Strategic Analysis and Implementation For TOYOTA Motor Company
Student
: Riyad Batal
NCC ID
: 00153816
Module
: Strategic Management
Center Name: MMS Education Center Date
: DEC 12, 2014
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Contents Introduction ..................................................................................................................................... 4 Task 1 .............................................................................................................................................. 4 Political........................................................................................................................................ 4 Economic..................................................................................................................................... 5 Social ........................................................................................................................................... 5 Technological .............................................................................................................................. 6 Threats ......................................................................................................................................... 7 Opportunity ................................................................................................................................. 7 Task 2 .............................................................................................................................................. 8 Strengths ...................................................................................................................................... 8 Weakness ..................................................................................................................................... 9 Resource Audit ............................................................................................................................ 9 Value Chain Analysis ................................................................................................................ 10 Core Competence ...................................................................................................................... 11 Strategic Capability ................................................................................................................... 11 Competitive Advantage ............................................................................................................. 11 Task 3 ............................................................................................................................................ 12 Introduction ............................................................................................................................... 12 1st issue is Low price ................................................................................................................. 12 2nd issue is Environment ............................................................................................................ 12 3rd issue is Social ....................................................................................................................... 13 Task 4 ............................................................................................................................................ 14 References ..................................................................................................................................... 16 2
Bibliography ................................................................................................................................. 17
List of Figures Figure 1 :Value Chain analysis ..................................................................................................... 10
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Introduction The great Japanese automaker company Toyota Motor Corporation TMC is one of the best leading car producers in the world, it holds a large range of vehicles from mini-sized cars to big large trucks and buses, it is well known and sold in a lot of countries around the world hiring thousands of employees. Their name is among the world’s strongest car production manufacturers because they believe as Japanese that improvement in things must be running continuously through their lifestyle. Toyota is a multinational company with factories all around the world, assembles and produces vehicles in local markets, Toyota Motor Europe TME assembles and manufactures in many countries in Europe such as United Kingdom, Czech Republic, France, Poland and others helping the company sales increase year by year. (www.toyota.eu, 2010) It has become a popular manufactures in Europe following the strategy of focusing on small cars segment with its high demand because of the fuel high price, environment, high unemployment and an unstable economy.
Task 1 There a number of factors that could affect organizations, these factors affect on the firm’s environment internally and externally. Environmental analysis comes in internal analysis that concerns stuff like employees, finance, office technologies and so on. The external analysis comes in micro and macro environment, micro such as costumers, supplies, distributers and competitors and macro such as political, economic, social and technological forces. And that is known as PEST analysis. (NCC lecture) PEST analysis is a very helpful and useful analysis tool to help understand losses or growths of a specific market concentrating on the Political, Economical, Social and Technological factors of the business. PEST is very useful to show the benefits and available opportunities for the business itself.
Political The Political factor is so important for the multinational companies, such as Toyota, because it will guide the company to understand the country specific requirements, regulations, security measures, restrictions and policies. It has huge influence on the businesses regulations and how much will the consumers spend. (ukessays.com, 2009) Any recent produced cars must comply with the European vehicle emission standards and regulations this is known as Euro Standards, therefore, Hybrid or small engine cars with lower CO2 emissions has big demand and support from the government because it is friendly to the environment also vehicles with high CO2 emission will have higher rates of TAX charges. 4
This industry in Europe faced strong regulations to make high mileage cars while increasing the automobile productions and sales. (academia.edu, PEST Analysis) Renewable energy is aimed by the Government Policy to decrease dependence on foreign oil which will affect on the country’s security and economy due to the oil price raising. Surely, with the mentioned above, the political environment is stable for Toyota, because it makes cars with low CO2 emissions and longer mileage which would reduce petrol usage also because this industry is enormous, therefore Toyota has a positive political impact because it makes cars that use less fuel and reduce dependency on fuel.
