1.0. Introduction:
The purpose of this research paper is to critically evaluate the Toyota Company. The evaluation of the company is carried through different models that include the SWOT analysis, Porters five force, PEST analysis and ANSOFT matrix. These models will help to evaluate the business thoroughly and the paper will also help for further researches in the area. 2.0. Business Overview:
2.1. Organizational Overview: Toyota Motor Corporation is Japan based company founded in 1937 that operates worldwide. It is the top company of Japan on the base of its market capitalization and thirteenth among top most companies of the world by its revenues. In 2012, the company was recorded as the most car manufacturing firm in the world. 2.2. Recommendations: Toyota motors are famous for their just in time manufacturing. The organization is doing well in this regard and competes with the world’s top car manufacturing firms (Michael M., 2000).. However the quality of the car as compare to other care manufacturing companies is not satisfactory. They should focus on the quality and designs of the car. As compare to Honda, the intense competitor of Toyota in Asia and some other regions, they have elegant designs and quality cars. Apart from that the company should also focus on fuel efficient and hybrid cars to increase its production and to make people aware of these cars. 3.0. Strategic Analysis of Toyota Corporation:
The corporate strategy of Toyota varies with time and its operations. In the recent era the corporate strategy of the business is to maintain the top position in the industry (Henry, A. 2008). The company is also striving to enhance its technology in order to increase the quality of its cars and to meet the needs of ever target market. 3.1. Strategic Analysis: Strategic analysis is the procedure by which the organizations assess its external and internal environment and the factors related to it. Organization then analyzes its strengths and weaknesses and strives to avail the possible opportunities and also focuses on risk minimization. The strategic analysis defines goals and objectives for the organization (Henry, A., 2008). The theories of strategic analysis vary with the time and from one organization to the other. Every organization has its own strategic view and on the basis of that they analyze their organization. Every organization in the world assesses their internal and external factor and then formulates a definite strategy for that which is helpful to overcome the discrepancies and to lead the organization in a good path. The evolution of the theories also varies with the time and situation.
The dynamics in the macro environment impacts these theories. So we cannot stick to just one theory for a very long time. In the case of Toyota Motors, the company must properly analyze its outside environment and also to assess its internal organization. The company while making the strategies, formulating its goals and objectives should keep the factors that are directly or indirectly related to the organization in its view (Taylor, A. 2003). The firm must also keep a keen eye on its competitors and also continuously improving its operations and avail the best possible technology in order to have a competitive edge over its customers. The company must also analyze its strategies on regular basis and update it continuously. 3.2. Strategic Positioning: Strategic positioning refers to the strategies adopted by the organizations in order to position itself in the mind of their target customers. The positioning may be done with its products and services, how it is marketed and how it is designed to meet the needs of their customers (OICA, 2009). Strategic positioning can also be explained as the attempts that the organizations do in order to create a competitive edge over its customers. How the firm position itself that creates a unique image in the minds of their targeted customers. The theory of positioning was first introduced in 1969 by a marketer Jack Trout.
He explained the concept in the industrial marketing magazine in June 1969. The theory was further explained in detail by Al Ries and Jack Trout in their book named “Positioning- The battle of your mind”. Furthermore many researchers worked on the concept and added more to the theory. In order to assess the performance and to analyze the strategic depth of Toyota Corporation, we will here apply various models. Three basic models used for this purpose are SWOT analysis, Porters Five Forces and PEST analysis. First we will analyze the company by SWOT analysis. SWOT analysis of Toyota Inc: The strength of the company is that it has a strong brand reputation and its brand value is about 30billion US$. This portrays a positive image of the company in the mind of their customers. Its innovative culture, industry leader in the market for production and sales, its strong portfolio of its products and the industry leader in the hybrid or green cars are the main areas of its strength. The weaknesses of the organization is its weak presence in the emerging markets where there is potential. They only focus on Asian and American markets while it has no grip over European markets.
