The Toyota Motor Corporation Company Problem - Report Example

Company Problem The Toyota Motor Corporation Contents .................................................................................................................. 2 2. Case Summary ........................................................................................................3 3. Problem Identification …………………………………………………………………….4 4. Analysis …………………………………………………………………………………….5 5. Recommendation and Implementation ………………………………………………….6 6. References …………………………………………………………………………………7 Abstract: This report discusses the various problems faced by the Toyota Motor Corporation, one of the largest automakers of the world and the several alternatives that could be taken into consideration to address those problems. Some of the crucial problems faced by the company in recent times include the steady rise in global fuel prices, growing environmental concerns as well as the penetration of low cost car manufacturers from developing countries. These problems have even driven the company to take drastic steps such as the recent cutting down of its annual sales targets for the current year (2008) owing to the continuous fall in the sales of its trucks and SUVs which form a significant part of its revenues. The fall in its automobile segment is also largely due to the growing environmental concerns, likely impact of global warming, and the resultant shift in customer preferences towards environmental friendly and fuel efficient cars. All these factors together have led to formation of several alternatives that could help the company address these critical issues and retain its competitive positioning in the industry as well as continue its rapid progress towards attaining its future targets that of a 15% share in the global automobile industry. The alternatives discussed above are developed keeping in mind the company’s strengths and weakness and its ability to tackle the present situation through its range of products and strategic planning abilities. Section 1. Case Summary: The Toyota Motor Corporation is one of the largest automobile manufacturers in the world. Founded in 1926, by Sakichi Toyoda as a modest automatic looms manufacturing company, Toyota has grown to be a multi million dollar organization and a world leader in automobile manufacturing. The company through its substantial diversification, expansion and R&D efforts has managed to capture significant market shares, and aims to capture 15 %1 of the global market by the year 2015. However, the company currently has been facing certain setbacks due to several factors such as the rising fuel prices, environmental concerns such as global warming, weakening of the yen, as well as threats from low cost car manufacturers from developing nations such as India and China. These factors could pose serious threats to the company’s advancement towards growth and prosperity. To combat such external forces, the company has initiated efforts at creating environmental awareness through encouraging and driving the sales of its hybrid car – The Prius, as well as by initiating and promoting environmental activities such as the recently organized the tree plantation drive at the company’s Japan plant as well as water reduction measures undertaken at its European branches at Burnaston and Deeside plants in the U.K2. The company also has plans to enter the small car segment in India, to capitalize on the factors such as availability of cheap labor, low cost and the growing trends towards the largely untapped markets in the small car segment so far. Section 2. Problem Identification: The company at present is faced with several critical problems which could greatly disrupt its growth towards sustainable development and severely affect its long term goal of capturing the 15% global market share. Some of the most crucial problems are listed below: i. Rising fuel costs ii. Growing Environmental Concerns iii. Penetration of low cost car manufacturers from developing countries Rising fuel prices have had the greatest negative impact on Toyota, as evident from the sharp decline in the sales of its trucks and SUVs hampering its revenues in U.S, Europe and Japan. Considering this crucial factor, the company was forced to announce reduction in its projected global vehicle sales for the current year, which was reduced from 9.85 million announced at the beginning of the year to 9.5 million3. Moreover with world wide awareness about the environmental effects on account of gas emissions and changing customer preferences who are now increasingly demanding environmental friendly cars, leading auto makers have now shifted focus to attend to the customer demands. Toyota’s Prius is thus finding huge markets due to the factors such as rising fuel prices as well as growing environmental concerns. The company is also planning to venture into the Indian and Chinese markets, which with its booming population, cheap labor and low cost production facilities are considered to have substantial potential for growth. Section 3. Analysis: The above listed problems could pose serious threats to the company and significantly hamper its future goals, thereby ultimately reducing its revenues and overall profitability. In order to sustain its competitive standing in the industry and retain its position as a world leader the company would have to devise several alternatives to combat the threats posed by such external forces by revising its strategies and banking on its internal strengths such as huge and capable man power resources and competitive strategic planning by the senior management team. The significant reduction in the sales of its trucks and SUVs on account of rise in fuel prices, as well as the penetration of low cost manufacturers of small cars from developing nations eating into the market share of the company, are ultimately having a significant impact on the profitability of the company. This could be resolved by considering the following alternatives discussed below: i. Promotion: Promote and develop its hybrid cars ii. Expansion: Set up new plants in developing countries iii. Development: Develop its human resource team The company can utilize this opportunity for promoting its hybrid cars which could attract huge customers who prefer environmental friendly and fuel efficient cars, or it can consider setting up manufacturing units in developing countries such as India or China where the factors such as huge and rising population could be utilized for producing cheap and cost effective small cars. Alternatively the company can focus on the development of its human resource which is a valuable source of its success. The R&D efforts of the company are largely backed by a competitive and able human resource team, which has facilitated the company to achieve stupendous success in a short span of time and continue its march towards success and growth. Section 4. Recommendations and Implementation: Considering the present scenario, the most crucial factor affecting the company’s growth is the rising fuel prices and the growing environmental concerns. These factors could be addressed effectively by the company by promoting the sales of its hybrid cars that would not only solve the issue of rising fuel prices but also significantly help in reducing the gas emissions thereby achieving its environmental objectives as well. Thus this would, by far, be the most logical and profitable solution for the company and would ensure a major market share as well. The company doesn’t have any direct competition to its hybrid cars and can utilize this strength to dominate the markets for longer period of time thus attaining its future targets of grabbing substantial market share in the coming years. The company can promote its hybrid cars by banking on its large scale popularity in the U.S. markets. At a time when the industry leaders such as Ford and GM are battling for sustainability by resorting to such stringent measures such as price cuts, laying off of its employees, closing down of some of its plants and booking heavy losses, Toyota can boast of retaining its sustainable market standing by promoting the sale of its hybrid cars and enhancing its brand image as an environmental friendly organization. References: Msnbc: Toyota seeks 15% of global car market, Retrieved: Aug 11, 2008, from: Toyota Today: Sustainable Plants taking root, Retrieved: Aug 11,2008 from Motor Authority, Toyota lowers its 2008 global sales target, Retrieved: Aug 11,2008 from: Read More