Toyota: Analysis of Vision Statement, Corporate Level Strategies & SWOT

1 | P a g e

Report on Corporate Level Strategies of ‘Toyota’

Group No. 6: SYBBA B

Mihir Mandrekar B030

Surbhi Mehta B032 Abhilasha Mohan Ram B034

Rohan S. Negi B035 Dhaval Pasad B037

2 | P a g e

Table Of Content

Sr No.

Topic

Name

Page No.

1

Introduction:

Vision & Mission analysis

Surbhi Mehta

B032

3

2

Strategy:

Diversification

Abhilasha Mohan

Ram B034

7

3

Strategy:

Combination

Rohan Negi

B035

10

4

Strategy:

Integration

Dhawal Pasad

B037

15

5

SWOT Analysis

Mihir Mandrekar

B030

19

6

Conclusion

25

3 | P a g e

INTRODUCTION The Toyota Group (トヨタグループ Toyota Gurūp) is a conglomerate company that

work together and mostly share the Toyota brand. Toyota Motor Corporation abbreviated TMC, is a Japanese multinational automaker headquartered in Toyota, Aichi, Japan. It is the third-largest automobile manufacturer in 2011 by production behind General Motors and Volkswagen Group and the eleventh-largest company in the world by revenue. In July 2012, the company reported it had manufactured its 200-millionth vehicle.

The company was founded by Kiichiro Toyoda in 1937 as a spinoff from his father's company Toyota Industries to create automobiles. Toyota Motor Corporation group companies are Toyota (including the Scion brand), Lexus, Daihatsu, and Hino Motors, along with several "nonautomotive" companies. TMC is part of the Toyota Group, one of the largest conglomerates in the world.

The primary companies in the group are Toyota Industries Corporation and Toyota Moto Corporation. It is also considered by many to be a keiretsu, although it does not contain a major bank.

A keiretsu (system, series, grouping of enterprises, order of succession) is a set of companies with interlocking business relationships and shareholdings. It is a type of informal business group.

The member companies own small portions of the shares in each other's companies, centered on a core bank; this system helps insulate each company from stock market fluctuations and takeover attempts, thus enabling long-term planning in innovative projects. It is a key element of the automotive industry in Japan.

Majority-owned subsidiaries

• Toyota Industries Corporation (founded in 1926) • JTEKT Corporation (1935) • Toyota Motor Corporation (1937) • Toyota Auto Body, Co. Ltd. (1940) • Kanto Auto Works, Ltd. (1945) • Toyota Tsusho Corporation (1946) • Toyoda Gosei Co., Ltd. (1949) • Denso Corporation (1949) • Towa Real Estate Co., Ltd. (1953) • Toyota Central R&D Labs., Inc. (1960) • Toyota Communication Systems Co., Ltd. (2001) • Toyota Financial Services Corporation (2000) • Daihatsu Motor Co (1907; Toyota owns 51% of the company since 1999.) • Hino Motors (diesel trucks and buses. Toyota owns 50.5% of the company since 2001.) • Toyofuji Shipping Co. (Shipping company for Toyota vehicles overseas)

4 | P a g e

Analysis of Vision & Mission Statement

By: Surbhi Mehta B-032

VISION

A vision statement for a company or organization focuses on the potential inherent in the company's future, or what they intend to be. It contains references to how the company intends to make that future into a reality, the vision statement is simply a description of the “what,” meaning, what the company intends to become.

TOYOTA’S GLOBAL VISION

“Toyota will lead the way to future of mobility, enriching lives around the world with the safest and the most responsible ways of moving people.

Through our commitment to quality, and respect to the planet, we aim to exceed expectations and be rewarded with a smile.

We will meet our challenging goals by engaging the talents and passion of people, who believe there is always a better way.”

Future of Mobility Commitment to Quality

Enriching lives around the World Constant Innovation

5 | P a g e

The Statement gives voice to who they are as a global enterprise, the values they embody, an the good that they are striving to accomplish. Designed to inspire all Team Members to even greater things, the Statement emphasizes Toyota's commitment to quality, innovation and respect for the planet. At its heart is this signature statement: We aim to exceed expectations and be rewarded with a smile.

