Essay on "Strategic Management Report"

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[EXCERPT] . . . .

Strategic Management Report

Toyota Motor Corporation

Toyota Motor Corporation is a Japanese multinational automobile manufacturer headquartered in Toyota City, Aichi, Japan. It is one of the world's largest automakers on the basis of revenues, scale of operations, and vehicle production capacity. The major products of the company are automobiles, commercial vehicles, power engines, and motorcycles. It manufactures personal, luxury, and heavy transport vehicles under its own brand name and deals in fuel, hybrid, and electric vehicles. Toyota Motor Corporation is the largest subsidiary of the Toyota Group which also owns a number of well-known automobile brands like Daihatsu, Lexus, Scion, Hino Motors, etc. Toyota manufactured its 200-millionth vehicle in July 2012. It was founded in 1937 by Kiichiro Toyoda. The mission of Toyota Motors Company is to produce the highest quality vehicles that can provide real value for the consumers' money in terms of performance, status, and satisfaction (Toyota Motor Corporation, 2013).

2. SWOT Analysis for Toyota Motors Corporation

2.1. Internal Environment

a. Strengths

b. Weaknesses

A well-recognized brand in the global automobile industry with a wide range of top-class vehicles.

Enjoys strong brand loyalty and stakeholders' confidence which it has developed by giving superior operational and financial performance over the years (Pfeifer, 2013).

The top industry leader on the basis of production capacity, scale of operations, and revenues (Young, 2013).

A strong focus on efficient manufacturing approaches like Just in Time, Total Quality Management, fuel-efficiency, Research and Development, etc.

The pioneer in introducing hybrid and gasoline-electric technology in automobiles.

Best known for performance, reliability, quality, durability, and the real value for money (Toyota Motor Corporation, 2013).

Less focus on small cars in the most potential markets like United States, Europe, and Asian countries.

High employee turnover and lay-offs during the last couple of years have led to strong criticism by the International communities.

Weak grip in the European markets due to the strong presence and competitive strategies of other top brands.

More focus on increasing production capacity worldwide instead of achieving differentiation and low cost leadership.

Recognition as a foreign importer in the Japanese markets has led to weakening relationships with the local suppliers, dealers, and distributors.

2.2. External Environment

a. Opportunities

b. Threats

Investment in more fuel-efficient and innovative automobiles.

Modernizing the interior and exterior of personal and luxury cars in order to attract more potential customers.

Introduction of small cars in the emerging markets to target low income and small family consumer segments.

Greater investments in Eco-Vehicle Assessment System (Eco-VAS) to become more environmental friendly.

International expansion in potential markets like China, Russia, U.S., India, and European countries where the demand for automobiles has been increasing day by day.

Industry saturation and intense competition from the world's top automobile manufacturers.

Rising oil and gas prices in the world market are directly affecting the production and operational costs of the company.

Tight emission standards and environmental protection laws are also putting heavy pressures on the company's manufacturing capabilities.

High risk of exchange rate fluctuations.

Economic downturn impacts the profitability of the company as well as the demographical patterns in the target markets (Kotler, 2008).

3. Analysis of the General Business Environment for Toyota Motors Corporation

3.1. Political Forces:

Being a multinational corporation, Toyota has to keep in view the political environment of its target countries. Political instability is one of the leading factors which impact the fuel prices, exchange rates, regulatory policies, and economic performance in a country. The government imposes heavy taxes, duties, and trade laws on the local and foreign automobile companies which they have to follow in order to operate in a legal and lawful way (Blythe & Megicks, 2010). Some large economies like European Union and China are supporting automobile manufacturers by minimizing tax obligations and custom duties. Toyota can take it as a potential opportunity for expanding its operations in the automobile markets of these economies.

3.2. Economic Conditions:

The economic environment consists of inflation, industry growth rate, unemployment, exchange rate, interest rates, and other economic forces that impact the earning and spending patterns of individuals, businesses, and governmental entities (Frederic, Agnes, & John, 2011). Toyota takes positive or negative impacts from these forces on its production costs, product demand, sales performance, and profitability. For example, rapid industry growth and economic stability in developed countries enable it to earn attractive returns on its investments. In contrast, the poor economic conditions of under-developed and developing countries decrease its profit margins and overall performance in the industry (Brassington & Pettitt, 2006).

