In Depth Analysis Of The Toyota Motor Corporation Marketing Essay

In Depth Analysis Of The Toyota Motor Corporation Marketing Essay The main products for the company are categorised into three segments they are automobile, finance and housing communication system. The core business was automobile segment engages in the design, manufactures and sales that includes a car smaller than a compact car to luxury and sport vehicles, as well as trucks, SUVs, buses and minivans. Additionally Toyota produces automotive parts and accessories for its own use and for sale to others. Popular models include Land cruiser, Lexus line, Camry (best selling passenger car in America, 2004) and Corolla as well as the Tundra (Motor trends truck of the year, 2000). Toyota annual sales approximately reaches 7.5 million models on all five continents (America, Europe, Asia, Africa and Australia) in which the main markets for both Toyota and Lexus brand vehicle is the United States, followed by Japan. The other highest markets areas are U.K, China, Australia, Canada, Germany, Thailand, Saudi Arabia and the South Africa. In all, Toyota markets vehicles are more than 170 countries/regions. The global main competitors for Toyota are VW group, General Motors, Renault Nissan, Hyundai Kia and Ford. As shown in the appendix1 during the year 2008 Toyota dominates the global light vehicle sales with the highest market share of 14% by overtaking the main rivals like GM and Hyundai Kia in the midst of recession, instead booms the profit. But the position among the competitors changed drastically in the year 2009. The financial summary of Toyota for the year 2009 is tabled as follows. (Billions of yen) The financial report clearly shows that during the year 2009 Toyota made a net loss of  ¥437 billion ($ 4.3 billion) that never happened from the past 1950. It happens due to the worst sales, when company could not sell up to that volume in which that company take out its costs which related to production and sales. Whilst Toyotas president, Fuji Cho openly avowed in the year 2002, that Toyota is aiming for 15% of the global market share by 2010 accommodating itself with the new global vision named as Innovation into the Future. The new theme (vision) consists of four elements they are recycling based society, development of motorization on a global sale, diverse society, and age of information technology. Hence with the severe competition Toyota continues an effortful attempt to attain a goal outlined in the Global Vision 2010 by increasing its competitiveness. ANALYSIS OF THE CURRENT BUSINESS ENVIRONMENT AFFECTING THE AUTOMOBILE INDUSTRY: According to Johnson scholes (1999), different steps to be followed in environmental analysis for finding the strategic position of the organisation they are 1) Assessing the nature of environment, 2) Auditing environmental influences, 3) identifying key competitive forces, 4) identifying competitive position and finally identifying the key opportunities threats. The external environment, as a determined element remain a topic of interest in management literature (Joshi and Campbell 2003; Nahm et al., 2003). Hence, a balance relationship between environment and manufacturing strategy is complex for organisation to achieve success (skinner, 1969; Hayes and Wheelwright, 1984). On the other hand Pagell and Krause (1999,2004) argued that manufacturing flexibility is a global event in high performance organisation regardless of the environment they operate in. However, it is difficult to handle environmental uncertainty (complex) by depending only on primary analysis which is derived from the output of diversity ensuring that different parts of firms responsible for different aspects of diversity are unattached, and given resources and authority to handle their own part of the environment (Johnson and Scholes 1999). Considering the above factors the analysis of Toyota Motor Corporation in the automobile industry is carried out with help of analytical tool kit such as PESTLE and FIVE FORCES. PESTEL ANALYSIS: As shown in the Appendix-II PESTEL analysis for Toyota Automobile Industry is done with respect to the geographical locations of U.S and Japan. The most vital factors from the analysis have been taken and described below to find the current opportunities and threats of the company. The automotive industry is subject to various government regulations including those related to vehicle safety and environmental issues such as emission levels, fuel economy, noise and pollution. Many governments also impose tariffs and other trade barriers, taxes and levies, and enact price or exchange controls. Toyota has incurred and expects to incur in future, significant costs in complying with these regulations. New legislation also subject Toyota to additional expenses in future. As an automotive manufacturer, Toyota may became subject to legal proceedings in respect of various issues, including liability and infringement of intellectual property and Toyota is in fact currently subject to a number of pending legal proceedings could adversely affect Toyotas future financial condition and results of operations. Toyota is subject to various risks associated with conducting business worldwide. These risks include political and economical instability, natural calamities, fuel shortages, interruption in transportation system, wars, terrorism, labour strikes and work stoppages. The occurrence of any of these events in major markets in which Toyota purchases materials, parts and components and suppliers for the manufacture of its products or in which its products are produced, distributed or sold, may results in disruptions and delays in Toyotas business operation may adversely affect Toyotas financial