Global Operation Supply Chain Management - Corporate Comparison - Ford vs Toyota

Automotive Industry Comparison This document does not contain any technical data subject to the EAR or ITAR

Igor S. Garcia, MBA Richard Neves, MBA Manuel Jenni, MBA Chisachi Ohno, MBA Ernesto Horikoshi, MBA Madad Rustamov, MBA

Industry Context

This document does not contain any technical data subject to the EAR or ITAR

Global Market

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World's Top Automotive Markets

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2012Ford #5 Global Auto Producer

Toyota #1 Global Auto Producer


China Positioning At A Glimpse

Competitive Environment - emerging markets

Group Units yr to da te June Marke t Share

1 Volkswagen Group 1.628.392 15%

2 Hyunday Group 811.341 8%

3 General Motors Group 784.336 7%

4 Toyota Group 439.861 4%

5 Renault-Nissan Group 392.417 4%

6 Ford Group 330.025 3%

7 Honda Group 309.781 3%

8 PSA Group 279.975 3%

9 BMW Group 202.693 2%

10 Suzuki Group 124.587 1%

Toyota Camry Toyota’s Best Seller in China

Ford Focus Ford’s Best Seller in China


Market Position - Progression

Toyota Becomes #2 Producer – Dethrones Ford

Ford Becomes #4 Producer Behind VW

Toyota Becomes #1

Ford Becomes #5 Producer Behind Hyundai

Toyota Becomes #3 GM Regains #1 Spot

Toyota Becomes #1 Ford Remains at #5


Industry Context

Automotive Industry 2012

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Ford & Toyota Production By The Years (1998 - 2012)

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Company Analysis


Ford • Founded in 1903 by Henry Ford in Dearborn, Michigan

• Founding Ford family remains in comapny

• First vehicle the quadricycle.

• First to adopt the assembly line process to drive vehicle initial ownership down and increase customer base, efforts drove car price down from $2000 to $250 by 1908.

• Model T became first global platform, sold approximately 15 million units.

• 1970s exemplified low quality production.

• 1980s – 2000s growth via acquisition of foreign auto companies, centered around low quality.

• 2007 – Present Ford revival – “The Way Forward”

• 2008 – Way Forward Renamed One Ford by A. Mullaly

• Current 5th Largest Car manufacturer in the world.

• In the 2000s, Ford divested, discontinued unprofitable Operations, including Volvo, Jaguar, Land Rover, Mercury, Mazda

Toyota

Background

• Founded in 1937 by Kiichiro Toyoda as a spinoff from his father ‘s Toyota industries to create automobiles

• In 1934 being a department of Toyota industries they created first product Type A engine

• In 1936 Toyota produced it’s first car passenger Toyota AA

• In 1924,Sakichi Toyoda invented the Toyoda Model G Automatic Loom. The principle of Jidoka, which means the machine stops itself when a problem occurs, became later a part of the TPS (Toyota production System).

• Toyota received its first Japanese Quality Control Award at the start of the 1980s.

• Toyota began building plants in the US by the early 1980s.

• Toyota started to establish new brands at the end of the 1980s, with the launch of their luxury division Lexus in 1989.

• In the 1990s, Toyota began to branch out from producing mostly compact cars by adding many larger and more luxurious vehicles to its lineup

• In 2008 Toyota surpassed GM and became the world's largest automobile maker


Global Presence

• 1x HQ + 7 Regional HQs • 2 x Casting & Forging Facilities • 20 x Engine Assembly Facilities • 29 x Assembly Facilities • 6 x Stamping Facilities • 4 x R&D Facilities • 3286 x Dealers

• 1 HQ + 8 x Regional HQ • 2 x Casting & Forging Facilities • 11 x Engine Assembly Facilities • 37 x Assembly Facilities • 3 x Stamping Facilities • 10 x R&D Facilities • 167 x Distributors


Category Ford Motor Company Toyota Motor Company

Combustion Engines Best in Class Combustion Engine 2.0 DOHC

Best in Class Combustion Engines

Hybrid Hybrid Vehicles Hybrid Vehicles

Electric Electric Vehicles Electric Vehicles

Interactive Technology “Sync Interactive Technology”

