Impact Of Research And Development And Promotion On Sales Volumes In Toyota

Strategies to improve sales volumes

This study will portray the impact of research and development in improving the sales volumes of the organization named Toyota. As stated by Camisón & Villar-López, (2014), innovation and creativity are essential for gaining competitive advantage and maintaining sustainability of the industry. Toyota is the market leader in their segment due to their operational efficiency, which has enabled them to increase their operational margin. It is also the market leader in terms of sales volumes in the organization.  As stated by Lee et al., (2015), most of the global companies have changed their orientation form being product oriented to marketing oriented.  Globalization has made availability of information to different parts of the world so effective use of promotional strategy is essential for gaining competitive advantage in the market. Digital marketing plays an important for promotional success in today’s market and the study will evaluate the influence of promotional strategies and innovation for improving the sales volumes in Toyota.

The primary goal of any organization either is profit maximization, which is achieved by either increasing the sales volumes, or decreasing the cost structure by increasing operational efficiency.  This study will focus on identifying the strategies required to improve the sales volumes, which are effective use of innovation and promotion. Innovation is necessary for catering to the present needs of the consumers and promotion is required for increasing brand awareness and market penetration. This study will emphasize the impact of research and development cost and promotional cost on the sales volumes of Toyota.

The research is aimed at identifying the impact of research and development and promotion on the sales volumes of Toyota.  The study will separately analyze the impact of both the independent variables on the dependent variable.

H₁₀– There is no impact of cost invested in R&D on the sales of Toyota cars

H₁₁– There is a positive impact of cost invested in R&D on the sales of Toyota cars

H₂₀: There is no impact of cost invested in advertisement on the sales of Toyota cars

H₂₁– There is a positive impact of cost invested in advertisement on the sales of Toyota cars

To identify the relationship between product R&D and sales of Toyota automobiles

To examine the impact of advertisement on sales of Toyota automobiles

Does product R&D affect the sales of Toyota automobiles?

Is there any significant relationship between and sales of Toyota automobiles?

Bouncken et al. (2016) stated that automotive industry utilizes the “sense– respond–learn” approach for products innovation for motivating customers to buy their products.

Impact of research and development on sales

Casadesus?Masanell and Zhu (2013) depicted that the organization gathers data from marketing surveys and customer clinics and then utilize the information for developing ideas for new technology. The analysis is related to the guide vehicle and feature of the automobile and this study is helpful in assessing the opportunity in emerging markets (Pagell & Shevchenko, 2014).  The response collected is divided into two parts- develop and execute. Christopher (2016) stated that if the response is found to be effective, it is executed for developing products, process and business portfolios; otherwise, the ideas are considered for future technology options.

Slater et al. (2014) stated that an organization should continuously invest cost in improving the product in order keep their customer motivated to remain associated with the company. The term product innovation refers to introduction of new service or goods for indented use of the products and characteristics (Im et al., 2013). Some companies invest cost in developing new products; while, some invest cost in re-inventing the product.

Bohnsack et al. (2014) stated that in new product development, the process of changing the form of the products is focused along with the changes in components, materials and packaging of a product. The change can also be related with the transformation of technical ideas (Gunther et al., 2015). Taken for instance, in conventional time, driverless cars especially for SUVs like Lexus have been innovated by some companies like Google (Dethe et al., 2016). The car has the facility of video camera for detecting traffic lights or any moving objects, lidar, a rotating sensor to create a three dimensional (3D) map of the environment, distance sensor to measure the distance of various obstacle and position estimator to evaluate car’s position in the map. 

Kastalli and Van Looy (2013) stated that the process of converting ideas and strategies into information in order to create a new product is refers as designing of the products. Zailani et al. (2015) highlighted that designing or re-inventing product is the core of innovation in order to develop a new object. Taken for instance, Yoo (2013) stated that in automobile companies, fuel was used in traditional days and now electric cars have been invented in order to diminish the carbon emission rate. Moreover, in order to avoid car crashes, automobile companies have also developed vehicle-to-vehicle (V2V) communication technology that uses ‘ad hoc network’ (Pinkse et al., 2014).

