Thoroughly Analyze The Company Toyota Marketing Essay
|✅ Paper Type: Free Essay||✅ Subject: Marketing|
|✅ Wordcount: 4615 words||✅ Published: 1st Jan 2015|
The purpose of carrying out this report is to thoroughly analyze the company Toyota to come out with some idea to improve the company and gain competitive advantages over numbers of competitors there are in the current automobile market.
The scope that we covered to study the company Toyota includes analysis of current situation of Toyota in the automobile market, background check of the company, consider strategic options for the company and recommendations for Toyota. Some approaches are used to examine details of Toyota’s current market situations are analyzing the general market environment, Porter’s Five Force analysis, description of stakeholders and determine the company’s strengths and weaknesses using SWOT analysis.
Some limitations that appear as an obstacle during the working of this assignment are:
Lack of reliable data. Data and facts that we used to carry out this assignment are mostly found in the internet but not solid facts from Toyota Company.
Time consuming. An analysis of internal and external market environment takes considerably large amount of time but it provides more detailed information.
2.0 Background to the organisation
Toyota Motor Corporation is an automobile company based in Japan. Like any other automobile company, Toyota Motor Corporation operates on three major business segments which are designing, manufacturing and sales of automobile products, and also parts and accessories. The company manufactures different types of car including sedans, minivans, sport cars, as well as trucks.
The company was established by Kiichiro Toyoda back in year 1937 and the first vehicle created was the Toyota AA. Toyota sells its car products on all five continents of the world and regarded as one of the biggest car manufacturer in the world. The company currently employs approximately 300,000 people worldwide.
In the year 1959, Toyota opened their first manufacturing plant outside of Japan, in Brazil. Since then, Toyota maintained an idea of localizing both production and design of its products. This also means that Toyota does not only produce vehicles overseas, but also designs them there, with a network of both design and R&D facilities in North America and Europe.
Today, Toyota is one of the world’s largest manufacturers of automobiles in both unit vehicle sales and in revenue. Statistics shows that Toyota produces over 5.5 million vehicles per year, which is equivalent to an incredible figure of one car every six seconds.
3.0 Situation analysis
3.1 General Environment Analysis
In general, the external environment facing the organization includes a general environment and a competitive environment. Talking about general environment it is about the changes that occur in the general environment will directly have an impact on the transcend firms and particular industries.
The external environment of Toyota relates closely to key forces outside the organization with potential to manipulate extensively on their products and services. We will analyze the general environment based on Toyota’s company. There are analyzed and categorized into 5 parts: demographic, economic, sociocultural, global and political.
Demography is the study of the characteristics of human populations, namely size, growth, density, and distribution. The analysis of demographic is able to offer insight into the links between these characteristics and the economic, cultural, geographic etc.
Toyota is known as the most trusted brand all over the world. People usually link the brand Toyota to vehicles; vehicle is officially regarded as a status symbol for Toyota. Some consumers purchase Toyota, mainly because of the brand that makes them look elegant and classy.
Consumers that need vehicles are those who need transportation and those can afford to purchase a vehicle, these potential consumers are segmented as consumers with occupations.
Automobiles industries are majorly affected during inflation period, because automobiles are high-end products especially branded cars. Due to the inflation in year 2000, the prices of Toyota rise from 20% to 30% per annum. However, after 3 years when the economy recovered, the market is back to its normal price again.
Besides, Toyota has to bear with the government tax in different countries. Every countries has different tax rate for automobiles, in Malaysia the tax rate for automobiles is very high, that is why the imported cars such as Toyota in Malaysia costs a bomb to the customers.
During the earthquake happened in Japan on year 2011, Toyota cars were stop supplying to all countries for a short period due to the damage infrastructure. There were no energy supply, transportation system, gas, water, and communication systems due to earthquake. The earthquake causes significant effects on the Japan’s economy and it consequently affected the sales of Toyota.
