Toyota's financial unit has asked for an emergency loan from a state-backed lender on March 16, 2009, with reports putting the figure at more than US$3 billion. It says the international financial situation is squeezing its business, forcing it to ask for an emergency loan from the Japan Bank for International Cooperation. It is the first time the state-backed bank has been asked to lend to a Japanese car manufacturer.
On May 8, 2009, Toyota reported a record annual net loss of US$4.2 billion, making it the latest automobile maker to be severely affected by the global financial crisis that started in 2007.
On November 5, 2012, Toyota reported that its global net earnings for the quarter ended Sept. 30 surged 572.1% to US$3.2 billion compared to the same period last year.
3. SWOT Analysis
Toyota's main strength is its well-known, trusted brand name. Also, the emphasis on the value of its employees and the necessity of instilling within them a sense of value makes the company that successful, as well as the application of technology and the utilization of machinery to aid in the manufacturing process. Their unique concepts of Jidoka and Just-in-Time have allowed them the speed and precision in manufacturing vehicles that has afforded them the opportunity to increase production profits and close the gap between themselves and their rivals, such as Ford and GM. However, one of the significant weaknesses of the corporation is Toyota's prior litigious issues and the claims of inadequate safety standards brought against them. Quite impressively, Toyota has turned this weakness into a lesson learned and implemented a standard of quality and safety that is now hard to match. (Medeiros, 2007) However, the bad publicity after the recall of 3.8m Toyota and Lexus vehicles may cause reputation damage on the company. Also, a serious threat is VW, which enlarged its business group by acquired Porsche recently and if VW ends up turning Suzuki into its 11th brand, it will overtake Toyota as the world's biggest car firm. (The Economist, Dec 9th 2009)
Streghts
New investment by Toyota in factories in the US and China saw 2005 profits rise, against the worldwide motor industry trend. Net profits rose 0.8% to 1.17 trillion yen ($11bn; £5.85bn), while sales were 7.3% higher at 18.55 trillion yen. Commentators argue that this is because the company has the right mix of products for the markets that it serves. This is an example of very focused segmentation, targeting and positioning in a number of countries.
In 2003 Toyota knocked its rivals Ford into third spot, to become the World's second largest carmaker with 6.78 million units. The company is still behind rivals General Motors with 8.59 million units in the same period. Its strong industry position is based upon a number of factors including a diversified product range, highly targeted marketing and a commitment to lean manufacturing and quality. The company makes a large range of vehicles for both private customers and commercial organizations, from the small Yaris to large trucks. The company uses marketing techniques to identify and satisfy customer needs. Its brand is a household name. The company also maximizes profit through efficient manufacturing approaches (e.g. Total Quality Management).
Weaknesses
Being big has its own problems. The World market for cars is in a condition of over supply and so car manufacturers need to make sure that it is their models that consumers want. Toyota markets most of its products in the US and in Japan. Therefore it is exposed to fluctuating economic and political conditions those markets. Perhaps that is why the company is beginning to shift its attentions to the emerging Chinese market. Movements in exchange rates could see the already narrow margins in the car market being reduced.
The company needs to keep producing cars in order to retain its operational efficiency. Car plants represent a huge investment in expensive fixed costs, as well as the high costs of training and retaining labor. So if the car market experiences a down turn, the company could see over capacity. If on the other hand the car market experiences an upturn, then the company may miss out on potential sales due to under capacity i.e. it takes time to accommodate. This is a typical problem with high volume car manufacturing.
Opportunities
Lexus and Toyota now have a reputation for manufacturing environmentally friendly vehicles. Lexus has RX 400h hybrid, and Toyota has it Prius. Both are based upon advance technologies developed by the organization. Rocketing oil prices have seen sales of the new hybrid vehicles increase. Toyota has also sold on its technology to other motor manufacturers, for example Ford has bought into the technology for its new Explorer SUV Hybrid. Such moves can only firm up Toyota's interest and investment in hybrid R&D.
Toyota is to target the 'urban youth' market. The company has launched its new Aygo, which is targeted at the streetwise youth market and captures (or attempts to) the nature of dance and DJ culture in a very competitive segment. The vehicle itself is a unique convertible, with models extending at their rear! The narrow segment is notorious for it narrow margins and difficulties for branding.
Threats
Product recalls are always a problem for vehicle manufacturers. In 2005 the company had to recall 880,00 sports utility vehicles and pick up trucks due to faulty front suspension systems. Toyota did not g ive details of how much the recall would cost. The majority of affected vehicles were sold in the US, while the rest were sold in Japan, Europe and Australia.
As with any car manufacturer, Toyota faces tremendous competitive rivalry in the car market. Competition is increasing almost daily, with new entrants coming into the market from China, South Korea and new plants in Eastern Europe. The company is also exposed to any movement in the price of raw materials such as rubber, steel and fuel. The key economies in the Pacific, the US and Europe also experience slow downs. These economic factors are potential threats for Toyota.
