GE 2230 Revolution in Global Business
Name: Leung Dick Kei
SID: 53574144
Final project (individual part)
Nowadays, more and more people would like to buy a car and
the demand is increasing in the automotive industry. So many car brands are
cooperating and producing more cars for the customers.
1.
Ways
that organizations shifted the brand cooperation of engaging in global business
over time
The
automotive industry began in the 1890s. US dominated the automotive industry
for the whole decade except 1980, Japan overtook the leading position. US
became the world leader in automotive industry with producing 485,000 out of
606,124 motor vehicles in 1913 (Foner & Garraty, 1991). There were 2000
firms producing vehicles in 1900 in US but only 44 left in 1929. The Europe and
Japan market had the similar situation because of World War I.
There
were several types of engines in the beginning: steam, combustion
and electrical. There were advantages and disadvantages on each of the engines
but the combustion engine beat the other two and became popular. Some pioneers
of automotive industry in US built reliable engine based on combustion.
In
the very beginning, vehicles had limited demand because they were expensive and
time consuming to produce. The vehicles entered the market as a toy for the
rich. Until 1908, Model T is produced by Ford Motor Company which aimed average
family, making it to be the bestselling vehicle of all time and the most famous
in the world. Ford entered the mass market and already sold over million cars
by 1920. At that time, in order to increase demand, Henry Ford did two things.
First, he lowered the price of Model T. He eventually reduced the chassis
assembly line from 12.5 to 1.5 hours, the reduction of time to produce Model T
pushed ahead the reduction of manufacturing cost. Second, in 1914, Ford
introduced “$5 Day” which was doubling the pay rate of factory workers. And he
also reduced the working hours of the workers from nine to eight hours. The
increase of the salary allowed the workers to buy the vehicles they produced,
that increase the sales of Model T greatly. These two critical factors created
the US middle class. This was what Ford do to generate demand in the old days.
Now,
the automotive companies will cooperate to generate demand. Devices, design,
engines, materials, components of vehicles are improving, but those all limited
by technology and financial situation. So, the automotive companies start to
cooperate and do the research and development part together or use the
competitors’ technology to complete the production, in order to cut the
manufacturing cost. Also cooperation can lead to new types of production and
new attempt of the companies. New vehicles with better devices, components and
technology deserves a price on the market and also attract more customers and
create demand.
For
example, BMW and Toyota cooperates and focuses on three dimensions: lithium-ion
batteries for hybrid and pure electric cars, fuel cells and lightweight
technology on the new sports car platform. The cooperation of BMW and Toyota is
the exchange of technology. BMW agreed to supply diesel engines to Toyota and
Toyota shared hybrid technology with BMW in the agreement of memorandum of
understanding in 2011.
Besides,
they are cooperating to produce two mid-size sports cars now: the spawn of
reborn of Z4 of BMW and spawn of new Supra which is based on FT-1 concept of
Toyota. This is the most visible project and it will last until 2020 (). BMW will use extensive
carbon fiber to make the cars as light as possible. Both of the new cars will
use the same rear-wheel drive platform, and the engine will be either a
straight-six engine from BMW or a gasoline-electric hybrid four-cylinder engine
from Toyota, but surely with front-engined layout. The two cars are also using
BMW’s lightweight technology from the development of i3 and i8. The Europe
Executive Vice President of Toyota, Karl Schlicht, said that Toyota needs
sports cars to put energy back into the brand. The two companies also benefit
from each other. Toyota benefits from BMW’s luxury vehicle expertise and
economies of scale, and BMW benefits from Toyota’s expertise in hybrid
technology.
2.
Ways
that global forces and international contexts have influenced or enabled the
history shift to the new way of creating demands in brand cooperation
There
are few global forces and international contexts that influenced the history
shift to the new way of creating demand in brand cooperation: globalization and
technology development.
Globalization
is the inexorable integration of markets, nation states, and technologies to a
degree never witnessed before- in a way that is enabling individuals,
corporations and nation-states to reach around the world farther, faster,
deeper and cheaper than before, the spread of free-market capitalism to
virtually every country in the world (YÜCEL & DAĞDELEN, 2010). “The
Globalization of Markets,” that a global market for uniform products and
services had emerged (Holt, Quelch & Taylor, 2004). Automotive industry is
also changing based on globalization, which affecting all brands and
manufacturers. Automotive companies are cooperating to complete the product
development, which is an integration of markets and technology. Companies can
benefit through cooperation from increasing product variety, enjoying economies
of scale, decreasing manufacturing cost, doing research and development well
and improving technology.
For
example, as mentioned above, the cooperation of BMW and Toyota is because of
globalization. BMW is a German brand and Toyota is a Japanese brand, they
originally are not connected and do not have any relationships. However, under
globalization, they collaborate and develop products together in order to
produce two new products. So they are reaching around the world farther,
faster, deeper and cheaper than before and selling the products all over the
world to create demand.
On
the other hand, new technologies are essential in the industry. In the
automotive industry, new technology is essential and needed to be improved
overtime. Technology is changing with each passing day, companies have to
improve their own technology to maintain their competitiveness. The fastest and
lowest cost way to improve the technology of the products is cooperation with
other brands. As the business partner may have the technology the company
needs, it not, the company can develop the technology with its partner. For
instance, the global hybrid cooperation is a set of hybrid vehicle technology
generated by General Motors, Daimler, Chrysler LLC and BMW. The cooperation is
to develop a set of hardware and software to fulfill the vehicle target needs:
the requirement of the trucks, the performance needs of luxury sedan and the
demand of front-wheel drive. They teamed up and develop this technology so new
products can equip it, so as to create more demand.
