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INTRODUCTION

In this fiercely aggressive business world, the goal of most firms is to establish distinctive
or unique capabilities to gain a competitive advantage in the marketplace through utilising the
most of their core competencies. Competencies refer to the fundamental knowledge owned by
the firm (knowledge, know-how, experience, innovation and unique information), and to be
distinctive they are not confined to functional domains but cut across the firm and its
organisational boundaries. Today, business enterprises in developed countries operate in a more
complicated, and more regulated, environment. The strategic task, then, is to create a distinctive
way ahead, using whatever core competencies and resources at its disposal, against the
background and influence of the environment. Through these distinctive capabilities the
organisation seeks sustainable competitive advantage. Competition in many domestic and
international markets appears to be entering a new phase, in which product quality and
performance are becoming more important to customers than price. In such markets, the
effective management of the new product development process is the essence of competitive
advantage. Due to such changes, a review of the organisations’ strategic capabilities is a must if
they are to keep up with the demands of the changing times. This paper analyses the strategic
capabilities of Toyota Company in face of the ever-stiffening competition in the automotive
industry, as a potential tool to further strengthen Toyota’s position in the automobile market.

BRIEF TOYOTA BACKGROUND


Toyota Motor Corporation is a famous Japanese multinational corporation, and is
considered the world’s second largest automaker of automobiles, trucks, buses, robots, and
providing financial services. Its founder is Kiichiro Toyoda, born in 1894, and the son of Sakichi
Toyoda, who became popular as the inventor of the automatic loom. Kiichiro inherited the spirit
of research and creation from his father, and devoted his entire life to the manufacture of cars.
After many years of hard work, Kiichiro finally succeeded in his completion of the A1 prototype
vehicle in 1935, which marked the beginning of the history of the Toyota Motor Corporation.

The first Type A Engine produced in 1934 was used in the first Model A1 passenger car
in May 1935 and the G1 truck in August 1935, and led to the production of the Model AA
passenger car in 1936. In addition to being famous with its cars, it still participates in the textile
business and makes automatic looms that are now fully computerised, and electric sewing
machines that are available in different parts of the world. It has several factories around the
world, which serve to manufacture and assemble vehicles for local markets. The corporation’s
factories are located in countries such as the United States, Australia, Canada, Poland, France,
Czech Republic, United Kingdom, Turkey, South Africa, Brazil, Argentina, Venezuela, Mexico,
Japan, Indonesia, Pakistan, India, Mexico, Malaysia, Thailand, China, Vietnam, and the
Philippines. Despite the many locations of its factories, its headquarters is located in Toyota,
Aichi, Japan.

It invests a great deal of time and effort in its research into cleaner-burning vehicles, such
as promoting a Hybrid Synergy Drive and running a Hydrogen fuel cell in its vehicles. It has
significant market shares in developed countries, such as the United States, Europe, Africa and
Australia, and has significant markets in South East Asian countries. Its brands include the
Scion, its division in the United States, Guam and Puerto Rico, and the Lexus, which is Toyota’s
luxury vehicle brand.

Aside from producing cars and other types of automobiles, such as SUVs and coasters,
Toyota also, participate in rallying or racing. The company’s presence in Motorsport can be
traced to the early 1970s, when Ove Andersson, a Swedish driver, drove for Toyota during the
RAC Rally in Great Britain, and in succeeding years, Toyota Team Europe was formed. Up to
the present, Toyota cars are still being used in a variety of racing events in different countries
around the world. These events include the CART in Vancouver, the Le Mans, the Indy Racing
League, the NASCAR, and the Toyota F1 Series.
Vision
“To be the most respected and successful enterprise, delight customers with a wide range of
products and solutions in the automobile industry with the best people and the best technology.”

Core Values
 World class production quality
 Achieving the ultimate goal of complete customer satisfaction
 Being seen as the best employer
 Fostering the spirit of teamwork
 Inculcating ethical and honest practices
7 ps
7Ps is a major concept that is applied in the locomotive industry to realize large
volume of sale, employee retention and annual turnover. This paper entails an
analysis of the 7Ps applied by Toyota Company, which is among the top
manufacturers of vehicles in the world. The paper focuses on how numerous
marketing variables have enabled the company to gain huge profits. Moreover, it
will demonstrate how each of the variables gives the company a competitive
advantage amidst its competitors. Moreover, the discussion will illustrate how the
7Ps helps to boost the corporate image and how they enable Toyota Company to
obtain a remarkable market share.

