7/5Introduction

According to Hopkins (2008) and DiCarlo (2009), their fear is justified by various factors

amongst them are risks of expanding in to new location, lack of information regarding new

profile of customers and their preferences, risk of defeat from the well established market

competitors and political factors and problems in customisation of the strategy of supply

management and organisational distribution to fit in the new environment. However, as asserted

by Scholes and Whitington (2008) and Johnson et al (2008), in certain situations a strategy of

global expansion is not just an option but a requirement in terms of survival considering the

external challenges faced by the corporation. An example of such a situation could be expansion

of Toyota to Europe, a market posing great challenges for Asian and American entrants, which

has secured their top position through a strict strategy of standardization.

A critical analysis of Toyota’s entrance in to Eastern Europe related major strategic difficulties

and benefits is done in this paper, with a particular emphasis on how the launch of Aygo has

effected its performance in the segment of mini cars. Another important point which made the

author chose the object of Analysis as TME is that until now Toyota’s European division is

considered its weakest link.

European Market Analysis

A suggested location for foreign direct investment is the newest Balkan country of Kosovo,

through establishment of Toyota’s manufacturing base in that region. Despite the fact that other

non EU Balkan countries such as Albania and Croatia have statistically higher economic growth,

the following points show why Kosovo was selected.

1. As compared to other non EU Balkan countries such as Albania, Serbia and Croatia,
 Kosovo has the lowest investment cost which is a major point towards its selection.

2. Since Kosovo gained independence from Serbia, political stability in the region has

increased. Despite the views of the analysts that most of the Balkan countries might view

Toyota’s decision to base in Kosovo negatively, it should not be forgotten that these

countries were amongst the first in acceptance of its independence, which shows that they

support its growth.

3. A positive co relation has been observed by financial analysts between the increase in the

shares’ intrinsic value and the conglomerates investment in countries facing their period of

transition in the likes of Kosovo. Toyota’s stock value decreased due to the negative

marketing forecasts regarding the whole brand due to worldwide disruptions in their plants.

Taking this in to consideration, support gained from EU and USA for expansion of TME’s

in to the world’s newest country would lead to short term benefits due to increased value of

shares.

4. Customer variations in Western and Eastern parts of Europe are:

CRITERIA WESTERN EUROPEAN CUSTOMERS EASTERN EUROPEAN

CUSTOMER

PURCHASING Despite the financial crisis recently, countries Power of bargaining and

POWER in the EU have consumers with greater purchasing power is lower.

purchasing power and hence a stronger

bargaining position.

PREFERENCES AND In spite of the recent financial crunch, EU In spite of the fact that they

PRIORITIES statistics are more oriented with quality as are more, the vehicle

shown by statistics. Moreover, countries such production industry lacks

 as Germany, Italy and France have their own strong brands which makes

local brands which are preferred more. customers give greater value

Hence, considering Toyota, the customers’ to Toyota as a brand which

have greater bargaining power due to this. is high in quality and

affordable, in comparison to

other EU customers.

3.PORTER'S FIVE FORCES Competitive Analysis

An organization has to develop a vital understanding of its competitive environment’s nature if it

wants to successfully establish strategies appropriately and achieve its objectives (Wilport,

2002). Considering this, Porter’s five force analysis is done for Toyota in the following pages;

this model deal with explanation of the external factors to the industry which effect internal

competition and the micro environmental factors which have an impact on how firms compete

with each other, the diagram is which is present as following :

Competitive Force Particulars Total Threat

High entry costs
New entrants  Local advantages Very High
Strong branding
 Mature business
Strong Portfolio of Products
Rivalry powers High
Price Sensitivity
 Quality Standards
low for spare parts / accessories
suppliers
Bargaining power of suppliers Low
High for service providers

No Switching Costs

Bargaining power of buyers High
Number of alternatives available
Strong options for automobile users
Less options for corporate
Substitutes High
Family/friend/ Relatives
Camping/ RVs

2.1 The degree of rivalry

It has been strongly advocated by academics that the competition strength is at many times

effected by the preferences of customers, which may simply be due to consumption habits of

routine from cultural practices, rather than due to product’s quality superiority. According to the

Toyota official website (2010), the above fact has in it main strength and power of bargain of

competitors of Toyota. In the A market segment, Toyota’s main competitors are Citron, Fiat,

Peugeot and Mercedes, which have traditional brand establishments with emphasis on superior

quality and customers in all countries, even the European ones, have awareness regarding them.

