SWOT Analysis on Toyota Car Company
In the modern business environment, the market is
fierce and aggressive. Therefore, the established companies should survive and
compete through the development of distinctive and unique capabilities to gain
a competitive edge via utilization of core competencies. The competencies
should outline the unique and fundamental know-how possessed by the business
entity. In the developing world, for instance, business enterprises operate in
increasingly complex and severely regulated environments. Hence, the
organizational strategic plan should entail utilization of environmental and
background influence coupled with core competencies. Capabilities such as these
are specific and ensure that the organization can take over a leading role in
the development of innovative products that ensures survival due to its
competitive nature. In today’s business environment, customers consider quality
and performance of a product rather than the price tag, thus amplifying the
essence of effective management and the process of development of new
products.
Toyota Company is an automotive manufacturer
headquartered in Aichi Toyota Japan. It has more than 330, 000 workers
worldwide and is ranked 12th as one of the largest corporations in
terms of revenue generated annually. Only General Motors and Volkswagen are
ahead of Toyota in terms of Automobile manufacturing. In fact, since Toyota’s
conception, it has produced more than 200 million vehicles. It is listed in Japan
as the largest company by market capitalization. Kiichiro Toyoda founded the
organization in the year 1937 as a diversification and a spinoff from the
family owned Toyota industries Inc. (Ireland 242). Today, Toyota produces motor
vehicles under five brands namely Isuzu, Yamaha, and Daihatsu. Others include
Lexus and Hino.
SWOT Analysis
Strengths
·
Global organization
Toyota is a reputed multinational with plants and
operations across more than 170 countries. This stamps its position as a market
leader a trendsetter, given its sophisticated network of suppliers, logistics
and service delivery. It is clear that any corporation that wishes to compete
with Toyota has to put its global presence and dominance into perspective.
·
High Financial Strength
Toyota boasts of an annual sales growth of more than
29.5% and a sales turnover of 150, 000 million dollars as at 2012. This enables
the organization to invest heavily in research and development activities to
manufacture innovative products using the latest technology.
·
Brand Image
Toyota has a strong brand image centered on
environmental friendliness and sustainability, customized range of products,
and quality and durable products courtesy of technological investments and
research. Toyota’s strategic management team understands the importance of
considering the impacts of its products to the environment. As the planet move
closer towards eliminating products that rely on non-renewable sources of
energy, Toyota is at the forefront in innovating the next generation of cars
that use solar and electricity to minimize carbon emissions.
·
Industrial Leader in Production and Manufacturing
Toyota maximizes its profitability by incorporating
lean and efficient approaches of manufacturing automobiles for instance total
quality management. in addition, Just In Time (JIT) production ensures that the
company saves its financial resources by eliminating the need for incurring
warehousing costs for raw materials and factory outputs. Worth mentioning also
is that the firm is a research leader, especially in the field of
environmentally friendly automobiles.
·
Excellent Market Penetration
It is not easy for large multinationals to penetrate
into new markets in the developed or the developing world, given strict
requirements and regulations aimed at protecting local markets, producers, and
business corporations. However, Toyota has successfully launched its operations
in global markets such as the United States and China. Its ability to fend off
strong competition from the already established organizations in these
countries demonstrates Toyota’s strength and resilience.
Weaknesses
·
Often regarded as a Foreign Importer
Most of Toyota's products are manufactured in Japan.
They are then exported to other countries in the developing world. A strategic move such as this has elicited a
sharp reaction from business activists and governments of these countries. They
are opposed to what they view as denial of job opportunities to the equally
competent local workers to produce Toyota’s automobiles from within the
countries’ borders to enable locals to reap the economic benefits.
·
Production Capacity
As Toyota conduct most of its productions within
Japan, most of its competitors are strategically positioning themselves in
distinct manufacturing locations all over the globe. This enables them to tap
into unprecedented benefits of such as taking advantage of efficiency in
nearness to raw materials and cheaper labor in countries like India, China, and
Brazil.
·
2005 Quality Issues
Toyota has been sharply criticized for 2005
large-scale recall of ‘below standard and quality’ products. It tarnished the
corporation's brand and image and it is yet to fully recover from the incident.
Even though significant strides have since been made to ensure the quality of
its automobiles, Toyota is yet to shake off the dark patch it acquired in the
process. However, it has currently embarked on a campaign to market its
products and to assure loyal customers of their quality and durability.
Opportunities
·
Innovation
Toyota is the first car manufacturing company to
innovate and to mass-produce a hybrid vehicle that switches electricity and gas
to power its engine. For instance, in 2013, the firm released Prius model that is based on advanced
technology to minimize energy consumption and to lower carbon emission into the
atmosphere (Vezzoli and Ezio 100). Given that at the time the oil prices were
selling at an all-time high, it resulted in widespread investment and adoption
of the new car model, which resulted in a widened portfolio especially for
customers opting for alternative cars apart from fuel guzzlers.
·
Expansion into New Market Segments
Toyota has a potential of expanding aggressively into
new market segments both in the developing and developed word. For example, the
firm recently launched Toyota Aygo model whose sleek design is intended to woo
a younger generation of customers. So far, Aygo model has achieved success in
parts of Eastern Europe, the United States, and Japan.
·
Production of Fuel-Efficient Cars
The future of automobile industry hinges on fuel
efficiency, sustainability, quality and cost. The governments in most countries
are tightening rules and regulations to make it harder for pollutant cars to
penetrate the market. Already, Toyota has invested heavily in the development
of next generation of sustainable cars. Therefore, it has an opportunity of
gaining a larger market segment should it continue its current trend.