One aspect of the vision is “respect to the planet”

The process for developing an Environment Action Process begins with the parent company in Japan, Toyota Motor Corporation (TMC). Every five years, TMC develops a global five-year environmental action plan (EAP).

Eg The ingenuity and persistence of team members at their Cambridge, Ontario plant, have found a way to reduce annual water consumption of water by more than 13.2 million gallons (50,000 cubic meters).

This has made their plant in Princeton, Indiana, honor as one of only two North American recipients of the Water Champion award.

6 | P a g e

MISSION

A mission statement is a statement of the purpose of a company, organization or person, its reason for existing.

The mission statement should guide the actions of the organization, spell out its overall goal, provide a path, and guide decision-making. It provides "the framework or context within which the company's strategies are formulated."

TOYOTA’S MISSION “To provide safe & sound journey. Toyota is developing various new technologies from the perspective of energy saving and diversifying energy sources. Environment has been first and most important issue in priorities of Toyota and working toward creating a prosperous society and clean world.”

The mission statement of Toyota Indus Motors Company Ltd, defines the organization's purpose and primary objectives. Its prime function is “to provide a safe and sound journey.”

It provides a reason for being, which is one of the most important aspect of a mission statement. The mission statement is clear and concise and provides focus and a sense of direction.

Toyota’s focus as mentioned in the mission statement is to develop new technologies and to conserve energy. They also seek to be environment friendly.

7 | P a g e

Strategy: Unrelated Diversification (Creation of ‘Toyota Motors’ from ‘Toyota Industries’)

By: Abhilasha Mohan Ram B-034

Background

In 1933, Toyoda Automatic Loom Works, Ltd created a new division devoted to the production of automobiles under the direction of the founder's son, Kiichiro Toyoda.

Toyoda Automatic Loom Works, Ltd was encouraged to develop automobile production by the Japanese government, which needed domestic vehicle production partly due to the worldwide money shortage and partly due to the war with China

Toyota Motor Co. was established as an independent and separate company in 1937. The company was eventually founded by Kiichiro Toyoda in 1937 as a spinoff from his

father's company Toyota Industries to create automobiles. Toyota currently owns and operates Lexus and Scion brands and has a majority

shareholding stake in Daihatsu Motors, and minority shareholdings in Fuji Heavy Industries Isuzu Motors, and Yamaha Motors.

Toyota Industries has promoted diversification and expanded the scope of its business domains to include textile machinery, automobiles (vehicles, engines, car air-conditioning compressors, etc.), and materials handling equipment, electronics, and logistics solutions.

The company includes 522 subsidiaries. In 1983, Toyota Financial Services became a new subsidiary of Toyota Motor

Corporation in Japan. The Toyota Financial Services brand identity was officially launched in December 1999.

TFS is a service mark that acts as an umbrella brand name used to market the products of Toyota Motor Credit Corporation (TMCC) and Toyota Motor Insurance Services, Inc. (TMIS). TMCC was incorporated in California on October 4, 1982, and commenced operations in May 1983 by approving a finance contract for a used Toyota Corolla in Denver, Colorado.

TFS provides retail and wholesale financing, retail leasing, vehicle protection plans and certain other financial services to authorized Toyota, Lexus and Scion dealers, Toyota forklift and Hino dealers as well as Toyota Material Handling, U.S.A. dealers, affiliates, and their customers in the United States.

http://www.toyotafinancial.com, http://www.toyota.com

8 | P a g e

Analysis

Toyota Industries: Sales by Business Segment (FY 2012, Consolidated Basis)

• "FY 2012" refers to the fiscal year ended March 31, 2012, and other fiscal years are referred to in a corresponding manner.

http://www.toyota-industries.com/corporateinfo/corpdata/

1. Why is it unrelated diversification?

At the time of establishment of Toyota Motor Company, present day ‘Toyota Industries’ was in the business of making handlooms.

This can be seen as a ‘Conglomerate Diversification’ as Toyota expanded its scope from Handloom Industry to Automobile Industry.

