Toyota in Australian Market - Case Study Example

Toyota in Australian Market Name University Course Title Instructor Date Contents Contents i 1.0 Introduction 1 2.0 Industry Overview 1 2.1 The Company 1 2.2 Location & Distribution 2 2.3 Profitability 2 2.4 Growth in Traditional & Online Business 2 2.5 Key Success Factors 3 2.6 Major Competitors 4 2.7 Enablers and Obstacles 4 3.0 Overall Industry Overview 4 4.0 Analysis of Competitors 5 5.0 Conclusion 6 Appendices 9 Appendix 1: Profitability of Toyota Australia 9 Appendix 2: Top 10 Vehicle Sale in 2011 9 Appendix 3: Total Market Share by 3 Local Manufacturers 10 Appendix 4: Total Market Share (Importers) 10 Appendix 5: PESTEL Analysis 11 Toyota in Australian Market 1.0 Introduction The ultimate priority of a company is to make profits. This can be realised through creation of value to the target market. Creation of value is a holistic process that involves all functional departments. To measure a company’s success, one can use the market share approach as a measure of dominance. Toyota has managed to gain market in Australian market through its wholly owned subsidiary Toyota Australia. According to Toyota Motor Corporation Australia Limited (2012a), in 2011 they commanded 18% of Australian auto market. This translated to 181, 624 vehicles. This implies that they sold the highest number of vehicles compared to other single brands. The same leadership was observed in 2010 where the company as a single brand commanded 20.7% of market share. This was the second highest sales ever recorded (Curran & Jones, 2011). This kind of dominance calls for academic interrogation and that is why the company has been chosen for analysis. The aim of this paper is to examine Toyota’s operation in Australian market. 2.0 Industry Overview 2.1 The Company Existence of Toyota Company dates back to 1937 (Toyota Motor Corporation Australia Limited, 2012b). For the case of Toyota Australia a subsidiary fully owned by Toyota Motor Corporation, their existence dates back to 1958. In 1958 Thiess Brothers imported first land cruiser for their Hydro-electric scheme. Subsequently, they sold the vehicle in 1959. In 1963, Toyota cars were being assembled in Australia by Australian Motor Industries later to be named AMI-Toyota. In 1971, Thiess Brothers rebranded to Thiess Toyota and by 1979 they had achieved market leadership. It is during the same period that AMI-Toyota initiated engine and stamping plant. In 19988 the operations of the two were merged to form what is known as to day as Toyota Motor Corporation Australia. With the merger the firm engaged in various restructuring programmes that saw it build assembly plant at Altona (Toyota Motor Corporation Australia Limited, 2012c). 2.2 Location & Distribution Toyota Australia has adopted hybrid mode of distribution in Australia. This means that the company is in virtual environment and also physical location. These two approaches plus certified distributors acts as customer contact points in Australia. The company has it’s headquarter at Port Melbourne Victoria State and manufacturing plant in Altona Victoria state. In addition, the company has sales and marketing office located in Woolooware Bay, New South Wales. Further, Toyota Australia has their own branches that distribute their vehicles in all Australian states apart from Western Australia where they have engaged independent distributor (Toyota Motor Corporation Australia Limited, 2012b). The principal role of the sales and marketing office is to indulge in marketing activities, franchise development, domestic sales, national service, operations & logistics, parts & accessories, strategic planning and export & distribution (Toyota Motor Corporation Australia Limited, 2012b). 2.3 Profitability Toyota has had mixed fortunes since 2007/08 with the net profit dwindling from 07/08 with slight improvement in financial year of 2010/11 even though it was still a loss. In 07/08 they made a net profit after tax of 242.2 million and in 2008/07 they made a net profit after tax of $123, 2009/10 they made net loss after tax of 107.9 million. In the financial year 2010/11, the firm recorded a net loss after tax of $13.2 million. In the same period, they recorded sales revenue of $8.2 billion, export sales of $1.4 billion and capital expenditure of $259 million. The cause of this loss is attributed to appreciation of Australian dollar against other major currencies. This reduced the competitiveness of Australian manufactured Toyotas. Moreover, they noted increased cost of raw materials and competition as key culprits to the loss (Toyota Motor Corporation Australia Limited, 2012d); (See appendix 1). For these periods considered, 2010/11 experienced the lowest sales revenue, second lowest export sales and highest capital expenditure. 