Toyota has become one of the leaders in vehicle industry. Its history goes back to the 1930s, when the company was founded by Kiichiro Toyoda. Toyota Company was a branch project of Toyota Automatic Loom Works run by founder’s son. Its first creations were A1 and G1 passenger vehicles. Only in August 1937, Toyota Company was established as a separate entity. Ever since that time, company had encored its positions on a global market. In 2012, Toyota Motors Corporation was the largest manufacturer in the world by production capacities. Starting from this year, 2014 it occupies the fourteenth place in the world by revenue.
The company’s values and business style in terms of management are known as the Toyota Way. Toyota Way is a code of conduct embraced by all of its employees. Amongst its content there are two headings Respect for People and Continuous Improvement that lay the foundation for five major principles that include: challenge, improvement, go and see, respect and teamwork (Toyota Motor Corporation, n.d.). The Toyota Way encounters four main components that are essential for its operations: long-term thinking, problem-solving process, adding value and root problem solving leads to organizational learning.
Toyota’s global vision reflects its intentions to lead the way to the future of mobility via enriching lives around the world with the safe and responsible ways of moving people. They seek to achieve the mentioned above through commitment to quality, constant innovation and respect for the planet, exceeding expectations with a smile as a reward from customers. The company also emphasizes on involvement of those who are talented and passionate who seek better ways of achieving corporate goals. Tracing back to its foundation, the Toyota Company has changed the course of its products and services. The Toyota Grop consists of 16 companies that provide goods and services. Its product line includes manufacturing of automobiles, luxury vehicles, commercial vehicles, engines and motorcycles. Services, provided by Toyota embrace banking, financing and leasing. The Toyota Company also performs an expertise in fields that are not related to the automobile business: housing, financial services, environmental (marine, biotechnology and afforestation) and communications.
Its headquarters are located in Toyota city in the Aichi prefecture in Japan. Ten of its plants operate in Japan. Its geographical presence embraces manufacturing or assembling plants in North and South Americas region, Europe and Asia and Oceania.
As of March 2014, the Toyota’s:
- capital was worth 80.4 billion yen;
- net sales 2,007.8 billion yen;
- net income 91.7 billion yen.
During 2012 and 2013 total sales were 9,748,000 and 9,980,000 yen respectively (Reuters Financial, 2014).
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1. Every company seeks the way to increase profits
Thus, expanding the geographical borders is means – maximizing profits and minimizing risks. Starting as a domestic company that manufactured passenger cars, the Toyota Company has managed to occupy leading positions on the world market. Its first model passenger car was around 3,500 yen that was cheaper than analogues offered by General Motors or Ford. Another significant push for making business globally is related to company’s marketing campaigns and strategies that are developed locally. It helps to adjust business to local demands with the quality and reputation of the brand.
The Toyota Company makes a huge emphasis on its philosophy and corporate culture. They pose themselves as modest brand that provides quality products. The product line embraces all different types of vehicles, from small, luxury to big-size trucks. It closely coincides with customer demand. Innovation is one of the major factors that attract customers. The company implements its innovations through the creation of vehicles that have unique characteristics because of optimization and differentiation on the regional level. Another peculiar feature of Toyota on an automobile market related to innovations is realized through creation of basic high-quality parts that are cross-usable in different products (Thompson, 2014).
Expanding means establishing its production within a specific region and thus, it affects the budget and as a result – profit. Over the course of its development up to this date, the Toyota Company consists of 540 consolidated subsidiaries and 226 affiliates worldwide with 333,498 members of employed staff as of March 2014. To sum up above, Toyota has managed to become a flagman in an automobile industry via innovative approach to manufacture a variety of products that fit into different categories of customer segment. Besides, the Company has a highly developed and successful marketing course of development that helped to enter foreign markets and adjust to its rules.
2. The competitive advantage of Toyota can be explained by Porter’s model
Threat of New Entry (Weak):
- Large amоunt of capital required
- High retaliatiоn pоssible from existing cоmpanies, if new entrants wоuld bring innоvative prоducts and ideas to the industry;
- Few legal barriers prоtect cоmpany from new entrants;
- The company has established brand image and reputation;
- Products are mainly differentiated by design and engineering quality;
- New entrant could easily access suppliers and distributors;
- It is very hard to achieve economies of scale for small companies;
- Gоvernments оften prоtect their home markets by intrоducing high import taxes;
Supplier power (Weak):
- Large number of suppliers;
- Some suppliers are large but the most of them are pretty small;
- Company uses another type of material (use one metal instead of another) but only to some extent (plastic instead of metal);
- Materials widely accessible;
- Suppliers do not pose any threat of forward integration;
Buyer power (Strong):
- There are many buyers;
- Most of the buyers are individuals that buy one car, but corporates or governments usually buy large fleets and can bargain for lower prices;
- Buyers are price sensitive and their decision is often based on how much does a vehicle cost;
- Buyers do not threaten backward integration;
Threat of Substitutes (Weak):
- There are many alternative types of transportation, such as bicycles, motorcycles, trains, buses or planes;
- Substitutes can rarely offer the same convenience;
- Alternative types of transportation almost always cost less and sometimes are more environment friendly;
Competitive Rivalry (Very Strong):
- Moderate number of competitors;
- If a firm would decide to leave an industry it would incur huge losses, so most of the time it either bankrupts or stays in automotive industry for the lifetime;
- Industry is very large but matured;
- Size of competing firm’s varying but they usually compete for different consumer segments;
- Customers are loyal to their brands;
- There is moderate threat of being acquired by a competitor; (Nkomo, 2013, p.4).
3. External environmental factors are important for the proper growth, which leads to occupation of leading position on domestic and later on global markets.
