Lexus and Volvo Company
The car market in Kuwait is still very young. It is just beginning to develop sustainably through marketing activities and marketing research. Kuwait companies, which are operating in the automotive market, are mainly divided into two separate groups: automotive eminent firms and suppliers. Their policy purely relies on a marketing price for the goods sold. Lexus and Volvo are the well-known automobile companies, and their history is very similar. However, Lexus is considered to gain higher productivity. The purpose of the research is to analyze the concepts of strategic management, their evolution, and the study strategies of both companies. The marketing research of the satisfaction level of the end-users of the wholesale cars showed that currently, the automotive market in Kuwait is experiencing an intense competition, where Lexus Company takes a leading place (Dawson 2011). The major aim of this project is to develop the recommendations of how to increase the productivity for both companies, high performing Lexus and low performing Volvo.
Mobile Industry Structure
Jumping oil costs in the mid-2009 had an important impact on the country’s economy. At that time, credit fixing has minimized the monetary development. The Central Bank of Kuwait (CBK) gauged that the nation slid into subsidence with a 2.4% compression (Dawson 2011). As a result, the car segment, which vigorously depends on buyer certainty, took a thump. Merchants have reported that the second-hand auto transactions were more productive than new vehicle segment. While new display deals had dropped by around a half, the utilized machines deals had fallen only by 10-15% (Hodge & Schachter 2006). On the other hand, this pattern may be broken, as purchasers in Kuwait demonstrate an unmistakable preference for new vehicles. As a result, the economy will be restored, driving up buyers’ certainty. However, now the automobile segment experiences a difficult period in Kuwait.
Lexus division is a premium car brand. It is produced by the Japanese company Lexus Motor. The company was originally aimed at the US market. However, nowadays the brand cars are sold in more than 70 countries worldwide. Volvo, on the other hand, is a Swedish company. Nowadays, Volvo is a division of the Ford Motor Company. Thus, two companies have established developed branches. Volvo was founded in 1915. On April 14, 1927, the first production car Jakob OV4 was released (Homler 2008). Lexus Company is considered to be founded in August 1983 (Dawson 2011). Thus, two companies have been founded in almost the same period. They had a similar portion of time for their development. In addition, the concern Volvo brands include Renault Trucks, Mack, Nissan Diesel, Prevost, and Nova Bus (Homler 2008). The origin of the name Lexus often explained as a combination of the words luxury and elegance. Another theory is that Lexus is the acronym for the phrase «luxury exports to the US» (Dawson 2011). However, the team claimed that the Lexus brand`s name has no special meaning and that the word Lexus associates with luxury and technology. When Volvo orients more on the medium class cars, Lexus positions itself as high-class vehicles. Lexus sales in 2009 amounted to 6,400 vehicles. The most public model for Lexus remains the car Lexus RX350 (2178 cars). In addition to the new generation, RX 350 crossover sales leaders were Lexus LX570 (1690 cars) and Lexus RX450h (805 cars) (Dawson 2011). Volvo had one of the largest truck productions in 2002, however, now the data is different (Homler 2008).
Nevertheless, Volvo and Lexus are similar companies in terms of development, branches, and world name. However, Lexus is a more developed company comparing to Volvo.
The key Lexus` strategy aims to satisfy the needs of consumers, eliminating three significant barriers: to low production efficiency, financial losses, deviations from the standard. To continually reduce costs and improve quality in production, Lexus should consistently carry out a number of strategies that will structure the premise for the concept of harmonious production. Lexus implies the involvement of all employees in the process. Innovations spread rapidly across the enterprise. Continuous improvement is a part of the corporate culture. The technology provides Lexus with slim manufacturing quality control at every stage of the process. Now and again, specialists have the privilege to stop the conveyor belts. They are governed by strict regulations. The basic objective is to provide a single template for production and service techniques to minimize damage and other defects in the equipment. Ideally, any defect must be removed before the product enters the next stage of processing (Hodge & Schachter 2006). This reduces the number of expensive improvements and increases the responsibility of employees. The manufacturing management in the company considers the interruption of the production equipment as a loss. The reason is that industrial enterprises have a general system of preventive maintenance. Its purpose is to prevent equipment breakdowns and downtimes. The quality control extends beyond the organization as they also depend on the efficiency of the production process and customer satisfaction. The basic purpose of the joint activities with suppliers is to reduce the costs and the number of parts and assemblies (Hodge & Schachter 2006).
