Toyota Motor Strategic Marketing Management - Essay Example

Toyota Motor Corp Strategic Marketing Management Your name Class Affiliation/ University Course name Professors’ name Date Table of Content Introduction 4 History of Toyota Products 4 Market Analysis 6 Swot Analysis: 6 Strengths 6 Weaknesses 8 Opportunities 8 Threats 9 Pest Analysis 10 Porters Five Forces 11 Market Trend Analysis 13 Marketing Strategy 14 Conclusion 16 Appendices 19 Introduction This paper seeks to offer a strategic analysis of Toyota Motor Company by covering three integral parts i.e. history of Toyota products, market analysis, market trend analysis, and 3-year, 5-year, and 10-year marketing strategy. Briefly, Toyota is Japan-based investment dealing with locomotives and financial services. The renowned company conducts its activities in three particular segments starting with automobile segment, which is involved in design, manufacture, and sale of vehicle products including sedans, minivans, 2BOX cars, SUVs, and trucks in addition to vehicles’ respective parts and accessories. The second segment is Finance category that provides financial services in relation to sale and leasing of Toyota products, both cars and equipment. Thirdly is Others Segment, which plays the role of designing, manufacture, and sale of car housings. Besides, the third segment handles information and communication businesses. The New York Times (2012) confirmed that Toyota Motor Corporation had already created 511 subsidiaries and 217 related companies by the end of March 2011. The news article further confirmed a move by Toyota to acquire Kanto Auto Works Ltd at the beginning of 2012. History of Toyota Products Wagner (2012) traced the manufacture of the first Toyota product in 1936 when the company was still a subsidiary of Toyoda industries. The first engine, classified as Type A, was produced in 1934. Afterwards, production of the first car and truck i.e. Model A1 and G1 followed in 1935. It is important to note that more success was registered by building more trucks whose parts were widely interchangeable with Chevrolet engine of mid 1930s. During the Second World War, Toyota managed to build few vehicles for the Imperial army due to material shortage. This insufficiency forced the company to manufacture body panels i.e. for KB trucks, using plywood. In post war era, the United States military permitted Toyota to step up its vehicle production. Toyota capitalised on U.S. military training manual to improve its processes and develop employees. Melito (2006) confirmed that even though U.S. discarded the industrial training program in 1945, Japan utilised it to develop kaizen and other manufacturing processes. Toyota proceeded with the manufacture of trucks until 1947 when it shifted focus to the manufacturer of Toyopet, Model SA (Toyoland.com, n.d, para 7). Toyopet operated under top speed of 55 mph derived from a 27 Horsepower engine. Nonetheless, Toyopet was intended for cheap usage on rough terrain of post-war Japan. Its production lasted for five years during which 215 SA Toyopet were developed. Later, 194 SD vehicles were introduced in a time span of 2 years. Wagner (para 3) estimated that by 1955, Toyota was already manufacturing 8400 cars per year a figure which shifted to 600,000 by 1965. Other post-war vehicle produced by Toyota was civilian truck branded Land Cruiser. The Crown, a first luxury vehicle, was also manufactured in 1955 followed by 1-liter Corona in succeeding years. In 1957, North Americans bought more Chevrolets and Fords as compared with Datsun and Toyota accordingly forcing Toyota producers to assess how they could make their vehicle more appealing. Toyota then returned with prestigious Corona in 1964 that made the company increase its sales from 6,400 in 1965 to 71, 000 in 1968, and 300,000 in 1971(Wagner, 2012 ). 1970s was a tough period for automotive industry owing to oil restriction of 1973 and fuel short experienced in 1978. Motivated by American demand for fuel-efficient vehicle, Toyota resorted to producing new Corona, Corolla, and Celica (Algoe, 2012). When Toyota discovered that Lincoln and Cadillac had lost hold of North American market due to customer demand for fuel-efficient vehicle, Toyota seized this opportunity to produce Luxury Lexus, LS 400, in 1989. Market Analysis Toyota manufactures cars under three specific labels: Toyota, Scion, and Lexus. Founded in 1989, Lexus falls under luxury division of Toyota products and mainly targets high-ended customers. Interior design of Lexus vehicles i.e. leather interiors, touch screen navigation, innovative technology, and advanced quality control is in such a manner to give owners high utility. The Scion label was introduced in 2002 to satisfy young generation who are more interested with trendy features. Models that fall under