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PREPARE FOR:

PROF. MADYA DR. NOREHA HALID

INTAN MAIZURA BINTI ABDULRASHID

ZP00965

SABRINA BT ADNAN ZP00688

SUZANA AB RAHMAN ZP00915

ZULFA HAMZAH ZP00966

Business Economics and Decision

AnalysisZCZB6023

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annual revenuehovers around

US$186 milliondollars andWorkforce of

290,000 peopleworldwide

8th largestcompany in theworld Established in 1937

Renowned forits amazingcost cuttinginitiatives

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The Toyota Company is a leader in the car manufacture,assembly and distribution the world over.

A very efficient management style that the company useshas been one of the reasons for the firms goodperformance.

The market structure can be seen as an oligopoly. Thisis due to the fact that there are other key players like GMwho are peer competitors

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Mission of Toyota is to manufacture cars that meet thecustomer needs in constantly;

They comply with local, national and international lawsand regulations as well as the culture;

Believe that management interacting with its

stakeholders is of the greatest importance

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Toyota Company has been producing vehicles andsignificant products that are not expensive and readilyavailable.

This has been a significant factor that has enabled theCompany to have a major cut in the market , and it isprojecting to have most of the market by the end of 2013,as it has put a cross a number of strategies to enable itreach the set target.Top 3 Automakers Global, OICA, 2010

Group Units % Share

Toyota 8,557,351 11.0

GM 8,476,192 10.9

Volkswagen 7,341,065 9.4

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Toyota Company is able to apply its strengths andopportunities it has to create a competitive edge in theindustry. Toyota has previously concentrated on theJapan and American markets and it needs to setup

strategies to penetrate the other markets as well. Toyota has taken a good position as far as sustainable

development is concerned.As with any car manufacturer, Toyota faces tremendous

competitive rivalry in the car market. Competition is increasing

almost daily, with new entrants coming into the market fromChina, South Korea and new plants in Eastern Europe. Thecompany is also exposed to any movement in the price of rawmaterials such as rubber, steel and fuel. The key economies inthe Pacific, the US and Europe also experience slow downs.These economic factors are potential threats for Toyota

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Toyota Company is one of the worlds leaders in carexport and it appears to literally be living its mission,which is to be the world leader in the creation ofautomotives that are best in terms of value.

The company is working towards the end of creating asociety that is prosperous by providing their clientele withthe best value for their money.

The Company is also conscious about sustainabledevelopment, and this can be clearly seen in its differentcorporate social responsibilities as well its sustainable

development initiatives aimed at reducing the pollution ofthe environment.

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Toyotas customers are very diverse and they range fromthe low income earners to the very rich.

Toyota has catered for all car needs that may arise forany individual with their wide range of motor vehicles.They range from small sports cars to big family vehiclesand trucks as well as vans.

The customers comprise a varied group of people, withdiffering ages, incomes, geographical locations, andsocial and cultural statuses.

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Toyota products on individual basis according to theirspecific needs. In some cases we have organizationspurchasing cars for their firms usage or for theiremployees. In such a case, the product buyer and

purchaser is not actually the product user.

Once individuals purchase the companys product, thereis an increased exposure to its other products. Product

awareness is enhanced through advertisements,newsletters, website information, and other informationalsources.

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Target Market

Each of Toyotas products is designed to

target a specific market. The design criteriarange from top speed, capacity and exteriorappearance like color and shape.

There is a high speed, small, two-seat modelcars for the relatively younger and singlepeople who are adventurous to the big five-

seat models for the family set up.

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Value Proposition

Toyota, giving them a better image of Valueand a better price on the same top qualitymerchandise.

Toyotas value proposition has been builtupon quality and reliability.

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Competitive Strategy

Toyota relied on having a very strong

relationship with its suppliers to achievegreater efficiency

Just In Time (JIT) system of inventorymanagement, which was pioneered by Toyota,the company has greatly improved its positioninside of the Marketplace.

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Barriers to Entry new entrants is very low

Buyer Bargaining Power Bargaining power of the buyers is

moderately highSupplier Bargaining

PowerBargaining power of suppliers is

very low

Threat of Substitutes Threat of substitute products ishigh (switch to other brand)

Intensity of rivalry The competitors is very strong isthis industry

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Toyotas market structure is Oligopoly

The criteria:

Industry dominance by few large firms

Products sold by these firms are either differentiated oridentical in nature

Barriers to entry exist.

Buyers and sellers have perfect information

Firm engage in price competition and react optimally toprices charged by competitors.

