Toyota - Swot Analysis 681t4t

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INTRODUCTION 1.1

Company Background

Toyota Motor Corporation (トヨタ自動車株式会社 ) is a Japanese automotive manufacturer which headquartered in Toyota, Aichi, Japan. The company was founded by Kiichiro Toyoda in August 28, 1937 as a spinoff from his father’s company Toyota Industries to create automobiles. In 2014, the multinational corporation consisted of 30,038,875 employees worldwide. Toyota was the largest automobile manufacturer in 2012 (by production) ahead of the Volkswagen Group and General Motors. Toyota is the first automobile manufacturer to produce more than 10 million vehicles per year around the world. In 2014, Toyota was the largest listed company in Japan by market capitalization and revenue since it worth more than twice as much as SoftBank in Japan (Ng, 2015). 1.2

Development of the Business Toyota was founded in August 28, 1937 as a spinoff by the son, Kiichiro Toyoda

from his father, Sakichi Toyoda’s company Toyota Industries to create automobiles. Sakichi Toyoda had completed the non-stop shuttle change type Toyoda automatic loom (Type-G) in years 1924-1929 (as shown in Figure 1, Appendix 1). In year 1940-1949, many vehicles are produced such as BM truck, SB small truck, and SA compact enger car (as shown in Figure 2, 3, & 4, Appendix 1 & 2). They are started to produce domestically. In 1950, there is an issue regarding financial crisis or labor dispute or voluntary retirement. Thus, Toyota Motor Sales Co., Ltd. and Minsei Spinning Co., Ltd. (currently Toyoda Boshoku Corporation) are established. They begin a Creative Idea Suggestion System. After establishment of Towa Real Estate Co., Ltd., Corporate slogan 1|Page

“Good Thinking, Good Products” is established. The great achievement in these years was the first time in the centuries, Japanese enger car (Crown) was exported to the United States. In 1961, first model of Toyota Corolla (as shown in Figure 5, Appendix 3) dealership started to operate and Total Quality Control (TQC) is adopted throughout the company. Toyota signed for labor management t declaration in 1962. Quality business starts developed and Toyota had won award in Deming Prize (as shown in Figure 6, Appendix 3) for major advance in quality improvement. Then, Toyota ed business partnership with Hino Motors, Ltd, Higashifuji Proving Ground, and Daihatsu Motor Co., Ltd. Toyota managed to reach cumulative exports of 1 million units, as well as annual domestic sales with 1 million units. In 1970-1979, the business kept boosting and won the first Japan Quality Control Award. Toyota vehicles started producing worldwide in 1972. For this time frame, the cumulative export had increased as compared to previous years. They reached export cumulative of 5 million units in 1975. The cumulative total of export production keep inclined steadily to almost 10 million units. In the early 1980, Toyota started to run Toyota Vista dealership. There was occurrence of restructuring where Toyota Motor Co., Ltd. and Toyota Motor Sales Co., Ltd. was merged and formed Toyota Motor Corporation. Toyota also formed t venture with the New United Motor Manufacturing, Inc. (NUMMI) and managed to make 20 million units on cumulative export and produced up to 50 million Toyota vehicles in local in that year. Several developments like operation of Kasugai Housing Works and Toyota Memorial Hospital is seen. Toyota Motor Manufacturing had made the total annual domestic revenue up to 2 million units. The business developed by making duo dealership with Volkswagen and Audi cars open in early 1990. RAV4L and RAV4J are introduced and their overseas annual profits more than 1 million units. This time gains from overseas sales had reached to more than 3 million units. They started initiating in oversea of Toyota Financial Service Corporation in the early 19 century. Sichuan Toyota Motor Co., Ltd started to broad the manufacturing business in China. They started to publish Toyota FCHV (as shown in Figure 7, Appendix 4) in limited editions sales and they managed to achieve 100,000 units of worldwide. 2|Page

