Toyota Motor Vehicles: SWOT Analysis

Toyota Motor Vehicles

Background

Toyota Motor Corporation is a famous Japanese multinational corporation, and is considered the world’s second largest automaker of automobiles. The founder of Toyota is Kiichiro Toyoda, who born in 1894, and the son of Sakichi Toyoda, who was popular in the invention of the automatic loom.

Toyota motors became a mainstay of Japan economy 1n 1960. And it get great growth in this time. And the annual sale of TMC in Japan was about one million dollar I 1962

Introduction

Toyota Motor Corporation, being a multinational is the world’s largest automaker in terms of sales volume. As of 2008, Toyota employs approximately 316,000 people around the world in comparison to second ranked automaker General Motors’ 266,000 employees. The company is mainly engaged in automobile business and financial business.

In end of 1989, Toyota started its manufacturing in Europe by having two main manufacturing plants working in UK. It provides all ranges of cars from mini vehicles to big trucks.

Toyota Philosophy

Toyota’s management philosophy has evolved from the company’s origins and has been reflected in the terms “Lean Manufacturing” and Just In Time Production, which it was instrumental in developing. The Toyota Way has four components: 1) Long-term thinking as a basis for management decisions, 2) a process for problem-solving, 3) adding value to the organization by developing its people, and 4) recognizing that continuously solving root problems drives organizational learning.

They deals in wide range of cars like:

• Avensis
• Previa
• Dyna
• CBU Camry
• Coaster
• Land cruiser Prado
• Fortuner

Toyota Motor’s main competitors:

1. General Motors (GM): It was the world’s largest selling vehicle producer but their market shares were decline in the 80’s and mid 90’s.
2. Ford: It was the second largest motor car selling and profit making company in the world right behind the GM Company.
3. Chrysler: It was the third main competitor of Toyota. The company was almost gone bankrupt during the 80’s but their government support their company and saved them.

Main Body

SWOT Analysis

(S)trengths

One of the main biggest strengths of Toyota is the JUST IN TIME concept. Just in Time spirit implies to the two opposing forces of providing fast and

flexible response, and yet building mechanisms and systems that are efficient and waste-free. The concept is to provide the right product and information, at the right time, in the right amount, in the right manner, while maintaining high standards of efficiency and cost control. JIT has resulted in ZERO inventory and enormous saving in the cost.

The company has recorded a strapping financial performance in recent years. Toyota Motor’s revenues increased at a compound annual growth rate of 11.1% during 2004-08.The Company also had witnessed a considerable increase in profitability. During 2004-08, the average operating profit margin and net profit margin of the company stood at 9.1% and 6.5%, respectively. The strong financial performance of the company has contributed to its market domination. This, in turn, enhances investors’ confidence in the company for investment.

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Toyota is one of the top leading automotive brands in the world. In the annual ranking of top 100 global brands by BusinessWeek and Interbrand in 2008, Toyota figured in the sixth position. According to the survey, Toyota’s brand value has increased by 6%, to reach $34.1 billion in 2008. In addition, it is the highest ranking automotive brand name in the world. It is ranked well ahead of its competitors like Mercedes, BMW, Honda, Ford, Hyundai, Porsche and Nissan. For instance, in the same period, Ford has been faced with a number of troubles, including a failure to meet its goals for SUV mileage gains or to exploit its well-regarded Escape hybrid; subsequently, the brand value of Ford fell by 12%, to $7.9 billion in 2008. Toyota’s luxury car, Lexus, also has an independent ranking in the top 100 global brands. The brand value of Lexus was around $3.6 billion, with a ranking of 90. Some of the other popular product brands of the company include

Corolla, Camry, Sienna, Prius and Scion. The company’s strong brand image gives it considerable competitive advantage and helps the company to register higher sales growth in domestic, as well as in international markets.

In 2003 Toyota has beaten its rival Ford into third spot, to become the World’s second largest carmaker with 6.78 million units. The company is still behind rivals General Motors with 8.59 million units in the same period. Its strong industry position is based upon a number of factors including a diversified product range, highly targeted marketing and a commitment to turn manufacturing and quality. The company makes a large range of vehicles for both private customers and commercial organizations, from the small Yaris to large trucks. The company uses marketing techniques to identify and satisfy customer needs. Its brand is a household name. The company also maximizes profit through efficient manufacturing approaches (e.g. Total Quality Management).

