The automotive industry involves the companies and operations that help manufacture motor vehicles and their spare parts. Most of the companies are involved in manufacturing principal products, including passenger automobiles and light trucks. The common motor vehicle designs include; automobiles, trucks, buses, and motorcycles, which mainly use gasoline and diesel as fuel sources. The industry has experienced changes in the supply chain due to coronavirus pandemic-related issues. The supply chain issues involved the global decline of semiconductors chips supply resulting in low vehicles inventories and profit issues. This paper discusses the comparison between Tesla and Toyota motor vehicle manufacturing companies.
The origin of the automotive industry is related to the development of gasoline engines in mid-1860, mainly in France and Germany. Kallstrom (2015) state that the automotive companies before world war I was characterized by the small shop with few handmade cars. The companies manufactured equipment that included stationary gas engines, marine engines, machines tools, sheep-shearing machinery, washing machines, and milling machinery. The common companies included Rolls-Royce from Britain and Ford from the United States, founded by partners who integrated their engineering and business skills.
The United States automotive involved vehicle manufacturing companies who assembled vehicles components manufactured in other companies. The Assembly techniques helped the companies maximize profits through cost minimization. The manufacturing companies were able to build vehicles at low cost where they were able to purchase car parts at credit and repay after the sale of their products. The sales of cars were mainly through the dealership, which helped boost companies’ sales. The companies focused on the production process, which would help create high-performance vehicles. The process encouraged experimentation on various ways of production to help improve cars’ production efficiency. This factor has resulted in the current-day production of electric cars since they are more efficient and environmentally friendly.
Supply issues in 2020
The Covid 19 pandemic outbreak has resulted in supplying chain issues in the automotive industry, which have affected the company’s inventories. The automotive industries face supply chain disruptions, lower production volumes, increase in cost and future uncertainty. The situation is predicted to worsen with years and eventually become better. Mangram (2012) states that car sales have reduced by between seven to ten percent, and the market is predicted to reduce by twenty percent. The supply shortages and supply network disruption can result in company closure. The current situation may seem unfavorable for company survival, but it provides the opportunity for companies to revisit their supply strategies and develop new supply strategies.
The automotive companies lack adequate visibility for their products, which affects their procurement process. Janoskova et al. (2018) state that, on average, vehicles consist of more than 30,000 components and depend on the supply chain to acquire the products. The challenges in visibility affect the procurement process, which influences the company’s inventories resulting in shortages and delays. Additionally, automotive companies have been faced with an increase in the cost of transportation. The freight prices have increased due to transportation constraints and few transportation companies. The increase in transportation has resulted in to increase in the company’s costs which increased the risk of generating losses.
The covid 19 pandemic has resulted in to increase in the cost of raw materials due to complexity inaccessibility. Li (2019 ) states that the prices for raw materials have increased by 274%, termed the domestic sheet metal market. The travel restriction has increased complexity in the procurement process of raw material since most of the raw material used in vehicle manufacturing is exported from other countries. The increase in raw material has been reflected in vehicle prices, affecting vehicle affordability. On the other hand, the increase in raw material cost has resulted in to decrease in productivity. The decrease in productivity has been reflected in company losses since companies cannot reach their production targets.
Tesla Inc. (Tesla) is an automotive and energy company that designs, develops, sells, and leases electric powered electric cars and generates and develops electric storage systems. The company produces vehicle models, including Model Y, Model 3, Model X, Model S, Cyber truck, Tesla Semi, and Tesla Roadster vehicles. The company also installs and maintains clear energy systems and offers end-to-end clean energy products. Tesla Headquarters is in Austin, Texas, with manufacturing facilities in Germany and China and operates across the Asia Pacific and Europe.
Tesla was founded in 2003 by a group of engineers who aimed to prove that people can drive electric cars without compromise. The company philosophy is based on developing scalable clean energy that is sustainable and stops depending on fossil oil. The company combines safety, performance, and efficiency to build its cars. Currently, the company manufactures its cars in Fremont, California, and Gigafactory in China. The company has taken a proactive approach towards safety, involving employee participation in training before starting to work. High employee training and experience have helped the company achieve continuous growth for decades.