Kannan (2017) depict that digital marketing focuses on all the target market with the help of internet. Samson et al. (2014) also stated that digital marketing provides the opportunity to SME to make people aware of their business. This platform also offers established organizations to share the initiative taken for attracting their existing customers towards their products. (Armstrong et al., 2014) on the other hand argues that advertisement is used to generate or increase the rand awareness and it cannot be used for motivating people to buy products. Charan and Dahiya (2015) thus present a counter statement that in case of digital advertisement, there is less space issue and some organization represents comparison of their products with competitive organization to make people aware of the enhanced features and quality of the products.

Impact of promotion on sales

In automotive industry, the main audience targets are business people and person with high income (Boone & Kurtz, 2013). These people can also be reached through traditional marketing like newspaper advertisement and promotion through business magazines. Thus, the cost involved in traditional marketing also helps in promoting the brand and attract businesspeople to know about their products.

The result of research and development is represented in the performance of the products. The quality of the product is improved due to the research made in the function of the products. However, Casadesus?Masanell and Zhu (2013) stated that the adverting of the R&D initiatives promote the sales as customer intends to buy new products or have the desire to get a new experience. People can see the performance of the newly developed products through their research. This is also helpful when an organization intends to expand their market in other nation or territory (Pinkse et al., 2014). The research and development department research on the target market, preference of the products and the quality they prefer.

The more the people are satisfied by the product invention by the R&D department, the more will be the sale of that particular company. This department is liable to develop products or characterizes of the products that closely matches the customer demand. Thus, the impact of research and development department can be seen on the customer satisfaction (Yoo, 2013). Berends et al. (2014) on the other hand stated that higher customer satisfaction boosts the sales of the organization.

In the current business scenario, creativity and innovation is the key to success for the business organizations. This is due to the reason that, offering innovative products in the market will help them to stay ahead in the competition. This is the reason behind the initiation of the research and investment by the business organizations. More investments in the research and development will help them in rapidly the developing the existing products and introduce new products. According to Hall, Lotti and Mairesse (2013), initiation of the research and development is having positive impact on the generation of the sales revenue.

This is due to the reason that, the products will be more updated and caters to the change in the market with the help of the effective research and development. Thus, customers will be more attracted with the help of the updated products, which will ultimately enhance the generation of the sales revenue. For instance, Hyundai motors have invested huge capital on their research and development. This helped them to modify and update their current product portfolio significantly and offering newer products ahead of their competitors. According to kale (2017), the strategy of effective research and development of Hyundai motors helped them in becoming the second largest carmaker in the Indian market in terms of sales.

Organization also formulates a research and development department in order to develop products that are completely new. In this way, these organizations are able to patenting new items that can attracts more customer and make them aware of their effort that they take to improve their business and customer experience.

A company not only invests on the research and development department butt also allocate financial resources for supply chain, advertisement and formulating new business networks (Kannan, 2017). Armstrong et al. (2014) stated that advertisement allow people to know about the initiative an organization takes in every aspects to get ware of the operations functionalities. 

Pagell and Shevchenko (2014) highlight that especially in case of digital advertising, people can share their feedback both positive and negative in the posts that an organization is sharing through different media like Facebook fanpage, YouTube channel, Twitter and Instagram. More people can get knowledge of the products quality and the advantage that those customers have experienced. Thus, investing cost in making the digital channel more interactive can promote the brand through the feedback shared by users (Samson et al., 2014). The positive feedback can boost the sales as it provides other people the reliability regarding the products.

In recent time, every other organization promotes their brand through same platform and it is thus difficult for a user to identify the correct brand with correct motive and quality (Berends et al., 2014). Kannan (2017) thus stated that the content of the advertisement should be done in such a way that it matches to the psychological thoughts and requirement of the users. This approach is used by organization, who intends to attract customers through their content that boosts their intention to read more about their products and know about the quality if the products. Pagell and Shevchenko (2014) argued that though this is a indirect way to promote their products but the genuine details about the products and the positive respond of the previous customer can help in motivating their intention to buy that products. In this way, advertisement can boost the sale of an organization.

Apart from the research and development, advertisements also play an effective role in enhancing the revenue regeneration. According to Gopinath, Thomas and Krishnamurthi (2014), there is direct relationship between the advertisements and revenue generation. According to the authors, having effective and extensive advertisements will help to communicate the offerings to the maximum number of customers. Thus, the more will be the communication of the product offerings, the more will be the exposure in the market. This will in turn increase the sales revenue in the market.