condition and result of operation. The worldwide financial services industry is highly competitive. Increased competition in automobile financing may lead to decreased margins. A decline in Toyotas vehicle unit sales and residual in value risk due to lower used vehicle price increase in the ratio of credit losses and increased funding costs are factors which may impact Toyotas financial operations. The likelihood of these factors materializing has increased as a result of the ongoing rapid worldwide economic deterioration and competition in automobile financing has intensified. If Toyota is unable to adequately respond to the changes and competition in automobile financing, Toyotas financial services operations may adversely affect its financial condition and result of operations. Increase in prices for raw materials that Toyota and Toyotas suppliers use in manufacturing their products or parts and components such as steel, precious metals, non-ferrous alloys including aluminium and plastic parts may lead to higher production costs for parts and components. This could in turn negatively impact Toyotas future profitability because Toyota may not be able to pass all those costs to customers or require its suppliers to obsorb such costs. PORTERS FIVE FORCES: Michael Porter identified five forces that affect an industry. These forces are degree of rivalry, threat of substitutes, barriers to entry, buyer power, and supplier power. For the more on this framework proposed by porter, see Appendix. Viewing the automotive industry through the framework of porters five forces can be helpful in understanding the forces at play. Degree of Rivalry: The automotive industry is highly competitive with Big 3 such as GM, Ford and Daimler Chrysler. In the 1980s the Toyota entered a fairly disciplined U.S market and have been very focused in growing their shares of the market. The great diversity of rivals in terms of cultures and philosophies has intensified rivalry in the Industry. Market growth is slow in the established markets of U.S and Europe, and companies must fight fiercely to eke out gains or prevent losses in market share. However, growth is potentially huge in the rapidly industrializing nations of China and India. In these booming markets Toyota could take advantage of the opportunities to reap handsome awards. The degree of rivalry in the automotive industry is further heightened by fixed costs associated with manufacturing cars and the low switching costs for consumers when buying different makes and models. Threat of Substitutes: The threat of substitutes to the automobile industry is fairly mild. Numerous other forms of transportation are available, but none offer the utility, convenience, independence, and value afforded by automobiles. However there are inherent underlying social and cultural attitudes that keep people from owning automobiles in some parts of the world. Barriers to Entry: The barriers to enter the automobile industry are substantial. For a new company, the start-up capital required to establish manufacturing capacity to achieve minimum efficient scale is prohibitive. An automotive industry is quite specialized and in the event of failure could not be easily re-tooled. Buyer Power: In the relationship between the Toyota and its ultimate consumers, purchasers of finished vehicles, the power axis is tipped in the consumers favour. Consumers wield the greatest power in this relationship due to the fairly standardised nature of the vehicle and the low switching costs associated with selecting from among competing brands. However, Toyota remains marginally powerful due to large customer to produce ratio. The automotive industry is a dynamic place. With the forces above at play, and with history as a guide, it is safe to stay that the Toyota must continue to change, evolve and adapt. OPPORTUNITIES: Increasing Demand for Hybrid Vehicles: Globally it is estimated that the demand for hybrid electric vehicles(HEVs) will be approximately 4 million units by 2015. Rising oil price and more emissions regulation are likely to increase the demand for HEVs, as hybrid vehicles are less polluting and less operating cost (more fuel efficient) when compared to conventional diesel and gasoline engine, Toyota industries has strong focus on devices for plug-in hybrid vehicles. The companys competency on hybrid technology is likely to drive growth in the medium term. Establishment of New Material Handling In North America: Toyota is formulating a program to expand its material handling equipment in North America. In this context, in March 2010, Toyota industries determined to create a newly owned sub-subsidiary, Toyota material handling North America (TMHNA). Previously, both Toyota and Raymond used to closely work together to boost business efficiencies in the areas of manufacturing, quality and procurement. Though, TMHNA has officially created to integrate management and operational activities in North America. Establishment of TMHNA would enhance the regional co-ordination and increase the performance of the material handling equipments products of Toyota industries. Growing Opportunities in Emerging Automotive Products: Toyota is now concentrating on the new markets such as India, China, Russia and Middle East region seeing that these markets are expected to view a strong growth in the future. In addition, Toyota also provides automotive logistic services. The company, with powerful automotive business operations, would be aided by the growing vehicle demand in these emerging markets. THREATS: Kyoto Protocol: The Kyoto protocol for the lessening of carbon emission went into effect in 2005, which results on industrialized countries to cut-down their green house gas emission from