4. Strategic Management
Toyota's value chain is so well developed that it makes the company more profitable than the three largest automobile companies in the USA. (Henry, 2008). The main strengths of Toyota's value chain are in the inbound logistics, due to the usage of Just-in-time production method, because it minimizes inventory cost. The other most valuable part of the chain is the Human resource. The employees are perceived as Human Capital. Toyota's HR department is aware that happy employees translate into better job performance. This equates to the kind of increased production and quality that renders satisfied customers.
Toyota is positioned in the moderately low-price, high volume market. The company has managed to overcome mobility barriers and entered the luxury market with its Lexus brand, which is now competing with BMW and Mercedes. (Henry, 2008).
Political
In times of crises the Japanese government is subsidising Toyota. The adoption of new regulations in Europe, concerning the emissions of CO2 and reducing the impact of it on the environment is another issue concerning Toyota. The company continues to exploit its know-how of developing hybrid cars. Also there is political instability in the main oil-producing countries in the world, leading to higher oil prices and less demand for cars.
Economic
The collapse of the international economy leaded consequently to the falling of the power of the yen, which devaluates the prices of Toyota`s shares on the stock exchange. The economic crisis also diminishes the demand for Japanese electronics and cars. In additions there was a decline in the world buying power and high prices of the crude oil.
Social
The population in the world as a whole is aging, which means that less people are interested in new car models. Also, as a consequence from the economic crises, more people are using alternative transportation means but cars, and by this again leading to excess production capacity.
Technological
Toyota is considering building a hybrid-electric system available on every vehicle it sells worldwide during the 2010s. The company is the most innovative company during recent years, due to its vastly developing R & D department. Toyota is aiming at zero waste and zero emissions as an ultimate group goal. The main objective is the continuation of development of hybrid technology and development of hydrogen fuel cell technology.
Environmental
Toyota is investing heavily in vehicles with lower emissions, for example, the Prius, based on technology such as the Hybrid Synergy Drive. It is considered the most widely rolled-out environment-friendly system in the automotive industry to date.
Legal
In 1998 the United Nations Economic Commission for Europe adopted the Global Agreement on Vehicle Regulations, which leads to limitation of the emissions of CO2, that a car can eject in the atmosphere, from which Toyota Company benefited the most. In addition, some countries impose restriction on foreign countries to enter their markets in order to try to sustain the export and adopt new precautions of the competition law.
Toyota has good knowledge of the car industry and is recognized as being at the front of innovation. Toyota's skills are clear in everything they do, they have good innovation skills and are always looking to move with the market and never be behind. They have a dedicated marketing team who always uses the best selling approach to push the product into the limelight.
5. Competitive Advantage
Toyota's strategic advantage was to be better able to determine the needs and desires of consumers before they actually express them. Toyota, perhaps because of its early failures in the U.S. marketplace, conducted research to recognize the regulatory, environmental and legislative market drivers that would eventually translate into future purchasing variables for consumers. Toyota used an effective product development process that was able to reduce the cycle time for developing new models, bringing new products to market almost 30 per cent faster than its competitors. This agility gave Toyota a competitive edge in a business environment driven by changes in market trends and government mandates. Toyota's edge on new technology and the environment stemmed from the Toyota Production System (TPS). As part of the TPS, the company utilized a just-in-time production system that was designed as a pull system; as opposed to the push system of mass production.24 The just-in-time production system allowed for a reduction in inventory and operating costs. It allowed Toyota to be flexible and fast in making changes to the production system and vehicles. The TPS system also required quality control to be built into the production line. Employees could determine quality assurance by stopping production as necessary to eliminate defects. The TPS system revolutionized the quality and productivity of the company and helped to create an organization that focused on customers' future needs, rather than responding to current desires.
6. Recommendation
One recommendation for Toyota is to be more ruthless in utilization of its early leadership in the commercialization of hybrid systems and electric-vehicle technology. Although every other giant carmaker will launch new hybrids and purely battery-powered vehicles, or is preparing to, Toyota is convinced that it is still ahead of the pack. Within a few years there will be a hybrid version of every car Toyota makes and there are plans to extend the Prius brand to cover a range of innovative low- and zero-emission vehicles. Toyota has to stop making so many dull cars with all the appeal of household appliances. (The Economist, Dec 10th 2009). The company has to focus more on safety standards, in order to avoid bad publicity. Also, it can acquire few small companies, to reinforce its market position and expand the company. Another strategic option for Toyota is to separate its hybrid models into a separate brand that will target customers that are more environmentally friendly. Given that currently the world is still recovering from the financial crisis, a new brand, offering moderately cheep, environmentally friendly and efficient car would be perceived very well.
7. Bibliography
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