Toyota’s Operational and Industry Environment

In order to analyse the Toyota’s operational and industry environment and its competitive position in the auto mobile market, there some appropriate strategic tools are using in this paper. Such as the SWOT model , Porter’s Generic strategy and Ansoff matrix. The SWOT model analyses the companies internal and external strengths with opportunities as the factors of the company’s success in the competitive market. And also this model analyses the companies weaknesses with threats for its fluctuation of sales. Generic strategy refers to analyse the company’s strategic choice with in the competitive rivalry. In addition Ansoff matrix also analyse how Toyota uses appropriate strategies to be as the world leader in the car manufacturing and sales of subsidiaries.

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Toyota’s competitors such as the Ford Motor company, General Motors and Honda Motor Corp, who concern to decide the companies market position in the market. During the periods these all companies are different position in the auto market. As the leader of the auto manufacture Toyota Motor Corp Ltd adapts the management corporate philosophy which is meant that Toyota Way including Toyota Production system(TPS), and as the Lean production. The company’s corporate philosophy decide the long term competitive advantages. The elements of TPS are Just In Time(JIT), Jidoka(quality improvement) and Kaizen. In addition, Toyota’s Total Quality Management(TQM), which is correlated with TPS, is also the most important system to catch the market share in the rival. These systems are adapting in the production line to product the plants efficiently with the combination of the low cost and high quality. This opportunity seeks the best in the global auto market. And also the supply chain management too is as a supporting hand for the company. These all will be briefly discussed in this paper.
At the end of this paper, it is analysed that how the elements of Generic strategy such as cost leader, differentiation and focus and Toyota’s operational systems are functioning together to get best competitive position within the competitors world wide. With that, Ansoff matrix will be analysed by its elements such as market penetration, product development, market development and diversification regarding the company’s performance and competitive position.
INTRODUCTION:
The Toyota Motor Co. Ltd was founded in 1937 by Kiichiro Toyoda, as a one of the world’s leading manufacturers. It has become the world Largest, and most profitable car maker . During the Second World War, the company produced trucks for the Japanese Army. Unlikely ,the company’s factory in Aichi was bombed down by the enemies before war ended. 
After the war ended ,Toyota’s production of cars commercially began with the SA model in 1947. In 1957, the Toyota Crown was exported to the USA as the first time. It announced its arrival to British in1957.After 1960s the company started to spread its operations world wide. Toyota entered into an alliance with Daihatsu and Hino Motors. It’s Compacts, produced smaller and fuel efficiently from the start.  Names of few of the popular Toyota vehicles are Toyota Prius, Camry, Lexus, Toyota Tundra, Toyota Tundra Double Cab and Corolla (http://www.swot-pest-porter.com).
In the early 1970s, the company’s production was behind of Ford Motor and GM, but in 1974, Toyota Corolla got largest place in world car selling. And, after ten year Toyota was in second to GM in the market(www.nytimes.com) .Now it is the third largest manufacturer in the global automobile market by sales which is producing more than 5.5 million vehicles per year(www.conceptcarz.com).
LIMITATIONS AND CONSTRAINS:
In my point of view the time is the important problem to analyse the company’s operational and industry and their competitive position within it. There are lots of resources available for this analysis, however ,it is difficult to understand and recognise the very relevant resources from the pool of them.
COMPETITORS OF THE TOYOTA.
In the global auto market Toyota’s strategic position is very strong than other competitors. It is clear that the Ford Motor , GM and Honda Motors are the main competitors in the market. Among these, Toyota was the third largest automaker in the world.
Along with GM, when the Japanese automakers’ sales in U.S had gone into a decline, Ford took attention on Toyota customers with great offers at the January 2010. In February 2010, Ford over took GM to be the number 1 seller in the U.S as the first time since 1998. But ,Honda Motor co didn’t follow its rivals at targeting Toyota customers , this is why its sales drop by 5% in 2010 (www.reuters.com). In 2009, while GM had 20% and ford had 16% , Toyota had 17% of the market share in U.S( www.reuters.com ).
Especially, the company’s operational system such as the TPS, TQM and the Toyota Way add real value to the company’s business which is as the different management style. This value adding procedure is giving a unique strategic position in the market. For example, Toyota Prius is a enormous value and it is a commitment to green products green innovation.
Toyota’s project management makes sure that the projects and goals are aligned with the added values of the company and core competencies. The reason for the project manager of Toyota is the understanding the importance of competencies and core values with the need of working together. And , project manager should give efforts and best thoughts towards develop its attributers and remained focused on business goals.(http://svprojectmanagement.com).
