Toyota and General Motors: Marketing Research

Introduction

We have chosen two car brands or manufacturers as subject for this study and formulating our questionnaire. Toyota and General Motors are two of the world’s leading car manufacturers. Wherever they are positioned in the car industry in the world, they always make a mark and show their brand on top of all the others. Toyota and General Motors are themselves car brands, yet they present different brands or names to the market, which present a mark of quality.

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It is the purpose of this paper to conduct a study on how these two car brands have made their way to the top; how they have been competitive and retained their name in the car industry. These two car manufacturers have survived the worst financial crisis in history, and they are now right in the midst of another global financial crisis.

For sure, their marketing and operational strategies differ from each other. But how do they differ in terms of quality, strategic and operational management. The key features and their respective brands will be discussed in this paper.

Background

The questionnaire has been formulated in accordance with our studies and research of the two car brands, their features, values and attributes.

The questionnaire is designed to determine the quality of the brand, values, and features of Toyota and GM brands. Quality determines profitability because if a certain product is known to be belonging and sold by a quality-oriented company, people will buy it, and chances are, they will remain loyal to the company and eventually the brand.

Toyota Motors

Toyota is one of the world’s leading automakers whose strategies stem from its innovations in production, marketing, sales and promotions, and branding. It has penetrated the U.S. market and is, in fact, a threat to other giant U.S. automakers like Ford, GM, and Chrysler.

Toyota was only a small company in Japan, averaging 18,000 vehicles per annum, but in the 1950s up to the early part of the 21st century, it increased its production. It became a leading car manufacturer with its own method of achieving mass production efficiencies. The Toyota Production System was an innovative way which made the company export oriented; it began manufacturing plants in many countries including the United States. (Lynch, 2008, p. 772).

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In its early years, Taiichi Ohno, the chief engineer, started experimenting to improve production. This was since its early founding when Toyota engineers introduced the kaizen and kanban concept of production. Kaizen means “continual improvement” in Japanese. Toyota’s engineers invented this approach to their operations wherein some stages are cut or shortened to save time and provide flexibility. (Gourlay, 1994, p7, cited in Lynch 2008, p773)

Toyota was still a struggling, tiny company, when it had to apply flexible production methods; this was through the Toyota Production System. Lynch (2008, p. 772) emphasizes that “it took many years for Taiichi Ohno to develop kaizen and kanban, and to have them adopted across the company.”

The kanban system was used to signal employees when to order or replenish parts or products. It is composed of coloured cards especially designed to give notice to employees on the products’ availability. Toyota also used research and development in its design stage and came out with combining parts to be produced in one process rather than two. On the other hand, the layout strategy provided for ‘cellular layout arrangements of plant machinery’ rather than ‘linear layouts for production lines’ which allowed workers to operate a number of machines and allowed them to work in teams to provide layout’ (Lynch 2008, p. 773).

Another leading Toyota personality was Shotaro Kimaya, a US-trained manager, who headed a separate marketing company inside Toyota, and his job was to sell Toyota products aside from its cars. Kimaya introduced many marketing innovations in the company during the 1960s and 1970s. Together, Kimaya and Ohno made the company successful in Japan. They set up dealer networks, cheap financing for customers, and a strong and dedicated salesforce. Export of cars and products was begun and by the 1970s “40 percent of all production was being sold outside Japan, especially in the US” (Lynch 2008, p. 772).

Toyota also introduced a branding strategy where “the quality and finish on such car[s] is high and the profit margins substantial” (Lynch 2008, p. 770). Toyota manufactured hybrid cars, such as Prius, a hybrid power vehicle whose engine can work out with petrol and electricity. “Toyota’s strategic path towards developing a new premium position in hybrids is more in tune with present consumer values than a strategy of product proliferation and stuffing cars full of technology that most customers will never want to use.” (Jones, 2007)

Toyota‘s continual improvement concept is one of the reasons for its success. It motivated its management and employees to go international and establish manufacturing plants in many countries including the United States. Its workforce is composed of a loyal team of expert engineers and technicians who are retained for longer periods even in times of financial crisis.

What propelled Toyota to market leadership was its marketing strategy of establishing a separate company to sell Toyota products. Nowadays, Toyota parts are still the reliable parts auto owners need, and sometimes they use these as substitute components for their cars which are not even Toyota brand. After-sales of spare parts and vehicle regular servicing are another profit-making strategy, and they add up to the customers’ sticking to the company for their products, and “customers are forced to continue to use the manufacturers’ dealer networks for servicing or face the threat of invalidating their new car guarantees” (Lynch 2008, p. 771).