2. Reason behind Diversification Sakichi Toyoda, a prolific inventor, created the Toyoda Automatic Loom

Company based on his groundbreaking designs, one of which was licensed to a British concern for 1 million yen.

This money was used to help found Toyota Motor Company, which was supported by the Japanese government partly because of the military applications.

The Japanese relied on foreign trucks in the war in Manchuria, but with the Depression, money was scarce. Domestic production would reduce costs, provide jobs, and make the country more independent.

By 1936, just after the first successful Toyoda vehicles were produced, Japan demanded that any automakers selling in the country needed to have a majority of stockholders from Japan, along with all officers, and stopped nearly all imports.

Source: http://www.toyoland.com/history.html

9 | P a g e

3. Benefits from Diversification Less Competition: The Japanese government passed a law forcing the market

leaders, General Motors and Ford, to leave Japan. Also, failure of the Government to encourage the large Japanese conglomerates (zaibatsu) to enter the industry, made the government provide incentives for Toyota to do so, making it the only licensed car manufacturer alongside Nissan in 1930s.

Portfolio Diversification: Toyota would be making vehicles alongside handlooms, which would help them broaden their scope & grow as a Group. As of today Toyota is the largest producers of carmakers, having dethroned General Motors again!

The Japanese company sold 9.7 million cars and trucks worldwide in 2012, although it's still counting. GM sold 9.29 million.

Toyota Motors ranked No.8 in the Fortune 500 list in the year 2011. Toyota Financial Services has constructed a global network that covers

approximately 90% of the markets in which Toyota sells its vehicles. Mainly concentrated on auto loans, leases and Toyota dealer floor plan requirements, TFS provides auto sales financing to approximately 5.4 million customers. Thus effectively helping in making their own cars more affordable to their potential consumers all around the world. Again being a strategy that helps them a stronger competitor in the market.

10 | P a g e

Strategy: Sequential Combination- New United Motor Manufacturing, Inc. (NUMMI) (Between ‘Toyota’ & ‘General Motors’)

1. Joint Venture (Cooperation) 2. Divestment (Retrenchment)

Rohan Negi B-035

Background Toyota’s initial attempt to export compact cars to the U.S. in 1958 had failed because of

poor Quality and styling. After redesigning their automobiles and improving quality, they made a Second, and successful, entry into the American market.

The oil crises of 1973 and 1978-79 greatly increased U.S. demand for compact and sub-compact cars as gasoline shortages and sharp price increases occurred. Toyota and several other Japanese manufacturers were well positioned to supply this growing market with their high quality, fuel-efficient vehicles.

The U.S. companies were not able to produce, in the United States, small cars at as low a price or as high in quality as those made in Japan. Thus, at the time of the oil crises, American manufacturers were not in a position to compete effectively in the small car market.

When the American industry’s marketing and manufacturing efforts failed to recapture the sub-compact market from the Japanese, the Reagan Administration convinced the Japanese government to impose a limit on its exports --- a Voluntary Restraint Agreement (VRA) --- in 1981.

The Japanese manufacturers still desired to increase market share in the U.S. beyond what the VRA would permit. Honda thus started manufacturing automobiles in a plant in Marysville, Ohio in 1982 and Nissan began production in Smyrna, Tennessee in 1983.

Toyota preferred to manufacture only in Japan and export their cars to world markets. With the VRA, and Honda and Nissan now producing cars in the U.S., Toyota felt that it also had to establish manufacturing facilities there.

11 | P a g e

Analysis 1. How did the ‘Joint Venture’ begin?

NUMMI was established at the site of a former General Motors Fremont Assembly site that had been closed two years earlier in 1982 (GM plant since 1960).

GM and Toyota reopened the factory as a joint venture in 1984 to manufacture vehicles to be sold under both brands.

Roger Smith’s GM provided the land and buildings as its contribution to NUMMI and Toyota pumped in at least $100M cash money, along with manufacturing know-how.

Toyota held 50% of the company and GM the rest, with management largely from Toyota.

2. Reason for JV? The idea of reopening the plant emerged out of the need that GM had to build high-

quality and profitable small cars and the need Toyota had to start building cars in the United States, a requirement due to the possibility of import restrictions by the U.S. Congress.