Through close collaboration with suppliers, automakers can pass most of the work related to the development and quality control of components to suppliers. In addition, it can reduce labor costs for their enterprises (Hodge & Schachter 2006). In recent years, Lexus has launched a joint program with suppliers. As a result of the program, the number of steps required to produce the car has reduced. The new program reduces the spending of the company by 30% on all major components of the new models, which was impossible without the direct participation of manufacturers’ accessories (Hoseus & Liker 2008). Initially, Lexus cars aimed at the lower and middle market segments. It was achieved through the control system. The amount of production was clearly dependent on market demand (Dawson 2011). Quality in this firm increased. The production system was constructed to avoid repeating mistakes. It enabled a constant improvement.
Lexus's philosophy preceded long-term development. Furnishing the beginning of the XXI century was intimidating. The problem is that everything was very good. The success was on the rise. Many companies in these circumstances believe that they can rest on their laurels. However, a company that does not understand the crisis and the need to improve continuously can face the disaster. Since the establishment of the company, Lexus and all subsidiaries constantly sought to contribute to the sustainable development of society by producing and offering innovative products of the highest quality. This desire enabled Lexus to develop its own philosophy, values, and management methods. These methods were transferred to the company from generation to generation. The company established a system based on guidelines (Hodge & Schachter 2006):
- Regard the letter and soul of the law of each country, to deal openly and honestly in order to be a worthy corporate citizen of the world.
- Respect the culture and traditions of all nations and to invest in the economic and social development of society.
- Steering effort to manufacture environmentally friendly and safe products, to improve the quality of life throughout the world.
- Develop advanced technologies and offer products and services of the highest quality.
- Develop a corporate culture that encourages personal and collective creativity and promotes respect and mutual trust between ordinary employees and management.
- Collaborate with business partners in research and development in order to ensure sustainable long-term growth and mutual benefits, while at the same time be open to new contacts.
Thus, the key recommendation regarding these aspects is to use a long-term philosophy, basing it on the following principles:
- The choice ought to be made considering the long-term, even if it contradicts the short-term financial interests.
- The continuity of the flow process facilitates the identification of problems.
- Use a hauling system to avoid overproduction.
- Distribute workload evenly.
- Interrupting the production process must become part of the production culture if required quality.
- The established standardized tasks are the basis of continuous improvement and delegation staff.
To conclude, the car industry is very complex, and quality is becoming more important. It is good for Lexus to continue paying attention to quality. Indeed, the concept of lean manufacturing improves the efficiency of the enterprise as a whole and the individual operating units without major capital investment. In particular, the introduction of lean production significantly reduced inventories of raw materials, work in progress, and finished goods, leading to cost reduction. These routines can prompt a critical advancement of the production cycle, reducing the time and number of defects to a minimum. Therefore, the company is able to produce a variety of products in small batches and quickly respond to market demand. The implementation of lean manufacturing helps to maintain high turnover and profitability, and hence increasing the efficiency of the company.
In addition, Lexus ought to:
- continue to undertake purposeful endeavors to fortify its administration and raise corporate value;
- advance business and rapidly react to changing business conditions;
- maintain a streamlined structure through the reduction of altered expenses and improve its business in existing markets;
- accelerate its business venture through entering developing and rising countries, fastidiously checking economic situations in particular locales and presenting items suited to the attributes and needs of every business;
- make manufacturing and distribution channels understand the perfect product suited for the particular market, and improve the quality introducing an extensive variety of cars to the customers;
- consider making Lexus a need in the Chinese market. This will give an opportunity for the company to outperform other auto producers in the luxury car segment;
- remove the center administration, giving designers more power to decide on what a particular client base needs are replied and enabling them to develop new autos;
- seek the improvement of naturally cognizant, vitality - sparing items while joining capacities and administrations requested by clients (quality chain) and conveying them to the worldwide business;
- develop three specialties units, specifically, “arrangements" in the zones of materials taking care of gear, logistics, and material hardware; "key parts" in the fields of auto air - molding compressors and auto hardware; and "mobility" in the spaces of vehicles and motors;
- reconsider consolidated administration on a worldwide scale. Lexus ought to improve the work environment and assorted qualities in the utilization of HR, and endeavor to support worldwide HR;
- implement consistency, including recognition of laws and regulations, and effectively partake in social commitment exercises;
- bolster commercial enterprises and social foundations around the world by persistently supplying items. Moreover, administrations should expect the workers to keep in mind clients' desires as the end goal.
