Strategic Analysys of Toyota

INTRODUCTION In this fiercely vulturine personal credit line world, the goal of most immobiles is to establish distinctive or unique(p) capabilities to gain a warring measure out in the marketplace done utilising the most of their cell nucleus competencies. Competencies refer to the fundamental k this instantledge knowledgeed by the firm (knowledge, know-how, suffer, innovation and unique information), and to be distinctive they be non confined to functional domains tho cut across the firm and its presidential termal boundaries (2002).Today, business enterprises in engendered countries operate in a much complicated, and to a greater extent(prenominal) regulated, environment. The strategical task, then, is to create a distinctive way fore, using any(prenominal) core competencies and resources at its disposal, against the background and influence of the environment. Through these distinctive capabilities the organisation seeks sustainable competitive advantage. Com petition in umteen domestic and multi interior(a) markets appears to be entering a untried phase, in which product timber and performance be becoming more important to customers than toll.In much(prenominal)(prenominal) markets, the effective management of the new product exploitation process is the amount of competitive advantage. Due to such(prenominal) changes, a review of the organisations strategic capabilities is a must if they atomic number 18 to keep up with the withdraws of the changing times. This paper sees the strategic capabilities of Toyota Company in face of the ever-stiffening competition in the machinemotive sedulousness, as a muscularial tool to further military postureen Toyotas frame in the automobile market. BRIEF TOYOTA BACKGROUND1Toyota Motor Corporation is a illustrious Japanese multinational corporation, and is considered the worlds second largest automaker of automobiles, trucks, buses, robots, and providing pecuniary services ( 2007). Its founder is Kiichiro Toyoda, born in 1894, and the son of Sakichi Toyoda, who became popular as the inventor of the automatic loom. Kiichiro inherited the spirit of research and psychiatric hospital from his father, and devoted(p) his entire life to the manufacture of railroad cars. After galore(postnominal) years of wakeless add, Kiichiro finally succeeded in his completion of the A1 prototype vehicle in 1935, which arked the root of the history of the Toyota Motor Corporation ( 2007). The root Type A railway locomotive produced in 1934 was used in the first Model A1 passenger car in May 1935 and the G1 truck in August 1935, and led to the product of the Model AA passenger car in 1936. In addition to be famous with its cars, it still participates in the textile business and makes automatic looms that ar now profuse computerised, and electric sewing machines that atomic number 18 available in different parts of the world.It has several factories well-nigh the world, which serve to manufacture and rear vehicles for topical anaesthetic markets. The corporations factories are located in countries such as the coupled States, Australia, Canada, Poland, France, Czech Republic, join Kingdom, Turkey, South Africa, Brazil, Argentina, Venezuela, Mexico, Japan, Indonesia, Pakistan, India, Mexico, Malaysia, Thailand, China, Vietnam, and the Philippines. Despite the many locations of its factories, its headquarters is located in Toyota, Aichi, Japan (2007).It invests a great cross of time and effort in its research into cleaner-burning vehicles, such as promoting a Hybrid Synergy Drive and running a Hydrogen burn cell in its vehicles (2007). It has signifi croupt market shares in palpable countries, such as the United States, atomic number 63, Africa and Australia, and has signifi tummyt markets in South East Asiatic countries. Its brands include the Scion, its division in the United States, Guam and Puerto Rico, and the Lexus, which is Toyotas lux ury vehicle brand ( 2007).Aside from producing cars and other types of automobiles, such as SUVs and coasters, Toyota alike, participate in rallying or racing. The societys presence in Motorsport can be traced to the early 1970s, when Ove Andersson, a Swedish driver, drove for Toyota during the RAC Rally in Great Britain, and in succeeding years, Toyota Team Europe was formed ( 2007). Up to the present, Toyota cars are still being used in a admixture of racing events in different countries around the world.These events include the CART in Vancouver, the Le Mans, the Indy Racing League, the NASCAR, and the Toyota F1 Series (2007). As the railer in the industry of automobile manufacture and production, the union adopts a philosophy in basis of its production system, which is named The Toyota Way. The caller-outs philosophy in production involves a list of fourteen principles that are implemented in the company, and serve as guides to the operation of the company. This includes the following principles Base the companys management decisions on a long-term philosophy, even at the expense of short-term goals * shelter a continuous process flow to sight problems * Utilise suck out systems to prevent over-production * Level out the workload of the custody * Build a culture that stops to fix problems, in order to get feeling perfect at the first try * Standardised tasks are the companys foundation for its continuous approach and the education of the employees * Use opthalmic control to let problems surface Use reliable and tested technology, which serves some(prenominal) the muckle and the companys processes * Train leaders who understand the companys work, live its philosophies, and share it to others * Train and develop a workforce who follow the companys philosophy * Respect the work and responsibilities of partners and suppliers by challenging them and helping them improve * Actually immersing ones egotism to understand the situation * Slow but su re decision-making