The Business Activity of Subaru

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Description and Core Products

Two divisions – automotive and aerospace – constitute the business activity of Subaru and determine its range of products. In the automotive division, the main products are cars such as crossovers, sport utility vehicles (SUV), and hatchbacks. Subaru also operates in the aerospace industry even though it takes up only 4% in its net sales (“What is Subaru?” 2019). The company develops construction and flight control technologies and pilotless IT systems. In commercial aviation, Subaru participates in joint international projects like Boeing 767, 777, 787 and 777X. For instance, the company is in charge of the integration of the center wing in Boeing 777X. Japan Ministry of Defense is another major customer that utilizes helicopters developed by Subaru and an American company Textron Inc.

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The majority of the manufacturing facilities of Subaru are located in Japan. The biggest manufacturing facility abroad is in Lafayette, Indiana, which in 2018 produced 348, 597 cars (“Production volume,” 2019). In 2019 Subaru, in cooperation with Tan Chong International, opened a production line in Thailand (“Tan Chong International Limited unveils first assembly plant in Thailand,” 2019). This manufacturing facility supplies Asian markets as well as covers Australia and New Zealand. They used to be present in South Korea, but a severe competition from Hyundai made them leave the country.

History of the Company

Subaru was founded in 1917 as an aircraft company, “The Aircraft Research Laboratory” by Chikuhei Nakajima (“What is Subaru?” 2019). The company became the core governmental supplier of aircraft during the Second World War. The company went through a reorganization process after the war in order to bring affordable vehicles like scooters and buses to the Japanese market. At the beginning of the 1950s, four companies merged to establish Fuji Heavy Industries (FHI). The first car, Subaru P1, was introduced in 1953, but another model released in 1958 became a hit – Subaru 360 (“Our story. Subaru heritage,” n.d.). It was the first car with a single shell in the main body of the car (a monocoque construction) and plastic elements. Since then, the automobile division of the company has become the leading one in the company’s structure.

Key Current Competitors

Globally there are 14 car conglomerates that control the automobile industry, and Subaru is not one of them. These 14 car companies altogether represent 65 different brands (Gould & Zhang, 2018). The key competitors for Subaru among these companies are Hyundai and Toyota. Hyundai is a big player not only in Asia but in Europe and North America too. Their affordable and reliable cars have gained many customers worldwide. Toyota Motor Corporation sells around 10 million vehicles of various ranges a year (“Sales, Production, and Export Results,” 2019). Their product line includes electric vehicles and hybrids, apart from sedans and mini-vans. However, in comparison to Hyundai and Toyota, Subaru has a little bit more diversified business because it operates in the aerospace industry.

SWOT Analysis

Subaru has a strong marketing and precise segmentation of their products. Many of their cars like the Ascent, a family-car launched in 2017 targets families that enjoy outdoor activities and choose safety. In addition, they have a line of cars for professional driving targeting amateurs and professionals in the car rally domain. Moreover, Subaru is a technologically advanced manufacturer that has developed an array of technologies, especially to improve the safety of vehicles. A driver assistant “EyeSight” was introduced in 2010 to prevent accidents and crashes (“EyeSight,” n.d.). Later on, the system was upgraded to introduce the steering wheel control. The company is trying to deliver cars that conform to environmental standards. For instance, Subaru XV Hybrid was released to offer a sustainable transportation solution.

Company’s priority market North America saw a 4.3% decline in sales in 2019 in comparison to the previous fiscal year (“Net sales and operating income by business segment,” 2019). The defect found in this model affected around 100 000 cars that had to be recalled (“Subaru recalls 100,000 more cars due to lax quality inspections,” 2018). This case is the major weakness during the current operational time of the company. The company experienced problems with remodeling Forester, which led to the delay in shipment.

The opportunity for Subaru lies in the electric vehicles market segment. Certain states in the U.S. have incentives for electric car owners; for example, California has a Clean Vehicle State Rebate Program. Subaru has already established a partnership with Toyota to produce a SUV electric vehicle. This cooperation implies the merge of technologies: the all-wheel-drive technology of Subaru and Toyota’s electrification solution. Despite the promising deal, there is a threat that Toyota will become an owner of Subaru in the future. Toyota has already acquired 20% of Subaru, and the potential purchase of the whole company will mean the loss of independence (Kane, 2019). Overall, increasing competition in the North American market poses a threat and a challenge for the company.

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New Product Proposal

Given all the existing external factors and opportunities, it is reasonable for the company to deepen its existing technological competences and knowledge. The new product has to fit into the profile of a new customer segment. The majority of customers nowadays are millennials with a new value system that shapes their consumer preferences. They are tech-savvy consumers who are concerned about the well-being of society and the state of the environment (Solomon, 2015). Subaru has developed safety appliances such as “EyeSight” which can be further transformed into an application for drivers. This application should feature safety control options and, for example, the tracker of CO2 amount released per journey and ways to offset emissions. With this application, Subaru has an opportunity to counteract the growing demand for electric cars and hybrid cars. Millennials prioritize transparency, honesty, and responsibility, therefore, choosing products that meet these requirements.

References

EyeSight. (n.d.). Web.

Gould, S., & Zhang, B. (2018). These 14 companies dominate the world’s auto industry. Web.

Kane, M. (2019). Toyota deepens ties with Subaru: Joint AWD electric cars coming. Web.

Net sales and operating income by business segment. (2019). Web.

Our story. Subaru heritage. (n.d.). Web.

Production volume. (2019). Web.

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Sales, production, and export results. (2019). Web.

Solomon, M. (2015). Truthiness and consequences: Today’s consumer trend of values-based shopping. Web.

Subaru recalls 100,000 more cars due to lax quality inspections. (2018). Web.

Tan Chong International Limited unveils first assembly plant in Thailand. (2019). Web.

What is Subaru? (2019). Web.

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BusinessEssay. 2022. "The Business Activity of Subaru." January 30, 2022. https://business-essay.com/the-business-activity-of-subaru/.

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