Toyota Motor Introduction Toyota Motor Corporation is one of the world‘s leading automakers, offering a full range of models

, from mini vehicles to large trucks. Global sales of its Toyota and Lexus brands, combined with those of Daihatsu and Hino, totaled 6.78 million units in CY2003*. Besides its own 12 plants and 11 manufacturing subsidiaries and affiliates in Japan, Toyota has 45 manufacturing companies in 26 countries/locations, which produce Lexus- and Toyota-brand vehicles and components. As of March 2003, Toyota employs 264,000 people worldwide (on a consolidated basis), and markets vehicles in more than 140 countries. Automotive business, including sales finance, accounts for more than 90% of the company's total sales, which came to a consolidated ¥16.05 trillion in the fiscal year to March 2003. Diversified operations include telecommunications, prefabricated housing and leisure boats.

American Samoa Australia Bahrain Brunei Darussalam China Fiji Guam Hong Kong, China

India Indonesia Israel Kiribati Kuwait Malaysia Nepal New Caledonia New Zealand Oman

Saipan Samoa Saudi Arabia Singapore Solomon Islands Sri Lanka Tahiti Taiwan Thailand Tonga United Arab Emirates Vanuatu Viet Nam

Pakistan
Papua New Guinea Philippines

Mission

“Toyota seeks to create a more prosperous society through automotive manufacturing And to sustain profitable growth by

providing the best customer experience and dealer support."

Geographic Region Total Sales ( Yen in millions) Japan North America Europe Asia Others 8,152,884 8,771,495 3,346,013 1,969,957 1,707,742.

Toyota International Portfolio Avalon Camry Passenger Corolla Avensis

Tarago

Prius

Echo

MR2

Sports Camry Sportivo Corolla Sportivo

Celica

Rav 4

4 W/D LandCruiser Prado LandCruiser 100

Kluger

LandCruiser 78 Hiace

Commercial Coaster

Hilux

Town Ace

Toyota In Pakistan Indus Motors
Indus Motor Company (IMC) is a joint venture between the House of Habib , Toyota Motor Corporation Japan (TMC) , and Toyota Tsusho Corporation Japan (TTC) for assembling, progressive manufacturing and marketing of Toyota vehicles in Pakistan since July 01, 1990. IMC is engaged in sole distributorship of Toyota and Daihatsu Motor Company Ltd. vehicles in Pakistan through its dealership network. The company was incorporated in Pakistan as a public limited company in December 1989 and started commercial production in May 1993. The shares of company are quoted on the stock exchanges of Pakistan. Toyota Motor Corporation and Toyota Tsusho Corporation have 25 % stake in the company equity. The majority shareholder is the House of Habib with 50 % of the equity. IMC's production facilities are located at Port Bin Qasim Industrial Zone near Karachi in an area measuring over 105 acres. Indus Motor company's plant is the only manufacturing site in the world where both Toyota and Daihatsu brands are being manufactured. Heavy investment was made to build its production facilities based on state of art technologies. To ensure highest level of productivity world-renowned Toyota Production Systems are implemented. IMC's Product line includes 6 variants of the newly introduced Toyota Corolla, Toyota Hilux Single Cabin 4x2 and 2 versions of Daihatsu Cuore. Quality Policy WE AS A TEAM AT INDUS MOTOR ARE COMMITTED TO FOCUS ALL OUR ACTIVITIES LEADING TO: • MANUFACTURING HIGH QUALITY PRODUCTS. • CUSTOMER SATISFACTION. • SERVICE TO SOCIETY. • MAINTAIN MARKET LEADERSHIP. Environmental Policy WE AS A TEAM AT INDUS MOTOR ARE COMMITTED TO CONTINUOUSLY IMPROVE OUR ENVIRONMENTAL MANAGEMENT SYSTEM TO:

• • •

IDENTIFY AND AVOID/MITIGATE THOSE ENVIRONMENTAL ASPECTS WHICH HAVE NEGATIVE ENVIRONMENTAL IMPACTS. COMPLY WITH ALL APPLICABLE LEGAL, REGULATORY AND OTHER REQUIREMENTS. ASSIST SOCIETY BY MAKING THE ENVIRONMENT MORE FRIENDLY..