Scion category comprise xA, xB, xD, tC, and iD. The third label is Toyota and houses several models namely SUVs, sedans, coupes among others. Among Toyota models, Toyota Camry and Toyota Corolla are popular with customers. Swot Analysis: Strengths Toyota’s size and brand name is the first source of strength for the company. Toyota investment leads in manufacture and sale of vehicles in the world. A part from operating in over 170 countries, Toyota brand is widely known for its quality and fuel efficiency. The brand is also friendly to the environment and comes in customised varieties. The second strength is with respect to pioneering innovation consequently granting the company a competitive edge in technology. Through innovation, Toyota has been able to meet frequent changes in industrial trends and consumer tastes. One of technological innovation is the manufacture of gasoline-electric hybrid automotive that culminated to millions of sales in 2010. Thirdly is the manufacturing process that maximises profits by employing Just-In-Time production, Total Quality Management, and Six Sigma. Capacity to maintain close relationship with consumers through an integrated supply chain and effective communication system is a source of insurmountable strength. Organizational culture gives Toyota employees an opportunity to participate in continuous development otherwise known as Kaizen. To comprehend strength of Toyota it is imperative to compare Toyota Camry and Nissan Altima as follows: Price Demand Sales Toyota Camry In 2011, Manufacturer's Suggested Retail Price (MSRP) was $21,955 - $29,845. Highly demanded in the U.S. market According to Gannett Company (2012), Toyota Camry was the best selling in U.S. in 2011 with sales of 308,510. Nissan Altima In 2011 Manufacturer's Suggested Retail Price (MSRP) was $20,550 - $25,570 Facing relatively high demand This was the second best-selling car registering sales of 268,981. Weaknesses Toyota’s large size, expansive market share, and high output can be source of weakness especially when Japan is hit by a natural disaster. Earthquakes have a devastating effect on Toyota. The virtue of being a global player who is marketing products across the world exposes Toyota to fluctuating economic and political conditions. It is also obvious from global orientation that Toyota faces movements in exchange rates. The second weakness is a decreasing market share that was recorded in 2011 where General Motors managed to record higher sales compared Toyota. A study by The Good Car Guy (2011) showed that Ford Motor Company, BMW Group, and General Motors managed to increase their market share whilst Toyota reduced its share of U.S. market by 0.6 %. Driessen (2011) discussed how Toyota recalls negatively affect consumer’s perception of Toyota products. Companies who will benefit from Toyota recall are the giants in the industry including Honda. Opportunities The rapidly expanding economies of China presents an avenue for Toyota to increase its sales while lowering costs incurred in production. Bloomberg News (2011) focused on Toyota’s intention to enter fast growing economies of China, India, and Brazil. The shift in consumer preference to small, fuel-efficient, and cost-effective vehicles is an opening for Toyota to make more sales since the company has always been a leading innovator. Technological advancement and consequent manufacture of Lexus RX 400h hybrid and Toyota Prius has contributed to environmental conservation. These varieties of vehicles are also efficient in fuel consumption therefore fitting well in the present era of sky rocketing oil prices. A side from making large sales out of these technologically advanced vehicles, Toyota has earned income from selling technology to other manufacturers including Ford. The launch of New Aygo is an effort to capture the growing urban youth market niche. Specifically, Aygo structure is convertible and well designed to satisfy DJ culture. Threats Strengthening Yen against Dollar and Euro is harmful to Toyota margins as production cost increase. Economic slump i.e. recession affect demand in an economy and therefore reduce the number of vehicles sold by the company. In appreciation of the fact that Toyota is a global player, the company is exposed to many competitors especially from China, India, South Korea, and Eastern Europe. Chauhan (2011) affirmed that introduction of Toyota’s Etios Liva in India would encounter stiff competition from Indian Suzuki. Frequent natural disasters in Japan coupled with rising price of fuel hampers growth of sales. Ohnsman (2011) discussed Toyota’s strategic move to introduce Camry with an intention of boosting sales in a market that had been destroyed by Japan’s earthquake and tsunami. The third threat is regular changes in customer preferences i.e. customer