Toyota has been in the market since 1867. The company was initially named as Toyoda by Japanese founder. But later in the year of 1929, the company was sold to a British company which later changed the company name to Toyota. Since the company was formed till today, the Toyota has been dedicated to, just not to produce the vehicles but also to bring the most innovative machines in the market.
In the 1950s the company faced some serious financial crisis but later on, due to its strong and effective policies and strategies the company sooner overcame its financial weaknesses and regain its market shares. After recovering from the financial crisis, the company did not focus only on financial aspect but also improved its quality. In the year of 195, the Toyota won the Deming Application Prize for quality control. In the following year, Toyota partnership with Hino Motors Ltd because there was huge demand from the customers and company planned to expand its operations.
In 1984, the Toyota signed agreement of joint venture with one the biggest market leader called General Motors. Meanwhile the Toyota also started its production plants into other parts of the world to reduce the cost and improve the efficiency. In the year of 1997, Toyota launched the world’s first mass-produced hybrid car.
Also, the company also entered into Formula One World Championship and produced the cars that can be used in sports. Later in 2004, the company launched Toyota Partner Robot. That clearly shows the technical capabilities of the company too. Today the company is known for its technical achievements and financial and market strengths. Although in recent years, the company has faced some serious issues in terms of finances and technicality but it has managed to build its brand and currently known as the market leader (Toyota, 2011).
The company has been producing various brands i.e. Yaris, Corolla, Camry, Venza, Prius, Scion xB, xC, xD and many others. The company does not only concentrate on manufacturing but also focus on current environmental and health & safety issues that can control the Co2 emission. The technologies that are used are up to highest standards. The produced machines are safe and enable the drivers to enjoy the most comfortable and luxurious journey.
The current business environment for automotive industry has been in critical conditions especially after global economical and financial crisis. It has become very difficult for the market players to not only increase the market shares but also to sustain in the current market and keep the market shares.
According to the industry experts and analysts, the auto manufacturing companies round the globe are now considering investing in new power train technologies, new plants, alternative fuel technologies, and high growth market. It has also been predicted by the experts that over the next five years the market shares of manufacturing and selling the vehicles will move towards the U.S manufacturers. But other top manufacturing companies will also concentrate on investing in alternative fuel vehicles to maintain and increase their market shares.
Among all the top market players, it has also been predicted that Ford Motors will be able to increase its market shares up to 43% as compared to with 29% and 13% in 2010 and 2009 respectively. General Motors is also expected to increase its market shares by 40% in the following 5 years as compared 13% and 15% in 2010 and 2009 respectively. Chrysler, on the other side also improved its market shares by 24% as compared to increase of 7.5% in the year of 2010.
A survey from KPMG found out that as compared to 2010, a part from U.S manufacturers, Volkswagen (was at number 4), Hyundai (was at no 2), Indian manufacturers (were at no 3) and BMW (was at no 9) managed themselves to be as the top 5 five market shares winners. Ford, Honda, GM and Toyota were ranked at 6th, 7th, 8th and 9th positions respectively.
Especially after the global economical and financial crisis, the automotive manufacturers found no other way but to inject huge capitals in the research and development to increase the market shares and ensure long term sustainability in the market. All the efforts and capital have produced the positive outcomes in terms of growth but on the other hand, it has created a complexity of intense competition (KPMG, 2011).
In India, the growth of automotive sales has been increased by 39.5% last year. It was recorded as the strongest growth in the last whole decade. China is one of the largest automotive markets in the world, also seen the significant growth as 33.2% in April 2010. The China Association of Auto Manufacturing expected the total sales of 15 million units in the year of 2010 which was increase of 10% as compared to 2009.
Also, the Japan also managed to increase the auto sales by 34% to 222,095 units in 2010. Only in Japan, alone Toyota increased its sales by 50% as compared to last year, excluding its Lexus brand. The sales of Honda and Nissan in Japan also increased by 13% and 31% respectively.
In Europe, Spain’s automotive market increased by 34% in April 2010, as compared to the same period of last year. But Germany’s auto sales decreased by 32% for the same period. Great Briton had seen the growth of 11.5% and France recorded a sales increased by 1.9%. In North America whole, the sales of automotive increased by 20% as compared to previous year.
It seems from the above growth rates in many countries around the globe that although the automotive manufacturers could not achieve their expected targets but overall industry have grown with significant rates. Also, the market gurus and analysts are expecting that in the following five years, the industry will grow further (EI, 2010).
- Since the Toyota has started its manufacturing factories, the sales have grown significantly.
- The Toyota id operating in more than 170 countries, being the market leader automotive industry.
- Toyota has also been working on Hybrid Technology, Advanced Driving Support System, Next Generation Mobility, Partner Robot, Next-Generation Batteries and Biotechnology at a time. So far the company has invested million of US dollars and in the final stages to produce the positive outcomes.
- The company is one of the largest car manufacturers in the world. In the first quarter of 2008, the company sold more cars than any other market players. It also shows the production capabilities of Toyota.
- Toyota owns Scion brands and Lexus which are also known as some of the biggest and known brad around the globe.
- The company majority of shareholding stakes in Hino Motors & Daihatsu and minority shareholding stakes in Isuzu Motors, Yamaha Motors, Fuji Heavy Industries & Mitsubishi Aircraft Corporation. It shows the financial health of the company.
- As compared to 2009, the company could not manage the sales to be sustained and it decreased from 7.7%.
- Due to global economical and financial crisis, the company has badly affected. Means there was no back up strategy to keep the market shares maintained.
- Recall of cars in the start and end of 2010, shows the weaknesses of research and development department and production departments.
