How Toyota became second largest company in world ........ competitive analysis of toyata!!!!

Let us today see what is Toyota competitive strategy.....what are it's strength weakness.....!

About Toyota Motor Corporation:

Toyota Motor Corporation is a Japanese multinational automotive manufacturer headquartered in Toyota, Aichi, Japan. In 2017, Toyota's corporate structure consisted of 364,445 employees worldwide and, as of September 2018, was the sixth-largest company in the world by revenue. As of 2017, Toyota is the largest automotive manufacturer. Toyota was the world's first automobile manufacturer to produce more than 10 million vehicles per year which it has done since 2012, when it also reported the production of its 200-millionth vehicle. As of July 2014, Toyota was the largest listed company in Japan by market capitalization (worth more than twice as much as number 2-ranked SoftBank) and by revenue.

 Swot Analysis of toyota

Strengths of toyota:

Toyota’s strength lay in its dedicated, well trained and disciplined workforce that did not mind bending their backs to achieve higher levels of productivity. Moreover, Toyota employees were eager learners and fiercely loyal to their company and were prepared to follow to the tee as it were instructions of their supervisors.

There was a debilitating sense of humiliation and an equally fierce desire to give it back to the western world in the Japanese society and Toyota workers were deeply influenced by it as they thought the only way to get even with their conquerors would be to excel them in industrial development.

Though they admired Ford’s Assembly Line Production process the top management of Toyota was not at all carried away by the prevailing glamour and glitz of Ford Motor Company. They visited several times the factories of Ford and minutely observed their production process but were not averse to adjust it to fit Japanese environment.

This independence of thought and courage to chart a new path was perhaps the greatest strength of Toyota Motor Company.

Weaknesses of toyota

The biggest weakness they had to overcome was a universal perception that Japanese products were not dependable. 

While such a perception could be fought off through markedly reduced prices in case of cheap electronic and other gadgets as watches, it was extremely difficult to fight off this perception for a high value item as an automobile especially since durability and dependability of an automobile is the primary criterion of choice for a customer.

As the Second World War ended Japanese industrial structure was in a state of near devastation and it was a herculean effort for industrialists to rebuild what they had and bring back the tempo and work ethic in a society that was scarred by a war that first used the nuclear bomb.

Quality was never an issue with Japanese manufacturers who concentrated on volumes and least costs. To effect a complete change in mind shift where quality became supreme while keeping costs at a minimum was indeed a huge challenge that confronted Toyota Motor Company.

Opportunities of Toyota:

The opportunities were virtually unlimited in the sense that Toyota was an underdog that was never considered a worthy opponent by any of the reigning automobile giants of United States and Europe. Being an underdog always brings with it the added advantage of not being seriously watched or scrutinized by competitors. 

The condescension of western manufacturers was further compounded by Toyota’s virtual rejection of Ford production system and this helped it to consolidate and strengthen its position virtually unnoticed by its competitors. So, when it emerged in the market competitors were totally unprepared and had no defense or counterattacking plan in place. Toyota utilized this opportunity to the hilt to climb to astounding heights.

United States of America due to international political compulsions of its own willingly transferred latest automobile technology and offered concessions and other form of assistance to Japanese industry in general and automobile industry in particular. 

This was an opportunity that Japanese could not even dream of as they could lay their hands on latest automobile technology that United States used in its advanced military vehicles. 

This opportunity provided the Japanese the much needed quantum jump in technical expertise and instilled in them a quality consciousness that was hitherto nearly absent in Japanese industrial landscape (Martins and Terblanche 2003).

Threats of Toyota:

There was a constant threat of customers turning their faces away from Japanese automobiles that did not have practically any esteem value which is a very important ingredient in customers’ purchase decision of automobiles. 

Other than lack of esteem value there was also the threat of failing to satisfy customer expectations in terms of comfort, standards of safety and comfort. It is a natural behavior of customers to shy away from new entrants in automobile market where visibility of products of a manufacturer is a very crucial for convincing potential customers into buying products of a manufacturer. 

So, there was a constant threat of whether that crucial volume could be achieved by Toyota Motor Company which would make it a cognizable presence in foreign automobile markets.

Japanese automobile industry got a tremendous boost through American help but there was a constant threat whether United States would continue providing unstinted help even when it realised that its domestic automobile industry faced competition from Japanese products.

If United States withdrew its hand of cooperation at initial stages when Toyota and the rest of Japanese industry was struggling to get back to their feet it would have spelt doom for this nascent company.

