance, on the other hand, is a concept of productive maintenance aimed at achieving overall effectiveness of the production system through the involvement of all the people in the organization; and 4) computer-integrated manufacturing is a concept to integrate the company operations from design, production, and distribution to after-sales service and support in the field, through the use of computers and modern information technologies (Towill).

Toyota's new leadership continues to renew emerging technologies by breaking down Toyota's "glacial decision-making process" that caused missed opportunities; pushing speed, flexibility, and manufacturing excellence; focusing on identifying problems and solving them {not ignoring them); pouring cash into new models and technology that take share from competitors (Hass, Pryor & Broders, 2006).

Toyota is now the world-class leader in speed and flexibility (some of its 30 plants can build 8 different models simultaneously on the same line). General Motor and Toyota Motor 11 Toyota continually invests for the future, and reported that 4% of the Toyota sales dollar was invested in R&D in 2004 (Hass, Pryor & Broders).

The innovation effectiveness at Toyota is a benchmark for competitors, yet Toyota is only the thirdhighest spender in the auto industry. Thus, Toyota has found ways to stretch the R&D expenditures across fewer models. For example, Toyota's Lexus was designed totally for U. S. consumers, from dealership to accessories, and is not sold in Japan (Hass, Pryor & Broders).

Toyota’s Technology Development Rising gasoline prices and consumers' growing preference for environmentallyfriendly technologies enhance the growth prospects for hybrid cars. Toyota concentrated on developing fuel-efficient cars that captures the largest percentage of the hybrid car market, having sold 720,000 units, and has clocked up cumulative sales of more than 50,000 hybrid vehicles in Europe as of July 2006 (Carr-Ruffino, Acheson, 2007).

Toyota also has the most advanced hybrid technology in the industry, and has two generations of patents ahead of its rivals, having used more than 650 patents on its Prius hybrid model (Carr-Ruffino &Acheson).

According to Wearable Robots (2007), Toyota is the most ambitious researcher of bionic technology in order to boost productivity by factory workers through products like high-tech prosthetic devices. And, Toyota already uses high-tech-prosthetic devices to allow workers to use mechanical arms that can lift thousands of pounds.

Robot suits are expected to create new opportunities for people in physically taxing jobs as well as allow older workers to delay retirement. General Motor and Toyota Motor 12 Toyota's approach to science, technology, and innovation has seen success through operations of basic scientific research, industrial efficiency, and environmental innovations (Toyota on a roll, 2005).

The article asserts that even though basic scientific research usually operates a few steps away from technological innovation in the motor industry, Toyota is doing some interesting things at its central research and development laboratory near Nagoya. As in other sectors, though, the transitional period between scientific knowledge to industrial application is shrinking.

Toyota? s success has always been more about industrial efficiency than technical innovation. But Toyota? s technology has progressed steadily over the past ten years, while the competition in the United States has been resting on its laurels (Toyota on a roll). Toyota Strategies The Toyota?

s strategic center (or central firm) plays a critical role as a creator of value This firm 1) requires partners to be more than doers, expecting them to be problem-solvers and initiators, 2) developers of the core skills and competences of partners would make them more effective and competitive because it forces members of the network to share their expertise with others in network and the central firm, 3) borrows ideas from others that are developed and exploited as a means of creating and mastering new technologies, 4) explains to partners that the principle dimension of competition is between value chains and networks

(Encourage rivalry between firms inside the network, in a positive manner), and 5) the structures the information system so that knowledge is funneled to the areas that need it the most (Lorenzoni, & Baden-Fuller, 1995).

General Motor and Toyota Motor 13 "Borrow" means that the strategic center deliberately buys or licenses some existing technological ideas from a third party; "develop" means that it takes these outside ideas and adds value by developing them further in its own organization. Members specializing in a particular function have access to others in the system performing similar tasks, and so they are able to share their knowledge.

This creates a level playing field within the network system. It also provides the opportunity for the members to focus and encourage the development of competitive advantage over rivals (Lorenzoni, & Baden-Fuller). Toyota Information Technology (IT) Cummings (1993) posits that the information technology (IT) plays an essential role at Toyota and Lexus.

The cores of Toyota Motor Sales? strategic IT applications are the vehicle and parts ordering systems, distribution systems, and sales reporting systems. Toyota? s primary business activity is to identify demand and trends in the automotive marketplace through the information technology, and to ensure that the right products are being built at the right time and being delivered to the right parts of the country.

The key management issue in the implementation of IT applications is to understanding different operating environments because consumer demands and trends in other countries can sometimes be very different from those in the US (Cummings).

Thus, continued improvement of products and the maintenance of positive relationships with customers require that the right information be available to the right people at the right time. The only feasible way to do this is to exploit today's information technology.

Through IT application, Toyota maintains a record of all services performed General Motor and Toyota Motor 14 on vehicles by all its dealers where each dealer has the ability to retrieve service records for a particular vehicle via his in-house computer system and its satellite communications network. Therefore, the dealer will be able to see all services performed on the specific vehicle, regardless of which dealer performed that service.