Economic Economic factors influences on an organization’s development and growth and affects on the consumers demand, they need to concentrate on the trading economy in the short and long terms. The consumers now choose cars with smaller efficient engines based on the benefits of fuel consumption and the savings over time which means they have paid back. Recently the prices of automobiles has increased due to inflation, the main factor that affect on price elasticity is from the oil dependency, customers came aware of new cars with efficient engines which causes saving money in terms of giving bigger mileage for the same amount of oil they could spent on older cars. The dependency on foreign oil and gas will affect on the country’s economy growth, Gross Demotic Product GDP and national security. Previously, the Europe Union had an agreement for quota system, which provides protectionism for European countries, later on they dropped the quota system and eased the tariffs for the external company which made it easier for many international companies including Toyota to trade in Europe and establish opening factories, which has lead to positively affect on decreasing the unemployment rate and the economic growth. (Choon Keet Sin, PESTLE Analysis on Toyota Prius)
Social The society environment plays a good part on the type of cars people buy and fuel efficiency in the car in terms of being green and mileage, the social factor is a change in consumer needs in the society, it affects on business is different from country to another, they should be considered. The challenge for Toyota is the difference between the Japanese customers and European customers, where in Japan there is all about working, where in European culture life is all about both work and social private life. The Japanese culture aspect is that they only take what they need not what they want, without wasting their energy and time on things they wouldn’t need, following “just in time” production just like what Toyota supports. (ukessays.com, 2009)
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People are able to communicate overseas more easily nowadays because of the social value of an additional transportation which has come from this industry, Toyota has come up with new strategy of making cars specifically to target at European consumer. Toyota employs a lot of people in a direct manner and a lot more indirectly which shows how it affects on the society in a major way. TME has made its products for green and small cars segment in Europe, which aims to keep the world in a clean environment and save the natural resources of the world focusing on providing acceptable social costs for European countries (www.Toyota.eu) In Europe TME conducts seminars and campaigns to introduce environmental issues such tips on ECO DRIVE, an economical driving style with cooperating with social communities and NGOs to be involved with the Europeans mentality on saving the environment. (www.Toyota.eu, Sustainability Report 2012)
Technological Nowadays the technology factor is a main driver of globalization and it is important for the competitive advantage, the automobile manufacturing industry should concentrate on it, because of the high competition among the European manufacturers, technology changes from time to another. The TME concentrates on this factor for all its processes, products, operations and others. One of the major technology strategies for TME is reducing CO2 emissions and innovate new alternative fuel such as electric motors and hybrid engines also reduce the air pollution, therefore TME is a great example for providing an environment-friendly cars. (www.Toyota.eu, Sustainability Report 2012) Technology solutions is the investment of today to get benefits for tomorrow, Toyota does not focus on producing fast cars yet it focuses on Eco-friendly cars in Europe, they are researching for alternative energy resources such as Hydrogen, Natural gas, Electricity and Bio fuels. (Toyota.eu, Sustainability Report 2012). Toyota produced Prius with a great Engine technology especially for Europe, which focuses on small engines with the ability to generate higher outputs and using aerodynamic technology for a smother air friction which will decrease the engine efforts and fuel consumption so it achieves low emissions throughout all area. (Choon Keet Sin, PESTLE Analysis on Toyota Prius) The car manufacturing industry in Europe is very competitive technologically where the greatest car manufactures in the industry have cutting edge in science, such as Audi, BMW, Mercedes, Jaguar and others which made it a difficult competition for Toyota and a big challenge for achieving Toyota strategy in technology. 6
Finally TME must concentrate on green cars it has a huge demand in future and in the European market maintaining the technological, economical and socio environmental factor with accordance to the European standards.
Threats Global competition in the automotive industry has become highly competitive because of the globalization, the competition which may reduce sales which could influence financial condition of a company. (Slide share, 2013, Toyota Analysis) The competition is the main threat for the TME especially in the crowded market for Europe and the Korean motor opened a factory in Europe which makes it a foreigner competitor that leads TME to make joint venture with Citroen and Peugeot in manufacturing the Aygo. (Slide share, 2013, Toyota Analysis) Another factor that threats TME are the Emission Restriction the probability of tightening or imposing new European emission standard that may increase the cost for product testing and manufacturing operation and it will be affected on the Toyota production reducing, however TME meets with the regulatory requirements of CO2 emissions. (strategicmanagementinsight.com, 2013, SWOT analyses) The economic recession is one of the most dangerous factors for the automotive industry in Europe. The cost of production may affect on many reasons such as pricing of the raw material and steel. The financial crisis which also affects negatively on the fuel price elasticity which threatens the production.
Opportunity Nowadays one the main environmental problems is climate change and air pollution, customers looking for products which aim to save the environment which is the best opportunity for TME to implement green cars using alternative resources such as, electricity and hybrid engines to reduce CO2 emission to meet the costumers needs and show the society responsibility. (Slide share, 2013, Toyota Analysis). Europe has many manufacturers seeking the same vision and responsibility as TME, with the existence of the products and market in Europe as per Ansoffs matrix which is to implement market penetration by making joint venture and strategic alliance giving a good opportunity to produce cars in Europe and develop supplied network to locate any future plants. As mentioned previously in PEST analyses, one of the best opportunities is to match mini cars segment which meets costumer needs in saving the environment and the economy. TME must innovate products specifically for this segmentation because of high unemployment rate, rising fuel price and economy uncertainty in Europe. 7
Task 2 Internal environment analysis for an organization is one of the basic analyses to make a strategy, it measures the power of a company and its whereabouts by finding out the strength and weakness factors then set the goals and objectives for the organization depending on results of the environment analyses and formulating the strategy to implement.
