Information technology and competitive advantage in the automobile industry

automobile industry and IT

Automobile Industry & Information Technology

The objective of this work is to discuss how three to five firms in the automobile industry and discuss how these firms utilize information technology for competitive advantage including the use of specific issues such as hardware, networks, software, CRM, ERP, and supply chains. Finally, this work will comment on the relative success or failure of the selected companies.

The work of W.C. Benton and Michael Maloni (2002) entitled "Relationship Performance in the Automotive Supply Chain state that as globalization has increased which has been "ironically driven in part by ITZ, competition has increased at accelerated rates. Increased competition has led to firms focusing more on their core competencies becoming less and less on vertically integration. This focus has led to increased specialization within the firm, which drives the need for firms to outsource more of their non-core functions." (Benton and Maloni, 2002) Benton and Maloni relate that resulting is the requirement that the firm construct a "…more collaborative business relationships with constituencies beyond its formal boundaries." In addition, it is related in the work of Benton and Maloni that information sharing that is closely integrated in information sharing serves to facilitate these relationships. (2002, paraphrased) The increase of competition has resulted in the range of integration experiencing expansion and the resulting critical need for information management. Stated as evidence for the need of information sharing is the "rise MRP, MRP2, CRM, SCM, and ERP…" (Benton and Maloni, 2002)

I. Toyota Company

The Toyota Company was founded in 1937 and has its headquarters in Toyota City, Aichi and Nagoya, Tokyo. The Toyota Company is the largest or all automakers in the world employing approximately 320,808 people and has emerged as the dominant leader in the automobile industry worldwide. The Toyota Company uses information technology and in fact is reported to embrace the use of "acknowledged and sure technology" and maintains its production process "at the highest quality level to ensure that no problem comes out of the product." (Khan, Shah, and Antala, 2010, paraphrased) Information technology is used in the automobile industry for the purpose of reduction of operations costs, establishment of standardized global operational processes, practices, communication and performance management, to improve personnel leverage and training, and to bring about a reduction in operational incidents and to increase the safety of personnel. (Khan, Shah, and Antala, 2010, paraphrased) Information technology manufacturing solutions include such as the 'Just-In-Time Process of Toyota for inventory handling, virtual manufacturing, QC and QA production processes and outsourcing including 1st, 2nd and 3rd tier suppliers. (Khan, Shah, and Antala, 2010, paraphrased) Customer Relationship Management information technology is used in the automobile industry for the purpose of identifying what the customer wants. Khan, Shah, and Antala (2010) write that the supply chain processes and strategies of Toyota "are the fundamentals in its operations. By adhering Just-In-Time manufacturing and Toyota Production System (TPS), Toyota emerges to be one of the world's largest automaker." It is reported as well that Toyota's 'Global Vision 2010 contains three elements include the following: (1) to step beyond 'harmonious growth and demonstrate responsibilities as world leaders; (2) to benefit society through manufacture of value added-products, technological innovation; and (3) to share prosperity with Toyota's employees. It is important according to Khan, Shah, and Antala (2010) to "undertake a paradigm change from the following three perspectives: (1) technology development/product development; (2) management; and (3) profit structures. (Khan, Shah, and Antala, 2010 ) Toyota uses a 'value chain' described as a systematic approach to examining the development of competitive advantage." (Khan, Shah, and Antala, 2010) The primary activities include: (1) inbound logistics; (2) operations; (3) outbound logistics; and (4) service. One of the most important sources of competitive advantage is that of technology because it is necessary that companies innovate "to reduce costs and to protect and sustain competitive advantage." (Khan, Shah, and Antala, 2010) It is reported that Toyota implemented "production technology, internet marketing activities, lean manufacturing, Customer Relationship Management (CRM) and other technological developments.

III. Ford Motor Company

It is reported that Ford Motor Company has a new flexible CNC machine-based process, which can be "retooled and reprogrammed internally, with little or no interruption in production." (Ford.com, 2010) Information technology is used to track automobile parts "along the production path" in what is "one of 1.24 million possible manufacturing paths…" (Ford.co.uk, 2010) In addition, CNC machine standardization has led to efficiencies in reducing the number of spare parts that are inventoried. The Ford Motor Company states that IT is at the "center" of the vision for the future of Ford Motor Company. Specifically stated is that the "internet, e-commerce and social media…are…radically reinventing the automotive industry…" which includes "…leveraging IT on a global basis to enable customers to configure custom Ford vehicles online for purchase, engineers using virtual design and testing capabilities, factories to build cars to order, dealerships to provide real-time customer feedback that can be leveraged to improve manufacturing processes and suppliers to control inventories at Ford factories." (Ford.co.uk, 2010) According to Ford Motor Company, its virtual value chain is comprised by: (1) Visibility -- where businesses co-ordinate, measure and sometimes control business processes; (2) Mirroring capability -- physical steps in the value chain may be substituted with virtual ones to create a parallel value chain in the marketplace. (Ford.co.uk, 2010)It is reported that the Ford IT infrastructure in the beginning focused on creating Defense supports to the TCP/IP communication with a design to serve the internal network for file transfer. The Global Enterprise Integration Network (GENES) process was created by Ford in 1990. Ford Motor Company expanded its regional competition requests for market share costs for infrastructure upgrades and its IT infrastructure includes "restriction on the types of application development platforms on the basis of easy information access and important data being delivered prompt t since delivery of that data makes a requirement of "…adequate management of organizational knowledge process reengineering and conversion is necessary if the application of new technologies to maintain costs and improve efficiency supply-chain failures and delays can strongly influence the Progress of the business and the market value of the company." (Ford.co.uk, 2010) Ford Motor Company further uses intranet and hypertext and multimedia technologies on the Internet. Supply chain management is also used by Ford Motor Company. Supply Chain Management or SCM is reported to involve "…coordination between suppliers, manufacturers, distributors, resellers and customers. The basic idea is that the SCM applications, the provision of information turns around to all those who manage to decisions about the product or product provider to the consumer are involved. Studies show that reducing the error in the distribution chain of supply, increasing revenue, increasing productivity and reduces the period of order-to-fulfillment." (Mass Communication, nd) The supply chains of Ford Motor Company are reported to be the perfect example of how it is that the "…traditional organizations can take action to adapt, what is current and maximizes business value. The process that Ford was requested by the continued support of management. It also depends on the alignment between those involved as the key to success. The correlation was not limited to internal employees, but extends also to the competitors to achieve a mutual benefit to work with suppliers to maintain the same reasons, and appropriate infrastructure and training programs to educate all on the vision and objectives of Ford Motor Company." (Mass Communication, nd)

Summary and Conclusion

Each of the firms examined in this study, and specifically those of General Motors, the Toyota Company, and the Ford Motor Company benefits from the information technology utilized in its manufacturing, sales and servicing process, which ultimately renders each of these companies with a competitive advantage in the automobile industry.