2.4 Growth in Traditional & Online Business The concept of people or other businesses being able to buy and sell products over internet and web has grown tremendously. This is based on the fact that it is real time, ubiquitous and does not require physical presence. Business models are how businesses structure their relationships so that they can create value and make profits. The first e-commerce business model that Toyota Australia has adopted is business-to-consumer model (B2C). This kind of platform involves engagement between sellers (business) and the ultimate consumer. The essence here is for the business organisation to display their products catalogue online (Mahadevan, 2000, p.57). Toyota does not work with internet middlemen, but engages the customers directly through gazoo.com. Through this portal customers are able to browse products on sale and purchase them. The next is business to business model where they can trade with suppliers. 2.5 Key Success Factors Competitive advantage is the advantage a business has over its competitors that is gained by providing customers greater value, either by means of lowering prices or through providing greater benefits and services that will justify higher prices. According to Michael Porter, there are two basic types of competitive advantage, which include cost advantage and differentiation advantage (Porter, 1998, p.46). Key Success Factors are integral aspects that business organizations employ so as to achieve their business strategy (Grunert & Ellegard, 1992, p.5). The key success factors of Toyota vehicles are derived from four layers of advantage. The first is the mix in their production of vehicle. The company is able to produce high end and high quality vehicles which are priced competitively. Secondly, they are able to produce vehicles for mass market. These vehicles are comparatively affordable. Moreover, Toyota is known to produce fuel efficient vehicles as compared to European and American manufactured cars. Lastly, the company has a guiding principle called “Kaizen”. This is an approach to quality management where the belief is that even the best can still be improved on (Funaru, 2010, p.10). The culture that the Toyota Company is famous for and they use it to shape employee performance is lean management and just-in-time production. The Lean manufacturing system aka Lean philosophy has been derived from the Toyota Production System (TPS) in the early 1990’s. The root of the Toyota Management system dates to early 1890’s where Sakichi Toyoda designed and patented the original idea of improved worker productivity and quality with the manual that he designed (Emiliani, 2006). Since then Lean management became an important route for improving performance by reduction of costs, improving quality, reducing lead times, and increasing market shares, developing new products and human resources (Monden, 1986 cited in Emiliani, 2006). The approach enabled the company to rise and be one of the leading vehicle manufacturing firms. 2.6 Major Competitors In Australian market there are numerous competitors. The competitors can be categorised into two. The first are those which have subsidiaries that are incorporated in Australia and with manufacturing plants. The second are those that import the vehicles from other manufacturing plants outside Australia. Various literatures point that Australians favour locally manufactured cars (Deloitte, 2012, p.8; Curran & Jones, 2011). The competitors in Australian market include Holden, Mazda and Ford (See appendix 2, 3 & 4). 2.7 Enablers and Obstacles One enabling factor is the government support. The government of Australia normally supports companies with local manufacturing plants (Curran & Jones, 2011). This means Toyota Australia is among them. The next success factors especially on online platform is the level of uptake of information technology and infrastructure development by stakeholders. Business Characteristic Survey 2009/2010 provides deep information how business utilises information technology. First there are various types of broadband connections that are available to various companies (Australian Bureau of Statistics, 2011). The enabling factor for Toyota is their vision tied to lean manufacturing and Just-in-Time production. To advance in e-business the company has embraced extensible online environment. Toyota Australia uses BEA WebLogic Workshop Technology to develop Java and Web services-based applications. This allows them to link with clients. Toyota Australia is ranked 721 in Australia by Alexa (2012). 