Tesla founder and CEO Elon Musk developed the company mission “to accelerate the mass-market electric car to market as soon as possible .”The company’s mission forms the backbone of its successful business model. The company’s first electric car was Tesla Roadster, a high-performance luxury sports car whose production ended in 2012. Later in 2015, the company developed their first SUV, model x, followed by Model 3 in 2017, which gave a breakthrough to affordable cars. The company depends on its high-performance Lithium batteries, which are used to power their vehicles.
Toyota Motor Corporation is regarded as one of the largest companies in Japan and the third-largest in the world. Q states that Toyota produces more than five million units per year which grow every year and is argued to control 9.8% of the automobile in the world in 1990. The company’s profits declined in 1990 due to the economic crisis. The company has been able to develop operational strategies that help overcome the company’s challenges. Toyota believes there is room for automotive growth since only one-third of the world population enjoys the benefits of motor transport.
Kiichiro Toyoda founded the company in 1935, which was inspired by vehicle manufacturing in the United States. The company faced challenges during its early ages due to competition from General Motors and Ford, which had already set assembly plants in Japan. A few years later, the company developed Toyoda Science Research Center and Toyoda Works, which are the core center of vehicle manufacturing. The company has gone through a series of vehicle models, which has been advancing for years and is still being advanced.
Toyota’s current CEO is Akio Toyoda, who has shifted the company’s future of vehicle manufacturing to enriching the world with the safest and most comfortable cars. The company is committed to quality, continuous innovation, respect for the environment, and stratifying customer expectations. The company products have been positioned as global environmental friendly, prioritizing effective vehicle management. Toyota has manufactured various eco-friendly cars that optimize energy consumption and fit various infrastructures in different countries and regions. The company has developed conventional petroleum-fueled vehicles and hybrid vehicles and plans to develop next-generation eco-cars to match the changes in the automotive industry.
Tesla’s marketing strategy involves zero cost in the marketing budget where the company does not carry out media advertisements for their product. The company has developed a digital platform where potential customers can access product details and purchase the company products. On the other hand, Toyota is involved in costly marketing activities, including paying for expensive media adverts and hiring marketing experts. Toyota is engaged in commercial ads that advertise the new vehicle model to help reach out to potential customer demands. Tesla’s zero marketing budgets have helped minimize the cost of sales and maximize its profits.
Toyota’s marketing strategy involves intensive marketing activities where the marketing team is creative advertising. The company has partnered with media companies to help advertise its company. Toyota faces high competition from dominant companies, forcing the company to invest in marketing activities to help maintain its competitive advantage. On the other hand, Tesla does not partner with media companies to help market their products. Tesla encourages the customer to referee for a new customer at an agreed token. The existing customer has a high rate of converting potential customers to new customers. Tesla capitalizes on a high product existence rate where their products have been embraced by accepted by government and non-government organizations resulting in increased sales.
Tesla and Toyota have embraced digital marketing to communicate to customers and market their products. Both companies use digital media and company websites for marketing their products and facilitating customers to purchase their products. Tesla does not have dealership partnerships since its products are purchased using digital platforms. Tesla has not involved salesmen and women since they believe salesmen and women can manipulate customers to buy products they don’t intend to. The company only depends on eCommerce to transact all sales activities. The use of digital marketing has helped both companies minimize the cost of marketing and helped increase the company’s publicity.
Toyota Company is involved in manufacturing a variety of products, including automobiles, material handling equipment, and textile machinery. The automobile products include; vehicles, engines, car air-conditioning compressors, and car electronics. On the other hand, Tesla is involved in manufacturing affordable electronic cars, clean energy generation, and energy storage products. Tesla has made the breakthrough in manufacturing affordable full electric powered electric car models, including model S, Model X, and Model 3. Tesla products have received acceptance due to their affordable prices, electricity use, and low cost of sustainability. The Toyota vehicles have been embraced due to their fuel efficiency and affordability.
