Factors that determine business strategies
Analysis of Business Strategies for the Chosen Companies
As discussed in the previous section, different organizations follow different business strategies based on several factors. These factors are explained as follows.
Target Market – Target market is often the most crucial factor in determining the business strategy of a company. For instance, if the target market is international, the company has to go through continuous and sustainable growth that is possible by high amounts of investments as well as mergers with other similar regional companies (Wesseling et al., 2015). Again, if the target market is small, the objective of the company is to maintain a sustainable business that does not require additional investments and mergers.
Market Competition – Market competition is another major factor in the development of business strategy of a company. When there is high competition in a specific market region, the large scale companies often seek to enter the market of a different region (Menon & Yao, 2017). Again, one of the common strategies related to this factor is to acquire a smaller competing company in order to get a stronger hold on the market.
Mutual Growth – There are certain conditions when two companies are already flourishing in the market of two different regions and both are looking to enter each other’s markets (Ghosal, 2015). In these cases, the companies start partnership with each other and function as a merged company in spite of maintaining different entities and organization structures.
Business Strategies Discussion
In this part, the analysis of business strategies is mainly focused on two specific case studies of car manufacturing industry – one is Toyota for analyzing the international marketing and business strategy and the other is GMC for analyzing the domestic marketing and business strategies.
Analysis of Case of Toyota.
Business Strategy, Five Forces, Corporate Level Strategy. The main business strategy followed by Toyota is to grow internationally, provide services all over the world and generate revenue from different markets. In spite of being based in Japan, Toyota has now set up operational offices in various parts of the world that work as independent units. Throughout its history, Toyota has acquired several smaller organizations as a technique to access the specific market and grow. One of the most significant acquisitions of Toyota is the acquisition of Hino in 1967. Hino is a specialist manufacturer of medium and heavy-duty diesel trucks and Toyota acquired it in order to get access to the truck market (Zokaei et al., 2016). This acquisition was significantly successful and one of the main turning points of business in Toyota history. Not only Toyota entered a new market within the same industry, Toyota’s services were further increased from only commercial vehicles to medium and heavy duty trucks. Currently, Hino is one of the largest subsidiaries of Toyota company.
Business strategies discussion
The five forces of competition for Toyota have been identified as follows.
Threat of Substitutes – Threat of substitutes is very high due to a large number of vehicle manufacturers operating in the same industry.
Bargaining Power of Buyers – Bargaining power of buyers is moderately high as the buyers are looking to compare prices of vehicles of different companies before selecting the most suitable one.
Threat of New Entrants – Threat of new entrants is moderately high with the development new automobile technologies and increasing popularity of electric and solar vehicles.
Bargaining Power of Suppliers – Bargaining power of suppliers is relatively low.
Industry Rivalry – Industry rivalry is very high as there are hundreds large scale manufacturers are operating in the same market.
Corporate Governance Mechanisms, Responsible Corporate Citizen. Corporate governance is one of the major parts of daily operations of Toyota. In order to manage the corporate governance mechanism, Toyota has a specific corporate governance system in which, some major stakeholder groups are attached.
Toyota promotes and undertakes several campaigns related to driving ethics and maintaining safety while driving a car. Toyota also ensures legal and environmental guidelines are considered during manufacture of the vehicles.
Analysis of the Case of GMC.
Business Strategy, Five Forces, Corporate Level Strategy. The main business strategy of GMC is to maintain a sustainable business within the United States. The company does not have any interests in international ventures and has slowly become domestic giant in the automobile market. GMC depends heavily on the existing brand value and the quality of services in order to sustain in the market (Grant, 2016). GMC has also maintained its original business culture has not acquired or merged with another company till date. However, acquisition or merger with some local companies can give GMC significantly more advantage over other business organizations in the market. One recommended company that GMC can consider acquiring is Mack Trucks (Macaulay, 2018). This company manufactures different types and designs of trucks and tractors that will help GMC to expand their services without having to go international or relocate. It will help the company to establish a stronger hold on the national automobile market.