OBJECTIVES OF THE COMPANY
To be the market leader and satisfy the requirements of its customers, the company has set certain objectives. These are: 1. 2. 3. 4. Improve Quality Enhance Efficiency Minimize Cost Increase Productivity

Over the previous years, the company has put in its best efforts to manufacture quality cars designed for its customers. To improve their efficiency, the company gives great importance to its human resource as the company believes that satisfied and quality conscious team can produced quality products. The company is using the philosophy of Kaizen for continuous improvement. It has become a way of life for the management of the company by doing these efforts towards their objectives.

Indus Motor Business Portfolio
BUSINESS PORTFOLIO: “The collection of businesses and products that makeup the company. “ Business portfolio of Indus motors includes • • • • Corolla HiLux Cuore CBU Unit (completely built up unit)

Corolla, HiLux and cuore are manufacturing in Pakistan, 65% of the car manufactured in Pakistan which includes body and other parts except the engine which is being imported from Japan Known as CKD (completely knocked down) Engine.

Portfolio Analysis: “A tool by which management identifies and evaluates the various businesses that makes up the company.”
Techniques or Tools for the Portfolio Analysis: There are two different techniques used for the portfolio analysis: Boston Consulting Group Matrix BCG Approach General Electric Matrix GE Approach

TO TOYOTA COROLLA BCG MATRIX
HIGH Business Growth

Rate LOW

HIGH

LOW

Relative Market Share

The McKinsey / General Electric Matrix The GE / McKinsey Matrix is more sophisticated than the BCG Matrix in three aspects: 1. Market (Industry) attractiveness replaces market growth as the dimension of industry attractiveness. Market Attractiveness includes a broader range of factors other than just the market growth rate that can determine the attractiveness of an industry / market. Compare also: Porter's Five Competitive Forces model 2. Competitive strength replaces market share as the dimension by which the competitive position of each SBU is assessed. Competitive strength likewise includes a broader range of factors other than just the market share that can determine the competitive strength of a Strategic Business Unit. 3. Finally the GE / McKinsey Matrix works with a 3*3 grid, while the BCG Matrix has only 2*2. This also allows for more sophistication. Typical factors that affect Market Attractiveness: STAR - Market size  2.0D - Market growth rate  Xli 1.3 - Market profitability - Pricing trends - Competitive intensity / rivalry + - Overall risk of returns in the industry COWS CASH - Opportunity to differentiate products and services  2.0D - Demand variability Saloon - Segmentation  Altis - Distribution structure Typical factors that affect Competitive Strength of a QUESTIONStrategic Business Unit: MARK - Strength of assets and competencies  GLI - Relative brand strength - Market share - Market share growth DOGS - Customer loyalty  SE Saloon - Relative cost position (cost structure compared with competitors) - Relative profit margins (compared to competitors) - Distribution strength and production capacity - Record of technological or other innovation - Access to financial and other investment resources

GROWTH STRATEGIES MARKET PENETRATION PRODUCT DEVELOPMENT

MICRO AND MACRO ENVIRONMENTS

Macro Environment
The larger societal forces that affect the microenvironment- demographic, economic, natural, technological, political, and cultural forces. These factors represent constraints within which all organizations including the automobile industry must function. The various components of general environment are: 1. Political

2. 3. 4. 5.

Economic Demographics Cultural Technological 1. Political Factors Government at all levels is an important component of the general environment no organization or industry is immune from the various decisions made by the government. The Pakistan, Government’s in consistent policies, frequent change in duty tariff and smuggling are main reasons of unstable market conduction. Like other motor companies Toyota is also affected by the current changing policies of the government. Previously the automobile industry had to cope with more than 77000 yellow cabs that were imported during the yellow cabs scheme and was later turned lose to the market after a change of government and the policy scrapped. In 1995, all the previous taxes and duties were rolled into one import duty of 30 percent on CKD kits as well as CBU vehicles. In 1996 the sales tax on CBU was increased cost to 18 percent. In 1997 the ministry of industries and production recommended that duty on CKD be reduced form 40 percent to 35 percent while the car sales should be exempted from CVT and the deletion programme should be accelerated. Just a few days back the general sales tax has been increased to 15 percent promoting more price like. So there is going to be a Rs.20000 increase in vehicles. 2. Economic Forces Government economic policies at the federal level clearly influence the ability of the industries to survive and progress. Inflation is a major economic factor which has affected the Pakistan. Automobile industry including Toyota. The current inflation rate is 21% to 23% annually prices in the auto market were deregulated in 2000 and grew almost 20 percent to 30 percent per annum to allow Toyota to bring their prices to profitable levels. After three years of “Still Market”, the market picked up. The recent increase of 15 percent sale tax is however, going to result in a price increase. 3. Demographics Forces Society holds a global or summary belief that an organization is proper and worthy of support. Toyota takes pride in being the most trusted name all over Pakistan. Its vehicles are regarded as a status symbol. It is the guiding principles of Toyota which has strongly developed trust in the people. 4. Cultural Factors Toyota respects the culture and customs of every nation and community and contributes to the economic and social development through corporate activities in

