Differentiating Between Market Structures for the Toyota Motor Corporation - Essay Example

Differentiating Between Market Structures for the Toyota Motor Corporation Abstract The purpose behind the establishment of any business organization is mainly to make profits and earn maximum customer recognition. Before entering a market, business organizations must identify the forces operating in that particular market, which encompasses the behavior of the targeted customers, strength of other dealers and possible challenges in that specific market. This paper will analyze the contemporary market structures with reference to the model employed by Toyota Motor Corporation in surviving in the global competitive motor market. The paper will also discuss possible competitive strategies as well as evaluating the significance of the strategies towards profit maximization by the Toyota Motor Corporation. Finally, the paper will end with recommendations on how Toyota Motor Corporation can implement various competitive strategies to ensure continued profit maximization. Differentiating Between Market Structures for the Toyota Motor Corporation Market structures refer to the kind of market organization or plan that exists in a certain economy with reference to the supply of products, customers’ behavior and strength and distribution of suppliers into the market. For any organization to prosper in its business processes there must be a properly defined and established market structure to assist in conducting significant sale of products. Determining the nature and structure of the market in which a company intends to venture prepares the company in making critical decision and systems to encounter potential competition in the targeted market. Prior information of market structure that rules in a particular market setup prepares business organization on how best to face the existing challenges in the particular market. Some of the most common market structures operating in the contemporary economic standing include perfect competition, monopoly, oligopoly, and duopoly. Decision on the kind of market structure to venture into depends on the products and customers targeted by a given business organization. The Toyota Motor Corporation is an example of an organization that has emerged successful in the global market due to the realistic choice of a market structure. The Toyota Motor Corporation has adopted strategies to emerge successful in a perfectly competitive market structure that characterizes the global automobile industry. To survive in this market, Toyota has been successful in identifying and analyzing the nature of the market, responsiveness of its customers and the ingenuity of its competitors. In this respect, Toyota has focused its technology and production processes towards filling the perceived loopholes that exist in the global motor market. Toyota operates in market structure where there are many buyers and sellers interacting in a free market without hindrance to enter or exit with rational prices. This means that market for products offered by Toyota Motor Corporation is highly competitive and requires adoption of viable competitive strategies to succeed. Toyota Motor Corporation ventured into the perfectly competitive market not out of pleasure but due to the existence of stiff competition that characterizes the global motor vehicle industry. Even though Toyota Motor Corporation enjoy the status of being classified among top five global motor companies, it faces stiff competition from Ford Motor Corporation, KIA, Honda, Nissan, and Mercedes Benz, among other globally renowned motor producing companies. Operating in a perfectly competitive structure requires Toyota to adopt mass production as well as highly innovative and creative strategies to ensure a strong competitive advantage in the motor vehicle industry. In addition, Toyota Motor Corporation found it easier to settle on the perfect competition marketing structure due to the efficiency and price sanity ensured by the model. With a perfectly competitive market structure, determination of price depends upon supply and demand forces making it easy for Toyota Motor Corporation to avoid risks attached to overpricing or under pricing of its products. Furthermore, Toyota succeeds under perfect competition by selling a significant volume of diverse car models, which makes it to stay ahead of its competitors. It is worth noting that with perfect competitive marketing structure, there is an assurance of ready consumers who exist in large numbers and only relies on quality assurance to start buying particular product (Mankiw, 2009). The mass production strategy would not have worked well for the Toyota if it was operating in an oligopolistic market structure. This can be derived from a critical analysis of the characteristics attached to oligopoly. An oligopoly involves major suppliers who have the capability of dictating the prices at which to sell their products. With an in depth understanding of the nature of the global market, adopting oligopolistic marketing structure by conjoining with big companies like GM would deny Toyota a chance to gain a big share of the global motor vehicle market and deny it the advantages that it currently enjoys under perfect competition. In an oligopoly market setting, Toyota could dictate its own prices by constraining its supplies, which in most cases