THE PILLARS OF THE TOYOTA’S SUCCESS AND COMPITITIVE ADVANTAGES:
Toyota’s operational systems are its pillars of the success in the industry wise. They are,
Toyota Way.
Toyota Production System(TPS).
Total Quality Management(TQM).
Toyota Supply chain.
Actually the Toyota way and TPS have been part of how Toyota has developed it’s supply chain. TPS has been part of how Toyota has developed its supply chain principles effectively towards best performance with suppliers, dealers and manufactures. These concepts work together to add value to the production line of Toyota.
THE TOYOTA WAY.
Toyota Way and Toyota Production System are the different concepts, but it’s 14 principles are giving a corporate philosophy by using Toyota Production System (TPS), which is a systematic and highly developed example of Toyota Way. Toyota Way is the culture and also a set of efficiency and improvement techniques, and also it is called that the company’s managerial philosophy. Its 14 principles are categorised into four categories.
Long-Term Philosophy.
Toyota’s philosophy of empowering its workers is the core of human resource management system. It brings employee loyalty and improves creativity and innovation by motivating employee participation.
– The Right Process Will Produce the Right Results.
– Adding value to the Organization by Developing the People and Partner
Continuously Solving Root Problems Drives Organizational Learning
With 14 principles of Toyota Way, another 4 high level principles such as Genchi Genbutsu, Kaizen, Respect and Team work and Challenge are correlated with each other. Thorough learning and kaizen , Toyota has managed to grow and achieve its goals.
Kaizen is a Japanese term means that change betterments it focused on improving the quality and the efficiency of the Toyota’s production line. Through Kaizen the members have given gift certificates instead of money. The philosophy of Toyota Way is passing down from generation to generation(http://www2.toyota.co.jp).
TOYOTA PRODUCTION SYSTEM (TPS).
Sources; http://www.1tech.eu
TPS is the way of company’s successful globally, which was introduced by Taiichi Ohno. Corporate philosophy is the basic of its success in the global market. TPS presences high standards of products this is why the company easily penetrate the markets world wide. And also Toyota’s work place morale and job satisfaction are producing reliable and high-quality products at reasonable prices. Many of the success of Toyota concern with high performance of human resources and supply chain management.
JIT – productivity improvement.
Kanban system manages the JIT production system and it supports by each of the previous steps. Generally, the JIT means that what is needed, when it is needed, and in the amount needed.
By using this concept, Toyota produces quality products by elimination of waste and avoiding the un reasonable requirements in the line production.
Under this system, the ways of achieving productivity improvement are
Providing a production instrument to the production line as soon as possible,
when a order for vehicle is received,.
Stocking few numbers of all part for assembly line
Proceeding process
stocking proceeding process of all parts.
Jidoka- highlighting of problem.
Under this concept the quality is consider by
Stopping machine safely on its own when complete a normal process and also when meet any quality problem.
communicating via the Andon (problem display board) when machine automatically stop. Because of this operator can continue at another machine. This will lead to a greater processing capacity.
Eliminating waste:
TPS works mainly with the internal in next stage in the production line and external customer perspectives which is considering and separate the value added steps from the non value added steps. According to Jeffery K. Liker , 8 categories of waste are eliminating in the TPS such as over production, waiting time, unessential movement and transport, over inventory and so on. The head of Toyota manufacturing divided the waste was eliminated in this system by JIT and Autorotation in the production line to add value(http://people.brunel.ac.uk).
The concept of respect takes responsibility to build trust each other in the TPS and the concept of team work encourage employees to achieve growth and performance by contributing the opportunities of development in the Toyota’s production line to add value.
Actually, the Toyota Production System has been a roaring success at Toyota, but much less effective in other locations in many conditions.
Total Quality Management (TQM):
TQM is a management system adapting by Toyota in the production line to add value of its products. This is the greatest strategy following only by Toyota successfully within the larger auto makers. Indeed, The TQM is based on the quality of the product with the commitments of the all members towards the long term success of the company.TQM works through a combination of the customer satisfaction and welfare of the society. At the end, the result is the high quality and low cost add value for the product in the TPS.
GENERIC STRATEGY AND COMPETITIVE ADVANTAGES.
Porter’s Generic strategy, seeking competitive advantage on Toyota, is defined as the basis on which a strategy business unit (SBU) might achieve or counter competitive advantage in its market. According to the cost leader ship strategy, Toyota reduced its cost at every element of the value chain. Toyota is the good example of an organization for producing quality cars at low price with brand and marketing skills to use a premium pricing policy.