the communities. Toyota believes in honouring the language and spirit of the law of every nation and undertake open and fair corporate activities to be a good corporate citizen of the world. This is the reason that Toyota is proud of the fact that Pakistani society considers Toyota vehicles to be a symbol of reliability, comfort, luxury and a have to be trusted. 5. Technological Forces Technology is of particular importance because it has been and continues to be the main source of increases in productivity. Despite changes in the means used to motivate people and the variety of incentives that have been offered to stimulated production, the resulting increase has been negligible when compared to that of created by technology. The locally produced Toyota Corolla introduced in May 1993 is now in its 11 th year. Its excellent quality, low maintenance cost and high resale value has won it the support and loyalty of its customers. Product diversification and a wide range of colours has allowed customers to exercise greater options and has sustained this threat. The total company’s product range comprises of 8 variants of Corolla and 5 variants Hilux. As a result of the “Safety First” commitment; for the first time in Pakistan SRS “Secondary Restrain System” Airbags have been introduced in the GLI Automatic and GLI manual models, side impact bars which protect vehicles for side collisions have however been routinely fitted in all Corolla variants since inception. The process of making a car more durable includes “Pitospaate Primer”, total immersion in a catholic Electro-deposit primer, which assures long term anti corrosion and an extra thick colour coat that is better than all others, ensuring that “New Car” look “New” for years to come.

MICRO ENVIRONMENT
The Micro environment consists of those components of the macro environment which are directly relevant to an individual’s organization. An organization’s micro environment includes 1. Customers 2. Suppliers 3. Internal Public 4. Competitors 5. Intermediaries The boundary between an organization’s Macro and Micro environment should not be viewed as static. Changes in the former will inevitably redefine the latter.

The various components of micro environment for Toyota have direct influence on its performance. Moreover components of Toyota’s micro environment are also related to its macro environment. 1. CUSTOMERS Toyota aims at developing loyal customers relationship. For this reappoint tries its best to understand who its buyers are and what are their needs. It tries to listen to its customers, realizing that they may be their best collaborators. Customers feedback drive their product development. To be the market leader and satisfy the requirements of its customers, the company has set certain objectives. These are a) Improve Quality b) Enhance Efficiency c) Minimize Cost d) Increase Productivity Over the previous years the company has put in its best efforts to manufacture quality cars designed for its customers. In Pakistan, more and more people want to experience the unique pleasure of motoring. Exhaustive, in-depth research and consumer surveys conducted over the past years revealed trends of customers and the environmental factors relating to use. Toyota’s Marketing Policy Toyota’s slogan “Reliability n Motion” represents its emphasis son strong trustworthy and life-long automobiles. It has many brand loyal customers and is considered as market leader. In Pakistan, it has aimed at various segments with their variety of models in Toyota Corolla, so customers in every segments can be satisfied. Different classes of Toyota Corolla introduced in Pakistan are; Model Description SE Saloon 1600 cc GLi 1300cc Xli 1300cc 2.0D / 2.0D Saloon Segments Industrialists, Well established Businessman, Professionals. Businessman, Top Level Mgt. of multinationals, Professionals, Government High Officials. Middle-level Executives, Government Departments & Organizations, Professionals, Armed Forces. Professionals, Business Executives who are fuel cost conscious.