3.0 Overall Industry Overview The strategies crafted and implemented business organization determines their strategic positions in the marketplace The strategic position of a business organization is also influenced by how business organization interact with the key external factors impacting on their operations and business activities. According to Kristandl and Bontis (2007, p.943), PEST analysis relies on an organization past events and experience but plays crucial roles in determining the future of a business organization. Enz (2009, p.53) notes that PESTLE analysis is an audit a business organization can undertake to determine environmental influences affecting the business and use the findings to develop strategic decision-making. These factors do affect an organisation either positively, negatively, directly or indirectly. A closer look at how these factors affect Toyota is found in appendix 5. Politically Australia is stable country with democratic government. This ensures that rule of law is adhered to and personal property is protected. Moreover, government do not interfere with operations of firms instead they have taken time to create policies that attracts foreign investors (Curran & Jones, 2011). The positive aspect about this is that an enabling environment that supports economic growth is created. In addition, the country has created robust security system (Rudd, 2008, p.2). Economically, Australia is one of the stable countries and was not affected with economic recession. This enabled auto dealers to sell over 1 million units (Deloitte, 2012, p.8). The only challenge is the strong Australian dollar which impacts on costs of exported products (Deloitte, 2012, p.4; Toyota Motor Corporation Australia Limited, 2012d). Socially, Australia has one of the most educated population which leaves in urban areas (Rudd, 2008, p.28). This means most customers are well informed and are likely to make rational decisions. This favours Toyota vehicles since they are up to standard both aesthetically and functionally. Technologically, Australia is a mid power economy and has got influence in pacific and Asia region. The country has human resource that is capable of doing domestic innovation. However, the next important medium is internet as tool of trade. The uptake of information technology is high with both individual and business being actively involved (Australian Bureau of Statistics, 2011). In environmental perspective, there is the realization that firms can not only base their performance on profits recouped alone (Geraghty, 2010, p.141). Ethical approaches and production of sustainable products is paramount. As policy, Toyota is now producing in mass hybrid cars that are environmentally friendly. This has worked for them has they have improved corporate image (Iamandi, 2007, p.8). There numerous legislations in Australia that ensures fair play for all. 4.0 Analysis of Competitors The main competitors of Toyota Australia include Holden which is a unit of general motors’ with a market share of 12.8 % in 2011. The second is Ford with a market share of 9.2% in 2011. The other strong players include Mazda, Hyundai, Nissan and Mitsubishi respectively (Deloitte, 2012, p.10; Curran & Jones, 2011); (see appendix 2). The companies to be analysed are Holden, Ford and Mazda. Holden has given Toyota run for their money. This company focuses on delivering station wagons and saloon cars to Australian market. Holden markets different brands of vehicles in Australian market. These include Astra and Rodeo. Moreover, they manufacture high end luxury cars and sports utility vehicles in the Melbourne plant (Holden, 2012). The same can be said of Ford Australia and Mazda. Within 3 months, Alexa ranks traffic of Holden 116, 942 with Melbourne city contributing the most. Alexa (2012) ranks Holden regional traffic at 1, 763 in Australia with those who visit the website being males who have no college education. Most of these people browse from school. In this period, the site ranks Holden sub domain of holden.com.au as having 98.14%. On the other hand Ford Australia ranks 3, 368 in Australia with 23% directing searches in Australia to their site. The site is mostly visited by males aged 55-64. Mazda ranked 2,321 in Australia with most visitors having no college in education. 5.0 Conclusion The aim of the paper was to examine operations of Toyota in Australia in the context of online business. The emerging finding is that Toyota has managed to gain considerable market share in Australia. This is base on it key success factors like innovation, fuel efficient vehicles and competitively priced vehicles. The other critical factor that has enhanced customer contact points is the e-business portal. Toyota has invested in business to business model and business to consumer model where the parties can transact business, follow progress and make payments. Reference Australian Bureau of Statistics (2011). Business use of Information Technology, 2009-010. Retrieved on 14 September, 2012 from: http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/A94083FE54BF202ACA2578F 6001C2DF5?opendocument. Curran, E. & Jones, D. (2011). Toyota tops market as 