Whats Wrong with Toyota - Essay Example

What’s wrong with Toyota? Toyota continues to value hard work, commitment to the environment, building cleaner and greener cars, being active in community, creating jobs, making history and celebrating diversity. These values without question have geared Toyota through out the attainment of its significant share in the market today. Not only that, its mission statement: “To attract and attain customers with high-valued products and services and the most satisfying ownership experience in America” serves as its guiding principle towards making significant actions in obtaining its goals. It is also through this mission statement that Toyota was able to focus even more in the U.S., its old market and where it gets its high portion of sales and market share. In fact, focusing in the U.S. market was never been a mistake considering that the U.S. is one of the most influential countries in the world when it comes to setting various trends in economics and politics in general. Toyota sales were growing in this country and in fact, Toyota was heading on to even more wider expansion just even as it continues to grow in popularity and acceptance around the world. However, amidst global economic recession, and despite the fact that this strongly caused strong negative impact to every automaker around the world, Toyota is not accustomed to experience them. To wit, Toyota’s experienced troubles are the following (Flint, 2009): 1. Operating loss of almost $5 billion in 2008, with $8 billion lost from January to March and sales just like every other auto industry sales. 2. Within the last three months this year, Toyota has been outsold by Ford Motor which was unexpected since Toyota was number two to General Motors. 3. Toyota exports 40% of its American sales from Japan but the yen had become so strong for the dollar. In 2007, Toyota was able to sell 9.37 million cars world wide, an indicator that it was then making out well. In fact, it made profits of $2.27 billion beating the General Motors as the world’s largest car maker as of the year 2007 (Japanese economy hitting record lows, 2008). However, it had an operating loss almost $5 billion in 2008 (Flint, 2009). In 2008 from January to October, Toyota sold only 7.74 vehicles and net revenues fell 6.3% ( Caggeso, 2008). In the last quarter of 2008, the Japanese exports dropped by $60 billion as a result of a rising Yen making cars and electrical goods expensive overseas (Japanese economy hitting record lows, 2008). This made its sales in its biggest market, the USA suffered. Based on last year’s sales, its sales was down 38% in the U.S., 20% in Canada, 30% in Japan and 18% in Europe (Flint, 2009). “Dai-Ichi Life Research Institute said: ‘Japanese exports are in a state of annihilation’” (Japanese economy hitting record lows, 2008). Toyota has never been accustomed to failures considering that the automotive industry where it belongs identifies it as one of the world’s largest automotive producers which aims to promote quality products in an international scale by making the world’s one of the greatest markets a target, the United States of America. Toyota is also known as the Japanese giant because it is the leading vehicle manufacturing company in Japan and without question, one of the highest earning companies in the country. In line with its ambitious goal to top in the world’s automotive Industry, there was a leaked report that Toyota’s Global master plan is to grab 15 percent of the global market by 2010 to outperform General Motors by simply extending substantial steps in developing countries like India, China, Brazil and Russia (Greimel, 2006). Definitely, Toyota has already set foot in these markets and made efforts to continuously promote its line of products and services. This further proves that within its moving upward spiral growth, Toyota was making significantly fast and aggressive efforts in reaching its prime objective. Toyota’s Industry Primarily known to conduct business in the automotive industry, Toyota actually operates in the following segments (Toyota Motor Corporation, 2009). A. Automotive operations 1. Designs passenger cars, minivans and commercial vehicles such as trucks and related parts and accessories. 2. Manufactures passenger cars, minivans and commercial vehicles such as trucks and related parts and accessories. 3. Assembles passenger cars, minivans and commercial vehicles such as trucks and related parts and accessories. 4. Selling of passenger cars, minivans and commercial vehicles such as trucks and related parts and accessories. 5. Development of intelligent transport system. B. Financial services operations 1. Provides financing to dealers and their customers for the purchase or lease of Toyota vehicles. 