Porter’s Five Forces Analysis:

In order to survive and prosper in an intensely competitive market place a firm must learn how to adapt to changes in external forces and factors over which the management has little or no control. The strategy adopted by the firm should be firmly based on its anticipation of future realignment of forces and a fair idea about nature and characterisitics of its future competitors (Levitt 1986).

Michael Porter postulated extent and intensity of competition in any market is determined by the following five basic forces (Porter 1980):

Potential Entrants:

It is not easy to set up an automobile company considering the enormous amount of capital and technical expertise that is necessary to set up one. Moreover, in a market where brand recognition and brand positioning is of vital importance to gain a toe hold, it is next to impossible for a new entrant to enter the market and create an imbalance in the prevailing market share scenario. Thus Toyota with its formidable market reputation and previous history of being a giant killer need not be too much worried about fresh competition. Even if any such competition does indeed materialize, the company is lean and agile enough to forestall maneuvers of any such new entrant.

Competitive Rivalry:

This is a veritable minefield in automobile industry. With each big player in the market bringing out new models after almost every six months and buyers becoming more and more discerning it is indeed an uphill task for any automobile company to consistently be ahead of the pack. But Toyota has excelled in this regard by drastically reducing lead time in handing over customers their new cars. 

The case in point can be explained through Scion line of cars produced by the company. The basic platform is manufactured in Japan in accordance with some predetermined schedule and they are transported to United States in that semi-finished state.

 The various models, viz., tC, xB or xD are manufactured according to specific confirmed orders either at Toyota’s Long Beach production facility or at dealer’s workshop depending upon which would be logistically and technically feasible and more economical. 

Thus Toyota is able to keep at bay competitive rivalry while keeping customers happy not only through speedy delivery but also by allowing them the luxury of customising their cars according to their individual tastes and preferences (Goldsby, Griffis and Roath 2006).

Substitutes of toyota:

Substitutes are available by the dime and the dozen as it were but Toyota is able to sell its cars without much anxiety and tension simply because it has been able to provide exquisite quality at very reasonable price through its inimitable Toyota Production System. Other competitors are simply unable to match Toyota’s quality at prices which Toyota quotes.

Buyer’s Bargaining Power:

This depends almost entirely on the financial strength of buyers and their ability to set off one producer against another. But this also does not have much impact on Toyota simply because its products are priced so reasonably that it is just not possible for competitors to quote prices that are lower than that quoted by Toyota. Moreover the quality of Toyota’s products also is in most cases superior to its competitors. Thus buyers have little or no influence on Toyota.

Supplier’s Bargaining Power:

Toyota has followed a policy of depending on a few suppliers and the mutually beneficial relationship has been going on for decades together resulting in deep rooted bonding between Toyota and its suppliers. Hence, the issue of suppliers flexing their muscles to gain an economic advantage is not really applicable to Toyota. It hardly faces any sort of supplier pressure. Tensions and frictions when they do surface are amicably settled across the table.

Thus it might be concluded that effective marketing does not depend only on thorough market survey about consumers’ tastes and preferences but also on an equally thorough research on the intricacies of industry and industrial intelligence about present and prospective competitors (Grant 1991).

BCG Matrix:

“Boston Box’ or BCG Matrix is a very popular managerial tool that identifies the strategically significant business divisions or product lines of a company and ranks them in a matrix that has relative market share and market growth on two axes. Though this tool was originally aimed at companies having multiple products portfolio it is now also used by single product companies to improve their profitability.

The Boston Consulting Group Box (“BCG Box”)

This decision making tool helps a business to determine investment allocation among its different product lines so as to maximize overall corporate return on investment (Lancaster and Reynolds 2005).

Toyota needs to determine whether it would invest heavily on a product lying in ‘question marks’ quadrant to pull it up to the ‘stars’ quadrant.

To regulate investment in such a manner that a company remains in the quadrant it now is in. Toyota’s Multiple Purpose Vehicles could be a very good example of such a decision.

To scale down investment in certain product lines so as to free capital urgently needed in some other product lines. 

Toyota needs to be very careful about such decisions as any reduction of investment would automatically prevent any further quality improvement in these product lines and might push down one product line presently enjoying ‘star’ status to ‘cash cow’ status.

To firmly decide to disinvest in product lines that refuse to budge from ‘dogs’ quadrant in spite of the best efforts of the management