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Table of Contents |1. |Current Situation | | | |A. |Current Performance |1 | | |B. |Strategic Posture |2 | | | | | | |2. Corporate Governance | | | |A. |Board of Directors |3 | | |B. |Top Management |3 | | | | | | |3. |External Environment | | | |A. Societal Environment |4 | | |B. |Task Environment (Industry) |7 | | |C. |Summary of External Factors(EFAS) |8 | | | | | | |4. |Internal Environment | | | |A. Corporate Structure |9 | | |B. |Corporate Culture |9 | | |C. |Corporate Resources |9 | | |D. |Summary of Internal Factors(IFAS) |15 | | | | | | |5. Analysis of Strategic Factors | | | |A. |Strategic Factor Analysis Summary Matrix (SFAS) |16 | | |B. |TOWS Matrix |16 | | | | | | |6. |Strategic Alternatives & Recommended Strategy | | | |A. Strategic Alternatives |17 | | |B. |Recommended Strategy |24 | | | | | | |7. |Implementation |29 | | | | | | |8. Evaluation and Control |30 | | | | | | |9. |Appendix |31 | | | | | | |10. Reference | |35 | 1. Current Situation A. Current Performance Company background Toyota Motor Corporation is an automobile manufacturer originated in Japan which produces various models, ranging from minivehicles to large trucks. It does not only do well locally, but also worldwide. Toyota has 12 plants in Japan and “52 overseas manufacturing companies in 26 countries and regions”, like the Mainland China or the United States.
How successful is Toyota anyway? Let us see in the following. (Toyota Annual Report 2005) Current performance In the fiscal year 2005, Toyota had sales of vehicles of “7. 40 million units, net revenues of ? 18. 55 trillion, operating income of ? 1. 67 trillion, and net income of ? 1. 17 trillion” (Toyota Annual Report 2005, p. 9). With this encouraging performance, Toyota was able to distribute more of its income to shareholders, indicating an increase in the return to shareholders. The market share of Toyota in Japan was about 44. %, “excluding minivehicles” (Toyota Annual Report 2005, p. 10). The Company achieved this by constantly introducing new models to the market. In 2005, Toyota reached a “consolidated overseas vehicle sales” (Toyota Annual Report 2005, p. 10) of 5 million units for the first time. Moreover, the sale of hybrid vehicles has grown 2. 5 times. The trend of globalization makes competition more and more fierce in the sense that not only price has to be reasonable, but also the quality has to be high, especially in the current environment that the cost of materials are soaring.
The problem of keeping costs low and in the mean time maintaining high quality thus becomes the key issue. However, Toyota achieved the satisfying results with these difficult conditions. Also the economic recovery of Japan and other countries raise the demand for automobiles, contributing to Toyota’s bright performance. B. Strategic Posture Mission and objectives Toyota’s management philosophy is to “heighten management efficiency and maintain solid growth” (Toyota Annual Report 2005, p. 9).
According to Toyota’s President, Watanabe Katsuaki, both of them have to be achieved in the meantime. In order to accomplish this, Toyota strives to become “the number one automaker in the world in quality, speed to market, pricing, and service” (Toyota Annual Report 2005, p. 11). So the manufacturing and management process must cater for attaining the goal. For example, the just-in-time inventory system was first adopted by Toyota in order to keep as little inventory as possible. For its staff, Toyota set a common goal of increasing sales and market share to motivate the employees.
Strategies For growth, Toyota would focus on three areas, namely development, supply and marketing. Developments—”shorten the lead times needed to bring appealing vehicles to market”, “safety and other next-generation technologies” (Toyota Annual Report 2005, p. 12). Supply—double local production, “raise domestic production capacity” (Toyota Annual Report 2005, p. 12). Marketing in Toyota — “fortify our sales network in regions worldwide”, “reorganized sales channels” in Japan and “strengthen sales capabilities through brand realignment” (Toyota Annual Report 2005, p. 2). 2. Corporate Governance A. Management Goal The priority of Toyota’s management is to maximize shareholder value over the long term. Also, to be a responsible corporate citizen is their objective too. As a result, Toyota strives to build “favorable relationships with all of its stakeholders, including shareholders, customers, business partners, local communities, and employees” (Toyota Annual Report 2005, p. 16). Awareness to ethics is kept in mind also, as they believe that it is the key to be effective corporate governance.
Without ethical awareness, the purpose of governance could never be served, no matter how well the system is. B. Management System A new management system has been introduced in Toyota in June 2003. This system comprises a “streamlined Board of Directors and the new position of non-board managing officers with responsibility for specific operational functions” (Toyota Annual Report 2005, p. 16). Apart from that, its management system has a different feature that the senior management directors do not only focus on management, but also on some operational issues.
In this way, the serve as the bridge between the management level and operations so that the management decisions can be well- suited to the front-line operations. Moreover, an auditor system is set up to monitor the management. There are a total of seven members in this system, as four of them are from outside of Toyota so that they do not have conflict of interests. Furthermore, in order to ensure that the management is adopting appropriate policies, there are annual meetings held by the International Advisory Board (IAB).
It comprises members from all over the world with different backgrounds. In this way, the Company could try to improve and review its management issues in various perspectives. In addition, conferences are often held for different stakeholders to express their opinions regarding issues of the firm. Accountability is another issue of corporate governance. Toyota discloses financial information, with the monitor of the Disclosure Committee, who makes sure that the disclosed information is authentic so that investors could make appropriate decisions. . External Environment A. Societal Environment – Opportunities and Threats Economic Having automobile has been an economical prestige symbol for everyone in the world, especially for the developing country, China. Before 1998, China had its own government restriction policies (Self Reliance and Security Oriented Policies) in order to limit the price and the competition from foreign investors, which have included quotas, high tariffs, and differential taxes favoring local suppliers( Joseph and Don, 2004).