Toyota products are focused on environment protection and diversity where the company has developed a research Centre to help develop products that serve the current trend. Toyota research Centre has helped develop fuel-efficient vehicles at affordable prices, for example, highbred cars, which have lowered fuel conservation. On the other hand, Tesla Company focuses on eliminating the use of fossil fuel to power cars and generating clean energy for domestic and industrial use. Tesla has invested in generating clean energy using solar power plants and developing power storage batteries. Tesla has partnered with the US government to build a car charging system where electric car owners can charge their cars from various parts of the country for free.
Product / differentiation
Tesla has created a sustainable energy ecosystem where they manufacture advanced energy solutions. The company has developed power walls, power packs, and a solar roof that enable households and businesses to manage renewable energy generation, storage, and consumption. Toyota specializes in manufacturing vehicles but has diversified to the manufacturing of car spare parts, car accessories, marine products, housing companies, industrial vehicles, and equipments. The company diversity helps minimize the risk of making losses on the overall company income. The company’s diversity has helped maintain its continuous company growth.
Tesla provides a wide variety of products and services which are supplied all over the world. Mangram (2012 states that the company’s electric vehicles have ranged between 250 miles to 370 miles which have high-performance batteries with customizable seats and storage. The company’s broad differentiation strategy includes building a solar city, which will involve building up a clean-energy ecosystem. The management believes that SolarCity technology will help achieve efficient and low-cost solar cells in the world. Tesla achieved its competitive advantage by capitalizing on reducing the raw material cost used in manufacturing batteries. Research and Development and Automation help innovate production procedures that minimize the cost of batteries and car parts.
Toyota has adopted both product differentiation and low cost as generic strategies to help gain a competitive advantage over other automotive companies. The company market scope is wide, which entails all types of customers who have the purchasing power to own a vehicle. The company is able to target every level of the customer since they have a variety of vehicles. The company has vehicles from different price ranges, from low-priced vehicles such as Prius to luxury cars like Lexus. The company’s differentiation strategy has been able to create a competitive advantage against its competitor due to its strong design and customer loyalty.
Tesla and Toyota are working on a partnership deal that will enhance the production of fully powered electric SUV cars. The partnership deal is expected to ensure collaboration between the two companies where Toyota will facilitate the production process while Tesla will supply electronic control platforms and technology software. Toyota aims at advancing the RAV 4 model to produce an electric-powered SUV. The two companies will work together to help minimize the cost of production and ensure there is minimal risk involved. Integrating different company capacities help the companies overcome challenges involved in the manufacturing process.
Tesla has developed customer-company relationships where the company employees are not allowed to influence customers to purchase their products. The company showrooms are not used for marketing purposes but for customers to test their products and access after-sales services. The company argues that salespeople in showrooms have the ability to influence customers to purchase company products they don’t desire. On the other hand, Toyota has built vehicle showrooms where customers interact with salespeople. The salesperson is allowed to advise the customer on the appropriate products that satisfy their need. The salesperson is rewarded depending on their performance, increasing the risk of customer dependence on the salesperson and customer manipulation.
Tesla has adopted online sales where all company sales are conducted online, and the customer visits the company showroom when collecting their products. Mangram (2012) states that the Tesla company encourages the customer to make orders online using the company website, make payments, and indicate the place of delivery. The company delivers the customer order using their delivery system. On the other hand, Toyota has integrated the use of online sales and showroom sales. The customers are allowed to make an order using the company website or visit the company showroom and purchase their products. The customer is allowed to communicate directly to the salesperson and purchase the company products.
Tesla’s management approach is based on effective decision-making influenced by innovation and optimal productivity. The company management makes decisions depending on the set objectives and strategic plan. The company decision areas include; designs of services and goods, quality management, process and capacity designs, location strategy, and layout design and strategy. On the other hand, Toyota’s management approach is based on company culture, which has been developed for many years. The management ensures there is effective administration of staff, ensures all employees are adequately skilled, and the employees are able to achieve the set objectives.
