Table of Contents
Introduction
SWOT analysis involves a strategic plan that makes managers assess the strengths, Weaknesses, opportunities, and threats that a business face in its venture. The objectives of the business must be clearly identified so as to ensure that the analysis is clearly achieved. Toyota Motor Company is a successful multinational dealing in automobiles production and sales (Marr, 2009). This paper takes a look at Toyota’s business organization and operations, the success, history, products, and gives a summary of the key revenue strategies that it adopts.
Toyota Motor Corporation continues to grow and expand and it has established in over 170 countries and regions globally. Its headquarters are in ToyotaCity in Japan and has primary markets in Japan, Europe, North America, and Asia. It employs approximately 320,808 people with others benefiting indirectly through trade of its products (Wright investment’ service research report, 2008). Its major competitors in Asia are the Mazda Motor Corporation, the Nissan Motor company Ltd, and the Honda Motor Company Ltd.
According to Wright investment’ service research report, (2008) in the financial year ending March 2009, Toyota recorded a Japanese Yen (JPY) 20,529,570 million or ($205,295.7 million) in revenue, though it was a 21.9% decrease from the previous postings. The company operated at a loss for the financial year 2009 which amounted to JPY 461,011 million ($4,610.1 million), which was not favorable compared to the JPY2, 270,375 million ($22,703.8 million) operating profit posted in 2008. The sales turnover continued to increase annually for five consecutive years from 2003 to 2008. They were; 16 trillion (2003), 17 trillion (2004), 19 trillion (2005), 21 trillion (2006), 24 trillion (2007), and 24 trillion (2008) (Wright investment’ service research report, 2008).
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The above losses give the management reason to conduct a thorough search within the company and most importantly a Strength, Weakness, Opportunity, and Threat analysis that will help identify the initial causes of the problems. It will help identify the internal (strengths and weaknesses) and external (opportunities and threats) factors in the organization (Hill, & Westbrook, 1997). The major problems were attributed to low unit sales, low spare parts sales, and the fluctuations in foreign currency translation fees impacts.
The SWOT analysis of Toyota Motor Corporation
The SWOT analysis will include internal and external factors in the company. The internal include; strengths and weaknesses; while the external include opportunities and threats.
Strengths
Strengths give the company a resource advantage in relation to its competitors and the way the market behaves. Toyota has a distinct competence that ensures that it gets a competitive advantage in the market. Toyota boasts of its global recognition which acts as a great asset of goodwill in the field of automotive business. Its strong international roots of 170 countries and region gives its strength to overcome its competitors in the business. It also boasts of a huge financial success in the market with its financial growth being enormous. Its huge sales turnover of approximately £131,511 million and sales growth of 29.3% are also its strengths (Wright investment’ service research report, 2008). The brand is well renowned for its quality, wide customized range, and environmental friendly goods makes it beat its competitors and stays in the lead.
Its strong performance in the Asian markets against its competitors; the Mazda Motor Corporation, the Nissan Motor Company Ltd, and the Honda Motor Company Ltd has given it strength to stay ahead in motor vehicle sales (Marr, 2009). Toyota has also invested in research and development activities which enables them to use recent technology. It has also enabled them to know the needs of the market and the consumer response to their products which enables them to adjust accordingly.
In the automotive sector i.e. manufacturing and production, Toyota is an industry leader; it is known for its ability to maximize profits through competent lean manufacturing approaches such as Total quality management and Just in Time (JIT) productions. This ensures that the products are in the market at the right time, at right quality, and to the specifications of the customer (Scott, 1982). Efficient distribution channels also auger well with the company’s strategy to grow since sales are well coordinated and all the products are present for the right customers all the time. This efficiency also ensures that customers are served well at all times; this has ensured that consumer trust is built which makes the company make huge profits (Hill, 2008).
Toyota Motor Corporation has excellent penetration of the key markets. These key markets include the US, Europe the Middle East and Africa (EMEA), and China which has made it the second largest automobile manufacturer in the globe. In 2005 there was a 0.8% profit increase due to new investments that were made in china and US (Wright investment’ service research report, 2008). These investments also made sales increase by a margin of 7.3% in the same year. The many global branches enables in time production at the markets. The company also makes a range of vehicles i.e. for private and organization (SUV and trucks) (Wright investment’ service research report, 2008).