The recent recalls of their cars and Tsunami has also negatively affected its operations (Ohnsman, A., Green, J. and Inoue, K., 2010). The opportunities for Toyota are in numbers. Its attitude towards the hybrid cars or green cars will prove very effective in the near future. Due to the increasing prices of fuel customers are trending towards fuel efficient and green cars. They should also focus on the changing needs of its customers and can expand through further acquisition of small companies. The threats associated with the company are the fluctuating prices of the fuel as it is directly related to the vehicle industry. The intense rivalry in the market, natural destructions, the steeping prices of raw material and changing needs of customers are the imminent threat to the organization. Strengths
1. Innovative culture
2. Brand reputation valued at $30 billion
3. Industry leader in production and sales
4. Strong brand portfolio
5. The leader in “green” cars development
Weakness
1. Large recalls
2. Weak presence in the emerging markets
3. No grasp on the European Markets
Opportunities
1. Positive attitude towards “green” vehicles
2. Increasing fuel prices
3. Changing customer needs
4. Growth through acquisitions
Threats
1. Fluctuating fuel prices
2. New emission standards
3. Rising raw material prices
4. Intense competition
5. Natural disasters
6. Appreciating yen exchange rate
Analysis through Porters Five Forces: In this section of the paper we will analyze the Toyota Motors on the basis of Porters Five forces. In this case the bargaining power of the suppliers is low as the company owns its own channels of supplying its raw materials and other products. Therefore suppliers cannot be the threat to the company to fluctuate its prices. The bargaining powers of buyers in this case is high and due to other automobile companies the buyers have more options due to which they have more powers of bargaining. Due to the availability of other substitutes the company faces difficulty to increase its product prices and the buyers can easily switch to other firm’s vehicles. The threat of new entrants in the industry is low as it is risky for the new entrants due to huge investment required and the already automobile organization who have well reputation in the market. Threat of substitute is very high for the Toyota industry. There are number of substitute automobiles available in the market which poses a crucial threat to the Toyota and impacts its sales and its revenues. The threat of competitors is also very high in the industry due to many potential competitors that has also a brand image in the market and can easily grasp the customers
Threat Of New Entrants (Weak)
Power of Suppliers (Weak)
Large amount of capital required
High retaliation possible from existing companies, if new entrants would bring innovative products and ideas to the industry Few legal barriers protect existing companies from new entrants All automotive companies have established brand image and reputation New entrant could easily access suppliers and distributors
Governments often protect their home markets by introducing high import taxes
Large number of suppliers
Some suppliers are large but the most of them are pretty small Companies use another type of material (use one metal instead of another) but only to some extent (plastic instead of metal) Materials widely accessible
Suppliers do not pose any threat of forward integration
Power of Buyers (Strong)
Threat of Substitutes (Strong)
There are many buyers
Most of the buyers are individuals that buy one car, but corporate or governments usually buy large fleets and can bargain for lower prices It doesn’t cost much for buyers to switch to another brand of vehicle or to start using other type of transportation Buyers can easily choose alternative car brand
Buyers are price sensitive and their decision is often based on how much does a vehicle cost There are many alternative types of transportation, such as bicycles, motorcycles, trains, buses or planes Substitutes can rarely offer the same convenience
Alternative types of transportation almost always cost less and sometimes are more environment friendly
Competitive Rivalry (Strong)
Moderate number of competitors
Industry is very large but matured
Size of competing firm’s vary but they usually compete for different consumer segments Customers are loyal to their brands
There is moderate threat of being acquired by a competitor
PEST Analysis of Toyota: PEST analysis is the Political, Economic, Social and Technological factors that are associated with the organization. The political influence of TMC is high on the government. As it is among the top organization and well reputed company so government has a full support to the organization. It has also a great economic impact and the company has thousands of employees which add to the economic growth of the company. Also the company exports its vehicles worldwide which have a positive impact on the government (Toyota. 2002). The company has both local and worldwide impact on the economy. The company has also kept social factors in its context and it has made its products for almost all segments. They are now focusing on green cars which will aim to keep the environment clean and to save the scarce resources of the world. Also the company is conducting seminars and campaigns related the environmental issues. In the area of technology, the company is using the best available technology in its products and aims to be the world leader in technology.