The vision of Toyota “Toyota will lead the way to the future of mobility, enriching lives around the world with the safest and most responsible ways of moving people. Through our commitment to quality, constant innovation and respect for the planet, we aim to exceed expectations and be rewarded with a smile.
Toyota respects the culture and customs of every nation and contributes to the economic and social development through the corporate activities in the communities. Other than it, Toyota also honored the language and spirit of the law of every nation and undertakes open and fair corporate activities to be a good corporate citizen of the world.
In general, every automotive industry is obligated to obey laws and government regulation set by different countries including vehicle safety and environment matters. Examples emission levels, fuel economy, noise and pollution.
Toyota has developed a practical plan to ensure persistent improvements. In order to comply with the standards of laws and government policy and regulations, Toyota is required to implement safety measures on vehicles.
On addition, Toyota has to face and deal with the tariffs, trade barriers, taxes, levies, exchange controls set by every country. Every country has different laws and regulation, Toyota has to tolerate and deal with it in order to get a permission to import the cars into the country.
– There was a new trade association namely Alliance of Automobile Manufacturers that was to replace the American Automobile Manufacturers Association that consisted only of American’s manufacturers automobile. This new trade association consisted of General Motors, Volkswagen, Volvo, Mazda, Nissan and Toyota as a group. The purpose and goal of Alliance of Automobile Manufacturers Association were to “work together on public policy matters of common interest to provide credible industry information and data, and to seek consistent global regulatory standards.
– The manufacturers started merging with another automobiles company in the late 1990’s. In order to create the largest foreign takeovers in the century, American Automobile companies started to merge with other foreign manufacturers.
3.2 Industry Condition (Five Porter’s Analysis)
Porter’s Five Forces Analysis is an analytical framework that is used to appraise and assess business competitiveness strategies in a specific market.
(i) Threat of Substitute Products
There are only small part of substitute products for automobiles, such as motorbike, bicycle, train, flight, and walking. Among the entire transportation mode, car would be the most suitable and perfect for people from all walks of life. Car has appeared as a necessity in every place as it brings convenient to the individuals.
However, in few cities such as Singapore, BeiJing, TaiPei, Tokyo, New York, Kuala Lumpur, car is no longer a necessity, since in these cities, there are MRT, LRT, Subway provided in every places.
(ii) Intensity of Rivalry among Competitors
In automobile industry, the competition among the industry is very strong. There is a lack of differentiation chances among the automobiles industry, because when the cars are manufactured, the competitors are usually compared to one another immediately.
Besides, common aspect such as price, quality, durability are usually greatly taken into consideration when the consumer purchasing a vehicle. Furthermore, the aspects listed above are almost the same level as other brands. Some offers cheaper and affordable price, some offers better quality, while some offers better durability.
When it comes to advertising the brand, the car manufactures often advertise their cars while comparing their products to other competitor. Thus, Toyota has to be outstanding among its competitors.
The strongest competitors of Toyota include Honda and Perodua (local brand). Honda is also another brand of Japan, the quality and price is almost the same compared to Toyota. Whereas for Perodua, the products are popular with affordable price, and moderate quality compared to Toyota.
(iii) Bargaining Power of Suppliers
In automobile industry, the bargaining powers of suppliers are quite weak.
Example, when manufacturing an automobile, many parts need to manufacture an automobile; accessories are countless to produce an automobile. Thus, in order to accomplish this “mission”, the automobile companies need many suppliers. As a result, there are many suppliers in this industry, and the suppliers appear to be powerless due to overflow of suppliers. If one supplier does not deal with the company, the company still has a lot of options to switch to another supplier.
(iv) Bargaining Power of Buyers
Whereas for the bargaining power of buyers in automobile industry, the power is higher than the bargaining power of supplier. It is not considered to be very high but it is moderately high.