·
Responding to Social Wants and Institutional Needs
Toyota’s Eco-VAS (Eco-Vehicle Assessment System)
assists in disposal, usage and production of motor vehicle components that
minimize the impact on the environment hence assisting in the manufacture if
hybrid fuels and electric cars to respond to institutional needs and social
wants (Schaltegger et al., 365). Besides, the corporation has relentlessly
continued its global expansion in countries such as Russia, India, and African
states where demand and population are rising steeply.
Threats
·
Increased Competition
Car manufacturing market, especially in Asia, is
saturated with cheaper products from India and China. It is becoming
increasingly hard for Toyota to sustain its competition in such countries where
it once dominated the market. As more Asian states such as Vietnam, Indonesia,
and the Philippines become industrialized, Toyota faces a threat of a shutdown
of its operation in these countries. Besides, other multinational car
manufacturers like Ford, Mercedes, and General Motors are launching intense
marketing campaigns aimed at increasing their global market share, hence
raising market tensions and competitive pressures.
·
Shifting Exchange Rates
Economic turmoil since 2008 has resulted in
unpredictable shifts on exchange rates. As a result, Yen (Japanese currency) has lost significant value in the stock
market which has led to unprecedented losses to Toyota. Surging costs of raw
materials due to shifts in rates of currency exchange has also affected the
firm’s profitability.
·
Economic Recession
Over the past decade, the Japanese economy has
performed poorly. In fact, there are predictions of long-term recession if the
government fails to institute measures to tame the tide. Negative projections
such as these scare off Toyota investors and also affect the rate of purchases
for new cars in the affected countries.
·
Demographic Changes
Industrialized states are including Japan, UK, Germany
and other European states are experiencing slowing population growth. It
implies that the number large families are on a decline, thus undermining the
demand and requirements for family cars. Therefore, the sale of Toyota cars in
this segment has diminished, hurting the overall annual sales revenue and
profitability.
·
Usage
Regulatory authorities in different countries
discourage use of private means of transport. For example, it is becoming
mandatory for some learning institution to provide bus transport services for
learners from their homes to the learning environment, thus eliminating the
need for private transport. In addition, organizations are restricting business
travel by providing alternative means of holding meetings such as video and
teleconferencing. Cycling is gaining prominence in the developed world given
its health benefits and environmental concern. As fuel prices rise, people are
necessitated to minimize the number of cars in use.
Strategies
Weaknesses to Strengths
Success and survival of Toyota in a modern business
environment depend on constant review and implementation of updated strategies
to retain its competitive edge and to maintain or increase its global market
share. In a first bold move, the organization should set up manufacturing
plants in countries such as India, Philippines and China and South Africa to
tap into benefits such as nearness to cheap labor and raw materials. In this
way, Toyota averts incurrence of transport and logistical costs hence redirect
the resources to research and development to boost innovation.
Furthermore, Toyota should diversify its production
bases from the United States and Japan to other strategic areas of the globe to
improve its production capacity. If this is done, Toyota will launch a direct
and effective competition to its rivals such as Ford and General Motors that
are strategically placed worldwide (Ghemawat 98). To avoid recurrence of 2005’s
failure to meet quality standards, and incurrence of excessive product recall
costs, Toyota should invest more in improving the product quality to meet the
international standards and to position the organization as one of the dominant
firms in the automobile industry. Achieving this goal calls for benchmarking
from other automakers such as Volkswagen and Land Rovers in Germany and
UK. Besides, the management should
assess the quality of production periodically to ensure adherence to the
required standards by global industry regulators.
Threats to Opportunities
As the global automobile market becomes saturated with
cheaper product, the only way that Toyota can survive is to produce more
quality cars at a cheaper price. The incurrence of marketing costs is
inevitable though the return on investment will be higher when market
conditions are stable. Therefore, there is a need for Toyota to invest heavily
research and development for an introduction of innovated products that meet
the malleable customer needs.
Taming the shifting exchange rates call for utilization
of international currencies such as Chinese Renminbi,
Euro, and US dollar to minimize the risk of overreliance on the volatile Yen in the international market. A
diversification such as this guarantees Toyota of financial stability amid
turbulent financial markets and poor economic projections in Japan, EU, and the
United States. It is true that the population in industrialized nations is
declining rapidly, however, in the developing economies such as India, China,
Vietnam, and Africa, the population is rising steadily. In fact, China and
India constitutes a third of the global population. Therefore, Toyota’s
attention should shift towards these emerging markets to capitalize on the
needs of the growing middle class.
In summary, it is clear that Toyota faces a dilemma of
diversifying its production while expanding the manufacturing plants to other
strategic global locations apart from the United States and Japan. The move is
aimed at gaining a competitive advantage over automobile manufacture start-ups mushrooming
in China, India, Philippines and other emerging economies. It is important for
Toyota’s leadership to admit the threat of market share loss as other rivals
gain prominence on a global stage. However, the management should intervene by
implementing innovative strategies such as investment in research and
development, global marketing and product promotion, and production of
environmentally sustainable cars.
References
Ghemawat, Pankaj. "Regional Strategies for Global Leadership." Harvard Business Review 83.12 (2005): 96-99. Print.
Ireland, R D, Robert E.
Hoskisson, and Michael A. Hitt. Understanding
Business Strategy: Concepts and Cases. Mason, OH: South-Western Cengage
Learning, 2014. 240-251. Print.
Schaltegger, S, Martin Bennett,
and Roger Burritt. Sustainability
Accounting and Reporting. Dordrecht: Springer, 2011: 360-265. Internet
resource.
Vezzoli, Carlo, and Ezio
Manzini. Design for
Environmental Sustainability. Berlin: Springer, 2012: 92-106. Print.
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