Toyota has got an effective Nationwide dealer network comprising of 25 dealers at Karachi, Lahore, Faisalabad, Mirpur, Islamabad, Peshawar, Sialkot, DI Khan, Multan, Quetta and Larkana. This spread of network shows not how Toyota is sincerely busy

in developing a company’s customer relationship and winning the hearts of brand loyal as well as attracting potential customers. 2. SUPPLIERS Suppliers constitute a second component in a typical organization’s micro environment. Toyota has to respond not only to the customers they supply, but also to the sources from which they receive supplies. Suppliers are given importance and respect by Toyota. It continuously aims at developing a strong relationship with its suppliers. This is done to ensure that Toyota suppliers provide quality materials which is the most important factor for Toyota vehicles. Japan, is the major supplier of CBU or completely built up vehicles. Also CKD kits or completely Knocked down Kits are supplied from Japan. CKD kits mainly comprise of the engine of vehicles. The vehicles which are assembled in Pakistan comprise of 65% locally manufactured parts. Toyota Indus aims for good relations with both the local and foreign suppliers. “To achieve maximum level of customer’s satisfaction” is Toyota’s mission. This can be proved by the fact that dealership is authorized to these selective people who offer 3 S’s. That is sales, services, spare parts. This is done to ensure convenience for its customers. They are offering the following services to cater to the needs of their customers: a) One year free servicing from any Toyota service center all over Pakistan. b) Free checkup camps are set annually. c) Spare parts easily available all over Pakistan. d) The dealership network comprises of seventeen dealerships all offering sales, services and spares. e) The customer retention department at the dealerships is also improved and consolidated periodically. The company believes on the fact that favorable supplier relations lead to improve quality, better shipping arrangements early warming of major price changes and advance information about technological or marketplace developments. So, the aim is to develop friendly, professional relations with suppliers in which both will profit. 3. Internal Public It is the action, of employees by which a company’s objectives are accomplished. In order to achieve its goals and objectives Toyota makes sure that highly competent and skilled people are employed. Emphases is laid to ensure that the person being hired meet the criterion for the respective departments. Training is an integral part in Toyota’s various departments. Training was intensified and various courses were conducted through the previous year. Technicians at the dealers’ service departments underwent extensive by IMC service departments to improve their skills. Moreover, periodic training of

managers is also conducted. This include training camps, short course conducted in various well-known universities, training programs conducted abroad and lectures of foreign exports. 4. COMPETITORS Market competition is the cornerstone of managerial capitalism. The five forces that shape the degree of market competition operating within an organization’s micro environment are a) Rivalry among existing organization. b) Relative power of customers. c) Relative power of suppliers. d) Threat of new entrants. e) Threat of new substitutes. Presently Toyota is proud to have the most market share. Honda stands second followed by Suzuki and Nissan. Since its start it was only in 95-96 that Honda managed to sale 200 more units of vehicles than Toyota. Still, Toyota is proud to be in a strong position. However to the spirit of competition is strong and this has lead Toyota to continuously try to improve itself, at all levels. Continuous emphasis is laid on to attract more customers, maintains healthy relations with its suppliers and makes efforts to improve technology. Careful strategic planning at al levels has enabled Toyota to achieve the highest market share and have an edge over other automobile companies. 5. Intermediaries

Banks, Leasing companies and car agents are some of the intermediaries for Toyota. These intermediaries basically giving the boost to the sales of Toyota, by offering the cars to the consumers, in easy installments and making the cars affordable for the customers to the higher extent.

SWOT ANALYSIS
In formulating sound strategic plans, an organization must assess its internal strengths and weaknesses in relation to the external opportunities and threats it faces. An effective strategy will take advantage of an organizations strengths and opportunities at the same time it minimizes or overcomes weaknesses and threats. Regular assessment and SWOT analysis is thus given importance.

Strengths
Competitive pricing. High market share.

High durability. Easy availability of spare parts. Aerodynamic body shape. Elegant body features. Comfortable ride. Luxurious car interior. High goodwill. Prestigious car history. Good resale value. Swift distribution channels. Updated safety features (Air-bags, seat-belts, ABS braking,Safety beams etc.) Low fuel consumption ·As production of vehicle is based on foreign joint ventures of Japanese origin, the product quality is of international standard.

Weaknesses
People often criticize the breaking of the car although that braking system of the car has been updated to ABS but still the body rolls when the brakes are applied at high speed. The cheesy of the car is not stable while doing high-speed sharp turns. The body of the car is too heavy. The rims and tires of the car are not impressive. The cars steering is a bit light and the driver cannot feel the road.