A joint venture was viewed as an approach that would lower the risk while providing help in overcoming difficult potential problems.

Toyota stated that it wanted to: i. Gain experience with American unionized labor

ii. Gain experience with American suppliers – Toyota grew up with its own semi-captive set of keiretsu suppliers. Working with new suppliers was always a serious matter for Toyota.

iii. Help diffuse the trade issue between the United States and Japan.

NUMMI would act as an opportunity for General Motors to learn Toyota’s i. Lean manufacturing- It is a production practice that considers the

expenditure of resources for any goal other than the creation of value for the end customer to be wasteful, and thus a target for elimination.

ii. Toyota production system- comprises its management philosophy and practices. The TPS organizes manufacturing and logistics for the automobile manufacturer, including interaction with suppliers and customers.

iii. To obtain high quality vehicles for its ‘Chevrolet’ division. iv. GM hoped to apply what it learned from NUMMI to its other plants.

On the other hand, Toyota was already trailing Honda Motor Co. Ltd & Nissan

Motor Co., which was by then building cars in the US. Also, GM had previously tried to compete with Japanese competition in compact

car manufacturing but met with a failure.

12 | P a g e

3. Approach Taken: In the original division of responsibilities for the joint venture, Toyota was to be

responsible for manufacturing while General Motors was to market all of the output. The only car to be produced was the Chevrolet Nova.

Key factors in Toyota’s approaches, however, were:

i. Developing cooperative management-labor relations; ii. Careful selection and extensive training of workers;

iii. Stressing teamwork and responsibility of the individual to the work group; iv. Putting safety and quality first, assigning the responsibility for safety and

quality to each worker, and giving them the authority to assure it.

4. Results The NUMMI plant facility quickly became 40% more productive than the average

American car manufacturing facility. Researchers at MIT estimated in 1988 that productivity at the NUMMI plant

exceeded that of all American-owned U.S. automobile plants, except Ford’s Taurus facility with which it was approximately equal.

The cars produced have won numerous awards.

5. Divestment( End of the Joint Venture):

On June 29, 2009, General Motors announced that they would discontinue the joint venture with Toyota leaving Toyota to single-handedly continue operations at the plant.

Initially, Toyota offered GM a version of their hybrid car, Prius, to be sold under GM’s label but an agreement could not be reached.

On July 10, 2009, General Motors emerged from government backed Chapter 11 reorganization after an initial filing on June 8, 2009. Two brands, Hummer and Saab were sold, and two, Pontiac and Saturn were closed.

GM later filed for bankruptcy. On August 27, 2009, Toyota announced that it would discontinue its production

contract with NUMMI. Toyota chose to do so as it already had excess production capacity from other plants.

Production by NUMMI currently accounts for about 20 percent of Toyota’s overall car output in North America

The NUMMI plant ceased operations on April 1, 2010 ending the Toyota-GM joint venture. California's last automobile manufacturing plant saw its last car, a Corolla, roll off the assembly line

13 | P a g e

6. Benefits from Joint Venture? Toyota Starts Car Production in USA.

Establishment of NUMMI an important global step for Toyota.

At NUMMI’s 20th Anniversary On February 12, 2004, Fujio Cho, President of Toyota Motor Corporation, commented that “NUMMI was Toyota’s initiation in North American Production. We are very proud to build quality products with GM. Without their partnership 20years ago, Toyota would not be where it is today.”

At NUMMI, Toyota learned that it could work effectively with American unionized labor.

The experience of Toyota at NUMMI has helped the company in realizing its primary objective. It successfully applied what it learned in the joint venture, and its increased confidence in its ability to successfully manufacture in other countries, in new wholly-owned factories in the U.S., Canada, Europe, and elsewhere. It has increased its U.S. (and world) market share greatly over the past 20 years and ranks no.1 in the worldwide car manufacturer list today.

Toyota’s share of the American market has been increasing steadily since it began manufacturing in the U.S. From 1993 to 2002, its share of the passenger market increased from 7.4 to 12.8 percent, and its share of the sports/utility market increased from 4.1 to 9.2 percent. The company now makes over 80 percent of its profits from the U.S. market.

