Toyota

Strengths Toyota has a global geographic structure, grouping the organisation activities; including management, by geographic regions (Deresky, 2006). This structure benefits the organisation by focusing on activities in local American market conditions, showing concern for local customers’ needs (Aghazadeh, 2003). Competitive advantage may arise from the production or sale of a product adapted to a particular country (Deresky 2006). The result is relatively flat hierarchy and management tends to be decentralised, compared with Ford having a centralised structure (Fang & Kleiner, 2003). However, strong management support is crucial a centralised structure, as demonstrated by Ford, who are having industrial relations problems (Professional Engineering, 1999). As Toyota employs a bottom-up approach, employees participate in new product development, product modification and share decision making. This method is most frequently used in their Research and Development department. Toyota America personnel (whether staff or management) have the same uniform, car-park and cafeteria; whilst engaging in company songs, ceremonies and social gatherings as one (Fang & Kleiner, 2003). This builds and sustains Toyota’s strong culture. Fang & Kleiner (2003, p.118) explains “management and labour share a common oneness in an effort to minimise the differences”, further strengthening Toyota America. This wellbeing corporatism gave rise to employee empowerment, job security, job enrichment and led to employee commitment and achievement of Toyota’s overall goal (Jacobs & Herbig, 1998). Toyota’s competitor’s GM and Ford have reduced their employee compensation benefits severely, as it reduces their production costs per car by $1,500US. In contrast, Toyota maintains a good employee relationship by sharing concerned for their total welfare and uses this to motivating employees. Benefits at Toyota include skill improvement workshops, low interest rate loans, housing subsidies, access to recreational facilities and retirement allowance (Fang & Kleiner, 2003). New investment by Toyota in factories in the US and China saw 2005 profits rise, against the worldwide motor industry trend. Net profits rose 0.8% to 1.17 trillion yen ($11bn; £5.85bn), while sales were 7.3% higher at 18.55 trillion yen. Commentators argue that this is because the company has the right mix of products for the markets that it serves. This is an example of very focused segmentation, targeting and positioning in a number of countries. Global organization, with a strong international position in 170 countries worldwide. In 2003 Toyota knocked its rivals Ford into third spot, to become the World's second largest carmaker with 6.78 million units. The company is still behind rivals General Motors with 8.59 million units in the same period. Its strong industry position is based upon a number of factors including a diversified product range, highly targeted marketing and a commitment to lean manufacturing and quality. The company makes a large range of vehicles for both private customers and commercial organizations, from the small Yaris to large trucks. The company uses marketing techniques to identify and satisfy customer needs. Its brand is a household name. The company also maximizes profit through efficient manufacturing approaches (e.g. Total Quality Management). Industry leader in manufacturing and production. Maximizes profit through efficient lean manufacturing approaches (e.g. Total Quality Management) and JIT (Just in Time) manufacturing and first mover in car research and development. Excellent penetration in key markets (US, China, EMEA) and now the second largest car manufacturer in the world, surpassing Ford. Weaknesses Being big has its own problems. The World market for cars is in a condition of oversupply and so car manufacturers need to make sure that it is their models that consumers want. Toyota markets most of its products in the US and in Japan. Therefore it is exposed to fluctuating economic and political conditions those markets. Perhaps that is why the company is beginning to shift its attentions to the emerging Chinese market. Movements in exchange rates could see the already narrow margins in the car market being reduced. Toyota produces most of its cars in US and Japan whereas competitors may be more strategically located worldwide to take advantage of global efficiency gains. The company needs to keep producing cars in order to retain its operational efficiency. Car plants represent a huge investment in expensive fixed costs, as well as the high costs of training and retaining labor. So if the car market experiences a down turn, the company could see over capacity. If on the other hand the car market experiences an upturn, then the company may miss out on potential sales due to under capacity i.e. it takes time to accommodate. This is a typical problem with high volume car manufacturing. Some criticism has been made due to large-scale re-call made in 2005, quality issues. Drawbacks occur because of differences in the national and business cultures of Japan and America. The national culture of American is highly individualist, compared with the Japanese collective culture. The business culture in Toyota insists on equality, thus taking time for American employees to adapt to a Japanese organization (Aghazadeh, 2003). Toyota’s top management play a key strategic role in the development of new products, however, management fail to give out specific and detailed work plans on these new products to employees (Fang & Kleiner, 2003). A level of ambiguity is considered healthy generating creative and innovative ideas, whilst leaving room for discussion by top management and staff. Thus, strong guidance from top management is necessary to avoid a potential weakness if top management and staff do not interact or work together effectively and efficiently (Jacobs & Herbig, 1998). Opportunities Innovation -first to develop commercial mass-produced hybrid gas-electric vehicles (gas and electric), e.g. Prius model. Based on advanced technologies and R&D activity. With oil prices at an all time high - this investment and widening of product portfolio fits consumers looking to alternative sources of fuels away from gas guzzling cars[3]. To expand more aggressively into new segments of the market. The launch of Aygo model by Toyota is intended to take market share in youth market. To produce cars which are more fuel efficient, have greater performance and less impact on the environment. Continued global expansion - especially in the emerging markets e.g. China and India, Russia, where population and demand is accelerating. Lexus and Toyota now have a reputation for manufacturing environmentally friendly vehicles. Lexus has RX 400h hybrid, and Toyota has it Prius. Both are based upon advance technologies developed by the organization. Rocketing oil prices have seen sales of the new hybrid vehicles increase. Toyota has also sold on its technology to other motor manufacturers, for example Ford has bought into the technology for its new Explorer SUV Hybrid. Such moves can only firm up Toyota's interest and investment in hybrid R&D. Toyota is to target the 'urban youth' market. The company has launched its new Aygo, which is targeted at the streetwise youth market and captures (or attempts to) the nature of dance and DJ culture in a very competitive segment. The vehicle itself is a unique convertible, with models extending at their rear! The narrow segment is notorious for it narrow margins and difficulties for branding. Threats. Product recalls are always a problem for vehicle manufacturers. In 2005 the company had to recall 880,00 sports utility vehicles and pick up trucks due to faulty front suspension systems. Toyota did not g ive details of how much the recall would cost. The majority of affected vehicles were sold in the US, while the rest were sold in Japan, Europe and Australia. As with any car manufacturer, Toyota faces tremendous competitive rivalry in the car market. Competition is increasing almost daily, with new entrants coming into the market from China, South Korea and new plants in Eastern Europe. The company is also exposed to any movement in the price of raw materials such as rubber, steel and fuel. The key economies in the Pacific, the US and Europe also experience slowdowns. These economic factors are potential threats for Toyota. * Saturation and increased competition, intense marketing campaigns increasing competitive pressures[5]. * Shifts in the exchange rates affecting profits and cost of raw materials. * Predictions of a downturn in the economy e.g. recession, will affect car purchases (especially new cars). As household budgets tighten - this could lead a decline in new car sales and possible rationalization of dealerships. * Changing demographics e.g. number of large families is declining. Undermining the demand for large family cars[6]. * Changing usage - families using the car less for taking children to schools. Home deliveries. Businesses - restricting business travel (tele-conferencing). Governments encouraging alternative forms of transport - cycling and incentives to use public transport across Europe. * Rising oil prices (fuel costs) and the costs of maintaining cars. Increase in families who have chosen not to own a car, or decided to use their car less.