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Background- The industry makes over 50 million cars a year and employees millions of people. The industry consumes nearly 50% of the world’s rubber, 25% of its glass and 15% of the steel. The automobile industry helps fuel the economy. It also responsible for half of the worlds oil consumption. As new companies entered the market, they adopted the assembly line. Companies like Toyota began to tweak the mass production that Ford had started. Later this was dubbed “lean Production”

Networks effect-The first automobile was prone to breakdowns and it was actually faster for people to get around using a horse and buggy. The automobile industry needed network effects to kick in so the car would pave roads along with gas stations.

Key factors about the industry- the industry was shifting from large automobiles with poor gas mileage to vehicles like the Prius and the Ford Focus, Hybrid cars.

Strengths- Lean Production reduced set up times for machinery and made shorter production runs more economical. Toyota all began to focus on JIT inventory systems, Flexible work practices and an organizational wide focus on QC, and the practice of stopping the assembly line to fix defects, the lean production system yielded significant gains on productivity and product quality. In turn it lowered cost, improved brand equity and gave Toyota a CA. Like earlier in the century as companies did with Ford’s assembly line, companies began to adopt the lean production approach. With all the foreign companies on the rise in the US market, it contributed to a number of key factors, including better designs and more fuel effect offerings. Superior product quality, higher employee and capital productivity, and lower cost due to smaller pensions and health care commitments.

Weakness- when oil prices hit $150 per barrel, people who were buying cars switched to more fuel-efficient vehicles, many of which were not made by American companies. Two factors that made the sharp decline particularly painful for the automobile industry. One there was high level of fixed cost associated with the industry. As sales fall below the breakeven run points, the high fixed cost imply rapidly rising losses. Also the fact that the industry was shifting from larger vehicles with poor gas mileage to smaller cars with better gas mileage. With the addition of foreign capacity, it created an excess capacity issues that was evident during the 08-09. It exceeded 40%. There was major competition to gain Market share, this included 0% financing, cash back on purchases and large reductions from sticker prices.
The big 3 have a major disadvantage when it comes to fixed cost. Right now they are paying out 3 billion dollars a year to cover health care costs. Another billion in interest payments for a bond to cover employee pensions. A perfect example is that it cost Toyota $45 per hour to make a car while it cost $75 per hour at GM.

Industry Trends- Several trends characterized the competitive landscape of the global auto industry. Most important was the decline of the big Three, the shifting patterns of global demand and the growth of China as a major market, along with the increasing attention paid to non-traditional engines, including hybrids and fuel cells.
Market share- the key role in market share is QC.
Changes in operations- Automobile companies are looking to take costs out of their system or capture more of the available demand. The most notable way of doing this has been an industry wide attempt to streamline product development, offer a wide read of niche cars, work more closely with suppliers, develop systems for building cars to order, and introduce a new breed of hybrid cars.
Historically it would take about 4 years and 1 billion dollars. To recoup the losses the companies would need high volume sales that are associated with EOS. This meant that there could be no major updates to the car for 4-7 years to get the money back. Companies learned how to cut cost, for example GM cut out 50 million on the design process by digitalizing the design of the car and tools. Gm was also using the same platform on all the smaller cars so they could be profitable with only selling 20-25,000 units. It saved them 12 billion dollars.

Market Share-where it was and where it is now = Where the market is headed.
Marketing Stratedgy

Lean production
Interia
Technology
Key compteneces-talk about Toyota

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