Toyota Strategy Analysis

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18/07/17 Marketing Reference this

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Automobile sector is known as one of the world’s most competitive and high tech sectors. But it is very difficult to enter into this sector because it needs huge capital to develop an infrastructure to compete with big giants of the market. Toyota corporation is also one the big giants. The following study is an analysis of this. The company was started in 1937 by Kiichiro Toyoda, now it is the second largest automobile manufacturer in the world after General motors. The following study undertakes the brief analysis of the different strategies implemented in the Toyota Corporation. These strategies were belonging to resource school of strategies and their main emphasis is on product quality. This study also provide us a insight view about the strength and weakness of Toyota and what are the future opportunities for them and what are the threats they can face as well.

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Introduction:

Company Overview:

Toyota is one of the leading Automobile manufacturers from Japan. The company manufactures almost all kind of vehicles like Buses, cars, SUVs, Forklifts, industrial vehicles and trucks. It was established in 1937 by Kiichiro Toyoda. In 1933 in his father factory, which was named as Toyoda automatic looms works Ltd., he established a small automobile unit. Then he visited many automobile plants in the United States. His unit was working to create fuel efficient vehicles in which they got succeeded in 1935. Than in 1937 he formally launched his own company with the name of Toyota Motors Company Limited. Toyota released its prototype small car in 1947. In 1949 the company was near insolvency, does not meet the payroll, and had to deal with the problems of workers.

Toyoda left the seat due to economic failure in 1949. Shoichi Saito and Eiji Toyoda who were his successor start the business with modern techniques and injected more capital to take it in running form. They build Kanban system in 1954, to ensure that all manufacturing parts must be available in the stocks. The popular models were Celica which was introduced in 1970, Tercel was developed in 1978 and the most renowned Model Camry was introduced in 1980. Till 1980, Japan had manufactured more vehicles than the vehicles manufactured in United States and Toyota was one step below from the world largest cars producing company GM (General Motors). Toyota and GM motor joined hand in 1984 to build a new combine manufacturing Unit Lexington, Kentucky. After that, for the next ten years from 1980s to 1990s to build new plants in North America Toyota invested 6.5 billion US dollars. They diverted their attentions towards luxurious car manufacturing. In the global recession while every company is in losses Toyota did not lose its market worth. Toyota has introduced first electricity and gasoline empowered car in 1997. In next two years they sold these cars in Japan up to 30,000. Over the time period its demand increases with a massive rate.

Aims of Repot:

This Report will provide a complete insight about the strategies of Toyota Corporation. It will tell us about the current business position of Toyota and how they have maintained the competitive advantage in the most competitive automobile industry. This will also provide us knowledge about different strategies used by Toyota.

Literature Review

Toyota’s mission & vision

Toyota vision:

Toyota Company is having very broader visions that depicts from their vision statement which is

“To be the most successful and respected car company in America”

It shows that Toyota wants to be the best company of the world but also to be best they do not want to comprise on their quality and customer friendliness. They want to be respected by their customers as well as their all other stake holders.

Toyota mission:

Toyota is company which is known due to its quality products. They provide their customer best quality and high value products in order to gain their loyalty this is also depicts from their mission statement.

“To attract and attain customers with high-valued products and services and the most satisfying ownership experience in America.”

This mission statement tells us that the mission of the Toyota is all about its customer. They want to provide high value products to attract new customers and to retain the older ones as well.

Toyota’s global strategic decision making

Toyota Company has claimed that they will setup technology centers which will gear up their global decision making capabilities. They have faced 8 million orders of new cars per year that’s why they need a speedy decision making system. They will increase the different center around the world in order to increase the efficiency of the product and speedy order processing. For this they have decided to build 6 units in North America, 6 in china and 7 units in Europe and many more in other countries.

They are trying to be the world largest cars manufacturing company for this purpose they are decided to build “Customer first” training center in which they will ensure the quality and quantity of the products. The head of Toyota Company Akio Toyoda is giving more emphasis on the quality of the product in order to get more loyalty of the customer. For this purpose he has appointed the five best Chief quality officers around the world Including, For Europe Didier Leroy, For North America Angelo, For Asia Region Sonoda, Masahiro Kato is selection for China, and Africa, Latin America and Middle East he has appointed Two person Katsutada Masumoto and Hisayuki.