Over the years, the traditional marketing mix has been extended and redefined
owing to the complex nature of products and services.In Toyota Company,
competition in the global market and demand to stay ahead in the market has seen
it evolve its concept of marketing to provide intangible and heterogeneous
services. It has sought to implore the best considerations that its management can
articulate in the highly changing market arena not just to survive, but also to
profitably operate and derive the necessary positive images in the market. It is
from this consideration that it employs all the 7 principles of marketing as an
aspect for progress.

Marketing

Marketing is regarded as one of the most crucial activities in any industry. In


modern marketing, the term marketing mix is a common concept. In various
contexts, marketing mix is usually referred to as the “7Ps of marketing”. This
entails a set of controllable factors or tools that are blend together to meet the
needs of consumers. In the case of Toyota Company, there are seven tools or
variables that used to ensure that consumers of automotive products are satisfied.
These variables include product, price, people, place, promotion, process and
physical evidence. This paper aims to discuss in depth the 7Ps in Toyota Company.

Product

There are numerous products which Toyota Company has managed to inject into
the global market. For instance, we have numerous vehicles such as Corolla, Land
Cruiser, RAV4, Lexus and Avensis. Toyota is proud to have left a remarkable
mark in the global motorway. As a matter of fact, the company has managed to
produce automotives that are able to cope with the impending fuel upsurges. As a
result, Toyota has become a major competitor in the car industry. Embracing
innovation has made the company to launch products that meet consumer’s
expectations.

One of the key elements of service marketing for Toyota is its products that satisfy
customers’ needs. According to Cusumano, the success of Toyota products and
services has been pegged on the notion that they are diverse and intangible. They
fit consumers’ tasks, meet their needs and expectations. It is important to note that
Toyota products, cars and car accessories, are fast evolving in the market and
therefore consumers continue enjoying new designs with time. The company has
continued to enhance the quality of its products by factoring in consumers’ tastes
and establishing effective links to address their demands.

Price

Toyota Company has set prices proportionally to the consumer’s income in various
parts of the world. The company has managed to produce cars for low and high-
income people thus ensuring that its target consumers are not let out. This has
given the company a competitive advantage since the sales continue to increase
and maximum profits are realized. However, the pricing is highly dependent on
demand and supply. Toyota’s brand, the experience its products give to its
customers and its ambience are some of the factors that have determined its price
offering. While it is hard to measure service and tangible costs of production,
Challagalla, Murtha and Jaworski indicate that certain factors such as overheads
and labor costs might determine the price of a product.Price determination for
Toyota Company has been consumer friendly. This has been so while maintaining
the highest possible quality. Indeed, Toyota products represent good value for
clients’ money. Its prices represents the tenets of marketing concept as they are not
cheap but represent quality, a consideration that gets clients to pay a little more.

Place

Toyota Company has been able to identify numerous market segments where its
goods are in high demand. As a result, its products have successfully penetrated
most of the markets in Asia, Africa, America and Europe.
Promotion

Toyota Company has launched advanced promotional activities. Through


advertisements, the company has shown its commitment to manufacturing
environmentally friendly vehicles. Promotion tactics used have revealed the green
image of Toyota locomotives that eventually increase their marketability.

Oldani defines promotion as the manner in which clients are informed of products
and services to the point where the services are sold.[7] Drawing from Toyota
promotion practice, it involves making small changes in the advertising of the
product. Such changes cause a dramatic shift in results and enhance sales. To
counter challenges of promotion, Toyota has continually developed new strategies,
offerings, advertising approaches and new sales and marketing processes. It has
used local medial such as the television, the news print, and even the radio to carry
out promotions.

