Archana World Prize Winner GMD 2021

Global Marketing Decisions (2304) Membership number: 40070811
GLOBAL MARKETING DECISIONS

(2304)
CIM MEMBERSHIP 40070811
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Contents
TASK 1: .......................................................................................................................................................... 6
Task 1 A: Critical evaluation on Toyota’s ability to understand its customer base and buying
behavior .................................................................................................................................................... 7
1.A.1 Importance of understanding buyer behavior for Toyota ........................................................ 7
1.A.2 Toyota’s ability to understand customer expectations due to technological advancements . 7
1.A.3 Toyota’s ability to understand customer concern towards environment ................................ 8
1.A.4 Conclusion ................................................................................................................................... 9
Task 1 B: Critical evaluation on fit between Toyota’s Organizational culture, strategic intent and
strategy ................................................................................................................................................... 10
1.B.1 Introduction .............................................................................................................................. 10
1.B.2 Evaluation of Toyota’s Organizational Culture ........................................................................ 10
1.B.3 Evaluation of Toyota’s Strategic Intent and Strategy .............................................................. 10
1.B.4 Evaluation on fit between organizational culture, strategic intent and strategy .................. 10
1.B.5 Recommendations on culture .................................................................................................. 11
TASK 2 ......................................................................................................................................................... 12
Task 2 A: Critical assessment on strategic marketing options available for Toyota to maximize
growth and profitability ......................................................................................................................... 13
2.A.1 Introduction .............................................................................................................................. 13
2.A.2 Strategic Marketing Options for Toyota .................................................................................. 13
2.A.3 FSA Review on proposed options ............................................................................................. 15
2.A.4 Conclusion ................................................................................................................................. 16
Task 2 B: Critical evaluation on sustainable funding sources and approaches available for Toyota .. 17
2.B.1 Introduction .............................................................................................................................. 17
2.B.2 Sustainable funding sources available for Toyota ................................................................... 17
2.B.3 Evaluation on financial approaches applicable for Toyota ..................................................... 18
2.B.4 Conclusion ................................................................................................................................. 19
STRATEGIC AUDIT ....................................................................................................................................... 20
TASK 3: ........................................................................................................................................................ 27
Task 3 A: Organization Background ....................................................................................................... 28
3.A.1 Organization Name: .................................................................................................................. 28
3.A.2 Company Type: ......................................................................................................................... 28
3.A.3 Size of the Organization:........................................................................................................... 28
3.A.4 Services Offered: ....................................................................................................................... 28
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3.A.5 Customer Base: ......................................................................................................................... 28

3.A.6 Main Competitors: .................................................................................................................... 28
3.A.7 Key Internal & External Stakeholders ...................................................................................... 28
3.A.8 Approach to Customer Satisfaction & Loyalty: ........................................................................ 28
Task 3 B: Critical evaluation on the contribution of Sri Lankan Airlines’ corporate brand in increasing
its value and brand equity ..................................................................................................................... 29
3.B.1 Importance of corporate branding strategy for SLA Limited .................................................. 29
3.B.2 Enablers of corporate branding strategies at SLA Limited ...................................................... 29
3.B.3 Critical Assessment on corporate branding strategy used by SLA .......................................... 29
3.B.4 Impact assessment on value and equity of the corporate brand ........................................... 30
3.B.5 Conclusion ................................................................................................................................. 31
Task 3 C: Critical assessment on strategic risks faced by SLA and respective mitigation strategies ... 32
3.C.1 Importance of assessing strategic risks .................................................................................... 32
3.C.2 Key Strategic Option of SLA & Associated Risks ...................................................................... 32
3.C.3 Assessment of Key Strategic Risks faced by SLA & Mitigation Strategies ............................... 32
3.C.4 Conclusion ................................................................................................................................. 33
APPENDICES ................................................................................................................................................ 34
REFERENCES ................................................................................................................................................ 36
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List of Figures
Figure 1: Connected Eco System (IPSOS, 2020) ............................................................................................ 7
Figure 2: Car decision making process Vs Digital Moments (Compiled by Author)...................................... 8
Figure 3: Shared Mobility Mileage 2030 (PWC cited in acquire, 2020) ........................................................ 8
Figure 4: Toyota cultural shift proposal (Groysbery et al, 2018) ................................................................ 11
Figure 5: MCC Matrix (Nicholls, 1995) ........................................................................................................ 16
Figure 6: Ansoff Matrix Vs Risk (Ansoff, 1957)............................................................................................ 17
Figure 7: WACC and Optimal capital structure (CFI, 2020) ......................................................................... 19
Figure 8: Mendelow Matrix ........................................................................................................................ 24
Figure 9: SGM Toyota.................................................................................................................................. 24
Figure 10: Global Hybrid & Electric Car Market (2014-2023) ..................................................................... 24
Figure 11: Snapshot on Toyota Operations ................................................................................................ 24
Figure 12: 10 Year Revenue Vs Net profits SLA (in Mn LKR) ....................................................................... 28
Figure 13:SLA Scale of Operations (Srilankan, 2020, Advocata, 2019) ....................................................... 28
Figure 14: Serviced offered by SLA (Srilankan, 2020) ................................................................................. 28
Figure 15: Corporate Branding Typology of SLA (van Riel & Bruggen (2002) ............................................. 29
Figure 16: Dimensions of Corporate Brand of SLA (Based on Davies et al, 2007) ...................................... 29
Figure 17:Branded House Strategy ............................................................................................................. 29
Figure 18: Shareholder Value Assessment SLA (Based on FT, 2020) .......................................................... 31
Figure 19: Brand Value Vs Ranking - SLA (Brandfinance, 2020).................................................................. 31
Figure 20: Risk Radar (Appendix 22) ........................................................................................................... 32
Figure 21: Proposed Risk Mitigation Plan for SLA ....................................................................................... 33
Figure 22: Customer Value Assessment of SLA (Based on the model by Whittmer et al (2011) ............... 35
List of Tables
Table 1: Strategic Intent Assessment – Toyota (Compiled by Author based on Appendix 6) .................... 10
Table 2: Culture Vs Strategy Assessment based on Appendix 6 ................................................................. 11
Table 3: Culture Vs Strategic Intent Assessment based on Appendix 6 and 17 ......................................... 11
Table 4: Strategic Options Toyota ............................................................................................................... 15
Table 5 FSA Assessment on Strategic options ............................................................................................ 16
Table 6: Sustainable funding options for Toyota ........................................................................................ 18
Table 7: Cost of Capital – Toyota ................................................................................................................ 18
Table 8: Stakeholder Analysis SLA............................................................................................................... 28
Table 9: Assessment of Corporate Branding Strategy of SLA (Based on Hsu et al (2015) .......................... 30
Table 10: Competitor bench marking on Customer Satisfaction (Brand finance, 2020 & Skytrax, 2020) .. 30
Table 11: Strategic Risks & Mitigation Plan SLA.......................................................................................... 33
Table 12: Detailed Risk Assessment ............................................................................................................ 35
List of Equations
Equation 1: CAPM Formula ......................................................................................................................... 18
Equation 2: WACC Formula (CFI, 2020) ...................................................................................................... 19
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List of Abbreviations
AI Artificial Intelligence
AR Artificial Intelligence
BHAG Big Hairy Audacious Goal
CAGR Compound Annual Growth Rate
CAPM Capital Asset Pricing Model
CLV Customer Lifetime Value
COC Cost of Capital
CRM Customer Relationship Management
CRM Customer Relationship Management
DPS Dividend per Share
EPS Earnings per Share
EV Electric Vehicles
EVI Electric Vehicle Index
FDI Foreign Direct Investment
ICT Information and Communication Technology
IOT Internet of Things
MaaS Mobility as a Service
MKIS Marketing Information System
NPD New Product Development
OP Operating Margin
PHEV Plug in Hybrid
PPP Public Private Partnerships
ROA Return on Assets
ROE Return on Equity
ROI Return on Investment
SGM Strategic Group Mapping
SLA Srilankan Airlines
SPV Special Purpose Vehicle
TFSC Toyota Financial Services Company
VFM Value for Money
WACC Weighted Average Cost of Capital
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TASK 1:
Word count: Task 1 A – 746 Task 1 B – 500 (Excluding headings and references)
A critical review on Toyota’s ability to address buyer behavior & a compatibility