After China’s integration into the World Trade Organization (WTO), the initial policies have changed, in quotas, local content requirements and rules on foreign investments (Joseph and Dean, 2004). This is a great opportunity for automobile market in China, as a new large market and the highest population in the world. Besides, decline in the dollar against the Yen brings to Toyota lose about $ 20 billion Yen in 2005 which means Toyota need to spend heavily in developing new models for foreign markets and expand production abroad and the cost of the raw material will increase.
As a result, Toyota will gain less profit but gain for more market share. (Todd, 2005) Technology Nowadays, in automobile industry, the huge manufacturers like Mercedes, BMW, Audi, Volvo, Nissan and Honda are pursuing for higher technology in order to increase their sales as well as market share and to offer more stylish designs for the masses. Beyond the Technology, consumers are focusing four key fronts when deciding their own automobile: Safety, electronics, performance, and fuel economy. (Lee and David, 2006) Best Safety
The latest technology of safety, the latest ‘active’ computer the auto has. In most car, anti-locking braking systems(ABS) and side-impact air bags are the features recently, however, there is a better performance of having the new technology of electronic stability controls(ESC) which can avoid accidents in the next revolution (Lee and David, 2006). In addition, in most premium cars, intelligent cruise control is the coming technology should be used which had a more ‘Active’ Computer’ to assist the driver in a new level of safety. Elegant Electronics
The elegant electronics means the entertainment systems in the auto, which the drivers are pursuing for the coming trends. Integrated onboard devices are going to be jumping from 20% of the cost of making a car today to 40% by 2015 (Lee and David, 2006). BMW and Audi had the idea of PC-like iDrive System which simplified the complex interface. (Lee and David, 2006) These are the coming threats of automobile, because of the increase of criteria of the drivers, which leads to the more electronic features, the more elegant and attraction of the automobile. Performances and Fuel-Economy
To have the best performances of automobiles, the cleaner the gas of output and inside the car mean the best performance. This was a great opportunity for Toyota which planned to have hybrid engine, in the form of direct-injection gas engines in order to treat the environment well. As a result, “the fuel economy rises by as much as 15% and the engine can run faster”, according to Lee and David’s research. Socio-cultural Consumers focus on four key criteria for having cars recently: want to have more and more car choices, stylish as well as sophisticated onboard devices, personalization and computerization.
These are large threats for those who are not as huge company, because the costs of making each car are increasing, by following, a personalization of having their own unique car which means consumers are gaining the ability to tailor a car purchase to suit their individual lifestyle (Lee and David, 2006) as well as representing their own unique images. Political-legal Japanese government had approved a Tax-Reduction in 2003 which benefits all the Japanese automakers, the industrial revitalization law. James & Yuzo, 2002) then, the automakers could use the Tax Credit as an opportunity for further improving the research and development spending. Alternatively, poor international relationship between Japan government and Chinese Government, as because the visit of Taiwan’s former president, Lee Teng Hui, which damage their international relationships and will be unlikely to be improve in short term. (Japan: Country outlook, 2005) As a result, this will be a threat for Toyota. B. Task Environment (Industry) Toyota Motor Corp. s keeping its position as the world’s second largest automaker in sales for the third year in a row in 2005. (Toyota Remains World’s No. 2 Automaker in 2005′ 2006) In Japan, Toyota got more 40% market share in the car industry. It reflected that Toyota is a successful market leader in Japan. Also, in the car environment, Toyota is facing different forces to influence its competitive status. Threat of new entrants In the car industry, the new entrant is generally low as it needs huge investment and insufficient resources to support. Toyota invested large capital in R in raising its quality.
The new company needs invest huge capital on product development; brand building, research and the company size should be strong enough to obtain sufficient resources. All those factors drive lots of obstacles in entry of the car industry. Bargaining power of buyers In Japan, Cars may not be necessary products and the price of a Car is higher. Many of the Toyota’s competitors target their products between the middle to upper class buyers. The bargaining power of the Japanese buyer is usually higher. They do not see a car as a necessary good but luxury good.
However, Toyota is selling lower prices and they successfully enjoy larger market share. (Japan Cars 2005, 2005) The bargaining power of the buyer is usually lower and they like to buy their own production, so that the competitive in western countries are higher. Threat of substitute products or services Most of the Japanese people select Japan Buses and Railways as their replace for Car. In Japan, the transportation is convenience; People may not use Cars as their main transportation vehicle. (Japan Buses 2004, 2004) The main substitutes are the Japan Buses, Railways and Taxi.
This could be a threat for Toyota Corporation. Bargaining power of suppliers Toyota has a very good relationship with their suppliers. Auto industry suppliers consistently reported that Toyota is their best customers and also their toughest (Liker, the Toyota way 2004, p. 199). The bargaining powers of suppliers are high. And there are not many selections for Toyota production. It might be a threat for Toyota. However, Toyota would turn the supplier into their business partner. Toyota would also seek their supplier advice and opinion to improve its production. This is an opportunity to improve their performance.