People

The company is keen to empower its entire workforce in the service and
production line. This has made its workers to become creative and customer
friendly. As a result, it has boosted the company’s self image and its ability to
respond to consumers’ expectations.[8] In a company, the managing director and
the front line staff are some of the individuals who are relied upon to promote the
image, products and services the company offers. According to Rajasekera, it is
essential to have the right people to drive a business forward. Management in
Toyota has established the necessary supportive structures that have witnessed the
growth of its products and offerings. Its leadership role in provision of the
necessary management practices that lead to the best management practices in
organizations. It is in this regard that the company assimilated its widely known
Toyota Company Philosophy that calls for long term critical thinking as a basis for
management decision making at all times. Therefore, its management structure has
been greatly devolved to the lower levels where it has direct link with employees
to monitor how they deal with clients.[9]

Process

Toyota has embraced a lean production model hence it is able to produce just-in-
time products. Proper management has reduced wastage and production cost thus
increasing efficiency. This has enabled the company to capture a huge market
share.
Physical evidence

In most companies, the interaction between consumers and manufacturers ends


when a business deal is made. However, Toyota has maintained a tangible
presence and a stable dealership with its new and old clients. This has ensured that
consumers still get services from the manufacturer when a need arises. Customers
have gained confidence with the company and this has enhanced more sales.

Place as a marketing mix refers to an actual location where a company’s product is


being sold. Toyota has vastly grown and this has seen it continue to reflect and
review locations upon which its salespersons meet its clients. It sells its services
and products in different places. This according to Causamo has the advantage of
increasing sales. Toyota also uses online shops, telemarketing, and mail order as
well as catalogs to facilitate greater understanding of the products by the
consumers.

Positioning in marketing is a unique component which according to


Rajasekera involves understanding how clients think or regards a product. Based
on attribution theory, this also extends to how people regard a company, its
position in the market and its offerings. By the onset of the 21st century, the
company had assimilated highly modernistic models of making its automobiles
which saw its recent hybrid cars colonize the US market with ease. Today, it has
over 15% of the US market share where over 2.5 million cars are sold
annually. Globally, its employees are over 350, 000 in number while over 100
million others are indirectly affiliated to it in major garages and repair operations
worldwide. These factors put in a competitive marketplace make Toyota a
successful company.[10]

Packaging is an important marketing mix. It represents the body of a


product. Fontenot et al. indicate that many customers are normally attracted,
impresses or repelled by the first impression of a product. Accordingly, Toyota has
used unique and attractive packaging of its vehicles. This has also extended to its
brochures, correspondence, waiting rooms, shops and offices as well as
salespersons who look professional in every way.
SWOT ANALYSIS
Strengths One of Toyota’s most potent strength is that they are one of the world’s best known
brands. As they have been in the business for several years now, the experience that they have in
manufacturing cannot be overemphasised. They already have built a solid reputation for being a
dependable automaker. Additionally, they have the strength of being diverse with respect to their
product lines, having affiliated automotive brands including Aston Martin, Ford, Jaguar, Land
Rover, Lincoln, Mazda, Mercury and Volvo, which allows clients to choose from a variety of car
models to fit their lifestyle. They are also known to be supportive of societal causes, in particular
the fight for breast cancer and support after the September 11 attacks in the U.S. They pioneered
the moving assembly line, which became their mechanism for making vehicles more efficiently
and faster, therefore more affordable. Traditionally Toyota's international operations were a
source of that allowed the company to maintain its position as the second largest auto maker in
the world and to respond to GM's competitive moves.
Weaknesses The company's organisational structure has become inefficient as the company
became more complex. This hindered Toyota's ability to manage its international network of
subsidiaries, branches, and companies. The weakness of its organisational strategy reflects to the
speculations over the likely performance of Toyota in the future, as the company’s financing
section is swamped down by hefty outstanding debts. The firm is not in risk of bankruptcy, but
the Toyota management is in a tight spot, and has to be extremely vigilant to not make it any
tighter. There is also a notable management issues within the company. Finally, because of the
increasing competition, the company has witnessed a decline in overall sales, a weakness on their
part as they have somehow failed to overcome the challenges that additional competition brings.

