An Analysis of Toyota Motor Corporation

Introduction: An Overview of Toyota

Across the globe, Japanese Automaker, Toyota Motor Corporation, is one of the leading producers of cars. Its range of vehicles includes family cars, trucks, buses, speciality cars, compact and subcompact cars, pickup trucks, sports utility and recreational cars and minivans. Toyota was incorporated back in 1937 and conducts businesses in the automotive industry. One of the reasons why the company is huge in the world is because hold the belief just like the Japanese people that improvement in things must always be running continuously through the life cycle (Toyota, 2018).

Summary of the Company

The company has factories in many areas of the world and also assembles and produces vehicles in local markets. In Europe, following the adoption of the strategy of focusing on small car segments, Toyota has become increasingly popular in the UK. Its vehicles are classified into either conventional engine vehicles, hybrid vehicles or fuel cell vehicles. Toyota is also involved in the manufacture of automotive parts, accessories and components for sale for commercial use and also for their own use. The company is well known across the world and has employed thousands of people (Reuters, 2018).

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Internal Resources and Capabilities that Give Toyota a Competitive Advantage

Toyota`s ability to make automobiles whose quality is great and at affordable prices is its core competence because through this, value is provided to customers. The core competence of quality can be attributed to practices of production that are quite innovative. In the past, automobiles have been revolutionised by-products from Toyota and all other companies involved with automobiles have been forced to improve their products quality (Hoppe and Krings, 2018). The "Toyota Production System", is the company's distinctive competence. This system is based on the lean manufacturing concept. The concept includes in it practices that are innovative like Kaizen, Just in Time, and Six Sigma. Over the years, Toyota has been working tirelessly in a bid to establish this distinctive competence. Currently, across the world, it appears that there is no other automobile company that can do it as well as Toyota does (Toyota Industries Corporation, 2018). Through this distinct competence, a competitive advantage has been established that has provided Toyota with a market leader position and a brand name that is sustainable.

VRIO Framework Analysis of Toyota Company

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Example of Just-in-Time illustrations of Toyota`s internal environment includes the company's strong systems of distribution and the well-developed inventory specialists it has. The superb manufacturing system at Toyota has register control systems and outstanding materials which facilitate the trusting of the highly mechanised and admiration of the company`s products by customers across the globe.

Key Drivers of Change in Toyota`s External Environment
Macro-Environment

It was back in 2000 when the changes occurring in the macro environment were recognised by Toyota (Toyota, 2018). With changes in the business and global procedures for manufacturing cars, Toyota realised that modifications had to operate in the state of the changes so that Toyota Company could be able to fully benefit from its car producing activities. The company produced the first hybrid car in the world, the Toyota Prius.

Political

Toyota is always a subject to the effects brought about by political conditions. In any market where there is political stability, minimal political tension would be witnessed and this provides Toyota with an opportunity for growth. In addition, free trade agreements between Japan and other countries where Toyota is already in operation provide opportunities for improved penetration of markets (Tan et al., n.d).

Economic

Toyota`s organisational development is affected by economic trends. Based on the weakness of the Japanese Yen, Toyota has the opportunity of improving its exports from Japan. Additionally, there is also an opportunity for Toyota to grow its business in the US, which follows Japan in terms of the biggest markets for Toyota`s products. The rapid growth witnessed in developing economies also provides Toyota with opportunities for improving revenues based on those markets.

Social

The sales of international brands are largely affected by trends and social and cultural forces. Social and cultural factors can easily become barriers in the global market which is made up of smaller markets. This is the reason why brands are normally forced into localising so that they connect with local customers in regional markets. Toyota has for some time now been planning to jump into production of electric vehicles come 2020.

Technological

It is not possible for a brand like Toyota to do well without investing heavily in technology. Consumers have been observed to prefer products from brands that are innovative technologically (Bush, 2017). As such, a brand increases its sales if it improves its technology. Cars that are low on consumption of fuel and environmental impacts are today considered better and their popularity has really improved.

Legal

Legal issues can come about as a result of failing to comply with labour laws and quality related laws that vary between different countries. Toyota has a strong focus on the safety of passengers and it faced legal problems in 2016 because of problematic passenger safety airbags. Toyota has been taking measures to ensure legal compliance all over the company at different levels. Toyotas guiding principle states that “Toyota will honour the language and spirit of the law of every nation and undertake open and fair corporate activities to be a good citizen of the world.”

Environmental

The importance of environmental factors for customers and brands has gained prominence. Customers have been observed to prefer brands that are friendlier to the environment. Sustainability has also been incorporated into business strategies. In the past, Toyota has achieved important milestones, from emission reduction to winning an award for Mirai, its fuel cell vehicle and also continues to make more efforts in its contribution to protection of the environment.

Bargaining Power of Customers

Toyota is directly affected by its customers through revenues (Funaru, 2018). There are low switching costs which imply that customers are at ease moving from Toyota to other competitor firms at low costs. As such, Toyota`s customers have a high bargaining power and there is a need for Toyota to ensure that its products are able to match the expectations and preferences of its customers.

Bargaining Power of Suppliers

The high availability of supplies that are required to manufacture Toyota`s products weakens the power of suppliers. Additionally, most of the suppliers in the automotive industry globally lack ownership control of the distribution of materials that end up at firms like Toyota. As such, this part of Toyota`s five force analysis highlights the ease with which the company is able to address the weak force or bargaining power of suppliers.

Threats of Substitutes

Toyota is affected by substitutes as they provide alternatives and as such providing competition. In most of the cases, it is always easy for Toyota to switch from to the other substitutes. The available substitutes include bicycles, public transportation and other forms transportation modes. There is a moderate threat of substitution created that Toyota must work to address and make its products more accessible, affordable and also convenient.