could involve high pricing thereby losing the trust to the smaller motor companies that are probably ready to cut their prices to the consumers’ expectations and make bulk sales. Moreover, Toyota could not adopt the oligopolistic market structure because the practice involves restriction of new entrants, which is not possible in a liberalized global economy. The characteristics attached to monopolistic market structure could not be appropriate for Toyota Motor Corporation in perfecting its sales in the international market. The first reason deeming monopoly an inefficient marketing structure for Toyota Motor Corporation is that it involves one supplier with the capability of dictating prices and restricting entry of new firms into the system (Mankiw, 2009). This can be proved by considering the fact that Toyota Motor Corporation entered motor market already operated by other market players thereby denying Toyota an opportunity to dictate pricing strategy as well as kicking the competitors out of the market system. Another reason defining the impossibility of Toyota creating a monopolistic marketing structure lies on the varied government policies in countries where it operates. Most countries prefer free market mechanisms that ensure availability of quality products for their consumers while ensuring growth of local players. Toyota is a visionary organization set to attain a leading status in the global motor vehicle market and therefore it has to embrace the ideals of perfect competition (Vaghefi, 2002). Just as oligopolistic and monopolistic market structures, duopoly could not work towards the achievement of the contemporary prosperous state enjoyed by Toyota Motor Corporation. To maximize its profit margins in a perfectly competitive market structure, the Toyota Motor Corporation has to identify and adopt selective competitive strategies. The first strategy is product differentiation, which requires Toyota to adopt technologies that help in ensuring product variety and quality to challenge the competitors’ complimentary products. Secondly, Toyota must rid off stiff competition from other market players by reducing the prices of its products (Kossowoski, 2007). Reducing prices while maintaining high quality of products have the effect of attracting more buyers to a product. Another competitive strategy that can be adopted by Toyota Motor Corporation in maximizing profits involves differentiation focus (Kossowoski, 2007). With differentiation focus, the organization can produce specific vehicles targeted for a segment of the market. For example, the organization can manufacture special vehicles that suit security operations or ladies. Toyota Motor Corporation has successfully adopted the aforementioned competitive strategies that have ensured top global positioning of the organization. To start with product differentiation, Toyota Motor Corporation employs strategic technologies enabling it to produce vehicles that consume less fuel as opposed to the competitors’ products. Currently, Toyota Motor Corporation is working on technologies that can ensure further reduction in the use of oil by adopting electric driven cars. Toyota Motor Corporation has also been praised for its cost effective products it offers to the global market. Most of the cars produced by Toyota are perceived to be cheap and of good quality (Browoswki, 2010). This fact has led to significant increase in the purchase of Toyota motors. On the side of differentiation focus, Toyota Motor Corporation has embarked on strategic designing of cars with reference to particular market segments. For example, Toyota produces Prado models that are majorly used by governments of various countries. The Duet, Platz, and the Vitz models are designed and fitted with automatic gear systems mainly intended for women drivers. The differentiation focus and overall competitive strategies employed by the Toyota Motor Corporation has ensured significant rise in the sales volume enjoyed by the organization. The strategies employed by Toyota Motor Corporation still have great potential to change the performance of the organization in the competitive global market. Toyota Motors has to conduct further technological exploration to ensure reduction in the cost of production so that it can continue cutting the prices at which it sells its products. The cost strategy should also be applied in building engines that consume less fuel yet with high performance so as to assists consumers in reducing their spending on fuel. Toyota Motors also stands the challenge of practicing further differentiation focus so that it reaches every aspect of the market. The differentiation focus should target women, men, youths and sports with special peculiarities in particular car design. Referencing Borowswki, A. (2010). Report on the Toyota Company. Norderstedt: GRIN Verlag Publishers. Institute for Manufacturing. Porter's Generic Competitive Strategies (ways of competing). Retrieved December 13, 2011 from http://www.ifm.eng.cam.ac.uk/dstools/paradigm/genstrat.html Mankiw, N. (2009). Principles of Economics. Bolton, MA: Cengage Learning Vaghefi, M. (2002). Toyota in the Press. Retrieved December 13, 2011 from http://sysdoc.doors.ch/TOYOTA/toyotaphilosohy.pdf Kossowski, A. (2007).Strategic Management: Porter’s Model of Generic Competitive Strategies Theory and Analysis. Norderstedt: GRIN Verlag Publishers. Read More