Impact of advertisement on sales of Toyota automobiles

For instance, Baccarella, Scheiner, Trefzger and Voigt (2016) states that, Audi is one of the prominent automotive organizations who are leveraging more on the advertisements and increasing their sales volume. The authors also stated that, the brand exposure of Audi especially in the developing countries is enhanced with the help of the extensive advertisements undertaken by them. Moreover, the unique approach of the advertisements of them is helping to create the distinctive image among the customers. 

Research methodology will systematically collect raw data and transform it into meaningful data. A research can be fundamental and applied based on the nature of the research (Taylor, Bogdan & DeVault, 2015). However, this is a conclusive study as the outcome has been set in the objective.

There are four philosophies of research and they are positivism, intepretivism, realism and pragmatism (Flick, 2015). Research philosophy will determine the methods used to conduct the research. In this study, positivism has been selected as the research philosophy for the study as consist of gathering of secondary data and deriving the defined conclusion from the given data.

There are generally three types of approaches and they are abductive, inductive and deductive (Silverman, 2016). In this study, deductive approach will be used to validate the theories discussed.  Deductive approach will enable to prove the given hypotheses. However, the data used in the study is secondary data.

The two types of research design are conclusive and exploratory research (Meyers, Gamst & Guarino, 2016).  In this study, the objective and conclusion has been predefined so conclusive approach will be the appropriate approach of research.  The premises in the study have been defined so exploration is not required.

Primary and secondary are the two types of data collection method used in academic research (Bryman, 2015).  In this study, secondary data will used for analyzing the given theory. Generally, secondary analysis is based on thematic analysis and case study analysis. However, the current study will consist of collecting financial data from the annual report of Toyota so that the relationship between cost of R&D and promotion and sales volumes can be identified.

Quantitative and qualitative analysis are the methods used for analyzing data (Palinkas et al., 2015). However, in this study, the data set consist of secondary data collected from the annual report. Quantitative analysis will be the basis of analyzing the collected data. Statistical tools such as Ms excel will be used for identifying the degree of nature of relationship between the independent and dependent variable.  Regression analysis will be conducted to analyze the data that has been collected.

Role of innovation and creativity in maintaining competitive advantage

Sampling is the process of selecting sample population from the overall population. Probabilistic sampling and non-probabilistic sampling are the two techniques of sampling (Sekaran & Bougie, 2016). However, in this study, non-probabilistic sampling will be used as the sample size and the population size will be identified from the annual reports of Toyota.

The data used in the study are authentic data and consist of data from the annual reports. The data has not been manipulated to obtain a desired result (Battiste, 2016). The regression analysis is authentic and portrays the exact relationship between both the variables.

The research is based on secondary data analysis and data has been collected from selected sources. Therefore, the data cannot be compared with the primary data and other sources to provide a different dimension. The study consist of single design in research and restrictive to a particular organization. The findings may not hold true for other organizations.  There is a time constraint in the study, availability of relevant article is less, and opinions of authors are contradictory in nature.

Regression between Sales volumes and Spending in research and development

SUMMARY OUTPUT
Regression Statistics
Multiple R	0.932370085
R Square	0.869313976
Adjusted R Square	0.854793307
Standard Error	13.23496401
Observations	11
ANOVA
	df	SS	MS	F	Significance F
Regression	1	10486.62062	10486.62062	59.86734895	2.88699E-05
Residual	9	1576.478451	175.1642724
Total	10	12063.09907
	Coefficients	Standard Error	t Stat	P-value	Lower 95%	Upper 95%	Lower 95.0%	Upper 95.0%
Intercept	-29.44632772	31.86958268	-0.923963392	0.379611232	-101.5403323	42.64767688	-101.5403323	42.64767688
X Variable 1	29.94720438	3.87044832	7.737399366	2.88699E-05	21.19164201	38.70276676	21.19164201	38.70276676

Analysis

Regression analysis is conducted to identify the degree and nature of relationship between the independent and the dependent variable. In this first regression analysis, research and development spending is the dependent variable and sales volume is the independent variable. Multiple R defines the correlation between the independent and the dependent variable. In this analysis, the value of multiple R is 0.932370085, which is almost close to 1. This means that strong positive correlation between the dependent and the independent variable. Therefore, with the increase in spending in research and development, the sales volume is expected to rise.

