A Strategic Analysis of Toyota Motor Corporation
Introduction
Toyota Motor Corporation is a well-established automobile manufacturer that specialises in designing, manufacturing, and assembling diverse automobiles. The firm was established in 1937 and has been in operation for 83 years. Toyota Motors has successfully established a broad product portfolio that includes minivans, speciality cars, pickup trucks, passenger vehicles, sport-utility vehicles, and commercial vehicles. With its headquarters located in Toyota City, Aichi, Japan, the company has managed to establish a footprint in the global market (Global Data, 2018). Its operations spread across Latin America, Africa, Asia, Europe, Middle East, North America, and the Asia Pacific. By the end of 2018, the firm operated 299 subsidiaries in Japan and 307 overseas subsidiaries distributed across 26 countries. The firm has further established over 50 manufacturing facilities across the 26 countries. The firm sells its products through 170 distributors that are located in 190 countries.
Apart from Automobiles, Toyota Motors has adopted the diversification strategy, which is evidenced by its operations in diverse market segments that include housing, information technology and telecommunications, financial services and housing. The firm has organised its operations into three main segments that include the financial services, automotive, and all other. Toyota Motors has achieved success in establishing strong financial performance. During its 2018 financial year, the firm’s revenue from the automotive segment amounted to JPY 26.35 million which represented a 5.3% year-on-year growth (Global Data, 2018). The firm has established an extensive workforce that is comprised of over 370,000 employees.
SWOT analysis
Internal environment
Strengths
Extensive operational network
Toyota Motors has established an extensive operational network by operating in a wide geographical area. This has significantly improved its capability in capturing major markets across the world hence improving its market share, revenue generation capability, and high economies of scale (Netland & Powell, 2016).
Toyota Production System
The firm has entrenched the Toyota Production System (TPS) as the foundation of its approach to automobile production. The TPS is based on two core principles that include just-in-time, and Jidoka, which emphasises on high-quality products (Global Data, 2018).
Weaknesses
Product recall;
Despite its industry successes, Toyota Motor’s competitiveness has over the recent past been affected by an incident of a product recall as a result of poor product quality. In 2018, the firm was forced to recall over 1.03 million of its gasoline-hybrid Prius model across North America, Europe, and Japan among other regions. Product recall might lead to a decline in consumer confidence (Global Data, 2018).
Declining networking capital
Toyota Motors has over the recent past experienced a significant decline in its networking capital between 2017 and 2018 from JPY 514,730 million to JPY 355,765 million, which represents a 30.9 % decline. Moreover, the company’s current ratio declined to 1.02 times from 2.51 during the same period hence affecting its capacity to meet financial obligations (Global Data, 2018).
External environment
Threats
Change in greenhouse gas emission norms
Toyota Motors cannot rule out the likelihood of experiencing challenges arising from the implementation of new greenhouse gas emission standards that are targeting the automobile industry in an effort to limit the occurrence of climate change (Global Data, 2018).
Fluctuation in the price of raw materials
The rising cost of raw materials may result in an increase in the firm’s cost of operation. The firm may subsequently be forced to pass on the additional cost to customers in terms of high product prices. Such an occurrence might negatively affect the firm’s competitiveness.
Opportunities
Growth initiatives; the company may experience rapid growth arising from the diverse growth initiatives that it has considered pursuing, for example, partnership with SoftBank and Uber in 2018 may result in improved capability in respect to automotive technologies such as the production of self-driving cars (Global Data, 2018).
New product development; the firm may enhance its future competitiveness by launching new products with respect to its different product categories.
Competitive advantage
In view of the changing internal and external environments that Toyota Motors is facing as illustrated by the SWOT analysis, it is imperative for the firm to consider strengthening its competitive advantage. To achieve this end, the firm should consider the following strategic recommendations.
Innovation; Toyota Motors should consider investing in product innovation. The firm should consider therefore consider investing in research and development in an effort to integrate new technologies in its products. One of the areas of research and development that Toyota should focus on including the development and commercialisation of the next generation of energy-efficient, safe, and environmentally friendly. Achieving this outcome demands the firm to focus on technology. Therefore, the firm’s research and development efforts should focus on enhancing the effectiveness of its products in minimising the negative effect on the environment through greenhouse gas emissions. Moreover, the research and development efforts should be aimed at improving the safety of its automobiles through traffic accidents. Thus, investing in technological innovation will ensure that its operations are aligned with the changing legal environment with respect to greenhouse gas emissions by the automobile industries (Global Data, 2018, Kakuro, 2004). Moreover, adopting a comprehensive innovation strategy will strengthen the firm’s success in responding to changing customer tastes and preferences with respect to automobiles. By undertaking new product innovation and continuous product improvement, Toyota will gain an edge in maximising the customers’ level of satisfaction, for example, through different aspects such as improved driving pleasure, comfort, and convenience. As a result, investing in product innovation will result in improvement in the attractiveness of the firm’s products hence contributing to a higher competitive advantage.
Quality management; the firm should consider implementing a comprehensive total quality management system across its production system and supply chain in order to improve and maintain the quality of its products (Milosevic et al., 2013). Ishank and Gooneratne (2018) affirm that total quality management constitutes a participative approach to management which emphases on the need for entrenching diverse programs amongst them the zero-defect program, and total quality management. In its total quality management, the firm should ensure that its employees are sufficiently motivated. Quality management will have a positive impact on the firm’s capability to minimise the incidence of product recalls hence increasing consumer confidence. In designing a total quality management system, Toyota Motors should consider integrating different aspects among them quality audit, quality inspection, quality control, quality reporting, and entrenching a quality conscious culture. By investing in total quality management, Toyota will enhance its operational efficiency, for example, by reducing the cost of operation associated with a product recall. Additionally, the firm’s approach to total quality management should be guided by a set of principles that include customer focus, establishing an integrated system, employee involvement, customer focus, and continuous improvement. In light of the intense competition that characterises the contemporary automobile industry, investing in quality management will enable Toyota Motors to gain a competitive edge by satisfying the customers’ product tastes, preferences, and requirements.
References
Milosevic, D., Filipovic, J., Djuric, M., & Ristic, S. (2013). Benchmarking as a quality
management tool in public administration. Engineering Economics, 24 (4), 364-372.
Kakuro, A. (2004). Development of science TQM, a new principle of quality management;
Effectiveness of strategic stratified task team at Toyota. International Journal of Production Research, 42 (17), 3691-3706.
Netland, T., & Powell, D. (2016). The Routledge companion to lean management. New York:
Taylor & Francis.
Global Data. (2018). Toyota Motor Corporation; financial and strategic SWOT analysis review.
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Ishanka, S., & Gooneratne, T. (2018). Total quality management and changes in management
accounting systems in a manufacturing firm. Asia-Pacific Management Accounting Journal, 13(1).