Case Analysis: Toyota Corporation
Abstract
For 75 years now, Toyota Motor Company has undergone various transformations from its home plant to other subsidiaries across the world. The company is now renowned for the production of SUVs and hybrid cars, and a number of car models that sell across the world. Based on an assessment of the company using, Nonetheless, this analysis recommends that the company should improve its technology to meet high-performance standards, engage more researchers to study shifts in consumer preferences, enhance its protection of property rights, and decentralized its power to promote a more effective global management strategy.
Introduction
Toyota Corporation is a Japanese automobile company that deals with the designing and manufacturing of various models of cars ranging from Cars, Minivans, Toyota trucks, personal cars to Sports Utility Vehicles (SUVs) and Hybrid cars (Toyota Corp., 2017). The company is an international conglomerate although its headquarters are situated in Aichi, Japan (Toyota Corp., 2017). Within five years of operation, it is believed that Toyota Corporation started in 1936 when an innovative son, Kiichiro Toyoda, converted his father’s company from a Weaving and Spinning Company that started in 1918 to an automobile company.
With the help of British business partners known as Platt Brothers, who had worked with the father since 1918, Kiichiro Toyoda invented the idea of integrating automotive technologies in Toyota. In 1936, Toyota managed to manufacture its first ever passenger car, which they named Model AA and before this development, Toyota Motor Company was born (Toyota Corp., 2017). By 1959, Toyota Motor Company had managed to conquer the internal market, and its first international production plant began in Brazil, South America (Toyota Corp., 2017). With branches in Canada, USA, Japan, Mexico, and distributors almost all over the world, Toyota has gained a sustainable market share since the 1970s.
Environmental Analysis
Competitive Rivalry – in Porter’s Five Forces model, Competitive Rivalry refers to the nature and intensity of competition in a niche market. Porter’s identified number of competitors, quality of differentiation, switching costs, and consumer reputation as some of the factors that define competitive rivalry (Grundy, 2006). The automobile industry is very competitive based on some factors. For Toyota Motor Company, the automobile industry is saturated with several automakers with different human and capital capabilities. Notable competitors include General Motors, Ford, Honda, and Chrysler. However, high customer loyalty and competition characterized by different consumer segments has made Toyota survive the test of time.
Buyer Power– Unlike the past, the automobile industry is nowadays full of buyers. However, the industry has buyers, who purchase these cars as individuals, and hence, the sizes made for the orders are often few for all the companies (Grundy, 2006). The cost of shifting from one manufacturer to another is moderate depending on the availability and strength of the market for the second-hand models (Grundy, 2006). Price is a sensitive issue in the automobile industry, and some customer would go as far as purchasing low-quality models so long as they satisfy their transportation needs (Grundy, 2006). Therefore, buyers have high bargaining power and high prices are serious threats.
The threat of Substitute Products and Services-In the automotive industry, Toyota is facing a tough moment as technology continues to enable an evolution of the previous products and an innovation of new products. In the current automotive industry, there are numerous car models and car designs including Honda and Nissan, who have been following Toyota closely in its pricing strategy, production approaches, and market segmentation strategies. Also, some alternative cars have assured consumers of cost effectiveness, better comfort, and product’s environmental friendliness. Nonetheless, market development, diversification, and exploitation of emerging markets have enabled Toyota to resist competition and maintain a large market share.
The threat of New Entrants– in his viewpoint, Porter’s considered a barrier to innovation, technology protection, entrant’s specialist knowledge, and economies of scale, cost advantages, and time and cost of entry as important factors that influence the ability of the new entrants (Bacanu, 2010). In the automotive industry, the threat of new entrants is weak as the old models such as Toyota have dominated the market due to their early establishment. Such a situation makes it uneasy for emerging competitors to oust the traditional brands (Bacanu, 2010). Moreover, the cost of entering the market is considerably high as the capital needed to establish a new automobile firm is very high. There are few legal barriers protecting the established firms from emerging threats. Strong brand image and sustained reputations of the established firms also difficult for new firms to penetrate.
Bargaining Power of Supplier– According to Hill, Schilling, and Jones (2013, p.56) “powerful suppliers squeeze profits out of an industry by raising the costs of companies in the industry and on the contrary, if suppliers are weak, companies in the industry can force down input prices and demand higher-quality inputs.”