Threat of New Entrants

There is a week threat of new entry. Significant entry barriers include the high costs of establishing, maintaining and growing a new industry in the automobile industry. The effect of new entry is weakened by these barriers. The threat of new entrants is really not a concern for Toyota as it seeks to grow its business and also maintain its position as a leading manufacturer of automobiles.

Impact of Main Competitive Forces Influencing Entrepreneurial Activities
and Profitability in the Automobile Industry

Across the world, the demand for automobiles is usually tied to per capita disposable income, prices of vehicles, product innovation and fuel prices. On the supply end, the prices of vehicles stem from equipment and material costs, with higher plastic and steel prices raising the purchasing costs of manufacturers and also retail prices. Over time, high plastic and steel prices have plagued automakers and this has led to an increment in the prices of products and manufacturing prices (Funaru, 2018).

Strategic Options that can be adopted by Toyota to
Increase its Entrepreneurial Opportunities

There are five different techniques through which Toyota can adopt a working strategy.

Committing to an Identity

Companies that are coherent do not get trapped on growth treadmills, chasing multiple opportunities for marketing, most of which they lack an idea on how to gain advantage from (Epstein, 2018). On the contrary, they are usually clear minded on what they do best, developing value propositions that are solid and also building capabilities that are distinctive and with the potential of lasting for the long term.

Translating Strategy into the Everyday

Most of the times, managers assume that there is a need to adapt their industries best practices and further threat external benchmarking as the path established to success. However, companies that are coherent, tend to view things from a different perspective. They translate the strategy into everyday (Grant, 2016). They are able to design and build their own capabilities that are bespoke and that set them apart from other companies. They then, in their own ways, bring those capabilities to scale.

Putting Culture to Work

Structural change is a standard business practice for solving problems of execution. The enterprise culture whenever considered is always viewed as a hindrance. Coherent companies, however, resist organizations that are disruptive and instead put their current culture to work. They tap ingrained thinking’s power and behaviour already existent below the surface in their company using culture and not structure in a bid to drive change.

Cutting Costs so as to Grow Stronger

Conventional companies may try to reduce costs across the board by going lean in all directions. However, the most successful companies, in a bid to grow stronger, cut costs (Ogrean, and Herciu, 2018). They strategically marshal their resources, doubling down on the few existing capabilities that matter most and further pruning back everything else.

Shaping their Future

Companies that are coherent should never try to simply become agile. They are not capable of responding to external changes as rapidly as possible. On the contrary, they shape their future by creating the change they so much want to see.

It is worth noting that selecting a way through which to play and also build corresponding capabilities in no way guarantees sustained leadership of any sector (Grant, 2016). There is a need for Toyota to constantly recharge its capabilities system so as to be capable of addressing dynamic trends and also further improve their value to customers. This will provide the company with an opportunity of protecting and also enhancing their competitive advantage. Depending on which model Toyota decides to use, the impact of trends that are new on the company’s capabilities system will be different.

For example, whenever addressing the trend of connectivity, the focus of a value player should be on the most efficient economic equation to maintain its niche as the provider of vehicles that are both inexpensive and of high quality. In the calculus, R&D costs may be shared by the value player and products with third-party companies, be selective about the advancement of features and also leverage off-the-shelf and non-custom technologies (Waldman and Jensen, 2016).

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Conclusion

For producers of automobiles, while the future is full of challenges, it also has tremendous opportunities. Currently, the world has been struggling with unprecedented shifts that are also enormous in vehicle technology and powertrain design. In the coming years, the mix of new vehicles that will hit the roads will not in any way resemble the vehicles on our roads today. On different thoroughfare, there will be an amalgam of features, models, drivetrains, vehicle-to-X communications, networks and artificial intelligence. So as to succeed in such a landscape, Toyota will need to ask itself a question that is fundamental, “Who do we want to be?” and in terms that are simple “how different should be we be so as to be in a position of value creation?” It is important for Toyota to determine the skills, processes, systems, culture and tools they can possibly leverage or build so as to establish differentiated ways of playing and further implementing working strategies.

References

  • Bush, T., 2017. PESTLE analysis: everything you need to know 2016. Available in:
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  • Epstein, M.J., 2018. Making sustainability work: Best practices in managing and measuring corporate social, environmental and economic impacts. Routledge.
  • Funaru, M., 2018. Toyota’s business strategies in international markets. [eBook] BRASOV, pp.2-5. Available at:
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  • Hoppe, S. and Krings, J., 2018. Auto industry growth strategies: Fasten your seatbelts. [Online] Strategy. Available at:
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  • Ogrean, C. and Herciu, M., 2018. Corporate Sustainability–From a Fuzzy Concept to a Coherent Reality. Studies in Business and Economics, 13(1), pp.112-127.
  • Reuters, 2018. Toyota Motor Corp (TM). [Online] Available at: [Accessed 21 Oct. 2018].
  • Strategic Management Insight, 2013. VRIO Framework. [Online] Available at:
  • Tan, J., Chua, W.L., Chow, C.K., Chong, M.C. and Chew, B.C., PESTLE Analysis on Toyota Hybrid Vehicles. J]. Academia Edu.
  • Toyota Industries Corporation, 2018. Value Creation Process. [Online] Available at: [Accessed 21 Oct. 2018].
  • Toyota, 2018a. The Changing Business Environment and the Expansion of Mobility Value. [eBook], pp.6-12. Available at:
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  • Waldman, D. and Jensen, E., 2016. Industrial organization: theory and practice. Routledge.

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