Strategic Management at Toyota Car Manufacturing Company - Case Study Example

Strategic Management Name of the Student: Name of the Instructor: Name of the course: Code of the course: Submission date: Strategic Management Strategic management is a concept which has been in practice in the business management field for a long time. However, over the recent past, the concept has gained a lot of focus but many business professionals owing to its importance in the management of an organization (Grant 2007, p.12). Generally, the strategic management concept is not constituted of a single strategy, but instead, it is an integration of several strategies, each of which has an important role to play in the management of an organization. The basic principle in strategic management is to ensure sustainability; ensuring that there is a proper utilization of resources, embracing the most appropriate processes and principles with a view of ensuring that a business organization remains competitive today and in the future (Nandakumar, Ghobadian & O’Regan 2011,p.223). Some of the concepts in strategic management include Porter’s five forces and Porter’s generic business strategies which give an indication of how a business organization is able to compete effectively in the market. Another element of strategic management is the concept of core competencies which ensures that an organization is able to make use of its core abilities and outstanding features to gain a competitive advantage over its competitors. The following essay will take a deep insight into Michael Porter’s five forces model, Porter’s generic business strategies and the concept of key competencies with respect to the Toyota Car Manufacturing Company. Toyota Car Manufacturing Company is one of the largest Car manufacturing companies in the world. The company is in the rank of the top three car manufactures in the world, the other two being General Motors and Ford. The home of the Toyota Car Company is located in Japan but it has factories in many locations around the world, going by its high tech manufacturing processes and principles (Toyota Car Manufacturing Company 2012, p.1). Generally, Toyota has been performing well in the international market, with a steady growth in revenue and market share; hence emerging as the must see car on any road in the world. This essay will analyze the company’s strategy with respect to the concept of core competencies, Porter’s five forces model and the Porter’s generic strategies. The Porter’s five forces are used in the business world to analyze a specific industry, hence providing an opportunity for the development of appropriate business strategies which aim at ensuring that a business is competitive in the market. The five forces which were identified by Michael Porter are the rivalry which exists between the competitors in the market, the entry of new players into the market, the threat of substitute products, bargaining power of suppliers and the bargaining power of the customers. The five forces will be analyzed with respect to Toyota Motor Corporation’s Business Strategy of 2008. With respect to the first force of the existing rivalry between the competitors in the market, it can be seen that the automobile industry is highly competitive. The competitors to Toyota in the car manufacturing industry includes: General Motors (GM), Volkswagen Group, Ford, Honda, Nissan, PSA Peugeots, Hyundai-Kia, Suzuki and Fiat which make the top 10 car manufactures in the world. For a long time, the competition in the industry has been stiff and GM has been the largest car manufacturer in the world. However, Toyota overtook GM in 2009 to become the largest car manufacturer in the world in terms of sales volume (Ryal 2009, p.1). This can be linked to its strategic plan which sought to increase the amount of sales of the company by focusing on the emerging markets and establishing a strategic marketing plan (The Toyota Car Corporation 2008, p.5). With respect to the threat of the entrance of new car manufactures into the market, it can be seen that the automobile industry is capital intensive; hence it is not easy for new companies to enter into the market easily. In addition to this, the reputation of a company enables a company to sell its products. This is very prominent in the car manufacturing industry. Therefore the ability of a new company to sell its products is very low due to its poor reputation. Therefore, the entry of new competitors into the market is not a major threat to Toyota; the main threat is the already existing competitors. According to Porter’s forces, an industry which is characterized by an ease of entry of competitors is more competitive, hence needing strategic competitive strategies, this is not the case with the automobile industry. With respect to the bargaining power of the buyers, it can be seen that there is no formal automobile consumer association which influence the prices of cars in the world. An industry in which the bargaining power of buyers is high tends to have its prices set by the consumer forces as opposed to the manufactures’ forces. The only bargaining power can be inform of large corporate which purchase a large number of automobiles. However, there is a need to get the consumers on the side of Toyota Company hence censuring that the company is able to sell its products. This has led to the upholding of corporate social responsibility in the company’s strategic plan so as to establish and maintain a good rapport with the market. However, the bargaining power of buyers is not a major issue in the automobile industry. As opposed to the low bargaining power of automobile buyers, the bargaining power of suppliers in the industry is high. In order to reduce the costs of the supply or raw materials to the company, Toyota car manufacturing company has placed numerous factories around the world hence reducing the distance of supply in addition to bringing operations to the local markets, hence being able to respond to the market forces in specific markets promptly. In addition to this, the company strategized to increase its activities in regions which had abundant raw materials in its 2008 business strategy (The Toyota Car Corporation, 2008, p.7). This enabled the company to take care of the bargaining power of the suppliers. Lastly, there is the consistent threat of substitute products in the market. Generally, the automobile industry is characterized by stiff competition between the various car models in the market. The comparison between the Land rover & the Range rover versus the Toyota Land cruiser and Lexus and the Isuzu Dmax, Navara, Ford and Toyota Hilux double cabs is proof as to the availability of substitute products in the automobile industry. In order to counter this, Toyota has differentiated its products adding a touch of fuel efficiency, sustainability, aesthetics and innovation to its products, thus making them competitive. As pointed out earlier, the generic business strategies are also important in an organizations strategic management practices. The Three Porter’s generic strategies are the cost leadership, differentiation and focus strategies (Walsh & Sanderson 2008, p.222). Looking at Toyota’s strategic plan, it can be seen that it integrates