Tuesday, April 24, 2007

Toyota to become largest car seller in world this year.

Toyota sold more automobiles than any other car manufacturer in the world in the first quarter of the year, displacing General Motors from the rank of number one car seller in the world. It is expected that at the end of the year, Toyota will have the crown for the year.

This is the result of the different strategies the car manufacturers chose. GM chose to sell big cars that were gas hogs. That was the strategy that fed into the U.S. desire for large cars, bolstered by low gas prices. Toyota chose to sell fuel efficient high reliability automobiles. The recent sharp increase in gasoline prices caused the change in which was number one.

My question - what in God's name did GM executives think would happen to them when (not "if" because it was certain to happen) when gasoline prices increased? Why did they stick to such a short-term and clearly time-limited strategy? They had to realize that they were trading the future of their company for increased sales each quarter that gasoline prices were low.

Were they that tied to the quarterly price of their stock on the financial markets? If that is the case, then Capitalism is a system of long-term economic suicide. Managers cannot trust the decisions that they are being pressured into making by the pressure of the financial markets.

I've got some ideas. I don't think that the strategic decision was made once and never changed. I suspect that the decision was something that happened as the company moved into particular market niches in competition to the foreign car companies, and then they never felt they could make the sacrifices in the short term that would be required to become competitive in the long term. That's a guess. I feel more certain that the strategic decisions were the result of a number of things that led to them, and that changing was too expensive.

Anyone have any idea?

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