“Entune”

Competitive Offerings

Commercial Trucks SUVs

Cars Hybrid

Electric Electric

Hybrid

SUVs

Cars

Trucks Commercial


Product Offering

Ford, 43

Lincoln, 5

Toyota, 66

Lexus, 20

Scion, 5

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Multiple vehicle lineup with few production platforms

Manufacturer # platforms Models / platform

Ford 14 (27) 3.5

Toyota 26 3.5


Ford: SWOT Analysis

Strengths • Strong position in US market, second largest

vehicle market globally • Strong growth in China – positioning in a growth

market • Product technology - ECOboost initiative (high

efficiency engines better fuel consumption that Toyota Prius)

• Strong financials – did not require USG bailout • Operational efficiency – global models produced

on common platforms with an ability to customize cosmetics to regional taste.

• Strong brand value

Weaknesses • Poor environmental record in the US. • High cost structure driven by its generous

employee compensation and pension plans • Sales strong dependency on US market

Opportunities • Strategy (low emission, high efficient combustion

engine ) aligned with future stricter emission standards and consumer concern

• Increased fuel prices - ECOboost initiative (forward looking value add)

• Strategic partnerships in R&D reducing costs

Threats • Decreasing oil prices – Shale / US • Rising raw material prices – suppressed consumer • Intense competition (small cars, hybrid or fully

electrical technology) • Exchange rates (appreciating dollar will erode

foreign income)


Toyota: SWOT Analysis

Strengths • TPS – Toyota production system • Brand equity (10th worldwide1) • Leader in sales in car industry • Massive balance sheet • Technology leader in many areas

including hybrids • Fuel Efficiency

Weaknesses • Quality issues • Sales strong dependency on

Japanese market • Low profitability in Europe

Opportunities • Green trend in the car industry • Growing purchasing power in

emerging markets

Threats • Recent quality scandals • Growing competition from

other Asian players ie Koreans and Chinese

• Decline in sales revenues


Marketing Strategy


Ford Marketing Strategy

Marketing objectives • Growth • Gain market share and therefore main focus is in

attracting new customer to small car market (customer lifetime value)

Targeting • New demographic (young) and psychographic

(trendy) segments in addition to existing ones • Priority to gain share in the US • Moving to capture the Chinese market • Retain existing customers

Positioning • Innovative brand with traditional heritage • Fuel efficiency • Product features , high technology and safety

Marketing Mix Product • “trade up” product range to capture early buyers and

provide a full lifecycle of products. • Sold off other marques (Land Rover etc) • Refresh of stable ‘historic’ brands keeping traditional

names.

Price • Value pricing strategy

Promotion • “push” for traditional segment and “pull” for new

segments • Personal selling: building relationships with customers

through social media presence, direct customer contacts, grassroots marketing and traditional dealerships (integrated)


Toyota Marketing Strategy

Marketing objectives • Maintain global sales leader leadership, attract and retain

consumers

Targeting • Focus on 50% Emerging / 50% Established

• Focus on fuel efficient vehicles (hybrid / compact)

• Retain clients through vehicle trade up.

Positioning • Build and exemplify trust

• Build a ideological bond with consumers to create a community (CSR, TeenDrive365)

• Moving Toyota culture and values into their augmented product.

• Brand awareness towards local markets (Lexus in US)

Marketing Mix Product • “trade up” product range to capture early buyers and

provide a full lifecycle of products.

• History of creating market segments through “break through technology” or products.

Price • Value pricing strategy

Promotion • “push” marketing

• Built on global vision to align corporate social responsibility with products


Order Winners Order Qualifiers

Image (40%) • Brand loyalty (existing), brand

building(new)

Cost • Selling price

Product (40%) • Features • Aesthetics • Perception of safety

Quality

(Product Performance) Cost (20%) • Running cost /fuel efficiency

Flexibility • Customized, build your own

Ford Order Winners / Order Qualifiers


Order Winners Order Qualifiers

Product(50%) • Perception of quality • Reliability

Cost • selling price

Quality (30%) Product • Product Features

(Product Performance) Cost (20%) • Running cost /fuel efficiency, warranty

period

Flexibility • Customized, build your own

Toyota Order Winners / Order Qualifiers


Operations Strategy


Ford Infrastructure / support

• Organization structure – “One Ford” centralized global organization, strong family ties , Chairman Bill Ford

• Functional Organization – global functional reporting • Marquee specialization – sold off acquired brands • Quality & Control System – Six Sigma, continuous improvement systems required

by supply chain • Changed planning from build to max production to Demand forecasting • Ford Financial within structure. • Clerical Processes – Centralized cash management system


Ford Transformational Processes

• Standardization (common production platform) with ability for regional customization.