3.3. Socio-Cultural Conditions:

The life styles, brand preferences, income levels, family size, and cultural values of general consumers are the part of socio-cultural environment. Automobile companies have to design their products, business strategies, and marketing campaigns in the light of all these factors. For example, the consumers with large family sizes prefer to buy family vehicles in contrast to the status-seeking people whose first choice is always the luxurious and modernized cars. Similarly, income level of consumers impacts their choice between fuel-efficient and luxury vehicles. There are certain other factors which affect the automobile industry; like transportation infrastructure of the country, response to oil and gas prices, brand loyalty, and influence of the advertisements and promotional campaigns by the automobile firms.

3.4. Technological Changes:

Technological changes are one of the leading forces in the general business environment of Toyota Motor Corporation. Due to the rapid advancements in the automobile technologies and sudden shift to hybrid and electric vehicles from traditional oil and gasoline vehicles, Toyota had to make huge investments in the recent past in order to redesign its manufacturing processes and cope up with the changing market demands.

3.5. Environmental Factors:

There are strict regulatory requirements and pressures from environmental protection entities on the automobile companies to manufacture more fuel-efficient and environmental friendly vehicles. They are also supposed to play their part in the social welfare and economic development of the societies in which they operate (Frederic, Agnes, & John, 2011). Toyota has taken various initiatives to become a socially and environmentally responsible business corporation. These initiatives include Eco-Vehicle Assessment System (Eco-VAS), green environment programs, education promotion programs, waste management, and numerous corporate social responsibility efforts (Toyota Motor Corporation, 2013).

3.6. Legal Factors:

Toyota has to adhere to the local laws and regulations which the governmental bodies and regulatory authorities in every country impose on the automobile companies. It has to adopt sound business and ethical practices along with performing its day-to-day business affairs in a fair and transparent way. All these efforts are necessary to operate in a legal way and avoid criticism and negative response from the worldwide stakeholders.

4. Analysis of the Competitive Environment for Toyota Motor Corporation

4.1. Intensity of Rivalry among Existing Competitors:

The global automobiles manufacturing industry is concentrated with a few large scale automakers and a number of small scale firms. The top market leaders in the global automobile industry include General Motors, Volkswagen Group AG, Honda, Renault, Suzuki, Hyundai, Nissan, PSA Peugeot Citroen, Ford, BMW, Fiat, and Daimler AG. These automobile giants are the biggest rivals to Toyota Motor Company. They compete with each other in order to dominate the industry by achieving the highest market share, production capacity, sales revenues, and profitability; as well as on the basis of performance, durability, quality, price, and branding of their cars.

4.2. Threat from the New Entrants:

The threat from new entrants is quite low in the automobile industry due to the presence of high barriers to entry and strong dominance by the top market leaders. A new entrant requires huge initial capital outlay to set up its manufacturing plant, implement the most advanced technological equipments, and establish its presence in the industry. Moreover, it is highly difficult for the new entrants to break the brand loyalty and emotional attachment of the consumers with already established brands (Bearden, Ingram, & LaForge, 2007).

4.3. The Threat from Substitutes:

A number of automobile companies have introduced hybrid and electric vehicles which are the direct substitutes to patrol, diesel, and gasoline vehicles. These substitute vehicles are being sold at very lower price as compared to traditional cars. The top market leaders like Toyota, Honda, GM, Suzuki, etc. are anticipating this technological shift as a big threat for their sustainability in the long run. Moreover, bullet trains and rapid buses are also becoming a strong substitute to personal and family cars.

4.4. The Bargaining Power of Suppliers:

The raw material used in the manufacturing of automobiles is readily available at very reasonable prices. Also, there are a large number of suppliers that offer raw material supplies at very low commission in order to strengthen their business and build long-term relationships with top automakers. Therefore, acquisition of raw material has never been a problem for automakers. Due to these factors, the bargaining power of suppliers is quite weak in all the corners of the world.

4.5. The Bargaining Power of Customers:

In contrast to the suppliers, the bargaining power of customers is stronger against automobile companies. Consumers can find huge variety of… READ MORE

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