Competition in the automobile industry has become a major issue. This is due to increase in number of companies offering cars and change in customer needs. This has forced companies to devise various strategies to help them overcome competition in the industry. Most of the auto carmakers in the world have started targeting generation Y while developing products. The companies have changed their product lines to fit the needs of generation Y (Green &Keegan, 2010).
Generation Y consists of almost 71 million Americans who were born between 1977 and 1994.Most of customers are aging and the companies have decided to develop brand loyalty among young people in the country. There are various companies that have decided to change their brands so as to suit their customers interest. Examples include Toyota, Honda etc. The strategy being used by the companies is product differentiation strategy.
Product differentiation strategy involves differentiating a companys product from other products so as to make it attractive to customers in a certain target market (Green &Keegan, 2010). The companies use product differentiation strategy to differentiate the products from competitors products.Most companies use product differentiation strategy because it is helps them achieve competitive advantage. In automobile company, the companys improve the design features of the vehicles so as to meet the needs of the customers.
The strategy helps improve the quality of products so as to increase productivity in the organization. In this case study, most automobile companies have used the strategy to target young clients. Most of the companies like Toyota and Honda have used the strategy to improve their products so as to meet the requirement of the users. A large percentage of customers in the market are young people who are aged 47 years and below.
Only a small percentage of old people in the market purchase the vehicles. This has led to competition among the automobile as the companies struggle to maintain their market share and maintain customers and attract new customers (Green &Keegan, 2010). Most of the young customers have different preferences.
For instance, they prefer Japanese cars as they equate them with coolness. In addition, most customers have decided to customize their cars by ordering turbo chargers and other parts using the internet. This has made it easy for the products to meet the needs of the young users.
Honda and Toyota have implemented the product differentiation strategy to improve their products. There are various reasons that force companies to change their products. For instance, the companies change their products so as to increase profits. They also change their products so as to increase the number of customers and retain customers. In addition, they change their products so as to meet their user needs and increase their market share (Green &Keegan, 2010).
As a result Toyota and Honda have decided to develop new brands that meet their customersâ€™ needs. For instance, Honda has developed the Element while Toyota has developed Scion. The products have been welcomed differently by their users as they have different features. The Element brand has a stylish dramatic exterior. It also has a â€œdash mounted shifterâ€.
In addition, the vehicle has a waterproof seat cloth. The product is available in different models. For instance, the 2 wheel drive model and the four wheels drive model. Honda used this strategy to increase its sales and the strategy proved effective as the sales in the company exceeded the target the company had set. The company had set a target of 50, 000 units. Most of the people who had not bought any product from Honda bought the new brand, hence the high sales.
Also, Toyota developed the Scion to meet the requirements of the users. Most of the users preferred Japanese cars unlike American cars and this forced the company to improve its product quality. The scion brand was stylish and customers were able to get it at a cheaper cost (Green &Keegan, 2010).
Toyota Company limited the number of scion vehicles available in the market for sale so as to reduce suplly and increase the price. Limiting the number of scion vehicles available in the market would help the company increase its profits. The scion brand was available in United States and the company only improved the design features of the product to suit the needs of the customers. I do not agree with the decision to limit the number of Scion vehicles because it would affect the company adversely.
First, it will make the company loose its market share as it would not be able to compete with other firms in the industry (Green &Keegan, 2010). Most of the firms have decided to improve their products so as to increase their markets share by attracting more customers. So, Toyota decision is not right because it interferes with the companys competitive advantage. This would in turn lead to decrease in profit due to low sales.
Also, the decision will make it difficulty for the company to meet the needs of the clients and hence loose of customers. Instead, the Toyota Company could have increased the number of scion vehicles available in the market so as to help it compete well with other companies in the industry.
In addition, the company could have increased the number of vehicles so as to meet the customers requirements and hence attract new customers and maintain existing customers. This is because limiting the number of vehicles available forces the customers to look for a substitute product from the competitors like the element brand (Green &Keegan, 2010).
Other companies like Ford and GM are using various strategies to cater for the needs of the customers in that particular market segment. For instance, the companies are using innovation strategies and product differentiation strategy to meet the needs of customers.
In innovation strategy, the companies have utilized the current technology and business innovations to improve their products and services. This has made it easy for the companies to meet the needs of the users. In product differentiation strategy, the companies have developed new products that are based on the needs of the customers. The companies have improved various features of their products to suit the preferences and needs of their clients (Green &Keegan, 2010).