The company’s JIT attempt to manufacture with an absolute minimum of inventory, in a shortened lead time. This feature support the company’s manufacturing cost in production line. Jidoka supports to reduce the cost in production line by highlighting the problem before occur. And also TQM of the Toyota is supporting in reducing the cost how with the minimum input and maximum out put with in a sort lead time.
Toyota is manufacturing its products for the market where what is needed and what is suitable. It’s mean that the company adapts the differentiation strategy well than other competitors. When it offer totally different from other rivals , this is why the company’s products aim on value with less price and which creates higher price and higher profit to the company. Hybrid Prius is the pertinent evident of differentiation in the rival. Further more, Toyota offers high quality and luxury brand cars in Japan, Europe and U.S( like Lexus ), the company is selling minivans and trucks in China, Brazil and South Asian markets, where the products of the Toyota are totally different than other major competitors. The thing is that even though, additional costs occur pursuing differentiation, and it is managed by increased revenue generated by the sales.
In the view of application of generic strategy with JIT, in which the production line is able to producing many varieties of products in response according to the changing customer demand in the market. It means the company uses the JIT production to differentiate its product in the market. And also TQM helps in Toyota’s differentiation strategy, how the company’s products with high qualification could easily differentiate among other competitors.
By adapting focused differentiation strategy, Toyota first introduced a brand, Scion, specifically for young buyers in January, 2003 which was a great success with that introduced hybrids in 1997 selling 127000 more than Honda. (http://ezinearticles.com). This strategy support to compete with other competitors in similar segments and to get competitive advantages.
JIT production and TQM support also in focused differentiation strategy. For example, when the company identifying specific market segmentation wised to buy a specific vehicle, JIT production gives that particular product to that targeting market segment.
THE APPLICATION OF THE ANSOFF MATRIX IN TOYOTA:
Market penetration:
Toyota penetrated easily and successfully world wide comparatively than other large manufacturers in building plants and sales the subsidiaries. Toyota’s first advantage of market penetration is presentation of strategic markets. For instance, it penetrated successfully in Asia, Europe and US. Whereas, its market rivals such as Ford and GM influence in only U.S and Europe. Toyota Motor Corp holds its foot in China and India to get competitive advantages heavily. By adapting this strategy, it manages the unexpected fluctuations for the markets of its products.
Product development:
One of the key to the success in the car market is new models which increase the demand and loyalty for the company’s brand. Toyota has huge reputation for producing few cars with fuel efficient and good performance. And, Toyota has enhanced to meet government requirements specially for reducing the hybrid fuel. A remarkable point is that Toyota was the first car manufacturer to market hybrid fuels, with the introduction of the Prius model in the market (www.reuters .com)
2010 Toyota Prius is the best example of the product development. The third generation Prius is bigger and more powerful than the previous version, but it will become in the United States as the only vehicle that offers combined mileage greater than miles per gallon (http://reviews.cnet.co.uk). But the latest Prius is 70Kg heavier than its predecessor, and this is largely down to the amount of new technology inside.
Market development:
Toyota Company sells its products in 70 countries world wide. In order to maximize the profit, it seeks new market with existing products. For example, China and South East Asia ere the new markets where the company sells its vehicles.
Diversification:
By adapting this strategy, Toyota seeks new products into new markets. While getting any troubles by the competitors in existing market with existing products, it is the pertinent strategy for its growth. The company emerges in China and South East Asia where targeting a 2012 launch and a piece under 1 million Yen. (www.reuters .com) and also one of the Toyota’s Mini vehicle unit which is Daihatsu Motor co(7262.T) is developing a small car for emerging market such as South East Asia, and may sell them under the Toyota brand the Chunichi newspaper said(www.reuters.com). The Compact car will be based on its vision and Yaris subcompact models in the new markets. In addition, these two models and a new set of entry level cars are announced for India, Brazil and China by Toyota. To develop the sales in emerging markets the company maintains a three layered approach. However, Toyota has relatively small market share in India, Brazil and other emerging markets. This is indicating the limitations of its market development (www.reuters.com).
Toyota gets a best strategic position in the competitive market by applying these strategies properly than other competitors.