Strengths Toyota is a world leading company with a strong brand position in the automotive industry globally, with a large number worldwide in the car sales, it has strong financial backbone, strong distribution networks which helps Toyota to improve their sales and market positions around the world. Toyota has different products with different segments for costumers which meet the needs of customers from all levels with the high production lines which gives Toyota its good reputation and brand image that reflects positively on the competitive advantage. Its products are famous with value cost, quality, durability, and reliability and environmentally safe which gives it the strength throughout Europe market. By innovating hybrid cars and high fuel efficiency engines and produce cars specifically to meet Europe standards with reducing air pollution and CO2 emissions, gaining competitive advantage among the automotive industry in Europe while possessing the society loyalty by keeping the environment green and saving economy through reducing fuel consumption. (www.Toyota.eu, Sustainability Report 2012). One of the strong factors for TME is the innovation of cooperation with European car manufacturers Peugeot and Citroen with a clever strategic alliance to manufacture the car Aygo specifically for Europe that gives the power of purchasing in the market share and added value for the company, with a reduced cost of courier and lowering the exchange rates also by sharing manufacturing parts alongside gaining from the sharing of knowledge and local experience. (www.Toyota.eu). TME has succeeded in advertising and promoting with showing their core competence and the company strategy for safe environment by supporting volunteered initiatives through NGOs to share awareness of ECO Driving steps under corporate society responsibility programs and activities. (www.Toyota.eu, Sustainability Report 2012).
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Weakness In recent years Toyota faced design engineering problems which was one of the weakness factors that has challenged Toyota manufacturing is not having high technical skills of engineering designs when they have high level of skills in production. When Toyota faced lapses in product quality it is announced to recall millions of cars around the world from the most popular models which were affected on the market share and reduced the share prices not only for that but also affected on the brand image for costumer and shook costumer’s confidence. (Slide share, 2013, Toyota Analysis) When Toyota decided to enter the European market they had lack of experience among the European competitors especially with suppliers and new young segment of costumers. Also it is such a strange investment which made it look as an interrupter from the local’s point of view, given it has overcome this issue but it is still not counted as proud European manufacturer like its rivals.
Resource Audit Most parts of Toyota cars production is outsourced, it makes standards for their production and get it from various specialized manufacturers such as, tires, glasses, water pumps, so it helps take a lot lesser time in production and makes better product quality, it has physical plants and assets around the world. They use resources to generate competences which is applied in their strategies and competitive advantage also integrate technological resources and the capital in machines so it makes competence in production to contribute in a sustainable competitive advantage.(study mode.com, 2013, Resources and Capabilities of Toyota) Toyota has strong capabilities in human resources, intellectual capital, learning and knowledge management, they share and train their suppliers along with their staff to maintain their core competence.
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Value Chain Analysis
Figure 1 :Value Chain analysis
(mekogroup.com, value chain) For primary activities:Inbound: The company almost obtain raw material from third party, they also handle small parts not manufacture, and keep good relationship with their suppliers. Operation: Toyota is properly manufactured and assembled, it is known for its reliability and durability thanks to the efficient operations. Outbound: They store and distribute their finished products to dealers to make them easily reachable. Marketing & sale: They focus importantly on marketing and the promotions variations to meet what the targeted customers need. Service: Toyota appreciates and gives value to their customers, so after-sale, maintenance and other services are included. (scribd.com,2009,Value Chain Analysis)
For support activity:Infrastructure: Toyota handles and controls its different departments by Management Information System and other systems. Human Resource: Toyota values their employees as Human Capital, they aim to maintain their employees by training and developments. Procurement: It aims to reduce the prices for purchasing with the most possible quality and they use e-Purchasing. 10
Technology: Toyota implements production technology and innovate to reduce cost by using internet activities and other technological developments. (scribd.com,2009,Value Chain Analysis)
Core Competence Toyota is rich in core competence which is high professional skills in management, high technology and knowledge with good relationship with competitive. It has high capabilities that give it high performance and production which made it distinct among competitors. The company is looking for unique product which is recognized by its ability to manufacture cars with great quality and best prices to meet costumer high expectations. With continues improvements in the Japanese word KAIZEN Toyota distinct in continuously advancing in production, it has just in time production which give it high efficiency in production. (www.Toyota.eu, Sustainability Report 2012).
Strategic Capability Toyota is a company with strong management capabilities that makes it to increase its value with time, with high ability to use competitive strategies successfully by focusing on assets and resources and market position. It has the ability to use their strategy for the future globally; it has successful management capability in Europe especially when they employ their capabilities and resources to meet standards for Europe in a challenging market. (Toyota.eu, Sustainability Report 2012).