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Other strategies motivated an increase of market share. Toyota provided dealer networks and cheap car finance for customers.

The company also developed the Toyota Camry model which is “today the biggest single-selling car in the US” (Lynch 2008, p. 772).

In the 1980s, Toyota penetrated the US market. It was beginning to grow at a time when other American auto-makers like Ford was struggling because of “shoddy quality, seat-of-the-pants engineering, manufacturing rework, poor reliability [that] its operating losses totaled $3.26 billion” (Grubb and Lamb, p. 58).

With General Motors, they reopened GM’s Fremont, California assembly plant, posing a threat to Ford in the U.S. market. It was also a strategy, on the part of Toyota, “to learn how efficient American workers could become under Toyota’s finely tuned management system” (Grubb and Lamb 2000, p. 58)

When Toyota became a major force to reckon with in the auto industry, Ford has been making moves to counter the threat. When Toyota and General Motors combined forces, Ford was in a disarray.

Another Toyota strategy is outsourcing its parts. Aside from producing parts, it uses outsourcing of car components, making production less costly. Toyota uses computer link-up and Information Technology with its suppliers.

Data revealed that in 2007, Toyota car production in the US reached 1,334,160 cars, and sales reached up to 2,620,825. (Toyota, 2009).

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Toyota also introduced the strategy of producing cars according to customers’ specifications, or the custom-built cars. The original concept came from Dell computer with its ‘build-to-order’ computers.

General Motors

Another vehicle producer to reckon with is General Motors, the world’s largest vehicle producer. General Motors “produced 8.5 million vehicles in 2003 [and had] a world market share of around 15 percent; Toyota only had nearly 7 million vehicles and a share of around 12 percent” (Lynch, 2008, p. 767).

General Motors “manufactures cars and trucks in 34 countries [and] sells and services vehicles in some 140 countries” (GM, 2009). It has sold cars under different brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, etc.

GM also has a heritage to its millions of customers, some of the world’s vintage cars such as the Oldsmobile F88, the Chevy Corvette, the Pontiac Solstice, among others. The “Impact” is its electric car, debuted in 1990. GM has now 8 hybrids which include the Saturn AURA, Chevy Silverado, the 2009 “Saturn Vue 2 Mode”, the GMC Sierra, and so forth. Hybrids use electricity, that is, its power comes from the battery, a “36-volt nickel metal hydride battery”, which is continuously being recharged. GM’s two-mode hybrid system operates on engine power and electric power. It also works on electric power “supplied by a 300-volt battery” (GM (c), 2009). Because of the electricity supplied by the battery, fuel consumption for a hybrid is reduced. And, because they are hybrids, they are sold with tax credits.

GM also introduced the catalytic converter, an environmentally-friendly car, made to comply with the Federal Clean Air Act. (GM Heritage Center, 2009)

GM reported a delivery of 129,227 vehicles in January, 49 percent lower than the previous year. Mark LaNeve, vice president for GM North America Vehicle Sales they are now being aggressive in the market and holding steady above 21 percent. They have also introduced the Chevrolet Traverse crossover which has reached sales of 5,200 vehicles. Other milestones included sales of Chevrolet’s crossovers, HHR, Equinox and Traverse which reached sales of 11,666. (GM, 2009 (d))

Hypotheses

Hypothesis # 1: Businesses that offer products of higher quality tend to be more profitable than their competitors.

Hypothesis # 2: Company strategies can motivate for an increase of market share.

Most of the questions in the survey deal on quality, which means how quality-oriented are GM and Toyota cars? Depending on the response of the respondents, quality determines, and which company gets a high score in the paired t-test is the most quality-oriented company. This company is more profitable than its competitor. It can demand higher prices for its products. “Moreover, high quality offerings instill customer loyalty, foster repeat purchases, insulate firms from price wars and help build market share” (Jobber and Lancaster, 2003, p. 663).

For companies like GM and Toyota interested in continued growth, successful new product strategy should be viewed as a planned totality that looks ahead over others. New product strategy and concept should try to predict in some measure the likelihood, character, and time of competitive and market events.

