Health Care Course PaperEssay Preview: Health Care Course PaperReport this essayThe automobile industry has been plagued with high costs, low profit margins, and accelerating competition for many years and, with recent emphasis on global climate change, now has increasing pressure to make the right decisions in many areas, including R&D and manufacturing. (Schwarz, 2008) The cost of energy and raw materials continue to increase due to global demand, fluctuations in exchange and interest rates pose another challenge and are difficult and costly to the industry, as well as the growing demand for the insertion of high-tech equipment. (Schwarz, 2008) The recent trends and challenges include external factors, customer, competition and the industry itself. (Schwarz, 2008) The critical elements for automotive makers to stay competitive in the seemingly volatile markets are low cost production locations, and ongoing upgrades to meet the customer demand.
Energy and raw materials costs are the current highest cost drivers for the automobile industry. The energy crisis has had a toll on automotive makers; with rising fuel costs the demand for more fuel efficient vehicles has affected sales leading to the excess inventory for the once popular, sport utility vehicle, which is now undesirable to the consumer. The cost of automotive raw materials such as steel, resins, rubber, copper and aluminum are rising, typically 10 to 20 percent from a year ago. (HMH, 2011). According to the survey of 110 suppliers, rubber and plastic resins appear to be costing suppliers the most headaches, rubber and plastic prices rose 11 to 20 percent this year, and 25 to 38 percent suppliers reported price increases greater than 20 percent for both. (HMH, 2011) Steel, aluminum and copper prices also rose significantly, but many suppliers say automakers are indexing those materials. Not so with rubber and plastics. With indexing, automakers pay suppliers more for parts if raw materials raise suppliers production costs. Automakers pay less if the price of raw materials drops. Kim Korth IRN president states that automakers are generally willing to index a given raw material if they can monitor price fluctuations through public price exchange, or benchmark, which do not exist for rubber and resins. (HMH, 2011). In the past the Detroit “Big 3” were noticeably reluctant to index, but recent studies show Ford Motor Co. and Toyota Motor Company are significantly more willing to index materials than their rivals.
The current trends as indicated in the diagram below highlight the global challenges to the automotive industry. Based on these Challenges the eight major trends affecting the automotive makers can be evaluated. The demand for cars is growing, stemming in large part from China, India and Eastern Europe (Schwarz, 2008) and the demand for increased tech savvy equipment as well while the leaders across the United States, Western Europe and Japan stay balanced or flat lined. Growth is lopsided, thus materials go up in price and more makers must reconsider how to purchase raw materials at the best cost. Legislation for more energy efficient cars also has placed added burdens in manufacturers especially because new technology costs more in turn driving up costs but the demand by the consumer is not the same. Even though people want fuel efficiency, at times to cost seems a tad exorbitant.
Competition has been fierce especially from Asian markets and a few other countries to include the South African automotive industry as they continue to explore the global marker. Not only are they exploring but they are winning the loyalties of buyers as they willingly offer the tiny perks that many are seeking. These companies may have found the winning formula in such that they are not concerned with the cost but with the end result and market value of the product. Toyotas globalization and localizing manufacturing states the following “no matter where Toyota vehicles are made, they must have the same high level quality” (Toyota Global Vision, 1995-2012). Industry is the final big trend and Toyota demonstrates the focus on alliances and partnerships in the US and other countries, using local suppliers, employing the standard that vehicles should be produced
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Toyotas Global Vision, 1995-2012, Toyota’s global brand image has been embraced by automakers and consumers everywhere, but is being underappreciated by car consumers and consumers of other markets who are in increasingly short supply of the product and may not know about the company because Toyota has not fully established the standards and the production standards. The company’s current stock price is high in both Asia & North America (10% or better), and there are few or no competitors for Toyota, despite strong demand from some European & North American automakers. Toyota also had strong support from the Japanese Toyota Consumer Product & Services (KCSO), including with the Japanese Toyota Product Marketing Association (KSPIA), as well as Honda (HSI) and Toyota, leading the way in improving the products in their own markets. Toyota is trying to show their market value, but it has faced increasing pressure from suppliers in other markets.
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The Japanese firm is in trouble both of being a small employer (it needs around 2,000 workers and one main production plant in rural Kyushu that imports only the tires), and as a big, multinational manufacturer. The number of workers that Toyota employs in China is just 4,640—about one third of that for the Japanese. Toyota’s exports of cigarettes to Europe (20,700 to the US and 15,000 to Germany) account for about 4% of its total gross merchandise sales, but Toyota has experienced a number of crises over the years, primarily related to lack of business, but also to a variety of other factors. In 2004, the company reported that it had fallen just short in sales of 1,000 cigarettes to Japan, but continued to bring in $25 million in sales tax each year—including that from the European countries. It was eventually forced to admit that it had lost the marketing market for it as well as the public-interest litigation with the US Department of Justice brought by the plaintiffs.
In April 1997, Toyota announced a partnership with the Japanese automaker which was intended to open another chapter and establish the Toyota Manufacturing Institute in China. According to the company, the initiative would provide a “new pathway to reach a commercial relationship” between the two companies, one with a new level of global involvement for the plant and one with a more focused Toyota focus. In January 1998, according to Toyota’s official website, “a new emphasis has been placed on working to maintain competitive levels of productivity and competition through a highly effective manufacturing operation.”
In September 1998, Toyota began to introduce a new fuel and diesel system developed by the Japanese company under the leadership of Professor Shinomi Yokoyama. The new system was initially called “Toyotas Japan Fuel and Diesel.” Originally based at the Yokoyama Plant in Kanagawa prefecture, it replaced the current tank-driven diesel engine and replaced the existing transmission. Production of fuel and diesel vehicles in Japan began in October 1998.
In January 1999 Toyota bought 20,000 Toyota Prius-powered vehicles from China’s Dongguan & Hubei Toyota Power Plant . Toyota Power installed more of the plant’s 5,000-liter six-cylinder engine for passenger-only vehicles. In February 1999, the company bought 10,000 Toyota Celica engines for a fleet of 25,800 vehicles from China manufacturer, BAFS. Toyota’s new Power Plant began operations in February 2000, with a total of 45,000