• Inventory / customization - Client build to order • Technology

• Virtual Manufacturing – speed to market / quality improvement • Technology development (ECOBoost) & Safety developments

• Location - Significant reduction in manufacturing plants 113 reduced to 59 improving economy of scale

• Make or Buy “Virtual” vertical integration where culture and quality systems of suppliers are aligned with Ford. Supply chain consolidation (fewer) and further building Supply Chain capabilities in low cost regions (South America)


Toyota Infrastructure / support

• Organization structure • Strong regional management to penetrate /understand local markets. • Business Unit structure with P&L resp. by varying brands • Non Japanese heads in global regions ‘localization’

• Functional Organization – global functional matrix • Functional centralization, Total New Global Architecture common production

platform • Product & Business planning division

• Quality & Control System –TPS


Toyota Transformational Processes

• Standardization common production platform (TNGA) with ability for regional customization.

• Inventory / customization - Client build to order • Capacity – Increasing capacity. • Make or Buy

• “Virtual” vertical integration where culture and quality systems of suppliers are aligned with Toyota. Supply chain consolidation

• Supply chain consolidation (fewer) and further building Supply Chain capabilities in low cost regions (South America)

• Technology – Hybrid engines etc. • Toyota Financial within structure. • Clerical Processes – Centralized cash management system


Alignment


Alignment of Ford

Corporate objectives Marketing Strategy O Winners O Qualifiers

Competitive Capabilities Transformational Process

Infrastructure Support

One Ford approach, consolidate product range and globalize.

Order Winners 1. Image – Brand ,Design 2. Product – Perception safety, features 3. Cost - Running cost, efficiency Order Qualifiers Cost – Selling Price Quality Flexibility

1. Image – Brand , Design 2. Product – Perception safety, features 3. Cost - Running cost, efficiency (car) 4. Cost – Selling Price 5. Quality 6. Flexibility

Marquee specialization – sold off acquired brands

Organization structure – “One Ford”, strong family ties , Chairman Bill Ford

Functional Organization – global functional reporting

Quality & Control System – Six Sigma, continuous improvement systems required by supply chain

Changed planning from build to max production to Demand forecasting Ford Financial within structure.

Standardization (common production platform) with ability for regional customization.

Inventory / customization - Client build to order

Technology Virtual Manufacturing Technology development (ECOBoost) & Safety developments

Location - reduction in manufacturing

Make or Buy - “Virtual” vertical integration

Marketing objectives

Gain market share and therefore main focus is in

attracting new customer to small car market (customer lifetime value)

Targeting

Young, trendy segments

existing segments

Priority to gain share in the US

Moving to capture the Chinese market

Retain existing customers

Positioning

Innovative brand traditional heritage

Fuel efficiency

Product features , high technology and safety

Make or buy - Supply chain consolidation (Supply Chain capabilities in low cost regions

All


Ford Competitive Capabilities vs. OW / OQ

Rank OW /OQ Competitive Capabilities

1 Image– Brand, design Image – Brand, design

2 Product Product

3 Cost - Running cost, efficiency Cost - Running cost, efficiency

4 Cost – Selling Price Cost – Selling Price

5 Quality Quality

6 Flexibility Flexibility

Strong alignment of OW and Competitive capabilities


Alignment assessment of Ford

• Infrastructure supports transformational processes • Transformational Processes form competitive capabilities • Competitive capabilities are aligned with OW/OQ • Culture “One Ford” is a blanket linking structure and processes • Multiple process alignment to No1. OQ – Sales Price