Strong Market Position

Market position refers to the relative market share that a firm holds in relation to its competition. Firms that have a large share of a market tend to be the most profitable. However, it should be noted that market share does not necessarily create profitability. Business strategies, such as the marketing of high quality products, and the provision of good service, result in profitability.

Questionnaire Formulation

The questions in the questionnaire were done in line with our knowledge of the car brands of Toyota and GM as a result of our researches from books, websites and online journals. The demographic taken is the “driving age” which can be described as from the legal age up to early forties of a person qualified to drive, working and can be married or single.

The first multi-item scale question is to get the perception of respondents on the quality and cost of the two brands. Respondents have five choices, and the choices indicate how a respondent strongly agrees or disagrees. This method of getting the opinion of a respondent requires close study because the two brands, Toyota and GM, are competing for the “first prize” or the top spot of the market.

The second question asks for an opinion on the future of Toyota and GM as an off-shoot of the global financial crisis. Which company will perform well? Both firms have survived the harsh times, the realities of recession in the 1970s and they have emerged successful.

The third question is a multi-item scale with a matrix of drop-down menus. The drop-down menus give three choices for each category: for the price category, the respondent can choose “expensive”, “not too expensive”, and “manageable”; for quality category, respondents can choose “state-of-the-art”, “premium guarantees”, and “trustworthy”. Out of these choices, we can evaluate which of the two firms sell products with low prices and of high quality.

The fourth question in the questionnaire is very relevant in our market research. The question asks for an opinion or a rating opinion in four categories: “extremely important”, “important”, “doesn’t matter much”, and “simply lag behind”. The products to be rated in the question are: cars, hybrids and electrics, environmentally-friendly cars, trucks, SUVs and vans, and vintage cars. When a respondent rates Toyota cars as extremely important, it means Toyota is on the lead as provider of quality cars to the public, and is also concerned of customer satisfaction. But when the same respondent also rates GM cars as extremely important, it means he rates GM and Toyota almost equally in delivering quality products to the public.

The fifth question is also asking for opinion on good engineering of the brand and the five categories are again devised here: strongly disagree, disagree, neither agree nor disagree, agree, and strongly agree.

The sixth and seventh questions are similar in that they are asking for a yes or no answer on the availability of parts and components of Toyota and GM. How available are their replacement parts for maintenance and repair and are these available in all countries?

The eighth asks for a simple question: which is cheaper Toyota or GM cars?

The ninth question asks for a brief essay for an experience which has given the respondent a lasting impression on either Toyota or GM vehicle.

A Paired t-test on GM and Toyota

Ten respondents who are potential buyers of cars are given a number of hours to test the two brands. It is assumed that the respondents would buy his prepared car brand after he had tested, inspected the brand features, and driven a number of hours.

The table would indicate whether the subject took or not a brand from GM and/or Toyota.

Paired t-test

Subject GM Toyota
1 Yes No
2 No Yes
3 Yes Yes
4 Yes No
5 Yes No
6 No Yes
7 No Yes
8 No No
9 No Yes
10 Yes No

Conclusion

Hypotheses have been formulated and we found out that quality products of both GM and Toyota catapulted the companies to maintain market position and eventual market shares. GM and Toyota are both leaders of the car industry in their own right. There can not be a close comparison as to how each competes, but it can be said that both companies have been strengthened by their company corporate and operational strategies. There was a time when the two companies came close to merger and acquisition, but that that didn’t happen because they care for the people and the public they serve. These two companies are organizations to emulate in the competitive world of the car industry.

The marketing concept of customer satisfaction is one important factor that is common in both organizations. They want to satisfy the customers through quality cars and products.

References

GM, 2009. About GM. Web.

GM Heritage Center, 2009. At GM, we make history every day. Web.

GM (c), 2009. Hybrids. Web.

GM, 2009 (d). GM Reports 129,227 Deliveries in January. Web.

Lynch, R., 2008. Global Automotive Vehicle – Strategy in a Mature Market and Toyota: What is its Strategy for World Leadership. In Strategic Management, 5th edition (Financial Times/ Prentice Hall), pp. 767-775.

Toyota, 2009. Toyota in the United States.

Jones, D., 2007. Profits from The Lean Business Model. In: Editor Robert Heller’s The Thinking CEO. 

SurveyMonkey.com. The Simple Way to Create Surveys. Web.

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