2. Provides retail leasing through the purchase of lease contracts originated by Toyota dealers. C. Other operations 1. Designing and manufacturing of prefabricated housing and information technology related business such as e-commerce marketplace called GAZOO.com. Market Summary Toyota operates on the three operations segments mentioned above and its goal is to establish products which of high quality and of high market acceptance. In general, Toyota is a market-driven company which always relies to manufacturing of products based on consumers’ taste. Its marketing mission is to predict consumer trends and create a line up of cars and trucks to capitalize on them (Taylor, 2007). This is to simply put it that Toyota can target every audience for as long as there is a specific trend of taste that can be further nurtured into profitable production of innovative product inspired by customers’ taste. Not only that, Toyota ensures to target its market’s trends by placing a great focus of effort on research about customers’ preferences. With this, it is never hard for somebody to create a feel for every Toyota product. In the case of Price Toyota, an established dealer group, a continued focus on customer proves to be a good way in maintaining customer loyalty in tough times (R. L. Polk & Co., 2009). This means intense focus is needed to create customer loyalty which is another strategy in line with marketing function and promotion. “Toyota’s primary markets of its automobiles are Japan, North America, Europe and Asia” (Toyota Motor Corporation, 2009). North America and Western Europe are its mature markets. Including Toyota, the United States is the largest market for most foreign automakers (Caggeso, 2008). Maintaining quality product and efficiency is one of the assurances why Toyota brand is still gaining popularity in the world. According to J.D. Power and Associates, an international market research company, Japanese cars are the most reliable in the world and Toyota’s Lexus brand was top in the survey conducted (Japanese cars still most reliable, 2008). Market Share and Competitors Toyota has been a strong player in the automotive operation and industry for many years. Toyota already conquered the world’s car market. In 2007, Toyota has 15% market share in the U.S. due to the fact that this company has been better at reading American car psyche (Taylor, 2007). Figure 1: (Toyota Global Sales and Market Share: 1970 – 2003, 2009) In Figure 1, it is shown that Toyota Global Sales and Market Share in 1970 was 6% and 27% in 2003. It is also projected in Figure 1 that the U.S. market share of Toyota is 13% by 2009 which is actually 2% lower than the actual in 2007. The major global competitors of Toyota are GM, Ford and Dainlerchrysler. In Asia, the major competitors of Toyota are Ford Motor Corporation, Bayerische Motoren Werke AG, Nissan Motor Corporation, Hyundai Motor Corporation, KIA Motors Corporation, Mazda Motor Corporation, Mitsubishi Motors Corporation and Suzuki Motor Corporation (Ohnsman and Ramsey, 2009). It is important to highlight that these automakers are giving special focus on incentive spending as the special part of their promotion. However, “Automakers’ spending on incentives averaged $2,946 a vehicle, a 27 percent increase from a year earlier, according to Edmunds.com. That was down from the record of $3,165 in March” (Ohnsman and Ramsey, 2009). Market Segment At present times, Toyota was in line with positioning its products and trying to capture young car buyers but they can be a tough market to crack (Tilin, 2003). Younger buyers are essential to Toyota’s product development. In fact, the company was able to continue promote its product to this market segment and never losses hope in trying to win the taste of the young generation. In 2009, despite market shift, Toyota confirms next 4Runner in development taking a new approach to court younger buyers (Paukert, 2009). However, long before shifting to its present market objective, Toyota was trying to constantly target consumers who are looking forward to find a real-world, long-term vehicle quality and dependability. In 2008, considering its economic climate, durability was a key component for buyers’ buying decision (Toyota Motor Sales Earns 11 Awards in 2008 J.D. Power and Associates Vehicle Dependability Study, 2008). Toyota was also consistent in hitting target customers who are simply looking for quality, innovation and satisfaction. The birth of Lexus can attest to this (From Question Mark to Landmark – Lexus Celebrates 20 Years, 2009). Not only that, Toyota did not fail to promote products to customers who are looking forward to efficiency and trying to help environment. There are products created to help improve the environment and reduce dependence on foreign oil (Toyota and Lexus Hybrids Top One Million Sales in the U.S, 2009). Even the fashion-focus customers cannot help but give Toyota a try. Toyota sees to it that its styles are not hopelessly outmoded but in line with the current trends and highly fashioned customer preferences. Media Wide media coverage on TV commercials, magazines, newspapers and internet are among the commonly used media in line with Toyota’s product promotion and strategic distribution. In particular, in today’s age of cyberspace, product sales are much more reliably fast and easy to acquire. Thus, internet-based marketing which is one of the effective approaches done by Toyota increases the chance of its products to easily reach their target. One basic example is the emergence of social networks in the internet where everybody is open to participate by commenting or appreciating Toyota’s line of products and offered services. Nowadays, promotion of products can be of varied forms and it goes even sophisticated. However, Toyota is still relying on trust, partnership and loyalty and thus, giving much more focus on its dealer management program. These dealers are its channels where the products can effectively reach the target