Toyota Company Marketing Analysis - Case Study Example

Running Header: Toyota Company Analysis Student’s Name: Instructor’s Name: Course Code: Date of Submission: Table of Contents Table of Contents 2 PESTEL Analysis 3 Political/Legal 3 Economic 3 Social/cultural forces 4 Demographics 5 Technological/innovation factors 5 Environmental factors 5 Industry Environment Analysis 6 Dominant economic characteristics 6 Forces of change 6 The Porter’s five forces 7 Threat of new entrants 7 The degree of rivalry 7 Threat of substitutes 8 Bargaining power of buyers 8 Bargaining power of suppliers 9 The internal environment analysis 9 Company’s resources 9 The value chain analysis 10 Capabilities 10 Core competences 11 Financial condition 11 Current strategies and objectives 12 Target market segmentation 13 Market Segmentation 13 Market Targeting 14 Market Positioning 15 Recommendations 15 Implementation 16 PESTEL Analysis Political/Legal Government regulations and laws have been affecting Toyota Motors throughout the world. Regulations on the need to take into consideration environment concerns has forced Toyota Motors become forced to design and manufacture less polluting motors as well as meeting certain mileage per gallon as illustrated by Haberberg & Rieple (2001). National Traffic and Motor Vehicle Safety of various countries has forced Toyota to improve the passenger’s safety, the driver visibility, and braking system in their vehicles. Japanese government has reproached Toyota due to increasing recall practices. Since many countries have are keen to develop their automobile sector, the government protect the Toyota Company from other competing countries by increasing the barriers of entry into the industry. In terms of the legal influence, the Toyota Company has had various directives and regulations as argued by Bill (2003). Such regulations include areas such as competition law, consumer protection law, taxations and emissions. The company therefore introduced a system of local suppliers who will help to cope with the increasing legal needs necessary to ensure national integration. Toyota has been subjected to various legal aspects including competition law, taxation, consumer protection, and emissions including fuels and air quality. Introduction of new legislations or change of current legislations might as well affect Toyota Company. Economic In the automobile business, Toyota Company is the pillar company in most developed and developing countries. It is the central foundation of their economic progress due to its major support in their steel, glass and plastic sector that provides its raw materials. However, it has recently faced decreasing profits and stagnant sales. It is also losing its significance in financial sectors and capital markets as a result of decreasing sales and profits. The current changes in taxation changes, interest rates, inflation, and economic growth around the world has greatly affected the production and sales of Toyota. This started during the financial crisis. This has made its exporting difficult to some countries due to foreign exchange rates. There is increasing high wages demands for workers in most countries due to inflation rates. The cost of raw materials (steel plates) for Toyota has been increasing recently making it increase its cost of production and subsequently high prices as illustrated by Haberberg & Rieple (2001). Social/cultural forces Tastes and fashions in car styling is greatly influencing the designing and manufacturing by Toyota. Change of lifestyles especially activity sporting is becoming a great threat to the Toyota. Toyota Company has socially affected the society by employing millions of people directly and indirectly throughout the world as illustrated by Hanson, D et el (2008). It has also increased the mobility where people are now able to move from one area to another easily. However, they are some social factors that are affecting demand of the Toyota vehicles. The issues of safety have negatively affected Toyota as people are starting to fear the safety of vehicles. The current increased recalls by Toyota have changed the perception and attitude of people concerning the safety. Demographics Changing demographics including declining family size is undermining the demand for big family cars of Toyota such as station Wagons. Increase in old people population in areas like China, Europe, and America is greatly affecting the industry as this segment does not put emphasize much on the use and purchase of cars. There has been increased demand of cars by both genders especially at younger and working classes regardless of gender. This has greatly increased the market segment of Toyota vehicles as illustrated by Jeffrey (2004). Technological/innovation factors The demand for new technologies is increasing forcing Toyota Company to revise its manufacturing and marketing processes. The changes of technological aspects in the current economic world are increasing the investment burdens, uncertainties, and risks. Technological changes are increasing making some cars outdated as more fashions that are new are being manufactured and designed by competitors as argued by Jeffrey (2004). The need for driverless, automation and navigation systems requirements are becoming a great challenge to Toyota, as they require to be taken into consideration when manufacturing