Competitive Advantage The competition in the automobile industry is strong in Europe, TME faces big players to compete with, it is struggling to increase its market share. It creates a unique brand image in the mind of the targeted costumers which is an advantage over the competitors. The company always keeps an eye out on their competitors with continuously improving quality and low cost. TME has accomplished a great achievement of the mini cars targeted segmentation, especially with less fuel consumption and low price in the Aygo and Prius.( Slide Share.com, 2013, Report on Corporate Level Strategies) It has created a competitive edge over costumers to keep them satisfied by developing and implementing their core competence and capability.
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Task 3 Introduction As mentioned previously on the environmental analysis for the internal and external factors it appears that Toyota is a one company that cannot be underestimated and is considered a huge competitor for automobile companies in the industry. It focuses mainly on being known to be low in price with good quality among its competitors, environment friendly is considered one of the major strategies for Toyota, especially in Europe, globally expanding all over the world, adapting with many cultures and take societies needs, without neglecting the cutting edge of technology.
1st issue is Low price Toyota mainly adopts low cost strategy as one of its competitive advantages they are focusing on reducing cost for all supply chain management starting from suppliers and resources of raw materials during operation to sales, logistics and capabilities in overall, when all other competitors focusing on reducing the cost Toyota achieved leadership in low cost production. (www.Toyota.eu, Sustainability Report 2012). Toyota should adopt competitive strategy in Europe by implementing low cost leadership strategy. Low cost leadership occurs by Toyota having their own channel of raw material suppliers to avoid fluctuation increase from the suppliers, redesigning of component process to save sustainable cost. They needed to be careful to make a decision to having assets and insuring those assets are fully used, low cost of product design, engineering and a skilled workforce. Low cost is a main interest of the targeted customers because of the economy uncertainty, increasing fuel prices and high unemployment rate in Europe, given this it makes it an appropriate strategy.
2nd issue is Environment Another corporate strategy for Toyota is to save the environment and keep the environment green by reducing emissions CO2, less fuel efficiency and innovate hybrid car with electric motors. (www.Toyota.eu, Sustainability Report 2012). For this issue, the best strategy the differentiation, increase market share with changing the costumer’s perception for Toyota products as a competitive car by added value downstream choosing clever advertising and promotion to view to the costumer the meeting of their needs for environment responsibility. 12
3rd issue is Social A clever competitive advantage of Toyota is involving with the countries culture, in Europe they focus on the society awareness of the economical practices to save the economy. They gain more loyalty of the costumers by dealing with NGOs and involve corporate social responsibility through social activities. (www.Toyota.eu). Appropriate strategy for this issue is by adopting social responsibility, one of the good business ethical practices and showing their care of improving people lives, supporting awareness campaigns for the society, support charities and education. This strategy will keep the stakeholders satisfied and give out a positive vision to the world about Toyota.
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Task 4 Undoubtedly when the organizations implement their strategies facing problems and barriers, strong management is the key behind overcoming these barriers, it plans and implements emergent strategies to flexibly change their approach of achieving their vision. For Toyota strategies as mentioned previously for implementing low cost leadership strategy many problems and barriers Toyota might face, some of it is like the ones developing and improving the quality of technology, and keep up with the modern technology, especially when they add new electronic systems and sensors. When the company plans to apply the low cost strategy, that means they will decrease all cost for all value chain in primary and supportive activities, these will affect directly on the quality of technology because they will not be encouraged to spend more money for research and development, and support innovation centers which slows down the technology growth in comparison to the competitors, the new technology production may appear defected that would force the company to recall the defected cars which will lead to losing customers trust and reputation, and society loyalty. Other problems that may face the low cost leadership strategy is price increase of raw materials and suppliers over-controlling the prices, forcing the company to raise their product cost affecting its known reputation of value of money. Also currency exchange rates in the scale of economy between company, suppliers and distributers may also make Europe increase the taxes rates for the foreigner markets, and making inappropriate advertising and promotions to the society. The company should keep its prices low for this strategy and adopt operational strategies to maintain capability and resources for appropriate prices. The implementation strategy should be flexible and emergent perspective in action plans which deals with all emergent cases that becomes a barrier of implementing the strategy. Suggestion for the low cost strategy, to keep technology growing with low expenses is to encourage younger people, invest and support innovation in schools and social groups and award the young learners by making technological competitions whom wages come lesser than the experienced ones, generating new ideas from the young minds.
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For suppliers it should seek out joint venture and strategic alliance opportunities and invest with suppliers and share the stocks to contribute with the suppliers decision. The strategies should be focused on the operational performance objectives quality, speed, dependability, flexibility and cost to create competitive products with achieving organization goals without neglecting any safety and technology.
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References
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