Good


Alignment of Toyota

Corporate objectives Marketing Strategy O Winners O Qualifiers

Competitive Capabilities Transformational Process

Infrastructure Support

Making ever better cars Stable base of business Enriching lives of communities

Marketing objectives - Become global sales leader - Attract and retain consumers Targeting -Focus on fuel efficient vehicles (hybrid / compact) - Retain clients though vehicle trade up Positioning - Build and exemplify trust - Build a ideological bond - Augmented product. - Brand awareness towards local markets (Lexus in US) Product “trade up” product range Sold off other marques Refresh brands Price Value pricing strategy Promotion - “push” for traditional segment - “pull” for new segments - Personal selling

Order Winners Product (Q perception, reliability) Quality Cost – Running cost, Hybrid Oder Qualifiers Cost – Sales Price Product (features) Flexibility

Cost – Running cost, Hybrid Product (Q perception, reliability) Quality Cost – Sales Price Product (features) Flexibility

Quality & Control System - TPS

Functional Organization - Global functional matrix - Functional centralization TNGA and Product & Business planning division

Organization structure - Strong regional management - Business Unit structure - Non Japanese regional heads

Make or Buy -“Virtual” vertical integration where culture and quality systems of suppliers are aligned with Toyota. -Consolidate suppliers

Standardization common production platform (TNGA) with ability for regional customization.

Inventory / customization - Client build to order

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Alignment Miss Alignment

Capacity increase


Toyota Competitive Capabilities vs OW / OQ

Rank OW /OQ Competitive Capabilities

1 Product (Q perception, reliability) Cost – Running cost, Hybrid

2 Quality Product (Q perception, reliability)

3 Cost – Running cost, Hybrid Quality

4 Cost – Sales Price Cost – Sales Price

5 Product (features) Product (features)

6 Flexibility Flexibility

Misalignment of OW and Competitive capabilities due to quality failures impacting Product quality perception


Alignment Assessment Toyota

• Infrastructure positively impacting Transformational processes • Organization Structure positively supports all transformational processes • Functional organization: ensure standardization and make or buy • Quality & control systems: ensures quality within make and/or buy

• Transformational processes • Increased production volume negatively impacted Quality and Product

Quality Perception • Recovery from quality failures through TPS

• Resulted in misalignment of competitive capabilities and Order Winners • Quality and Product Quality Perception lower than required to support

Order Winner


Future Challenges

Ford • Maintaining “One Ford” through expansion

program in Asia (centralized) • Continuous focus on technology is needed to

maintain OW • Focus to consolidate suppliers can become a

challenge from suppliers to deliver. High reliance on fewer core suppliers.

• Quality structure and supply chain needs to accommodate rapid product launches

• Move towards new suppliers in low cost regions need to be managed (quality).

Toyota • In 2013 Toyota is 7th behind Chevrolet and

Infinity in quality rankings (JDPower) • Poor quality - regional organization impacting

alignment of Quality structure into Processes impacting Toyota’s no.1 OW

• Poor quality – continued growth impacting alignment of Quality structure into Processes impacting Toyota’s no.1 OW

• OW of new younger market moving from Product identifiers to Image identifiers

• Move towards new suppliers in low cost regions need to be managed (quality).

• Political influence in key growth area (China) requiring a shift of operations to S. America


References

[1] http://www.toyota-global.com/investors/ir_library/annual/pdf/2013/p20_23.pdf [2] http://corporate.ford.com/microsites/sustainability-report-2011-12/financial-health-product [3] At ford Turdnaround is Job One – James B Shine (Kelogg) [4] Ford.com [5] Grant, Robert M. Contemporary Strategy Analysis [6] Wikipoedia.com [7] bloomberg.com (notice 2012) [8] http://www.academia.edu (moiz hussain) [9] Quality ranking JD power quality ranking 2013 [10] http://www.interbrand.com/en/best-global-brands/previous-years/2012/Best-Global-Brands-2012-Brand-View.aspx http://www.toyota-global.com/company/profile/overview/


http://www.toyota-global.com/investors/ir_library/annual/pdf/2013/p20_23.pdf




http://corporate.ford.com/microsites/sustainability-report-2011-12/financial-health-product












Global Operation Supply Chain Management - Corporate Comparison - Ford vs Toyota

Automotive

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