The organization's administration objective is to break the 12% piece of the pie boundary in transit towards 20% and to raise benefits. Volvo has three major strategies (Ewing, 2014):
- Broadening Strategies: Historically, under the initiative of the CEO, Pehr Gyllenhammar, Volvo expanded into a wide range of organizations and turned into a parent company in the mid-1980s. It turned into an inconsequential commercial enterprise, including such services and products as budgetary administrations, transformed nourishment (fish, brew, and so forth.), matches, and pharmaceuticals. Then again, in the mid-1990s, the aggregate strategy was turned around and Volvo refocused on vehicles and hardware. In 2000, Volvo Truck Finance North America was shaped for offering both financing and administration contracts for Volvo trucks (Hoseus & Liker 2008). It helped Volvo to enhance the association with clients and reinforced Volvo reselling exchange business.
- Vertical development methods: The company accomplishes vertical development through regressive coordination. Volvo was completely regressing, creating, and delivering all real commute train parts, including motors and transmissions independently from anyone else. The organization endeavors were focused on accommodating all the parts of the truck (Homler 2008). Concerning forward coordination, the organization appears did not have any control over circulation channels. They dispersed the trucks by the merchant systems.
- Portfolio systems: Since 1999, Volvo gathering was a producer of transport answers for business utilization, including five different business gatherings: trucks, transports, development gear, marine, and modern force frameworks, as well as aviation motors (Hoseus & Liker 2008). Every production line is seen independently as a sub-organization.
Regarding these strategies, the key achievement element for Volvo Trucks is the nature of the items and benefits it provides. Volvo's trucks were known for high dependability, best in class security, and great solace. In any case, Volvo Trucks later decreased expenses, incorporated transactions with its suppliers, which permitted Volvo Trucks to increase the number of benefits and deals (Ewing 2014). Another point is the association with clients. Particularly in the US showcase, the client is imperative, which means for the company that they need to comprehend the inclinations of the client and produce the trucks that meet their uncommon needs.
For Volvo, it is suggested to incorporate three strategic packages. The first one is for the company to decentralize and give more authority to the U.S. division, so they could make decisions according to their knowledge of the market. The second alternative is to focus on what it does best. Volvo should divest the production for the non-essential parts and focus on the engines and other important parts. The third alternative is to stay fully integrated and become a supplier for the assembly companies. This way Volvo can achieve economies of scale and further lower their costs. The second option is the most vital, is the least demanding, and has the best standpoint for the long-run. Through the removal of the superfluous exercises, the organization can center its assets on building up a higher innovation motor and create a stronger brand image if the item is usefulness. Additionally, current clients can be hardly lost due to the predominant client benefit that the organization gives. This will give a win- a circumstance for both the organization and its clients. The organization appreciates better brand image (not simply safe any longer) and better productivity from the motors (accordingly fulfilling its stockholders as well). The clients can appreciate a superior item, which is not provided by any other company.
The company is encouraged to incorporate the second strategy and focusing on what it does best. As the organization is confronting furious rivalry, it needs to act rapidly. In the first vital bundle, it is possible to achieve; however, the outcomes may not be evident in the short-run. For vital bundle 3, it will likewise take a lot of time for Volvo to create a decent relationship and demonstrate its value to the gathering organizations. With vital bundle 2, the organization can rapidly change their operations and focus manufacturing on a couple of parts that are more beneficial, in particular, the motor. Whatever remains of the assembling of the unbeneficial parts, ought to be stripped. The parts can be outsourced and acquired from different organizations. If the company focuses on motors, the level of benefit will increment and the organization will be able to focus on the innovation. As a result, the organization's monetary status can be enhanced in the short-run and have the capacity to secure customer satisfaction and loyalty.