It has made some adjustments to the approaches it used in Fremont while keeping others the same:

i. Its next factory was established as a wholly-owned subsidiary, and located it Georgetown, Kentucky where it could hire a non-union workforce.

ii. Having found that it could achieve high productivity and quality with a moderate level of automation, it decided that it could do even better by investing in a higher level of automation for its new plant.

iii. Its favorable experience in Fremont has been followed with the implementation of similar policies in selection, training, sharing of information, and the use of the team approach in Georgetown. Toyota made the greatest possible use of the experiences gained by the executives and managers initially assigned to NUMMI.

iv. Most of them were transferred as a group to the Georgetown factory. The personnel manager was later transferred from Kentucky back to Japan, where he was eventually put in charge of worldwide personnel relations for Toyota.

v. The company did learn to work effectively with American suppliers or, to put it another way, American suppliers learned to work with Toyota.

14 | P a g e

7. Pitfalls

NUMMI has only turned a profit in one year, 1992. But, Bloomberg fails to mention that the internal transfer pricing games are routinely played by large companies in order to recognize profits only in the most tax advantaged jurisdictions. So, outside of the bean counters at Toyota and GM, nobody really knows the profitability of NUMMI.

Its United Auto Workers contract guaranteed workers $28 an hour compared with $24 an hour in other Toyota plants.

Higher electric rates in California one of the factors leading to an increase in costs. Throw in shipping costs to get parts from the Midwest and to send finished Toyota

Tacoma pickups and Corolla compacts across the U.S It was one of the Japanese giant’s most expensive factories, if not the most

expensive

References:

http://userwww.sfsu.edu/ibec/papers/9.pdf

http://www.lean.org/shook/displayobject.cfm?o=1133

http://www.thetruthaboutcars.com/2009/07/nummi-not-so-nice-for-toyota/

http://www.businessweek.com/autos/autobeat/archives/2009/08/nummi_to_close.html

http://www.japantimes.co.jp/news/2009/07/12/business/toyota-mulling-liquidation-of-fremont-nummi-venture/#.UTxJaDe_T3M

15 | P a g e

Strategy: Integration (Backward Vertical Integration)

(Toyota Motor Co. Establishes Toyoda Gosei Co.)

By: Dhawal Pasad B-037

OVERVIEW

I. Toyoda Gosei engages in Research, development, manufacture and sales of: Parts for automobiles, conveyors, ships and various other transportation equipment; rubber, plastic and urethane component

II. Corporate Timeline: 1. 1949

Toyota Motor Industry Co., Ltd. incorporates rubber research operations as Nagoya Rubber Co., Ltd.

2. 1973 Changes name to Toyoda Gosei Co., Ltd.

3. 1990-1991

Establishes Meigi Logistics Center (logistics sector) Establishes Toyoda Gosei Kyushu Co., Ltd. in Takeo, Saga Prefecture (rubber and plastic sector)

Establishes TG Technical Center (U.S.A.) Corporation in Michigan (now TG North America Corporation) (design and technological development)

4. 1994 Establishes TG Pongpara Co., Ltd. in Chonburi, Thailand (plastic and urethane sector)

5. 1997

Establishes TG Kentucky Corporation (rubber and plastic sector) Puts acoustic material using recycled PET fiber into practical use Develops new recycling technology for rubber Earns ISO 9001 certification for major products in Bisai, Inazawa, Heiwacho, and

Moricho Plants Begins manufacturing and marketing green LEDs

6. 1998-1999

Increases equity holding in TG Pongpara and changes company's name to Toyoda Gosei (Thailand) Co., Ltd.

Begins manufacturing and marketing New LEDs, "TG Blue" and "TG Green" Earns ISO 14001 certification for Heiwacho Plant Establishes TG Kirloskar Automotive Ltd. Earns ISO 14001 certification for environmental management.

16 | P a g e

ESTABLISHMENTS BETWEEN 2000-2010 Establishes Daicel Safety Systems America, LLC Establishes Toyoda Gosei Rubber (Thailand) Co., Ltd. Absorbs Toyoda Gosei Kyusyu Co., Ltd. Establishes Toyoda Gosei India Pvt. Ltd. Develops rear-end impact airbag Develops rear seat center airbag Opens Miwa Technical Center Establishes TE Opto Corporation.