Their sales had exceeded 10 million on Camry Sedan. In this century also, they started to move to green vehicles and start Leasing Advanced Fuel Cell Hybrid Vehicle (as shown in Figure 8, Appendix 4). They also breakthrough their design and come out designs for F1. From year 2010 till recent years, the business keeps developing by t venture and strategic partnership. For example, they make agreement with Mazda on Hybrid System Technology License, t EV development with Tesla Motors, form strategic partnership with Microsoft and partnering with BMW. 1.3

Board of Directors Chairman President Executive Vice Presidents Senior Managing Directors Directors

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Tetsuro Toyoda Akira Onishi  Chiaki Yamaguchi  Kazue Sasaki



HirotakaMorishita

 

Shinya Furukawa Norio Sasaki

 

Masaharu Suzuki Toshifumi Ogawa

   

ToshifumiOnishi Kan Otsuka Keiichi Fukunaga Shuzo Sumi

  

Takaki Ogawa Taku Yamamoto Fujio Cho

Vision and Mission 1.4.1

Vision Through improvements of conventional technology, as well as pioneering

efforts in the application of new technologies, Toyota is taking great steps to develop eco-cars which will help us become a low carbon society. 1.4.2

Mission   

Provide world-class safety to protect the lives of customers Provide optimization of energy / infrastructure to local communities Putting high priority on safety and promote product development with the ultimate goal of “completely eliminating traffic causalities”

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

Deliver cars that will stimulate and even inspiring and that will thereby



earns smiles from our customers Addressing employees’ education

under

“Genchi-genbutsu”

philosophy, which is to go to the source to find the facts to make 

correct decisions, build consensus, and achieve goals at our best speed Through true mutual trust with partners, contribute to development of



new technology and improved expertise Contribute for economic development of local communities with R&D operations functioning effectively in each region

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SWOT ANALYSIS SWOT refers to strengths, weaknesses, opportunities and threats. SWOT analysis is a

process where the management team identifies the internal and external factors that will affect 4|Page

the company’s future performance (Hill, 2015). Strengths and weaknesses are internal factors that affect a company’s capabilities. Strengths can be defined as a company’s advantageous characteristics and main capabilities whereas weaknesses refer to any inner limitations a company encounters in developing or implementing plans. On the other hand, opportunities and threats are external factors that occur independently of the company. Opportunities can be defined as company’s advantageous conditions in the environment that could create rewards for the company while threats refer to conditions or obstacles that may restraint the company from accomplishing its objectives. Now, we are likely to provide a brief description of Toyota’s SWOT analysis (as shown in Figure 9, Appendix 5). 2.1

STRENGTHS 2.1.1

Strong Market Position and Brand Recognition Toyota Company has a strong market position in different geographies

across the world. The company has been recognized as the Top 10 of the best global brands. Toyota is the most valued automotive brand in the world. According to the Interbrand Rankings (2014), Toyota’s brand value has increased from 35,346$ million in 2013 to 42,392$ million in 2014 with 20%. Its majority of market share are in Japan with 45.5%. Apart from that, Toyota has market share in Asia (excluding Japan and China) with 13.4%, North America with 12.2%, and Europe with 4.3%. Such strong market position allows the company to gain competitive advantage in domestic markets, as well as to expand into international markets. 2.1.2

Strong Quality Management Toyota Company is one of the most innovative automotive companies and

it always focused on constant innovation. It starts with “Innovative International Multipurpose vehicle” plan (IMV) and Toyota Production System. Toyota production system emphasizes in just-in-time (JIT), Jidoka, Kaizen, environment and health and safety. For JIT, they link all production activity to real marketplace demand and rely on finely tuned processes in assembly sequence. Jidoka and Kaizen will be the incorporate quality check into every step of the production and 5|Page

team in all part of organization continually look for ways to improve operation. This is one of the innovative strength in production systems that seldom apply in other company (Toyota Production System, 2015). 2.1.3

Extensive Production and Distribution Network Toyota Company has an extensive production and distribution network.

