SWOT Analysis of Toyota Corporation - Essay Example

? Toyota SWOT Analysis Toyota SWOT Analysis I. Company History Toyota is arguably one of the largest automobile manufacturers in existence today and from the humble origins of the first Toyota vehicle, the Model AA of 1936, the company has grown into a giant global carmaker brand. A series of adept mergers and prudent business decisions such as setting up factories in countries such as the US to beat high import tariffs in the 1960s and the decision to delve into the luxury car brands in the 1990s saw Toyota grow into the phenomenon that it is. Toyota’s mission statement, “To sustain profitable growth by providing the best possible customer experience and dealer support” embodies the reasons behind the company’s success: sustainability, quality and customer satisfaction (Hino, 2006). II. Organizational Strengths and Weaknesses A. The “Toyota Way” Strategy Toyota has successfully implemented their widely recognized “Toyota Way” strategy in all its global business operations. This strategy is based on operational excellence through a 4-P model; philosophy, process, people and problem solving. Philosophy is anchored on long-term thinking; process on waste elimination; people on respect, growth and challenge; and problem solving through the concept of continuous improvement. The resultant effect of this strategy is organizational performance and excellence due to sustenance of high quality that not only attracts customers but also makes them loyal (Liker, 2004). The “Toyota way” is a clear strength since it is tailor-made for the company as evidenced by the fact that most of the other operational excellence strategies pursued by organizations around the world were developed from it including the popular “lean manufacturing”, “just in time” and “six sigma” philosophies. As a result, Toyota is way ahead of competitors since its strategy has evolved with the company and is integral in Toyota’s organizational culture hence few challenges can hamper its growth. B. Toyota’s Motivated Workforce Toyota boasts of an exceptionally talented workforce that under close observation takes the credit for the growth of the company from a small company in Japan to the renowned automaker. The top leadership at Toyota appreciates this fact and believes that their sole competitive advantage lies in their talent development and priority on workforce. The “Toyota way” only works due to the successful uptake by the employees and the Toyota culture of hard work and continuous improvement is possible through the quality of employees present (Liker and Hoseus, 2008). Toyota’s excellent workforce is a major strength especially considering the fact that the company operates on principles based on continuous improvement, high quality and organizational performance appraisal which would prove strenuous and overwhelming to weak employees. It is not unknown for companies to adopt noble strategies and policies only for them to fail due to difficulties in adoption by the workforce. C. Product Quality Concerns Toyota’s large size as a company means that any errors in manufacturing result in numerous faulty vehicles availed to the market which leads to customer dissatisfaction and aloofness to future car models. This is particularly damaging to reputation as evidenced by the recent recalls of vehicles due to failed breaking systems; concerns on safety are enough to cause virtually irreparable harm to a company such as Toyota. To maximize on quality, a Total Quality Management system should be carefully implemented besides much emphasis on batch testing since this is perhaps the only way Toyota can mass produce with quality assurance. D. Lack of Customer Involvement Toyota focuses a great deal on the internal aspects of its operations in terms of management and workforce performance optimization and fails to take into consideration the views and interests of the customers. This has resulted in some of its car models being ranked among the ugliest automobiles on roads; unenviable publicity by all means. To involve customers and ultimately ensure that products will be accepted as desired, Toyota should adopt a beta testing approach before mass-producing new models. This involves trying limited models on selected markets to gauge customer’s reception and then conducting market surveys. III. Toyota’s Opportunities and Threats A. Targeting the low end of the market The current economic state of the world means that many people are in a dire financial state. Besides this, the middle and low income individuals make up the largest portion of society, with disposable incomes reducing by the day and spending power spiraling down. Through production of considerably cheap vehicle models that also do not compromise on quality, Toyota has a big global market not only in developing countries but also emerging markets in the developed world. B. Rising Global Fuel Prices The ever increasing global fuel prices mean that it is becoming a lot more difficult to fuel big engine capacity vehicles. Skyrocketing prices are forcing car customers to either abstain from purchasing vehicles or if they do then select low capacity vehicles. Toyota has a range of models from several large engine capacity cars to small ones hence it is capable of adapting to changes in fuel prices. Currently, the trend is towards high prices and Toyota will be unrivalled in such a situation. C. Deteriorating Global Economic Growth The economies of many countries around the world are still trying to recover from the recent economic meltdown and their citizens are experiencing some of the most difficult financial conditions. Priorities are shifting towards basic survival and a car is becoming more of a luxury (Wad, 2010). The impact of such a situation for a mass producer and big employer such as Toyota is massive and only the adept management can keep the company from failing. This is especially so considering that the low and middle income markets -Toyota’s main preoccupation- is worst hit by the global meltdown. D. Rival Companies producing low priced cars New market entrants and existing companies are increasingly learning the value of targeting the low-end market especially in these financially challenging times. The traditional luxury car manufacturers are now making models that are also attractive to the market due to association with luxury. The threat to Toyota’s niche market is perhaps one of the most difficult challenges it has had to face in recent times since it eats into Toyota’s primary market share and for such a mass producer the effects could be quite serious as time passes. IV. Conclusion Toyota is well-placed to continue being a market leader due to its strengths in managerial strategy and culture (The Toyota Way), and a superb workforce that complements its strategy. Toyota needs to urgently address the issues of faulty vehicles and lack of customer involvement if at all it is to retain or improve its position in the market. The ever skyrocketing fuel prices and the global financial hardships present an opportunity for Toyota to pull away from its rivals in terms of market share. However, some of the two biggest threats that Toyota has to contend with arise from the global economic decline and competition for its primary low-end markets by new and old rivals, both of which have serious implications to Toyota as a mass car producer. References Hino, S. (2006). Inside the mind of Toyota: management principles for enduring growth. Productivity Press. Retrieved September 16, 2011 from http://books.google.co.ke/books?id=rAlcjg0QhGkC&printsec=frontcover&dq=toyota&hl=en&ei=BXVzTvSbE8_44QSLk8yiDQ&sa=X&oi=book_result&ct=result&resnum=3&ved=0CD0Q6AEwAg#v=onepage&q&f=false Liker, J. K., and Hoseus, M. (2008). Toyota culture: The heart and soul of the Toyota way. McGraw-Hill Publishers. Liker, J. K. (2004). The Toyota way: 14 management principles from the world's greatest manufacturer. McGraw-Hill Publishers. Wad, P. (2010). Impact of the Global Economic and Financial Crisis over the automotive industry in developing countries. United Nations Industrial Development Organization. Retrieved September 16, 2011 from http://www.unido.org/fileadmin/user_media/Publications/RSF_DPR/WP162009_Ebook.pdf Read More