The coefficient of determination is represented by R² , which will identify the explaining capability of the independent variable on the dependent variable. The value of R² is 0.8693, which is greater than 0.8 that means that goodness of fit of the regression line is high. Moreover, the R² value shows that 86.93 % of the dependent variable can be explained by the independent variable. There is a random variability of 13.07%, which is quite common in practical research data.

The F-value in the study is 2.88699E-05, which can be considered as .000.  The F-value is less than 0.05 so the null hypothesis has be rejected and the alternative hypothesis has been accepted. Therefore, it can be deduced that increase in cost of research and development will increase the sales volume of Toyota. The regression line equation for the first regression analysis is y = 0.029x + 1.9224, where if the value of x is put as 1 unit, then the value of y is 2.0214. Thus, with 1 unit increase in the value of x there is 2.0214 increase of y which signifies that increase spending in research and development will double the sales volumes of Toyota.

SUMMARY OUTPUT
Regression Statistics
Multiple R	0.487237823
R Square	0.237400696
Adjusted R Square	0.15266744
Standard Error	31.97101284
Observations	11
ANOVA
	df	SS	MS	F	Significance F
Regression	1	2863.788113	2863.788113	2.801741689	0.12848763
Residual	9	9199.310957	1022.145662
Total	10	12063.09907
	Coefficients	Standard Error	t Stat	P-value	Lower 95%	Upper 95%	Lower 95.0%	Upper 95.0%
Intercept	153.4255069	38.14437999	4.02223098	0.00300794	67.13692467	239.7140891	67.13692467	239.7140891
X Variable 1	12.01700743	7.179303011	1.673840401	0.12848763	-4.223704265	28.25771913	-4.223704265	28.25771913

Examples of successful implementation of research and development

Analysis

In this second regression analysis, advertisement spending is the dependent variable and sales volume is the independent variable. Multiple R defines the correlation between the independent and the dependent variable. In this analysis, the value of multiple R is 0.487237823, which is less than 1. This means that there is less positive correlation between the dependent and the independent variable. Therefore, with the increase in spending in advertisement, the sales volume is not expected to rise by much.

The value of R² is 0.2374, which is less than 0.8 that means that goodness of fit of the regression line is low. Moreover, the R² value shows that 23.74 % of the dependent variable can be explained by the independent variable. There is a random variability of 76.26%, which means there is less significant relationship between both the variables.

The F-value in the study is 0.12848763, which is greater than 0.05 so the null hypothesis has not been rejected. Therefore, it can be said there is no significant impact of advertisement spending on sales volumes.  The regression line shows that there is minimum correlation between advertisement cost and sales volume as most of the plotted points fall outside the regression line.

Conclusion 

The objectives formulated in the introduction will be linked with the findings and analysis to develop relevant findings.

The findings of the study show that there is positive correlation between cost in research and development and sales volumes. The F-value in the study is 2.88699E-05, which can be considered as .000 so the alternative hypothesis has been accepted. The regression analysis also highlights that increase in spending in research and developments will double the sales volumes. Therefore, effective research and development strategies will have to be implemented for improving the sales volumes. Product innovation, supply chain innovation and business model innovation are the three factors in improving the overall sales volumes of Toyota. Product innovation will continuously develop new products according to the developing needs of the target consumers.  Innovation in supply chain is important for manufacturing companies so that they can reduce their cost of production. The decrease in cost structure will increase the profit margin of the organization.  The use of innovation in business model is also crucial as it consists of all the processes of the organization. Vertical integration will ensure that there is continuous improvement in all the organizational processes so that operational efficiency can be increased.

Conclusion

The findings of the second regression show that there is no significant impact of advertisement cost on sales volumes. The F value is greater than which means that the null hypothesis has been accepted. However, the digital marketing and traditional form of marketing are two crucial components of promotion. Online advertisements and tradition form of advertisements such as television is an effective medium for penetrating into the target market. However, advertisements only increase the awareness of the consumers about the products and the organization but there is no guaranteed positive influence of advertisement cost on sales volumes of Toyota.

Therefore, it is recommended that Toyota should focus more on research and development. There is strong positive relationship between product research and sales revenues so Toyota should increase their expenditure on research and development. Similarly, in case of advertisement, Toyota should use digital marketing to improve their market penetration but there is no significant impact on sales volumes. However, promotional strategies will increase the brand awareness among the consumers.

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