1.0 Background of Honda and Toyota Company
Honda Motor Company, Ltd is a Japanese multinational corporation primarily known as a manufacturer of automobiles and motorcycles. Honda Motor Company, Ltd was founded 24 September 1984 by Soichiro Honda and Takeo Fujisawa. Honda is headquartered in Minato, Tokyo, Japan. Their shares trade on the Tokyo Stock Exchange and the New York Stock Exchange, as well as exchanges in Osaka, Nagoya, Sapporo, Kyoto, Fukuoka, London, Paris and Switzerland. The Civic is a line of compact cars developed and manufactured by Honda. In North America, the Civic is the second-longest continuously running nameplate from a Japanese manufacturer; only its perennial rival, the Toyota Corolla, introduced in 1968, has been in production longer. The main competitor of Honda Motor Company is Toyota Motor Corporation or we usually call it Toyota. Toyota company was founded by Kiichiro Toyoda in 1937 to create automobiles. Toyota Motor Corporation headquartered is in Toyota City, Aichi and in Tokyo. Cost leadership strategy is very important for both company to keep their prices low and lower cost than the competitor.
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2.0 Cost Leadership Strategy
A cost leadership strategy was founded by Micheal Porter, and it is based on the concept that can produce and market a good quality product or service at a lower cost than the competitors. For example these low costs of Toyota Motor Corporation should translate to profit margins that are higher than the industry average. Some of the conditions that should exist to support a cost leadership strategy include an on-going availability of operating capital control, good process engineering skills, management of labor and low cost distribution.
The appendix 1 profit margin growth by Toyota Campany
3.0 Operating Capital Control
Operating capital control is an analysis of the factors that will influence the costs of production. The management skills, availability of personnel and compatibility of manufacturing resources is very important for operating capital control. The Toyota Motor Corporation is always consider their marketing strength and access to low cost materials and effective production by defer to the availability of adequate operating capital. Toyota Motor Corporation use “pull” systems to avoid overproduction and level out the workload. A common theme across the companies that base their strategy around low cost leadership is supplier relationships. In other words they have sufficient control over in-bound supplies and logistics. Their cost effectiveness starts from the premises of their suppliers. This is very important as major costs are incurred in the inbound supply chain.
4.0 Good Process Engineering Skill
Good process engineering skill is important for a company to avoid the extra cost. For example Toyota Motor Corporation standardized tasks are the foundation for continuous improvement and employee empowerment. And use only reliable, thoroughly tested technology that serves the people and processes. The leaders who thoroughly understand the relevant technologies and are able to perform the tasks will teach and share with others. Furthermore they are always introduce the problems such as unavailability of materials and poor quality control.
5.0 Management of Labor
Management of labor is needed for cost leadership strategy, it include the effectiveness of the company infrastructure in terms of organization, recruiting capabilities, employee benefit programs, customer support facilities and logistical capabilities. Toyota Motor Corporation make decisions slowly by consensus, thoroughly considering all options and implement decisions rapidly. Furthermore freedom is given to management team to make critical business decisions without undue influence from distributors, suppliers, unions, creditors, investors and other outside influences. They also develop exceptional people and teams who follow the Toyota company philosophy and become a learning organization through relentless reflection and continuous improvement.
6.0 Low Cost Distribution
Low cost distribution method must be select by company to get the offering into the hands of the customer. These include direct sales involves the sale of offering using a direct, in-house sales organization that does all selling through the Internet, telephone or mail order contact.
Wholesale Sales involves the sale of using intermediaries or middle-men to distribute the product or service to the retailers. Toyota and Honda company set up a lot of outlet in many country. The outlet not only sell and display the newest car sample, the outlet also provide service and repair the vehicle beside the outlet. This will save a lot of money form just build a outlet to sell the car and build another service centre to service the vehicle.
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In conclusion low cost strategy is centered on the capability of the company to produce and deliver products of competitive quality at lowest competitive price. Both of Honda Motor Company and Toyota Motor Corporation are success by following cost leadership strategy and maintain the aim to lower the product cost, beside that they also create value for customers. Lead the customer confident with the company product and make the company name very well known. Better way to strategically position a company on the advantage of cost is to increase market share by transforming from lowest cost producer to lowest cost supplier of products. This way the company translates its cost advantage into price advantage for its customers and thereby improves the market share. Both of Honda Motor Company and Toyota Motor Corporation have a very experience and excellent company structure and management team to operate the company well. In my opinion not only Toyota and Honda company, for all the organization a well cost leadership strategy is very important, the manager of company must measure that the cost leadership strategy must be run well and follow by the employee, then only they can survive in this competitive world now day and get successful in future.
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