Overview 

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Founded in 1937 by Kiichiro Toyoda, Toyota Motor Corporation is a Japanese originated company who focuses on designing and manufacturing passenger cars in North America, Japan, Asia, and Europe. Being a great success story in Japan, Toyota Motor Corporation stands as the leading auto manufacturer in the industry and is ranked as the eighth largest company in the world. The Japanese government was excited about Toyota’s development since the money involved could help with the war against China. Currently, Toyota manufacturers their products in Japan, Canada, South Africa, Russia, Venezuela, China, the Philippines, Poland, Turkey, India, Thailand, Czech Republic, Malaysia, United Kingdom, Australia, Indonesia, France, Brazil, Portugal, Argentina, Pakistan, and Mexico. Toyota’s popular manufactured cars all over the world are the Toyota Prius, Camry, Lexus, Tundra, Corolla, and Tundra Double Cab. 

 

Problem Statement 

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As a result of the vehicle recalls that Toyota has had, the brand image has been damaged. Toyota claims to have the safest cars in the industry, however, after the injuries caused by bad production, Toyota has experienced a multi-billion-dollar loss in their market share. While this upset in recalls were a buying opportunity for some consumers, many investors walked out on Toyota because of the failure. While some investors walked out, it also put a strain on Toyota because new investors became scared to invesst in the company. Due to this massive recall and investor communication issue, a lack of trust developed around Toyota Motor Corporation which has affected both the company’s stock price and investor involvement.  

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Analysis of Current Situation – SWOT 

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Toyota has effectively established their brand as high quality with the best prices in the automobile industry. Having their products set at the best prices allows them to stand at a higher value according to the consumers. Toyota has gained success in establishing a strong market position in brand recognition. Having a strong market position has allowed Toyota to expand the company’s markets internationally gaining them a competitive advantage. Through this competitive advantage, Toyota has been able to have higher sales in not only international markets but also in domestic markets. Another strength that Toyota has gained is their network in both distribution and production. Toyota produces automobiles and other related products to more than 50 different companies in 27 different countries and regions, not including Japan. Since Toyota’s network is so widespread, the company’s distribution has helped them reach different consumers which has made them boost revenues each year. 

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Toyota has encountered a few challenges over the past few years. Toyota has made a variety of different recalls which has made a threat of the company’s brand image and sales. In 2009-2010, Toyota recalled about 9 million vehicles due to the “sticky accelerator pedal” that caused vehicles to accelerate uncontrollably resulting in some serious accidents. Since this was the largest production recall in the industry’s history, this has caused penalties in Toyota’s overall operational margins. In 2012, Toyota experienced a decline in sales on a geographic scale. The decline in sales were prevalent across Asia, Europe, and North America. The decline in Toyota’s geographic segments has put pressure on making profit over the recent years since these three segments hold over 50% of Toyota’s sales. If these trends continue over time, Toyota's overall revenues are expected to be affected.  

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The automotive industry has been growing rapidly in opportunities for expansion of products and technology. Tesla has set a whole different standard for self-driving cars and with the new technology at the industries fingertips, becoming a part of this more luxury model could add an advantage over Toyota’s competitors. This opportunity could lead to more customers resulting in an increase in revenues. In 2012, Toyota and BMW announced a long-term collaboration contract to co-develop electric powertrains, fuel cells, and vehicle technologies. This collaboration has created opportunity for Toyota through new product development and increasing revenues. This collaboration also allows opportunity for cost savings and an increase in operational margins. 

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The automotive industry is extremely competitive on a global scale because of the variety within the market. The competition revolves mainly around product quality, development and innovation, reliability, safety, pricing, fuel economy, and customer service. This increase in competition could lead to lower sales and larger inventory which can result in decreased revenue. Another threat that Toyota faces everyday are rising fuel prices. Oil prices have been increasing gradually over the past few decades. Customers look for vehicles that makes sense economically, so developing cars that are hybrid or electric can help with customer satisfaction.  