- 27% of Toyota potential buyers have changed their due to technical issues with the produced Toyota cars. The on-going technical issues in cars will lead the company to lose the market shares.
- As compared to first half of FY 2010, the net income of the Toyota was decreased by ¥4,931 million in first half of FY 2011.
- Growth in sales is the good opportunity for Toyota to increase its market shares.
- Adopted new technologies and innovative design and style may help the company to be the first one in the market to introduce and become the market leaders.
- Increase in inflation and interest rates around the globe may affect the purchasing power of the buyers and customers.
- Financial and economic gurus are expecting the crisis to hot again and this time it will impact harder than before.
- Joint-Ventures in auto manufacturing industries may affect the market position of Toyota.
Analysis of business Strategies:
This part of the report includes the thorough analysis of the business strategies that the company has adopted in order to grow its business. In order to serve the purpose several models are used to analyze the business strategy of company.
Porter’s Generic Strategies:
According to Porter’s generic strategies, the business strategy may fall in to one of the two or in both categories naming cost leadership and differentiation, as the model below suggests.
Toyota has adopted many strategies for the business growth as in the year 2002 the management released the new concept of Global Vision 2010, in which the management suggested that it will be constructing cost competitiveness in the recent century, and it has been very effecting since Toyota is expecting to save more than $2.7 billion per year, this is because the successful implementation of cost saving strategy called VI stands for value innovation which was initiated in 2005, according to this approach; the cars manufactured globally and locally will include the thousand of components in a car by module and systematic way. By this approach Toyota expects to be more competitive in the global market (Kotler, 1972).
From the above approach of the company, it can be rightly said that the company is focusing on the cost saving which will result in the cost leadership of the company.
Porter’s five forces:
According to Porter’s five forces frame work which describes that there are five forces which are on the business, and company should develop appropriate strategy to equalize these forces which will result in the competitive edge over the rivals (David, 2008).
According to the above model, the business strategy of the Toyota motors is quite strong, apart from the fact that there is huge rival scenario present in the global market as there are some very huge players like Honda, Ford, GM and many others, therefore the threat of the substitute is relatively high in this industry. As far as the threat of new entrant is concern, this force is very weak as entering in to automobile industry requires huge amount of capital and then again to compete with huge players is again very difficult, furthermore the companies have developed kind of oligopoly in some countries like in Pakistan, there are few brands which can be observed. The buying power of the consumer depends upon the product, as the products manufactured by the Toyota are categorized, high quality products cost high for the consumer and vice versa, the company has managed to develop a business strategy by which it can focus on every segment of the market by delivering different products.
The supplier power is relatively high, as the material used by the company is of high cost and the rising cost of the raw material has also resulted in increase in the prices of raw material hence resulting in more power for suppliers.
What might have done differently?
The company instead of having the cost saving structure it should have focus on being differentiating the products from others, like in 2008 the Toyota Company initiated to develop the environmental protection, in order to serve the purpose, the company ought to produce low emission cars, likewise the company should have invested more in the research and development department in order to develop the electrical cars, which are to be produced by the biggest rival Honda Motors.
Similarly the product range of the company can also be extended, like Toyota Bikes are not much of a success as compared to the Honda, and similarly the ATVs produced by Honda are much better than the Toyota. Moreover these products are not found in the developing markets. The approach for Toyota to be more cost effective has no issues, but the money saved should be invested in the appropriate place in the business, like Honda is not only producing vehicles but also providing mechanical home appliance which may include grass cutter or generators, Toyota can also diversify its business by having appropriate business strategies.
There are many issues that are currently being faced by the Toyota. Some of the key issues are;
- In Jan & December 2010, the company announced recall due to issues with accelerator pedals & certain 2011 Sienna vehicles to replace the stop lamp switch bracket. It clearly shows the in-efficiency of R&D and production departments (Toyota, 2010 & Bunkley, 2010).
- Due to recalling its products and machines in recent months, there is high risk of one-dimensional brand image.
- The recent survey about the Toyota found that 27% of potential buyers of Toyota vehicles are looking for other options because of due to technical and manufacturing issues (ManuN, 2010).
- As compared to first half of FY 2010, the net income of the Toyota was decreased by ¥4,931 million in first half of FY 2011 (Toyota, 2010).
- As compared to 2nd Quarter of 2010, the unit sales of 2nd quarter 2011 in the regions of North America and Europe have been decreased by 2,509 and 41,496 respectively.
- Total revenue of the company in the FY 2010 has been decreased by 8.7%.
- Total sales of Vehicles units have also been decreased in 2010 from 7,567,000 to 7,237,000, 5.4% as compared to previous year (Toyota, 2010).
While preparing the above report it has been noted that Toyota has been one of the leading market player in automotive industry. The company has strong market shares and significant growth rates in the past years. The company does not only focus on its customers but also values to its employees, shareholders, business partners and all the other stakeholders.
But, since the global economical and financial crisis affected the business world, there have many issues that Toyota has been facing. Some of the factors are external and some of the factors are within the company. One of the biggest issues that has been facing by the company is the re-call of its product line. This has affected the company’s brand image and decrease the sales volume in some parts of the world.
Overall industry analysis is showing that the overall market has been growing and almost all of the players in the same industry have improved their performances too. Customers are found to be more conscious about the brands and are looking for new technologies and comfort. The above SWOT analysis clearly shows that Toyota has real potential to overcome its technical issues and can not only regain its market shares in North America & Europe but also increase it.
It has therefore suggested to the company to adopt the pull and push strategies both to regain and increase its market shares. Both of the strategies will enable the company to attract the customers and increase the sales and profitability. The tactics have also be defined in the above report to ensure that Toyota adopts the most efficient and effective tools to achieve its marketing and strategic targets.
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