preferring small and fuel-efficient vehicles. An article by Valdes-Dapena (2011) addressed the 2005 Toyota recall of vehicles following quality issues. Among those recalled were 2004/2005 Toyota Camry, SUVs, Sienna Minivans, Solara convertibles, Lexus ES330, sedans, and RX330 SUVs (Valdes-Dapena, para 3). This automatically disturbs customer’s perception of Toyota products and eventual demand. Pest Analysis Political or rather legal environment influencing motor industry is pressure from environmentalist including Environmental Protection Agency to reduce carbon emission. In the same line, consumer protection legislation was introduced to control quality of products sold to the consumer and that is why Toyota recalled some products following quality concerns. Secondly, globalization has opened up markets around the world such that investors can easily enter a country and establish an industry. Economic environment of motor industry is marked by fluctuating exchange rates. In the past few years, Yen strengthened against the Dollar and Euro. This implies that car manufactures who rely on supply chain and production from Japan experience inflated costs. In consequence, manufacturers fail to reach a competitive edge in pricing products. Recent economic slump, emerging markets of China, India, Indonesia, Brazil, and the ever-expanding price of fuel describe also the economic environment of motor industry. Social environment mainly consist of change in customer preferences. Customers are now purchasing fuel-efficient and hybrid vehicles. In acknowledgment of increased number of working women, the desire for convenience motives households to purchase a vehicle. Life style and culture i.e. the American dream of owning a vehicle or two influences demand for locomotives. Improvement in technology is the most important environment in automotive industry. Toyota has always taken steps to improve its products through information technology. The company has pioneered innovation consequently granting it a competitive edge in technology. Through innovation, Toyota has been able to meet frequent changes in industrial trends and consumer tastes. One of technological innovation is the manufacture of gasoline-electric hybrid automotive that culminated to millions of sales in 2010. Porters Five Forces Threat of New Entrants in automotive industry is very low owing to very high investment requirements and risk involved. Well-established companies also dominate the industry. Toyota, for example, is a well-known brand and leads in several segments. This company is as well a leading innovator technologically thus giving it a competitive edge over other companies i.e. general motors. Threat of substitutes in motor industry is average following existence of several other forms of transport namely bicycles, rail, air, and walking. Different from vehicles, these forms fail to offer the much need utility, convenience, independence, and value. It is important to highlight how cultural values affect choice of means of transport. Some nations, constrained by geography, race, religion, or class, may not consider owning a vehicle as the first priority. On the other hand, American dream of owning a vehicle pushes people to purchase a car or two. Rivalry in the global automotive industry is very high and includes competition from GM, Ford, Daimler Chrysler, and others. Entrance of Japanese manufactures Honda and Toyota, into US market in 1980s led to high competition for market share (Ohnsman, 2011). Cultural diversity and difference in philosophical orientation has further stiffened rivalry in automotive industry. Slow growth in U.S. and Western Europe Markets forces companies to fight for the market share. Nonetheless, companies are now moving fast to invest in the growing economies of China and India. Apparently, while automotive industry experience high fixed cost when manufacturing their products, consumers on the other hand encounter low switching costs, which heightens level of rivalry. Buyer power is high as consumers dictate the nature of cars they want i.e. fuel-efficient cars demanded as price of oil in the world market rise. Demand for Hybrid vehicles, which offer low cost of operation, is increasing. Coupled with presence of varieties in the market and low cost of switching, buyers face strong bargaining power. Toyota has been able to lower buyer power by practising cost cutting measures consequently positioning themselves at a better position compared with competitors. Supplier power in auto industry is low given that car manufactures can easily switch to other suppliers. Diversified nature of supplier’s network and the aspect of providing essential factors for automaker culminate into establishment of long-term contracts with strict rules on quality and standards. A supplier who breaks these