the 1990 level by 5.2% by an average level during 2008-2012. Consequently, Toyota appointed the prevention of global warming as one of its strategic management issue and concentrate on measures to reduce global warming, which lead to increase in the cost structure of the company drastically. Intense Competition: Toyota is involved in competition with many automobile companies at home and abroad. Any differences in the allocation of management resources and in competitiveness of cost or technology are likely to impact the companys status in the automobile industry and its business performance. Toyota industries compete with the competitors having large volumes of business and greater financial resources than those of the company. High level of competition in the market place could affect Toyota business operation and could erode in market share. Exchange rate Fluctuation: Toyota industries encompass the production and sales of products and the provision of services worldwide. Toyota is sensitive to the fluctuations in foreign currency exchange rates and is principally exposed to fluctuations in the value of the Japanese Yen, the U.S Dollar and the Euro. In the recent Japanese Yen appreciated significantly against the U.S Dollar. The strengthening of the Japanese Yen against the U.S Dollar can have a material adverse effect on Toyota Industries reported operating results, which may in turn affect the valuation of the company. ANALYSIS OF THE TOYOTA STRATEGIC CAPABILITIES: According to Haberberg and Riepel (2008) capabilities are things that customers and other stakeholders notice when they are dealing with an organisation. Hence it is vital to identify the capabilities of Toyota, which is carried out with the frame work of resource based analysis (appendix- ) and value chain analysis. Value Chain Analysis: One key program is called value stream mapping, an analysis tool the automaker has been using to improve assembly line productivity is supply chain. Toyota manages the supply chain so efficiently that its production process is near perfect and it simply known as TPS (Toyota Production System), which developed by Toyota to deliver more effectively the products which their customers require, in a timelier manner than traditional management approaches. The unique management system of Toyota made a different relation with the suppliers when compare to other competitors, they are Frequent and reliable deliveries from suppliers Quality parts Small lot size Supplier network Communication with suppliers Proximity to the customers Single sourcing Long-term contract Supplier training Reduced lead time. Toyota is not asking suppliers to reduce price and profit instead, to find a way to minimise cost without having any negative impact on customer value. The present situation is Toyotas ability in developing the TPS and in integrating the policies and practises of their own that is the extension of internal policy deployment through their supplier association into the supplier network and the active co-ordination and development of suppliers, directly and indirectly through the widespread application of the Toyota production system. Resource Audit: Resources of Rolls Royce can be grouped under then following four headings they are Physical resources, Human Resources, Financial resources and Intangibles. STRENGTH: Robust RD Capabilities: Toyota industries actively carry out its research and development activities. Its RD activities can be broadly divide into two areas product development and improvements performed independently within each business division and RD undertaken mainly by the RD centre separate from the activities of its business division and with a view toward company wide- management strategy. Strong RD capabilities helps the company to keep up with the latest technological developments in the market and also helps in developing new products and technologies, thus contributing to the rapid growth of the company. Strong Engineering Capabilities: The company has strong engineering capabilities, for instance the Toyota is extending its product portfolio to include hybrid engines and hybrid vehicles. The company also manufactures electric compressor for hybrid vehicles. The companys strong engineering capabilities allow expanding its product portfolio. WEAKNESS: Overdependence on Japan: A Toyota industry is highly dependent on the Japanese market for its revenues. This overdependence on Japan could have a dampening effect on the companys revenues if the companys sales in Japan do not grow as expected. Addition to this the concentration of operation in this area increases Toyota industries exposure to country specific factors such as changes in raw material prices, labour strikes, changes in economic conditions, and most important increasing competition price from low-priced products. Evaluation of Possible Future Strategies for the TOYOTA: After scanning the environment, performing the SWOT analysis, that showed a weakness in Toyota may at the same time huge opportunities. Now we need to know how to use this opportunities to overcome the threats, minimise the weakness and maximise the strength. Toyotas success is largely based on its forward-thinking, innovative management style and its rigorous standards of quality. The Toyota production system is much-studied strategy of design and manufacturing which emphasizes streamlining and elimination of waste giving rise to the Just in Time and Lean manufacturing movements and continuous error checking and improvement. In addition, Toyota has repeatedly been ahead of the trend in investing new technologies. Instead of focusing on reducing labour costs, Toyota has increasingly automated their production facilities. And with the release