The company has also built large base of human resource who are experts, who are trained in the company’s network. This ensures that they can invent latest technologies and keep the company ahead of the rest.
Weakness
Even with the huge success of Toyota it still has some weakness that deters its maximum growth and effective performance. Toyota is a Japanese car producer this has made it appear a foreign importer to most of its market. This is responsible for low sales in markets that mainly purchase locally made cars. Toyota cars are produced mainly in US and Japan; this makes its production capacity to be limited (Marr, 2009). This is not the case with its competitors who have their production units located strategically hence having a better competitive advantage.
The large scale recall of some of its brands from already supplied markets in 2005, has caused customer panic in view of the fact that quality was compromised. This would be a set back in the efforts of the company to increase its sales and trust within customers (Menon. 1999).
Its big chains has its share of problems, the world markets currently tend to be oversupplied this means that any other product released in the market must be exactly what is required. Also, in view of the fact that it makes most of its cars in US and Japan there can be risks of fluctuating economic and political situations in those markets which may translate to other markets. Toyota requires maintaining production so as to keep hold of its operational efficiency.
The company has very huge investments incurred such as high fixed costs, high training and labor costs all this keep the company at higher risks in that when there is a reduced demand then the company will over produce, and when there is an increased demand then the factories may under produce which is a characteristic occurrence when dealing with mass production (Hill, & Westbrook, 1997).
The presence of huge expenses paid to employees after they retire as benefits really affects the company’s financial budget where the amount could be invested in other sectors where it could earn profits. The company also faces poor profit returns in the financial services sector.
Opportunities
This is part of an external factor in business. Toyota has a range of opportunities that will make it grow and be the best automobile company in the world. Such opportunities must be utilized at the first possible chance in order to be above the rest. Firstly investing in research and development will make the managers discover new innovations. Innovations such as the Prius model the first commercial hybrid gas-electric car would be required (Maynard, 2008). Many innovations should focus on the improvement of car and pocket friendly costs to the consumers. This will help reduce gas guzzlers and even have more environmental friendly vehicles.
The market is not yet saturated, aggressive venture to new markets should be a priority. Analyzing the market and finding products for each segment would be welcome in a bid to conquer the markets. Products should be target specific in that the customer e.g. the youth can have a preferred model, women too could have other specific preference. The new markets should be more preference specific as opposed to producing en-masse (Marr, 2009). The company has a chance to produce cars that are in line with society and institutional requirements.
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Production should be revisited with more production of fuel efficient, greater performance and environmentally friendly vehicles. This will include revolutionary technology like electric cars, cars using hybrid fuels, or solar energy. The Toyota’s Eco-Vehicle Assessment system (Eco-Vas) is one example which should be researched more (Menon, et al. 1999).
Targeting the emerging markets should be key aspects in order to secure the future of the company; such markets include China, Africa, India, and other areas where there is high purchasing power and high demand. This would be in line to encourage the global expansion to increase the established over 170 countries and regions worldwide.
Customer service is an effective tool that makes business grow, Toyota should invest in efficient customer service that will make it earn customer loyalty and develop a large customer base. This would help to improve on its brand name which will in turn increase. Other services that attract customers such as; after sale service, repairs, free clinics, discounted parts need to be considered so attract a large customer base.
Threats
Toyota like any other company has its share of threat to look out for when conducting business, while some threats will apply to all players in the industry others will be specific to the company due to its operations. The recent global financial crisis affected business world over with some business that had no measures to cushion them collapsing (Menon, et al. 1999). All companies are subject to such economic slowdowns that occur unexpectedly hence the company should lay down cautionary measures to avoid bankruptcy in such instances.
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Saturated markets and high competition are other threats that Toyota will face. These threats will be countered through market campaigns. in view of the fact that Toyota is global its trade will be done using different currencies, the rates of these currencies keep on shifting, when they shift sometimes will affect negatively the profits and raw materials costs.