(W)eaknesses

Usually big setup faces problems during oversupply as in it the company need to make sure that it is the models that consumers want. Toyota markets most of its products in the US and in Japan due to which they are always exposed to fluctuating economic and political conditions. Perhaps that is the reason that now the company is beginning to shift its attentions to the emerging Chinese market.

Toyota Motor provides pension benefits and other post-retirement health and life insurance benefits to employees. During the Year 2008, the company incurred post retirement benefit expenses of approximately $709.1m. The company also paid a total of approximately $671.5m for the post retirement benefit plans during 2007. Furthermore, by the end of March 2008, the company’s projected pension and post-retirement benefit obligations stood at approximately $14,865.9m as compared to the planned assets of approximately $11,256.4m, resulting into an unfunded status of approximately $3,609.5m. Sizeable unfunded post retirement benefits would force the company to make periodic cash contributions towards bridging the gap between post retirement benefits obligations and planned assets, which would reduce cash available for growth plans.

The company needs to keep producing the cars in order to retain its operational efficiency. Car plants represent a huge investment in expensive fixed costs, as well as the high costs of training and retaining labor. So if the car market experiences a down turn, the company could see over capacity. If on the other hand the car market experiences an upturn, then the company may miss out on potential sales due to under capacity i.e. it takes time to accommodate. This is a typical problem with high volume car manufacturing companies.

(O)pportunities

Worldwide demand for light hybrid electric vehicles (HEV) is estimated to reach 4.0 million units by 2015. Rising energy costs and increased emissions regulations are likely to increase the demand for HEVs, as hybrid engines are more fuel efficient and less polluting than conventional gasoline and diesel engines. The primary markets for HEVs will be within Triad countries (the US, Western Europe and Japan), although the quickly growing Chinese market is also expected to experience relatively strong demand for these fuel efficient and environmentally friendly vehicles.

Toyota Motor Company is keen to capitalize on the growing demand for hybrid electric vehicles. The company has spent a large amount of money for the development of hybrid vehicles over the years. The accumulative total of Toyota Motor’s hybrid vehicle sales reached 1.5 million in June 2008. Furthermore, the company plans to expand its hybrid lineup and achieve annual sales of one million hybrid vehicles by early 2010. For this, the company plans to introduce demand-creating products. The company also launched models such as the Prius and LS600h hybrids at the 2008 Beijing International Automotive Exhibition, held at the new China International Exhibition Center in Beijing. The company’s emphasis on hybrid technology will enable it to capitalize on the positive market trends in this segment to enhance its market position

Lexus and Toyota now have a reputation for manufacturing environmentally friendly vehicles. Lexus has RX 400h hybrid, and Toyota has it Prius. Both are based upon advance technologies developed by the organization. Such moves can only firm up Toyota’s interest and investment in hybrid R&D.

Toyota Motor has launched several new models in year 008. For example, in April 2008, Toyota Company has displayed a total of 50 concept vehicles at the 2008 Beijing International Automotive Exhibition. The company has launched its models including the compactYaris, the new Vios and Lexus LX570 SUV, along with concept cars such as the iQ compact and the personal mobility vehicle ‘i-REAL’. The company also displayed models such as the Prius and LS600h hybrids and the GOA (Global Outstanding Assessment) collision-safety body represented by a Camry and Crown models. Besides helping to garner additional revenues, new models will also help the company to revamp its aging model line up

Toyota is going to target the ‘urban youth’ market. The company has launched its new Aygo, which is targeted at the streetwise youth market and captures (or attempts to) the nature of dance and DJ culture in a very competitive segment. The vehicle itself is a unique one.

Convertible, with models extending at their rear! The narrow segment is notorious for it narrows margins and difficulties for branding.

(T)hreats

The worldwide automotive market is highly competitive. Toyota Motor Company is facing tough competition from other automotive manufacturers in its various markets. The competition among various auto players is likely to exaggerate in light of continuing globalization and consolidation in the worldwide automotive industry. The factors affecting competition include product quality and features, the amount of time required for innovation and development, pricing, reliability, safety, fuel economy, customer service and financing terms. Increased competition may lead the company to lower vehicle unit sales and increased inventory, which may result in a further downward price pressure and can negatively affect the company’s financial condition and results of operations.

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The European Union (EU) Commission and the EU Parliament have adopted a directive that establishes increasingly stringent emission standards for passenger and light commercial vehicles for model years 2005 and thereafter. Under the directive, manufacturers will be responsible for the emission performance of these vehicles for five years or 100,000 kilometers, whichever occurs first. A more stringent Emission standard (EURO 5) is also on the table of the EU legislative bodies and is likely to be effective from 2009. This will create more tough competition to work in EU as they would require more to concentrate on quality which will increase their cost and will lead to increase in prices by which the other competitors in the area would take advantage as their home land?