Toyota and its s produce automobiles and related accessories through more than 50 manufacturing companies in 27 countries and regions besides Japan. Toyota is also well-known for its environment friendly, safe and durable cars that are sold in more than 170 countries. According to Nkomo (2013), the company has produced 3,940,000 vehicles in Japan and 3,495,000 vehicles across all other manufacturing locations in 2012. In addition, Toyota has an extensive distribution network. While the company’s geographically well spread production base diversifies business risks, its extensive distribution network provides a wider reach, thus boosting revenues. 2.2

WEAKNESSES 2.2.1

Deterioration of Products The fast expansion of Toyota made it more reliant on suppliers outside

Japan to provide the spare part and more senior engineers to proper supervise the production. When they do not have enough resources and expertise, it can result in deterioration of product quality. It is proven when product recalls have increased in the recent year which can affect the brand image and overall sales of the company (Andrews et al. 2011). Toyota reputation is built on quality and safety. When recalls occur too often, it brings the company’s image get under way. For instance, Toyota faces Congressional hearings after recalled about 8.5 million vehicles globally in three separate actions and some models of vehicles had been halted in United States for its sales and production (Kosdrosky, 2015). 2.2.2

Poor Allocation of Resources

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Toyota has shown a poor profitability of financial services segment. The poor profitability related to the expenses of post-retirement benefits for senior employees, as well as the payment of dividend for the shareholders (Yousigma, 2011). Huge investment in scheme of post-retirement by Toyota Company and the demands of Toyota’s shareholders to pay high dividend have led to low of return in the company. In May 2009, Toyota had reported a record yearly net loss of US$4.2billion (MBA-Lecturers, 2011). In 2014, Toyota’s return on equity (ROE) and return on assets (ROA) were 5.7% and 2.6% respectively. Low ROE and ROA are due to the failure of the company in spending the shareholders’ money effectively and efficiently. It may result to low returns for its shareholders (Toyota Industries Report, 2014). 2.3

OPPORTUNITIES 2.3.1

Positive Attitude towards “Green” Vehicles Today, consumers are more aware of the negative effects (air pollution)

caused by cars and thus moving their needs to a more environmental friendly vehicles. With the increase in fuel prices, it opens up larger market for these hybrid cars. Toyota Company takes alternative to produce Toyota hybrids to attract customers. Consumers are more likely to buy new hybrid and electric cars as they emit less carbon dioxide that can harm life on the earth and cause greenhouse effect. Toyota hybrids are designed to create harmony between man, nature and machine. By introducing new car models, Toyota satisfy varies consumers’ tastes and needs by deg varies new hybrids, including Highlander Hybrid, Avalon Hybrid, and Prius Family (Jurevicius, 2013).

2.3.2

Growth of Global Automotive Market The global automotive industry was severely affected by the economic

downturn and declination of revenues occurs. To recover the declination of sales, 7|Page

government of China had reduced taxes to attract more customers and the State Bank of India (SBI) decreased interest rates on automotive loans in year 2009. This provides opportunities for Toyota to increase revenues and grow (MBALecturers, 2011). According to Pantong (2013), in Thailand, Toyota Motor Thailand (TMT)’s record sale breaks a new record of 500,000-unit mark, compares to previous high of over 300,000 units in 2010. Toyota has become the first to achieved record sales of 750,000 units after gone through lots of ups and downs in the past. 2.3.3

Growth through Acquisitions Toyota has successfully acquired other car companies in the past to grow

together. One of the acquisitions is between Toyota and BMW. They are partnering to cooperate on hydrogen fuel cells, vehicle electrification, lightweight materials and a future sports car (Reed & Bryant, 2012). The growing partnership between the two companies boosts the technological know-how of the companies and develops new products to increase revenues. Toyota also benefits in term of cost-savings and boosting operational margins. For instance, they are collaborating on lithium-ion batteries and other fuel-saving project which these technologies are expensive and through the partnering, Toyota can offset costs and share risks (Tschampa & Rosemain, 2013). 2.4