Opportunities
Making a sporty version of the car just like the CIVIC TYPE-R, this is the faster racing version of HONDA CIVIC having 200bhp and a sports body frame. Extra market can be captured by introducing Company fitted CNG Kitts in the car.

Threats
Swift competition from other manufacturers’ mainly Japanese and Korean car-makers.

High oil prices resulting in decrease in demand of fuel thirsty sedans. But the fuel Consumption of Toyota Corolla is fairly decent. Global inflation due to increase in population and high oil prices may result in decrease in demand of sedans. Increase in demand of other cars may result in downward trend of the brands goodwill. Lower prices of Korean car manufacturers may be a threat in the future. But presently Korean cars are not making a big impact in the market because of reliability and resale problems. Currently Pak Suzuki is posing a threat as Pak Suzuki is producing cheap cars and is targeting the lower-middle and middle income group consumers. Permission given by the Government to the overseas Pakistanis to import used cars in Pakistan.

IFE MATRIX
Major weakness (rating = 1), Minor weakness (rating = 2) Minor strength (rating = 3), Major strength (rating = 4).

Strengths
1 2 3 4 5 6 7 8 9 Competitive pricing. High market share. High durability. Easy availability of spare parts. Aerodynamic body shape. Elegant body features. Comfortable ride. Luxurious car interior. High goodwill.

Weight Rating Score
0.03 0.07 0.08 0.07 0.02 0.05 0.03 0.09 0.07 2 4 3 3 2 2 4 3 4 0.06 0.28 0.24 0.21 0.04 0.1 0.12 0.27 0.28

10 11 12 13 14 15

Prestigious car history. Good resale value. Swift distribution channels. Updated safety features (Air-bags, seat-belts, ABS braking, Safety
beams etc.)

0.06 0.05 0.02 0.05 0.05 0.05

3 4 3 2 3 2

0.18 0.2 0.06 0.1 0.15 0.1

Low fuel consumption ·As production of vehicle is based on foreign joint ventures of Japanese origin, the product quality is of international standard.

Weaknesses
1 People often criticize the breaking of the car although that braking system of the car has been updated to ABS but still the body rolls when the brakes are applied at high speed. The cheesy of the car is not stable while doing high-speed sharp turns. The body of the car is too heavy. The rims and tires of the car are not impressive. The cars steering is a bit light and the driver cannot feel the road. 0.07 3 0.21

2 3 4 5

0.04 0.05 0.02 0.03

3 4 1 3

0.12 0.2 0.02 0.09

1

3.03

EFE MATRIX
1 = The response is poor. 2 = The response is below average. 3 = Above average. 4 == The response is Superior

Opportunities
1 Making a sporty version of the car just like the CIVIC TYPE-R, this is the faster racing version of HONDA CIVIC having 200bhp and a sports body frame.

Weight 0.15

Rating 3

Score 0.45

2

Extra market can be captured by introducing Company fitted CNG Kitts in the car.

0.2

4

0.8

Threats
1 Swift competition from other manufacturers’ mainly Japanese and Korean car-makers. High oil prices resulting in decrease in demand of fuel thirsty sedans. But the fuel Consumption of Toyota Corolla is fairly decent. Global inflation due to increase in population and high oil prices may result in decrease in demand of sedans. Increase in demand of other cars may result in downward trend of the brands goodwill. Lower prices of Korean car manufacturers may be a threat in the future. But presently Korean cars are not making a big impact in the market because of reliability and resale problems. Currently Pak Suzuki is posing a threat as Pak Suzuki is producing cheap cars and is targeting the lower-middle and middle income group consumers. Permission given by the Government to the overseas Pakistanis to import used cars in Pakistan. 0.08 3 0.24 2 0.09 3 0.27

3

0.07

2

0.14

4

0.06

2

0.12

5

0.12

3

0.36

6

0.16

2

0.32

7

0.07

3

0.21

1

2.91

Competitive Profile Matrix

TOYOTA Critical Success Factor Advertising Product quality
Price Competitiveness

HONDA Score 0.6 0.4 0.4 0.3 0.48 0.4 Rating 4 3 3 2 3 3 Score 0.8 0.3 0.3 0.2 0.36 0.3