rules or charge high prices for supplies motivates a manufacturer to resort to other suppliers. More so, it is possible to relocate supply chain to a cheap external supplier. Toyota has been able to derive own competitive advantage by way of establishing strong relationship with suppliers. Furthermore, Toyota operates keenly its supply chain hence low supplier power. Market Trend Analysis The first trend is cost of raw materials, which continue to increase. A study by Belskiy (2010) shows vital commodities, steel and Iron, has been experiencing incessant price changes. This experience saw manufacturers sign short-term contracts with automakers and share risk in the highly volatile market. Even though manufacturers are now shifting to the use of aluminum, steel is still the most vital component of manufacturing vehicles (Belskiy, par 6). Secondly is price of fuel, which dropped from $4.11 per gallon in July 2008 to $3.42 per gallon in November 2011 (Reuters, 2005). The anticipation that the price of gasoline will increase in the future is a motivating factor for consumer to demand fuel-efficient and hybrid vehicles (Reuters, par 3). The third trend is an increasing demand for used cars. Over the past decades, price of used car has been rising due to increasing demand for these vehicles. This trend will offer stiff competition to new cars. Youngs (2010) emphasized that customers had resorted to used cars as world economy moved towards recovery from the global recession. High demand for latest technology and increased safety forms the fourth trend in the industry. Notwithstanding the fact that manufacturers invest in research and development to come up with new products, they have not succeeded in keeping pace with the rate of technological change. In-vehicle telematics that guarantees instant safety, security, and communication is a technological advancement that will assist a driver when driving around. Marketing Strategy 1. 3-year strategy Objectives Strategy 1. increase productivity Increase output while investment, work force, and machinery are kept constant. Even though raw materials will increase proportionally with output, operating expenses remains constant hence productivity. 2. Increase promotion of Toyota products in the China, Indonesia, Brazil, and India This will be done by forming new partnerships with advertisers in unsaturated markets of China, Indonesia, Brazil, and India who will revamp the business in addition to presenting Toyota products in creative way. Locally based advertisers will also eliminate conflicting messages about Toyota products thus increasing the possibility of making more sales. Messages contained in the advertisement should have the cultural outlook of local community. Design a strategic team who will handle issues regarding conflicting advertisement and cultural biases. 3. Improve operational efficiency Toyota should move into real time enterprise by reducing cycle times. Design, production, and distribution should be fast for purposes of gaining competitive edge. Emphasize just in time production Provide for flexibility in manufacturing 2. 5-year strategy Objectives Strategy 1. Introduce more fuel efficient and hybrid vehicles Invest in research and development to come up with a car that uses less fuel and contributes minimally to environmental pollution. Build light and small size vehicles Investigate the possibility of using charged battery to run a vehicle 2. Form conglomerates in mature markets This will necessitate Toyota to merge with other companies in order to increase their market coverage. Examples of companies that previously merged are Daimler-Benz AG and the Chrysler Corporation whilst Nissan and Renault formed an alliance in 1999. 3. 10-year Strategy Objectives Strategy 1. Build technology that allow cars to communicate safe distance between themselves Invest in research and development 2. Build a diversity program Change all spheres of business including customer care, production systems. Use a production model that eventually improves vehicle performance Conduct employee improvement program Conclusion This paper began by discussing the historical basis of Toyota products. The first section identified that the first car and truck, Model A1 and G1, were manufactured in 1935. Various other models were then manufactured in subsequent years. To understand Toyota, its environment, and the industry itself, market analysis was conducted. Tools deployed in the analysis include SWOT analysis, PEST Analysis, and Porter’s Five Forces analysis. Before putting down a marketing strategy for Toyota, trend analysis was performed to comprehend available avenues for development or rather advancement. References Algoe, S. (2012). History of Toyota Motor Corporation. Retrieved March 27, 2012, form