Moreover, competition is also provided by European brand due to their profitability and size.

Toyota’s competition threat is further increased by the element that its operations are in the

highly infiltrated A market segment, which represents 30% of the European market. It is

suggested by academic theory that the greater a market is crowded, the more aggressive the

competition. Toyota has the main advantage competitively in Europe of affordable prices which

may be harmed by the price war, thus showing high competition awareness by Toyota.
2.2 Threat from substitutes

According to Bowe and Gilber (2007) and Prashant (2008), the major distinction between

companies which are mediocre and the ones excelling on a constant rate lies within their ability

of transforming the main threats of the market in to opportunities and also from the ability to let

the main threats come internally in the organisation rather than externally. These propositions

not only represent on of the greatest strengths of Toyota’s greatest strengths, but also decrease

the barriers of threat for entry of products of Toyota significantly. Considering the perspective of

“product-of product substitution” , major threat for TME’s comes from the major threat the

aspiration of low cost car manufacturing companies such as Great Wall Motors, operating in

China, and other companies in Latin America such as Hispano-Argentina.

2.3 Bargaining Power of Customers

Considering the case of automobiles, an average customer from Europe if more sophisticated,

selective and demanding then one from America, Africa and Asia. This combines by the

overcrowded aggressive competition in the European sector of mini-auto comes to the

conclusion that customers of TME’s have high bargaining power. As asserted by Marcus (2008)

and EuroStat official website (2011), other than their strong power of bargaining, many complex

social and cultural phenomenons present in the market of Europe act as a barrier for marketers to

fully understand the customers profile and also devise a suitable marketing strategy for

maintenance of competitive edge in the market of Europe.

2.4 Bargaining power of suppliers

A company’s superiority in relation to its suppliers is determined greatly by its size, economic

and political importance. According to Helmut et al (2009), and Colis and Montegmory (2009),

this statement applies for Toyota in an international aspect especially because of its strategy of

plant expansion in recent years has a focus on establishing industrial units in countries going

through their transitional periods such as the factories set up in Czech Republic and China’s

province of Sichuan.

Specifically in Europe, a low bargaining power is the feature of Toyota’s supply chain

management participants. Suppliers have a low bargaining power also due to the fact that the

factory was launched by Toyota Motors as a joint venture with PSA, a company which has the

characteristics of high market share, immense bargaining power and authority in car market of

Europe. Although prior to the launch Helmut et al (2009) and Batkus and Classemen (2009),

considered that in comparison to the other European plants, the suppliers bargaining power in

Czech Republic would be higher as the construction of the industrial unit was done in Kolin,

which is a city near to Skoda’s factory.

2.5 Barriers of entry -HIGH

Penetration of new firms in the industry is made difficult due to the huge amount needed for

initial investment, strong political power held by firms already operating in the industry, along

with the business’ nature of being labour intensive. Nonetheless, as Jobber (2008) and De Marchi

(2010) assert, the wish of many companies to generate greater FDI will decrease Europe’s

barriers of entry put up through alleviations and tariffs. Moreover, brands which are already

established such as BMW and Audi have a low barrier of entry in the A market segment who’s

view regarding this route, as in Toyota’s case, would be a keystone for success in future.
3. Analysis of Strategic Positioning