Toyota would invite their supplier to become a joint venture partner. (Jeffrey & David 2006, p 270) Toyota always organizes different kind of training program for their supplier to keep improving the production. Besides, Toyota could develop the core suppliers. Toyota has developed a tiered structure. Toyota will work closely with these suppliers and expect them in turn to manage lower-tier suppliers. It is a method to turn the threats of high bargaining power of supplier into opportunities. Rivalry among competing firms Toyota focuses on the young driver market (Steve, 2003).
With an increasing numbers of young drivers, Toyota would take this opportunity to increase its competitive status. For the young drivers, they develop some trendy cars style rather than conservative style for the middle age driver such as Echo, Camry, etc. This vision could raise the competitive status of Toyota regarding their competitors. Up to now, Toyota is predicted to raise market share in 2006(Anonymous, 2006’Predictions for 2006). C. Summary of External Factors (See EFAS – Appendix 1) 4. Internal Environment: Strengths and Weaknesses A. Corporate Structure
There are three segments in Toyota, which are namely the automotive operations, financial services operations and other operations. The automotive operation is the largest part of Toyota’s business and it accounts for 90% of its revenue. Moreover, the automotive operation is divided into different regional parts (Asia, the US and Europe). The financial services operations cover over 30 countries and regions. The services provided are usually for financing the purchase of automobiles. For other operations, Toyota is more than just an automaker which include more like information technology and telecommunications, housings and marines.
B. Corporate Culture Toyota respects all of its staff members in the sense that it believes that they are indispensable to its success. Teamwork is strongly emphasized and as mentioned initially. Toyota has set a common target of raising market share to 15% for all of its employees so that they work for one focus goal of the “realization of Toyota’s vision” (Toyota Annual Report 2005, p. 11). Moreover, Toyota values communication with its employees. It believes that through communication, they could build up “Mutual Trust and Mutual Responsibility” (Toyota Annual Report 2005, p. 22). C. Corporate Resources
I. Marketing As the economic conditions gradually recover, the domestic demand for automobiles has increased. To cope with the demand, “Toyota is rebuilding its product strategy and sales channels to become even more competitive” (Toyota Annual Report 2005, p. 38). It aims to capture 45% of the Japan automotive market and aggregates “domestic, Toyota-brand sales channels from five to four and defined the roles and targets of the remaining channels more clearly” (Toyota Annual Report 2005, p. 38). For example, Lexus was separated out and developed as a premiere brand. Social Responsibilities
In order to be a responsible corporate citizen, Toyota strives to fulfill the social responsibilities. They do not only care about sustainable development of the Company but also that of the earth. This is done through its effort to maintain good relationships with its stakeholders, including the customers, employees, business partners, shareholders and the community. These were stated in the Guiding Principles at Toyota. There are a total of seven principles, which are shown below: 1. Honor the language and spirit of the law of every nation and undertake open and fair corporate activities to be a good corporate citizen of the world. . Respect the culture and customs of every nation and contribute to economic and social development through corporate activities in the communities. 3. Dedicate ourselves to providing clean and safe products and to enhancing the quality of life everywhere through all our activities. 4. Create and develop advanced technologies and provide outstanding products and services that fulfill the needs of customers worldwide. 5. Foster a corporate culture that enhances individual creativity and teamwork value, while honoring mutual trust and respect between labor and management. 6.
Pursue growth in harmony with the global community through innovative management. 7. Work with business partners in research and creation to achieve stable, long-term growth and mutual benefits, while keeping ourselves open to new partnerships. (Toyota Annual Report 2005, p. 21) Toyota also carried out environment protecting activities. In 2005, it launched the third plan for environmental protection. There are four major issues in this plan: Energy / Global Warming, Resource Recycling, Environmentally Burdensome Substances, and Air Quality. So the company would stick to the principles regarding these issues in different areas, such as R&D.
For instance, the R&D develops some vehicles that produce minimal poisonous emissions. Furthermore, Toyota undertakes the social contribution initiatives to fulfill its social responsibilities. There are a range of different activities, such as “science and technology promotion, road safety campaigns, patronage of the arts, environmental conservation, volunteer activities, and local community activities” (Toyota Annual Report 2005, p. 129). These initiatives are carried out worldwide where Toyota is doing business. Moreover, in Japan, it is a member of “Nippon Keidanren’s 1% Club” (Toyota Annual Report 2005, p. 29), in which it has to donate 1% of its nonconsolidated ordinary income to charitable contributions for each year. II. Finance The net revenues of Toyota have increased by 7. 3% in 2005 compared with 2004, which in dollars terms more than ? 18 million. Operating income and Net income have grown by 0. 3% and 0. 8% respectively also. Earnings per share have risen from ? 342. 9 to ? 355. 35. The amount of total assets has heightened 10. 4%. With the increased assets, which probably include investments, Toyota can achieve in expanding its production capacity. Also, the cash dividend per share has soared sharply for 44. %, meaning that the return to shareholders has risen. Additionally, the share price has risen 2. 8%, indicating that Toyota’s objective (to maximize shareholders’ value) is achieved (Toyota Annual Report 2005, p. 2). III. Research and Development (R&D) As the stress for safety and environment is becoming more crucial, Toyota’s researchers should strive to develop new types of automotive that incorporate high quality and reasonable cost. The core R facility is the Head Office Technical Centre. Apart from this, Toyota has also R facilities in the US and Europe, which are located in different geographical areas.