http://saraalgoe.hubpages.com/hub/ToyotaLTD. Belskiy, V. (2010). Will Rising Steel Prices Rob the Auto Industry of Its Recovery? Retrieved March 28, 2012, from http://www.frost.com/prod/servlet/market-insight- top.pag?docid=198319657. Bloomberg News. (2011). Toyota Chief Targets Emerging Markets, Risk Managemet. Retrieved March 28, 2012, from http://www.fa-mag.com/green/news/6971-toyota- chief-targets-emerging-markets-growth-risk-management.html. Chauhan, C. P. (2011, Jun 28). Toyota Etios Liva: First serious competitor to Maruti in compact cars. The Economic Times. Retrieved 28 March, 2012, from http://articles.economictimes.indiatimes.com/2011-06- 28/news/29712699_1_premium-hatchback-segment-compact-cars-small-cars. Driessen, E. (2011). How Hyundai can benefit from the Toyota recalls. Retrieved March 27, 2012, from http://www.pointlogic.com/news/white-papers/13-how-hyundai- can-benefit-from-the-toyota-recalls.html. Melito, S. (2006). December 8, 1945: Toyota Resumes Production. Retrieved March 27, 2012, from http://cr4.globalspec.com/blogentry/673/December-8-1945-Toyota- Resumes-Production. Ohnsman, A. (2011, December 15).Toyota Threatened in U.S. by Camry Converging Competition: Cars. The Bloomberg. Retrieved March 28, 2012, from http://www.businessweek.com/news/2011-12-15/toyota-threatened-in-u-s-by- camry-converging-competition-cars.html. Reuters. (2005, September 26). High Gas Prices Changing Auto Market. Reuters Retrieved March 28, 2012, from http://www.foxnews.com/story/0,2933,170297,00.html. The Good Car Guy. (2011). U.S. Auto Brand Market Share Chart - September 2011. Retrieved March 27, 2012, from http://www.goodcarbadcar.net/2011/10/september-2011-us-auto-brand- market.html. The New York Times. (2012, March 27). Toyota Motor Corporation. The New York Times. Retrieved March 27, 2012, from http://topics.nytimes.com/top/news/business/companies/toyota_motor_corporatio n/index.html. Toyoland.come. (n.d). Toyota History: Corporate and Automotive. Retrieved March 27, 2012, from http://www.toyoland.com/history.html. Valdes-Dapena, P. (2011, Nov 9). Toyota recalls 420,000 cars in U.S. Cable News Network. Retrieved 28 March 28, 2012, from http://money.cnn.com/2011/11/09/autos/toyota_lexus_recall/index.htm. Wagner, R. (2012). The History of Toyota Motors. Retrieved March 27, 2012, from http://www.ehow.com/about_5369156_history-toyota-motors.html. Youngs, L. (2010) .The Used-Car Conundrum. Retrieved March 28, 2012, from http://www.portfolio.com/industry-news/automotive/2010/03/01/used-car- demand-outstrips-supply-in-challenging-auto-market/. Gannett Company. (2012). Toyota Camry remains U.S. top- selling car in '11. Retrieved March 30, 2012 from http://www.usatoday.com/USCP/PNI/Nation/World/2012- 01-29-PNI0129cars-briefsPNIBrd_ST_U.htm. Appendices Appendix A: Growing demand for fuel-efficient vehicles % increase from Year Ago Market share Category March 2011 1st Quarter 2011 March 2011 1st quarter 2011 March 2010 1st quarter 2010 Hybrids 46.4% 33.9% 2.7% 2.5% 2.2% 2.3% Clean Diesels 46.1% 42.9% 0.7% 0.7% 0.6% 0.6% Very small cars 30.0% 23.3% 3.6% 3.5% 0.3% 3.4% All vehicles 17.2% 20.2% 100.0% 100.00% 100.0% 100.0% Source: Reuters (2005) The categories of very small cars as indicated in the table above are vehicles such as Ford Fiesta and Honda Fit. Appendix B: Rising gas prices Source: GasBuddy.com (2012) Appendix C: Toyota SWOT Internal Analysis Strengths Weaknesses Leadership in size and brand is well known Innovation leader Products are customised Customer Satisfaction & Loyalty Brand is friendly to the environment Utilize Cutting Edge Technology i.e. gasoline-electric hybrid automotive Culture that empowers employees Research and development Size and wide market coverage is a weakness especially when it comes to natural disasters. Being a global player exposes Toyota to adverse economic and political conditions i.e. movement in exchange rates Decreasing market share recorded in 2011 Toyota recalls is a disincentive for a customer to buy Toyota products External Analysis Opportunities Threats Moving into Emerging Markets China, India, and Brazil Customer preference for small, fuel-efficient, and cost-effective vehicles is an opening for Toyota to make more sales since the company has always been a leading innovator in this area Manufacture of fuel efficient vehicles fits a modern society where consumers are sensitive to price of gas Launch of New Aygo to capture urban life. Vertical & Horizontal Integration Opportunities to Increase Customer Base Develop More Products Strengthening Yen against Major currencies Exposure to competitors i.e. general motors World recession especially when operating in the world market. Rising cost of raw materials Regular change in customer preferences Competition From Domestic Level Companies Market Growth is Slow Appendix D: Porters Five Forces Model Read More