assessment on organizational culture, strategic intent & current strategy
REPORT
To : Senior Management Team
From : Marketing Consultant
Date : 30th November 2020
Executive Summary
The below report reviews how Toyota has addressed changes in consumer behavior on digital front and related to rising
environmental concerns. It also contains a critical assessment on the fit between Toyota’s culture, strategic intent and
strategy with recommendations for the future. 6
Task 1 A: Critical evaluation on Toyota’s ability to understand its customer base and buying behavior
1.A.1 Importance of understanding buyer behavior for Toyota
The global automobile industry is facing immense challenges due to changes in technology, new business
models, rising environmental concerns while facing a global pandemic. Hence the industry will be
disrupted in so many ways. So, futureproofing Toyota’s business model is critical by understanding the
resultant consumer expectation changes.
1.A.2 Toyota’s ability to understand customer expectations due to technological advancements
1.A.2.1 IoT to establish connected eco system
Emerging trend of IOT is one of the core
competencies for an automobile company
(Appendix 1, 2 & 3). IOT would support Toyota in
enhancing customer engagement with the
vehicles itself and how its value chain creates
superior customer experience (Bhargava, 2015).
But currently Toyota’s capability is low
(Appendix 15,16).
Connected technology would enable the
Figure 1: Connected Eco System (IPSOS, 2020) customers to get navigation, advance warning,
traffic alerts etc. which will enhance the user experience. The data collected via these systems could then
be linked to extended eco systems with dealers and service station to immediately address any queries
from customers. This was identified as the proposed product propositions (Appendix 10), which would
boost Toyota’s brand equity for being more consumer centric.
1.A.2.2 Adaptation of Blockchain technology to create value
Customers seek cutting edge mechanisms to simplify automobile buying process especially regarding the
financial transactions but not limited to TFSC. This is an opportunity for Toyota with high potential
(Appendix 3). However, its capability is at a medium scale (Appendix 15).
The technology has the potential to track the location, accidents, parts changes etc (Deloitte, 2017) which
can be helpful for Toyota and TFSC to assess car’s lifetime value and propose ancillary product offerings
like accessories, deals on car upgrade. This is critical during lengthening car usage. It could also support to
drive loyalty programs with the customer base on reminders on service, merchandise sales etc which is
currently nonexistent.
Toyota can integrate this technology to their autonomous and electric vehicles for contact free seamless
transaction which enhances user experience.
1.A.2.3 Understanding digital consumer journey & key account management
Due to pandemic lockdowns and limited mobility there are emerging trends of e-commerce and
contactless transactions which are yet to be fully addressed by Toyota since its ability in understanding
digital consumer journey is low. Toyota must understand key virtual customer touch points to address
this gap.
Based on the above, Toyota must improvise on influencer marketing, optimize its website, enable VR and
3600 on vehicle features, online help desk to facilitate customer digital experience by capturing micro
moments. It is also critical that the dealerships are well equipped to connect via IOT to offer virtual agent
support, service reminders, test drive bookings online as part of service catalog.
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Figure 2: Car decision making process Vs Digital Moments (Compiled by Author)
Toyota has 280 dealerships across the globe. With IoT, Toyota can activate tracking of transactions using
big data to conduct key account profitability analysis to devise strategies to enhance dealer performance.
1.A.3 Toyota’s ability to understand customer concern towards environment

1.A.3.1 Growth in hybrid and electric vehicles
Consumers are concerned on environmental pollution. Hence, they tend to associate with brands that
deliver this promise. Toyota’s portfolio mainly consists of hybrid, conventional and fuel cell engines
whereas hybrid and electric markets projected to grow 20%+ by 2023 (Appendix 11). Competitors like
Nissan has already established in this zero-emission platform while only few markets have required
infrastructure (Appendix 7). Considering above Toyota’s capability is relatively low in electric cars.
The challenge for Toyota would be in increasing R and D cost on electric vehicles technology and projected
reduction in per unit price by 2023 (Appendix 5,11) while matching customer expectations on mileage and
safety (Deloitte, 2020). This could be rectified with private public partnership with governments on
infrastructure development and co-creation of technology with the industry players until the electric
vehicle segment matures.
1.A.3.2 Increasing shared mobility trend
In high density geographies consumers have switched to ride/car sharing options which challenges vehicle
ownership model (Appendix 1). Despite having collaborations with Softbank and Uber Toyota need to
improve its capability further to address this trend with a long-term focus.
By 2030, the shared mobile mileage is expected
to be higher than owned vehicles. With the
looming recession with potential increase for
refinancing queries, an alternative option
Figure 3: Shared Mobility Mileage 2030 (PWC cited in acquire, 2020) Toyota could consider is next steps on strategic
partnerships. KINTO is a solution for limited
time ownership. However, Toyota has the potential to partner with government and Uber/lyft to enable
IOT driven, AI enabled ride sharing avenues for public shared rides. This could enable routing through
congestion free areas, contactless transaction, predictive analytics etc that could be mutually beneficial
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for Toyota and the local authorities. This would support per person/unit emission reduction and
compliment the overall emission control agenda for the company and society in general.
1.A.3.3 Adaption of sustainable business practices
Toyota follows triple bottom line principles (Appendix 18) with recycling, solar powered manufacturing
etc. Customer perception on source of origin is positively contributed to the brand equity of Toyota
indicating high capability. With upcoming technological advances, it could enhance digital craftmanship
of employees via establishment of Toyota technical hub.
1.A.4 Conclusion
Given the above context, Toyota’s ability to understand customer is at a medium level. Above discussion
could support the development of strategic options for Toyota which could fuel the growth of the
company to be the No 1 sustainable automobile company in the world.
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Task 1 B: Critical evaluation on fit between Toyota’s Organizational culture, strategic intent and strategy
1.B.1 Introduction
Culture of an organization is the normative glue which binds everything (Tichy, 1982) and determines its
ability to differentiate among competition (Schein, 1990). A good understanding on culture would enable
Toyota to strive for excellence.
1.B.2 Evaluation of Toyota’s Organizational Culture
Toyota’s corporate culture is influenced by Japan’s on interdependence and collectivism (Nomura et al,
1995) hence classified as “caring” culture (Fig 4). Toyota is a common purpose entity (Kurtzman, 2010)
and popularly known for customer satisfaction, quality and process improvement (Appendix 17). The tone
is set by the CEO via Toyota way. Company welcomes employee suggestions to deliver the best solution
at lower cost. Toyota complies with cultural and legal norms in its territories and practices triple bottom
line principles on sustainability (Appendix 18).
On the other hand, focus on the repetitive processes makes Toyota more mechanistic hence limits its
capabilities (Richardson, 2007). It’s ideal if it pursues mass customization focus to be appealing to the
customers while being economical (Alarcon and Monero, 2014). Alleged labor exploitation and product
recalls in the past questions the integrity of the company.
1.B.3 Evaluation of Toyota’s Strategic Intent and Strategy
Strategic intent sets the direction for a company (Odita and Bello, 2015). Having the right intent is critical
to obtain global leadership (Hamal and Prahalad, 1989) for Toyota and assessed below (Appendix 6):
Components Current Assessment Proposed Intent
Vision Vision doesn’t specify on technological adaption. It Be the trailblazer of smart
is not a BHAG (Collins, 1999) as it isn’t ambitious for mobility solutions with planet
a global company but a traditional and laid-back focus, talent engagement and
statement. It isn’t brief to be recalled by staff. innovative execution.
Mission Toyota has different missions for its businesses Building connected mobility
hence challenges alignment. Mission limits its solutions enabling zero emissions,
scope to only vehicles. zero traffic and zero accidents.
Values Values are internal focused than customer focused. Additional values: Customer
orientation, expansive thinking,
trustworthy
Tagline It only talks about customer satisfaction and must "Be smart with Toyota"
hint of VFM and ROI.
Table 1: Strategic Intent Assessment – Toyota (Compiled by Author based on Appendix 6)
Toyota’s current strategy is cost leadership where it focuses on quality, safety, affordability with intrinsic
appeal (Appendix 6). When industry embraces technocentricity, prevailing in cost leadership would hinder
Toyota’s competitive advantage. Toyota should focus on business collaborations, market and product
developments and move towards sustainable mobility solutions to be benefit from innovative execution.
1.B.4 Evaluation on fit between organizational culture, strategic intent and strategy
1.B.4.1 Culture Vs Strategy
Toyota is known for its expertise in hard (product) and soft (culture) innovations (Takeuchi et al, 2008).
But whether its strategy and culture are aligned is critical for the stability of the business.
Based on below assessment its culture and current strategy has low alignment.
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Assessment Rating
The strategy on delivering a safe and quality automobile requires knowledge worker 5/5
involvement. Toyota embraces this via continuous improvement.
Toyota tries to harmonize its operations with planet and people. However, it lacks ecofriendly 2/5
mobility offerings like electric cars.
Strategy to deliver intrinsic appeal requires more than safety, quality and price but to do with 2/5
prestige, design etc. There is no evidence on Toyota vehicles having these claims.
Table 2: Culture Vs Strategy Assessment based on Appendix 6
1.B.4.2 Culture Vs Strategic Intent

Assessment Rating
Vision is not audacious but lengthy hence difficult to comprehend 2/5
Multiple mission statements in divisions could lead to competing objectives 1/5
Company intends to lead the way to future of mobility and delivering resulting with speed 2/5
(espoused value). However, missed the opportunity in electrification due to rigidity and
daunting decision-making process
Focus on quality could support the intention to deliver customer satisfaction 4/5
Table 3: Culture Vs Strategic Intent Assessment based on Appendix 6 and 17
Based on the above culture and current strategic intent fits on a medium scale.
1.B.5 Recommendations on culture