buyers. Toyota was never left behind to receive prestigious awards from some independent group which were trying to appreciate its continuous efforts in providing best products and customer satisfaction. This can be a much reliable marketing tool and Toyota was making use of this to the fullest. In its website www.toyota.com, many articles about its current news and events which were positively promoting its line of products were posted and downloadable. Toyota was promoting efficiency and trying to help the environment. This alone had gained significant market output considering that a number of target customers viewed this as significantly appealing. Toyota consistently adapts conference and media coverage during product launching. Toyota’s automobile models such as Lexus and Prius had prestigiously acquired popularity just even before they were put into the test by customers. Toyota also has consistent and regular updates of progress on its environmental goals. This is a regular publication which can also be publicly viewed at www.toyota.com. Products The following are some of Toyota’s prestigious automobile models with their starting prices (Toyota-Inspired Designs to Debut at Fashion Focus Chicago, 2008) Yaris $12,205 Matrix $16,290 Corolla $15,350 Camry $19,395 Camry Solara $$20,180 Venza $25,975 Avalon $27,845 Tacoma $15,170 Tundra $23,155 RAV4 $21,500 FJ Cruiser $23,320 Highlander $25,705 4Runner $28,640 Sequoia $38,530 Land Cruiser $64,755 Sienna $24,000 Prius $22,000 Camry Hybrid $34,700 The above are all competitive prices subject to minimum adjustment from discount and other promotional activities. Products in Toyota are appealing to the public through their value proposition. Toyota emphasizes three important criteria why its products should be chosen by customers. These can also be considered as Toyota’s unique selling propositions. 1. Reliability 2. Parts supply 3. Quality These are three most basic criteria which Toyota believes crucial to customer’s purchase. In the case of reliability, Toyota ensures their customers that even in hardest conditions; its products are built to keep on working. Toyota also assures its customers that the parts of its products are genuine and are available when customers need them. Toyota sees to it that it provides only the products that meet customer’s requirement. Customer satisfaction is the primary objective in Toyota since it is an essential part of company’s improvement and success. Thus, continuous improvement of products and quality system is very important to be undertaken. Toyota: SWOT Analysis with regards to product production in the Global market Internal Strengths Weaknesses World’s third largest car manufacturer, biggest Japanese car manufacturer Reliable and High Quality Image R&D, biggest spend amongst car manufacturers; innovative ‘Just In Time’ Production Lexus brand, other strong brands Understanding of other market/ culture Distribution network/ car dealer Prestige/ image when compared with other specializing car manufacturers Lower market share in some part of the world External Opportunities Threats Hybrid technology Introduction of new models Online activities, online buying Strong competitors in every segment; Ford, GM, VW, Mercedes, BMW, Honda and others Public/Alternative transportation Heavy taxation/ fuel prices increase Global economic recession If all of these issues will be properly addressed, this will definitely make Toyota a cut above all other automakers around the globe. FFB Features. There are different features provided for every model that will suit to customer’s requirement. Functions. Ensuring features to suit customer’s requirement will result to usage and brand reliability. Benefits. Brand reliability on the other hand will result to ultimate customer experience and satisfaction. Brand Architecture Toyota is a strong brand for it is the third largest and renowned car brand in the world. The Main Marketing Issues The problem with Toyota was that it was able to build new factories and products just as the market in the U.S. fell apart. In addition, this rapid expansion made its products’ quality fell off. The alternative solutions to this problem are the following: 1. Brand strengthening 2. New market penetration 3. Product selection The chosen solution to the problem is the following: 1. Much more aggressive promotional activities Brand strengthening Toyota is a renowned brand name in the world and in fact, its higher market share in the U.S. for the past years can be a significant marketing tool to continuously strengthen its brand. Toyota has to ensure customer loyalty and so on. However, strengthening its brand may never be positive if negative public perception about Toyota continues to grow in number. Thus, this option might not work at all if it will never work out well the quality of its product in the first place. New market penetration Aside from the U.S. where Toyota really focuses to earn a share in its target market, countries like China, India and in some part in Europe can be promising markets too considering the number of population involved. This solution may never work effectively if for instance, people in China or in India will never develop a significant taste towards Toyota brand. Thus, it is a challenge on Toyota’s end to be globally competitive in its market research. Product Selection It would be much convenient for Toyota