Toyota: Strategic Company Analysis Report
(2701 words)
1.0 Executive Summary
Toyota is a major manufacturer and distributor of automobiles. Being a main player in the automobile industry, the company has acquired several essential business strengths that made it succeed for a number of years. Aside from making products carrying popular brand names, the company also takes pride of its product lines and innovative staff. Despite their strengths, Toyota has also encountered different problems that need to be addressed. These include the global financial crisis as well as the growing competition in the industry. To address these identified business concerns, it has been recommended that the company should consider limiting its product portfolio as well as conducting its target markets. These would help the company stabilize its financial status through sales generation and cost reduction.
2.0 Company Description
The company under consideration is Toyota Motor Corporation. Being among the premier auto-manufacturing firms in the world, it offers a vast variety of automobiles from mini-vehicles to huge trucks. It was established in 1957 by Kiichiro Toyoda, son of Japan’s “King of Inventors” Sakichi Toyoda (Toyota, 2005) Along with the brands of Toyota, the company similarly holds the brands of Lexus, Daihatsu and Hino. All of these brands have sold over six million units from January to September of the year 2005. The company manages over sixty plants all over the world which generates and develops the Lexus and Toyota vehicles along with its component parts.
The country of Japan is the centre of the operations of the company. In the country alone, there are a total of twelve plants within the Toyota City and the other parts of the Aichi Prefecture. Similarly, there are also manufacturing companies in Kyushu, Hokkaido, and Tohoku. On the other hand, the company has over fifty manufacturing companies overseas. Outside Japan, manufacturing plants are located in twenty-six countries and regions. The company employs their own kind of quality model.
3.0 Environmental Analysis
Based on the framework developed by Kotler (1984), a marketing plan must contain five basic elements. These include situation analysis, marketing objectives and goals, marketing strategy, marketing action plan and marketing controls. In the situation analysis, the aim is to analyze the environment of the business internally and externally. Specifically, the SWOT analysis is the tool used for identifying a company’s strengths, weaknesses, opportunities and threats. It is an analytical process that requires the search for a strategic fit between external opportunities and internal strengths while working around external threats and internal weaknesses (Hunger & Wheelen, 1996).
The strategy must be consistent with the organization’s culture. Finally the organizational resources must be available to actually implement the strategy that was formulated. Without the proper people, skills, abilities, finances and physical resources, the strategy cannot be implemented (Buhler, 1994). Below is the SWOT Analysis for Toyota.
Strengths
The company’s new investment in factories in China and United States has shown increase in profit as compared on the motor industry trends. This is because the company has been able to have the right mix of products for their target. Hence, one of their strengths is their targeting, segmenting and positioning approach.
The company has been able to use strategy like Toyota Production System to compete with their rival companies like Ford which they outgrow in 2003 to become the second largest automobile maker in the World. This is due to various factors which include diversified range of products, focused on lean manufacturing and quality.
The marketing strategy of the company has been able to satisfy the needs of their target market and the company has strong brand established in the global market.
Weaknesses
One of the weaknesses of the company is the inability to give consideration of the fluctuating economic as well as political situations of the host countries like Japan or US.
Toyota also needs to keep manufacturing cars so as to retain their operational effectiveness. It is said that car plants represents huge investment in terms of the high fixed costs, and the high cost of training and development as well as employee retention. hence, if the car market experience downfall, Toyota could see over capacity.
Opportunities
Toyota has the reputation for providing environmentally friendly automobiles. For instance Toyota has been able to produce Prius. Such vehicle is based upon the technologies created by the company itself.
In addition, the company can also move to investing in hybrid research and development which they can sell to other industries.
Toyota is targeting the ‘urban youth’ market. In this regard, the Toyota has launched their new Aygo, which targets streetwise youth market as well ass attempt to capture the nature of dance as well as DJ and hip hop.
Threats
One of the threats of the company is product recall which is also the problems of most vehicle manufacturers. For instance, in 2005, the company had to recall sports utility vehicles as well as their pick up trucks because of the problems in suspension systems.
The company is also facing tremendous competitive environment in the automobile market. Accordingly, the company is facing stiff competition with new entrants coming to the market from South Korea, China and other plans in Eastern Europe. Toyota is also exposed to different movement in the price of the raw materials like fuel, steel and rubber which can serve as a potential threat for the company.
4.0 Resource and Key capabilities
- Capabilities
Being one of the major manufacturers and distributors in the automobile industries, Toyota has a number of essential capabilities. One of which is its ability to produce unique and marketable products. Through its product development initiatives, the company is capable of making its innovative automotive products stand out from the rest and meet the needs of its customers. Another important capability is its global reach and connections. By establishing a number of offices abroad, Toyota is able to learn more about its foreign markets and distribute its products more easily. Finally, the company is also capable of supporting multiple marketing means. In particular, it employs various means of promotion and communication strategies in order to market its product and establish stronger relations with its customers.
Part of the operational management system of Toyota includes the management of the supply chain. The pattern and organization of a supply chain is perceptibly a comprehensive topic, concerning inter-dependencies between research and development, marketing and production roles, creating considerable courses of goods and technical, market and financial information. The geographical arrangement of a supply chain relies on location-precise and relational components (Levy, 1995) Location-precise components, like wages and resource accessibility; establish the most favourable location for every action in the chain when accounted separately from the rest of the chain. Relational elements manipulate the cost of incorporating actions in the chain and rely on the connection involving one action and the rest of the chain.