To align to proposed strategic intent (Table 1), recommended to embrace
learning culture with a degree of independence in decision making and
flexibility to adapt to changes.
Toyota should accommodate customer centric thought process in R and
D and mass customization in production to create appealing ecofriendly
mobility solutions.
Front line employees should be part of quality circles to gather customer
insights. Leaders to offer training to the employees to assess customer
expectation and deliver value. Toyota should follow balanced score card
to measure KPIs on customer, process, financials and people front to
monitor and reward improvements in annual appraisals.
Figure 4: Toyota cultural shift proposal
(Groysbery et al, 2018)
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TASK 2:
Word count: Task 2 A – 1247 Task 2 B – 748 (Excluding references & headings)
A critical assessment on strategic marketing options and sources of sustainable

funding and financial approaches for Toyota
REPORT
Executive Summary
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The below report reviews assess the strategic marketing options available for Toyota along with sustainable funding
options available for the same.
Task 2 A: Critical assessment on strategic marketing options available for Toyota to maximize growth
and profitability
2.A.1 Introduction
As per Johnson and Scholes (2008) strategic options are the key to win in a competitive landscape. Global
automobile industry is facing challenges and opportunities due to traction towards sustainable mobility,
global pandemic, new business models and technology (Appendix 1 and 3). Future strategic options for
Toyota is as below.
2.A.2 Strategic Marketing Options for Toyota
Strategic Option 1- Market Penetration (Ansoff, 1957)
Strategic Pillars Assessment on Growth & Profitability

1. CRM for Service Excellence at Customers take too long to switch to their next car hence customer
dealerships service is critical. Physical dealerships are expected to reduce in future
hence providing digital experience to the buyers via AR, customization,
online buying etc would gain prominence in future (McKinsey, 2020).
Data analytics will enhance the capability to serve the customers better.
Toyota must build in an online loyalty and MKIS platform where
dealerships can access the customer ID to understand customer
interactions, socio demographic status and history to initiate a data driven
dialogue with the buyer. Moreover, block chain technology integration
could also facilitate with payments and service reminders.
Dealerships could be ranked based on lead scores, response time

complaints etc (McKinsey, 2019) as a part of key account management.
This enhances CLV any thereby support growth and profitability.
2. Scaling up on budget car Global recession and unemployment, pandemic social distancing limiting
segments and refinancing the public transport usage, there is a potential demand from
“established” and “emergent” segments (Appendix 14) opting for
affordable cars. There would be possible rise in refinancing queries
towards TFSC.
To prepare for this opportunity Toyota should rationalize its automobile

portfolio and prioritize on economy cars units by enhancing its production
capacity. Prompt demand plans needs to be established and Daihatsu will
have to be supported with working capital financing to cater this demand.
3. Consumer centric thematic Toyota faces reputation issues (Appendix 2) regarding quality and safety
campaign of its vehicles. As mentioned in Table 1 customer orientation is proposed
as a new value by understanding customer associations with the cars and
resultant emotional benefits.
Toyota should communicate this with digital storytelling and thematic

campaign highlighting new services at dealerships, budget car offers,
safety features along with emotional benefits such as VFM, prestige etc
to win back the lost customer base while attracting new clientele. This
equity campaign would support the 5-year plan (Appendix 2) to become
most valuable automobile brand.
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Strategic Option 2- Market Development (Ansoff, 1957)

4. Launch shared mobility Mature markets are embracing ride or car sharing platforms (Appendix 1).
platform Gen Y and beyond (Emergent segment – Appendix 14) are 50% likely to
use pay per trip to commute while multi-tasking (Deloitte, 2015).
Established collaborations with Softbank and Uber could now be used by

Toyota as a mechanism to supply fleet and maintenance for ride share
drivers. Toyota should launch a car sharing platform “Toyota Go”, once
connected technology is implemented (pillar 9). This would arrest the
decline expected in social attitude changes on car ownership,
convenience, and budget consciousness (Deloitte, 2015) thereby
supporting the revenue growth (Appendix 2).
5. Grow in Asia Asian gained +2% contribution in 2019 with a growth of 9.7% despite India
and China degrowing at 12% and 14% respectively (Appendix 12). Region
has been booming for the past 30 years.
With FDI relaxation Toyota should form foreign manufacturing joint

venture with Maruti Suzuki and Shanghai general motors for synergic
benefits on establishing joint manufacturing plants to leverage on lower
manufacturing cost to reach 20% production cost savings (Appendix 2).
6. Partnering to develop e- Electric and hybrid car market is expected to grow by 21% in value and
mobility infrastructure 23% in volume by 2023 (Appendix 11). However only few European
economies, USA and Japan has the infrastructure to accommodate this
immediately.
EV Charging infrastructure needs to be developed by Toyota in alignment

with regulators on emission control goal. Based on electric vehicle index
(EVI) factors such as infrastructure, subsidies and incentives are low in
India, South Korea, Italy and France (Mc Kinsey, 2020). Hence this would
be a mutually beneficial collaboration to enhance revenue while acquiring
a new competency on electrification (Appendix 13).
Strategic Option 3- Product Development (Ansoff, 1957)

7. Launch of electric vehicles Battery and electric cars have slow decline compared to fossil fuel vehicles
amidst the global pandemic in Europe. Several governments worldwide
are subsidizing / penalizing customers while competitors are benefiting
from PHEV growth.
Toyota should invest in R and D to launch eco cars based on market

readiness (Strategy 6). Toyota must use the Asian production facilities to
enhance its capacity to accommodate this demand. NPD pipeline on PHEV
and electric cars is given as below. Post R and D phase, 10 EV models to
be launched during 2022 - 2024. This enables the company to reach the
strategic goals to generate 15% of income from eco vehicles (Appendix 2).
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8. Building MaaS eco system Toyota aims to develop connected cars and city concepts which are part
of proposed intent (Table 1). With the objective to bring down traffic and
enhance the reputation as good corporate citizen, Toyota has the
opportunity to use smart phone usage, 5G technology, IOT and its
competence to partner with local governments to launch public mobility
services with predictive analytics in high density areas in developed
economies. Hino buses could be integrated to the pilot project.
Competitors like Daimler is already trialing MaaS with Moovel in Germany

(Deloitte, 2017).
9. Enhance product features To embrace customer orientation (Table 1), Toyota’s cars should be
appealing to the users. Toyota should adopt mass customization strategy
to enhance design features like KIA/Daimler, modify the interiors with
sophistications and integrate with technology on IoT and block chain to
be part of connected eco system to enable AI guidance, virtual agent,
predictive analytics on traffic, automated payment and service excellence
as discussed in 1.A.2.
Table 4: Strategic Options Toyota
2.A.3 FSA Review on proposed options

Strategic Option Suitability Feasibility Acceptability
1.Market Improving service levels at Less risky options due to Customers approve of the
Penetration the customer touch point is comparatively low service level improvements
critical to reduce switching investment. Resources are while dealerships benefit
cost. Focusing on budget readily available. from additional demand
cars based on economic Dealerships needs training and sales. Investors will
conditions makes business on platforms and system on approve due to low risk,
sense. By creating thematic CRM and resources needs market share and equity
campaign, it triggers brand to be organized to handle gains (Appendix 7).
recall and association. budget car demand.
Score 8/10 9/10 9/10
2.Market This is a high-risk strategy Growing in Asia support Investor acceptance will be
Development but relevant for growth. market share gains while based on risk appetite level
Joint manufacturing alliance reducing cost of which has to be justified
reduces the risk on FDI. manufacturing. Strategic with projected cashflows.
Future proofing with alliance leads to synergies. Competitors and Toyota
infrastructure for EVs Infrastructure would will gain mutual benefits.
support the industry and Regulators would support
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enables Toyota with first not only Toyota which is a the infrastructure as part of
mover advantage. risk. urbanization & emission
control propaganda.
Score 9/10 7/10 8/10
3.Product Strategy will future proof High risk due to new Customer and regulators
Development Toyota. Eco cars and MaaS competency requirements will appreciate EV concepts
supports fuel economy and for Toyota on BEV and and connected technology.
congestion reduction while PHEV. Product Risk appetite determines
enhance car features will enhancement might need investor confidence.
support the appeal and extensive changes with Community will benefit
brand value. support from experts. MaaS from congestion reduction
for public is still in its and employees will benefits
infancy globally. from learning innovative
technology.
Score 9/10 7/10 7/10
Table 5 FSA Assessment on Strategic options
2.A.4 Conclusion
Based on Table 5, market penetration should be prioritized
while market development and product development come
in second and third. All these strategies are in line with new
competencies and proposed mission statements hence
would drive the growth of Toyota.
Figure 5: MCC Matrix (Nicholls, 1995)
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Task 2 B: Critical evaluation on sustainable funding sources and approaches available for Toyota
2.B.1 Introduction
It is essential that the Toyota considers each of above options as projects
and approach them in detail by understanding the framework on scope,
budget and timelines (Aston, 2020). It should also have the justification
on funding along with costs associated to assess the feasibility to get the
stakeholders aligned using investment appraisal techniques such as IRR
and NPV.
2.B.2 Sustainable funding sources available for Toyota