The Main emphasis of Toyota Company’s decision is to gain the customer loyalty and trust. That’s why in their every decision or strategy customer is the main beneficiary person. Recent Credit crunch badly affected the demand and growth of the Toyota. People purchasing powers are very low in this day that’s why no one is going to buy new cars. This results a decrease in demand for new cars and eventually it will result in the reduction in the profit of the company.

TOYOTA PEST ANALYSIS

(P)OLITICAL:

Instability is caused due to fuel efficiency an important decision factor for car buyers, increasing the chance of the plug-in hybrid. You can see some consumers will buy a hybrid plug-in like a train, dependence on foreign oil, and one that serves to strengthen the independence of the United States reduce the purchasing power in relation to the government. The Political instability around the world due to war and terror is also a big challenge for Toyota Corporation.

(E)CONOMIC:

The Oil prices by the concerns of increasing supply and demand will increase the attractiveness of the vehicle features such as plug-in hybrids that are less dependent on gasoline. Government increased tax credits and tax increases for gasoline, the possibility of plug-in hybrids. Global oil consumption has exceeded global production. India and china are growing at 8-10% per year put an enormous demand for oil on the world market prices to stay stable.

(S)OCIO-CULTURAL:

Positive factor for Toyota is that it is overall market leader with hybrid technology. Consumers will realize more their ecological footprint in the upcoming years. The operation of a hybrid is a status symbol in the young Hollywood.

(T)ECHNOLOGICAL:

Sales of hybrid vehicles will increase the competitive advantage over competitors with the potential mass market for hybrid technology and has established a strong position to innovate and develop hybrid platform to ward off competition. Next three years, Toyota and Honda are planning to hybrid power train to reduce weight by 50%. They also seek; the price of hybrid technology from $ 4,000 to $ 1,900 per vehicle as much low as possible.

SWOT Analysis on Toyota Motor Corporation

(S)trengths

  • Toyota is having a very good recognition among 170 countries due to its multinational image.
  • There is massive growth rate over the year around 29.3% with sales turn over around £131,511 million during 2009.
  • Due to its Lean production system which constitute of TQM a JIT Toyota has gained World’s No. 1 Position.
  • Toyota is considered now one of the world’s large car manufacturers due to entrance in major market of US, China and EMEA etc.
  • Toyota is having Research and development center which is ensuring quality and environmental friendliness of the products. (Toyota Annual Report: 2009)

(W)eakness

  • Toyota is regarding as foreign imports due to the Japan based company.
  • Toyota most of manufacturing Units are located in US and Japan only, while its competitors are taking the advantages of low production cost, cheaper labor and other cheaper management costs.

(O)pportunities

  • Due to shortage of Oil and increase in oil prices Toyota’s management is looking for other alternatives like gas-guzzling cars and they are looking for new hybrid gas and electric cars production on mass scale. (Toyota Annual Report: 2009)
  • Toyota is looking for cars that can increase performance, fuel efficiency and mainly environmental friendly.
  • To develop the car which are controlled through electricity and fulfills the institutional and social requirements and cost effective for this purpose Toyota has established their Eco-Vehicle Assessment center. (Toyota Website)
  • Now they are looking for big countries for the expansion purpose like Brazil, India, Pakistan, China and Russia.

(T)hreats

  • Competitive pressure is increased due to increase in Research and Development and belligerent marketing campaigns.
  • Increase in the prices of raw materials.
  • Decrease in the demand of new cars due to the recent recession around the globe. Purchasing power of the people is almost down to earth.
  • To cater the need of larger family units who demand for larger cars. (Demographic Factor Website)
  • In western countries there is large trend of using public transport instead of their own vehicles, this will eventually decrease the demand for new cars. (Market Research website)
  • Nowadays people are more contented to send their child through school or college busses instead of their own cars.

BCG Matrix (Toyota’s products)

The BCG model depicts that how much priority should be given to the particular business unit.

Following is Toyota BCG model:

The BCG Model Of Toyota Company

Business growth Rate

High

Stars

(Corolla)

Question Mark

(Cuore)

Low

Cash Cows

(HiLux)

Dogs

High

Low

Relative Position Market Share

The BCG Model Of Toyota Corolla

Business growth Rate

High

Stars

(2.0 D, 2.0 D Saloon)

Question Mark

(SE Saloon, GLi)

Low

Cash Cows

(Xli 1.3)

Dogs

High

Low

Relative Position Market Share

Toyota Resources School of Strategy:

The Resource strategy is based on the argument that some companies develop a collection of their key competencies in which they can differentiate themselves from their competitors. The Toyota is known for its quality which they have developed after the hard work and commitment of decades. They have invested a lot in their employees, in their structure, in their manufacturing units, and most importantly in their products in order to reach this skill level.