This information allows the dealership personnel to improve their diagnosis and to minimize vehicle down time, which, in turn, increases customer satisfaction (Cummings). Toyota uses this information exchange as a part of the foundation for vehicle refinements and improved product quality.

The cores of strategic IT applications are the Vehicle and Parts Ordering, Distribution, and Sales Reporting systems. Cummings further notes this analysis identifies additional variables, which play a role in the improvement process, such as sales history, seasonality, colors, accessory combinations, model mixes, local economies, consumer trends, and factory production constraints.

Through IT applications, the Ordering systems allows employees to communicate with the factories in Japan, the United States, and Canada, to let them know what the current production requirements are and what forecasts for future production are. The factories, in turn, use the information in the system to finalize their next month's production plan and to confirm their production schedules with the distributors.

They also use this information to ensure that they and their suppliers are properly prepared to meet future demand (Cummings). The Distribution systems are integrated with the Ordering systems and are used to ensure that the right products are delivered to the right markets without any unnecessary delays.

This involves very close and comprehensive communications with truck and rail General Motor and Toyota Motor 15 carriers across the nation to make sure that we don't have excessive inventories in their port facilities.

The Sales Reporting systems track vehicle and parts sales at many different levels and are used by virtually all levels of corporate management. These systems provide their own internal report cards to themselves about how they did "yesterday" and provide the necessary vision so that they can prepare themselves for "tomorrow" (Cummings). Conclusion Now that the boom in sales of large, conservatively designed sport utility vehicles seems to be over, US car-makers are experiencing a rude awakening.

As the prospects for the Detroit industry darkened earlier this year, credit agencies humiliated General Motors by reducing the ratings of some bonds that General Motors have issued to „junk? status. Toyota? s scientists and engineers do not match the flamboyant modern paradigm of innovation, as inspired by California? s Silicon Valley. They are, instead, meticulous, intensely loyal to the corporation, collaborative in outlook, and keen to keep a low profile.

The outcome is impressive — and demonstrates that successful innovation can take many different forms (Toyota on a roll, 2005). Tidd, Bessant, and Pavitt (2005) note “Being able to make something no one else can, or to do so in ways which are better than anyone else is a powerful source of advantage. ” (p. 6).

Toyota developed a unique strategy for its core and enabling technologies and, as a result, is able to offer better products, and services at faster, cheaper rates and at higher quality than that on the market, giving Toyota a major competitive advantage. At the same time, General Motors is still keeping its old strategy of offering multiple similarly designed models without comprehensive core and enabling General Motor and Toyota Motor 16 technologies, and is generally out of touch with its customer base. Thus, the outcome is clear as to why core and enabling technologies are vital to the competitive global business environment today.

Comparison and Contrast Organization System Core Technology General Motors Rational system Manufacturing Automation Protocol (MAP) in an open-systems interconnection standard for programmable devices of different vendors in a factory environment Internal communication to communicate throughout the organization included roundtable discussion groups, and the training of managers and employees Production is organized to yield the biggest market share and the highest profit. Mass-produced cars with a minimum of changes each model year at the lowest fixed cost per car

  • General Motors has historically used an arm? s-length model.
  • GM fosters vigorous supplier competition and maintaining arm's-length relationships, and outside suppliers is by short-term contracts (one year).
  • GM plans to eliminate approximately 30,000 jobs and close 12 plants.
  • GM offers too much similarity among its models, and generally out of touch with its customer base.
  • GM has been resting on laurels Toyota Motor Open system Toyota Production System to accelerate the "lean thinking” revolution for manufacturing operations Information technologies that run assembly line as a part of the foundation for vehicle refinements and improved product quality Manufacturing technology – Just-InTime Stockless Production that produces in timely fashion at the lowest possible cost in flexible process
  • Toyota has employed a partner model.
  • Toyota develops long-term partnerships with suppliers who are given implicit guarantees on future business.
  • Toyota plans to expend its operation opening new plants and hiring more workers in North America.
  • Toyota develops cars new features that customers want.
  • Toyota`s technology has progressed steadily Enabling Technology Core Competency Strategy SWOT Analysis Organization General Motors Toyota Motor

General Motor and Toyota Motor 17 Strengths Threats Large scale operations Strong brand portfolio Growing business in Asia Pacific region Declining profitability Declining market share Unfunded pension and other post retirement benefits Increasing demand for hybrid electric vehicles Opportunities in China and India New models Declining demand for light vehicles in US Rising raw material prices EU regulations 

Strong financial performance Growing business in Europe Global brand Weak performance in Asia Poor performance of 'financial services Increasing demand for hybrid electric vehicles Opportunities in China and India Rising raw material prices Declining demand for light vehicles in US Tightening emission standards Weaknesses Opportunities General Motor and Toyota Motor 18


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