Each of the strategic options proposed has a risk associated with it hence Figure 6: Ansoff Matrix Vs Risk (Ansoff, 1957)
the debt and equity funding options will have to align with the risk appetite of Toyota. Proposed
sustainable funding options are discussed as below.
Strategic Option Funding Option Critical Evaluation
Market Market penetration strategies are Retained Earnings:
Penetration adjustments to the current modus Pros:
operandi of Toyota hence strategic The cost of financing and floatation cost is nil
pillar 1,2 and 3 (Table 4) can be (CIMA, 2020). Higher retention ratio (66%)
funded using the retained earnings. might indicate over capitalization hence this
This is an internal source of equity could be avoided by Toyota. Penetration is low
financing. risk strategy hence will align with the risk
appetite of shareholders.
As per Appendix 20, Toyota’s EPS is
at US$6 while DPS is USD$ 2. Hence Cons:
it has been retaining USD $4 per Using retained earnings might indicate that the
share to be used to fund this shareholders will face an opportunity cost due
strategy. to lower dividend payout (CIMA, 2020) which is
to be justified with share price appreciation.
On budget car penetration strategy,Short term working capital:

Daihatsu’s small car division may Extending credit terms with Daihatsu and
face working capital requirements collecting from dealerships promptly is
for inventory buildup. Hence short-proposed to solve short term working capital
term working capital efficiency is requirement. This is internally sourced hence
proposed during COVID 19 period. less risky (Umeeryk, 2018).
Market Strategic pillars 4,5 and 6 (Table 4)
Private Placement of Shares:
Development are high risk strategies which can be
Pros:
funded through private placement This will have low issue cost where it can be
of Toyota shares to institutional arranged immediately (NI business info, 2020)
corporate investors. through a bank. Toyota can decide whom they
want to partner with (Government institution
As per Appendix 20, debt to equity on PPP, tech company on IT and infrastructure)
ratio is 1.69 indicating high hence flexible and goal oriented. Placement
leverage. Hence, equity capital is partners are risk seekers hence low ROI in early
proposed. stages will not raise red flags on funding (CIMA,
2020).
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Cons:
Dividends are not tax deductible and subject to
double taxation (CIMA, 2020). Toyota needs to
offer deeply discounted shares and have higher
credit rating to be attractive to an investor (NI
business info, 2020).
Product Strategic pillars 7,8 and 9 (Table 4) Convertible Preference Shares:
Development needs significant R&D investment Pros:
which are considered riskier. Hence They do not dilute ownership, don’t having
proposed to be funded via voting rights and received dividends only if
convertible preference shares. targeted profits were achieved (CIMA, 2020). If
the common share prices appreciate compared
Considering the higher gearing and to preference share dividends, investors have
opting for loans would burden the P the option to convert to ordinary share hence
and L hence this hybrid instrument gearing will be stabilized (CIMA, 2020).
is proposed.
Cons:
Dividends are not tax deductible and could be
double taxed (CIMA, 2020). Successful issue
depends on the credit rating and ROI on the
projects.
Table 6: Sustainable funding options for Toyota
2.B.3 Evaluation on financial approaches applicable for Toyota

2.B.3.1 Cost of Capital
Companies follow pecking order theory to decide which source of funding to pick first for their expansion
plans. Accordingly, I have proposed to choose internal, equity and hybrid financing to minimize the cost
of sourcing. Proposed funding options’ COC is discussed below.
Funding option Cost of Capital
Retained earning Opportunity cost of dividends – This could be measured using the
expected dividend payment as % of share price plus the capital gain
growth expected for Toyota shares (Carlson, 2019).
Private placement Capital Asset Pricing Model – This method assesses the risk adjusted cost
of capital for Toyota’s equity
capital (CFI, 2020). Additional
Equation 1: CAPM Formula premium generated by the
industry against treasury bill is adjusted to the project specific risk on
market development strategies of Toyota. Company should ensure that
the risk beta is less than 1 to ensure to find potential placement partners.
Convertible preference Discounted cashflows – Present value of principal payment and dividends
shares (CFI, 2020).
Table 7: Cost of Capital – Toyota
2.B.3.2 Optimal Capital Structure and Weighted Average COC

