The Downslide of the American Auto Industry - Essay Example

Management of Processes This topic illustrates how management of processes can help organizations to achieve competitive advantage. It discusses a case study of the troubled American auto industry. The case study clearly brings out the primary cause for the auto industry's downslide, which is the lack of proper business management process. As against this is the success of the Japanese auto giant, Toyota. Thereafter is a discussion on the "B200: Understanding Business Behavior" concept. The downslide of the American auto industry The U.S. auto industry ruled the country's economy and shaped its development for several decades. General Motors, Ford, and Chrysler created a huge number of jobs, while also influencing the country's culture and social life. However, the pressure of globalization and foreign competition had a big impact on the revenues of these companies (Emmons, Garry 2006). Lack of vision, corporate bureaucracy, bloated product lines or overcapacity, and lack of proper business management process started pulling down the sales of the American auto majors. Toyota - a success story Where the American auto companies lost, The Japanese auto major - Toyota - gained. Toyota acquired a significant market share by exporting attractive, low-cost, fuel-efficient vehicles to America. The Japanese auto giant achieved this by focusing on refreshing their products and having the flexibility in their factories. It stressed on the importance of lean manufacturing process and evolved the Toyota Production System (TPS). The company prefers to customize existing systems and equipment rather than installing the latest fancy technology. Their plants are in a state of continual improvement and repurposing, with input from everybody. Toyota uses technology not only in the manufacturing process, but also in engineering and designing. The objective of the 14 Principles of the Toyota Way is to base management decisions on a philosophical sense of purpose and think long term, to have a process for solving problems, to add value to the organization by developing its people, and to recognize that continuously solving root problems drives organizational learning (Liker, J. 2004). Behind Toyota's assembly line are sophisticated information systems supporting and enabling the business processes that help the automaker eliminate waste, limit inventory buildup and continually improve production. The main idea behind this business process management [BPM] is to blend machine-to-machine and human-to-machine connections to improve efficiency. What drives Toyota is its presumption of imperfection. The management encourages its work force to design and implement processes that help in getting it right the first time by reducing errors. It stress on continuous improvement and a pervasive lack of complacency with whatever was accomplished yesterday. B200 - Understanding Business: Processes Business organizations are considered as complex assemblies of interrelated sets of activities in which inputs are converted into outputs. This section helps us understand how business organizations apply the systems theory to perform their activities. It focuses on the importance of processes, and the resources that are needed for organizational success. Business management is now a systematic, methodical process that guarantees efficiency and effectiveness. Dr. Fahad Al Mekrad has discussed this topic at length in one of his works (B200 - Understanding Business: Processes). Transformation Process Model Organizations perform as systems and all parts the organization are operations. Organizations can either be 'closed or 'open' systems. Closed systems are completely self-supporting, while open systems interact with their environment. Open systems receive inputs from their environment, convert these inputs into outputs, and discharge their outputs into their environment. All operations are based on this input-transformation-output model. Competing on Capabilities The building blocks of corporate strategy are not products and markets, but business processes. Competitive success depends on transforming the company's key processes into strategic capabilities that consistently offer superior value to the customer. Organizations can prepare themselves for competition by shifting strategic framework to achieve aggressive goals and organizing around the chosen capability. Value Chain and Competitive Advantage A value chain is string of companies or departments working together to meet the demands of a product. Every value activity uses purchased inputs, human resources, and some form of technology to perform its function. Each value activity also uses and creates information, such as buyer data, performance parameters, and product failure statistics. Marketing in a Changing World Marketing is an activity directed at satisfying needs and wants through an exchange process. Marketing includes activities such as market research, product development, distribution, pricing, advertising, personal selling and others, designed to sense, serve, and satisfy consumer needs and also achieve organizational objectives. Relationship Marketing: Marketing is not just about developing, selling, and delivering products. It involves the development and maintenance of mutually satisfying long-term relationships with customers. Long lasting relationships with customers cannot be duplicated by competitors, and therefore offer a unique and sustained competitive advantage. Customer Processing Operation Framework Quality Strategy is a set of plans and policies to harness operations and resources to meet the customer's expectations and its purpose is to offer the business with a distinct advantage in the market place. A service operation could be considered as a customer processing operation (CPO). The CPO framework identifies the significant points and activities for the customer, before, during and after the service delivery system. Each point on the CPO framework has an impact upon the development of customer expectations and perceptions and thus identifies the factors that influence the provision of service quality. Logistics and Competitive Strategy The secret of success is a simple model based around the triangular linkage of the company, its Customers and its Competitors. The following figure illustrates the three way relationships (Source: Ohmase, K, The mind of the strategist Penguin Books 1983): Customers Company Competitor This model emphasizes on the ability of the organization to differentiate itself, in the eyes of the customer, from its competition. It enables the organization to operate at a lower cost and hence at greater profit. Business Process Reengineering Business process is a horizontal flow of activities while most business activities are formed into vertical functional groupings. Traditionally, all functions are viewed separately. Business Process Reengineering (BPR) views them as related. Successful processes need coordination. BPR focuses on lean production, time based competition, and Kaizen (continuous improvement). Conclusion When companies invest in setting up business processes and educating their employees in following these processes, they can be rest assured of long-term, rich dividends. Toyota is one good example for implementing such a model. Further to Toyota's success, companies around the world are considering management of processes as serious business to sustain and grow in this tough global market. Business and management organizations around the world are treating this subject with utmost seriousness. A lot of companies have started managing their business by following this prescribed, methodical approach. Works Cited list 1. Emmons, Garry. 2006, American Auto's Troubled Road Available at: http://hbswk.hbs.edu/item/5290.html 2. Liker, J. 2004, The Toyota Way: 14 Management Principles from the World's Greatest Manufacturer, McGraw-Hill. 3. Dr. Fahad Al Mekrad, B200 - Understanding Business: Processes Available at: http://www.arabou.org/Business/B200/chapter_1-12_(processes).doc Read More