Air transportation is drastically changing due to the impact of artificial intelligence and innovative technologies. Innovative companies in the sector have a competitive advantage and increased turnover as compared to other companies. The leading players in the industry include Toyota, Nissan, General Motors, and Honda. The motor corporations are very creative in their operations to outshine their counterparts in the market. The industry is manufacturing self-driving cars currently. The automotive manufacturers implement various human-machine interface technologies such as voice controls, interior-facing cameras, touch-sensitive surfaces, and smarter, personalized platforms. The competition in the industry is not only about sales and market shares but also on the effective leverage of technology to meet customer demand. The future of flying cars is getting closer, although there are some developments not yet accomplished.
Due to Toyota’s new invention, Nissan is operating in a very competitive business environment. The other companies in the sector are also providing similar products and at lower prices. As a CEO in the Nissan company, I would consider the news as a threat to the automotive industry. Toyota has invested in an electric air tax company, Joby Aviation, to gain a competitive advantage and increase turnover due to dominance in the target market (Martin, 2020). The Toyota company also has adequate capital to make such investments. The potential options for Nissan company include differentiation strategy, no reactions, and copying the product after intensive research. The differentiation strategy will allow Nissan to have new and innovative products that will result in an economic boost and decrease competitive powers in the market. The differentiation strategy involves the development of products that are unique and different. Nissan will consider these options for long-run attentiveness in the market.
The strategy of copying a brand is less risky and cheaper as compared to the cost of developing a new brand of product. It has an economic advantage because it reduces the expenses of creating a new product and experiencing all risks associated with the introduction of a new product. Using an established product by the company with a strong brand in promoting new products makes it less relevant to create awareness and imagery of the product because it will be easier to attract new consumers. The company will gain customer trust because the existing automotive product is a promise of the quality and other characteristics of the potential buyers.
Copying an original product from Toyota will result in dilution of the existing product image. This will damage the brand because it will be common. It might even be of bad quality hence destroying the reputation of the Nissan company. A disaster may happen, and it might be uncontrollable, thus affecting the brand of Toyota and Nissan companies. It will also result in cannibalization because the products are positioned in a common market. It is safe to stick to a product that customers already know rather than venturing into new products. The development of new products comes with an uncertainty ranging from unfamiliar production processes. When the development strategy fails, Nissan will need to absorb the investment made without returns. The advantages of the copying option outweigh the disadvantages of the option. For instance, the cost of introducing the product at Nissan company will be cheaper as compared to the costs of inventing a new product.
The competition from Toyota’s company will decrease Nissan’s market share and shrink the consumer base because of the lack of innovative products. Failure to innovate will leave Nissan weak while Toyota is succeeding because of its decision to update the business model. Having a narrow approach to the concept of innovation is going to make Nissan struggle with its products and brands. Reluctance to innovate in the motor industry will lead to decreased sales, market share, and total profitability. Not reacting to the decision of Toyota can help Nissan avoid unnecessary pressure and losses in the market. However, this can be the worst option for the Nissan company. The business should make appropriate decisions and develop strategic plans to solve the problem.
Companies use several marketing strategies to win a customer base to them instead of their competitors. Differentiation strategy enables businesses to communicate unique features of the available products and develop a niche for the product. With the use of artificial intelligence and innovative technologies, Nissan can design a unique better automotive product in the market. Differentiation strategy builds unique quality products. Nissan will analyze the specific products and compare them with the new product developed by Toyota. After understanding the differences, Nissan will communicate the features to customers through promotions and advertising. Through differentiation, Nissan will build its reputation using its company image-like strength. Consumers require companies to develop innovative features based on previous products, and these companies market their products using their past success. The buyers recognize the company and relate its brand image as a product that conforms to different standards in comparison to its competitors. Differentiation strategy builds a difficult to imitate, superior quality products developing specialized advantage that dictates the value of the product. The products have non-price competition in the market because of their uniqueness.