Counterfeit products in the market have largely increased overtime. This affects the quality of cars in future and also affected the turnover of company sales traded in spare parts. Many counterfeiters target products of renowned companies like Toyota this requires the company to establish effective means to determine counterfeits in the market and effective customer service that will ensure the customer is enlightened on undertakings of the company.
The world keeps on changing and so does needs, for example many families used to be large but now they are reducing. A large family would demand for a larger car or even more cars, but now the small nuclear families have an impact on the sales of the car companies due to reduced demand. Change has also been seen in family usage of the cars. School buses pick and drop children at home to school and back as opposed to when parent did it, this lowers demand hence sales (Menon, et al. 1999). Alternative means have also come up, with the government encouraging other means such as trains and cycling this lowers demand and lowers sales.
Cars have been attributed to too much pollution in the atmosphere, the use of fuel that emits dangerous fumes is being campaigned against this instills a negative business atmosphere for car dealers that make loose on business. Fuel costs are rising and consequently raising the costs of maintaining cars on the road, this will have negative effects since people may not purchase cars on the base of operating costs.
The recall of faulty cars mostly in 2005 was mainly in the US, Australia, Japan, and Europe which are the largest markets (Hyde, 2009). If this happens again it does not only incur the company other unnecessarily costs but loose the loyalty of the customers who may opt to purchase other brands.
The amount of competitive rivalry in the vehicle production is immense and Toyota being amongst leaders is under pressure to perform exceeding above average so that it is not overtaken by its rivals. Raw material is also a factor that cannot be overlooked; the current global crisis of overexploitation of resources may make raw material increase in cost which will raise production costs.
Analysis of the global business environment as is pertinent to Toyota
The motor vehicle industries have been experiencing a competitive business environment which is essential for Toyota to understand its marketplace. The motor vehicle industry is divided in to three sectors commercial vehicles, cars and motorcycles. Toyota has been over the years being concentrating on manufacturing of cars but there have been increasing demands especially in developing countries for high demand of commercial vehicles. Different economies have also different preferences on the vehicles which they buy. The company has its demand of new vehicles mainly from the developed countries which most people keep on upgrading their vehicles after they have used them for a short period. While, developing countries mostly prefer buying used vehicles. Both markets are of great interest of Toyota as there is need to carry on an extensive research in developing countries to ensure that it’s able to tap the needs of most of their clients so that they would retain the market as they venture in to new users as well. While in developing countries where most of the used cars are being sold to a viable market for spare parts as the vehicles need frequent maintenance.
Toyota’s current global operations and strategy
Toyota has increasingly being building training centers in different part of the world as it strategizes on its main phase of growth. According to Maynard (2008), the company is planning to achieve what it has achieved so far in twenty years in five years by speeding up its development. Currently Toyota has plants in 27 countries and it has many more being built up especially in developing countries where its business have been thriving and it has potential markets which have not been tapped or its immerging due to change in living standards. The company has been predominantly being lead by Japanese even in overseas branched but it has increasingly being diversifying its staffing especially in management levels which it has recruited foreign managers who are autonomous but would seek assistant from Japanese for the skills which they would not get in their countries or regions which are designated to them.
By next year the company is targeting to sell 10.4 Million vehicles in one year which is double what they used to sell in 2000. This is an indicator that markets of its vehicles have increased steadily over the year this has made it adopt a strategy of opening up factories in regions which have proved to be potential customers. The regional factories are also tailored to meet the needs of the clients in the region depending on their preferences of the vehicles which they needs. With such a strategy the company shall be able to penetrate the market with ease and be more competitive as it shall be able to meet the needs of its clients much precisely than its competitors. The company had also being under great criticism due to vehicles which it had supplied in the market which had faulty accelerator which had given it poor publicly. It is therefore recommendable for the company in future to perform thorough quality inspections to evade any poor publicly in the international market.
Conclusion
Toyota has achieved a lot in the motor vehicle markets and is inspiration to many companies to achieve such success. The strength weakness opportunity threats analysis gives it a strategic outlook that will help maintain its growth and even surpass given targets. Prolonged growth in Toyota Motor Corporation is core thus management must remain focused to deal with the weaknesses and threats while capitalizing on the strengths and opportunities present in order to achieve greater heights.
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