Political
Economic
Government stability and likely changes
Corruption level
Tax policy (rates and incentives)
Regulation/de-regulation
Trade control
Import restrictions (quality and quantity)
Tariffs
Competition regulation
Environmental Law
Laws regulating environment pollution
Growth rates
Inflation rate
Interest rates
Exchange rates
Unemployment trends
Labor costs
Stage of business cycle
Credit availability
Trade flows and patterns
Level of consumers’ disposable income
Monetary policies
Fiscal policies
Price fluctuations
Social
Technological
Health consciousness
Education level
Attitudes toward imported goods and services
Attitudes toward product quality and customer service
Emphasis on safety
Lifestyles
Buying habits
Religion and beliefs
Attitudes toward “green” or ecological products
Population growth rate
Basic infrastructure level
Rate of technological change
Spending on research & development
Technology incentives
Technology level in your industry
Communication infrastructure
Access to newest technology
Recommendations: For SWOT analysis, Toyota must critically analyze the outside environment and also the internal analysis of the organization in order to know its strengths, overcome its weaknesses, to avail the opportunities and to minimize the expected threat. This will enable the organization to better understand the internal and external environment and to utilize it for the betterment of the company. For porters five forces I would recommend that as the bargaining powers of suppliers is low on the company so the company has better chance to take a competitive edge over its rivals by keeping its prices low as compare to its competitors without compromising on quality. For PEST analysis I would recommend that the company should focus on green cars as it is the need of the future as a socio environmental factor, technological and as we as the economic factor. The company should also strengthen its ties with the government so that its operations must continue smoothly. 3.3. Strategic Choice Theory:
Strategic choice theory is a concept that explains the roles of the leaders or the groups that plays a leading role in the organization and making alterations or finding the solutions to the issues that arises in the changing government policies. This theory was designed by Child John in 1972. Before strategic choice theory it was a general concept that the goals and strategies of the organizations were made on the basis of external environment. But now the strategic theory explains that the organization’s strategies have to be designed not only on the basis of external environment but also to analyze the organization internally. Using Ansoff Matrix Model in Toyota:
Ansoff matrix is a strategic tool that is applied in the organizations in order to relate the marketing policies or strategies with the overall strategies and goals of the organization. Ansoff model has four dimensions that are Market penetration, Market development, Product development and Diversification. These four models are shown in the following table
In this section of the paper we will analyze the TMC on the basis of Ansoff matrix model. Following are the areas where we can assess the market strategy linked to the organizational strategy of TMC. Market Penetration: The market penetration strategy best fits with the organization in the existing, growing and emerging markets. Market penetration strategy is composed of three variables which are sustainability, acceptability and feasibility (Toyota. 2002). As TMC holds a strong brand in the market so it is quite easy for the company to target the new market and to grow in the existing markets. In acceptability the TMC must enhance its quality and post purchase services if the company aims to target the competitor’s customers and to strongly promote its product in that markets. In the feasibility, TMC should target each and every segment of the market as the company has huge manufacturing capability and they can easily penetrate into the new segments and new markets. Product Development: According to the reports TMC spends 4.4% of its profits on the research and development in order to develop its products (Behura, 2009).
Due to rise in rising prices of the fuel and the environmental issues the company is focusing to develop fuel efficient and environmental friendly automobiles. For this purpose TMC has launched its Prius models in the market which is very fuel efficient and environmental friendly. In 2008 Toyota was recorded as the most spending organization on its research and development. The acceptability of these green and fuel efficient cars in the near future is very high and also the investors are taking interest to spend in this sector which is a positive sign on behalf of TMC. Market Development: This strategy aims to develop the market for the products of the company and to go beyond its existing consumer’s base to the new areas and markets. In this strategy the organization goes beyond its existing geographical areas. In this case TMC is planning to expand its market from Asia and America to Europe which is the potential area for the Toyota. Toyota wants to sale its existing products to the new markets and planning to formulate strategies to penetrate in the new markets.
Apart from that the company may also develop its market by targeting the new segments (Lynch, 2006) and for this purpose Toyota is now focusing on the young generation and green cars to develop its market. Diversification: Diversification strategy is to develop new products for the new markets. In this strategy Toyota is trending towards the new products as explained earlier the Prius brand. Also the organization aims to produce more sport cars for the young generations and economy cars for the low level income people. Also the company is aiming to diversify to aircrafts, rail coaches, luxury buses, robots, heavy trucks and motorbikes (Plunkett Research Ltd., 2009).