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Issuesin

Toyota

ProductRecall

RestructuringToyotas

Management

PricingDecisions

Quality Issues

Lack of Supply

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PRODUCT RECALLS

In 2005 the company had to recall 880,00 sports utility vehicles andpick up trucks due to faulty front suspension systems.In 8 million the number of Toyota cars now pulled in for repairworldwide since November 2009

Reputation decrease

Tarnish Toyotas reputation as being reliable vehicle. Themajority of affected vehicles were sold in the US, while the rest weresold in Japan, Europe and Australia

Lost confidence

Reinstating legitimacy of Toyota in buyers, buyers have lostfaith

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A product recall is a request to return to the maker abatch or an entire production run of a product, usuallydue to the discovery of safety issues.

The recall is an effort to limit liability for corporatenegligence (which can cause costly legal penalties) andto improve or avoid damage to publicity.

Recalls are costly to a company because they oftenentail replacing the recalled product or paying fordamage caused by use, although possibly less costlythan consequential costs caused by damage to brand

name and reduced trust in the manufacturer.

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Currently, eight Toyota models have been recalled to fixthe sticky accelerator issue. No models from Scion,Toyota's low-cost brand, or Lexus, Toyota's luxury brand,have been affected. The recalled models are:

2009-2010 RAV42009-2010 Corolla2009-2010 Matrix2005-2010 AvalonCertain 2007-2010 Camrys

2010 Highlander2007-2010 Tundra2008-2010 Sequoia

Within 5 years Ford recalled about 14.3 million vehicles

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Sep 26, 2007 US: 55,000 Camry and ES 350 cars in "all-weather"floor mat recall.

Nov 02, 2009 US: 3.8 million Toyota and Lexus vehicles again recalleddue to floor mat problem

Nov 26, 2009 US: floor mat recall amended to include brake overrideand increased to 4.2 million vehicles

Jan 21, 2010 US: 2.3 million Toyota vehicles recalled due to faulty

accelerator pedals

Jan 27, 2010 US: 1.1 million Toyotas added to amended floor mat recall

Jan 29, 2010 Europe, China: 1.8 million Toyotas added to faulty

accelerator pedal recall

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Feb 08, 2010 Worldwide: 436,000 hybrid vehicles in brake recallfollowing 200 reports of Prius brake glitches.[

Feb 08, 2010 US: 7,300 MY 2010 Camry vehicles recalled over potentialbrake tube problems

Feb 12, 2010 US: 8,000 MY 2010 4WD Tacoma pick-up trucks recalledover concerns about possible defective front drive shafts

Apr 16, 2010 US: 600,000 MY 19982010 Sienna minivans for possiblecorrosion of spare tire carrier cable

Apr 19, 2010 World: 21,000 MY 2010 Toyota Land Cruiser Prado and13,000 Lexus GX 460 SUV's recalled to reprogram thestability control system

Apr 28, 2010 US: 50,000 MY 2003 Toyota Sequoia recalled toreprogram the stability control system

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May 21, 2010 Japan: 4,509, US: 7,000 MY 2010 LS for steering

system software update

July 5, 2010 World: 270,000 Crown and Lexus models for valvesprings with potential production issue

July 29, 2010 US: 412,000 Avalons and LX 470s for replacement ofsteering column components.

August 28, 2010 US & Canada: approximately 1.13 million Corolla andCorolla Matrix vehicles produced between 2005 and2008 for Engine Control Modules (ECM) that may have

been improperly manufactured

February 22, 2011 February 22, 2011 US: Toyota recalls an additional2.17 million vehicles for gas pedals that becometrapped on floor hardware

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brake problems

on the hybrid car

PRODUCTRECALLS

prospect ofbillions ofdollars incharges andoperating losses

QUALITYISSUES Toyotas short

tenure acomplete failure

PROFITLOSS

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YESbecause, itexemplifiestheresponsibleparty for the

communityworldwide

Saving theindustry andthemselves frommore losses-due to legalsuits and acts

Put safety andreliability overrevenues and profits-gain confidencethrough trust is builtby trustworthy

behaviors, not bywords, and they havedemonstrated by theiraction that they canbe trusted

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Owners, potential re-purchasers, and prospective buyers,

reinstall faith

Resolution of the problems to the satisfaction of U.S. andJapanese investigators

Ensure no further difficulties on the road for the affected orother models

Extended warranties to reassure current owners

Internal activities that offer assurance that Toyota trulyunderstands why the problems occurred, reveals them

publicly, and is undertaking actions to prevent any

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The best decision Toyota should not increase their price, itbecause the firm involve in oligopoly in order word if a leader likeToyota firm increase its prices other firm or their competitor in

this industry were not follow because the fear of losing thecustomer.

But if firms reduce its prices, other firm will follow because

another firm will offer lower price but same technology or used ofthe product.