 

Industry Analysis – Porter's 5 Forces 

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The threat of new entrants is low. Since there are a lot of large companies already established in the industry, the likelihood that new entrants will join the industry is not high. The cost of developing a new brand is extremely high along with the cost of supply chain costs. This high cost of establishing, maintaining, and growing a firm that stand out to competitors create entry barriers. Toyota does not worry about new entrants making an impact on the market because Toyota is considered a top automobile manufacturer across the world. 

The threat of substitutes affects Toyota’s company through other competing products, therefore resulting in a low threat. It is usually easy for customers to shift from using Toyota to using substitutes. Some of these substitutes consist in biking and public transportation. However, since these substitutes are only available and possible to use in highly populated areas like cities, Toyota products are more readily available over substitutes.  

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Within Toyota’s industry, the power of buyers is relatively high. It is easy for buyers to go back and forth between different automotive companies depending on competitive prices. Consumers tend to go back and forth between different automotive companies when it comes to buying a new car. Having a solid website or an easy way for consumers to access information about Toyota’s products is important when it comes to buyers doing research on a new potential car. It is important for Toyota to make sure the products they sell match the preferences and expectations of their target market 

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When it comes to Toyota’s suppliers, the power is low. There is a somewhat high population of suppliers around the world that influence the products that Toyota buys. Since this population is high, there is a competitive environment around which suppliers are used and which are not. Toyota does not have control over the distribution causing their power of supply to be weak. 

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The rivalry among existing competitors is extremely high. Different companies in the automotive industry are competitive against each other when it comes to innovation and marketing. Toyota competes with some of the top companies in the automotive industry, however, Toyota successfully differentiates through technology, cost, fuel efficiency, and brand image.  

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Financial Analysis 

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Analyzing an 8-year trend of Toyota Motor Corporation, the company has performed well compared to other companies in the industry. The percent change in revenue from 2011 to 2018 is 29%, which reflects the increase in profit value over time. Toyota’s operating expenses grew on a drastic incline while their inventory also grew year over year. The inventory turnover ratio was steady between 2011-2014 and then drastically dropped in 2015. However, after 2015 the inventory turnover ratio drastically increased all the way to 2018. Long-term debt has increased at a steady rate over the 8-year trend because of Toyota’s expansion rate into other countries. While the long-term debt is at a loss, their asset ratio is impressive. Despite the recalls, Toyota has made advancements over the years that have made them good competition compared to other companies in the automotive industry. Toyota continues to advance through technology and fuel-efficiency which has helped significantly in their year over year growth. 

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Strategic Options and Recommendations 

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Toyota should continue efforts to strengthen their marketing and management platform. Maintaining the structure that Toyota has, the company should continue to reduce fixed costs and enhance business markets that they have in developed countries. Focusing on these developed countries can drive in the maximum amount revenue year over year. To market deeper into these developed countries, Toyota should monitor each individual market to decide what characteristics and products each market needs. Since these needs vary from country to country, catering and customizing products to these needs can drive more customers to Toyota. People around the world are becoming more concerned with energy saving products. A few companies in the industry have already taken advantage of developing energy saving vehicles but it is important for Toyota to jump into this market as well. Creating vehicles that are more fuel efficient and environmentally conscious will drive in consumers to buy Toyota’s products. In addition to being environmentally conscious, putting safety as a top priority in Toyota’s work platform will drive assurance in the customers. Toyota should enforce laws and regulations and make it known that they participate in these safe practices. 

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Conclusion 

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Toyota is considered to be highly competitive in the automotive industry both nationally and internationally. Automobiles, luxury vehicles, commercial vehicles, and engines are the main products that Toyota offers. While Toyota has been under some controversies with recalls in previous years, being in the top leading positions in the industry has left Toyota with a high competitive advantage. Toyota has opportunity to expand its business through emerging markets in developed countries as well as providing different product offerings. If Toyota decides to enter new developed countries, then their competitive advantage could increase compared to other companies in the industry who have not entered that specific country’s market.  

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