CPM Matrix for the Land Cruiser Toyota and Range Rover - Case Study Example

Introduction International organizations operating within the competitive environment need to assess their environment, competitive forces as well as external environment. The overall purpose it to actually assess as to whether the firm has the required level of resources and competitive advantage to actually deal with such challenges. When performing the strategic analysis, it is often assumed that the organizations are faced with the threats which are uncertain. International firms face a relatively larger uncertainty and risk in terms of their environment because they are faced with multiple risks which are often beyond the control of the organizations. In order to deal with such situations, there are different strategic tools available to the organizations which can help them to assess their external environment and make their strategic moves. SWOT Analysis, Porter’s five forces and CPM Matrix are three of the widely used strategic tools by the firms to actually assess their external environment and make strategies to deal with the risks and opportunities highlighted by such strategic tools. This paper will discuss and present the SWOT Analysis, Porter’s five forces and CPM Matrix for the Land Cruiser Toyota and Range Rover. SWOT Analysis of Land Cruiser Strengths 1. Toyota is considered as one of the best car brands in the world and this image is also being reflected in the land cruiser- a luxury vehicle manufactured by the company. Range Rover on the other hand however, not such large brand recognition at the global level as it is confined to few selected regions where it is a famous brand. 2. The Land Cruiser series is also the longest running car series ever produced by Toyota suggesting the overall marketability and brand acceptance of the vehicle since it is being produced and marketed by the firm. The Range Rover model however was launched in 1970s and is a relatively recent model as compared to Land Cruiser which was launched much before Range Rover was launched by Jaguar. 3. Backed by strong and one of the most sophisticated technology which has helped the vehicle to achieve the required level of customer loyalty. The body of the Range Rover however comprises of aluminum thus giving it an edge over other firms in terms of its toughness and durability. (Hitt, Ireland and Hoskisson) Weaknesses 1. There is generally a lack of scale in production of Toyota Land Cruiser as the firm has not been making this luxury SUV at the mass market level. Range Rover is also faced with the same weakness as it is only sold in select markets with limited scale production. 2. The overall cost structure of the firm is relatively expensive making it out of the reach of those who can otherwise afford luxury vehicles. Range Rover is also considered as an expensive car and is often beyond the reach of the mass market. The average price of both the vehicles is over $70,000 in international market. Opportunities 1. Land Cruiser’s presence is some select countries with higher level of per capita income. However, in order to cater to the wider needs of the customer base, the product can be sold across different international markets. Range Rover’s major market is UK and EU however; it needs to extensively cover the Asian market also. By further penetrating into the Asian market for luxury products, both these brands can actually extend their reach and create new markets to further extend their brand life. 2. Technology can be one of the differentiating factors which can allow a firm to gain many opportunities provided technology is used in most innovative manner. Threats 1. Toyota Land Cruiser is in demand in markets which are considered as relatively mature in nature. Competition from low range luxury cars aimed at the mid-level income groups can create significant level of competition for both the brands. 2. Both these brands are serving the markets which are relatively mature with little consistent growth opportunities available in the existing markets. Five Forces Analysis Porter’s five forces analysis is one of the most important and critical strategic tools to help firms to understand their environment and make the decisions accordingly. The overall five forces analysis for Land Cruiser and the Range Rover is: Threats of New Entrants Auto- manufacturing industry is a capital intensive industry with lot of capital required to set up highly sophisticated plants to manufacture the luxury cars. As such the automobile industry has the inbuilt natural advantage to enjoy the natural barriers to entry and lessen the threat of new entrants. As such the overall threat of new entrants is relatively low however, the existing players in the market who are not offering luxury cars can however enter into the market to increase the competition and drive down the profits and prices. It is critical to note that both the brands have not been able to achieve the required level of economies of scale which also serve as one of the factors to restrict threat of new entrants. However, both these brands are in the market since decades and given the overall history of these firms, it is expected that the learning curve of these firms have been at the mature phase allowing these brands to avail the benefits of better Research and Development activities. Threat of Substitutes Automobile industry has many substitutes including luxury air travel, train, public and personal transports of lesser prestige. Considering the overall diversity of the substitutes, the overall threat of substitutes is relatively high. However, it is also important to understand that both the Land Cruiser and Range Rover are considered as the luxury items with relatively inelastic demand i.e. the price changes may not result into changes in demand in similar proportion because of high customer