Toyota Motor Corporation - Marketing Strategies - Case Study Example

Toyota Motor Corp – Case Study Background Incorporated in the year 1933 and based out of Japan, Toyota Motor Corporation operates in the automotive sector world over. The company has roughly around 219 subsidiaries globally of which 53 companies were accounted through equity method. The company is into designing, manufacturing, assembling and sales of the cars and heavy utility vehicles of different variants. Under the heavy utility vehicles, the company manufactures minivans, trucks and other related parts. Toyota was one of the first companies in the world to produce hybrid car named Prius, which runs on gasoline engine and motor. Some of the other cars that use conventional engines and have been present in the global industry are Corolla sedan and Yaris brand. The mid-sized vehicles such as Toyota Camry, Allion, Mark X and Premio have been some of the cars which have improved the company’s bottom-line over the years. In the luxury segment, Lexus, Century limousine and Crown are some of the best known brands in the industry. Additionally, the company offers sports utility vehicles such as Lexus SC, Scion TC, Highlander, and FJ Cruiser. In the pickup trucks segment, Tacoma and Tundra provides a diverse product portfolio. The company also offers heavy utility vehicles that are primarily used for the purpose of transportation as well as construction. The company is present in the category of 4 to 8 tons load capacity vehicle manufacturing, and also into small trucks segment with 2 to 4 tons capacity. (Hemscott 2006) Apart from manufacturing vehicles, the company also provides finance options to the dealers and customers who desire to lease or purchase products from Toyota. Some of the other peripheral business segments that help in increasing the sales margin for Toyota are information technology-related businesses and offering e-commerce. Gazoo.com has been one of the Web sites launched by Toyota in order to increase their business in the Web space. The intelligent systems designed by Toyota provides technology such as car multimedia system, advanced transportation tracking devises, logistics systems, transportation infrastructure, and on-board intelligent systems to the customers. Over the period of time, Toyota has been able to expand its business in various geographies which includes North America, Europe and Asia. Being headquartered in Japan, the company has major market share in that country. Market Share As per the reports released by Associated Press, sales of Toyota surpassed General Motors in the first quarter of 2008. The company sold 2.41 million vehicles globally between January to March 2008. In comparison, General Motors sales figure stood at 2.25 million for the same period. Per analyst view, in order to survive in the industry for a longer period of time, Toyota would have to maintain its presence in all the geographies that it operates currently. With the increase in the oil prices, denting the revenue figures for all the automobile manufacturers, it needs to be seen how the hybrid cars would be a catalyst in defining the shift in the company’s business model. Although, Toyota and its peers saw a decline in sales from North America and Europe, their operations in Asia helped them in increasing their global sales by 3 percent. Although, Toyota has been able to become the market leader in the global scenario, General Motors thrust to market their product in China can also be seen as a caveat for Toyota in surpassing them as a number one world automobile company. In addition, GM is also envisaging of launching Buick Invicta in China which may be one of the factors that might thrust their sales figures significantly. (Toyota Claims 2008) U.S. Market Share by Manufacturer   May-08 May-08 GM 0.238 0.193 Toyota 17.2 18.4 Ford 16.5 15.4 Chrysler 12.8 10.7 Honda 9.3 12 Nissan 6 7.2 Hyundai 4.6 5.6 BMW (includes Mini) 2 2.3 Volkswagen (includes Audi) 2 2.2 Mercedes (includes Smart) 1.4 1.8 Source: US News Strategic Focus Toyota has always upheld the philosophy of “Lean Manufacturing” and Just in Time Production, which has not only helped the company in understanding the current market trends effectively, but has also given them an edge over the competitors in optimally utilizing the resources available. The four basic components of its management strategies includes long-term thinking for taking management decisions, recognizing the need to solve root problems for driving organizational learning, developing people to innovate new products, and initiating various processes to solve problems. As a part of its vision to give back to the society and community, Toyota has promoted various educational programmes to support the low-income community. Some of the programmes include Toyota Family Literacy, which has been launched in collaboration with National Center for Family