new vehicles. However, increasing internets are increasing their marketing and selling capability of Toyota, as it is able to reach more people throughout the world. Increasing technologies are making it easy for new competitors to enter into the Motor manufacturing industry making it a threat to Toyota. Environmental factors Changes in climatic conditions in the world have significantly influenced the design and manufacture of Toyota vehicles. Global warming has forced Toyota motors design less polluting vehicles including electric cars that are environmentally friendly. They have been increased interest of low carbon society globally. Toyota Company has greatly contributed to the congestions in many cities leading to a lot of accident. Toyota Company has been forced to establish R&D centers in order to take advantage of human capital and research infrastructure in order to design and manufacture cars satisfying environmental and safety regulations safety (Louis & David, 2009). Industry Environment Analysis Dominant economic characteristics Toyota’s Company dominant economic characteristics are identified by the size of market, scope of competitive rivalry, number of competitors within the market, and presence of exit and entry barriers. Profitability of the industry, capacity utilization and pace of technological change also influences the customer’s decision. Forces of change There has been increasing impacts cause by porter’s forces towards providing a competitive advantage to the firms. According to Porter’s 5-force analysis, the external factors affecting an industry influence the nature of competition within the business environment. These forces clearly show the nature of competition and internal forces influencing the competition. These forces have greatly influenced the working of Toyota Company. The five forces that impact on Toyota Company in a competitive market includes the rivalry among existing vehicles firms, the threats of new entrants into the market, suppliers bargaining powers, powers of buyers and the threats of new car substitutes (Kippenberger, 1998). As illustrated by Porter, the intensity of competition in the market is determined by the strength of above forces. The Porter’s five forces Threat of new entrants Motor industry makes significant high returns hence attracting new firms. This has greatly threatened Toyota Company mainly as a result of increasing manufacturing technology of vehicles. Various government are building their own vehicle manufacturing industries while more encouraging investors to make build new industries for vehicle manufacturing. This is becoming a new threat to Toyota. This is clearly being illustrated in developing countries hence making it competitive for Toyota business. New competitors include Daewoo, Kia, Proton, and Skoda among others. New mergers and acquisitions such as Renault/Nissan and General Motors/Saab among others are new threats for Toyota according to Jeffrey & David (2005). However, barriers like economics of scale, and capital requirement of new machineries and technology are holding back new entrants threatening Toyota. The degree of rivalry In the recent past, Toyota is losing its image as a most attractive and biggest car manufacture. This is because of the financial crisis in the world and increase recent recalls. Toyota is worried of its position in the compact and co-friendly car segment. Any technological advancement Toyota makes are almost equivalent to those of GM, Nissan, European Manufacturer, and Honda as argued by Mariana & Open University (2002). Threat of substitutes According to Ann, & Jenny, (2009), Substitute products are threatening the profitability and market segment of Toyota vehicle segment throughout the world. Substitute products reduces demand for Toyota making it become oversupplied. There is increased switching of car classes as more people are buying small sports cars, estate cars, and multi-purpose vehicles. This has reduced demand for small salons and hatchbacks hence threatening Toyota. The increasing developments of rail systems as well as increased popularity of two-wheeled vehicles in cities and rural areas are significantly becoming a major threatening force. Emergences of aircraft flying shorter distances at affordable prices are making people shift towards that kind of mode of transport (Moore, 2010). This is providing a threat to Toyota vehicle manufacturers. Substitution involves three categories that include product-for-product substitution. This is when a person changes one car to another type like motorbike. Another is generic substitution and substitution relating to something people can do without including cars. Bargaining power of buyers The high number of competitors within the car industry has greatly increased the bargaining power of new buyers. The bargaining power is in most instances determined by how the buyers are informed. Toyota recent recalls has greatly influenced the willingness of customers to its products. Concentration of buyers within the market and the way they are willing to buy also determines the way they buy according to Mulcaster (2009). It is worth to note that the buying power of buyers is directly related to number of manufacturers. Bargaining power of suppliers Toyota Motors is currently using a mix of Kanban, TQM, and Just-in-time production hence the need