Aside from the supply chain management approach, the operation management is also integrated with the human resource management strategy employed in the company. The human resource management of Toyota adheres to the technical and managerial components of its operation management, i.e. flexible production or the alleged Toyota production system. Here it is sufficient to sum up its key attributes. These include the employment of multi-functional equipments needing the employees’ programming capabilities. Another is multi-skilling of employees for diverse duties in a teamwork setting. The third is the just-in-time delivery as an alternative of the “just-in-case” inventories of work-in-process elements down the assembly line, and in-process quality examination by line-assemblers as opposed to by industrial engineers. The fourth is a current of proposals from shop-floor employees who shape the quality control circles for constant development (kaizen) (Liker, 2004). The fifth is the long-standing, trust-founded inter-company connections with suppliers and “just-in-time” delivery of outsourced components. Last is the ascendancy of outsourcing above in-house manufacture of parts, components, and accessories (PCAs) apart from important components like engines.
- Resources
Core competencies of the company also represent its competitive advantages; these include features of the company that enable it to overcome business competition and other relevant challenges. In Toyota’s case, one of these core competencies is its workforce or people. Talent and skills are among the most important factors automobile industries business must look for in its employees. Through these, the company will be able to design products that meet the customers’ standards. This is considered a core competency as it is challenging to employ talented and highly-skilled staff members. Another important core competency of Toyota is its distribution channels. By means of utilizing foreign retailers and distributors, the company is able to enter foreign markets and establish greater global coverage. This is a core competency as the company was able to overcome the risks of international business operations; in turn, this competency factor adds to the profitability of the company. Lastly, the product brands the company carries are also essential core competencies. Through the popularity of the brands names of Toyota products, the company is able to use brand identity to attract more customers as well as build regular buyers.
Toyota tries to preserve its home-grown economic model such as the values it practices in its business practices to be able to retain their competitive advantage. Indeed, it is a hard task for the company to preserve its locally conceptualized model while maintaining linkages with the global economy (Liker, 2003, 2004). However, because critical success factors are established as key aspects needed by a company, this has become easier in dealing with the issue of globalization. The latest developments in the company proved that it is stronger than ever, emerging victorious from otherwise discouraging situations. In order for the said system to work at your advantage, there is also the need for you to follow the so-called “14 Toyota Way Principles”. This operating philosophy serves as a guide for its management (Toyota, 2007).
This is the very core reason why Toyota, despite the competitors’ effort of imitation, continues to gain market share and huge profits continues on building new plants, retains a harmonious relation with its supplier and enthusiastic workforce, with its labor costs retained at a lower amount compared to others. They are also described as “the fastest runner in the race” in auto industry. Production efficiency helps them reach that point. Their record (most productive) of 27.9 hours per-vehicle time surpasses the record of their competitors like Ford and Chrysler. The tools of the TPS seem to work smoothly for them. These tools are lean, agile, TQM, TPM, re-engineering, just in time, cellular/continuous workflow, etc. TPS should not only be a cost-based strategy, it should also be a value-based one. The full potential of the TPS is as an operational solution ready to remake entire organizations – both at the process and management levels.
5.0 Assessment
- Implementation
From the environmental and industrial analysis done for Toyota, the discussion was able to identify essential aspects in the automobile industries. These aspects include quality, people, supply chain management and creativity. As Toyota has these important aspects, the company was able to make through the industry. Specifically, the company succeeded through its strong brand identity, years of operations as well as established product lines. However, there are still problems that would have to be resolved. Its main problem is centered on its declining sales as well as the increasing level of competition within the automobile industries sector. Annual reports of the company revealed that the sales degeneration of the company is brought about by the diversity of its product portfolio; while this used to be essential company strength, some of the product lines of the company are not as profitable anymore.
- Contingency Planning
The cost reduction and sales generation are actually joint controls for the company to address its financial issue. In order to reduce the expenses incurred by the company, Toyota should consider and evaluate its existing product lines. As the company manages a large array of product brands, it has also been allotting resources on items that are not making much impact to the market, resulting to significant wastes. Thus, it is probably helpful if the company would concentrate its resources on more salable automobile industries items. Aside from this, reducing the product portfolio of the company will also make the management of its supply chain less complicated as well as less costly.
The company should also consider studying its consumers more. With consumer research, the company will be able to identify what factors are causing the decreasing market hold of the company. Through this, the company can have their products customized according to these identified factors, resulting to a possible sales increase. In general the plan for Toyota is focused on company waste reduction and operational development for higher customer satisfaction; all of these are directed towards the aimed stabilization of the company’s financial status.
6.0 Recommendation
In order to address the company’s financial concerns and economic fluctuation, the strategic recommendation given in this paper is centered on cost reduction and sales generation. With these recommendations, the plan would involve the reduction of the company’s product portfolio, resulting to less resource allocation and simpler supply chain systems. In order to generate greater sales, it has been suggested that the company should consider carrying out new consumer researches; considering that consumer trends are rapidly changing, the company should identify the new interest or preferences of the customers in terms of automobile industries items. Through this, Toyota will be able to modify its products based on these new trends. By means of the recommended strategies, Toyota would likely achieve a more stabilized financial status, allowing it to formulate other strategies that would overcome its issue on business competition.
7.0 Conclusion
The analysis of Toyota’s environment showed that the business has successfully operated for year through its distinct strengths, which include its brand identity, workforce, and long years of operation as well as product diversity. Aside from these, the analysis of the industry also emphasized that creativity; qualities, management of supply chains as well as the services delivered to the customers are some of the most important aspects that are present among the companies operating within this business sector. Despite being a major player in the industry, the analysis identified some important issues TOYOTA would have to address so as to continue operating successfully. It main business concern is it the decreasing salability of some of its product brands as well as strategic failures that resulted to major company losses. Moreover, the hold of the company over a large market share has been decreasing mainly due to the rise of competition level in the industry. This then indicates that the current practices and strategies of the company are no longer effective and that changes would have to be done.
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