7. Shareholders Information

Major shareholders (ten from the top)

Shareholder's name Number of shares held (thousand shares)

Holding ratio (%)

Toyota Motor Corporation 55,459 42.65

The Master Trust Bank of Japan ,Ltd.(Trust) 7,752 5.96

Japan Trustee Services Bank,Ltd.(Trust) 6,158 4.73

Sumitomo Mitsui Banking Corporation 5,049 3.88

Japan Trustee Services Bank,Ltd.(Trust 9) 2,291 1.76

Nippon Life Insurance Company 1,714 1.31

SSBT OD05 OMNIBUS ACCOUNT - TREATY CLIENTS

1,501 1.15

The Dai-ichi Life Insurance Company, Limited

1,493 1.14

Mitsui Sumitomo Insurance Company, Limited

1,162 0.89

Toyoda Gosei Co., Ltd. Employee Stock Ownership Plan

1,044 0.80

17 | P a g e

ANALYSIS

1. How did the Integration begin? Toyota Motors was established in 1937 & within 10 years of inception was a big

player in the Japanese market. Despite this, production wasn’t high as the country was recuperating from the losses

of World War II & also because of the lack of availability of suppliers supplying good quality parts & the expensive nature of products due to material shortages.

Toyota Motors Co. Ltd felt the need to expand the scope of its business, to bring down the cost of production.

This led to the establishment of Toyoda Gosei Co. Ltd, which would supply Toyota Motors with various car parts.

This can be seen as a move back in value chain as Toyota, which initially manufactured cars, will now be making parts for its car rather than relying on outsiders.

This can be seen as backward integration as with establishment of this industry, they got closer to raw materials that are rubber and plastic parts.

2. Reason behind adopting this strategy? As per Toyota Global Vision, “Through our commitment to quality, constant

innovation and respect for planet, we aim to exceed expectations and be rewarded with a smile.”

To achieve this vision they came up with Toyoda Gosei co., Ltd to bring quality to their automobiles by providing raw materials to Toyota Motors.

They have been constantly bringing innovations in their operations as they started in rubber sector have expanded and have a much diversified portfolio.

3. Benefits from this strategy:

Toyota Motors became the major stakeholder in company with 42.65% holding ratio.

Toyoda Gosei Group is a global system supplier of automotive components and LEDs with an extensive network. As a pioneer in the fields of polymer technologies and optical semiconductors, they strive to become a true global system supplier to bring happiness to customers all over the world.

Toyoda Gosei uses automation more wisely than its competitors. Automation for them drives design of their processes.

At Toyoda Gosei, they look at a process that they know how to do very well, and think of how to make that process better.

18 | P a g e

Today, they have diversified themselves by providing various products and technology :

Interiors and Exterior parts {Automobile parts}

Automotive Sealing Products {Luggage and Door Weather ship}

Functional Parts {Fuel Train Modules and Power train parts}

Safety System Products {Air Bag and Steering Wheels}

Optoelectronic Products {LED products and applications}

General Industry Products {Construction and Industrial Machinery Components}

Foundations Technology {Basic Research, Design, etc}

Recycle Technology {Development and Adoption of Recycling Technology}

Over past few years you can see that there is no major change in sales. They are slowly and constantly increasing their sales volumes thus by bringing up new innovations.

Years Net Sales (millions of Yen)

Net Income (millions of Yen)

2001 ¥292,883 ¥4,058 2002 ¥303,093 ¥4,058 2003 ¥344,842 ¥17,258 2004 ¥396,983 ¥12,679 2005 ¥435,539 ¥10,585 2006 ¥498,428 ¥10,787 2007 ¥593,454 ¥15,943 2008 ¥662,497 ¥30,802 2009 ¥546,380 ¥3,951 2010 ¥495,002 ¥14,255 2011 ¥516,982 ¥17,116 2012 ¥504,518 ¥8,971

19 | P a g e

SWOT ANALYSIS

By: Mihir Mandrekar B-030

SWOT is an acronym for the internal strengths and weaknesses of a firm and the environmental opportunities and threats facing that firm.