for fast supply of materials (Ries & Trout 2001). However, not all suppliers have the capability to bargain especially those supplying steel, as they are many suppliers of steel manufacturing. Toyota cooperates with its high number of suppliers towards reducing delivery delays. Bargaining power of suppliers is the same as that of buyers and it usually based on the concentration of suppliers and their size (Ries & Trout 2001). It also depends on the degree of differentiation of the inputs of the firms. The power exists where the switching costs in the market are high like in case of Toyota Company switching cost that is low hence making bargaining power of suppliers low as well. High suppliers and manufacturers of automobile raw materials have led to suppliers bargaining power becoming very low. Toyota can be able to switch to another supply easily in case one fails. This is a clear indication that its suppliers have a low bargaining power. The internal environment analysis Company’s resources A resource is an element a company controls so as to organize its operational process. Resources at Toyota can be viewed in terms of financial, human resource, and physical resources. These are the major resources behind the success of Toyota Motors. In terms of financial resources, Toyota Motor’s 2005 financial results indicated a full-year net loss. However, it regained itself through its expressive profits in 2007 as illustrated by Arkadi (2010). In 2006, it gained a profit of 21.4percent. In terms of physical resources, Toyota has several factories that manufactures and assembling vehicles globally. Some of its manufacturing factories include Japan, Australia, Poland, Turkey, UK, and Canada. Others that have been recently developed in China, Argentina, Philippines, and Mexico among others. In terms of human resources, Toyota employs over 38,340 people directly in North America. In North America, the company has made around $16.8billion through direct investment. Toyota has over 1745 dealers within North America alone. In 2005, it purchased parts, components and materials worth $26.1billion. In 2005, the Toyota Company produced about 14.8 million vehicles and in the total amount of sale were about 39.2 million vehicles as illustrated by Arkadi (2010). The value chain analysis Value chain analysis usually groups the company’s activities into two including primary activities and the support activities used in determining the competitive advantage of a firm (Vivek 2006). At Toyota, value chain analysis is used in determining the global strategies that gives it a competitive advantage. Toyota has set up strategies to beat other foreign operations of GM and Chrysler Companies. Toyota now focuses on recovering its competitive position in the local market that makes the company survive in the competitive market. The issues that apply across the value chain include population growth, urbanization, poverty and others that the Toyota Motor Company attends to in order to maintain a sustainable competitive advantage (Oswald, 2011). Capabilities Toyota’s capabilities include structural and institutional factors that have enabled it shape the strategic response necessary in keeping up with new rules introduced in the industry. It also enables Toyota to keep up with the new rules that are introduced in the industry to be capable of dealing with short-term challenges in the market that include competitor’s strategies. Toyota has human resource department capable of meeting the needs of its clients (Tichy, 2003). Workers have skills necessary to build a product according to customer prefers. Toyota has developed its employees capability through training or being involved in more activities and therefore learning through experience. Core competences Toyota has various core competencies that enables it gain advantage in the market while gaining market leadership within the motor industry. Toyota brand is well known throughout the globe. This has resulted due to Toyota’s effort to its improved effort in brand management. Another core competency in Toyota is supply chain management (Satoshi 2006). Toyota maintains its steady supply of its products including glass, plastic, and steel. This has enabled it maintain a continuous manufacture without lead times. Toyota has out sourced its logistic system to various dealers throughout the world. This has greatly improved the inventory management and scheduled production activities. Financial condition The Toyota financial condition involves income statement, cash flows, balance sheet and statement of retained earnings that the company has been operating under. The financial condition of the Toyota Company has been stable for a long period due to the production of various brands for example in 2006. According to Arkadi (2010), the Toyota Company aimed at producing about 9 million cars and about 10 million in 2008. The revenues from the financial service grew in 2002 by 22 percent and the operating income rose by 42 percent. This represented a satisfying increase in revenues and profits for the Company. The net revenue for the fiscal year ended 2007 was about 24 trillion yen, which was an increase of 13 percent as compared to the previous fiscal year. In the same year the operating income and net income increased by 19 and 20 percent respectively (Toyota 2011). These increase in revenue enabled