Topic: Toyota 'losing its shine', says The Economist

[vdk]

Good responses, Demo and John, thanks.  While my question was intended as a purely hypothetical situation, I'm sure you'd agree that if GM had stepped up efforts of constantly improving their product offerings, efficiencies and profitability over the years, the loss of market share wouldn't have been anywhere near the magnitude it has been.

And that was their main problem. Other brands improved their cars in terms of quality, reliability etc. while GM fell behind. It takes a while for people to realize this and switch but in the end they do. Just take a look at the Cobalt and the Civic. How can you have 50% market share with cars like that? If GM had made cars that would compete effectively with the Japanese I don't see why they couldn't retain a large market share.

[G35X]

“…but in theory, why couldn't it have been possible for GM to keep 50% of the market? “ – Giant Dwarf

Yes, it could have.  Ever heard of the Lanchester’s power laws? Frederick W. Lanchester is no stranger to the automotive engineering.  But, his foremost contribution to business in general is his theorization of what makes winners and losers in a combat or war. Books about his theory have long been a “must read” for Japanese businessmen (and possibly Korean counterparts, too) and they are following Lanchester’s teaching by the letters.

In mass marketing if you have more than 40% of the market and there are several competitors, you own the market and you can keep that position unless you commit a fatal error, which GM did.  If you are a small company faced with the giant, you must localize and specialize your warfare as VW did more than 50 years ago in North America. If you are the giant faced with the localized or specialized challenge, you must crush it with all the might as soon as the challenge appears.  Unfortunately, GM ignored the challenges made by VW’s and Toyotas in the small-size, low-cost segment of the market.  Arrogance and ignorance are deadly combination.

If the giant knows the game and tries to crush you, then the small guy must move the playing field to someplace else.  Eastman Kodak owned the photography film market.  Polaroid monopolized the instant photography market.  So, Fuji came up with the digital camera. Even though Eastman Kodak originally developed the concept, possibly it did not make it to the market sooner for it could destroy its lucrative film business.  While the big guy is thinking that he is the champion of boxing, the small guy must move the ring to the sumo wrestling.

[johngenx]

If the giant knows the game and tries to crush you, then the small guy must move the playing field to someplace else.  Eastman Kodak owned the photography film market.  Polaroid monopolized the instant photography market.  So, Fuji came up with the digital camera. Even though Eastman Kodak originally developed the concept, possibly it did not make it to the market sooner for it could destroy its lucrative film business.  While the big guy is thinking that he is the champion of boxing, the small guy must move the ring to the sumo wrestling.

And in some ways, this is what they did.  The Prius is in some ways the digital camera.  The Civic and Corolla were products that no one at the Big Three even envisioned.  They didn't even really think of them as cars!

Now, without anti-trust laws and regulation to ensure competition, a large player can not only keep a 50%+ market share, but eventually create a monopoly.  They do this by using their supplier chain to keep resources away from other firms, predatory pricing to eliminate upstarts and other strategies.  The only thing that might end up killing them off is their inability to see the future.

Firms that lose are those that think "drill bits."  Suppose we have a company that makes drill bits.  Hell, we make the best drill bits, and can sell them for less than anyone else.  Sounds great, eh?  However, no one needs a drill bit.  Your customers need holes.

If someone comes along and markets a better, cheaper way to make holes, well, drill bits are done for.

Newprint edition news.

Film.

and so on.

[rrocket]

And in some ways, this is what they did.  The Prius is in some ways the digital camera.  The Civic and Corolla were products that no one at the Big Three even envisioned.  They didn't even really think of them as cars!

Indeed.  In this months Motor Trend, there's a brief blurb about an interview that one of the writer's did with a Ford Exec in the early 90's.  He asked the exec about the growth of imports sales, particularly in California and the exec basically said it was an anomaly and it would soon pass.  Talk about being clueless, eh?

[safristi]

..yeah all the rest of us had CRYSTAL BALLS.......................... ...U of course foresaw.......ALL........................A(WINDSOR).....Q?..."What is an EMPTY SHELL CALLED?"...............

[Thinking Out Loud]

Good responses, Demo and John, thanks.  While my question was intended as a purely hypothetical situation, I'm sure you'd agree that if GM had stepped up efforts of constantly improving their product offerings, efficiencies and profitability over the years, the loss of market share wouldn't have been anywhere near the magnitude it has been.

And that was their main problem. Other brands improved their cars in terms of quality, reliability etc. while GM fell behind. It takes a while for people to realize this and switch but in the end they do. Just take a look at the Cobalt and the Civic. How can you have 50% market share with cars like that? If GM had made cars that would compete effectively with the Japanese I don't see why they couldn't retain a large market share.

Most of GM's small car offerings were infrequently redone relative to their Japanese counterparts:

Original Cavalier 1982-1994 (1988 saw a refresh)
First redesigned Cavalier 1995-2005

23 years and essentially only two, ground-up, new models.  That's, like, four brand new vehicle cycles in Japanese auto design.  And the Cav was never cutting edge in terms of reliability or design for that matter...but it serviced its purpose well as cheap transporation for the masses - not a Corolla beater.

[Erik]

And lets not forget that the Japanese having the huge advantage of developing their industry with a closed market. After GM and Ford were asked to leave the Japanese market in the 50's, the Japanese effectively closed the market for the next forty years for everything but Japanese manufacturers, while selling all they wanted to into the US market to (some will argue that they still use non-tariff barriers to limit access to their market, but we won't go there now.) . Gm also was wildly successful until well into the 80's, and it is hard to go against decades of success.

The beginning of the end of GM was definitely Roger Smiths disastrous reorg in the mid 80's. Twp fuel crises hurt, and them one bonehead beancounter did the worst damage of all.

[mmret]

John Ralston Saul defines The Economist as a "magazine which hides the names of the journalists who write its articles in order to create the illusion that they dispense disinterested truth rather than opinion

I had to stop reading their drivel. Its just too blatantly judgmental these days.

But why, you ask? The Economist or any other "news" magazine for that matter is not really interested in truth. They are interested in whatever sells. Sadly this often comes down to "pick a demographic and push really, really hard"

[johngenx]

As an economist (though not practicing, as I finally perfected it    ) I used to read The Economist for a laugh.  True, it makes no real attempt to being a journal for peer reviewed work, but the title and the print and the entire thing is set up for laypeople to think it's really academic and smart and blah blah blah.

That said, sometimes the articles are on the money, but even a broken clock is right twice per day.

[mmret]

As an economist (though not practicing, as I finally perfected it    ) I used to read The Economist for a laugh.  True, it makes no real attempt to being a journal for peer reviewed work, but the title and the print and the entire thing is set up for laypeople to think it's really academic and smart and blah blah blah.

That said, sometimes the articles are on the money, but even a broken clock is right twice per day.

Thus leading to said people assuming their IQ just shot up 30 points by reading it, which they promptly show off to their friends.

See that kid in starbucks with the Macbook and no job? That's your future Economist "correspondent".

Surely such a menacing scourge must be put down. The dystopian situation of a world run by pseudo-intellectuals all thinking thoughts identical to those found on The Economist's glossy paper is not a far fetched outcome. Most worryingly, perhaps, is not what these pseudo-intellectuals think they know, but what they do not know that they do not know. The stakes could hardly be higher.