THREATS 2.4.1

Intense Competition In the rating of best global brands, Toyota managed to rank in the Top 10

list. However, Mercedes and BMW are closely followed behind and they also showed great increase in brand value (Interbrand Rankings, 2014). Toyota faces strong competition from automotive manufacturers in its various markets in the extension of globalization and consolidation in the worldwide automotive. According

to

Kallstrom

(2015),

socioeconomic

trends,

infrastructure

development, customer requirements, and government regulations drive the intense competition. Intense competition can lead to lower vehicle unit sales, 8|Page

which may result in downward pricing pressure when there are larger inventory, thus impacting the financial condition and results of operations of the company. 2.4.2

Natural Disasters Toyota has several manufacturing services in Japan, Thailand, China and

Indonesia. Some countries located in the Pacific volcanic ring are often subject to natural disasters like volcanoes and earthquakes that disrupt manufacturing in the amenities and causing declination in Toyota’s production volumes. Indonesia, especially, sits between the world’s most active seismic regions and meant the islands experience some of the strongest earthquakes and most powerful volcanic eruptions known on Earth (Israel, 2010). In Tahara City, Toyota Motor Corporation signed an agreement to reinforce coordination of disaster aid activities and create disaster-resilient communities in local stakeholder (Toyota Global Newsroom, 2015). 2.4.3

Yen Currency Swings Toyota’s revenue comes from the sale in different foreign countries. The

profits earned abroad must be sent back to Japan, headquarter of Toyota and converted into Japanese Yen. Toyota is sensitive to the fluctuations in foreign currency exchange rates and is principally exposed to fluctuations in the value of the Japanese Yen, the US dollar and the Euro. The strengthening of the Japanese Yen against the US dollar and fluctuations in foreign exchange rates would have a material adverse effect on Toyota’s reported operating results, which in turn would impact the valuation of the company (Nkomo, 2013). When there is escalating yen exchange rate against other currencies, the profit rear by Toyota will be declined. There are always fluctuations in yen exchange and this is a threat to the earnings of Toyota sales. 3.0

CONCLUSION Through this assessment, we have learned more on Toyota brand and its SWOT analysis.

We realized that SWOT analysis has assisted Toyota Motor Corporation in evaluating their 9|Page

business and them to take advantage of their strengths and opportunities, as well as to address weaknesses and threats for improvement. A good action planning can help the company go through a substantial amount of time without mishap. Hence, we tend to recommend two strategies in helping Toyota to improve their weakness that mentioned in 2.2. First and foremost, one of the reasons of deterioration in products is due to the insufficient of senior expertise in monitoring and supervising the production of automobile. In this circumstance, HR manager should conduct recruitment and provide better and conditions of employment to attract more expertise to their company. In addition, training program should be implemented for employees in order to enhance their knowledge, skills, and abilities in producing high quality products. The contents of training program should include quality management in term of ethics of work, continuous improvement, customer focus, leadership, and teamwork. On the other hand, Toyota Company should appropriately allocate their company’s resources especially in financial resources in order to prevent the company from poor profitability. Appropriate investment should be made in scheme of post-retirement. The company should consider their earnings which can cover the expenses of the company before they make huge investment in the post-retirement matter. Besides, in term of dividend payment, Toyota Company should suitably pay dividend to their shareholders. They cannot simply pay high dividend to their shareholders in an attempt to retain them. In contrast, when the company encounter financial crisis, the shareholders should consider company’s difficulties in producing high dividend for shareholders. In a nutshell, Toyota is a great global brand and we believe that they can do their improvement effectively and efficiently in bringing Toyota onto the top of its game by addressing its strengths, weaknesses, and opportunities, as well as threats.

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