As with any other car manufacturer, Toyota is facing great deal of competitive rivalry in the car market. Competition is increasing almost on the daily basis, with new entrants coming into the market from China, South Korea and new plants in Eastern Europe. The company is also exposed to any movement in the price of raw materials such as rubber, steel and fuel. The key economies in the Pacific, the US and Europe is also experiencing slowdowns. These economic factors are potential threats for Toyota.

PEST Analysis

(P)olitical

Toyota had a lot of help from the local government, including tax breaks. The company is likewise linked closely to the policies ofgovernments, the earnings of banks. Toyota is currently dominated by little more than a handful of firms, each wielding colossal financial, emotional and political power. The company’s approach to dealing with political institutions has not always been brilliant. It tends to be good on technical issues, although it has not always fully presented the longer-term options, in order to make the choices and their implications clear. Toyota is expected to ‘sell’ Indiana and its assets to the world.

(E)conomic

For much of the developed world, Toyota Company is a pillar company in auto mobile business, a flag of economic progress. The Toyota Company has been a core company, a unique economic phenomenon, which has dominated the twentieth century. However, the automobile industry including the Toyota now suffers from a series of structural schisms and has become riddled with contradictions and economic discontinuities. For the capital markets and the finance sector, it has lost a lot of its significance, as a result of ever declining profits and stagnant sales. The proliferation of products means that it has become hopelessly wasteful of economic resources. While all these and more sound like a very gloomy assessment of such a vast economic phenomenon, the industry is not in the end despondent. A different future is possible for the industry, a highly desirable one.

(S)ocial and Cultural

Toyota’s ability to bring to market world-class vehicles depends, in large part, on the craftsmanship and hard work.

As part of the development in automotive industry, the Toyota Company actually affects the society as a whole. It employs millions of people directly, tens of millions indirectly. Its products have transformed society, bringing undreamed-of levels of mobility, changing the ways people live and work. The social value of the additional mobility that this industry brings involves the value of the people being able to commute over longer distances easily, among many others. There are, on the other hand, particular social issues to address in many developing countries, often those that are the result of an undertone of religious faith. Toyota company has the role to

play in helping develop the mobility of such countries and it can be achieved at an acceptable social cost of the country is prepared to learn the necessary lessons from those who have traveled this route before it, and to make the necessary investments.

(T)echnology

In 1994, the Toyota Company had given its employees the challenge to bring up with new technological change in cars. The car for the 21st century. For this purpose a special team was developed to make the car. This team was named as G21 team. In 1997; Toyota’s G21 team made a car which is both fuel efficient and environment friendly as well. They made a hybrid car named as Prius. This car was a major success in Japan at that time. Till that time Toyota hasn’t introduced this technology outside Japan. In 2001 Toyota introduces hybrid cars worldwide. Hybrid car can be run on engine or battery or both. The production of first hybrid car in Europe was started in 2010. Success of hybrid car can be shown by the fact that over 3,000,000 cars were sold worldwide.

There are different models of hybrid cars had been made so far which are as follows,

• NHW10 Model (1997-2000)
• NHW11 Model (2001-2003)
• NHW20 Model (2004-2009)
• NHW30 Model (2009-till present)

Recommendations

Toyota is being one of the top motor vehicle producers in the world still needs to do a lot more improvements regarding their quality and services by taking seriously the consumer complaints

Since last few months the company is facing some quality issues which need to be rectify soon because some researchers are also pointing out these which is creating a bad impact for the company and its market share.

Toyota also had added some experts containing both consumers and experts. They had been recommended by their union back in Japan to review their quality but they are not directly affiliated with the Toyota Company. They also need to review these members and had to directly affiliate them with Toyota.

Toyota’s main hazard in their success had been their big recall of its cars all over the world. The company had failed to identify and solve this issue and this can create big impact in their sales and perception of their customers while purchasing car. So they need to rectify and solve this problem quickly so that the image of the company can be retained.

Moreover they also should make a proper consumer profile on their website as well. This will enable them to easily identify its consumers and make the strategy for marketing according to that.

The company had used social media like face book and twitter for the consumers. It is the demand of the time of these days but the problem is that they are not making good use of it. Their participation through these is almost zero. If they improve on that participation and make it more active then that will help the company a lot and can be a good marketing source as well.