Strategic Management: External Analysis - Essay Example

Like other competitors in the industry, Toyota has faced a challenging and complex global industry and is challenged to execute a more effective strategy taking into account the global business environment of the industry. The automotive industry has however started well in the recovery process and this is expected to attain a full-brown recovery level in the next few years (Monica, 2010). This study explores Toyota’s external environment to discuss its opportunities, threats, actions taken by the company, and provide recommendations on possible actions that the company should take.

Opportunities Toyota Company has a great and potential market opportunity in Asia, which has the potential to increase its sales volume. The company has a potential market target, the urban youth market; Toyota is attempting to capture their DJ culture as depicted in their lifestyle through development of new models that are unique and easily convertible. The other great opportunity for Toyota is that the company has a strong reputation particularly in manufacturing of environmental friendly vehicles examples of which include the Prius hybrid, which is established through advanced technologies.

This hybrid vehicle has seen increased demand as fuel prices rise and it is deemed a potential brand for Toyota in terms of increasing market share (U.S. News, 2008). The company has sold hybrid technology to competitors like Ford, which enables the company to increase its investment in hybrid technology research and development. Threats Global economic conditions have had devastating effects on the automotive industry; economic slowdown coupled with the stiff competition posed by rivalry competitors in the industry has posed great threat to Toyota Company.

Competition has remained stiff in the automotive industry as new market entrants particularly from South Korea, and China increase. The company has marked sharp decline in total production and in the sales volume, this has seen contraction of potential markets especially North America and Europe following economies deterioration. Eminent changes have also been recorded in the automotive industry as market shift towards low-prices and manufacturing of small vehicles, these changes have heavily affected sales (Toyota, 2009, p. 3). The other threat faced by Toyota is the rapid appreciation of Japanese Yen against the euro and the U.S. dollar, the result has been reduction of the company’s profitability.

Given the rising prices of the raw materials like rubber, and steel that are used in manufacturing vehicles, Toyota has marked high valuation losses that reduce their earnings. The governments in Europe, and U.S and other markets have tightened emission standards and this has challenged automotive companies including Toyota to increasingly invest in environmental friendly products, which has meant additional production cost to the companies. Action taken by Toyota The executives, analysts and management of Toyota Company have identified and recognized the mentioned threats and they are devising ways to meet them and explore the available opportunities.

Toyota places customer at the front of its business activities and focuses on providing high quality vehicles and affordable prices. This has been effective in enabling Toyota to meet