SWOT analysis can be done using a simple grid. It is a widely used technique through which managers create a quick overview of the

company’s strategic situation. The technique assumes that an effective strategy derives from a sound ‘fit’ between the company’s internal sources (strengths and weaknesses) and external environment (opportunities and threats).

The main aim of the technique is to maximize the strengths and opportunities and minimize the weaknesses and threats. Accurately applied, this simple technique can be used to derive successful strategies.

Example of SWOT analysis grid:

20 | P a g e

SWOT ANALYSIS OF TOYOTA

A. STRENGTHS:

i. New Investments: a. New investment by Toyota in factories in the US and China saw profits rise, against

the worldwide motor industry trend which was suffering heavy losses. Net profits rose 0.8% to 1.17 trillion yen ($11bn; £5.85bn), while sales were 7.3% higher at 18.55 trillion yen.

b. ANALYSIS :- The company had the right mix of products for the markets that it served. USA believes in ‘living life king size’ and is obsessed with bigger cars. Toyota primarily sold bigger cars like Fortuner and Qualis in the American

market and this was a great success. China on the other hand prefers fuel-efficient sedans. Toyota in China

marketed and sold cars like Prius, Corolla and Camry. This was possible because of much focused segmentation, targeting and

positioning of their products.

ii. Manufacturing:

a. In 2003 Toyota knocked its rivals Ford into third spot, to become the World's second largest carmaker with 6.78 million units. The company is still behind rivals General Motors with 8.59 million units in the same period.

b. ANALYSIS :- Its strong industry position is based upon a number of factors including a

diversified product range, highly targeted marketing and a commitment to lean manufacturing and quality.

21 | P a g e

The company maximizes profits through Total Quality Management or TQM which is an integrative set of principles and behavior adopted by Toyota’s management for continuously improving the quality of products and processes.

The company makes a large range of vehicles for both private customers and commercial organizations, from the small Yaris to large trucks. Therefore, if the demand in one sector decreases, the company always has other sectors as back up and the chances of a complete loss are low.

iii. Strong Brand Image : a. Toyota currently sells 70 models of cars under its namesake brand with Corolla

and Prius as flagship models. Toyota’s brand image is also associated with environment friendly cars as it is a leader in manufacturing of ‘green’ cars.

b. ANALYSIS :- Toyota increases brand awareness, sells more cars in order to increase the

existing brand image. Toyota through a series of surveys and studies of customer behavior

understood that customers are growing selective in terms of fuel efficiency and CO2 emissions.

The management quickly decided to invest in ‘green’ technology and Toyota became one of the first companies to manufacture environment friendly, hybrid and efficient cars like the Auris.

This greatly boosted their Brand image giving them competitive advantage over their competitors.

22 | P a g e

B. WEAKNESSES

i. Large scale Recalls : a) Toyota had quite a few large-scale vehicle recalls over the past few years. The

company recalled 9 million vehicles in 2009-2010 and 7.43 million cars in 2012. Such recalls does not only hurt the firm financially but significantly damages firm’s brand.

b) ANALYSIS:- Recalls have taken place mostly because of safety issues that have not

been met or because of certain defects in the cars produced. Toyota must ensure that the cars produced are faultless and of good

quality. An increase in recalls not only results in losses but also harms the brand

image of the company.

ii. Weak presence in emerging markets : a) Toyota markets most of its products in the US, Europe and in Japan. Therefore it

is exposed to fluctuating economic and political conditions those markets. Emerging economies as China or India make only a small percentage of all Toyota’s sales.

b) ANALYSIS:- The company in order to reduce this weakness has started to shift its

attention towards India and China, which is a good move. But, it must do more to increase its market share in these emerging economies in order to compete with General Motors which has a bigger market share especially in China.

Toyota must also look towards Africa. Many African nations like Tanzania, South Africa are experiencing high growth rates. Not many car manufacturing companies have ventured into the continent. Toyota should increase sales of cheaper, smaller cars in Africa. This will give them an advantage over GM in the global scenario.