Buyers are the consumers that will buy most of the industries output. The seller and manufacturers rely on the consumers in order to maintain and gain more business because the buyers are considered to be a significant portion of industries revenue. If seller fails to retain their customers, then they are losing the customers to their competitors. Buyers have low switching cost. When the buyers are not happy with current seller, all they need to do is to sell the current car and purchase a new one immediately. However, not every buyer can afford to pay for the car loan if they keep purchase the new car, only the rich buyers can afford it. Also, not many buyers are willing to change their car too frequent. Thus, the buyers are in few numbers.
(v) Threat of New Entrants
In automobile industry, the threat of new entrants is very low compared to other industry.
Automobile industry has already successfully achieved economies of scale in last century; the industry is mature and well-known. If one company wants to compete with the other companies in automobile industry, the company has to achieve the economies of scale first. It means that the company or the manufacturer has to produce automobiles in a huge amount so that consumers can afford to purchase it.
Besides than the economies of scale, new entrant of automobile company need to have a huge amount of capital and fund in order to be able to manufacture the automobiles. Not only that, the company need that fund to sustain research and development, R&D is necessary and compulsory for the innovation required of automobiles.
Last but not least, another high level of barrier to entry is the access to distribution channel. It is necessary for a company to find a dealer in order to delivery their products the customers. The dealership is very limited and it is hard to have wider variety of inventory.
3.3 Description of Key Stakeholders
Toyota is a large distinctive firm. Therefore, it has many stakeholders. Stakeholders are the people who are affected by a firm’s performance and who have claims on its performance. They are classified into 3 main groups which are capital market, product market and organizational.
Capital Market Stakeholders
Based on the info given on 31st March 2012, the three leading shareholders of Toyota are Toyota Motor Corporation, Denso Corporation and Towa Real Estate Company. They have the potential to profit if the company does well, but that comes with the potential to lose if the company does poorly. Toyota’s basic management principal is to ensuring the sustainable profitability of the shareholders and strive to enhance the corporate value. There are three key components of Toyota’s financial strategy in order to increase the revenue of the company which is “growth”, “efficiency” and “stability”. Regarding growth, Toyota plans to implement forward-looking investments to respond to structural shifts in demand and ensure long-term sustainable growth.
Product Market Stakeholders
Toyota’s primary customer is the entire world of people, from age groups 16-80 and above. Based on their principles “customer first”, they are trying to provide an innovative, safe and outstanding high quality product to fulfill a wide variety demands of the customers. They created the Solara to put some sportiness into the Camry, and they had the Celica especially for sport car lovers. Other than that, Prius the most hybrid car is created in order to better for the environment. They make dependable, long lasting economical sedans that are affordable, such as the Camry and Corolla. For the car users who carry a lot, they can choose Sienna and Highlander. Small cars like Matrix are suitable for small family.
Business partners as well as suppliers and dealers work closely with Toyota in manufacturing activities. No matter in good or bad times, Toyota and its suppliers face the same issues and problem together. The global economic crisis has all delivered challenges to suppliers of automotive components. These challenges include logistic failures, product interruption and supply disruption. For instance, the effects of Great East Japan Earthquake and natural disasters in Australia, dealers support a lot during these natural disasters. Therefore, they must built strong and close relationships with each other based on the need for mutual support and a harmonious society.
Toyota Industries is committed to a wide range of social contribution activities that benefit local communities. What Toyota do is promotes environmental conservation and environmental education in local communities. In other words, Toyota minimise the environmental impact throughout the vehicle life cycle, which is from manufacturing period until scrapping of end of life vehicles. Moreover, Toyota strives to save energy, reduce CO2 emissions, use resources wisely through such as recycling.
They must have some type of assurance of security in order to maintain a healthy and productive workforce. Dissatisfied workers can have a tendency to organize which can then have the power to heavily influence the company in a way that management will probably not find helpful. Also, under a labour management relationship based on mutual trust and mutual responsibility, Toyota respects for employees’ diversities such as gender, age, perspective religion, nationality and last but not least, the culture of an employee.