They can cater for the distinct needs and demands of that particular place. For example, cars are necessities in America but it might not be the case in Japan. So the features demanded will not be the same. Toyota has spent ? 770 billion on R in 2005, comparing with ? 755 billion in 2004. In fact the spending has been increasing steadily in the recent five years, meaning that it is devoting more and more resources in R, which is accompanied by an upward trend in the sales of vehicles. As a result, we can see that the increased spending was rewarded by a higher turnover. IV. Operations and logistics
In part of Operation and logistics, Toyota believed six focuses which are the followings: 1. Stop any waste 2. Quality is very important forever 3. Copy is easier than create 4. Where need car, where produce car 5. Environment protection is trend and must follow 6. Creative and innovation is Toyota main idea Toyota used product-oriented. It used “Just-in-time” concept to reduce waste. It is a flexible manufacturing. All productions are automation or robots. It tries to reduce time and production cost to lead its product has a price advantage. It also looks serious its quality and lead its product always are innovation and creative.
Although Toyota is one of the world’s leading auto manufacturers. It also faces some problem. First, oil price is rising. It causes its production cost increase. Second, Japan is lack of natural resources (steel and iron) to produce cars. It always depend other countries to import that lead to reduce its competitive advantage. As a result, the quantities of Japanese cars are always fewer than the quantities of European cars. Toyota continues to raise its growth in unison and thinks a harmonious relationship with the environment, the global economy, local communities and its stakeholders is very important.
It helps to a get long-term, stable growth. So, it will invest aggressively in future technologies to develop automobiles that are greener, safer and more fun to drive. Toyota creates a new logistic method. It does not follow the MRP method because MRP is not good for quality control. So, it finds “Just-in-time (JIT)” is most suitable for it. It is a wonderful method that helps to reduce waste (time and cost) and enhance quality. The idea is likely we buy products from supermarket. When consumer need their products then put the products on the shelf. It reduce place to store. Just-in-time (JIT) is a management philosophy that strives to eliminate sources of manufacturing waste by producing the right part in the right place at the right time. Waste results from any activity are cost without value-added, such as moving and storing. JIT (also known as lean production or stockless production) should improve profits and return on investment by reducing inventory levels (increasing the inventory turnover rate), reducing variability, improving product quality, reducing production and delivery lead times, and reducing other costs (such as those associated with machine setup and equipment breakdown)” (Richard, 1984).
The Toyota Production System has become the basis for highly efficient “lean” manufacturing in industries worldwide. It guides the evolution of Toyota’s worldwide operations. They look serious on their quality control and team work. Reduce all waste and save time. Using “Concurrent Engineering” and lead all of design idea mix together. And all of staff must follow their direction. V. Human Resources Management Toyota has some concept to employ their staff. It believes that only has a good training for their staffs that lead to produce high quality products.
Toyota focuses on “the Desired Outcome, Not the Daily Tasks of leaders. ” It signs some effective leadership to increase high morale and consistent achievement of target in the group. “Toyota places a great deal of importance on the production-related leadership. These leaders directly support the values-adding activities, which is the central core of the organization. Toyota uses an” inverted pyramid” model for leadership, where the leaders of the organization are pictured at the bottom to support the majority of the organization? Jeffrey 2006, P. 222) (See in Appendix – 4, figure a. ) So, we can see that Toyota is a well-organization in its structure and the staff also take serious on team-work. Their objective and direction is the same as putting the company first priority in mind. Besides, its office staff or engineering position structure is similar to the production structure, except there are usually no group or team leaders. It is very special and different from other corporation. “Though there are few position tittles.
The office staff includes “assistant staff” and “associate staff” who have responsibility for no technical jobs, and “specialists” who have specific technical skills and are responsible for production engineering, facilities maintains, safety and environmental compliance, accounting, human resources, and other assignments requiring a technical degree. ” (Jeffrey & David 2006, P. 224) The flexible distribute work for staff helps to reduce waste of human resource. But this system also has some weakness. The decision making will be slow because the complicated collectivism group decision making.
The production cost by providing a lot of training. VI. Information system Toyota believes that don’t waste any time and resource. So, it creates some system to help it. 1. Just in time system “Just-in-time (JIT) is a management philosophy that strives to eliminate sources of manufacturing waste by producing the right part in the right place at the right time. ” (Richard, 1984) 2. ) Kanban Production Control System “A kanban is a card that is attached to a storage and transport container. A kanban system is a pull system, in which the kanban is used to pull parts to the next production stage when they are needed.
It identifies the part number and container capacity, along with other information. ” (Richard, 1984) Kanban system is used to express parts between work stations in ideal quantities. It is not same as JIT, and a kanban system is not required to apply JIT, although JIT is required to implement a kanban system and the two concepts are frequently equated with one another. These two systems are for helping to manage the data and reduce waste. Save time and place lead to increase productivities. Cost will diminish and enhance competitive advantages. D.