With the current structure on debt to equity ratio of 1.69 Toyota should adjust the composition of debt
and equity to arrive at the optimal capital structure. This will determine the weighted average cost of
capital of Toyota which will be used to conduct investment appraisals as discount factor (CIMA, 2020).
18
Equation 2: WACC Formula (CFI, 2020)
Figure 7: WACC and Optimal capital structure (CFI, 2020)
As reflected in Fig 7, optimal structure is where WACC is at its lowest and debt to equity ratio is at a
beneficial level (corporate finance, 2020). Optimal capital structure is determined by the industry and the
associated business risks and macro-economic factors (CFI, 2020). WACC can also be arrived using the
formula above by weighing the cost of equity and debt. Treasury department at Toyota should establish
the optimal structure by arriving at the lowest WACC to enhance shareholder wealth while minimizing the
risk.
2.B.4 Conclusion
Given the above proposals, Toyota should be mindful on the environmental volatility and investor
mindset, especially during a pandemic situation and related economic regimes, prior to funding and
initiating mission critical projects to reap the ultimate benefits.
19
STRATEGIC AUDIT
20
Appendix 1: SWOT Analysis
Strengths Weaknesses
Legacy of 80+ years - Toyota has been in operations since 1937 and been one External failure costs - Despite following quality guidelines Toyota had recall
of the top 10 automobile brands in the world. vehicles to airbag defects and brake failures in 2014. In 2018 it recalled batches
of hybrid cars. This led to bad will for the company.
Global Presence - Covers Asia, Europe, North America territories enable scale Labor Exploitation - Toyota faced complaints on longer working hours, poor
benefits. 50 facilities in 26 countries which are sold in 190 countries working conditions (1990) and use of seat shop workers (2004).
One stop shop - Toyota manufactures and sell automobiles along with value Unrelated diversification – Toyota’s has unrelated diversifications such as in
added services like financing options, automotive parts and accessories. agriculture and food service industry questions its corporate positioning.
Diverse range of automobiles product offerings - Under automobiles the Opportunities
company manufacturers and offers a range of vehicles to accessories
Stable financial performance - Company recorded a revenue of USD 281.2 Booming Hybrid and electric car market - Countries started investing in
Bn with 5% CAGR with operating margin of 7% and net margin of 6.2%. The hybrid and electric markets to evade CO2 emissions. This market grew by
shareholder equity has increased to USD 184 Bn with a ROE of 9.8% in 2019. CAGR 21% in value and volume during 2014 - 2018 period. The market is
ROA 3.7% in 2019. Company's cash dividends per share shows an increase projected to grow by 22% CAGR by 2023. USA, Japan and few European
from USD 0.42 in 2010 USD 2.09 in 2019 countries has the infrastructure to capitalize on this growth momentum.
Strong brand equity - The company's brand equity has grown by 19.7% Market penetration - Toyota could expand to Europe expand since that’s one
compared 2018 and ranked second in most valuable automobile brand listing. of the markets which is growing in term of new car sales.
Balanced stakeholder view - Company follows a balanced stakeholder view in Relaxed FDI regulations & entry to BRIC countries - Chinese and Indian
its operations like safety for consumers, mutual trust within partners, education governments has relaxed their FDI policies. These economies are growing.
and training for employees, infrastructure development for the communities Brazil is growing in terms of car sales which an opportunities Toyota could
etc. take advantage of.
Sustainability focus - Company expects to support sustainable development Subsidies for car industry - Automobile industry has urged the European and
with sustainability philosophy, green technology, recycling, township UK regulators for subsidies, if received could be an opportunity compensate
development projects etc. It focuses on triple bottom line principles. for the R&D cost incurred and develop sustainable eco cars in the region.
R&D and Innovation - Toyota has established R and D hubs across many Pandemic lead opportunities - EU market shows a growth in sales of electronic
countries. It has invested heavily in R & D with spending increasing from USD car despite COVID 19, customers wanting to maintain social distancing norms
7 Bn to 10 Bn in 2019 showing the commitment. and avoid public transport, contactless transactions like Chinese supplier
Geely. There could be an opportunity for budget cars during the recession that
is expected to follow (Ex Germany)
Strong organization culture - The coportae culture revolves around customer Public private partnerships - There are opportunities to jointly develop the
satisfaction, kaizen and quality. This is line with the mission to become a electric vehicle charging stations along with other motor companies. IOT lead
mobility company which is safe and sustainable. connected city concepts could be used with data for congestion reduction, lane
management etc by partnering with government.
Winning business collaborations - Toyota partnered with competitors like New business models & technology - Fleet mobility scheme with KINTO on
Peugeot, Nissan, Honda etc. for mutual knowledge sharing and future benefits. subscription-based rentals, blockchain technology to enable payment
It also entered into agreements with rising competitors like Uber & SoftBank. infrastructure, rapid developments in alternative fuel sourcing due to
Quality as core value - Toyota's Total Quality Management framework focus government pressures, IoT enabled smart appliances and mobility systems
on end to end quality management in product quality, sales and service quality
via quality assurance cycle, PDCA process etc.
Threats
Increasing competition - Rival car companies entering electric markets with Regulatory pressures - Tax incentives on vehicle purchases are expiring for
expansion of production facilities is become a challenge for Toyota. In global China and India hindering the vehicle purchases. Stringent emission laws in
ranking Mercedez Benz leads the way while Porche and Audi has higher brand EU and China forcing for low emission technology.
value growth than Toyota with 54% and 31% respectively.
Market saturation & substitutes - As global markets become saturated, Downturn in global automobile market- Market has contracted by 4%. India
alternative technologies are emerging as a threat (Uber, ride share Apps) and China declining heavily. Germany is expecting a recession.
Global pandemic and related negative trends- Pandemic is impacting the US China trade war - US manufacturing sector faced an impact, and tariffs on
global automobile supply chain as factories in Wuhan were shut down. Chinese imports to USA impacting automobile market.
Pandemic lead to limited mobility due to lockdown and working from home
arrangements.
Longer waiting period - Consumer behavior of waiting for the vehicle with Infrastructural constraints - Not all the countries have the charging stations
best technology that suits their needs is expanding vehicle usage. Hence hence impact the growth potential of electric car market.
challenging the sales volumes of Toyota and its competitors.
Brexit - Impact of Brexit for EU is still unclear and expected to have an impact Higher development cost of technologies - Innovation cost for future
on the global economy due to international trade. The impact is expected to hit developments on sustainable technology is quite astounding with production
the margins of the automobile companies due to manufacturing cost, tariffs etc. overhaul costs.
21
Appendix 2: Key Issues, Critical Success Factors & 5 Year Goal for Toyota
Key Issues Critical Success Factors 5-year strategic goals
Handling international trade: US China trade Strategic lock in: Vehicle range, after sales services, Enhance the brand value and become No 1
war, Brexit, FDI relaxation in India and China, parts and accessories, financing, insurance, valuable automobile brand by 2024
recession in Germany, factory shut down in payment/service reminders, customization,
Wuhan, upcoming recession accessibility, trust and reputation would increase the
switching cost and reduce attrition.
Growing hybrid and electric car market & Range of product offerings: Range of cars, mini vans, Double the net revenue with CAGR 20% to
limited infrastructure: CAGR 21% growth in trucks and buses. Investing on electric vehicle range reach USD 600 Bn by 2024
2018 and 21% by 2023. Potential subsidy, only few would attract environment conscious customers.
lucrative markets with infrastructure.
Adapting to green technologies: High R&D cost, Successful business partnerships: Joint electric Capture 5% market share by 2024 in hybrid
ride sharing apps, blockchains, IoT technologies, vehicle infrastructure project with government & and electronic car market
alternative fuel to reduce CO2 emissions, fines. competitors, connected city development with the
authorities, FDI investments in India and China, racing
and sports partnerships (mobility partner)
Limited mobility during pandemic: Contactless Sustainable Mobility: Innovative pipeline on hybrid & Establish manufacturing plants in India and
deliveries, reduced mobility, working from home, electric cars and related technologies China to reduce the manufacturing costs by
avoidance of public transport 20% by the years 2024
Managing product quality: Vehicle recalls in Building trust & reputation: Product quality, service Increase R&D to sales ratio to 6% in 2024
2014, 2015 and 2018. Customers seek trust if not excellence, employee & customer value creation, lean with NPD revenue contribution increasing
switch. Reputation is key. management, shareholder value enhancement by 15% of the total income.
Appendix 3: Macro Environmental Analysis - PESTEL
Force Driver Impact O/T Rating
Tax concessions Countries becoming saturated hence tax concessions are expiring T M
expiring
Political & CO2 emission penalties Penalties for beyond average carbon emission T M
Legal Subsidies Expected subsidies for electric car manufacturers O H
Infrastructure Only few lucrative markets has the infrastructure with charging stations T H
Global recessions Lost jobs, Customers expected to cut their spending and limit to budget cars T H
Pandemic Limited mobility, lock downs, production stoppages, limited international trade and low sales T H
Interest rate US revised the interest rate to zero impacting business operations T H
Economy
US China trade war Impacts global supply chains and tariffs on imports T H
FDI relaxations Possibility to enter to China and India O H
Brexit Trading terms, potential tariff, supply chain etc. T M
Socio Green consumerism Longer waiting for the right car technology, ride sharing, traction for electric vehicles T&O M
Cultural Social distancing Avoidance of public transport and owning a car O L
New technology AI, IOT, Block chain, alternative fuel, robotics O H
Technology
E Commerce Contactless transactions O L
Ecology New markets Countries urging for hybrid and electric car market and sustainable developments O H
Appendix 4: Scenario Planning
Options Description Best Case Worse Case
Scenario 1: UK exiting EU would Toyota can focus on Europe (excl UK) and emerging European supply chain gets impacted with the loss
Brexit Impact impact global automobile economies to expand its operations in hybrid and of market share to competition on hybrid and
market industry electric car sales bringing 10% growth to revenue. electric car markets with a loss of 5% revenue.
Scenario 2: Asian region is growing Successful joint ventures with market leaders in India Joint ventures in India and China impacted due to
Relaxed FDI along with China and India and China for collaboration on eco car manufacturing pandemic second wave hence just in time delivery
restrictions relaxing FDI restrictions. facilities to bring the production cost down by 15%. system impacted hence revenue drop by 10%
Scenario 3: Sustainability regulations Joint development of infrastructure facilities in Development initiatives impacted due to global
Growth of favoring hybrid & electric Europe and in emergent markets in collaboration with recession and economic downturn hence delayed
electric and car market the governments and other players leading to revenue and affecting the car industry growth by 20%
hybrid vehicle growth of 10% from electric and hybrid cars.
markets
22
Appendix 5: Micro Environmental Analysis - Porter’s Five Forces

Force Driver Implications Impact
Startup cost Investment for manufacturing, establishing network, recruiting skilled labor is high
Legal requirements Regulators are enforcing carbon emission laws, labor laws, FDI restriction etc.
Threat of Image & Reputation Establishing brand image is tough while maintaining positive reputation Low
new entrants
Economies of scale Units sold must be high to reach scale advantages
Differentiation It’s not only about the product, the prestige, after sales services, value for money etc.
Modes of transport Public transport like trains etc but lacks convenience and social distancing
Threat of
Limited mobility Pandemic lead to working from home virtual conferencing etc but not significant Moderate
substitutes
New models Ride sharing, Uber, rental cars - doesn’t need to own a vehicle anymore
Product knowledge R & D for industry specifications which are sourced by automobile companies. Ex Engines
Bargaining
Switching cost For a company practicing just in time the switching cost is high
power of Moderate
Quality Quality of engine, metal etc is critical which influences the safety and reputation
suppliers
Forward integration Low risk due to higher investment and exit cost
Price sensitivity Value for money is key with similar products at affordable prices available in plenty
Bargaining
Incentives Government tax incentives support the purchase of a car.
power of Moderate
Knowledge Customer search lot of info prior to purchase hence knowledge is high
customers
Backward integration Dealers cannot become manufacturers due to investment and R&D cost
Exit barriers High sunk cost on severance pay, selling specialized assets, union issues etc
Maturity of the industry The industry is highly concentrated with similar offering with dominant key players.
Product & services Vehicles, fuel technology, after sales, financing, insurance – one stop shop
Existing High
Technology adaptation IOT, fuel technology, blockchain, e -commerce - New trends are emerging
R and D cost New product development & production overhauls especially in electric cars is high
Distribution network Dealer network is critical for stabilizing as global player
Appendix 6: Strategic Intent Review (Hooley et el, 2008)
Current Future
Vision Company intends to lead the future in mobility business, enriching people's Be the trailblazer of smart mobility solutions with planet
life globally, in safest responsible ways. Through innovation, quality and focus, talent engagement and innovative execution.
planet focus company aims exceeds expectations of the customer. This will
be done via engaging the talent who strive for continuous improvement.
Mission Create vehicles which are popular with customers Building connected mobility solutions with zero emissions,
zero traffic and zero accidents.
Values Continuous improvement and respect for people Continuous improvement, respect for people, customer
orientation, expansive thinking (Innovation), trustworthy
(Safety)
Tagline "Rewarded with a smile" "Be smart with Toyota" - Eco friendly and value for money
Strategy Superior quality affordable cars that does not compromise on environment, Global expansion, Strategic collaborations to expand into
safety and driving abilities and intrinsic appeal ecofriendly vehicles, developing infrastructure and
technological capabilities
Appendix 7: Stakeholder Expectations Analysis

Stakeholder Expectations Power Interest
Internal
Employees Working conditions, salary, prestige, training & development, diversity Low High
Connected
Suppliers R& D cost, materials, specifications, continuous business, knowledge, prestige High High
Shareholders Business performance, ROI, R&D funding, shareholder value High High
Customers/Distributors Safety, quality, value for money, after sales services, financing, energy efficiency High Low
Dealerships Sales, product knowledge, trade terms, network expansion Low High
Subsidiaries Technology, expertise, reputation High High
Competitors (Collaborations) Infrastructure, knowledge sharing, expertise, future growth, reputation Low High
External
Government Taxes, subsidies, legal compliance, penalties High Low
Communities Emissions, infrastructure, economic development, culture, CSR Low High
23
Appendix 8: Strategic Group Mapping Appendix 9: Mendelow Matrix
Figure 9: SGM Toyota Figure 8: Mendelow Matrix