3.
Evaluation
of the “paradigm shifts” involved
that have influenced and enabled the historical shift to the new way of
creating demands in brand cooperation
A
paradigm is systematic set of ideas and values, methods and problem fields, as
well as standard solutions that explain the world and inform action. There are
two directions that automotive industry involved in paradigm shifts in brand
cooperation. For manufacturers, the competitors become business partners and
benefit from each other. For sellers’ strategic response,
there are originally few types of products, the products quality improves and
increases the product variety.
For
manufacturers, those who are competitors originally become a business partner. In
the beginning, the manufacturers in automotive industry are all competitors.
All of the companies only design the vehicles of their brands and do not think
of cooperate with the others. All of the companies only produce their own
products and sell to customers. Nevertheless, the technology improved overtime,
companies had to pursue the new technology used in the vehicles. If the
competitors develop some technology the company does not have, then the company
is already losing a lot of customers because people like pursuing new things
and new trends. People will pursue things that new release and the trend to be
more trendy and fashionable. So the technology of the vehicles are important in
the automotive industry. Later on, when companies discovered that they could
not use the same technology in every products and had a high research and
development cost, people started to think about cooperation. The competitors
will become business partners of the company and reduces direct competition.
Companies have agreements and produce the vehicles together. So for the
manufacturers, the paradigm shift influences them and create demand in brand
cooperation.
For
sellers’ strategic response, originally there are few types of products, but
then the products quality improves and also increase the product variety.
Before the cooperation of the brands, there are only few products of the
companies because they cannot produce a lot of vehicles at one time. Designing
and producing vehicles is a very time consuming activity, also costs a lot.
Companies are also limited by technology and materials. Afterwards, when a
company cooperate with another and become business partners, they can design
and produce cars together. They can share the technology, and improves the
vehicle’s quality. Also, they cooperate and produce the vehicles together can
increase the variety of the products because companies do not limited by
current technology and resources. So for the sellers’ strategic response, the
paradigm shift influences the sellers and create demand in brand cooperation.
4.
Evaluation
the costs of consumerism due to this new way of creating demands on various
spheres of human existence
Consumer
culture is a system in which consumption, a set of behaviors found in all times
and places, is dominated by the consumption of commercial products. It is also
a system in which the transmission of existing cultural values, norms and
customary ways of doing things from generation to generation “is largely
understood to be carried out through the exercise of free personal choice in
the private sphere of everyday life.” (Sheth & Maholtra) The consumerism is
affecting the automotive industry a lot. Under consumerism, people consumes
vehicles for many quantities for various reasons: lifestyle, practical use,
enjoyment… They select vehicles not only for devices and equipment, but also
consider emission of pollution, appearance, comfort, etc. This lead to a great
demand and also automotive companies have to produce various products to
correspond to their preference. So more companies have to cooperate with each
other in order to produce more vehicles. The key to global brand success is to
win at the local level while realizing the advantages offered by global scale (Chadwick,
2009).
In
the society, people have high cost of consumerism in the automotive industry because
vehicles are expensive. Under consumerism, lot of people want to have their own
car and travel to anywhere they want, they also think that they have to own a
car. Vehicles were luxury goods in the past, but now people are purchasing and
consuming with large quantities. Plenty of companies tend to produce entry
level vehicles in order to attract middle class people, those vehicle are
mainly for practical use. The society is changing and let people to consume
more vehicles, government is implementing lots of law to protect the consumers
and the automotive companies in this dimension.
For
the consumers, more and more people consider to buy a car. They have different
preferences and requirements for the vehicles. For example, engines,
horsepower, material used for the whole car, appearance, spaces inside the car,
function, size, devices, price, etc. Marketers need to understand how their
brand is meeting the needs of customers and how successful their marketing
efforts are in individual countries (Kotler, 2009). So the cooperation of
brands try to fulfill the above requirements and let consumers to choose their
favor.
Reference
Automobiles
– Facts & Summary – HISTORY.com, Eric Foner and John A. Garraty, 1991: http://www.history.com/topics/automobiles
Ford
Motor Company Official Global Corporate Homepage | Ford.com: http://corporate.ford.com/homepage.html
BMW,
Toyota Push Development of Midsize Sports Car, Elisabeth Behrmann and Craig
Trudell, Nov 6, 2014: http://www.bloomberg.com/news/2014-11-06/bmw-toyota-push-development-of-midsize-sports-car.html
BMW and Toyota move forward with
new sports car, Ronan Glon, Nov 8, 2014: http://www.digitaltrends.com/cars/bmw-toyota-move-forward-new-sports-car/
BMW
to launch hybrid sports car with Toyota, Greg Kable, Mar 24, 2014: http://www.autocar.co.uk/car-news/geneva-motor-show/bmw-launch-hybrid-sports-car-toyota
Readings:
Week2:
Identity and the Forces of Globalization
Week3: Globalization of markets,
marketing ethics and social responsibility, Recep YÜCEL & Osman DAĞDELEN,
2010
Week4: THE GLOCAL STRATEGY OF
GLOBAL BRANDS, DUMITRESCU Luigi & VINEREAN Simona
Week5: How Global Brands Compete,
Douglas B. Holt, John A. Quelch, and Earl L. Taylor
Week5: Global Brands, Local
Cultures, Simon Chadwick
Week7: Consumer Culture, Jagdish
Sheth and Naresh Maholtra
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