AUTOMOTIVE INDUSTRY ANALYSIS
Submitted by Team A
Prof. Alan Flury
December 5, 2005
ME 6753: Principles of Management for Engineers
Team A ii
This analysis focuses on the automotive industry, specifically, large-scale manufacturers of automobiles. The automotive industry is inherently interesting: it is massive, it is competitive, and it is expected to undergo major restructuring in the near future due to globalization and decreasing oil reserves. The analysis team members (we) feel qualified to perform this investigation due to our familiarity with the industry and our educationseveral of us have studied and worked on problems associated with automobile manufacturing and we are all mechanical engineering graduate students. Analysis Methodology:
The report begins with a historical overview of the automotive industry. This is followed by an analysis of the industry's structural characteristics using Porter's 5 Forces Model as a framework, which provides an understanding of the automotive industry as a whole in its current state. Next, ten representative companies of varying sizes are analyzed and compared; the chosen companies and selection criteria follow. General Motors, Ford, and Toyota were chosen because they are the current market leaders. DaimlerChrysler, Nissan, Volkswagen, and Honda were chosen because of their status as stable international companies who have been in the automobile business for many years. Hyundai, Maruti Udyog, and Shanghai Automotive Industry Corp., based in Korea, India, and China, respectively, were chosen based on their growth potential and their status as relatively new to the industry. These ten companies are analyzed in terms of their market position, their financial situation, and their management strategy. Where useful, specific statistics have been incorporated into the analysis including: market share, return on equity, return on sales, revenues, net expenses, net income, market value added, number of brands, number of models, debt rating, and debt ratio. The examination of the industry as a whole and of some of the major players in the industry provides a good framework within which insightful conclusions can be derived about the current state and future of the automotive industry. Major Findings and Conclusions:
In the conclusions section, we identify and describe attributes of successful companies including: production efficiency, well-planned cost structures, manageable size, distributed management of brands, attention to underserved markets, focused strategy, and well-respected brands and products. We then move from specific company attributes to identifying key trends in the automotive industry as a whole including: international expansion, conglomeration in mature markets, distributed competition in new markets, increased environmental regulation, increased energy constraints, and increased operational efficiency. Using these trends, we predict where the industry is headed and how it will evolve to meet new challenges.
The report concludes with the recommendation section, which provides a prediction of the near-future success of each of the analyzed companies. The outlook is not great for any of the four well-established, Euro-American companies considered in this report: DaimlerChrysler, Ford, General Motors, and Volkswagen. Of these companies, we conclude that DaimlerChrysler seems to be holding up the best. The future looks much more promising for the four Asian companies with international market reach that were studied: Honda, Hyundai, Nissan, and Toyota. Toyota stands out as being best positioned for success in the near future, while Honda will most likely continue to be successful on a smaller scale. And although currently successful, it is much more difficult to predict the future success of Maruti Udyog and Shanghai Automotive...
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