Developing Strategic Intent for Toyota


 Introduction

The following paper includes the analysis of Toyota motors which is a car manufacturing organization. The following report includes the description about the organization, its strategies, industry analysis in which it operates and its position in the industry. The report also discusses about the organizational competencies and capabilities. The report also includes the discussion about the deficiencies the organization have and the major threats the organization faces. The report also includes recommendation of some strategic strategies which the organization can follow for its long term growth.

Description of the organization

 Toyota Motor Corporation is a multinational organization having its headquarters in Aichi, Japan. The company is a multinational auto manufacturing organization. The company was one of the largest automaker in terms of production. The company is also among the top largest companies in terms of revenue. The company was founded in the year 1937 by Kiichiro Toyoda. The company is the global player in car manufacturing and having operations in several countries. The company has a strong brand image based on its quality and is the industry leader in manufacturing hybrid cars (Fujimoto, 1999). The company has a high financial strength and also has a strong financial position in more than 170 countries worldwide. The company has excellently penetrated in China, US, and EMEA markets. The company was also among the first companies which manufactured and developed hybrid gas electric vehicles. The company is expanding with a great pace into different automobile segments. The company employs more than 3, 00,000 employee’s world wide. The company has a wide range of products which it offers to worldwide customers. The company is in automotive industry, robotics and financial services as well. The main business of the company is automobile business (Fujimoto, 1999).

Strategies

The company is a strategic player, as the company has its operations worldwide; the company has got huge success in the US market. The company has Americanized itself largely although not entirely. The company strategy in America was to overtake the global car manufacturer GM, and this was attained by positioning itself in America was not as a foreign company with an aim to weaken the American economy and strengthen the Japanese economy but its aim was to work as a domestic manufacturer (Naughton, 2005).

The company strategy to lead and become the global player and not just to become number one in US was to provide high technology cars with high fuel efficiency and environmental conservation. The company has developed Toyota hybrid system which becomes a huge success globally. The company also has the strategy to hire the local managers in order to have a grip over the markets worldwide. He company also as the strategy to steadily increase its corporate value in long term ion order to attain the advantage of favourable relationship with the stakeholders, business partners, customers, employees and local communities. The company also has the strategy to follow the corporate governance of each country and work out the customer’s social responsibility for long term growth of the business. The company also has the internal control strategy in order too maintain its goodwill, autonomous decision making capabilities, and enthusiasm in order to attain the respect of the people (Naughton, 2005).

Industry

The automobile industry is highly competitive, as there are several number of market players operating in the industry. Looking at the global scenario it can be seen that this is one of the most vital and economic sector in terms of revenue. Mainly the automobile industry does not include the industries that are dedicated to the repairs and maintenance of vehicles after their delivery. The automobile industry is one of the most vital industries all over the world for economies as they generate high amount of revenues for the company. The industry has several large players worldwide and sells vehicles related to different segments (Hill, & Jones, 2007).

 The whole industry is divided into luxury and utility vehicles. Toyota mainly deals in both the luxury vehicles. The industry is also one of the largest employers in several economies. The industry capacity can be seen from the fact that there are more than 1000 million care and light trucks on road all around the world and the number is increasing day by day. These vehicles consume more than 260 US gallons of gasoline, diesel and petrol per annum. The automobile is the main mode of transportation for several developing economies of the world. It has been estimated that one third of the world automobile demand will be from four major markets i.e. India, China, Russia and Brazil by the year 2014. The major development in the automobile sector is in the light motor vehicles. It has been seen that there is more than 26 % growth in the total production of vehicles in the year 2010 and 2011.

SWOT

Strengths: The Company has several strengths as the company is the global player with a strong international positioning in more than 170 countries. The company also has a high financial strength with an average sales turnover of more than 131511 million pounds. The company also has the strength of strong brand image which is based on its quality of vehicles and also the environmental friendly products it offers with a customized range of products. The company also has the strength of high penetration in several key markets including US, china and EMEA. The company also has the strength of excellent R&D team that help the company to expand its products. This also has helped the company to develop innovative products increasing its global sales. The company also has the strength of excellent production system, with the adoption of the just in time system that helps the company to produce quality products with lower costs (Taylor and Kahn, 1997).

Weakness: the major weakness of the company in the global markets is that it is seen as a Japanese car manufacturer and as a foreign importer. The company also has the weakness of having its major manufacturing units in US and Japan as compared to its competitors having more strategically located worldwide and attain global efficiency gains. The company also has the weakness of the large criticism that it faced in the year 2005 for its large scale recall of its vehicles due to some defects and inefficiencies. Being big is also one of the weaknesses for the company as the world automobile market is highly in the condition of oversupply of vehicles, so the company need to make sure that it produces those models that are in high demand from customers. The company also has the weakness that the company needs to keep its operating efficiency operational and keep manufacturing cars, this leads to overcapacity if there is adown turn in the market demand (Schonberger, 2001).

Opportunities: the company ahs a high opportunity to develop the commercial mass hybrid gas and electric vehicles. With the prices of oil at all time high the company has the high opportunity to opportunity to develop and make investment in its product portfolio that fits the consumer demands and needs and also look for more alternative sources of fuel that can be used in the automobile sector. The company also has the opportunity to expand more aggressively into different regions and new segments. The company also has the opportunity to manufacture more fuel efficient vehicles having greater performance and having least impact on the environment. The company can also look for global expansion into emerging markets like china, India etc (Taylor and Kahn, 1997).