Numerous academics argue that in order to excel in the nowadays competitive business

environment, a strategist must find the balance between being consistent with the corporate

strategy 3and the ability to shift from that strategy when necessary and customize it to better fit

the new challenges posed by the overall external environment. The excel of Toyota in numerous

markets as a car leader is a sufficient evidence for its management being aware of the above

mentioned fact. Although, Toyota initiated its pathway as a multinational company, by pursuing a

global strategy (featured by standardized products, exploiting economies of scale), and continued

to apply this success story to every market they have penetrated, their penetration in the

European market is featured by a significant number of elements common to a multi county

strategy (customized to host country circumstances) , leading to the conclusion that TME applies

a hybrid strategy (combination of both, rather on strictly absolutizing upon a single strategical

pathway). The joint venture with PSA , was seen by numerous analysts as a proof of Toyota's

determination to customize its operation and products to the European market, therefore, making

a shift from an absolute global strategy. Further evidence , is TME's penetration through Yaris,

specially designed in France (customized for the European consumers), and strictly sold and

distributed in the continent. Nevertheless the launch of the Aygo, put into doubt the extent of

Toyota's hybrid strategy, by posing the question of how can cars with 93% standardized products

be diversified стратегија (Jermain , 2010; McPeak and Tooley, 2009,

4. Potential Strategies success factors

Key successful factors are defined as the necessary conditions to succeed in a given market, and

the inability to recognize them lead to fatal performance(Kotler and Keller, 2009). It is a

frequent scenario, that the key factors being perceived as the most threatening and challenging to
be achieved, to represent a source or better said opportunity that would ensure excel in a given

business environment (Gupta,2008; Uhainer and West,2009).

A typical example for the mini-car industry and TME specifically is the factor “quality

control(Bold, 2004)”. The emphasis on quality control is all the more pertinent in the automobile

industry as regulation requires that safety standards are adhered to and failure to do so can lead

to large penalties and bad press which would damage the firms reputation (Warburton, 2009.

The emphasis on QC although frequently although requires major investment and legal burden,

triggers the ambition among car manufacturers to become more cost efficient in terms of

production and achieve economies of scale , another crucial key successful factor in that car

manufacturing industry (Graham, 2005).

Toyota as the emergent company in producing hybrid technology, achieved the most crucial

competitive edge. Therefore, a creative, visionary marketing strategy that pushes the

“conventional borders” , offering customers a new experience related with the company figure

(further developed for TME in the last section of the research paper) , will not solely represent a

goldmine of skyscrape sales figure but will ensure long run customer loyalty.

Recommendations for the best strategy in the European Continent

The first recommendation offered to Toyota comprises both building a supporting production

facility as well as strengthening the distribution in less developed regions of the European

continent. Apart from the global recession which particularly impacted countries like Spain, Italy

and Portugal representing the cornerstone of the A-market segment, the population in Europe is

aging, and it is a widely known fact that Generation X displays lower preference towards mini-

cars. Therefore, it is highly recommendable for Toyota to strengthen in distribution in transitional

European countries with an exponentially growing youth, such as Albania, Kosovo, Croatia etc.
In Kosovo for example, over sixty percent of the population is young, similar statistics in the

other countries. By strengthening distribution in these countries, Toyota largely diminishes the

threats of head to head competition which has not focused much in these regions, as well as, gets

a possibility to establish itself as a brand to be consumed traditionally over generations, due to

the fact that these regions are less emotionally attached to European brands and if purchased by

young people who are about to start a family , it ensures that their future generations are

emotionally linked to Toyota.

8. Conclusion

From the above research paper, it can be derived that Toyota fulfils all necessary key successful

factors in order to succeed in the European mini car segment. Nevertheless, in order to capitalize

upon this favorable fact it is necessary for TME to not solely be cautious towards its aggressive

competition, but also continue with a strategy which will aim not solely upon customizing the

products of the entity to meet European tastes and needs, but also continue its established

pathway of creating to its customers the perception of TME being a Pro European brand. The

economic recession threatening the major markets of the mini car products, as well as, the ageing

population in Europe should trigger Toyota invest in transitional European countries which are

expected to experience economic growth in the next decade and have juvenile population, like

the Balkans.