The disadvantages of using the differentiation strategy are as follows. Utilizing the approach in the market needs a larger financial investment from Nissan. For the company to convince the buyers that their new product has unique features, it is required to communicate the information to the buyers. The cost of the advertisement is high, and the company should assess the return on investment in the new product and promotion costs. The differentiation method faces the challenge of changing the perception of the customers. Many buyers perceive the product as equivalent to other products from the competitors. Nissan will be scrambling to develop a new exciting product that its consumers will embrace. Nissan’s competition will be working hard to solve the same problems, and it is not enough for the development of an innovative product. Regardless of whether Nissan has a product development plan or not, it is not essential in the long run compared to how the strategy is implemented. Conclusively, the differentiation strategy at Nissan company will result in a competitive advantage. However, the method is expensive, and also, the company will face challenges in changing the perception of potential customers.
The product costing system is an accounting procedure where the expenses used by a business to develop a product are examined. Cost accounting objective is capturing every cost incurred during an accounting period to help the management in making the right decisions. The process involves collecting, classifying, and recording all the incurred costs, which are later summarized and evaluated to determine the best selling price and profitability. The expenses within a company are divided into three categories, including variable costs, fixed costs, and mixed costs. Fixed costs are constant, while the variable costs change with the range of activity. Mixed costs vary and have features of both fixed and variable costs. Examples of fixed costs in a company may include rent, administrative salaries, equipment depreciation, and insurance. Mixed costs may consist of maintenance, while utilities may fall under mixed costs.
The copy option will involve a few costs. The first cost will be the expense of buying into another company developed idea, that is, 394 million dollars. Moreover, the company will incur research costs while performing market analysis and while introducing the product in the market. These costs should be managed to ensure that the company does not suffer losses. Effective cost management reduces the risks of losses while giving the company a competitive advantage. Activity-based cost accounting can be helpful in this option. It involves monitoring of the company’s operations, which constitutes tracing consumption of resources and costing the end products, resources assigned to activities and activities to cost objects based on consumption estimates (Tabitha and Oluyinka, 2016, p.52). This method involves accumulating overheads from every department and assigning them to specific cost objects like products and consumers. The approach is accurate and useful to managers in comprehending the cost and profitability of the company’s product. In this case, the activity is diversification through copying an already developed concept from Toyota company.
In case, Nissan chooses to do nothing about the activities of Toyota company; it will not incur direct costs. However, this is a wrong decision because a lack of innovation in the automotive sector may result in collapsing of business. The company will experience decreased profitability due to a lack of competitiveness in the market. Nissan should innovate using artificial intelligence and advanced technologies as a way of facing competition and increasing its customer base in the industry.
The differentiation strategy in Nissan company will involve the development of the new unique product. There are several costs to be incurred in the process of product development. The costs of labor, transport of products, technological input, purchase of raw materials, and stocking fees are included. The overall cost is used by the company to plan various strategies to be utilized in the business, including promotion campaign strategies and product pricing. Product costing is also used to strategize how to control production costs to maximize the return on investment. Nissan needs to have a product costing system to help it make long term decisions concerning the costs over the product life cycle and assist in determining the most purchased products in the company. Marginal costing is the best method for the differentiation strategy. It is an analysis of the relationship between a company’s product, sales, production level, costs, and expenses (Tabitha and Oluyinka, 2016, p.51). The contribution margin gives the management a useful insight into potential profits, the most profitable product price, and the marketing type required.
Air transportation is drastically changing due to the impact of artificial intelligence and innovative technologies. The leading players in the industry are Toyota, Nissan, General Motors, and Honda. Toyota investment in electric air tax company, Joby Aviation, to gain competitive advantage and increase turnover rate. The diversification activity in Toyota company is a threat to other companies in the industry. The potential options for Nissan, a company in the industry, are doing nothing, copying Toyota’s concept, and differentiation strategy. Each of the three options has potential advantages and disadvantages. However, doing nothing is the worst decision the Nissan company can make. The options will also result in some direct, fixed, and mixed costs. Several accounting tools, like marginal costing and activity-based cost accounting, are applicable in the available options. Due to the changing technologies, companies should develop appropriate diversification strategies to gain competitive advantage and improve profitability.
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