Literacy. It has also created the Toyota USA Foundation that supports the underprivileged people. To order to provide education on the technological front, Toyota has established the Toyota Technological Institute in the year 1981 and has been giving various scholarships to young talented engineers. (Liker 2004) The company also pledges its support for environmental protection by implementing the Fourth Environmental Action Plan in 2005. The plan ensures that Toyota’s corporate development, production, design and sales are in line with the environmental standards set up by the government. Additionally, the company also focuses in maximizing its efforts to protect the environment, provide safety to the consumer and save energy through various R&D initiatives. The evolution of hybrid technology and the continual effort to manufacture vehicles based on this module has been the core initiative undertaken by Toyota over the years. In the past couple of years, Toyota has not only manufacture hybrid cars but is also looking at future technologies such as plug-in hybrids that can be used as a viable solution for the ever increasing fuel prices. The company has achieved in producing 100 per cent bio-ethanol fuel efficient cars that was launched in Brazil. (Toyota Promises 2008) Marketing strategy Over the period, Toyota’s marketing strategy has witnessed a shift wherein, the focus of selling automobile product has now become more energetic in approach. In the former years, Toyota has always catered to audience that were either higher income group or business community. The changes introduced in their product line and the emergence of middle income group forced Toyota to revisit their marketing strategy and evolve their plans to cater to the youth and the business community simultaneously. Nevertheless, the core strategy for the company remained the same, where they did not compromise on quality, maintenance and producing fuel efficient cars. Moving away from the traditional marketing methods, like conducting surveys and focus group studies, Toyota came up with a new strategy of attracting young crowd through direct marketing by placing their ads, kiosks and contest in the pubs and other places. In order to cater to the young professionals, Toyota came up with new marketing methodology that included hosting exclusive parties, fashion shows and music concerts. For instance, for the launch of Scion, the company evolved its marketing strategy to lure youth aged between 16-30 years with a salary bracket of $30,000-$50,000 per year. For marketing the age old Lexus, Toyota targeted people with the age group of 35 and above but also focused their efforts to cater to the college going professionals whose household income was $65,000 and above. In a move to launch, iQ minicar in Italy, Toyota began guerrilla marketing that included using leaflets that was stuck to the side-view mirrors of the cars in the parking lot. Toyota’s vision to cater to all segments of the society is not restricted to just technological innovations but their marketing strategies cruises along side their corporate vision. This can be seen by the way the company evolves its marketing strategy for all of its products in a unique manner, promoting each of its variants in a different way taking in account the age group targeted. Business Model Taiichi Ohno was the key person who designed the Toyota management style, which was used in their production system. According to this system, sensors were installed that could halt the machines in case of any malfunctioning. Likewise, the workforce was also instructed to halt the entire production line if they saw any imperfection. Additionally, the production system also strictly adheres to the corporate strategy that follows the principle of reducing waste and optimally utilizing the time within the manufacturing unit. The system also focused on identifying key resources who had the capability of understanding a piece of work and mastering it as well. This helped the company in reducing time on training and overhead costs. The corporate strategy of Toyota can be summed up in the words of Seisei Kato who stated "Never fail to reward merit, but never let a fault go unremarked." (Martin 2006) Operational Focus Toyota’s business philosophy has revolved around three basic aspects including operational excellence, supplier development and employee relations. The core to the Toyota’s operational excellence is their effort to continually improve their system and looking at long-term sustainable growth. In order to provide a congenial environment for people to grow within the company, Toyota believes in empowering its employees at all the levels and making them accountable for their work. In Toyota, employees are optimally utilized and value adds to the entire organization by applying their knowledge and experience to improve the operational processes, which has