MBA

Accordingly, over 40% of the industry profits were from automotive sales, while the number is forecasted to decrease to 29% by 2030, as new technologies and areas will be the center the industry (Oshikiri & Hanai, 2018). To follow this trend, Toyota also strives to develop new technologies. In addition to the innovation of new technologies, in the automotive industry, the key success factors also include flexibility, exportation, efficiency, cost control, and optimized resource utilization (Morea, 2017).

Competitive Strategy

Basically, the generic strategy the company applies that determines its general approach in the automotive industry is the combination of cost leadership and broad differentiation (Thompson, 2017).

By using cost leadership strategy, the company minimizes the operation cost. The company always makes efforts to improve the efficiency and speed of production while keeping high quality to satisfy customers. These efforts are the well-known Toyota Production System (TPS), which comprises Just in Time and Jidoka (automation with a human touch) (Toyota, 2018). TPS tremendously eliminates waste, improves efficiency, and ultimately reduces cost. It enables the company to have more resources to pursue higher profitability and more KAIZEN (improvement), which is one of the keywords of the company's principles. Subsequently, it has tremendously strengthened the company’s competitive advantage, enhanced brand image, and given the company a leader position in the automotive industry.

By using differentiation strategy, the company keeps improving its business and product

uniqueness. For Toyota, differentiation is closely related to innovation, which is the blood of the

company and helps to provide unique and attractive products. The recent innovation is that the company is using Connected Technologies to create a connected platform which enables the collaboration of various industries and companies to provide new mobility services (Toyota, 2018). The company also strives to innovate automated driving technology (Toyota, 2018).

Besides the generic strategy, the company also applies other intensive strategies to boost its growth and enhance competitive advantages in the current market.

Toyota has a variety of products and its product strategy is closely related to high quality.

As mentioned above, Toyota provides traditional automotive (Toyota car), high-end automotive (Lexus), automotive parts and accessories, financial services, and other products and services of IT, e-commerce, and housing. In addition to a variety of products, the company is also dedicated to providing high-quality products. This competitive strategy has enabled the company to achieve market penetration and seize more market share.

The keyword of the company’s distribution strategy is the global presence. The company has an extensive distribution network comprises dealerships, retailers, showrooms, e-commerce site and direct selling agents in over 190 countries and regions (Toyota, 2018). In addition, entering the emerging market by exporting low-cost vehicles also creates the company the competitive advantages.

Currently, environmental sustainability is the hot issue in the global market. Making contributions to environmental sustainability now become a company's competitive advantage and selling point. Toyota also follows this trend to enhance its positive brand image and brand value. The company has launched Toyota Environmental Challenge 2050 in 2015 (Toyota, 2018). The company also claims “Respect for the Planet” as its core value and environmental sustainability strategy (Toyota, 2018). Directed by this strategy, the company began its promotion of electrification and has boosted the production and sale of electric or hybrid vehicles.

Recommendation

Generally, Toyota should strive to keep competitive in the industry to withstand the intense competition and focus on satisfying customers since they have strong power in this industry.

In addition to exporting low-cost vehicles to emerging market, Toyota can also export high-end vehicles and introduce high technologies to those promising markets. It will help the company to nurture its great customers, create customer loyalty in emerging countries, boost local automotive industry development and economic development, and furthermore, help the company to become the strategic leader in the automotive industry of those countries.

The author has noticed that most key employees of the company are Japanese. In order to support a solid global management, the company needs to enhance the diversity in its workplace and nurture new blood worldwide.

Toyota is also recommended to seek new development in terms of environmental sustainability by providing new green technology and transportation ways while keeping the high quality and function.

Tesla, Inc.

Company Profile

Tesla was founded in 2003 in Silicon Valley and now has become the leading electric vehicle manufacturer under the direction of Elon Musk and headquartered in Palo Alto, California (Tesla, 2018). The company has business in North America, Europe and Asia (MarketLine, 2018).