An Internal Analysis of Toyota Motor Company
Strengths
Market Development- Perhaps the most viable forte of Toyota Motors is the ability to have a strategic marketing team that is capable of developing new markets for the products and business ideas of Toyota (Hill, Schilling, & Jones, 2013). Since its inception, the company has been using market development as one of its major strength in development. Being competent in market development has enabled Toyota to gain global presence.
Value, Innovation, and Better pricing– Toyota is a hi-tech and value-driven company (Hill & Jones, 2008). The initial development of the loom was not the only innovation. Since its inception, Toyota has embedded its design processes with great innovation that captures the imagination of many consumers (Hill & Jones, 2008). The company provides hi-tech cars and expensive car products at relatively low prices than most of its competitors.
Resource Capacity– the company, has both tangible and intangible resources that support the growth and stability of the corporate strategies (Hill & Jones, 2008). FY2016 shows that Toyota had an annual income of $252.380 billion. As Bacanu (2010) states, together with financial resources, the company enjoys a huge financial base that is suitable for initiating new ventures and a skilled human capital that is essential for providing a strong intellectual capacity.
Weaknesses
Susceptibility to Imitation- Toyota has historically suffered from imitation, where its close competitors imitate its product and design and strategies, consequently making the innovation of Toyota to lose their intended market value. Imitations have made Toyota keep losing its product value. It was until recently when Toyota began restricting access to its latest equipment and technology by the competitors.
Constant Product Recalls- Toyota has historically suffered from product recalls. This year alone, Toyota has recalled cars worth 2.9 million from all over the world. The latest recalls have been associated with problems in the development of airbags. Defective airbag inflators have been noted in RAV4 SUV, Corolla Sedan, and even other great designs, consequently hurting the reputation of the company.
Current Business-Level Strategy
The business-level strategy of Toyota focuses on product quality, customer focus, and utilization of technology (Bacanu, 2010). Toyota is very keen on providing high-quality products
Major Issues Facing the Company
- The problem of advances in green technology
Recommendations
- Toyota should improve its technology to meet consumer’s high-performance standards
Conclusion
Toyota Motor Corporation is a global leader in the manufacturing of cars. The company emerged from the initial ideas of Kiichiro Toyoda before it successfully expanded across the world. Using Porter’s Five Forces model, it is possible to predict a brilliant future for Toyota based on an evaluation of the weak competitors, the weak threat of the new entrants and the weak competition from the alternative products.
References
Bacanu, B. (2010). Differentiation vs. Low-Cost Strategies in Romania. Management & Marketing, 5(2), 135-142.
Grundy, T. (2006). Rethinking and reinventing Michael Porter’s five forces model. Strategic Change, 15(5), 213-229.
Hill, C. W., Jones, G. R., & Schilling, M. A. (2016). Strategic management: theory: an integrated approach (12th ed.). Cengage Learning.
Toyota Corp. (2017). History of Toyota. Retrieved from http://www.toyotauk.com/about-toyota/history-of-toyota.html
Dear Benjamin,
Thank you for preparing the work.
Nevertheless, it should be corrected (1) to remove the irrelevant information and (2) to keep Toyota company in the center of attention IN EVERY SENTENCE OF THIS ESSAY. Please, (3) remove the numeration from the text and (4) ensure that the text is written in paragraphs with the clear topic sentences, with smooth transitions between them, and with the logical idea development.
Please, carefully read the comments above containing my comments regarding what should be improved and make the necessary corrections. Please, make sure to proofread the work BEFORE UPLOADING IT.
Thank you for your efforts!
Best regards,
Your Mentor Vira
- Here is the customer’s instruction for this section: “ Environmental Analysis-an analysis of the external environment for the company (general and competitive) leading to the OPPORTUNITIES and THREATS. Look at all 6 of the general environmental categories. Also look at the competitive environment to identify opportunities and threats. Applying Porter’s Five Forces model will help, along with looking at any key Complementors that have a major effect on the industry. “
- Let me remind you the requirements of the client for this section: ” The Current Business-Level Strategy the company is pursuing. How does it fit with the life-cycle of the industry and the competitive environment?” Please, add the necessary information.
- Please, enrich the conclusion and use deeper analysis for it. Here is what the client wants: “ Summary and Conclusions- a brief summary of the paper with its findings and conclusions.”