2010 car sales second highest ever. Retrieved on 14 September, 2012 from: http://www.theaustralian.com.au/archive/business-old/car-sales-second-highest-on- record/story-e6frg98x-1225982946503. Deloitte (2012). Deloitte Motor Industry Services: Australian Industry Overview 2012. Retrieved on 14 September, 2012 from: http://www.deloitte.com/assets/Dcom- Australia/Local%20Assets/Documents/news- research/Press%20releases/Jane%20Kneebone/Deloitte%20Report_Motor%20Industry% 20Overview%202012.pdf. Emiliani, M. L. 2006. “Origins of lean management in America: The role of Connecticut businesses.” Journal of Management History, 12 (2): 167-184. Enz, A.C. 2009. Hospitality Strategic Management. New York: John Wiley & Sons, Inc Funaru, M. (2010). Toyota’s Business Strategies in International Markets. Retrieved on 14 September, 2012 from: http://feaa.ucv.ro/annals/v3_2010/0038v3-004.pdf. Geraghty, L. (2010). Sustainability reporting - measure to manage, manage to change. Keeping Good Companies, No. 3. Pp 141-145. Grunert, K. G. & Ellegard, C. (1992). The concept of key success factors: theory and method. MAPP working papers no 4, ISSN 0907 2101. Holden (2012). Holden Wise. Retrieved on 15 September, 2012 from: http://www.holden.com.au/products-and-services/holdenwise Iamandi, I. (2007). Corporate social responsibility and social responsiveness in a global business environment: a comparative theoretical approach. Romanian Economic Journal No. 23, pp.1-16. Kristandl, G. & Bontis, N. 2007. Constructing a definition for intangibles using the resource based view of the firm. Management Decision, 45(9): 1510-1524. Mahadevan, B. (2000). "Business Models for Internet based E-commerce: An anatomy". Working paper. Retrieved, September 14, 2012 from: http://www.pearsoned.ca/highered/divisions/text/cyr/readings/MahadevanT1P2R2.pdf Porter, M. E. (1998). Competitive Strategy: Techniques for Analysing Industries and Competitors. New York: The Free Press. Rudd, K. (December, 2008). The First National Security Statement to the Australian Parliament. Pp. 1-41. Toyota Motor Corporation Australia Limited (2012a). Sales. Retrieved on 14 September, 2012 from: http://www.toyota.com.au/toyota/company/operations/sales. Toyota Motor Corporation Australia Limited (2012b). Company. Retrieved on 14 September, 2012 from: http://www.toyota.com.au/toyota/company. Toyota Motor Corporation Australia Limited (2012c). History. Retrieved on 14 September, 2012 from: http://www.toyota.com.au/toyota/company/history. Toyota Motor Corporation Australia Limited (2012d). Finance Report. Retrieved on 14 September, 2012 from: http://www.toyota.com.au/toyota/sustainability/economic- positioning/finance-report. Appendices Appendix 1: Profitability of Toyota Australia Source: Toyota Motor Corporation Australia Limited, 2012b Appendix 2: Top 10 Vehicle Sale in 2011 Source: VFACTS, December 2011 cited in Deloitte, 2012, p.10 Appendix 3: Total Market Share by 3 Local Manufacturers Source: VFACTS, December 2011 cited in Deloitte, 2012, p.11 Appendix 4: Total Market Share (Importers) Source: VFACTS, December 2011 cited in Deloitte, 2012, p.12 Appendix 5: PESTEL Analysis Factor Issue Political Australia has a stable and democratic political environment. This means it is easier for businesses to operate. Moreover, the country has various legislations that protect all investors and ensure level playing ground. Moreover, government tend support local manufacturers which Toyota is among them. Economic Australia has relatively stable economy and was not affected by global recession. In addition, the unemployment only rose moderately during global downturn. This means it has optimum environment for doing business without worry about huge price inflation Moreover, as the economy continues to prosper there is hope that people will have some disposal incomes to spend on vehicles. Social People are well informed and they know what they want. Moreover, Australians like to buy vehicles which are locally manufactured. Technological Technology is a two edged sword. One it allows for ease of doing business through online technology. This has allowed Toyota to do e-commerce by consumers and its suppliers. The next is technology as enabler for innovation. Toyota is known for its innovative approaches. They are the first to produce fuel efficient vehicles that are affordable and guarantees performance. Legal There are various legal constructs aimed at creating level playing field for all businesses. These include those protecting intellectual properties. Environmental Globally, there are undergoing strategies aimed at ensuring production of environmentally-friendly products. This means the company has to be environmentally conscious. In realisation of this, Toyota had embarked in mass production of hybrid cars which are environmentally friendly. Source: Author, 2012 Read More