Appendix 10: Product Onion - Toyota Appendix 11: Hybrid & Electric Market Growth
Figure 10: Global Hybrid & Electric Car Market (2014-2023)

Volume growth > value growth hence per unit price will continue to drop.
Appendix 12: Review on Toyota Operations
Key Insights:
Automotive is the key

division. North America and
Japan are the key markets in
value and units.
Japan is high in revenue per

unit (35 K) and other regions
has low value (14 K). Vehicle
mix and prices differs by
regions.
Against 2018, Toyota has

grown by 1% in value and
unit growth was negligible.
Asia and Europe are growing

markets while others show a
decline in 2019.
Drop in North America and

other markets in composition
was caught up by Asia with
2% increase in mix.
Figure 11: Snapshot on Toyota Operations
24
Appendix 13: Strategic Capability Analysis

Unique Resources Core Competencies New Competencies
Equity, reputation and trust Production capabilities for a range of automobiles Emerging models of mobility - Ride sharing, Uber, KINTO
Global presence in 190 Total quality management with Kaizen, PDCA etc Strategic partnerships - Regulators and industry on emission
countries control & infrastructure
Financial stability & growth Lean operations with no waste R and D on electric and hybrid cars, efficiency to offer at low
cost
Large global customer base Focus on triple bottom line people, planet, Pandemic lead behavior - contactless transactions
community while conducting manufacturing
One stop shop for automobile Technology adaptation: Blockchain, IOT, e- Capability building via Toyota university for the employees
needs commerce, green technology, recycling, robotics
Strong organizational culture Economies of scale with 8.96 Million car sales in Customer experience building - CRM, social media engagement,
2019, second largest. feedback tracker, data analytics, AI installations in vehicles
Winning business partnerships Presence in mass and premium market Glocalization: to match individual markets and customer needs
& acquisitions (Matured and emerging markets)
Appendix 14: Segmentation – Toyota (B2C)
Segments Eminent Established Emergent
Luxury vehicles: SUVs, pickup Midsize vehicles: Electric and hybrid Compact vehicles: Mini vans, budget
Products Automobile
trucks, Premium eco vehicles cars cars
Offerings
Brands Lexus, Leisure Boats Prius, Auris, Corolla Daihatsu
Social Class Upper class Upper middle class Lower middle and low class
Psychography Lifestyle Luxury lifestyle: Highly exclusive,
Active and family driven lifestyle Active and social lifestyle
motor sporting enthusiasts
Age 45 years or above 30 to 45 years 18 to 29 years
Demographics Income level USD 12,000 or above USD 4000 - 12,000 USD 4000 or below
Profession C Suite Middle Management Junior executives or graduates
Geography Country Urban - North America, Europe, Sub urban -North America, Europe, Rural - North America, Europe, Asia
Asia Asia
Benefits Value AI, block chain reminders, status, Leasing, credit cards, insurance Energy efficiency, durability,
Sought addition customization, deisgn, engine power ride/car sharing, KINTO
Current positioning "Pursuit of Perfection" - Lexus "Don’t get left behind" - Prius "Light you Up" - Daihatsu
Future positioning "Be smart with Toyota"
Appendix 15: Customer Need Analysis Appendix 16: Value Chain Analysis
Activities Current Capabilities Potential Capabilities
Operations TQM, economies of scale, EVs, design, technology
PDCA, hybrid & electric integration
technology
Outbound 170 Distributors, 280 dealers Ride / car sharing Apps
Primary
Logistics
Marketing & TFSC, equity, Customer first Consumer centric Ads, digital
Sales philosophy, mobility journey, virtual agent
campaigns, brand building
After sales Customer assistance centers, Connected technology for
services survey & feedback, servicing, dealer and customer using
repairs, inspections, 3S IOT, big data, virtual support
Firm Global network in 190 Emerging markets expansion
infrastructure countries
Secondary
IT IOT, Blockchain, AI, robotics, VR, data analytics, AI,

safety technology, Gazoo intelligent navigation
HR Kaizen, safety, Genchi Craftmanship on technology,
Genbutsu, Toyota way, Code Toyota technical hub
of conduct
25
Appendix 17: Elements of Culture (Schein, 2010) Appendix 18: Triple Bottom Line
Toyota's Culture Assessment Diversity, Equal employment
Strong heritage in automobile industry, family business of Toyoda Safe working environment
Focus on safety (product development) and energy optimization Winning business collaborations
People
Grow the community and regional presence and R & D operations Compliance with country's culture
Customer first approach to operations (Caring, accuracy & trust) Enriching society with regional presence
Artifacts
Strong leadership driving excellence Ergonomics, equal pay

Appeal of the car at affordable price point Training and development
Compliance on laws and regulations Revenue CAGR 5% growth since 2010
Open communication with the stakeholders OP margin 7%, NP margin 6.2%
Safe work environment, equal opportunity, ergonomics, equal pay DPS CAGR 20% - shareholder value increase
Profit
Labor exploitation, child labor, product recalls challenging safety Asset & liquidity base CAGR 6%,8% since 2010
Respects the planet with sustainable mobility solutions R & D focus with CAGR 4% investment since 2010
Engaging talent and passion of the employees
Espoused Values
Equity grown by 7%
Bring in harmony among people, society and environment ROE, ROA grew by 19% and 20% CAGR since 2010
Toyota way and code of conduct as guiding principles for Sustainable mobility in hybrid and electric cars
employees Recycling - Nickle battery
Continuous improvement -challenge, Kaizen and Genchi Gebutsu Long lasting vehicles with energy efficiency
Planet
Respect for people covering teamwork and respect values Business collaboration on sustainable solutions
Deliver results at speed to market Energy infrastructure improvement for communities
Basic Assumptions
Striving for excellence via innovations and process improvements Solar panel, hydrogen plant developments
Steller customer service focus Supporting agriculture industry
Focuses on product quality, sales and service quality with inter
department collaborations
No harm for the environment via operations Appendix 20: Financial Ratios
Aligning to respective country's culture
Appendix 19: – Strategic Options

Product
Existing New
Market penetration Product development
1. CRM 1. Electrification
Existing
2. Penetrating to compact 2. MaaS eco system

and budget car segments 3. Enhance product
3. Consumer centric features
Market
thematic campaign
Market development Diversification
1. Shared Mobility 1. Fleet handling (Related)
New
2. Grow in Asia 2. Acquire ICT company

3. Infrastructure for eco (Unrelated)
cars
Appendix 21: Competitor Capability Review

VW Daimler BMW Ford Nissan Honda Volvo Hyundai Toyota
Started in 1937 1926 1916 1903 1928 1948 1927 1967 1937
Units sold (Mn) 10.40 3.40 2.50 6.00 1.34 5.30 NA 4.40 8.95
Revenue (Bn) 270.00 192.00 98.00 160.00 111.00 147.00 27.00 84.00 277.57
No of Employees 302,554 298,683 134,682 199,000 133,893 215,638 43,000 120,000 370,000
Revenue per Head 892,403 642,822 727,640 804,020 829,020 681,698 627,907 700,000 750,190
Value share 19.8% 14.0% 7.2% 11.7% 8.1% 10.8% 2.0% 6.1% 20.3%
Value share rank 2 3 7 4 6 5 9 8 1
YoY Value growth 2.70% 2% 0.10% NA -3% 9.70% 34% 4% 1%
26
TASK 3:
Word count: Task 3 B – 747 Task 3 C – 750 (Excluding references & headings)
A Critical Review on the Corporate Brand & Strategic Risks of Sri Lankan Airlines
REPORT
Executive Summary
The following report reviews the role of SLA's corporate brand in increasing value and equity. It further assesses the strategic
risks faced by the entity and proposed mitigation strategies for the same.
27
Task 3 A: Organization Background