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3.4. SWOT Analysis
Toyota is a global organization with strong position in the automobile market. Toyota sells its vehicle in more than 170 countries and regions worldwide. The primary markets are Japan, North America, Europe and Asia. Toyota has strong brand image. Its brand is a household name which is based on the quality, environmental friendly and also customized range. Other than that, Toyota is an industry leader in manufacturing and production. It maximizes profit through efficient lean manufacturing approaches and also the first mover in car research and development. With high financial strength, the company is more stable. At the same time, it helps to improve the revenues from sales made in the global market.
Car plants needed a huge investment in fixed cost as well as the cost for training and retaining labor purpose. When the car market is facing a downturn, the company could see over capacity. However, if the car market is facing an upturn, it may affect the potential sales due to the under capacity. Therefore, in a condition of exceed supply, car manufactures need to make sure that their products are highly fulfill with customers’ expectation. Most of the products of Toyota are in U.S and also Japan, so it is exposed to fluctuating economic and political conditions those markets.
Toyota now has a reputation for manufacturing hybrid electric vehicles. For instance, Toyota Prius. It is based on the advance technologies developed by the organization. The increasing energy costs and stringent emission regulations enhance the demand of the hybrid electric vehicles because of its high fuel efficiency. In addition, Toyota has also sold on its technology to other manufactures. This action firms up Toyota’s interest and investment in hybrid research and development. Last but not least, the expansion in global also acts as an opportunity for Toyota. This happens in markets such as China, India and Russia where population and demand is increasing.
A fierce competition in the global automotive has increasing the competitive pressure. The competition may affect the automobile unit sales and also influence the financial condition of a company. As economic experience downturn, it will affect the purchasing power of customers especially in new cars. This could lead a decline in new car sales and possible rationalization of dealerships. Other than that, the rising of oil prices may affect customers to buy a new car or they decided not to use their car often. Car markets are also sensitive with the movement in the price of raw materials such as fuel, steel and rubber. As the shift in the exchange rates in the market may affects profits and cost of raw materials.
3.5 Summary of situation analysis
Toyota’s capacity to stay on top of productivity efficiency and quality rankings can be credited to its general environment. From the analysis above, we can observe that how well Toyota makes use of their general environment and turn the unfavorable condition into a favorable one.
Next, the 5 Porter’s Analysis also explained about the factors that cause Toyota to stand up from their competitors. Besides, Toyota also handles the relationship with their key stakeholders very well until they can produce products and services that can satisfy most of customers.
Lastly, to fully understand the situation analysis of Toyota Company, a SWOT analysis is determined and it mainly consists of the Company’s strength, weaknesses, available opportunities, and finally the threats that the Company is experiencing or projected to go through.
4.0 Strategic options for the organization
4.1 Multidomestic Strategy
A multidomestic strategy is an international strategy in which strategic and operating decisions are decentralized to the strategic business unit in each country so as to allow that unit to tailor products to the local market. (Hitt, 2010, p. 203) Toyota needs to focus on competition within each country. They can use a highly decentralized approach which allows each division to focus on a geographic area, region, or country. This approach will place less pressure on headquarters staff because management of country operation is delegated to individual managers in each country. Thus, the effectiveness and efficiency of Toyota will increase from time to time. As a result, Toyota can produce their car which can be better adapted delegated ted to the local markets. In short, the use of multidomestic strategies can expand the firm’s local market share because the firm can pay attention to the needs of the local clients.
4.2 Transnational Strategy
Transnational strategy is an international strategy through which the firm seeks to achieve both global efficiency and local responsiveness. (Hitt, 2010, p. 205). How best to implement a transnational strategy is one of the most complex questions that large multinationals are grappling with today. As a suggestion, Toyota needs to conduct the local market survey in order to understand the market before they penetrate into a particular local market. Besides, Toyota has to be responsive to local demands due to variations in consumers taste and government regulations across countries mean. Thus, Toyota has to confront significant pressures for cost reductions and for local responsiveness. To the almost finished products with many common component parts, Toyota can add local product features, tailoring the finished product to local needs. Thus, Toyota is able to realize many of the benefits of global manufacturing while reacting to pressures for local responsiveness by differentiating its product among national markets.