Opportunities Toyota Motors Company has the distinct opportunity to have cleaner engine
emissions, in alignment with their corporate responsibility to become environment-friendly.
Through working with environmental groups to help clean the environment, they also have the
opportunity to further enhance their image to the general public. Since they have already started
investing in Solar Power, the end is a more viable prospect. Toyota could further widen the scope
of their opportunities through specialising and rationalising its worldwide operations on a
regional basis and to develop a network organisation in which its subsidiaries would increase
their transnational linkages. Besides Toyota learning about the possibilities of producing quality
automotive products in their areas of operation at a comparative cost advantage, other relevant
factors could bring about new opportunities for exporting vehicles: the parent company's
efficiency-seeking strategy; its competitive disadvantage in the small-car segment of the market
and the competitors' moves in this market-segment; and the new more flexible regulations in the
respective countries in which they have manufacturing plants. Further, with Toyota’s existing
capability to innovate on automobiles, they have the opportunity to penetrate a still larger scope
of market.

Threats. As with any firm in the automotive industry, Toyota faces very tight competitive
rivalry in the auto market. Competition is escalating, with the threat of new entrants continuously
flowing into the market from South Korea, China and new plants in Eastern Europe. Toyota is
also exposed to the risk of movement in the price of raw materials such as steel, glass, rubber and
fuel. The key economies in the US, Europe and the Pacific are also experiencing slow downs
lately. These economic factors are latent threats for the company under analysis. Further,
substitute products such as Natural gas, Electricity, Ethanol, Vegetable oil, Sunlight, Water poses
a distinct threat to the sustainability of company sales. While Toyota strategies responded to the
local opportunities and competitive advantages that were built over time in different national
markets, the competitiveness of foreign operations was also dependent upon the company's
management capabilities and its overall position in the industry worldwide. If such factors were
to perform under expectation, their competitiveness in the international scene would suffer
seriously.
STRATEGIC CAPABILITY

Strategic capability is the adequacy and sustainability of the resources and competencies of an
organization for it to survive and prosper. It is underpinned by the resources and competencies
of an organization. Strategy is concerned with matching a firm’s resources and competencies to
the opportunities that arise in the external environment. Increasing emphasis on the role of
resources and capabilities as the basis for strategy is the result of two factors. First, as firms’
industry environments have become more unstable, so internal resources and capabilities
rather than external market focus has been viewed as a securer base for formulating strategy.
Second, it has become increasingly apparent that competitive advantage rather than industry
attractiveness is the primary source of superior profitability.

UNIQUE RESOUCES AND CORE COMPETENCIES


Threshold resources and competencies are important but they do not create competitive
advantage. Competitive advantage is created and sustained if the organization has unique
capabilities and resources that competitors cannot imitate.

Unique resources are those resources that critically underpin competitive advantage and that
others cannot easily imitate.

For Toyota:

 Plants that Operate in Harmony with the Natural Environment:


For an automaker, making cars, i.e., manufacturing is the most fundamental operation. Toyota’s
Sustainable Plant Concept attempts to incorporate the concept of sustainability into
manufacturing. Toward its goal of achieving a sustainable plant based on the concept of "a plant
that fully utilizes natural resources, while operating in harmony with the natural environment,"
Toyota established the following three basic initiatives

Energy reduction: Development and introduction of low CO2-emitting production technologies


and daily kaizen (improvement) activities.

By the end of FY2006, the Tsutsumi Plant had reduced its CO2 emissions by 50% or more from
the 1990 level by taking such actions as installing an innovative gas engine cogeneration system.
The Tsutsumi Plant plans to further conserve energy by eliminating energy waste. At the
Takaoka Plant, Toyota is introducing low CO2 production technologies to reduce the number of
drying ovens needed in its painting process. The technologies implemented on the new No.1
Painting Line, which began operation in 2007, and to be implemented on the new No. 2 Painting
Line, are together expected to reduce the Plant's annual CO2 emissions by approximately 35%.

Energy conversion: Utilization of renewable energy (solar, etc.).

In the area of utilizing renewable energy, the Tsutsumi Plant installed a polysilicon-type
photovoltaic power generation system with a rated output of approximately 2,000 kW. This
system is one of the largest being used by an automobile production plant in the world and is
capable of supplying approximately half the electricity needed in the assembly process.
Additionally, part of the generated electricity is stored in batteries and used for powering the
streetlights surrounding the Plant.