Summary of Internal Factors (See IFAS – Appendix 2) 5. Analysis of Strategic Factors A. Strategic Factor Analysis Summary Matrix: SFAS – Appendix 3 B. TOWS Matrix |Internal Factors |Strengths (S) |Weaknesses (W) | |(IFAS) |Global brand & product |Hesitation in decision makings | | |Sufficient Talented Labours |Complex production procedures | | Strong in R & D |Too many staffs | |External Factors |Efficient supply chain & distribution | | |(EFAS) |Social & environmental commitment | | |Opportunities (O) |SO Strategies |WO Strategies | |China enters WTO |Expand its business to Asian Countries like|Mass production to attain economies of scale | |Environmental friendly technology |China |Revolute R&D to be focusing more on supporting | |Consumer’s customization |Developing more environmental-friendly |software in order to simplify the production | |Joint venture improvement activities |products |procedure | |Increase of young drivers |Healthy Social responsibility for young | | | |drivers | | |Threats (T) |ST Strategies |WT Strategies | |Few choices of suppliers |Diversify the its product into other area |Develop product offers for more features, | |Keen Competitions in Japan | |quality, services or customization | |Japanese Currency value drops | |Find a joint venture partner which is | |Tax and raw materials cost increase | |China-based and strong at technology | |Many Substitutes | | | 1. Strategic Alternatives & Recommendation Strategy A. Strategic Alternatives Business Strategic Alternatives Cost Leadership
A cost leadership strategy is an integrated set of action designed to produce and deliver products at the lowest cost relative to competitors with features that are acceptable to the target markets. (Thomas & David 2004, p. 118) The company is usually selling the price in relatively lower than its competitors and the products are usually standardized to fit the broad mass market. Costs driven down through investment in the efficient –scale facilities and tight overhead and cost control in areas such as service, sales force, etc. Pros ? Attract price sensitive customers ? Continuous efficiency improvements serve as a barrier of entry to potential entrants ? They may also enjoy the advantages of the bargaining power of supplier as the costs of the margins are higher than its competitors. Cons Competitors imitate cost leader’s strategy requiring cost leader to increase value by reducing price and/or adding valued features at same price. It would not be sustainable in Short-term. Differentiation A differentiation strategy is an integrated set of actions designed to produce and deliver products that customers perceive as being different or unique in ways that are important to them. Moreover, it is characterized by offering products at premium prices with unusual or customized features, responsive customer service, and rapid product and after sales services. (Thomas & David 2004, p. 118) Pros ? For the rivalry with existing customers, the brand loyalty and lower price sensitivity helps to insulate from the competitive rivalry. The bargaining power of buyers would also be an advantage, as the lack of perceived acceptable alternatives with comparable combinations of features and cost increases the firm’s power over customers. ? The uniqueness of the differentiated product creates substantial entry barriers such as the environmental friendly car. Cons ? Imitation by competitors which can not be sustainable. (Ford, General motors) Cooperative strategies There are two types of cooperative strategies including Collusion and Strategic alliances. Collusion is the active cooperation of firms within an industry to reduce output and raise prices in order to get ground the normal economic law of supply and demand. (Thomas & David 2004, p. 126)
They may also consider using more strategic alliances; it is to develop the business partner to achieve the significant objectives that are mutually beneficial. Strategic alliances could help Toyota to obtain technology and manufacturing capabilities. It could also gather the stronger technology to improve its production. Corporate Strategic Alternatives Directional Strategy Concentration Growth – Internal Vertical integration This is a strategy which a company operates vertically in multiple locations on an industry’s value chain from extracting the raw materials to manufacturing to retailing. Pros ? Using full vertical integration in China’s market in order to reduce the dependency on external stakeholders for buying and selling. Cons Increase the risk of Toyota by increasing the fix cost. Geographical Horizontal Growth This is a strategy which expanding the company’s products in other geographical locations. Pros ? For Toyota, it is an opportunity to enter the immature China Market for increasing its product sales in the short term. ? According to its philosophy, ‘Where product sell, where production place’, Toyota should plant a new base in China for long term production. Cons ? Investing a wrong city in China will seriously waste huge resources as well as the time spends. Production Horizontal Growth This is a strategy which means increasing the company’s product or services offered to the existing markets. Pros For Toyota, it is also an opportunity to increase its competition advantages in order to increase the market share in short term. Cons ? Higher the risk of providing or producing unprofitable products/services. Diversification Concentric Growth By this strategy, the company’s growth will be expanded its related industry when it has a strong distinction competence position as the attraction of its industry is low. Pros ? Toyota has many strong distinction competences like its knowledge, HR management, marketing skills, R & D, and operation and logistics. As a result, at this part will increase the market share. Cons ? At this part, might cost Toyota a lot of money and time-consuming. External Growth Strategies Acquisitions
To adopt this strategy, it will buy a company which benefits its interest and strengthen its market positioning and/or increase diversification. Pros ? Toyota can reduce its cost of new development as well as time-consuming of R & D. Cons ? Inability to achieve synergy in short term which leads toward more time-consuming. Stability Strategy – Pause Pause strategy is suggested in order to let the company have a time break for stopping current growth activities or retrenchment strategy. Pros ? Provides Toyota have a break, a time for consolidation of its resources after the rapid growth. Cons ? Increase the competitors’ time for taking an advantage in China Market. Functional Strategic Alternatives Marketing Strategies Market Development
Economic recovery of Japan and other countries especially China (after entry WTO) raises the demand for automobiles. Toyota should hold the chance and capture the large share especially greener cars. It needs to keep the high quality and low cost of its products to maintain its competitive advantages. Product Development The focus would be investing aggressively in future technologies in order to develop automobiles that are greener, safer and more fun to drive. Push Strategy It fortifies its sales network in regions worldwide and strengthens sales capabilities through brand realignment. Besides, it should raise awareness by giving more promotion. Pros ? Increase awareness and goodwill. ? Increase total sales and profit. Build a good relationship between suppliers and retailers. Cons ? Set up a high-quality sales network need a lot of resource and time that increase the cost and the workload of staff. ? Too many promotion audience may feel clutter. Pull Strategy Spending more on consumer advertising and give them more premium to attract them to pay attention Toyota products. Pros ? Build up a good relationship between buyers and customers. ? Increase total sales and profit. ? Enhance brand awareness. Cons ? Too many premiums might depreciate Toyota brand image. So, premium may use for the old model. ? Production cost will increase when too many advertising and premium. Price skimming