3.A.1 Organization Name: Sri Lankan Airlines Limited (SLA).
3.A.2 Company Type: SLA is the national carrier of Sri Lanka since its inception in 1979 (Srilankan, 2020)
with the termination of Air Ceylon. In 1998 it was partially acquired by Emirates which was then bought
over fully by Sri Lankan government in 2008 (Srilankan, 2020). The became part of one world alliance since
2014 & strives towards the vision of becoming most customer centric airline in Asia (Srilankan, 2020).
3.A.3 Size of the Organization: SLA is an LKR 180 Bn revenue company with a CAGR of 9% for the past 10
years due its monopoly. However, since taken over by the government the company has been making
losses (Srilankan, 2020) and raised much negativity around its operations. However, the brand was ranked
14th by Brand finance (2020) and as 45th most respected entities as per LMD (2020) in Sri Lanka.
One of the
24 modern 116
6693 top 5 loss 14th in Sri
destinations
aircrafts employees making Lanka
51 Countries
Entities
Figure 12: 10 Year Revenue Vs Net profits SLA (in Mn LKR) Figure 13:SLA Scale of Operations (Srilankan, 2020, Advocata,
2019)
3.A.4 Services Offered: SLA offers 5 services (Figure 3) of which 81% of revenue
is stemming from passenger transportation services (Srilankan, 2020).
3.A.5 Customer Base: SLA caters to both B2C and B2B customers. Customer base
is segmented by geographies as the company intends to become Asia’s no 1
consumer centric airline. 61%+ of the revenue is generated from this region
(Srilankan, 2020). Based on traveler needs (psychography), income Figure 14: Serviced offered
(demographics), and frequency of travel (behavioral), business/leisure travelers, by SLA (Srilankan, 2020)
economy/business class bookings and frequent flyer rewards are offered respectively.
3.A.6 Main Competitors: In the key region of Asia, main competition is coming from Indian carriers such
as Air India, spice jet, indigo while Malaysian airlines, Singapore Airlines, Cathay pacific poses competition
from pacific horizon. Etihad, Qatar airways and Emirates poses challenges in gulf mega hubs (ft, 2020).
3.A.7 Key Internal & External Stakeholders
Category Stakeholders Power Interest Expectations Strategy
Government H H Returns, control, reputation Key Player
Internal
Employees L H Salary, Job security, Progression plan Keep Informed
Connected Customers L H Service, value for money, safety, convenience Keep Informed
Other Airlines M L Capacity share, alliances, code sharing Minimal Effort
External
Carrier suppliers H M Payment plan, maintenance, publicity Keep Satisfied
Table 8: Stakeholder Analysis SLA
3.A.8 Approach to Customer Satisfaction & Loyalty: Skytrax airline ratings has given SLA a 3-star rating
based on service level assessment and ranked it 95th in 2018 under world’s best airline ranking based on
passenger satisfaction survey (Skytrax ratings,2020). Hence it is evident that SLA need to focus more on
enhancing the customer satisfaction. However, the airline’s Flysmiles frequent flyer loyalty program grew
by 10% in membership in 2019 and contributed to membership revenue growth of 8% through various
value-added benefits in terms of duty-free shopping, fine dining, excess baggage etc (Srilankan, 2020).
28
Task 3 B: Critical evaluation on the contribution of Sri Lankan Airlines’ corporate brand in increasing its
value and brand equity
3.B.1 Importance of corporate branding strategy for SLA Limited
Sri Lankan Airlines is the corporate brand which handles the carrier, cargo, catering, academy and fly
smiles product brands. Having valuable corporate brand is part of any company’s identity management
agenda (Balmer, 2001). It is the key differentiator in the market space (Roper and Fill, 2012).
3.B.2 Enablers of corporate branding strategies at SLA Limited
Figure 15: Corporate Branding Typology of SLA (van Figure 16: Dimensions of Corporate Brand of SLA (Based on Davies et al, 2007)
Riel & Bruggen (2002)
The above figure depicts enablers the corporate branding for SLA which could have a halo effect on its
sub brands. This broad-based view will reduce the tunnel vision of one the top state entities of the
country. Strong endorsement strategy followed in corporate brand could help the stakeholders to
associate relatively well with child brands.
Despite SLA having a good brand equity it lacks in flexibility to restructure itself and become profitable to
change the negative reputation around the corporate brand on corruption and mismanagement of funds.
This risk would have to be addressed by SLA.
3.B.3 Critical Assessment on corporate branding strategy used by SLA
SLA uses branded house strategy (Reibsten, 2005) since it has multiple
products related to aviation/tourism industry with “SriLankan”
association. It follows monolithic architecture to connect the symbol and
style of the parent logo with its sub brands (Olins, 1989). This is a
common strategy used by similar players like South West airlines and
Boeing (Hsu et al, 2015).
A comparative study was conducted on current vs other corporate
branding strategies like house of brands, hybrid model, endorsed brands
Figure 17:Branded House Strategy etc., and a relative score was listed as below:
29
Relative
Factors Scale Assessment
Score
Marketing economies Corporate brand association with "Sri Lankan" helps to ++
of scale establish sub brands with low investment
Supply Side Cost efficiencies on All sub brands could be managed under one banner & within ++
Determinants operations the same industry
New service Easy off take with corporate brand associations, could be the ++
Returns
introductions differentiator
Ability to attract new Difficult since Sri Lankan established itself in aviation industry -
segments and related services.
Demand Side Success rate of new Helps to retain or expand customer base due to trust ++
Determinants launches
Brand extensions & The launch of Mihin air as low-cost arm was not successful -
Customizations and had to be divested eventually.
Reputation Corporate brand mishaps would impact and overshadow sub High
brands' reputation and equity
Brand Dilution Extension of sub brand under one corporate name might High
dilute the competitive nature due to spillover effects
Risks
Brand Risks
Cannibalization Sub brands are catering to different aspects of aviation Low
industry
Stretch Branded house strategy limits the flexibility to diversify, High
customize or expand into other segments
Table 9: Assessment of Corporate Branding Strategy of SLA (Based on Hsu et al (2015)
3.B.4 Impact assessment on value and equity of the corporate brand

3.B.4.1 Customer Value Assessment – SLA
Customer’s perceived utility of using a service or product is termed as customer value (Woodruff, 1997).
Gonagala and Abesekara (2020) have found that inflight service quality, entertainment, ticketing and
reservations along with cabin environment influences the perceived customer satisfaction for SLA. Sri
Lanka being a strategic hub for global travel, monopoly market, tourism related favorable policy changes
have supported SLA and its sub brands to grow it customer value.
SLA’s customer value is assessed in Appendix 23 where it scores 74%. In comparison with the Asian rivals
SkyTrax passenger satisfactions ratings are as below:
Table 10: Competitor bench marking on Customer Satisfaction (Brand finance, 2020 & Skytrax, 2020)
Based on both reviews, SLA scores between 60% - 70% on customer value.
30
SLA must work on the overall passenger satisfaction ratings inflight entertainment, seating comfort, flight
frequency to enhance the perceived value. The brand has added value through lounge services, duty free
shopping, ground handling etc at the airport to add on to the service quality (Srilankan, 2020). Becoming
the 4-star rated carrier with higher airline ranking would enhance the emotional value and contribute to
the brand equity.
3.B.4.2 Shareholder Value Assessment – SLA

Shareholder value maximization is the goal of a company (economic times, 2020). SLA sales has grown by
9% CAGR (Sri Lankan, 2020) whereas global airline industry is only expanding at 5.3% (Statista, 2020).
However, SLA has been accumulating losses which is currently at LKR -326 Bn and highly geared with
>100% ratio (Srilankan, 2020). Shareholder value is negative 350/- per share for SLA.
Revenue generation ability is
hindered by negative bottom
line hence diluting the equity
of the corporate brand.
Figure 18: Shareholder Value Assessment SLA (Based on FT, 2020)
3.B.4.3 Brand Equity Value Assessment – SLA

Given the above, it is evident that the
corporate brand is supporting the equity
growth from customer value generation
stance while hindering in shareholder point
of view. This is reflected in brand finance
ranking on brand values.
SLA earns LKR 180 Bn per annum making it
one of the largest entities of Sri Lanka. The
strategic location of Sri Lankan, global
airport landing rights, brand affinity and the
monopoly market it operates in supported
Figure 19: Brand Value Vs Ranking - SLA (Brandfinance, 2020) the revenue generation (Brand finance,
2018). This led the brand to have a value
when the bottom line is negative. Corporate initiatives to correct the operational constrains will
determine the sustainability of the corporate brand propositions of SLA in the long run.
3.B.5 Conclusion
SLA should be self-sufficient to compete in the global arena against other Asian airlines from both
customer and shareholder value standpoint. It has the strength to raise customer value via its corporate
brand initiatives. However, it must find avenues to strengthen the core financial stability of the business.
31
Task 3 C: Critical assessment on strategic risks faced by SLA and respective mitigation strategies
3.C.1 Importance of assessing strategic risks
Strategic risks are stimuli which affects the organization’s intensions to deliver its corporate objectives
and enhance shareholder value (Frigo & Anderson, 2011). For a complexed industry like airlines with state
ownership & taxpayer funding, various local and global factors play a vital role in influencing business
continuity. Hence its critical to manage the strategic risks at SLA.
3.C.2 Key Strategic Option of SLA & Associated Risks
As per SLA’s 5-year strategic plan (Srilankan, 2020) the
strategic intent is to enhance the route network covered by
the national carrier with strategic alliances under following
avenues:
➢ Broad commercial alliance - Capitalizing on “One
World” alliance with code sharing benefits (Goel, ND
and Srilankan, 2020)
➢ Being the catalyst to Sri Lanka’s tourism strategy by
partnering with national tourism ministry Figure 20: Risk Radar (Appendix 22)
Strategic alliances above will yield benefits such as image boost, competitiveness and economies of scales
due new routes (Goel, ND). However, the means adopted by the entity to achieve the overall strategic
expectations lead to various risks as mentioned in risk radar.
3.C.3 Assessment of Key Strategic Risks faced by SLA & Mitigation Strategies
Based on Fig 20, business risks and financial risks were identified as critical and discussed in detail below:
Risk Root Causes Mitigation Justification