Generally, Tesla operates in two segments: Automotive; and Energy Generation and Storage (MarketLine, 2018). Automotive segment is the company’s mainstay segment, in which the company designs, manufactures and sells electric vehicles, related after-sale services. Currently, the company has launched three categories of products: Model S, Model X, and Model 3; and a new product Roadster that waiting to be launched (Tesla,2018). Energy Generation and Storage segment include the design, manufacture, sale and other related services of energy generation and storage products.

In 2017, the company was reported to climb to the most valuable automotive manufacturer in the U.S. (Richter, 2017). For the fiscal year ended December 2017, the company is reported to have a revenue of USD11,758 million, an increase of approximately 68% in fiscal year 2016 (MarketLine, 2018).

The major competitors of Tesla include Audi AG, Nissan, Toyota, Daimler AG, Honda, Porsche, Ford and Volkswagen (MarketLine, 2018).


The company aims to provide environmentally friendly, durable and high-quality electric vehicles and claims its mission as to achieve sustainable energy transition (Tesla, 2018).

Industry Strategy

Porter’s Five Forces analysis

Competition in the industry: High

Generally, Tesla is facing an intense competition (Kissinger, 2018). Even Tesla only focuses on the manufacture of EV, the company still competes with other traditional automotive companies as well as hybrid vehicle manufacturers, since the EV industry is only a branch of whole automotive industry. The competition will be more intense when traditional automotive manufacturers begin to manufacture EVs. Tesla has to keep its competitive advantage to withstand the increasingly intense competition.

Power of suppliers: High

There are many suppliers in the EV (electric vehicle) industry. However, the EV manufacturers still struggle to get electric components that meet their needs, especially for a company like Tesla, who requires premium materials and advanced technology. Even those suppliers have limited control of forward integration, they are still in a position to raise the price.

Power of customers: Moderate

Low switching cost and many available alternatives have contributed to increasing power of customers (Kissinger, 2018). However, the number of EVs especially high-end EVs is limited. Hence, to some extent, it has weakened the power of customers who have specific needs.

Threat of substitute products: Moderate

Similar to Toyota’s case mentioned above, the threat of substitute products for Tesla is moderate. It is of the low switch cost and ease for customers choosing substitutes including public transportation, bicycles, motorcycles and other transportation ways (Kissinger, 2018). However, convenience may be sacrificed to choose those currently available transportation ways. While gas-powered vehicles are less environmental friendly, Tesla benefits from its advantages.

Threat of new entrants into the industry: Low

Compared to the traditional automotive industry, the EV industry is still young. However, same as the traditional automotive industry, it's not easy for new companies to enter the EV industry because of the requirement of advanced technology, high capital and high cost (Kissinger, 2018). Hence, instead of paying attention to new entrants, Tesla focuses more on competing with existing both traditional automotive and EV manufacturers.

The environmental sustainability is having a more significant impact on both the automotive industry and EV industry. As mentioned above, the new technology will dominate the automotive industry in the future. The company strives to benefit from these trends. On the other hand, as a leading company, also a really unique company in the EV industry, Tesla attracts worldwide attention. Hence, the mass media tends to specially report or exaggerate Tesla’s traffic accidents and lead the public concern to the use of Li battery or its automated driving.

Competitive Strategy

The generic strategy the company applies that determines its general approach in the industry is the broad differentiation (Rowland, 2018). This strategy enables the company to keep product uniqueness and enhance the competitive advantages. Unlike other companies have wide product type, the company only provides limited high-quality products of both EV; and related energy generation and storage. To some extent, it has created the company a professional image in EV manufacture. Moreover, the company has already created a niche market thanks to its Model S (MarketLine, 2018). The products the company provides are great in achieving environmental sustainability. It meets the current social demand while most other companies’ products are unable to do so. In addition, people are thinking that Tesla products are more stylish than other EVs. In order to better serve its customers, Tesla also provide its own charge station while other companies do not have their own charge station (Field, 2018). This has enhanced the company’s competitive advantage in providing better service and uniqueness. The differentiation strategy also has pushed the company to keep innovating new technologies, exploring new areas and figuring out better transportation solutions (Tesla, 2017). For example, the company introduced the technology of solar roof, which enables the roof to turn sunlight into electricity, and has commenced the production (Tesla, 2017). The use of solar roof will better serve its EV users. Since there is no company does the same as Tesla, it will definitely make the company more competitive.