CONCLUSION AND RECOMMENDATION:
As above, the third largest auto maker Toyota is a successful company in the auto makers. The factors of the company’s success and its best competitive position in the competitive revalry, are its internal strengths and external opportunities. Even though, it is as the world leader in the auto market, it faces some problems as its own weaknesses and the threats from other competitors and from the outside. These factors are analysed by using SWOT analysis in the appendix. In addition, the company’s main competitors compete with it heavily during the years such as Ford, GM, and Honda. However, Toyota Motor Corporation is in a much strengthened strategic position in the auto market. There are some details describe the company’s achievements among the competitors in the appendix. The Toyota Motor Corporation achieves its competitive advantages by using the best operational systems in the industry such as the Toyota Way, TPS known as the Lean production and TQM in its production line. Porter’s Generic strategy analyse the company’s strategic position in the market with the correlation of those operational systems toward the competitive advantages. And also Toyota’s supply chain management is reflecting its uniqueness in the global market which is noted in the appendix. At the end, the Ansoff matrix describe the company’s current position by market penetration, market development product development and diversification strategies.
In my point of view, Toyota Motor Corporation still is the world leader of the car makers. But in 2008 and 2009, it faced decline in its sales by few problems. However, the president of the company Akio Toyoda who and the every level employees of the company commit their whole life over take these problems. I suppose that, in future it will be the number one auto maker in the global car manufacturer with the attention of over taking particular quality problem for preventing the quality problem by using its the world greatest strategic operational choices in the industry.
APPENDIXES:
1. TOTAL SALES OF THE TOYOTA AND ITS COMPETITORS:
COMPANIES
VOLUME
MAY 09
MAY 08
DSR
DSR5/09
DSR5/08
GM
-29.555
191,875
272,363
-26.84%
7380
10,088
Ford
-24.25%
161,531
213,238
-21.373%
6,213
7,898
Toyota
-40.72%
152,583
257,406
-38.44%
5,869
9,534
Honda America
-41.46%
98,394
167,997
-39.21%
3,782
6,222
Chrysler Group
-46.88%
79,010
148,747
-44.84%
3,039
5,509
Nissan NA
-33.10%
67,4874
100,874
-30.52%
2,596
3,736
BMW Group
-27.65%
22,993
31,781
-24.87%
884
1,177
*The daily selling rate (DSR) is calculated with 26 days for May 2009 and 27 for May 2008.
Source: http://www.autoblog.com/2009/06/02/by-the-numbers-may-2009-gm-and-ford-surprise-edition/
TOYOTA’S INDUSTRY RANK AT IMPORTANT ATTRIBUTES.
ATTRIBUTES
INDUSTRY RANK
Innovation
3
People management
3
Used of corporate assets
2
Social responsibility
1
Quality of management
2
Financial soundness
1
Long term investment
2
Quality of products /services
2
Global competencies
2
Source: http://money.cnn.com
3. WORLD’S TOP 10 AUTO GROUPS BY 2009 H1 SALES.
RANK
COMPANY
SALES(US $ Millions)
1
Toyota Motor Corp
3.564
2
General Motor Co
3.553
3
Volkswagen AG
3.265
4
Hyundai Mo. Co
2.153
5
Ford Motor Co
2.115
6
P S A Peugeot Citroen
1.587
7
Honda Motor Co
1.586
8
Nissan Motor Co
1.546
9
Suzuki Motor Corp
1.15
10
Renault SA
1.107
Source: www.reuters.com
4. THE SWOT OF TOYOTA
Strengths and Opportunities;
Toyota’s Just in Time (JIT) allows the production system to produce vehicles efficiently and quickly, one at a time, which is great quality and provide satisfaction to consumers. And ,the company has a major strength which is Toyota’s Production System(TPS) prevent waste and therefore reduces the amount of energy, raw materials and other resources used, this is making it towards sustainability(www.toyota.eu).
Toyota is a best profit maker in the market. This is because, rising up of the share price of Toyota. For example, Toyota’s stock market value is approximately 30% of the value of the global car market. If we combined the profits of all global car makers, Toyota would account for about one third. And other all Japanese car makers would account for another third. Only the rest final third, would be accounted by all European, North American and other Asian car makers together. (http://www.marketingteacher.com).
Another reason for it’s climbed up to the top is beyond loyalty. Toyota’s life long learning by Kaizen and improvement management systems makes best decisions.
Japanese companies, specially, Toyota is excellent in particular areas as the strengths it’s self. Such as
Elimination of waste and cost cutting.
A culture rooted in manufacturing.
Fast, disciplined product development cycles.
Consistence and relentless
Toyotas managers always knows that where they want to be five years from now and are working at getting there.
