Toyota Motors

Introduction

Toyota Motors is one of the market leaders in the motor vehicle manufacturing industry in the world. The company has a market base of a little over 170 regions and countries. These countries house slightly over 50 manufacturing companies that are charged with the responsibility of production. The main manufacturing facilities are found in South Africa, China, Australia, Taiwan, the UK, Canada, US, Japan, Turkey, France, India, Indonesia, Brazil and Argentina. This gives the company quite an extensive production network. Its headquarters are in Japan (Toyota City) and it is estimated to employ 317,716 people. The company has been doing well financially as well. Its profits went up marginally from 2011 registering revenues of JPY 18,993,688 (close to $233,622.4), which translates to a 0.2% increase from the previous year.

Business model (See appendix 1)

Toyota Motors falls under the umbrella of companies, which subscribe to the global production systems. Toyota Motors has been making strides in expanding overseas production through relocation of its operations to other parts of the world. However, this system of production also comes with its own set of weaknesses, which range from leaking of technologies to inefficiency in the transfer of tacit knowledge in the production sites located overseas (Frey and Schlosser 1993)

Strengths

Toyota Motors enjoys high rates of growth in sales both domestically and internationally. The company has a strong brand that positions it strategically in the market place. The company has a large market share compared to its competitors in the market place. It commands a 47.3% share for Toyota brands in Japan, 14.3% in North America, 13.7% in Asia (excluding China and Japan) and 4.4% of the European market share. This strong market position has been pivotal in giving the company a competitive advantage as well as facilitating its expansion into other international markets.

The company invests heavily in Research and Development in order to bring about an expansion in its product portfolio, improve safety, quality, and functionality and generally manufacture products, which are environmentally compatible. The company works with both conventional and hybrid engines technology in order to realize the dream of environmentally friendly cars. The company’s unrelenting focus has been instrumental in incorporation of newer features into its already existing product range as well as bringing out the very latest of technology (Newton et al 2004).

The distribution network is extensive equally. Other than commanding the largest auto sales in Japan, the company’s vehicles are also marketed through about 180 distributors located in 170 countries. The company boasts of 42 distributors in South and Central America, 55 in Africa, 16 in Oceania, 30 in Europe, and 12 in Asia. This highly extensive network of production and distribution has made it possible for the Toyota brand to realize a global reach (George 2002).

Toyota Motors has been experiencing an increase in its profit margins for the last few years. This was a result of a JPY300 billion ($3.7 billion) increase in unit sales of vehicles, an increase in sales of parts and reduction of costs among other factors. The company’s increased operating efficiency can be attributed to efficient management of costs and informed decision making. These features of the company can be leveraged in the realization of future growth of the company.

Vulnerabilities

The company recently conducted safety recalls with the total number of vehicles recalled being over 3.5 million. The recalls were prompted by defective accelerator pedals and floor mats. The National Highway Traffic Safety Administration (NHTSA) eventually issued inquiries to the company and the US treasury fined the company a total of $ 16.4 million as settlement. An addition, fine of $ 32.5 million was also imposed on the company for its failure to affect timely issuance of recalls as required by the NHTSA. These kinds of massive recalls have potential of negatively impacting the consumer confidence in the products of Toyota Motors or even severely denting its brand image.

It is estimated that the sales decline in Japan, which happens to be the company’s largest market segment was as high as 4.8% in recent years. The decline can be attributed to a dip in demand occasioned by a conclusion of subsidies targeted at eco-cars, which had been extended to manufacturers by the government as a stimulus package, thus stirring competition. Fluctuating foreign currency exchange rates also had its toll on the market of vehicles. This decline in sales could exert pressure on the regions, which are traditionally considered as profit regions by the company (Power 2003).  It could also affect the overall revenues of the company as a whole.

Compared to its competitors, Toyota Motors generally has a relatively low return on its equity (ROE) as well as return on its assets (ROA) compared to its competitors. This implies essentially that the company is not efficiently utilizing shareholders money and neither is it generating high returns for these shareholders.

Natural calamities such as floods, earthquakes and many others usually disrupt the production of the company especially given the fact that it operates predominantly in Japan, which is prone to earthquakes. Frequent occurrence of such disasters can have severe influence on the production output caused by work stoppages. Overall revenue base of the company as well as the profitability could also suffer (Bazerman and Watkins 2004).

Political Factors

Given that Toyota operates on a global scale, it is not immune to various political regulations. Political risk factors are among the many risks that surrounds Toyota Company’s business model. The government is important in every aspect of an environment, within which a business exists. Various laws regarding the safety of the vehicles, the amount of noise they are supposed to make just to mention a few of various countries laws that the company has a physical presence. Political instabilities such as wars may also impact negatively on the company’s performance in the country of concern.

Economic factors

Economic factors such as increase in the inflation levels affect the demand for the company’s products and services and the consumer purchasing power decreases. The recent recession was also detrimental to the company as it led to a decrease in the real income of the consumers thereby shifting their spending to other essential services. This greatly reduced the demand for the company’s product especially in 2008-2009. Fluctuating exchange rates can impact on the company, especially, in Japan where the plant relies on imports to assemble the final product. Increase in government taxes also affects the company’s business model as it is forced to pass the cost increase to consumers in terms of increased prices.

Social factors

Toyota Company prides itself as being one among many companies in the world, which has managed to win the society from all the various countries where the company has a niche. The company is keen to observe ethical, religious and social considerations in the way it sells and manufactures its cars. The company ensures that its marketing strategy is adopted all over the world where it has a physical presence in order to follow its social strategy. The company vehicles are regarded highly by the society and are seen as a symbol of status all over the world.

The company is also very active in the corporate responsibility issues that concern with giving back to the society. In an effort to being good corporate citizen all over the world, the company engages in varies corporate activities all over the world. This has led to appreciation by the society as they regard Toyota products as being a symbol of a company that provides vehicles that can be relied upon, that offer a fair degree of comfort, and that are luxurious.

Technological factors

The dynamics in technology calls for companies to invest substantial amounts of resources in research and development in order to satisfy the ever increasing needs of consumers in the market place (Medeiros 2007). Toyota Company has continuously adopted the changes in technology in its business model. Toyota corolla for example, was a model which the company introduced into the market in 1993,  however, the company has  improved continuously and to date, and today the model is one among those that have excellent quality, requires less costs to maintain it and also the price of disposing it is also very rewarding. The company has also continuously diversified in their product offering and able to provide cars that have a wide range of colours. This has helped the company to survive in the competitive market place despite having to counter the threat of new technology (Humayun 2010). Company’s today are also inventing cars that are propelled by an electric engine, which is seen as more friendly to the environment and saving fuel. Thus companies may be forced to follow suit and manufacture this type of vehicle, which is likely to be more marketable among the consumers given its performance and cost benefits.