23 | P a g e

C. OPPORTUNITIES

i. Hybrid and Eco friendly Technology : a) Lexus and Toyota now have a reputation for manufacturing environmentally

friendly vehicles. Lexus has RX 400h hybrid, and Toyota has it Prius. Both are based upon advance technologies developed by the organization. Toyota has also sold on its technology to other motor manufacturers, for example Ford has bought into the technology for its new Explorer SUV Hybrid.

b) ANALYSIS:- Increasing fuel prices have boosted the demand for more efficient cars.

Customers today are more aware of the harm air pollution by vehicles causes to the environment. Therefore, there is a big demand for environment friendly cars.

Since Toyota already has a first mover advantage in making hybrid eco friendly cars, it should capitalize on this opportunity and invest more on hybrid R&D and produce more environment friendly cars.

This will result in huge profits and increase Toyota’s market share.

ii. New Customer Segments : a) Toyota is to target the 'urban youth' market. The company has launched its new

Aygo, which is targeted at the streetwise youth market. The vehicle is a unique convertible with inbuilt sub woofers.

b) ANALYSIS :- The youth of today have become more independent and wealthy. This has

created a big market for cars. Therefore Toyota is trying to capitalize on this opportunity by introducing the new Aygo for the youth. It attempts to capture the DJ culture and the nature of dance to market this car.

Even though the profits earned through the new Aygo are not big, it has helped Toyota increase its market segment, which is crucial for expansion. Moreover, this segment may prove to be highly profitable in the future.

iii. Global Expansion :

a) Toyota is expanding its market share and operations in emerging economies like India and China. Toyota’s emerging market sales ratio reached 45% in 2011, an increase of 10% in the three years since we achieved 35% in 2008. The Toyota Global Vision calls for an emerging-market sales ratio of 50% by 2015.

b) ANALYSIS :- Emerging economies have a huge demand for cars. Toyota must make

sure it increases its market share in the developing economies in order to survive and compete in the global scenario.

By increasing localization and strengthening the supply chain system, Toyota is slowly expanding into emerging markets.

24 | P a g e

D. THREATS:

i. Competition : a) Toyota faces tremendous competitive rivalry in the car market. Competition is

increasing almost daily, with new entrants coming into the market from China, South Korea and new plants in Eastern Europe. Volkswagen group is strongly growing and GM steps up after its reorganization to become more competitive than ever.

b) ANALYSIS :- There is nothing much that can be done to curb the rising competition.

But, competition can be fought by introducing new products, slashing prices, increasing market segments and innovation.

Toyota has introduced the Yaris which is a very cheap car and has also sliced the costs of older versions of Corolla. The Aygo and Prius are examples of innovative products by Toyota.

ii. Shifts in exchange rates : a) Most of Toyota’s revenue and raw material come from foreign countries. The

profits earned abroad must be sent back to Japan and converted to yen. Appreciating yen exchange rate against other currencies means lower profits for Toyota.

b) ANALYSIS :- This is a threat, which is very difficult to minimize. Toyota will have to

wait till the Yen depreciates but, this will result in delayed payments and increased debts which is bad for the company.

Another solution could be setting up new bases in other countries so that they can enjoy their profits through the exchange rate of that country.

25 | P a g e

Conclusion

Toyota Industries has promoted diversification through continuous innovation all through its life and expanded the scope of its business domains to include textile machinery, automobiles (vehicles, engines, car air-conditioning compressors, etc.), and materials handling equipment, electronics, and logistics solutions.

All these Expansion Strategies adopted by Toyota has resulted in making Toyota one of the largest Conglomerates.

Toyota Motors in itself has 522 Subsidiaries some of which are individually present in Forbes Fortune 500 list

Today Toyota is the largest carmaker in the world leading General motors and the top selling automaker. The Japanese company has sold 9.7million cars and trucks in 2012 leaving GM in second place with 9.29million cars.

The backbone of their success being their sharp, well thought out and excellently implemented strategies. It yielded excellent result over the years it brought them to the No. 1 position and if maintained, there is no doubt about the fact that they’ll maintain their position for years to come.