Type
Business Principal and Agent Clash: Public If SLA was operating in a competitive market
Risk SLA is 99% owned by the government private structure this fraudulent behavior would
(Srilankan, 2020), which is the principal partnership impact the sales which was avoided due to its
and executives were appointed as agents monopoly. To mitigate governance issues, the
to manage the business. Agents favored company should opt for 10-year PPP with a
personal interests which lead to competent airline/ company (49%) to make
misappropriation of funds. In the case of SLA streamlined. This was a proven case when
Airbus purchase, contracts in 2015 lead to Emirates turned around SLA in 2008 (Sri
penalties worth USD 17 Billion for contract Lankan, 2020). This would reduce the
violations (advocata, 2019). This is due to governance risk and lead to recovery.
lack of internal controls, poor policies,
incompetent governance committee and
lack of transparency.
Inefficient Operations: Become lean SLA cannot continue to be a loss-making entity

The company is overstaffed with the with and be competitive in its operations. To
security of government employment. The restructuring become leaner, experienced management
carrier takes 50% additional crew whereas should assess areas like catering inventory,
an Airbus would only require 8 on board baggage handling, auto check in process,
(simpleflying (2020) due to collective improved customer services etc to be more
agreements. This hints that there could be cost efficient. IATA and US airways follow lean
an easy reduction of 100 headcounts airline principles and proven successful
potential for efficiency improvements. (Simpleflying, 2020).
32
Financial High gearing & liquidity risk: Special PPP requires an enterprise value which is
Risk SLA lack the ability to meets its current purpose currently negative (Refer 3.B.4.2). To be
and future cash obligation due to vehicle (SPV) attractive the debt should shrink in the
inefficient operations and losses made. balanced sheet which could be done by a
SLA borrows from various financial introducing a SPV with a 25 years loan from a
institutions for long and short-term bank in the Asia. The borrowing should be
requirements which makes it a highly closer to LKR 300 Bn to evade the concern for
geared company with >100% leverage the PPP partner. This could isolate the risks
ratio. Debt maturity is longer and adds up legally for SLA till the company turns around
to LKR 464 Bn. (Srilankan, 2020) and reduce the gearing. This is a common risk
mitigation strategy used in aviating financing
in Mauritius and Bermuda (Conyers, 2020).
Shrinking revenue & credit risk: Cost control During times of crisis becoming cash rich is
Due to pandemic faced with COVID 19, to become critical. Hence SLA should look at scenario
aviation has become one of the industries cash positive planning based on the recovery status from
to face existential crisis. It’s expected that pandemic. SLA should capitalize on the
the industry would get a hit of 60% on the repatriation operations at a premium price.
revenue (moodysanalytics, 2020). Travel They should offer emergency landing for other
and cargo agents defaulting on their repatriation flights for fuel. Variable rate with
payments is high due to delays in cash Labor department’s approval could be
collections. IATA collate the travel dealer explored for ground level staff to make the
payments and securely transfer to SLA operations shift basis. Company to defer
without any collateral whereas service capital investments and consider sell & lease
customers are secured by guarantees back of major assets until situation resolves.
(Srilankan, 2020). Shrinking revenue and
delayed cash collection leads to credit
exposure for SLA.
Table 11: Strategic Risks & Mitigation Plan SLA
It is recommended that the company maintains and reviews the risk register and embrace the culture of
taking calculated risks with establishment of rigorous risk governance.
3.C.4 Conclusion
Fig 21 summarizes key

strategic risks and
mitigation plans
discussed above. With
the sound risk
framework in place,
the company could
retain its position in
star alliance and
continue to be the
ambassador for Sri
Lankan tourism.
Figure 21: Proposed Risk Mitigation Plan for SLA
33
APPENDICES
Appendix 22: Risk Assessment – SLA
Response
Category Type of risk Assessment Probability Impact
Strategy
Poor corporate Lack of proper internal control, lack of
H H Avoidance
governance transparency
Cost structure & Cabin crew count is higher than global
inefficiencies standard, Global oil prices impacting cost of H H Mitigate
operations
Principal Agent Executives exploiting power, acting in self Monitor and
Business Risks M H
problem interest Prepare
Government Lack of commercial understanding,
H H Transference
ownership bureaucracy, lacking profit orientation
Going concern COVID 19 pandemic possess threat for the
Monitor and
(Black Swan business continuity of the national carrier H H
Prepare
Impact) without any restructuring
Shareholder Negative retained earnings
H H Transference
value
High gearing & Third party funding without rationalization
Liquidity risk on the use of funds. H H Mitigate
Financial Risks
Shrinking IATA agents might delay the payments
Monitor and
revenue & owning to global recession and reduced H H
Prepare
Credit risk passenger travel
Exchange Rates 75% of the expenditure and 84% of the
Monitor and
revenue are in other currencies (Srilankan, H M
Prepare
2020).
Interest Rates A composition of the borrowed funding is
stemming from floating rate interest hence Monitor and
L L
frequent change will impact the P and L (Sri Prepare
Economic Risks Lankan, 2020)
Recession Following a global pandemic, a global
recession is underway hence travelers would
postpone their vacations, global events could
H H Accept
be cancelled, companies would opt for
virtual conferences hence would impact the
company
Fraudulent SLA is under heavy scrutiny for
Reputation behavior mismanagement taxpayer funds. Since it’s in
L L Avoidance
Risk monopoly it has evaded impact on the
customers.
Landing rights L H
Political
Political climate along with current L L
Regulatory Instability
repatriation and landing rights are impacting Accept
Risk War and
the aviation industry as a whole L M
Terrorism
Repatriation H H
Carbon Aviation industry accounts for up to 5%
H M Mitigate
emissions carbon emission (risk & insurance, 2020).
Environmental Based on the temperature and weather only
Risk the carrier height and landing can be gauged
Climate change M M Accept
by the pilot hence due to increasing global
temperature in certain parts of the world
34
planes remain on ground till the situation

passes (risk & insurance, 2020)
Virtual tour/ Alternative technologies for events and

L L Accept
conferences mobility (electric trains, underground
Technological
Alternative railways/highways) continuous to impose
Risk
transportation threat on the airline industry but impact is L L Mitigate
mediums quite low for Asian territories.
Table 12: Detailed Risk Assessment
Appendix 23: Customer Value Assessment – SLA
Figure 22: Customer Value Assessment of SLA (Based on the model by Whittmer et al (2011)
35
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Global Marketing Decisions (2304) Membership number: 40070811

GLOBAL MARKETING DECISIONS

3.A.5 Customer Base: ......................................................................................................................... 28

BHAG Big Hairy Audacious Goal

CAGR Compound Annual Growth Rate

CAPM Capital Asset Pricing Model

CLV Customer Lifetime Value

COC Cost of Capital

CRM Customer Relationship Management

CRM Customer Relationship Management

DPS Dividend per Share

EPS Earnings per Share

EVI Electric Vehicle Index

FDI Foreign Direct Investment

ICT Information and Communication Technology

IOT Internet of Things

MaaS Mobility as a Service

MKIS Marketing Information System

NPD New Product Development

PHEV Plug in Hybrid

PPP Public Private Partnerships

ROA Return on Assets

ROE Return on Equity

ROI Return on Investment

SGM Strategic Group Mapping

SLA Srilankan Airlines

SPV Special Purpose Vehicle

TFSC Toyota Financial Services Company

VFM Value for Money

WACC Weighted Average Cost of Capital

A critical review on Toyota’s ability to address buyer behavior & a compatibility

Figure 2: Car decision making process Vs Digital Moments (Compiled by Author)

1.A.3 Toyota’s ability to understand customer concern towards environment

1.B.4.2 Culture Vs Strategic Intent

1.B.5 Recommendations on culture

A critical assessment on strategic marketing options and sources of sustainable

Strategic Pillars Assessment on Growth & Profitability

Dealerships could be ranked based on lead scores, response time

To prepare for this opportunity Toyota should rationalize its automobile

Toyota should communicate this with digital storytelling and thematic

Strategic Option 2- Market Development (Ansoff, 1957)

Strategic Pillars Assessment on Growth & Profitability

Established collaborations with Softbank and Uber could now be used by

With FDI relaxation Toyota should form foreign manufacturing joint

EV Charging infrastructure needs to be developed by Toyota in alignment

Strategic Pillars Assessment on Growth & Profitability

Toyota should invest in R and D to launch eco cars based on market

Competitors like Daimler is already trialing MaaS with Moovel in Germany

2.A.3 FSA Review on proposed options

Figure 5: MCC Matrix (Nicholls, 1995)

2.B.2 Sustainable funding sources available for Toyota

On budget car penetration strategy,Short term working capital:

2.B.3 Evaluation on financial approaches applicable for Toyota

2.B.3.2 Optimal Capital Structure and Weighted Average COC

Equation 2: WACC Formula (CFI, 2020)

Figure 7: WACC and Optimal capital structure (CFI, 2020)

Appendix 1: SWOT Analysis

Appendix 5: Micro Environmental Analysis - Porter’s Five Forces

Appendix 7: Stakeholder Expectations Analysis

Appendix 8: Strategic Group Mapping Appendix 9: Mendelow Matrix

Figure 9: SGM Toyota Figure 8: Mendelow Matrix

Figure 10: Global Hybrid & Electric Car Market (2014-2023)

Automotive is the key

Japan is high in revenue per