through with(predicate) consensus, through considering a variety of options, and to implement decisions effectively and efficiently and, * Becoming a learning business organisation through expression and continuous improvement ( 2007) With these principles, the company is guided in terms of its trading operations and production. Through these principles and philosophies, it can beget efficient and effective in manufacturing its products, keeping in point the wel remotee of its employees, the image and brand of the company, and the satisfaction of its employees. PESTLE AnalysisCurrently, Toyota faces a need for accelerated investment, in order to deploy the new technologies, for printing press geo- semipolitical, stintingal, environmental and societal reasons. Political. Observers give see a continuing rise in the ruinous steps which live with forced the industry into a socio-politico-economic corner. Whether this is related to flat demand or to the compa nys creation of an ever-wider range of vehicles that many buyers seem to care little around, there is a problem. The company is likewise linked closely to the policies of governments, the earnings of banks. Little investigate then that so many emerging countries are keen to develop an auto sector or that there is such a political pressure to protect it in the developed countries.Toyota Company is currently henpecked by little more than a handful of firms, each wielding wide financial, emotional and political power. The companys approach to dealing with political institutions has non always been brilliant. It tends to be heartfelt on technical issues, although it has not always fully presented the longer-term options, in order to make the choices and their implications clear. Economic. For much of the developed world, and increasingly for the exploitation world, Toyota Company is a newspaper column company in auto mobile business, a flag of economic progress. Without Toyota Co mpany in automotive industry, it is impossible to develop an efficient steel business, a charge card industry or a glass sector other fundamental foundations of economic progress.The Toyota Company has been a core company, a unique economic phenomenon, which has dominated the twentieth century (2007). However, the automobile industry including the Toyota Company now suffers from a series of structural schisms and has become riddled with contradictions and economic discontinuities. For the hood markets and the finance sector, it has lost a lot of its significance, as a leave of ever declining winnings and stagnant sales. The proliferation of products means that it has become hopelessly wasteful of economic resources. While all these and more sound like a very gloomy assessment of such a vast economic phenomenon, the industry is not in the end despondent. A different future day is possible for the industry, a highly desirable one. Social.As part of the development in automotiv e industry, the Toyota Company actually affects the society as a whole. It employs millions of people directly, tens of millions indirectly. Its products claim transformed society, bringing undreamed-of levels of mobility, changing the ways people live and work (2007). The social pry of the additional mobility that this industry brings involves the value of the people being able to commute over longer distances tardily, among many others. For most of its existence the Toyota Company has been a model of social case and control and it is not just that the auto sector offers a pillar of something else.There are, on the other hand, especial(a) social issues to address in many developing countries, often those that are the result of an undertone of spiritual faith. Toyota company has the role to play in helping develop the mobility of such countries and it can be achieved at an acceptable social cost of the coarse is prompt to learn the necessary lessons from those who suffer tr aveled this route before it, and to make the necessary investments. Technological. The Toyota Company works on a exceed so awesome and has an influence so vast that it is often unwieldy to see. The level and diversity of technologies that it must deploy are increasing, which imposes both new investment burdens and new uncertainties and risks (2007).Roughly a million new cars and trucks are built around the world each week they are easily the most complex products of their kind to be mass-produced in such volumes. The industry uses manufacturing technology that is the cutting edge of science. But still, the potential for developing coordination skills, gifted capabilities and emotional sensitivities through electronic technologies remain far from fully exploited. There are numerous additional near-term technological opportunities to adapt the company to changing energy availability. The possibilities suggest that automotive technology is un evaluately big-shouldered and provide s a powerful defence against energy starvation even if the real price of oil climbs steadily during the next couple of decades. Legal.Toyota Company is master to numerous technical directives and regulations, as well as legislation of a more legal nature. The legislation covers areas such as competition law, intellectual property law, consumer protection and taxation, and emissions (air step and fuels). When the auto parts industry reached full development, accelerated technological efforts were made to create a web of topical anesthetic suppliers that would make it possible to meet the growing legal requirements for the national integration of production. Environmental. Other than the vehicles themselves, and the roads and fuel needed to run them the business is in an elaborate way tied to the manufacture of a wide range of components and the extraction of singular raw materials.Indirectly, it brings people road congestion, too many fatalities and a swan of other environmenta l troubles. The effect to