Market Penetration
Product Development
Existing models to be sold more. Continue sale in existing matured big markets in Japan, US Camry , Corolla on discount price
Acquisition of competitors ( economy and Luxury brands)
Sale of used Toyota cars
Made slight modifications to models ( interior)
Sell to other members in same family
Target same segment for loyalty
Develop innovative products in auto-sector to sell in existing markets Advanced features , new break system, safety bags, automatic gears Bio –fuel, Solar –powered , Diesel engine cars for India, hydrogen gas Hybrids for existing models
Cars for the handicapped
Hatch backs, SUVs and small cars for developing and emerging markets Market Development
Diversification
Shift focus from existing matured markets ( America, Japan, Middle –east) to emerging developing markets of the future Expand at large scale in India, China, Thailand, Brazil, Iran, Turkey , Czech, Poland Explore new segments for existing cars by repositioning ( women, youth )
Formula -1 sports cars
Enter with new products into markets not tried until now
Aircrafts
ships and marine engines
Robots
Luxury bus
Heavy trucks and cold chains
Motor bikes 200- 500 cc
4.0. Functional strategies/Corporate strategies adopted by Toyota: Functional level or corporate level strategy comprises of the overall strategies of the organization. These strategies may be production strategy, operational, marketing and financial strategy. In this paper we will discuss the two functional level strategies which are Marketing strategy and Human resource strategy. Marketing Strategy of Toyota: Toyota Motors Corporation has adopted a suitable marketing strategy and it has been successful in this cause. The promotional and marketing strategies have made the Toyota brand known to every customer. Toyota aims to have their car for each and every customer and therefore they have the mission for a right car at a right place. The TMC has segmented the globe into different markets and regions and formulated various strategies for each and every region on the basis of their needs and wants (Hill C. 2009). It has segmented the globe and the markets as US, EU, China, India and Indonesia and on the basis of their needs designed automobiles. In these region US is the priority market for Toyota in which Toyota sell almost 30% of its products and thus generates huge amount of revenues from this region.
Asia is also the vital geographic region for Toyota which forms the second most beneficial region for Toyota. Toyota has marketed its various products in the market. They have marketed economy class cares for the low level customers and luxurious cars for the elite customers. Also the company has launched environment friendly or green cars in the last decade which has also added value to the organization (Hill C. 2009). Apart from that Toyota has segmented its marketing strategy at various levels which are global, regional and national level. The company stresses its product in the market for their comfort, kindness and excitement. The marketing strategy of Toyota and its analysis is composed of the market conditions, the buying power of the consumers, economic conditions of the country and the taste of the consumers. In addition Toyota has very solid promotional and marketing strategy uses integrated market communication tool in its strategic implementation. The promotion on the television, magazines, newspaper and now on social media is very effective on the case of TMC. Also the official blog of Toyota also adds value to the promotional strategy of the company (Taylor, A. 2003).
Toyota Motor Corporation has three basic elements in its marketing planning. These three elements are Green, Safety and Economy. The declining share of its competitors in the markets has posed opportunity for the Toyota and now they can easily target those markets in order to grasp their hold. As in 1986 Toyota was having 5% share in the whole US market but in 2006 their share increase to 15% which is continuously increasing (Cusumano, M.A., 1989). Human resource Management Strategy of Toyota: According to the honorary advisor to Toyota Motor Corporation Eiji Toyoda, “these are the people who make our products (automobiles), therefore it is necessary to give training and education to our people”, TMC believes that enhancing its human resources could add value to its products which ultimately add value to the organization. For the development of human resource the organization must handle its own values and perceptions (Liker, J., 2004). With the organization expansion and its growth both geographically and product related it is quite essential now to focus on the human resource management of the company. The human resource management has become an important and priority aspect for the Toyota. In this regard Toyota is facilitating its employees with providing them training to improve their skills and with that they also provide the opportunity of on job training to the employees in order to learn practically and then utilize these practices for the betterment of the organization.
The company conducts the training for individuals on the basis of their qualification and the position of the employee in order to enhance their skills and abilities. In the year 2001, Toyota adopted a new guideline policy named as Toyota way 2001, in which they formulated some guidelines and regulations for all the employees of the organization. The guideline was based on two key concepts that are “respect for others” and the other is “Continuous Improvement”. Furthermore there are five principles that are based on the code of conduct of the employees at Toyota Motor Corporation. These five principles are Challenge, Improvement, Go and see, Respect and Teamwork of the employees (Jeffrey K. Liker and Michael Hoseus. 2010). Both the human resource and marketing are interrelated as marketing activities are carried out through personals. The more competent they are the best will be the marketing strategy of the company.
Marketing Strategy
Human Resource Management
High level of promotion
Segmenting market on the basis of needs and wants
Geographical segmentation globally, regional and local
Trending towards hybrid of green cars
Market development and penetration specially European markets Strong Brand image
Training and education to the employees
Toyota 2001 code of conduct
Two key pillars are respect for others and continuous improvement Focusing on their people in order to enhance their skills for the best use of their organization
5.0. Conclusion:
The paper has extensively described the different models and implemented those models of Toyota Motor Corporation. These models have thoroughly analyzed the company’s external and internal environment. We have concluded that in the era of this intense competition and the dynamic environment Toyota needs to keep a keen eye on the micro and macro factors and in the light of these factors they must formulate strategies. The organization must focus on the human resource management as they are the key assets of the organization and their improvement will lead to the success of the organization.
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