Toyota’s innovation and creativity is a major opportunity. Company’s commercial mass produced hybrid gas and electric vehicles are creating more opportunities in the competitive markets. Prius is the pertinent example for these advance technology adaptation of Toyota. It based on advanced hybrid technology and ‘R+D’ activity. This investment and Toyota’s wide range of product portfolio support customers for alternative sources of fuel away from gas guzzling cars. Another example of innovation is that Toyota Sienna is planned to join the hybrid line up by 2010 (www.brandchannel.com)
Toyota mostly attracts the youth market by its segmentation. As Pedro Pacheco(spokes person for Toyota Europe) said, “The urban youth segment is attractive to us because it can success fully influence the whole of youth sector, and it allows to attract customers to the brand at an earlier stage” (www.brandchannel.com). Toyota like these customers to grow by providing products as their like. This is a big opportunity of establishing a life – lasting relation ship.
Toyota taking heart the customer feedback it has received, together with it’s suppliers, dealers and it’s world wide employees, it’s commitment is on it’s products and services and also it’s commitment to the customer first. This feature is giving many opportunities to Toyota world wide.
Toyota’s continuous global expansion also brings opportunities to it. Practically, Toyota has its factories in all continents and its vehicles are made up in different countries. Remarkably, for recent years the company emerged in third world countries and it is getting possible opportunities.
And it tends for the localisation of the production using their situation in different countries as the suppliers of the production local market. This result of globalization is making many opportunities for the company.
Weaknesses & Threats
Almost every problem creates a need for inventory, which is one of the largest wastes. This is really a reflection of ineffectiveness. Because every manufactures should need to make sure that their models consumers want or not and conditions of those markets. These may be the reasons of putting attention on emerging market heavily.
Toyota’s production needs a huge investment with high fixed cost and cost of labour. This may allow to face problems like over capacity or under capacity if occur any upturn or downturn.
The main problem is that the company’s products are too expensive for its emerging markets, when other competitors like Tata Motors (TM) produce reasonably cheaper cars.
The movements of the exchange rates make narrow margins in the market of its sales. For example, in 2009, Toyota’s chairman said that the strong appreciation of the Yen against the Dollar and Euro and the rising cost of raw materials made losses in Toyota’s sale (www.glgroup.com).
The demand for larger cars decreased while increasing the demand for small cars by changing the life style nowadays. This is also a challenge for Toyota.
According to the increasing expenses, the consumer usage of cars is decreasing. This factor reduces the demand of cars in the market as well as the high price Toyota’s cars.
Businesses operate their operations with fewer fuels by the technology improvements. For instances, Europe governments are encouraging more alternatives for transport, which is reducing the demand for new cars (www.businessteacher.org.uk). These all factors are the threats for Toyota.
5. SUPPLY CHAIN MANAGEMENT OF TOYOTA:
Toyota has coordinated the plans across the supply chain and has executed them efficiently. It is the ultimate way in which Toyota has built its superior efficiency in operations. Its effective performance is estimated by the process and their results. This process aims to create a balance between the supply chain parameters.
Components of Supply chain management.
Variety of products.
Velocity of product flow.
Variability of out comes against fore cast.
Visibility of process to enable learning.
(http://www.mhprofessional.com/product.php?isbn=0071615490)
The variety represents an extremely important design selection of supply chain which has an effect on the participants of the supply chain. When choosing variety, there is a need to have feed back to make sure that it is suitable to represent for the market situation.
Velocity has clearly shown in the Toyota’s supply chain. It allows doing the procedures at the same time throughout the system.
By reducing the variability orders, supply chain will need low level of inventory. It also support for the high quality and cost reduction across the supply chain. These three concepts of supply chain management influence on the stable of supply chain of Toyota.
However, Toyota’s supply chain ran too hot, which means, working with a lot of unfamiliar suppliers. They didn’t have proper understanding of Toyota’s culture. The majority of the problems of the company concern with this problem.
The Toyota Way and TPS have given them the competitive advantages on a global scale. Most of these advantages are gained through a combination of the arrangement of the human resources policies and their highly efficient global network of the suppliers and manufactures. According to the TPS Toyota maintain the quality of the product while reducing the cost and eliminating the waste efficiently. Through these techniques Toyota is able to develop competitive advantage in their manufacturing and sales. Toyota considers that the workers are at the centre of the process of continuous improvement and that their creativity leads to innovation, to improve the loyalty and morale in the work place. At the end, when the job satisfaction is high, there is a greater likelihood that reliable and high quality products can be offered at an affordable price. So the low cost and high quality of the products create high demand for Toyota’s products in the competitive market.
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