Based on the situation of the current market and in order to enhance competitive advantages, the company also have other intensive strategies.

The company operates particularly carefully in its distribution network. Basically, the company only has direct sale and doesn’t franchise any third-party dealers. Customers will customize and complete their orders on the official website. It enables the company to high control the sale and distribution process to ensures the high quality of both products and services. The direct sale and the official service center have formed “Service Plus”, which describes the company’s another strategy of always providing better service. “Tesla Rangers” is another tool, which works to help customers to review and solve problems online, that enhances the quality of customer services.

Recommendation

Generally, faced with intense competition Tesla should keep working to enhance competitive advantage and focus on providing better products and services to satisfy customers.

Tesla now only has business in limited countries and regions, the author will recommend the company to increase its market presence by entering more regions to boost its growth.

In addition, since the company only operates domestically, the expansion of operation to emerging market is also recommended. It may boost its production since the company suffers from production delay and long waiting time before delivery. Since the labor cost in the emerging market is low, it will alleviate the company’s pressure on employee layoff to improve its finance.

Now, still a lot of people doubt the safety of the battery use in EVs. The dissemination of accident news has aggravated the doubt. Hence, as an EV manufacturer, Tesla needs to continue

its innovation in terms of reinforcing of the battery safety to enhance public confidence.

SpaceX

Company Profile

In addition to Tesla, another unique company Elon Musk directs is SpaceX. SpaceX was founded as a private aerospace technology company headquartered in Hawthorne, CA by Elon Musk in 2002. The company now has more than 6,000 employees (SpaceX, 2018).

Generally, the company operates in the design, manufacture and launch of rockets and spacecraft; and provide space transportation services. Its notable products include Falcon 9, Falcon Heavy, and Dragon Capsules (SpaceX, 2018). The company has located its launch facilities mainly in Florida, California, Texas, Washington, Virginia and DC (SpaceX, 2018).

SpaceX is a company that keeps making history and has a long list of achievement. For example, the company is the first private company to make achievement in launching and returning spacecraft from the orbit and manufacturing commercial spacecraft. Currently, the

company has over USD12 billion value represented on contract (SpaceX, 2018).

The company’s main competitors include United Launch Alliance (ULA), Blue Origin, Orbital ATK, Boeing, Lockheed Martin, and Ariane Group. Besides, China and Russia are two large competitors the company is facing (Mosher, 2018).

The ultimate goal of the company is to enable humans to leave Earth to save humanity through its innovation and revolution in aerospace technology (Seemangal, 2017).

Industry Strategy

Porter’s Five Forces analysis

Competition in the industry: Moderate

There are only a few of players in the aerospace industry. However, all these existing players have strength in aerospace technology and they usually compete for long-term cooperation and contract (Adamkasi, 2017). In addition, the pressure from SpaceX’s low-cost strategy has intensified the competition in the industry. SpaceX will also experience the intense competition in the future. Hence, in general, the competition in the aerospace industry is moderate.

Power of suppliers: Moderate

The number of suppliers in the aerospace industry is not large. Hence, it has given suppliers more power to raise the price (Adamkasi, 2017). Nevertheless, companies always require high quality and technological products from suppliers and provide long-term contract. It has led the suppliers more open to accepting price negotiation. Hence, the power of suppliers in the general aerospace industry is moderate. While SpaceX claims that the company is vertically integrated with its own entire supply chain (Sharma, 2018). It gives SpaceX a stronger position in the industry.