When a new product comes out, Toyota should set it in high price and lower when the product out or may be sell the whole model to others (Some developing countries still using some old model) when the product is out. Pros ? Profit will be increase Cons ? It may decrease the image of Toyota when its products always in high price or old model still sell in market R & D Strategies Technological leader Toyota is a large in automobile industry and the huge manufacturers in the world. It does more research and always enhance its technology including safety, electronics, performance, and fuel economy. Pros ? Increase the market shares because its products always keep innovation and new. ? Build the goodwill and awareness. Cons ? Keep the products innovation must pay more resource on R&D that lead the product cost increase. High risk when new products launch if the product are not ideal. Logistics Strategies Toyota uses “Just in time” method to handle its products. But some suggestion can use on it. The use of internet Internet commonly applies nowadays. More promotion on using internet for customers to choose the preference model and the logistic process should use more through internet Pros ? Increase productivities because save time and procedure. ? Reduce production cost by employ less people Cons ? Elderly customers might not know how to use computer and internet. HRM strategies More training Provide more training for staff and with high salary to employ high quality employees. Pro Increase productivity and keep on the sustainable skills. Cons ? Increase cost of production by providing more trainings B. Recommendation Strategy – Business Differentiation focused To a large extent, Toyota is using the differentiation strategy. They are mostly focus on the customization rather than standardization. They have different products line for the broad mass market. They are customized its products towards different market. For example, Toyota Camry is one of the customization for it market. Toyota’s Camry was the most ideal for vehicle customization from Aftermarket Business in 2005 by Chris Miller Also, Toyota is developing the unique features – the environmental friendly car.
This product is an environmental friendly concept and this is the high technological product to minimize the air pollution to the environment. Also, this product could decrease the use of oil and gas in replace of the electronics. It is expected that the environmental friendly car is Toyota unique feature and would be popular in the future. It also reflected that Toyota is focus on the differentiation rather than cost leadership. Toyota is also used focused differentiation strategy, the Lexus car providing free city parking and focus on time poor and high income clients. In the Toyota case, the prices of its products are increasing and the cost of production is also raised. Besides, Toyota has lots of product lines for different target segment.
They cannot standardize all their cars to fit broad mass market. For example, Lexus line is for upper class segment and the prices are higher. The Crown and Corolla Lines are for middle class and young driver segments and the prices are relatively different. In comparing with its competitors, Toyota is not selling cheaper. They are focus on long-term rather than short-term result; they are providing commitment to quality. (The Toyota Way 2004, P. 71) Avoid to follow the leading competitor’s strategies may be a good idea sometimes. Different companies would have different culture and background. Mercedes Benz has its own brand equity and special features.
The cost of Mercedes Benz is different from Lexus Car and the price and functions could not be followed. Toyota further develops the environmental friendly car to take advantages of the unique technology. Environmental friendly car could ease the pollution and save the use of oil. It could take the opportunity in the technology factor. Toyota is focusing on differentiation; they should have special features and complete after-sales services. They could further expand the supporting service. For example, open 24 hours customers’ service centre. This service centre provides professional advice to Toyota customers. Customers would be more confident to buy Toyota Car.
Toyota could also provide some individual maintenance to the individual buyers. The maintenances may include modification of the Car style and functions to make the car more durable. Also, provide more accessories a rear spoiler, 18-inch wheels and tires, and various interior trim components for dealer installation. Cooperation Strategy It recommended that Toyota could use the cooperative strategies which are to gain competitive advantage by working with other firms. Toyota could direct communicate with other firms to start the cooperative strategies. It could reduce the financial and political risks; Strategic alliances could help Toyota minimize the cost of production as the production cost has been shared.
An appropriate joint venture could also be easily to avoid the political risk of expansion. For example, Toyota joint with China Motor Car could easily increase the distribution channel into the China Market. It would also enjoy achieving competitive advantages. A few years ago, general motors and Toyota formed Nummi Corporation as a joint venture to provide Toyota a manufacturing facility in the United States and GM access to Toyota low-cost, high-quality manufacturing expertise. (Thomas & David 2004, p. 126) Recommended Strategy – Corporate Geographical Horizontal Growth As there is a large opportunity in China’s entering WTO, Toyota should not miss this bright prospect.
China has the world’s largest population and one of the fastest growing economic in the world (Howard, 2005) without doubt a lot of new drivers in the coming future. Planting a vertical integration base China is a right choice, because other competitors are surely targeting this enormous profit. Product Horizontal Growth In recent years, the consumer’s tastes are continuously changing as becoming more demanding as mentioned initially in socio-cultural, by then they want to have more and more car choices, stylish as well as sophisticated onboard devices, personalization and computerization (Lee and David, 2006). Therefore, Toyota is recommended to increase the products’ features, qualities or services to the current existing markets like in these two large scales, Japan and US.
As a result, Toyota could keep on its sustainable competitive advantage through the 26 countries (Toyota Close Up, 2006). Recommended Strategies – Functional Marketing Strategies Toyota should expand its markets in the developing countries and Asian counties to gain the market share. Especially in China, its market will wholly open after entry WTO. Besides, Toyota is more popular in Asian. So, it should concentrate the market and promotion Product Development Toyota has developed greener car series. Nowadays, consumers more concern environment protection and hope to save energy. Toyota should hold the trend and improve the technology on this. Push Strategy Toyota should set up more efficiency sales network and open more new market.