Therefore from this theory Toyota should not increase price of car,it will lead their customer to choose another substitute with sametechnology the car. Thus, it will lead to decline the revenue of the

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Toyota (Thailand production) has barriers toexport many cars to Malaysia due to highImport Duty, ExciseDuty and Sales Tax imposed by MalaysiaGovernment even though there is a highdemand

This is done to protect Malaysia automobile

industry

This cause Toyota car price to increase andreduce demand in Malaysia market

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CBU Rate since 2006

ASEAN - CEPT

JENIS/KAPASITI ENJIN

DI DE CJ

2000-

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(5% +90% + 10% ) x Harga CIF Kereta(RM72,380.00)

(RM3,619.00 + RM65,142.00 + RM7,238.00) = RM78,378.30

This import car tax prices will be added back tothe CIF price of the car

RM 78,378.30 + RM72,380.00 =

Toyota Estima 2.4 RM72,380.00

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Price not including price/gains to be be

set by the major distributors

Price not including

salesmen profit prices

Price not including insurance and road

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AFTA implementation 2015 will reduceImport Duty, Excise Duty and Sales Tax

Reduction in Import Duty, ExciseDuty and Sales Tax will reduce the carprice and this will increase demand in

Malaysia market

Toyota should increase production by 2015

to capture the increase demand due to

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During the Tsunami crisis, Toyota announced that overtimeand the yearly bonus would be cut for all employees, andwithin a few months, paid overtime was also eliminated.

Toyota faces a large enough drop in unit sales and revenue

that it will be forced to fire a substantial number of its factoryand white collar staff. The firm currently employees 320,000people.

During restructuring, Toyota companies will first let go of lower-skilled part-time employees and workers while holding on tosalaried, higher-skilled employees to maintain their corecompetencies.

The extreme nature of economic stress forced the company torely on social mechanisms to induce older employees to leave

the company.

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Regarding the transaction cost concept in the economicwhat the Toyota do in term of restructuring the firm isreasonable.

Transaction costs were referring to the costs associatedwith acquiring an input that is in excess of the amount paidto the input suppliers. In order word Toyota will lead tominimize the cost and maximum the profit the firm and it willcover all the debt facing by Toyota.

Moreover Toyota was being able to rely on policies used inliberal market economies, such as severance packages, toinduce employees to leave the company. The pay-by-

performance policy also became a contentious issue.

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Toyota Motor Corp would "trim production" at itsjapans vehicle assembly factories, due shortage

of Thai-made parts as floods in that countrydisrupted supply;

Toyota it would cancel overtime at its four

directly owned vehicle plants in Japan whileother subsidiaries and affiliates would alsoreduce vehicle assembly.

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Toyota had ramping up production at home sincelast month to make up lost due to 11 Mac

earthquake and tsunami that struck northeastJapan and also disrupted the supply with thesupply of about 100 parts affected in Thailand.Toyota has said it would also pull back

production in Indonesia, Vietnam, andPhilippines.

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Refer with the case of Toyota want to trim the productionitself. It is deserve it for their firm it because one of theappropriate ways implement in theory of economic insupply and demand market.

The theory market supply and demand state, using supplyand demand framework also can predict how changes inone or more supply shifter will affect the equilibriumquantity and price of production good and services. In order

word there several factor will lead to the shifter of supplycurves. The several factor which are input price, technologyor government regulation, number of firm, substitutes inproduction, taxes, and producer expectations.

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However when refer the Toyota wants to trim theirproduction it refer to the factor where the producerexpectation whereby due shortage of Thai-madeparts as floods in that country disrupted supply,Toyota estimated an output loss of about 6000vehicles in Japan. Therefore Toyota will reduce theirquantity of supply by using cancel overtime at its fourdirectly owned vehicle plants in Japan while othersubsidiaries and affiliates would also reduce vehicleassembly thus, there will less produce of productionof car. As result it will lead to minimize the costduring the crisis.

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Supply chain monitoring to be important

Toyota Motor Corp should pay attention to thewelfare of workers toward high motivation of works

Appropriate decision making

Producer expectation must be accurate to minimizethe uncertainty condition or risk.

Build more subsidiary company of Toyota in order todiversify the uncertainty risk

Establish an Intelligence Department/Team to tacklethe recall issue recall involving recurrence problem

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LESSONLEARNT

created a great opportunity forToyota to re-look into their oldquality systems and improveon their products.

New strategies are evolved: withenhanced research &development and step-up ofquality control

introduce a better product and withproper corporate governance

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build on its

reputation andslowly regain itscustomers'confidence thrcontinuousimprovement ofits products andwell conversedcommunication.

a hardlearningexperience

for Toyota, ithad alsocreatedopportunityfor othercompanies

injects areminder orlesson toToyotacompetitors orany other

businesses, torecognize theimpact thathow will apoorlymanaged crisisimpact abusinessoperation

manypreventativemeasurescan be step-up to preventan issueevolving to acrisis.

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