Power of customers: Moderate

Unlike other products, the aerospace products are quite expensive. As a result, the number of customers is limited. Since the number of companies that provide aerospace products is limited, it gives the buyers limited choices. Nevertheless, the customers often provide long-term contract and they always have many requirements (Adamkasi, 2017). Hence, it has strengthened their bargaining power as buyers. To some extent, SpaceX's low-cost strategy has given it more power in negotiating with customers since few companies can offer the same.

Threat of substitute products: Low

Aerospace products are costly and require high-quality materials and technologies. Hence, there is no doubt that a limited number of products can substitute for current aerospace products. In addition, the customers have a clear need when making purchases (Adamkasi, 2017). Hence, the threat of substitute products is low. SpaceX will also benefit from it.

Threat of new entrants into the industry: Low

SpaceX is the new entrant into the aerospace industry. However, still it is not easy for companies to enter this industry, which is on the premise of high capital and advanced technology (Adamkasi, 2017). In addition, the patent limits, the regulation, and geographic factors are other possible barriers.

Competitive Strategy

Generally, SpaceX applies Focus strategy by entering a narrow market; and concentrating on providing products and services to a particular group, normally nations and tycoons since few people can afford or have the needs. SpaceX focuses on designing, manufacturing and launching rockets and spacecraft; and providing space transportation services. SpaceX strives to completely satisfy its customers and ultimately achieve its goal to enable humans to leave Earth to save humanity through its innovation and revolution in aerospace technology. SpaceX is competitive in its narrow market since the competition there is not intense or is moderate at most.

SpaceX also focuses on cost reduction which really enhances its competitive advantages.

In order to achieve cost efficiency, instead of using conventional supply model including outsourcing, the company strives to be vertically integrated by establishing its own entire supply chain to reduce the cost (Sharma, 2018). Another way SpaceX is innovating to reduce cost is to return the launch vehicles from the orbit after launch and fully reuse it (SpaceX, 2018). Being able to reduce cost means the company is able to provide same value products or services at a more competitive price.

Innovation is the blood of SpaceX and accomplishes SpaceX. For example, as stated above, a fully reusable spacecraft is being innovated to reduce cost and to make the history. The company never stops innovation, and it makes the company be competitive in the industry. Now the company keeps exploring to conquer Mars and enable 1 million humans to live on Mars in the near future (Devlin, 2017). Whether it will be achieved or not, being bold to innovate and publicize the goal have already made the company gain public attention to promote itself and obtain customer and inventor’s confidence.

As a private company, SpaceX seeks cooperation with governments to alleviate financial pressure and keep competitive in the market. The company has contracts with the US government and has already launched some covert missions for it (SpaceX, 2018). The company also has a share of over USD22 billion budget for aerospace from Air Force annually (Seemangal, 2017). Now, there is no private company can obtain the same. SpaceX is also asking the deregulation from the government to better develop their great cause.

Recommendation

Although SpaceX is claiming to save humans on earth, the company is now only based in the United States. Hence, in order to seek the development of the company and to accomplish its great cause, the company is recommended to compete for other countries' contracts.

Since the design, manufacture, and launch of spacecraft are costly, especially for a private company. SpaceX is recommended to gain more investment from either nations end or the public to ensure the development of the company.

Since the company already has its own entire supply chain and its own technology, the company is recommended to become suppliers in the aerospace industry. It may help the company make more profit and increase the possibilities for the company to become a strategic leader in the industry.

Even the company is trying to help people escape from the earth, it cannot be achieved until at least decades. Hence, the company still should consider environmental sustainability by providing a more environmental sustainable spacecraft and launch.

Conclusion

The business environment is complicated and changes a lot. Few companies can survive all the time with immutable strategies. Toyota, Tesla and SpaceX all succeed in their industry and they all have strategies that fit their current situation and position. However, the competition will only become more intense in their cases. Hence, all of them should make an adjustment based on the business environment at that time to keep their competitive advantages and build more.

Reference