The five forces of market competition for GMC are as follows.
Threat of Substitutes – Threat of substitutes is low as the quality of services and brand value of GMC means substitution of the company will not be an easy job for any existing or new business ventures.
Analysis of the case of Toyota
Bargaining Power of Buyers – Bargaining power of buyers is low because they are attracted by the brand value of GMC and do not consider price as a barrier to a deal.
Threat of New Entrants – With the development of new generation electric and solar powered trucks and SUVs, GMC has also taken active initiatives to adopt the techniques within its own innovation model. Hence, threat of new entrants is low.
Bargaining Power of Suppliers – Bargaining power of suppliers is relatively high due to the quality demands of the company.
Industry Rivalry – Industry rivalry is moderately high due to the presence of numerous national and international truck and SUV makers.
Corporate Governance Mechanisms, Responsible Corporate Citizen. Corporate governance mechanism of GMC is multifold and a large number of policies have been developed for corporate governance processes. As a part of the corporate governance model, several committees are functioning together.
As a part of the responsible corporate citizen initiative, GMC has published a set of ethical, moral and environmental policies and guidelines regarding the control and management of their own business processes.
Recommendations for Improvement
For Toyota, it is recommended to evaluate existing markets more closely as well as adopt the latest technologies in order to compete with the newcomers like Tesla which already uses most ultramodern technologies for manufacturing the cars.
For GMC, it is recommended to adopt or acquire some small and medium organizations that have high potential in the market. This will help the company to increase its sustainability in the current changing market landscape.
Conclusion:
It can be concluded that owing to the differences in organizational goals and target markets, Toyota and GMC have entirely different business strategies and operation frameworks. However, in spite of the differences, it is to be noted that both the organizations need to increase their sustainability if they want to cope with the rapidly changing market.
Business organizations have separate business strategies depending on their target market as well as business goals that are to be achieved. Hence, it is often seen that different organizations follow entirely different directions of business strategies for growth. For instance, some companies having the goal of increasing international reach look to acquire or merge with other companies that increase their area of business (Beiker, 2015). Again, for domestic companies, if the target is to keep hold of the domestic market, there are very few mergers or acquisitions associated and these companies mainly depend on existing brand value and quality of services for keeping hold of the market. These strategic directions are evident from the cases of Toyota and GMC that operate differently in terms of business in spite of being in the same industry (Halal, 2015). Toyota was initially founded in Japan but owing to the growth interests, the owners decided to venture overseas in which, they have been very successful. On the other hand, GMC solely depends on brand value and popularity in order to maintain a sustainable business within the target region.
This report is used to analyze and describe the business strategies followed by GMC and Toyota including some other related factors like corporate governance mechanisms and control methods applied.
References:
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Ghosal, V. (2015). Business strategy and firm reorganization: role of changing environmental standards, sustainable business initiatives and global market conditions. Business Strategy and the Environment, 24(2), 123-144.
Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
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Macaulay, S. (2018). Non-contractual relations in business: A preliminary study. In The Law and Society Canon (pp. 155-167). Routledge.
Menon, A. R., & Yao, D. A. (2017). Elevating repositioning costs: Strategy dynamics and competitive interactions. Strategic Management Journal, 38(10), 1953-1963.
Weinstein, A., & Winston, W. (2016). Defining your market: winning strategies for high-tech, industrial, and service firms. Routledge.
Wesseling, J. H., Niesten, E. M. M. I., Faber, J., & Hekkert, M. P. (2015). Business strategies of incumbents in the market for electric vehicles: Opportunities and incentives for sustainable innovation. Business Strategy and the Environment, 24(6), 518-531.
Zokaei, K., Lovins, H., Wood, A., & Hines, P. (2016). Creating a lean and green business system: techniques for improving profits and sustainability. Productivity Press.
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