the Company to announce a second half cash dividend for six months. Figure 1. Financial conditions of Toyota (2001-2008) (Toyota 2011) Current strategies and objectives As illustrated by Duane, Robert & Michael (2008), Toyota is currently optimizing their capital on investment in order to transfer technology more effectively. Toyota is shifting its operations efforts to effective manufacturing strategies that are likely to increase its production. This includes lean and kaizen manufacturing; Toyota’s lean manufacturing expertise has played a great role in its operations. Toyota has also strategized to go greener by ensuring all their vehicles driven by hybrid gasoline-electric motors in near future. Currently, it is shifting towards producing fuel-efficient cars. Toyota is also strategizing on a continuous research and development towards improving its engine efficiency and less pollution. Toyota Company is also planning on how to increase its market growth in China, Russia, India, and Brazil. Toyota’s objective is to pursue sustainability through continued technological innovation in attaining a low carbon society. Toyota wants to make hybrid vehicles that are lighter, small and of lower cost. Target market segmentation Market Segmentation Toyota has distinct groups of customers in the market who vary with characteristics, behaviors and needs. This is because they require varying products or marketing mixes. Toyota has various customer segments that vary with age, location, levels of earning, environmental group, and use of vehicle. All these have varying preferences of Toyota cars in terms of models. In age perspective, many young people prefer stylish and classic vehicles, as they are aware of their fashion according to Jeffrey, Michael & Center for Quality People and Organizations (2008). This has led to Toyota manufacturing cars that meet the demands of this segment. Toyota is taking into consideration these segments by designing and manufacturing motor vehicles that meets those demands. Toyota Prius is a car for environmental friendly groups. This market segment is increasing rapidly due to increased awareness of pollution aspects and movement to greener technology. Most business people prefer heavy trucks and pickups hence Toyota Company takes does not put effort into style and color aspect of this segment. High-income earners and low-income earners have varying car preferences hence two different segments. Old people on the other hand have a preference of less complicated and light cars that are energy efficient. Therefore, this has led Toyota to take into consideration of all those requirements and needs of its varying segment. Toyota manufactures varying types of vehicles to ensure that it meets the targets of every market segment according to Jeffrey, Michael & Center for Quality People and Organizations (2008). Market Targeting Market targeting involves manufacturing a vehicle that targets a particular group while meeting its requirements. Toyota uses various Medias to target particular target groups or country. Lexus is also manufactured for prestige luxury and its promotions are made on journals or magazines to target most readers. According to James & Jeffrey (2006), the brand has been associated with the biggest names together with Prada, Louis Vuitton and Gucci. The Company should be capable of determining the reliability of the brand and customers’ satisfaction before deciding which group in the market to be targeted this is because it is normally difficult to change consumer perception about a brand of car. For example, luxury buyers and especially those who are old become stubborn while purchasing since they are loyal to the cars they have owned. Toyota manufactures a car after carrying out a market research that analysis the customer requirements. Such is the case of Toyota Prius that was manufactured to target environmental aware groups of people. A recent manufactured Toyota Probox and Vitz have been targeted to low income earners due to its low prices and low fuel consumption. Toyota has also increased its expansion in order to target people in many region of the world including Africa and South America. This is mainly through less polluting vehicles that are readily affordable by low-income earners. In targeting the ‘urban youth’, Toyota has launched a new Aygo capturing the DJ culture due to its unique convertible model . The increasing numbers of ‘urban youth’ are aware of certain culture and style. Market Positioning Market positioning involves a company product fitting in the market while attracting potential customers. Some of the elements that Toyota has put in place in achieving its marketing positioning include pricing, quality, service, distribution channels and delivery of its vehicles. Toyota has built a strong brand that puts it in the forefront of all other motor vehicle manufacturers including GM and Chrysler Companies as illustrated by Mulcaster (2009). In positioning itself, Toyota produces new brands after sometimes with excellent qualities. Such include Scion that was introduced in 2003, this has gained a competitive position in the market especially among the younger generation due to its quality and price. Towards improving its position in the market, Toyota has established various retailer outlets and offices throughout the world in ensuring it is able to reach