Distribution channel should consider more economic ways to save time and resource. Pull Strategy Toyota should strengthen its promotion especially PR event. Toyota is lack of charity PR event. It helps to build a positive and good image on it. R&D Technological leader Toyota recent year spent a lot of money to do researches. It should enhance its technology including safety, electronics, performance, and fuel economy. It should try to create more new technology to grab market shares. Logistics Strategies The use of Internet Toyota should set up a web site which gives customers to choose and buy product from internet. Besides, Toyota should set a web-site for customers to leave messages and opinions.
It helps to check the customers’ preference and improve its products. On the other hands, it can keep the “Just in time” system. China is a very large market. Toyota should plan how to use this system perfectly in China, especially in western part of China. It is a new opportunity. This system really can help it to reduce the cost of production Human Resource Management Strategy More training Toyota should give more training for local and foreign staff especially others countries language e. g. English, Cantonese, Chinese. Study their culture and enhance staffs’ knowledge. Employ more good quality and experienced leader to prove the team forward. 7. Implementation (Time Periods) Strategic Alliance
Toyota should enter more new market and target group. By using 2 – 3 months to evaluate the China market in order to find some Chinese car company which could be partners, by then, speed up the distribution channel and market penetration. Differentiation Its marketing should spend 1 month to decide which series should differentiate from its competitors. Then decide how to produce and innovate. Geographical Horizontal Growth R&D department should use 1 – 2 years to decide which new market should open. Some Asian countries become rich e. g. India and China (Toyota Close Up, 2006). Study which style of car should be suitable for them Persons in Charge |Development of Action Responsibility |Monitoring of Action Responsibility | |Focus differentiation |Marketing and R & D departments |Senior Managing Director, Vehicle Engineering| | | |Group, Future Project Division, and Motor | | | |Sports Division, and Member of the Board – | | | |Tetsuo Hattori | |Geographic and Product Horizontal growth |Financial, Logistic and R & D departments |Senior Managing Director, Finance and | | | |Accounting Group and Member of the Board | | | |- Takeshi Suzuki | |Strategic Alliance (Joint Venture) |Marketing Department |Managing Officer; President, FAW Toyota Motor| | | |Sales Co. , Ltd. (FTMS) – Toshio Furutani | Table 1 Expected Financial Consequences of the Action |Strategies |Growth | |Focus differentiation |10 % | |Geographic and Product Horizontal growth |5 % | |Strategic Alliance (Joint Venture) |N/A |
Table 2 For the Strategic Alliance, it is hard to measure and estimate the financial feasibility. Therefore, N/A is put in Table 2 in order to show it is immeasurable. 8. Evaluation and Control Besides the Questionnaire, there are some evaluation and control method to measure whether the goal had been achieved: |Perspectives |Measures of its goals (short term and long term) | |Financial |ROE, ROI, cash flow and quarterly sales growth | |Customer |Sales Volume of the Toyota’s products.
The percentages of the Market share | | |quarterly. | |Internal Business Perspective |Visual value added control(Liker, the Toyota way 2004, p. 149) Training and | | |Development Courses (Liker & David, the Toyota way Field book 2006, p. 258 ) | | |Quality Control, Company appraisal | |Innovation and Learning |Monitoring the development process on the products | | |Plan-Do-Check-Act process (Liker, the Toyota way 2004, p. 364) | In the Financial, Toyota could evaluate the performance by using the analysis report of ROI, ROE, cash flow and the quarterly sales growth • For customers, Sales volume of the Toyota’s product reflects the willingness from the customers. The market share also reflects the effectiveness to the public. • For the internal business, appraisal could be done in every year to evaluate the staff performance. Toyota would use the value added control system to check the company problem. • Quality Control ensures the quality of production can fit the standard. • Training and Development Courses could improve the staff’s performance and improve the communication with the employees. • Monitoring the development process on the Products to see the effectiveness and also provide training for the user on the use of technology system. Plan-Do-Check-Act process provides a complete direction for the employees to standardize all the tasks. 9. Appendix Appendix – 1 External Factors Analysis Summary |EFAS Table for Toyota Motor Corporation | |External Factors |Weight |Rating |Weighted Score |Comments | |Opportunities | |China enters WTO |0. 15 |3. 0 |. 45 |Entry a large Market | |Environmental friendly |0. 15 |5. 0 |. 5 |Concerns the environment protection| |technology | | | | | |Consumer’s customization|0. 05 |4. 0 |. 20 |Well in R & D | |Joint improvement |0. 10 |4. 0 |. 