Strategic Management: External Analysis (Add (Add (Add Strategic Management: External Analysis Introduction The Toyota Motor Corporation (TMC) or simply Toyota is a multinational automaker headquartered at Toyota in Japan. It is the world’s largest automobile manufacturer in terms of sales and production. This paper will explore the firm’s major external threats and opportunities and how the company is addressing those elements. External Threats and Opportunities As Per Company Officials In their introductory messages, both the chairman and president of Toyota address several challenges and opportunities faced by the company. While going through their introductory messages, it seems that the chairman of the company considers implications of the Great East Japan Earthquake as one of the biggest external threats to the Toyota.
The Chairman Fujio Cho strongly opines that the company has to take great efforts to contribute to the revival of the automobile industry as well as manufacturing sector (Chairman’s message, 2011). At the same time, the President Akio Toyoda says that effects of global financial crisis and product quality and safety issues are the ongoing threats to the company.
He also holds the view that unstable sales and profitability are some other external challenges that the organization is facing nowadays. In the words of Toyoda, the company’s breakeven point is now “more than 1 million vehicles lower compared to what it was at the time of our worst reported loss” (President’s message, 2011). In addition, Cho asserts that the Toyota is currently struggling with quality issues and he adds that the firm must work on re-establishing trust by rebuilding strong relationships with customers, dealers, and suppliers (Chairman’s message, 2011).
Similarly, both the chairman and the president address several opportunities for the company in their introductory message. Both of them are of the belief that the company’s social responsibility programs would raise potential market opportunities for the company. The President Toyoda points out that in an attempt to mitigate the impacts of the Great East Japan Earthquake, the Toyota’s support teams analyzed the situation and immediately responded to the recovery issues of affected communities. He adds that the company gave first priority to preservation and restoration of communities rather than restarting the production (President’s message, 2011).
Cho believes that the firm’s powerful and potential workplace may provide it a series of opportunities. Similarly, both Cho and Toyoda strongly argue that the company possesses a potential group of stakeholders and this situation is identified to be one of the most promising opportunities for the firm. To justify this argument, they point that their stakeholders kept shares with the company even when the organization confronted with a difficult business environment as a result of global financial crisis and the 2011 earthquake.
As mentioned in investopedia, an average person cannot start manufacturing automobiles as it needs huge investments (The industry handbook). Therefore, Toyota is relieved from the threat of new entrants to a great extent. In addition, Toyota generally buy majority of their products from more than one supplier. When the company decides to switch its supplier, it can cause dreadful impacts on the existing suppliers. Therefore, weaker supplier power also creates a favorable business environment for the Toyota. On the other hand, increasing concerns about environment, pose potential challenges to the company’s strategic planning.
Two Major Threats Firstly, availability of close substitutes is seemed to be the major threat to the automobile industry. Nowadays, increasing costs of maintaining a vehicle may persuade people to seek alternative transportation including bus, train, or airplane. Presently, automakers really strive to survive market competition, which threatens their long term sustainability. Although, auto industry has been historically avoiding price-based competition, nowadays leading automobile manufacturing companies including Toyota and Honda offer rebates, preferred financing, and long term warranties to their customers as part of product promotion.
Hence, intensified market competition negatively affects the automobile manufacturers. Two Major Opportunities Historically, it seems that buyer has weaker bargaining power in the automobile industry. It is obvious that automobile industry generally sells costly products and probably rich customer groups would be its target market. Moreover, consumer may not have much buying power since they never purchase cars bulkily. Hence, weaker buyer power benefits automakers. Likewise, improving living standards of people offers potential opportunities for automobile industry. It is clear that an automobile manufacturer attains more profitability from luxury cars, and people will buy such cars only when they achieve financial stability.
Both the executives at Toyota and independent analysts duly accept the above identified threats and opportunities the automobile industry has been facing. How Toyota Addresses External Threats? From the above sessions, it is obvious that the ongoing effects of Great East Japan Earthquake and the 2009 global crisis are the most potential threats to the Toyota. As the company Chairman Fujio Cho says, it is necessary for the Toyota management to ensure active involvement of employees to survive these issues and thereby to bring the company back to the track of stable growth.
As part of disaster recovery program, the Toyota has increased its incentives. It seems that the company’s “incentives reach their highest levels ever at $2,416 per unit resulting in the biggest year-over-year increase amongst all automakers at 49%” (TrueCar. com. 22 April, 2010). From the annual report, it is also clear that the Toyota management is trying to cover its external market threats by focusing on technological developments and product innovation (Annual Report 2010).
This strategy has been clearly reflected in the introductory messages of the company chairman and the president. Likewise, presently the company focuses more on electric car manufacturing sector as an attempt to contribute to its environment safety strategies. In my opinion, it would not be better for the company to raise the incentives as the company is already facing a profitability decline. In contrast, Toyota management must allot more finance for research and development activities, because consumers’ tastes and specifications in the automobile industry frequently change.
In addition, it is also advisable for the company to focus more on developing large markets like India and China. Conclusion Evidently, the Toyota is facing a set of external challenges and new opportunities nowadays. The company has framed effective strategies in its annual report to address the market influences and the changing business scenario. It is advisable for the company to invest more on product innovation and market acquirement. References Annual report 2010: Purpose, perspective and passion. (31 March, 2010). Toyota Motor Corporation, 1-102.
Retrieved from http: //www. toyota-global. com/investors/ir_library/annual/pdf/2010/pdf/ar10_e. pdf Chairman’s message: Applying our limitless ingenuity aiming for further growth and the recovery of Japan. (2011). Retrieved from http: //www. toyota-global. com/investors/ir_library/annual/pdf/2011/p07.pdf The industry handbook: Automobiles. (2011). Investopedia. Retrieved from http: //www. investopedia. com/features/industryhandbook/automobile. asp#axzz1aq7bi4MR President’s message: Rewarded with a smile by exceeding your expectations. (July 2011). Toyota Annual Report 2011. Retrieved from http: //www. toyota-global. com/investors/ir_library/annual/pdf/2011/p08.pdf TrueCar. com. (22 April, 2010). True car forecasts April auto sales and incentives spending: Industry sales up 23%, Toyota incentives reach record highs.