customers while positioning it properly. This is enabling it knowing the requirements of its customers in varying regions in terms of geographical needs (Trout & Rivkin 2006). Recommendations It is recommendable for Toyota Company to carry out an extensive market research in which it will be able to identify its market dimensions and how it products/cars are perceived in the market. It should collect information required such as the safety, effectiveness of its distribution channels, availability of the vehicles to buy, and affordability in terms of cost. It should also ensure that it collects feedbacks from the customers concerning the usability of the vehicle after they buy them. These information will enable Toyota decide on the strategies it will use in order to increase its market segment in consideration of its competitors. Toyota Company should also continue with its extensive research and development in order to meet the demands of new arising vehicle needs as well as the stiff competition. The increased competition from rivalry competitors requires Toyota to invest more in research and development. It should improve its funding on innovations as an effort to compete effectively with the competitors like GM and Nissan. Toyota should also carry out an extensive marketing operation throughout the world. This is through various Medias including TVs, newspaper, and internet. It should also improve its internet buying, booking and review of its vehicles to customers throughout the world by taking into considerations varying language backgrounds. Toyota should also improve its distribution channels by establishing various assembly factories and motor bazaars in regions where it has not established itself currently. Implementation Toyota can implement the recommendation of carrying out an extensive market research by training personnel who will collect information. It will also be able to carry out market research by using internet simple questionnaires where people and customers will be able to give their feedbacks. This is expected to give relevant information on the product thus improving it accordingly. This is likely to increase various customer segment expectations accordingly. Continued R&D will enable Toyota Company maintain its competitive advantage through the design and manufacture of excellent products. Toyota Company will able to achieve this by increasing it innovation funding. This is expected to improve the vehicles while coming up with new type of vehicles that meets the needs of customers and environmental requirements. Extensive marketing will be achieved by investing in the internet marketing. This will enable it increase its sales and ordering through the internet regardless of the region of the world. Toyota Company should also develop motor Bazaars throughout the world as a way of increasing availability of its vehicles to various customers throughout the world. References Ann, N & Jenny, H 2009, CIMA Official Learning System Enterprise Management, Elsevier, Oxford. Arkadi, B 2010, Report on the Toyota Company, Elsevier, Germany. Bill, V 2003, Toyota turns edgy to grab Gen Y buyers, HBS Press. Duane, I., Robert, E & Michael, A 2008, Understanding Business Strategy: Concepts and Cases, Cengage Learning, London. Haberberg, A & Rieple, A 2001, The Strategic Management of Organizations, Pearson Education Limited, Essex. Hanson, D et el 2008, Strategic management, Competitiveness and globalization, Pacific Rim Third Edition, Melbourne, Thompson. James, M & Jeffrey, K 2006, The Toyota product development system: integrating people, process and Technology, Productivity Press, New York. Jeffrey, K & David, M 2005, The Toyota way field book: a practical guide for implementing Toyota’s 4Ps, McGraw-Hill Professional, London. Jeffrey, K 2004, The Toyota way: 14 management principles from the world’s greatest manufacturer, McGraw-Hill Professional, New York. Jeffrey, K., Michael, H & Center for Quality People and Organizations 2008, Toyota culture: the heart and soul of the Toyota way, McGraw Hill Professional, New York. Kippenberger, T. (1998) Strategy according to Michael Porter, The Antidote, Vol. 3, no. 6, pp. 24-25. Louis, E & David, L 2009, Contemporary Business 2010 Update, John Wiley and Sons, New York. Mariana, M & Open University 2002, Strategy for business: a reader, SAGE, California. Moore, H 2010, Creating public value, Strategic management in government, Cambridge, Harvard University Press. Mulcaster, W 2009, Three strategic frameworks, Business strategy series, vol. 10, no. 1, pp. 68 – 75. Oswald, A 2011, Business Transformation Strategies: The Strategic Leader as Innovation Manager, SAGE Publications, Michigan. Ries, A & Trout, J 2001, Positioning, The battle for your mind, Warner Books - McGraw-Hill Inc. New York. Satoshi, H 2006, Inside the mind of Toyota: management principles for enduring growth, Productivity Press, New York. Tichy, N 2003, Managing strategic change, technical, political, and cultural dynamics, John Wiley, New York. Toyota 2011, Financial Results, viewed 9 April 2011, http://www.toyota- global.com/investors/financial_result/ Trout, J & Rivkin, S 2006, The new positioning : The latest on the worlds #1 business strategy, McGraw Hill, New York. Vivek, S 2006, Supply Chain as Strategic Asset: The Key to Reaching Business Goals, Wiley Publishers, Tokyo. Read More