the use of all the three strategies. With respect to cost leadership, it can be acknowledged that Toyota Car Company has far much lower prices for its products as compared to its competitors. Ideally, the low prices at which Toyota automobile retail at in the market as compared to automobile from other company’s has been a major strategy for the company. As per The 2008 business strategy for the company, the reduction of costs was one of the major strategies which the company sought to undertake (The Toyota Car Corporation, 2008, p.8). The review of the production profess automation of the process and the use of the just in time and lean manufacturing strategies are some of the elements which have enabled the company to reduce its operation costs, thus able to reduce the costs of their automobiles in the market. The differentiation strategy upholds the need of the redesigning of products with an aim of increasing the value which is given to the customer (Walsh & Sanderson 2008, p.222). This is an important strategy especially in a market characterized by stiff competition as it is with the automobile industry on which Toyota operates. Looking at the Toyota strategy, it is important to acknowledge the product differentiation elements which it has strategized to integrate into its cars. Some of the key features which are renowned with Toyota automobiles are fuel efficiency; on this point, the use of electronic fuel injection (EFI) and variable valve transmission injection (VVTI) can be credited to Toyota. Good aesthetics for instance in the Toyota Lexus, innovation for instance the integration of technology in the car systems among other features makes Toyota’s products competitive in the market. In addition to this, the efficient quality management and assurance in the production lines ensures that the company’s cars are efficient and reliable; which is a much desired feature in automobiles. Therefore, product differentiation has worked to the advantage of the company. Lastly, the company makes use of the focus strategy whereby it makes use of both the price based and differentiation based focus strategy. For instance, the company has vehicles made for specific markets. For example, vehicles made for low economies for example Africa are normally cheap, for instance the Toyota corolla. With respect to differential focus, the manufacturer makes specific automobiles for specific markets, for instance the land cruiser for use in the rugged terrains of Africa and Asia. From this, it can be seen the focus generic strategy enables an organisation to take care of specific target markets. As pointed out in the introduction, this essay was also to discuss core competencies. Core competencies are the important aspects of an organization’s products/ processes which the organization is able to offer effectively, hence gaining a competitive advantage over its competitors (Baitmangalker 2004, p.70). The concept of core competencies hold that an organization should establish, cultivate and maintain core competencies which are a mark of its products, hence using them to gain a competitive advantage over its competitors. The concept of core competencies can be acknowledged by looking at the major brands in the world, for instance Microsoft, Nokia, Sony and Toyota, the company under analysis in this essay. The concept of ore competences hold that a core competence should fulfill the following conditions: firstly, it should give an organization the ability to gain access to a wide range of potential market, it should give more value to the consumer and lastly, it should be hard for competitors to copy. Looking at the Toyota car manufacturing company, several key competencies can be identified. The first one is Kaizen, which is the continuous development of the current automobiles in the market (Marksberry, Badurdeen, Gregory & Kreafle 2010, p.671). Looking at the poroductio0n cycle of vehicles in Toyota, one cannot fail to notice the emphasis which the company puts on the continuous development of its products as opposed to its competitors for instance GM who review their products after years (about 5), Toyota starts developing its products almost immediately after releasing them into the market. This explains where there are many series of Toyota cars in the market. This is due to Kaizen, as it’s commonly known at Toyota. Another key competence of Toyota is its production system. The company is known to use the Just in Time (JIT) manufacturing system which upholds the elimination of waste and the removal of processes which do not add value to the final product such as warehousing (Marksberry 2011, p.133). This has enabled the company to reduce its operation costs as per its 2008 business strategy and consequently being able to maintain a cost leadership generic strategy. The company also makes use of up to date and efficient manufacturing systems and principles. On this point, it is important to note of the lean manufacturing system used by the company. This system ensures that the company is able to optimize on the manufacturing process, hence being able to get high quality products at the lowest cost possible (Marksberry, Badurdeen, Gregory & Kreafle 2010, p.671). Another core competence of Toyota Company is reliability and efficiency. The company’s cars are known for their reliability s per the expectations of the user. This is due to the efficient manufacturing and production systems upheld by the company. Lastly, the company is known for its innovation (Treece 2006, p.1). Only recently, the company announced a partnership with Microsoft which would see the networking of a car s as to establish a social network between the car and the user. This is just one of the many innovative ideas of Toyota. Others include the development of hybrid cars, increasing fuel efficiency by the use of high technologies for instance VVTI among others. Going by the growth in the number of sales of Toyota’s automobiles which has seen the company claim the top spot in the car manufacturing industry, it can be acknowledged that core competencies have a great role to play in the competitiveness of a company (Hino 2006, p. 16). In conclusion, it can be seen from this essay that strategic management is an important practice in any successful organization. The case analysis of the Toyota Car Manufacturing Company with respect to the Porters generic strategies & five forces and the concept of key competencies had proved this. Toyota is one of the strongest brands in the automobile industry. The company is the largest car manufacturer in the world and looking at its production systems, manufacturing systems and management systems, a key element o strategy can be identified. From the discussion of the three aspects identified above, it can be concluded that strategic management is multifaceted; hence needing to be integrated in each operation in a firm. Therefore, it can be concluded that the concept of the core competencies and Porters five forces and generic strategies are a part of strategic management since they enable an organization to develop its growth strategy in addition to enhancing its competitiveness in the market. References Baitmangalker, S., 2004. 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