to continue manufacturing products which are gaining too much popularity and public acceptance. The positive result of this would be to ensure higher sales yet minimize amount of production costing. However, this strategy may never consider other customers’ preferences coming from a subjectively small number yet still belonging to a significant portion of the market. Another thing, with this strategy, Toyota might be well restricted to continue product innovation which at some point attracts customers well. Much more aggressive promotional activities After knowing the strategies of Toyota when it comes to its promotion of products, it would be much more interesting to try to look at it improves aggressively its past promotional activities. This is to exactly put it that it has to add its expenditures on promotional activities. Promotional activities are effective in terms of gaining public interest towards certain products. This can be proved how Toyota had gained significant market share through its current promotional strategies. However, this alone needs to be given much more focus considering that a lot of people may never be aware of its new line of products and innovation. The goal of designing promotional activities is to make it effective so as to significantly obtain revenue. However, this can be even much more risky since additional expenditures shall be ensured yet Toyota needs to consider its target market that at present situation very varied. This is to simply put it that Toyota has to ensure a promotional design that will consistently cater target customers in all walks of life around the world. Promotional activities like magazines and TV commercials are very effective media to promote product recall. However, this time, Toyota might as well consider using Hollywood stars as endorsers of the product. Asian people for instance, are known to easily adapt western culture and thus Western artists can easily influenced them in terms of trends and other related matters. The bottom line of this is that Toyota will learn not to be too dependent on the U.S. There are still great and good markets that remained unexplored. References Caggeso, M. (2008). Toyota to Slash 2009 Sales Outlook, Cut Costs. Retrieved July 19, 2009, from Money Morning Web site: http://www.contrarianprofits.com/articles/toyota-to-slash-2009-sales-outlook-cut-costs/10142. Flint, J. (2009). What’s wrong with Toyota? Retrieved July 19, 2009, from Forbes Web site: http://www.forbes.com/2009/07/14/toyota-akio-toyoda-business-autos-backseat-driver.html. From Question Mark to Landmark- Lexus Celebrates 20 Years. (2009). Retrieved July 21, 2009, from Toyota Web site: http://www.toyota.com/about/news/product/2009/01/10-1-lexus20years.html. Greimel, H. (2006). Report: Toyotaeyes 15% global market share. Retrieved July 19, 2009, from USA Today Web site: http://www.usatoday.com/money/autos/2006-11-13-toyota_x.htm. Japanese cars still most reliable. (2008). Retrieved July 19, 2009, from Breaking News English Web site: http://breakingnewsenglish.com/0808/080807-japanese_cars.pdf. Japanese economy hitting record lows. (2008). Retrieved July 19, 2009, from Breaking News English Web site: http://breakingnewsenglish.com/0812/081223-japanese_economy.pdf. Ohnsman, A. and Ramsey, M. (2009). Toyota Leads Asia Automakers’ U.S. Market- Share Dip (Update 2) . Retrieved July 23, 2009, from Bloomsberg Web site: http://www.bloomberg.com/apps/news?pid=20601080&sid=aEYYQkTvEMMQ&refer=asia. Paukert, C. (2009). Despite market shift, Toyota confirms next 4Runner in development. Retrieved July 19, 2009, from Auto Blog Web site: http://www.autoblog.com/2009/03/09/despite-market-shift-toyota-confirms-next-4runner-in-developmen/. R. L. Polk & Co. (2009). How Price Toyota Acquires and Retains Customers through Targeted Direct Marketing. Retrieved July 19, 2009, from Polk Web site: http://www.polk.com/TL/CS_200902_PriceToyota.pdf. Taylor, Alex III. (2007). America’s best car company. Retrieved July 20, 2009, from CNN Money Web site: http://money.cnn.com/magazines/fortune/fortune_archive/2007/03/19/8402324/index.htm. Tilin, A. (2003). Will the Kids Buy it? Toyota hopes that hip young car buyers will flock to Scion, its first new division in 14 years. But Generation Y is one tough market to crack. Retrieved July 19, 2009, from CNN Money Web site: http://money.cnn.com/magazines/business2/business2_archive/2003/05/01/341961/index.htm. Toyota and Lexus Hybrids Top One Million Sales in the U.S. (2009). Retrieved July 22, 2009, from Toyota Web site: http://www.toyota.com/about/news/product/2009/03/11-1-hybrid.html. Toyota Global Sales and Market Share: 1970 – 2003. (2009). Retrieved July 21, 2009, from Automotive Information Network Web site: http://www.automotivedigest.com /content/ displayArticle.aspx?a=55702 (Toyota’s market share). Toyota-Inspired Designs to Debut at Fashion Focus Chicago. (2008). Retrieved July 24, 2009, from Toyota Web site: http://www.toyota.com/about/news/product/2008/09/19-1-fashionfocus.html. Toyota Motor Corporation. (2009). Retrieved July 19, 2009, from Reuters Web site: http://www.reuters.com/finance/stocks/companyProfile?symbol=TM.N. Toyota Motor Sales Earns 11 Awards in 2008 J.D. Power and Associates Vehicle Dependability Study. (2008). Retrieved July 24, 2009, from Toyota Web site: http://www.toyota.com/about/news/product/2008/08/07-1-jdpower.html. Read More