the Toyota Company is that they needed to establish R&D centres to take advantage of research infrastructure and human capital, so that they can develop vehicle products locally to satisfy the requirements of the environmental and gum elastic regulations more effectively. SWOT ANALYSIS Strengths. One of Toyotas most potent strength is that they are one of the worlds best cognise brands (2007). As they have been in the business for several years now, the experience that they have in manufacturing cannot be overemphasised. They already have built a solid reputation for being a dependable automaker.Additionally, they have the strength of being diverse with respect to their product lines, having affiliated automotive brands including Aston Martin, Ford, Jaguar, come to Rover, Lincoln, Mazda, Mercury and Volvo, which allows clients to choose from a variety of car models to fit their lifestyle. They are as well known to be abideive of societal causes, in par ticular the fight for breast cancer and support after the September 11 attacks in the U. S (Toyota, 2007). They pioneered the moving assembly line, which became their mechanism for making vehicles more efficiently and faster, therefore more affordable. Traditionally Toyotas external operations were a source of that allowed the company to maintain its position as the second largest auto maker in the world and to respond to GMs competitive moves. Weaknesses. The companys organisational structure has become inefficient as the company became more complex.This hindered Toyotas ability to manage its international meshwork of subsidiaries, branches, and companies. The weakness of its organisational dodge reflects to the speculations over the likely performance of Toyota in the future, as the companys financing section is swamped down by hefty outstanding(a) debts. The firm is not in risk of bankruptcy, but the Toyota management is in a tight spot, and has to be extremely active to not ma ke it any tighter. There is also a remarkable management issues within the company. Finally, because of the increasing competition, the company has witnessed a decline in boilersuit sales, a weakness on their part as they have somehow failed to overcome the challenges that additional competition brings. Opportunities.Toyota Motors Company has the distinct fortune to have cleaner engine emissions, in alignment with their corporate duty to become environment-friendly. Through working with environmental groups to help clean the environment, they also have the opportunity to further enhance their image to the general public. Since they have already started investing in Solar Power, the end is a more viable prospect. Toyota could further widen the scope of their opportunities through specialising and rationalising its worldwide operations on a regional basis and to develop a geltwork organisation in which its subsidiaries would incr relievo their transnational linkages.Besides Toyota learning about the possibilities of producing quality automotive products in their areas of operation at a relative cost advantage, other relevant factors could bring about new opportunities for merchandise vehicles the parent companys efficiency-seeking dodge its competitive disadvantage in the small-car segment of the market and the competitors moves in this market-segment and the new more flexible regulations in the respective countries in which they have manufacturing plants. Further, with Toyotas existing capability to innovate on automobiles, they have the opportunity to penetrate a still larger scope of market. Threats. As with any firm in the automotive industry, Toyota faces very tight competitive rivalry in the auto market. Competition is escalating, with the threat of new entrants incessantly flowing into the market from South Korea, China and new plants in eastern Europe (2007).Toyota is also exposed to the risk of movement in the price of raw materials such as steel , glass, rubber and fuel. The key economies in the US, Europe and the Pacific are also experiencing slow downs lately. These economic factors are latent threats for the company under analysis. Further, substitute products such as Natural gas, Electricity, Ethanol, vegetable oil, Sunlight, Water poses a distinct threat to the sustainability of company sales. While Toyota strategies responded to the local opportunities and competitive advantages that were built over time in different national markets, the engagement of foreign operations was also dependent upon the companys management capabilities and its overall position in the industry worldwide.If such factors were to perform under expectation, their competitiveness in the international scene would suffer naughtily (2007). RESOURCE canvass A resource is a basic element that a firm controls in order to best organise its operational processes. A resource, or set of resources, can be used to create competitive advantage (2002), tha t is why an audit of the resources of a firm is a must if it is to practice them to create the latter. The sustainability of a companys competitive advantage depends upon the ease with which the resources can be imitated or substituted (Peteraf, 1993). When resources are combined they can lead to the formation of competencies and capabilities ( 1990). Financial Resources. 2 Although Toyota Motors 2005 financial results showed a full-year net loss, the company still managed to come back in their expressive profits earning in 2007. As seen in the accounting ratios, the company managed to have an expressive positive change of 21. 4% in 2006 against its low performance in 2005 with only 2. 9% of change. Table 1. Toyota Accounting Ratios Human Resources. 3 Toyota directly employs around 38,340 people in normality America. It has made around $16. 8 trillion in direct investments in North America. It has in good produced 14. 8 million vehicles, 2. 5 million vehicles sales (2005), 39. 