Porter’s 5 Forces and Generic Strategies (on Toyota)

Threat of New Entrants:

In Automobile business the threat of new entrance in the industry are very low because it is a high tech industry and needs huge amount of capital and innovative technology to establish a manufacturing unit.

Bargaining Power of Suppliers:

Toyota is one of the leading automobile manufacturers and holding a major share in the global market, so it has dominant role on its suppliers but it does not manipulate the rights of suppliers it take cares them and their needs as well.

Intensity of Rivalry:

The competition is very high in the Automobile industry the larger Automobile companies are General Motors, Ford and Honda are its main competitor. They are having large resources and they can any strategy to have customer without taking care of capital back up.

Bargaining Power of Customers:

As there is a large no. of substitute available in the market and the bargaining power of customer is high.

Threat of Substitutes:

Due to many substitutes available in the market for Toyota products as other manufacturers are producing same quality products as well.

          7S Model (7s strategies of Toyota)

  • Strategy
  • Share Values
  • System
  • Style
  • Structure
  • Skills
  • Staff

Western Management of the Toyota is giving more importance to the hard side of the seven S’s model which includes structure, strategy and system. They give their more intentions towards day to day activities and daily events and to develop a better organizational structure in order to have and maintain competitive advantage.

On the other hand Japanese management of Toyota pay more value to soft side of seven S’s model which includes sills, shared values and staff etc. They pay more intentions to get competitive advantage through their employees, they provide them training and different skills to enhance their working power and they have unique leadership style and unique shared values.

DEMAND AND SUPPLY FOR TOYOTA

In the market the price is totally depended on the price which is offered by the seller and the prices on which the buyer is willing to buy the product that is called market price. Here we will discuss the Toyota’s demand and supply side factors which are the essential elements of the automobile market.

The Following factors influence the demand and supply of automobile:

1. The price at which seller is ready to sell in the market after bargaining.

2. The price which at which any potential buyer is ready to buy from the market.

In the market the Buyers make an offer for car and the seller has right either to accept it or reject it.

Analysis of the Factors which affect the demand and supply of Toyota:

The main factors which affect the demand of the Toyota in the UK are population, Income

POPULATION

The increase in population will result in increase in demand for the products. The increase in the population will increase the long run demand for Toyota cars. When the population increases the people will go for new product this will automatically increase the demand for products which are prevailing in the market.

Following charts will show the rightward shift in the demand of the Toyota products which will cause due to the increase in the population around the world.

P

S

D1

D

When demand goes up Toyota has to increase its supply to cope with market needs. The New demand for Toyota products is depicted through D1 curve.

INCOME

Other determinant of demand and supply is the Income of adult. The Toyota Company has to look the income rate of adults before setting their prices. To increase the market share the Toyota has to look the right segment for the right products. As income level goes up the demand for the products also increases.

Following charts will show the rightward shift in the demand of the Toyota products which will cause due to the increase in the income level of the population.

P

S

D1

D

When demand goes up Toyota has to supply to cope with market needs. The New demand for Toyota products is depicted through D1 curve.

 

Why is Toyota leading from others?

The rise of Japanese manufacturers in the positions of global hegemony in the decades after World War II is well known. In recent years, despite the known problems for Japanese companies like Nissan and Toyota cars worldwide, including continued and even increased its competitiveness. This is based on the philosophy of a competitive advantage, such as the Toyota Production System that is well known. System depends in part on the management of human resources policies, promoting creativity and loyalty of employees, but also and above all, a very efficient network of suppliers, manufacturers of components. Toyota is second on the list, which includes fourteen world’s best manufacturers, including General Motors and Ford. While Honda and Nissan are now also considered high quality cars manufacturers but they can never defeat the Toyota in advantages of supplier’s networks, Human resource management and distribution systems in World and in also in the most competitive market United States.

Critical Analysis of Toyota:

The technology is found all over the world and it is important to experiment for the company is recognized worldwide. In the world of automotive industry, Toyota is considered is to be a leading automobile company from Japan. This status they achieved by spending billions of dollars on new design and innovations in car and mass marketing campaigns. Toyota is in the eyes of consumers has emerged, many cars in the world. Toyota is enjoying a global reputation by building new, innovative and best quality products in affordable prices. As compared to its competitor Toyota is offering lower prices. The quality is the core strategy of the Toyota they do not compromise on it. They believe on a long term relationship with suppliers and with all other stake holders. Typically, the companies do not want to reduce their returns and follow the target strategy is for sale at cost price + profit = Sales prices. But Toyota’s is having different approach a bit ‘, which is devised in the car price – cost = profit.