of the Prius in 1997, Toyota introduced the first mainstream hybrid vehicle, cashing in on the demand for fuel economy and reduced environmental impact. Like the Prius, the section line successfully addressed a new consumer sector, a plan that Toyota will continue to follow. These strategies combine to give Toyota a significant sustainable competitive advantage. In order to realize the image that Toyota is striving to achieve it is important to undertake a paradigm change from the following three perspectives they are are technology development, management and profit structures Acquisition of a Competitor: Acquisition of competitor is known as improvement strategy of expanding its core business. The acquisition will lead to rise in market share (barney and Hesterly, 2010) for Toyota through market penetration, market development and market expansion, if the acquire company is operating in more and different emerging markets. This form of acquisition is called horizontal integration and would lead to an increase in market share and decrease in competition. Toyota to exploit the merging market such as India and China it should acquire the existing competitor so that it is easily strengthen the market position and open new opportunities for competitive advantage New Strategic Capabilities: There are strong competitors for Toyota in the technology, marketing and manufacturing. Therefore to reduce the intensity of rival among the major players, Toyota can look into joint venture strategy to capture the emerging markets such as China, India and Russia. Implementation of Strategic Change: Surviving to highly competitive rapidly changing environment often requires firms to develop strategies that provide the right kind of flexibility to succeed their specific environments, thus achieving fit between the type of flexibility to succeed in their specific environments, thus achieving fit between the type of flexibility pursued and the demand placed by the environment. Negotiating: Negotiation should be there to understand the demand of both buyer and seller and these has a significant impact as the negotiations unfold and implementation begins. Implementation: Implementation is the critical part for the leadership and communication to execute the change management. The changes that should be made for merging should be planned in detail because there are many issues that are expected with acquisition such as integration challenges, culture, control system, financial operation and loss of key personal (Thompson, 2001). In order to overtake these problems Toyota has to do a proper planning and research before the implementation to get the positive outcome. Conclusion: The product developments are in increasing nature because of the emerging new markets and the technological factor is adding value to the company focusing for the next generation, hence I personally recommend on investor to invest with Toyota APPENDIX-II PESTEL ANALYSIS FACTORS IMPACT(opportunities threats) TIME SCALE POLITICAL: Political instabilities, fuel shortages, natural calamities, wars, terrorism and labour strikes Arab oil embargo turned fuel economy into an important automobile policy goal for the U.S government. The occurrences of any of these events will results in disruption and delays in operation. Prolonged disruption may adversely affect the financial conditions of Toyota Toyota Government relation are 1, Reliance on Business association 2, Personalized network and 3, emphasis on harmony. Changes in legislation Continuous process Every 5 years ECONOMICAL: Financial crisis that began in 2007 and accompanying sharp declaration of vehicle sales during 2008 serious challenges for all automakers. Energy crisis. Rise in price of gasoline. Exchange rate fluctuation with respect to Dollar Establishment of new material handling company in north America which will limit the cost of exporting the vehicle to US Alternative energy efficiency technology and more investment in RD Big cars got smaller, small cars got better Drove down demand for big, expensive cars, and pilled in capital from Japan and elsewhere, which helped drive up the dollar In March 2010 Continuous Continuous Continuous SOCIAL: Demand for fuel efficiency by consumers Intense Competition More demand for hybrid electric vehicles Resulted in more choices for buyers and searching opportunities in emerging market Estimated within 2015. Continuous TECHNOLOGY: Rising energy cost and increased emissions regulation are likely to increase the demand for hybrid vehicles. Toyota industries has strong focus on hybrid vehicles Demand to reach within next five years. ENVIRONMENTAL: Kyoto protocol The emergence of government regulation for vehicle safety and emissions. Reduction of green house by 14% from the 1990 level within 2012 4years LEGAL: Toyota may became subject to various legal proceedings in respect of various issues, including product liability and infringement of legal property, and Toyota in fact currently subject to a number of pending legal problems Adversely affect the Toyotas future financial condition and results of operation Continuous NOTE: Analysis mainly based on the Japan and US geographic location Appendix-III Porters Five Force Model New entrants Industry Competitors Intensity of Rivalry Buyers Suppliers Substitutes Appendix-IV Value Chain Analysis Reliance on Business association (internationalization)-well connected to each other and with politicians and bureaucrats. Personalized network- The use of personalized /informal network for political influence and mobilization in Japan is a more visible and frequent activity than in many other industrialized countries. Emphasis on harmony- strong emphasis on harmony among firms and policy makers.