Tesla is headed by Elon Musk, who has revolutionized the company due to his management plan based around the company mission. Elon has developed a business model that enables customers to pay their car costs through premium. The strategy involves differentiation of targeted market segment though targeting premium buyers and low-price buyers on the automobile products. Additionally, the company has gained its uniqueness due to increased investment in research and development. The investment in research and development has helped the company to develop ecosystem products and, at the same time, achieve its sale targets.
Toyota has a comprehensive expression management philosophy based on the foundational principle of continuous improvement and respect for people. Dr. Jeffrey Liker developed the company management philosophy in 2001, but it has not been made public. The philosophy is categorized into fourteen guidelines which are based on four principles which include; the long-term philosophy, which entails sustainability guidelines, use of the good process to produce the right result, which details the continuous improvement guideline, adding value to the organization through leadership development and continuous solving the root cause of the problem through the learning process.
The top line (sales)
Tesla sales have been increasing since 2016 when it first started selling electric-powered cars, where it has been setting new records every year. Tosesarij (2020) states that the Tesla company recorded a 677% increase in sales in December 2020 due to its competitive care model, which includes model 3, model Y, and Model S. the company’s increased productivity has helped serve the growing growth demand for electric-powered cars. Similarly, Toyota is the world’s top-selling automobile company in the world. Toyota has faced various challenges, such as the Covid 19 pandemic and the great recession of 2008, affecting the company’s sales.
Tesla’s sales plan involves eliminating showrooms in major cities and focusing on locating delivery centers in cheap towns. Tesla focuses on directing sales staff and delivery staff to encourage potential customers to order products digitally. The sales staff should guide potential customers to purchase products online and direct customers to the nearby store. The company has used its parking spaces to allow the customer to test vehicles before making a purchase. The strategy will help the company to eliminate fancy stores. On the other hand, Toyota engages dealership sales where sales staff work in dealership stores in groups. The staff are highly skilled and informed on the product information, order taking, data collection, and finance insurance. Toyota has adopted a pull strategy to ensure the product satisfies customer demand.
Bottom line (profits)
Tesla company first recorded profit in 2018 since it has been undergoing reconstruction since 2018 where the profit has been growing at optimistic projection. Tosesarij (2020) states that the annual gross profit in 2019 was $4.069 Billion, a 0.67% increase. The annual gross profit in 2020 was $6.63 billion, which was a 62.94% increase. In 2021 the company recorded an annual gross profit of $13.606 billion, a 105.22 % increase. On the other hand, Toyota’s profit has been affected by the Covid 19 pandemic, where the company recorded gross revenue of $229.67 billion in 2020, which was a 12.93 % decline. The company recorded an increase in revenue in 2021 of $270.18 billion, which represented an increase in revenue of 17.64%. Toyota has been able to recover effectively from the financial crisis and other factors due to its well-established manufacturing and marketing strategies.
Toyota’s growth strategy involves a focus on market penetration which entails reaching and attracting more customers to the current company market. Adner et al. (2019) state that Toyota ensures they produce products that serve every market segment. The company focus on cost minimization and maximization of the company sales, which helps achieve set company profit. On the other hand, Tesla’s growth strategy involves gaining a competitive advantage against its competitors. The process involves using advanced technology in electric car production. The company combines growth strategies and generic competitive strategies the improve operational effectiveness.
Tesla and Toyota companies are regarded as the most innovative companies globally. Tesla has made a breakthrough in manufacturing fully powered electric cars that are affordable and efficient. The company has diversified in manufacturing electric vehicles and clean energy generation to help create sustainable energy generation. On the other hand, Toyota has remained sustainable for many decades and has overcome various financial crises. The company focuses on market penetration by manufacturing vehicles that are suitable to every level of customer.
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