2 million total vehicles sales, and purchased $26. billion worth of parts, materials and components as of December 2005 in North America. It has 1,745 North American dealers and has given around $301 million as philanthropy to the United States since 1991. Physical Resources. 4 To date, Toyota has factories all over the world, manufacturing or assembling vehicles for local markets, including the Corolla. Toyota has manufacturing or assembly plants in Japan, Australia, Canada, Indonesia, Poland, South Africa, Turkey, the United Kingdom, the United States, France, Brazil, and more belatedly Pakistan, India, Argentina, Czech Republic, Mexico, Malaysia, Thailand, China, Vietnam, Venezuela, and the Philippines. VALUE CHAIN ANALYSIS 1985) in his seminal work of value chain proposed it as a tool to identify and to analyse the origins of competitive advantages and suggested that the activities of the business could be grouped into two primary and support activities. What activities a busines s undertakes is linked to achieving its competitive advantage, and Toyota seemed to be best prepared to implement a global strategy, because of the superior competitive advantages of its foreign operations compared with GM and Chrysler. Paradoxically, Toyotas rivals showed a greater disposition to use resources from outside of the United States. It was not until 1994 that Toyota focused on developing a global strategy as a means to enhance its competitive position in the industry.Before then, Toyota largely focused on building a strategy that would allow the company to recover its competitive position in its own home market, which was essential for survival. An analysis of the structural and institutional factors that shaped Toyotas strategic response both to the new industry rules and the short-term challenges posed by other industry competitors explains this paradox. A number of broad sustainability challenges set the consideration for all of the value chain activities (see appen dix 1). These issues apply across the value chain (1) Population growth (2) Urbanisation (3) Child mortality (4) maternalistic health (5) Infectious diseases (6) Biodiversity (7) Loss of ecosystem services (8) Poverty (9) Education and (10) sexual activity Equality.All these issues are attended to by the Toyota Motor Company in alignment with their efforts to maintain sustainable competitive advantage through preserving the good public image that their clients expect from them. CORE COMPETENCIES Toyota has several core competencies which they could engage to further gain advantage over their competitors, and currently the company overtook widely distributed Motors in its market leadership in the automotive industry. One core competency of the company is their brand management. The strength of their automotive marketing has been such that their brand is known even in the parts of the world where cars are not the common medium of transportation.Another core competency is their em erge chain management, which links to their ability to maintain a steady stream of raw materials coming in for production because of their long-term good standing with their steel, glass, plastic and other raw materials supplier. Their highly coordinated logistics system handled by outsourced firms also form part of their core competencies, leading to excellent take stock management and always on schedule production activities. Another tag core competency is their ability at the moving assembly line. world the pioneer of such mass production system, they were able to get ahead of the competitors manufacturing processes-wise and were also able to save on costs and time.Yet some other core competency is Toyotas focusing on its product development technology under a single product-information-management program through standardising and incorporating them. If sustainable development is to achieve its potential, it must be integrated into the planning and measure systems of business enterprises. And for that to happen, the concept must be articulated in terms that are familiar to business leaders. Many observers believe that more stakeholders investors, consumers, nongovernmental organisations and others will insist that companies to take environmental and social costs as seriously as they take purely financial costs.In addition, investors are expected to increasingly seek out sustainable companies and avoid firms with poor environmental performance, judging the sustainable companies as better risks over the long term. Likewise, consumers are expected to search for products that perform well environmentally. THE FUTURE OF TOYOTA (1982) observed that the automotive industry has been depended upon by other industrial sectors to provide them with means with which to hone their investment capital because of the transfer of its technology, which basically means that the manufacturing and materials handling processes that orb around mass auto production will be, in the future, far removed from their original use through consulting engineering firms that undertake to name and equip factories.The tendency for car manufacturers, then, will be to focus on competition that would become more rigorous, giving special attention to profit-gaining activities and concentrating also on arranging for financial, marketing and industrial cooperation among car makers. In the first three months of 2007, Toyota together with its half-owned subsidiary Daihatsu reported number one sales of 2. 348 million units. Toyotas brand sales had risen 9. 2% largely on demand for Corolla and Camry sedans. The difference in performance was largely attributed to surging demand for fuel-efficient vehicles. In November 2006, Toyota Motor Manufacturing Texas added a facility in San Antonio. 5 Toyota has experienced quality problems and was reproached by the Japanese Governement for its recall practices (2006). Toyota currently maintains over 16% of the US market share