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Strategic management in all organizations on their activities has a direct impact. “This is the reason due to which Toyota is the leading car manufacturer’s policy; strategic management is attractive which has established in the world. It is easy for your new employees and managers, such as design and installation of the new car, get Training in the Centers which are located near to them. Toyota plans to build more new plants. Toyota is now one of leading automobile dealers due to its strategic management.

The result of this strategic architecture, are based on a thorough analysis of corporate resources and skills, as well as the orchestration of strategic resources and capabilities over time in measures of productivity.

Product quality of Toyota was compared with five other companies including Nissan, Honda, GM, Ford and Volkswagen. In vehicles problems that Toyota received are one on per hundred vehicles that make top ranked company among industry giants. This is harmonized by a recent test conducted on truck safety, Trucks Insurance Institute of America. In this study, rating of the Toyota Tundra was a “good one” amongst all its competitors.

Impact of additional Assets

The Following chart shows the data of productivity of the cars over 6 years from 2003 to 2008 amongst 6 giant car producers including, Ford, GM, Honda, Toyota, Nissan and Volkswagen.

 

Above figure shows the employees productivity over 6 the years for different car producing countries. GM motors show very low productivity in terms of per employee. They start from 10,000 $ per employee which is very low they improve over the years but not as compared to others. In the end of 2008 they can just touched the 12500 dollar per employee productivity. The second company is also showing low results in terms of the productivity for per employee. They have fluctuations over the last 6 years. They started with 10300 $ and in the 2007 they crossed 15000 for per employee. But they went down in 2008 to 10800 $ productivity for per employee. Next company is Ford they are showing good growth over the years. The good thing was its having constant growth. They started with 15600 $ and after a constant growth ended with 25000 $ for per employee at the end of 2008.

The Toyota is leading amongst the all; they are showing very good results over the 6 years from 2003 to 2008. They started good and end is also good. Toyota started with record opening of 42500$ per employee productivity. They are improved over the years. In the second year they went down little bit but they recovered from the very next year. They ended with the remarkable ending of 62500 US dollar per employee productivity. Even the world No. 1 company cannot compete with Toyota in terms of productivity.

Honda is also showing very good results like the Ford Motors. They started very low from 13500 $ and ended with 23000 $ after 6 years. Nissan is also showing fluctuations over the years and the Volkswagen shown very low results as compared to all.

BCG model Analysis:

According to BCG analysis we can see Corolla line of products of Toyota is falling in stars that show the high growth rate and high market share as well. In needs a lot of investment because every new cent invested in this category will result in high returns. When we make further BCG matrix of Corolla line of product we found that 2.0 D and 2.0 D saloon these two models fall in stars it means these models are having high growth rate and high market share as well. They can earn much more results. SE saloon and GLi lies in question marks they need analysis to increase market shares. Xli 1.3 falls in cash cows and it has slow growth rate and having high market share.

The Cuore Line of products of Toyota are having very high growth rate but very less market share as compared to Corolla line of products. Hilex line of products lies in Cash Cow category that have high market share but now low growth rate. It is also about to saturation point.

Conclusions & Recommendations

Recommendations:

The Toyota has achieved its current status by maintaining its product quality now they have market reputation so they never have to compromise on quality in every situation because competition is very strong and no room for mistakes.3

Secondly Toyota has good human resource management system as well it can also improve it to maintain its competitive edge.

Toyota have many models which are performing very well in the market but on the other hand there are many other models which are just wasting the resources of the company, Toyota needs to do a brief analysis of them and if it is not possible to bring them in stars then company must have to drop these models.

For investors, Toyota is still very good option to invest it is having very well past records, high productivity and huge market share and we can expect future demand as well.

Conclusion:

The Toyota is considered a place with high job satisfaction and to produce the high quality and customer oriented products. Toyota is one of the leading car producer made so many changes in their own plants and as well as their suppliers units as well. Toyota has adopted very successful system and developed a customer oriented market structure. Over the few years we have seen many drastic changes in the Toyota products which resulted in the high growth and more capital share.

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