Shivagya answered on
May 07 2020
Toyota Innovation Audit Report
This report tries to
ing to light the various processes implemented at the Toyota motor corporation by firstly giving a
ief introduction of the industry, the company, its competitive landscape and the multiple factors that come into play in its business environment. It also utilizes multiple frameworks to analyse its competitive and business landscape. Among the various frameworks utilized are the SWOT analysis, the application of the Porter’s 5 forces model, the Mckisney’s 7S model, the Boston Consulting Group’s Growth Share matrix and the lastly a VRIO analysis.
Based on the various analysis performed with respect to the company’s practices and financial performance, the report will try to provide recommendations to further the mission of Toyota Motor Corp. and these recommendations should be perceived as personal opinions rather than industry facts on which they have been based.
The report also goes on to suggest innovations for Toyota Motor Corp. in the multiple arenas and domains such as business strategy, strategic partnerships, R&D activities and asset management capabilities. These innovations will only assist Toyota in performing better & delivering its true potential to its shareholders and investors. With the rise in emerging technologies such as AI assisted driving, advanced tech in vehicles, alternate fuel types and electric vehicles; Toyota faces a tough road ahead and this report will try to gauge the potential of the threats and businesses to the company and recommend ways to stay ahead of the curve.
Executive Summary 1
Company background & History 3
Industry Analysis 3
Competitive Landscape 3
Porter’s Five Forces Framework 4
Industry Market Share 5
SWOT Analysis 5
Growth - Share Matrix for Toyota (BCG matrix) 7
VRIO (Valuable, Rare, Inimitable and Organization) Framework 7
The McKinsey 7 S framework applied to Toyota Motor Corp. 8
Conclusion & Recommendations 10
Company background & History
Toyota Motors was founded as the automotive dept. in 1933 as Toyota Automatic Loom Works limited and in 1937 formed a separate entity as an incorporation by the name Toyota Motor Corp. This is despite the fact that the Toyota group of companies was founded in 1918 by Sakichi Toyoda and was even called as a part of the top 10 most influential inventors in 1985 by the office of Japanese Patents. Toyota used to reverse engineer the engines made by Chevrolet till Kiichiro Toyoda was forced to resign post the financial & labour crisis in the 1950s, Eiji Toyoda was his replacement who along with Taiichi Ohno were responsible for the development of the famous Toyota Production System. After that Toyota wen to become the largest auto manufacturer in 2007 & was also awarded the 10th position in Fortune Magazine’s Fortune Global 500 in the year 2009. (CORPORATION., T. (2018))
Toyota Motor Corporation is headquartered in Toyota City, Aichi, Japan (City in Aichi Prefecture). The company went on to report a revenue of 27.60 Trillion Yen (248.4 billion USD) and was also the fifth largest revenue producing company globally in 2016 with the largest market capitalization by a listed company is Japan, nearly double the market cap of the second in line (Softbank). (TOYOTA, M.S. and Guide, C.D., 2001)
Competing in the automotive sector on a global scale in not at all easy, given the various constraints that constantly make it more difficult to remain competitive in the industry such as the ever increasing fuel prices which pile on the growing environmental concerns of fossil fuel consuming SUVs to fuel efficient cars and hy
ids. In this ever changing landscape came another competitor which revitalized the electric vehicle market, Tesla, with its iconic
anding and positioning, making the EV market more competitive and R & D oriented. Toyota’s key competitors include Ford Motor Company, General Motors Company, Honda Motor Company, Tesla Inc. and other major automotive manufacturers. (Scholar.harvard.edu. (2018))
Porter’s Five Forces Framework
The Porter’s Five Forces framework is a tool utilized for analysing the competition of an industry, with five key forces acting on the competitive landscape, the threat of new entrants, the bargaining power of suppliers, the threat of substitutes, the bargaining power of suppliers and the industry’s internal competitive rivalry. We begin by analysing each aspect as an independent factor. (Ferguson, E. (2018))
The threat of new Entry is classified as LOW because of multiple reasons which include the high capital investment required to set up manufacturing, operations and distribution along with an effective, efficient and relatively responsive supply chain network. Possible retaliation by existing players in the face of new and innovative product offerings can also act as dete
ent to new players trying to enter the market. The existing
and image and perception of existing & established players in the market will dissuade any new entrant as they will require a significant duration to build up a
and image and
and loyalty. The product differentiation in the automotive industry is based on quality of engineering, design and cost factors. Smaller & newer companies will take a long time to achieve economies of scale therefore making cost a viable factor to not enter into the cu
ent market. The high import duty & taxes makes it difficult for foreign players to enter a market thereby disrupting the domestic market in place. Note that innovation in the industry as a whole is on the rise and could be a potential future threat, given the increased use technology in vehicles from self-driving, autonomous cars to battery powered electric vehicles. For now the technology is yet to be completely developed and adopted on a commercially viable scale to be classified as a threat, this means Toyota has scope to buff its research and development up.
The threat from power of Supplier has also been classified as LOW as the number of suppliers available is huge, both small & large suppliers are available with the smaller ones out numbering the larger ones thus making it difficult to have any bargaining power or leverage with the supplier group. The different materials sourced for manufacturing and the manufacturing process by each player in the industry varies from player to player and supplier to supplier. With the wide variety of materials available and ongoing R&D adding new technology every year, the competition grows fierce leaving lesser of a hold on the supplier’s end. There is no threat of forward integration from the suppliers end. Toyota could leverage the upcoming technologies in the materials and manufacturing space to make lighter cars which are more fuel efficient in nature. Substances like graphene based composite materials have shown remarkable results in controlled test environments. (Slepchenkov, M.M., Barkov, P.V. and Glukhova, O.E., 2018)
The threat from Buyer Power has been deemed as HIGH given the large number of buyers but also taking into account that individuals buy a single unit or two but governments, corporates and firms buy fleets at a time at possibly discounted prices. The Medium/ relatively low switching costs associated with a vehicle make it more difficult for the industry to keep a hold on the customers further increasing the leverage available with the buyers. The buyer considerations can easily factor in other
ands & Automakers, thereby meaning low consumer
and loyalty. Most buyers in the market space are price sensitive and the purchase decision is majorly based on the cost incu
ed in procurement of the vehicle. There exists no threat of backward integration from the buyers. Toyota can explore new avenues to limit buyer power by enhancing its membership...