Threats: the company has the threat of increase in the competition and saturation of the automobile sector. The company also has the threat of high competition from several players doing aggressive marketing campaigns increasing high competitive pressures on the company. The changes in the exchange rates also have the threat to the company profits and cost of raw material which the company imports from other countries. The company also has the threat of down turn in the global economies like recession which will highly affect the car sales especially the new car market. The changing demographics are also one of the threats which the company faces as with the changes in family sizes the demand for family car is declining. The rise in the prices of oil is also a concern for the company as the cost of maintaining cars is increasing.

Industry Analysis

In order to formulate the strategic view of the company and its business environment the current business environment of the company is analyzed mainly using the PESTEL framework. The PESTEL analysis has been done in order to analyse the market environment of the automobile industry.

Political Factors: Looking at the financial conditions worldwide and the crisis that has affected several countries there are several remedy measures taken by the government of several countries to protect and stimulate the industry and organizations. Analyzing this it can be proved from the example that at the end of the year 2008 the United States government gave $17.4 billion short term loan to Chrysler and GM. In March 2009 Toyota Company has also asked for $2 billion loan from the Japanese government. These policies of governments aid the vehicle organizations to survive in the critical conditions which are affected by the financial crisis occurring in the world economies (David, 2008).

Economic Factors: Looking at the difficult financial conditions of the economies and the organizations in the automotive industry it can also be said that there is a great impact of the economic factors on the automotive industry. The automotive industry is showing recovery evidence in this period. From the evidences it has been seen that the companies that were in financial trouble has started earning profits like Chrysler has demonstrated that it has started producing operating profits with the increase in the sales of the passenger vehicles.

Social Factors: With the increase in the prices in the fuel all around the world due to high demand the customers are moving towards small displacement engines due to its high efficiency. The changes in the demographics and social factors, like the change sin the family sizes also has an impact on the companies like Toyota (Grant, 2005).

Technological Factors: With the changes in the prices of fuel and changes in the type of demand from customers the technological factors and their advancement is one of the major concern for the automobile industry all around the world. Due to the preciousness of the energy vehicles the demand for other energy vehicles are increasing. The companies are working on developing technologies and hybrid systems that will help in travelling faster and are more energy efficient (PESTEL analysis of the macro-environment, 2007).

Environmental Factors: The gas emitted by the vehicles is one of the big concerns for the automobile industry. Several standards have been developed by several economies ion the mission on gas from the vehicles; the organizations have to develop such technologies that are more environmental friendly and leads to less gas emissions. The testing and development of such products have an impact on the company’s manufacturing costs and also on its global operations (Thompson & Martin 2005).

Legal Factors: Every economy has their own legal policies to protect their own automotive corporation benefits. The Asian countries have changes their policies for import duty of vehicles. The changes in the legal factors related to the import and export of vehicles is also one of the concerns for the automobile industries. This shows that the organizations need to make different strategy for different economies based on the legal environment for threat country.

Toyota’s competencies and capabilities

The company is highly capable of competing with the foreign players due to its high research and development activities. The company also has the high capability of research team using which the company is able to launch the hybrid vehicles and is one of the larges auto manufacturers. The company also has the capability of excellent internal management and large employee force using which it can increase its production at any point of time. The company is also capability of entering the new market spaces in short period of time and can compete the local players in different countries (Thompson & Martin 2005).

Resource and organisational deficiencies

The major deficiency of the organization is that the company has its production capacity mainly located in US and Japan, while the competitors are more and more strategically located n diverse regions and have the advantage of global efficiencies. The company major manufactures its cars in US due to which the company has to use dearer costing parts which increases the costs of company produces. The company also has the deficiency of recall made by the company in the recent decade, which has impacted the company production capacities and also the goodwill of the high quality manufacturer. The company is also being impacted by the global recession due to which the company cannot stop its production in order to utilize the full operational capacities and thus has an over production which is piling up at large (Lin, Zhiang and Chun Hui, 1999).

Major threats

The major threats of which the top management of the company may be worried about includes the over and excessive increasing prices of fuel which is raising concerns in the automobile industry as without which the vehicles are of no use. The company is also facing the threat of increased competition from the global players as each company is active in the research and development activities. The management is also of the concern related to the high fluctuations in the exchange rates of currencies which is impacting the company revenues and profits. The company management also faces threat of changing usage of the utility vehicles, with the changes in demographics there is a decrease in the demand for the family vehicles which is impacting the company products demand and piling up large stocks (Grant, 2005).

Recommendations

From the analysis of the company and the automobile industry and looking at the trends all around the globe it can be recommended that the company must focus on its research and development practices and try to develop cost efficient and energy conservative technology. The company is also recommended to start manufacturing operations around the globe and not majorly in US and Japan in order to decrease its cost of production which will help the company to attain competitive advantage in long term. The company must adopt the production of its vehicles in several areas and countries in order to decrease its cost of production and moving towards economies of scale which will help the company to grow in different markets and compete with global players in the coming five years.

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