40 |Advices from suppliers for | |activities | | | |improvements | |Increase of young |0. 10 |3. 0 |. 0 |Increase Sales Volume | |drivers | | | | | |Threats | |Few choices of suppliers|0. 10 |1. 5 |. 15 |Hard to negotiate a better price | |Keen Competitions |0. 10 |4. 0 |. 40 |Many Competitors in auto industry | |Japanese Currency value |0. 05 |2. 5 |. 25 |Use more money than before to buy | |drops | | | |the same material domestically | |Tax and raw materials |0. 10 |2. 5 |. 25 |Increase in production cost | |cost increase | | | | | |Many Substitutes |0. 10 |2. 0 |. 20 |Other transportation like Bus | |Total |1. 00 | |3. 225 | | Appendix – 2 Internal Factors Analysis Summary IFAS Table for Toyota Motor Corporation | |Internal Factors |Weight |Rating |Weighted Score |Comments | |Strengths | |Global brand & product |0. 15 |5. 0 |. 75 |Well known product | |Sufficient Talented |0. 10 |3. 5 |. 35 |Well Structured in HR | |Labours | | | | | |Strong in R & D |0. 15 |4. 0 |. 0 |Good | |Efficient supply chain &|0. 15 |4. 0 |. 60 |Reduce cost, wastage and | |distribution | | | |time-consuming | |Social & environmental |0. 15 |3. 0 |. 45 |Good Social | |commitment | | | |responsibility | |Weaknesses | |Hesitation in decision |0. 10 |1. 0 |0. 0 |Group decision make | |makings | | | |decision slow | |Complex production |0. 10 |2. 0 |0. 20 |Hard to understand all | |procedures | | | |the procedure which lower| | | | | |the efficiency | |Too many staffs |0. 10 |3. 0 |0. 30 |Complicated HR Structure | |Total |1. 00 | |3. 55 | | Appendix – 3
Strategic Factor Analysis Summary (SFAS) Matrix |Internal & External Strategic Factors |Weight |Rating |Weighted |Duration |Comments | | | | |Score | | | | | | | |S* |I* |L* | | |Strengths | | | | | | | | |Global Brand & Product |. 15 |3. 0 |. 5 | | |X |Name recognition | |Strong in R & D |. 15 |5. 0 |. 75 | |X |X |Good Development | | | | | | | | | | |Weaknesses | | | | | | | | |Hesitation in decision makings |. 10 |2. 8 |. 28 | |X | |Slow in decision making | |Complex production procedures |. 10 |2. 0 |. 0 | | |X |Slowly to understand the | | | | | | | | |whole procedure | | | | | | | | | | |Opportunities | | | | | | | | |China enters WTO |. 15 |3. 5 |. 525 | |X | |Enter New Market | |Environmental friendly technology |. 15 |4. 5 |. 75 | | |X |Expert in Environmental | | | | | | | | |protection | | | | | | | | | | |Threats | | | | | | | | |Keen competitions |. 10 |2. 5 |. 25 | | |X |No. 1 in auto industry | |Many Substitutes |. 10 |2. 0 |. 20 |X |X |X |Improvement of other | | | | | | | | |transportations | | | | | | | | | | |Total Scores |1. 00 | |3. 3 | | | | | S*: Short Term (Less than 1 year) I*: Intermediate Term (1 to 3 years) L*: Larger Term (3 years and beyond) Appendix – 4 Figure a. [pic] 10. Reference Toyota Motor Corporation n. d. , ‘President’s message’, Toyota Annual Report 2005. Retrieved 26 January 2006, from http://www. toyota. co. jp/en/ir/library/annual/pdf/2005/06. pdf Toyota Motor Corporation n. d. , ‘Corporate Governance’, Toyota Annual Report 2005. Retrieved 26 January 2006, from http://www. toyota. co. jp/en/ir/library/annual/pdf/2005/19. pdf Toyota Motor Corporation n. d. , Corporate Profile. Retrieved 26 January 2006, from http://www. oyota. co. jp/en/about_toyota/outline/index. html Toyota Motor Corporation n. d. , ‘Contributions towards sustainable development’, Toyota Annual Report 2005. Retrieved 26 January 2006, from http://www. toyota. co. jp/en/ir/library/annual/pdf/2005/09. pdf Toyota Motor Corporation n. d. , ‘Business overview’, Toyota Annual Report 2005. Retrieved 26 January 2006, from http://www. toyota. co. jp/en/ir/library/annual/pdf/2005/11. pdf Toyota Motor Corporation n. d. , ‘Consolidated financial highlights’, Toyota Annual Report 2006. Retrieved 26 January 2006, from http://www. toyota. co. jp/en/ir/library/annual/pdf/2005/01. pdf Toyota Motor Corporation n. . , Financial highlights. Retrieved 26 January 2006, from http://www. toyota. co. jp/en/ir/financial/high-light. html Toyota Motor Corporation n. d. , Design, R&D. Retrieved 26 January 2006, from http://www. toyota. co. jp/en/about_toyota/rd/index. html Joseph F. Francois and Dean Spinanger 2004. ‘Regulated Efficiency, World Trade Organization Accession, and the Motor Vehicle Sector in China’, The World Bank Economic Review, vol. 18, Iss. 1 pp. 85. Retrieved January 29, 2006, from ABI/Inform database. Lee Walczak and David Welch 2006. ‘Dream Machines’, The Business Week Iss. 3967, pp. 52. Retrieved January 29, 2006, from ABI/Inform database. Toyota Remains World’s No. 2 Automaker in 2005′, 2006, Jiji Press English News Service, pp. 1. Retrieved January 29, 2006, from ABI/Inform database. Jeffrey K. Liker 2004, The Toyota way, The McGraw-Hill Company. Jeffrey K. Liker and David Meier, 2006, The Toyota way fieldbook, a practical guide for implementing Toyota’s 4Ps, The McGraw-Hill Company Todd Zaun 2005, ‘Profit Plunges at Toyota As It Vies for Market Share New York’ Times (Late Edition (east Coast) pp. C. 4. Retrieve 1 February, 2006, from ABI/Inform database. David Hendricks, 2005, ‘Training program coming for Toyota supplier workers’, Knight Ridder Tribune Business News. Washington pp. 1.
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