Mitsubishi Rating 1 2 3 2 3 2 Score 0.2 0.2 0.3 0.2 0.36 0.2

Weight 0.2 0.1 0.1 0.1 0.12 0.1

Rating 3 4 4 3 4 4

Management Financial position Customer Loyalty

Global Experience Market share

0.2 0.08 1

3 3

0.6 0.24 3.42

3 2

0.6 0.16 3.02

4 1

0.8 0.08 2.34

Competitors Situation SUZUKI MOTORS : Suzuki is the leading name in small commercial vehicles and passenger cars. Suzuki commenced its operation by assembling small 800 cc cars. Suzuki has been so far a sole leader in 800cc and 1000cc passenger cars as well as 1000cc jeep Potohar. But the emergence of so many competitors in the market will definitely trigger a very hard time to Pak Suzuki. Suzuki has launched Mehran 800cc, Cultus 1000cc, Baleno 1.3 & 1.6 Eli and Gxi, Bolan van & Ravi pickup 800cc and Potohar jeep.

Pak Suzuki’s sales during FY08 portrayed 31 per cent upsurge. Sales figures of Pak Suzuki Motor’s during FY08 posted sanguine growth at 31 per cent to 99,104 units compared to 75,720 units during FY07. On MoM(month to month) basis, sales figures increased by 3.9 per cent to 11,247 units during June compared to 10,824 units in May 2006. Pak Suzuki is the market leader in the 1000cc and lower segment of cars with sales of Suzuki Mehran, Suzuki Alto and 14 Suzuki Cultus at 35,982 units, 16,823 units and 21,390 units respectively. The company has replaced Suzuki Baleno with Suzuki Liana during the period and the product is getting acceptance in the market. Sales figures of Suzuki Liana remained on the ascending trend with 1,535 units during June compared to 1,187 units in May. Honda: Honda started its operation in Pakistan in 1994. Honda is enjoying its key position in the segment of 1300 cc and above. Honda has launched many models like Civic 1.5 cc, City 1.3 cc to 1.5 cc etc. VTI brand continued to be popular among customers. During FY08, Honda Atlas Cars’ sales soared by 17 per cent to 28,134 units as against 24,066 units previously. Currently, Honda Atlas assembles only two vehicles namely Honda Civic and Honda City to tap the upper-end segment of car market. On MoM basis, Honda City sales stood at 1,229 units in June, almost double compared to 626 units during the preceding month. Demand of Honda Civic declined by 61 per cent to 341 units MoM.

Dewan Farooque Motors: It is the major competitor which has commenced its operation with a wide range of products in domestic automobile market. Dewan Motors is basically collaboration with Hyundai and Kia, two Korean auto manufacturers. The initial response to Dewan's offering in the market with record company booking of its Santro Plus. It has launched its Kia classic 1300 cc car with sophisticated features. In future wide range of models like Kia Shuma 1500-1800cc car, Kia Sportage 2000 cc sports utility are expected to launch in the market. Dewan has also launched its 1.5 tons Shehzore, the assembly of Hyundai light commercial vehicle has already started at the Sindh Engineering Plant in Karachi under contractual agreement. Dewan's presence in the market will give the major move to the auto industry in Pakistan. The intense competition will give the benefit to the potential buyer in the market.

Automobile sales figures of Dewan Farooque Motors’ has remained stable on the back of increased demand of Hyundai Shahzore, which is considered to be the most competitive vehicle in the LCV segment. 15 During FY08, Hyundai Shahzore’s sales stood at 9,234 units, 15 per cent higher compared to 8,012 units previously. On the other hand, Hyundai Santro’s sales remained almost intact at 7,031 units during FY08 as against 7,009 units last year due to intense competition from small imported cars. Daihatsu: Daihatsu, another new player in the market with its Cuore 850 cc, increased the competition in the market . Daihatsu and Indus Motor signed an agreement to launch the Coure in market. The project worth Rs 750 million was developed at Port Qasim between Daihatsu and Indus Motor to produce Coure. Daihatsu also heated up the competition in small car segments. Suzuki for the first time faces competition in small car business. It is for the first time that Daihatsu will produce its car in Toyota Plant in Karachi. The assembly plant of Daihatsu has the capacity to produce 10,000 Cuore cars in the year. But the expected level of output in future will be some about 5000 cars in the starting year of its operation

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