thereby been a significant step towards retaining employees. (Reingold) In addition, Toyota has built a strong relationship with the supplier group and has propagated to ideology of strengthening the bond between the manufacturers as well as the customers. In understanding the supplier’s business model and helping them in earning profit has helped them in connecting with the consumers directly which has thereby increased their sales volume. While the other automakers, globally, diverged their energies in investing in advancing their technologies, Toyota has believed in the philosophy of inculcating people and creating strong relationship with the supplier community, which has been the major reason behind their business excellence in the automotive industry. Technologies, methodologies and processes Toyota’s strategy to invest in the employees is not restricted to creating a congenial environment, building relationship and securing the future of the employees, the company has been able to collaborate with the universities across various geographies to train and equip its manpower with advanced technical knowledge. While automakers in Detroit, the heart of automobile centre in US, have shifted their focus to cutting cost and selling more vehicles, Toyota continues to invest in the research & development activities. The company announced the plan to invest in a new research centre near Ann Arbor. In collaboration with University of Michigan, Toyota, plans to invest around $100 million over the next four year to develop the centre. Due to the rise in oil prices auto makers around the globe have witnessed a steep fall in their sales, with no exception for big three automobile giants in US, viz General Motors, Chrysler, and Ford. This has led to companies minimizing their cost, by laying-off jobs and seizing to launch new variants in the market. This has led to auto-workers to search for jobs outside Detroit. Toyota’s decision to invest in the R&D centre would help the autoworkers in looking out for jobs in Detroit itself. Analyst opines that by the year 2010, the centre would help place nearly 1100 people in the Metro Detroit area (Eisenstein 2008). Some of the ideologies propagated by Toyota over the years have now become a case-in-point for rest of the auto-makers around the world. The company has insinuated the culture of competition, effective changes in the organisation to improve production, management as peers, and attacking the problem from the onset. These principles have made the company compete with stalwarts in the industry such as GM and Ford to name a few. Investing in intellectual and physical property simultaneously explains the reasons for its outstanding success over the years of operations. Toyota has instilled the ideology of being self-critical and not to be complacent of the achievement made in the past. The philosophy of taking responsibility of the work and improving the processes to save cost has been trickled down to the lowest level in Toyota. The company firmly believes in improving the systems and processes on a regular basis, it has developed the culture of constantly asking questions to nip the problem from the bud. This ensured greater success over its peers as workers across the levels were able to value-add. Additionally, managers and supervisors have always been considered as people who can improve the process rather than being “bosses”. Thus, creating a flat hierarchy in the organisation (Frahan). Works cited Hemscott, “Toyota Motor Corp. Profile,” 2006, viewed 21 August 2008, < http://www.marketwatch.com/tools/quotes/profile.asp?symb=tm> Liker, J., "The 14 Principles of the Toyota Way: An Executive Summary of the Culture Behind TPS", 2004, Ann Arbor, Michigan: University of Michigan, Pp. 37. Reingold, Edwin M., “Toyota: People, Ideas and the Challenge of the New,” Penguin Books. “Toyota Promises More Hybrids,” Business and the Environment, August 2008, viewed 21 August 2008 Martin, Robert J., “The Toyota Difference Makes For Smooth Ride,” Business First, 16-22 June 2006, viewed 21 August 2008 < http://www.insyte-consulting.com/Home/InTheNews/Editorials/ToyotaDifferenceMakesForSmoothRide> “Toyota Claims World's Best-Selling Automaker Title,” 24 April 2008, viewed 21 August 2008 < http://usnews.rankingsandreviews.com/cars-trucks/daily-news/080424-Toyota-Claims-World-s-Best-Selling-Automaker-Title/> Eisenstein, Paul “Good News? Toyota Pushing into Big Three Country,” 2 April 2008, viewed 23 August 2008 < http://blogs.thecarconnection.com/blogs/paul_blog/chrysler/good-news-toyota-pushing-into-big-three-country/> Frahan, Antoine Henry de, “How Toyota Is Rejuvenating the Idea of Corporate Culture,” viewed 23 August 2008. Newman, Rick, “How Toyota Could Become the U.S. Sales Champ,” 9 June 2008, viewed 23 August 2008 < http://www.usnews.com/blogs/flowchart/2008/6/9/how-toyota-could-become-the-us-sales-champ.html> Read More