4.3 Non-equity Strategic Alliance
Non-equity strategic alliance is referring to two or more firms develop a contractual relationship to share some of their unique resources and capabilities to create a competitive advantage. It is one of the strategic alliance strategies. As an option, Toyota Motor can have an agreement with their competitors like Hyundai and Honda to work together to develop a new hybrid system for the use of their product in the future. The agreement is expected to produce more hybrid car in the market and making the hybrid car become popular among the consumers. This agreement will allow Toyota to improve their technology in a shorter time due to the exchange of technology among the co-operate companies. However, these two companies will separately integrate the new hybrid system in their future vehicles. It is obviously show that Toyota and Honda will still be competitors in the future. In short, by sharing research and development costs, the companies can both make more rapid advances in hybrid technology.
5.0 Key selection criteria
Non-equity Strategic Alliance
– Shorter time to implement compared to other two strategies as they only focus on local market
-Need a longer period of time to implement the strategy due to geographical, cultural and language differences.
-Need a longer period of time to produce the outcome as they have to deal with others companies.
– Do not allow the development of scale and thus can be more costly.
-Cost a lot to survey the local market
-Save cost to invest in research
-Managers have little incentive to share knowledge and experience with those in other countries, leading to duplication of activities and reduced economies of scale.
-Limited information sharing reduces the possibility of developing knowledge-based competitive advantage.
-Competition may escalate among the subsidiaries for the firm’s resources because subsidiary managers do not share a common corporate vision.
-Inefficient manufacturing, redundant operations, a proliferation of products designed to meet local needs, and generally higher costs of international operations than other strategies.
– Difficult to use as it will have a conflicting goals
– Cultural differences
– Language barriers
– Handling the functioning of virtual teams (different members may be located at different geographies)
– Technical challenges (the IT systems need to be up to date and should be functioning smoothly at all times)
– Sound knowledge of local market (Consumers’tastes, preferences, buying habits etc.)
-Activities outside scope of original agreement
-Hidden costs, we cannot estimate the actual cost
-Inefficient management because it involve more than one companies
– Information leakage may happen because more people involve in the project
-Loss of competencies as your future products may not as good as your competitors
-Loss of operational control as other companies will have their opinion about operational management
-Partner product or service failure
-Partner unable or unwilling to supply key resources
-Partner take advantage of its position
-Partner experiences financial difficulties
As we compared from the table above, we conclude that the transnational strategy is the most suitable management strategy for company like Toyota. Transnational strategy is challenging because there are a lot of obstacles that might stop them from going on. These include culture differences, language barriers and taste of local customers. However, this strategy is necessary in order to allow an international company to compete in the global market. On the positive view, the effective implementation of a transnational strategy often produces higher performance than does the implementation of either the multidomestic or non-equity strategic alliance. Although it might be cost a huge amount of money for Toyota to understand the local market, research has shown that it will be worth in the long-term view. After Toyota understands the need of local customer’s preference very well, they will definitely able to capture the local market very fast compared to their competitor. With the transnational strategy, Toyota will be becoming the biggest carmaker in the world eventually.
In conclusion, Toyota Motor Corporation is the world’s second largest automaker. It’s a Japan-based company mainly engaged in the design, manufacture and sale of car products which are including minivans, passenger cars, and trucks and so on. Besides, Toyota makes automotive part and some accessories for its own use and for sale to others. Toyota sells its vehicles in more than 170 countries and regions worldwide. The primary markets are Japan, America, Asia and Europe. Toyota is headquartered in Tokyo, Japan.
From this research, we come to a conclusion that the management strategy that Toyota can implement is the transnational strategy. This strategy may have some obstacles but it is necessary for achieving success in global market. The upside of this strategy is that an effective implementation of the transnational strategy usually helps the company produce higher performance. Cost is another obstacle but it is necessary to achieve long term goals. With this strategy and everything works smoothly, Toyota will someday become the world’s biggest automobile company in the industry.
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