Toyota has managed to achieve success via thorough guidelines and principles of business that were created within the company. While entering business, especially automobile industry it is not enough to know competitors, one should have clear understanding of what advantages your company has over others on a market; thus, it shows ways for improvement. The Toyota Company has become a leader on the market not in one day. In 2012, the Toyota Motors Corporation was recognized as the largest automobile manufacturer in the world, with the reported production of 200-millionth vehicle in the middle of that year. Its annual production of vehicles reaches 10 million. The biggest share of its success belongs to production system, known as “lean manufacturing system” or “just-in-time system” that has become popular worldwide and thus, studied. The system functions in the way of producing vehicles ordered by customers in the quickest and the most efficient way. The method helps to deliver vehicles in a short period. Firstly, it explains the significant number of factories all over the world that work for a specific region. Secondly, this approach helps to establish so-called communication with customers and ability to be flexible in fast-changing tastes and trends.
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Economic factors are also important for the company’s growth. The economic system and policies, nature of the economy of the country, trade cycles, level and distribution of income define the economic environment of the company (Jain et al., 2006). One of the examples, describing mentioned above is connected with Toyota entering North American market. The company has entered the market with its small passenger cars that were cheaper that those of competitors. During the oil crisis in 1970s, the Toyota was able to respond to customer demand for small cars with improved fuel economy while competitors were producing small cars of lower quality. It shows that the Company had healthy and fast-responding solution to the situation both on a global scale (oil crisis) and customer demand within a region (small cars with effective fuel consumption).
Socioeconomic factors are related to the brand’s features – quality, reliability and durability. Over a span of time, the Toyota has become the most trusted vehicle manufacturer in the world. After launching a luxury line, it had become a symbol of status. Toyota’s input into socioeconomic development of every country always associates with respect. The laws of a country are valued by fair corporate actions from senior management. Thus, Toyota has gained general recognition from the society. Company’s priorities in each country combine awareness of traffic laws and work-life balance for its employees.
Financial performance of Toyota is determined as outperformed. During the last five years, total assets increased 586.8 billion yen to 3,243.8 billion yen that can be explained in terms of an increase in market value of investment securities. Liabilities grew due to an increase in deferred tax liabilities. Net assets growth is estimated at the level of 327.2 billion yen. Cash flow from operating activities rose due to posting income before income taxes. In comparison with the last fiscal year, net case has also grown. Cash flows from investing activities resulted in a decrease in cash of 274.2 billion yen, resulted by increase in payments for purchases of property, plant and equipment (Toyota Industries: Financial Summary, 2013).
When analyzing Toyota’s presence in the US market, for example, it is important to highlight that Toyota has minimum political and legal implications. It is connected with company does not have to deal with unions has minimal financial burden along with the retirement and financial plans. There is no need for the company to splurge budgets on legal costs associated with its operations and health care expenditures. The government within the country where the company runs its business outlines legal framework for the Toyota. In the United States, there are laws that are directly applied for the company – competition, consumer protection or taxation and emission laws.
Physical factors are associated with challenges that company has faced while being among the leaders in automobile manufacturing. These are forces that have a direct impact on plans, strategies and decisions made by the company.
Challenges embrace the wide spectrum of spheres including:
- intense and high competition
- economic crisis of 2008
- malfunction of products (Camry Solara and Lexus, four million of which were recalled by the company; 2009-2010 the Company recalled around eight million cars and trucks manufactured in the US)
Political environment of the Toyota Company is affected by the decisions related to marketing and thus, development of new products. Despite of the geographical location, companies are still vulnerable to a political environment within a specific country. However, states are interested in maintaining companies inside of the country as they give working places and are subject to taxation. With its number of consolidated companies and affiliates, the Toyota Company belongs to the bunch that is protected by local governments with further creation of competition on the market, adding customer values.
Sociocultural factors refer to the influence of certain social and cultural factors on an organisation. The factors influencing the social environment of an organization are usually beyond the control of the Toyota Company and may include the following: attitude of people to work, religion, cast etc.
The Toyota Company has established The Toyota Way internal principles and guidelines for its employees. The staff has to embrace and follow five principles: challenge, improvement, go and see, respect and teamwork. A lot of work is done by creating comfortable conditions for local staff and creating opportunities via incentives and programs aimed at growth both personal and professional. The Company has launched Corporate Citizenship program that includes environmental awareness, traffic safety, education and input into the society by volunteering. Technological environment is a driving force for future development. Toyota spends a lot of time working on technological advance and production of products of the highest quality. For example, back in 1997 the company was the first who launched mass production of hybrid electric vehicles (Toyota Prius).
Technological environment means the creation of cars that are popular with consumers. They are popular because of safety of its products, environmental issue, and engagement with intelligent transport systems outside of the vehicle. For example, Corolla model that is present on the market for over 17 years has been attractive to customers due to important features such as gas expenditure and low maintain cost (Flynn, 2013).
The Toyota is one of the leaders on automobile market and industry as well. Success coincides with some of the challenges that the company had to face in the mid 2000s related to technical malfunctions of its products. It took many resources, tangible and intangible in order to solve these issues and restore its reputation.
The biggest achievement of Toyota is an ability the products of Toyota to be beneficial for the society and environment at the same time. Over the time, the company has gained success on the market leading to the constant demand of its product, thus, profit as well. The Company always seeks new ways in technology to improve its products, which is promising for company’s career.
Toyota Motor Corporation should seek ways to detect bugs while products are not sold to the end consumers. It will enable efficient control and responsibility. Business expansion is possible in new emerging economies. For it, Toyota has to be flexible and responsive to local market demands. Emerging economies are new horizons to be discovered by Toyota. The Company should pursue its innovative approach towards environmentally-sound products not only in automobile industry.