loyalty and retention. It is therefore critical that though substitutes exist, their overall threat to the survival of the firms may not be sufficient threat. It is however, important to note that air travel may be one of the important substitutes posing greater risks specially where distance is relatively large. Domestic flights may easily provide a much quicker substitute as compared to the luxury vehicles to cover larger distances at lesser time. Bargaining Power of Suppliers Over the period of time, a unique supply chain model has evolved for the automobile industry with Toyota evolving into one of the most efficient utilizers of the capabilities of its suppliers. Toyota has been able to establish Toyota cities in which it has evolved the concept of just in time inventory. This practice has allowed Toyota to actually not only reduce its inventory carrying costs but also dilute the overall bargaining power of the suppliers. Apart from this, the sheer buying power of these firms allows them to successfully deal with the suppliers. Since Toyota and Range Rover has an established market with consistent demand therefore suppliers may not be able to enjoy the greater degree of bargaining power against both these brands. Bargaining Power of Buyers The availability of information to the buyers through the internet, more awareness about the environmental damage these automobile makers can cause to the environment as well as other factors have led to an increased bargaining power for the buyers. Social recommendations on the internet and social networks also make it more complicated for the firms to actually influence the behavior of its customers. As such, it becomes a relatively difficult task for the brands to easily influence the buyers in their buying decisions. Rivalry in the competitors Due to limited number of players present in the industry, the industry is experiencing a greater degree of rivalry among the competitors. Since both the range rover as well as land cruiser is older players in the market with established management structures, research and development and loyal market, it is relatively difficult for the firms to penetrate into the domain of each other. This also makes the overall competition relatively more fearsome within the market. The Competitive Profile Matrix Recommendations Considering the above discussion, following strategic moves can be considered by the companies: Market Development Considering the overall situation, it is clear that the brand recognition is relatively high in the well-developed Western markets. However, in order to take advantage of the new and emerging markets, it is important that existing products are rolled out into the new markets. Markets such as India, UAE and China can offer a lot of revenue opportunities provided the right marketing mix is adapted to actually market the products. Market development strategies require that the firm need to focus on first entering into the market while at the same time ensuring that existing environment is understood and explored. Since new markets such as India and China are not served by the domestic luxury car manufacturers therefore the global brand recognition of the car can influence the potential customers. Market development can also be achieved through marketing the brand to the non-buying customers. In order to achieve this, firm however, has to understand the consumption habits of the non-buying customers and further customize its product offerings to actually attract new customers. Innovative marketing and advertising is therefore the key factor to help the company to gain further brand recognition in such market segments to increase the overall market share. (Hill, Jones and Schilling) Market penetration Considering the technological sophistication and the established market share, market penetration can serve as an important strategic move. Market penetration requires further serving the needs of the existing markets through different factors including pricing, introduction of new features etc. Market penetration therefore may require an extensive understanding of the market besides developing the features and the product innovations which can be readily sold to the existing markets. Reduction in pricing can also be one of the key factors which the company can pursue to actually further gain the market share and penetrate into the existing market by increasing its overall market share. To successfully use this strategy, the firm has to actually consider its existing penetrating rate as well as the penetrating share. To maximize the market penetration, it is therefore critical that both the variables are actually maximized to help the firm to achieve the desired level of strategic penetration into its existing markets. Conclusion Luxury brands have relatively different dynamics and require a well-thought out strategies to help them gain the foothold in the market. Both the brands i.e. land cruiser and range rover are well-known brands in their established markets however, certain factors distinguish them from each other besides helping them to use their own competitive advantages. Considering the overall discussion above, it is important to actually either develop the new markets or to penetrate into the existing markets. In order to successfully use both these strategic objectives, it is important that the firm need to be proactive and keep an eye on the overall environmental changes and act accordingly in order to use its competitive advantage to take advantage of new opportunities. Works Cited Hill, Charles, Gareth Jones and Melissa Schilling. Strategic Management: Theory: An Integrated Approach. London: Cengage Learning, 2014. Hitt, Michael, R. Duane Ireland and Robert Hoskisson. Strategic Management: Concepts and Cases: Competitiveness and Globalization. London: Cengage Learning, 2014. Read More