Dell Computers Outline

Professor Cummings Mgt 509
Michael Scheck, Raul Loys, John Duey, Keatha Banelli, Matthew Daley

Dell Case– Comments from the Team
• Company objectives, pro-forma statements, and financial trends are based upon company data.

• The revenue growth rate (in the major objectives section) is based upon the industry definition which for our purposes is the United States. • Although the numbers we will lay out in the following slides represent all of Dell, our focus is on the United States.

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• "This industry includes companies that develop, sell, repair and support computers and related products and services. The computers and related products and services are not only sold worldwide but produced in locations across the globe to ensure proper market penetration. The computers produced within this industry can be mass produced or “built to order” models. Competition can come in the form of substitution to this industry, including from companies that mass produce computers, related products, and services. • For convenience, this will herein be referred to as the computer industry.
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Dell Computers – General Case Information Industry Definition

Dell – General Case Information
• Projected Industry Growth Rate: -2.1% (This is a 2010 to 2012 estimate for background purposes only.) • The tablet has really taken a toll on the personal computer sales numbers.
• http://www.gartner.com/newsroom/id/2301715

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Dell Case - Assumptions Regarding Industry Units Sold
US - Industry – 2000 – 2010 – 2011 – 2012 Unit Sales 46 million 93 million 95.4 million 90.3 million % Change For reference +50.5% +2.5% -5.4%

http://www.statisticbrain.com/computer-salesstatistics/ http://www.gartner.com/newsroom/id/2301715

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Dell – General Case Information
• Dell revenues were up 1% in 2012. Revenue was $62.1 billion, up one percent from fiscal year 2011. • The solid financial performance of fiscal year 2012 was driven largely by strategic moves to optimize our operations and invest in our end-to-end solutions and services capabilities.
http://www.dell.com/Learn/us/en/uscorp1/secure/dell-fiscal-year-2012-inreview?c=us&l=en&s=corp&cs=uscorp1

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com/usa/us-recession-economy-quarter-101/ http://www.nydailynews. it will be assumed that customer loyalty is a huge element involved in the buying process.Dell Case – Some Major Assumptions • As a part of this case strategy. as in 2012 Gross domestic product fell at a 0. • The current economy is in question still. • Dell has made a decision to go private http://rt.1255594 7 .com/news/national/dell-bows-stock-market-24-4billion-buyout-article-1.1 percent annual rate.

due to the heavy use of tablets.” • The average price of a computer will be somewhere between $300-$1600 http://abcnews.go.com/average-cost-of-pcs-today/ Dell Case – Some Major Assumptions 8 .• Computer prices will rise in 2013.com/blogs/business/2012/12/8-things-that-will-costmore-in-2013/pt Honda. and recent return of desktops to “work machines. http://noblepcs.

Dell Case – Major Objectives 9 .

5 billion.1 billion dollars to $64. per year for each of the next five years from $62. We feel that this number is an aggressive number due to the impact of tablets on the marketplace as well as a weakening PC industry overall.Dell Major Objectives Revenue Growth The revenue objective for Dell is to grow at 1%. on average. 10 .

6%.Dell Major Objectives Return on Sales (ROS) • Our ROS objective for Dell is to limit the ROS reduction to 3. 11 .0% by 2017. down from the current 2012 level of 5.

Dell Major Objectives Return on Equity (ROE) • Our ROE objective for Dell is to continue at 39.16%. the more efficient Dell has been in utilizing its equity base and the better return is to investors. 12 . • One important thing to remember is the higher the ratio percentage.

Dell can do this with a more efficient use of its assets.2%.Dell Major Objectives Return on Assets (ROA) and Market Share • The ROA objective for Dell is to increase return on Assets to 15%. 13 . • The objective for Dell is to achieve a market share of 15%. • A big aspect of ROA is customer loyalty and Dell has a strong brand name with a loyal customer base. As of 2012 Dell had a market share of 10.

high quality products at an affordable price. 14 .Dell Corporate Vision Our vision is to be the number one provider for computers and computer services in the industry. Our goal is to create customer loyalty through superior customer service. and our commitment to a better tomorrow.

Key Aspects of Toyota (NA) Case Strategy 15 .

Toyota (NA) – Type of Strategy to Follow • Offensive against a weaker rival (General Motors) – Attack competitor’s weakness • High operating costs • Poor management • Inferior technological position • Poor financial condition – Attack competitor’s strength – Introduction of electric car 16 .

Toyota (NA) – Key Aspects of Strategy • R & D – 24% of strategy • New plant processes and assembly line changes for hybrids/electric car production – 24% of strategy • Marketing – 20% of strategy • Strengthen distribution network – 14% of strategy • Reopen component plants and improve suppliers network – 18% of strategy 17 .

Toyota (NA) – Key Aspects of Strategy • R & D accelerated spending will emphasize alternative fuel technologies. – 90% expense items – 10% capital expenditures 18 . This will be 24% of total strategic expenditures.

Toyota (NA) – R&D Alternative Fuel Priorities Percentage of R & D allocations: 1) Hybrid 55% 2) Electric 40% 3) Biofuel 3% 4) Hydrogen 2% Total 100% 19 .

Fifty percent of the effort will be allocated to the development of new technologies. These efforts must continue in order to stay ahead of the competition. Products in the market have the highest MPG. Fifty percent will be allocated to the reduction of component costs. 20 .Toyota (NA) R&D – Hybrid Technologies 1) Toyota has been the leader in this area with over 15 years of R&D effort.

they have the potential to establish a strong market presence in this area.Toyota R&D (NA) – Electric Powered Automobiles 2) Starting with the planned mass market introduction of the “Volt. Alliances with third party specialists will be made to bring our electric cars into the marketplace.” by GM. they will be substantially increased. 21 . The goal is to surpass GM in electric car sales by 2013. Although our efforts have also been put into electric technologies.

Ethanol and other biofuels have been used for decades. This is also important in the face of government mandates for alternative fuels. Toyota should focus upon designing one engine that can use all types of biofuels. has had a negative effect on food supplies. There have been some reports that the use of corn. The cost/benefit ratio of mass market biofuel availability is questionable. 22 . as a source.Toyota (NA) – Biofuel Technologies 3) Even 3% of the R&D strategy is a sizeable amount of money. This technology is also affected by political influences.

23 . hydrogen cell technologies will most probably allow for “breakthrough” products. In the distant future. This technology development must be continued. Toyota should pursue this technology in a very focused way. but should have low priority. changing the nature of the automotive industry.Toyota (NA) R&D – Hydrogen Cell Technologies 4) Promising technology developments and massmarket potential are significantly longer than our five-year timeframe.

– 10% expense items – 90% capital expenditures 24 . This will be 24% of total strategic expenditures. particularly fuel efficient trucks.Toyota (NA) – Key Aspects of Strategy • Development and installation of processes to manufacture new advanced product offerings.

http://en. Alabama.wikipedia. West Virginia. Georgetown. A new plant slated to be built in Blue Springs. Princeton.org/wiki/Toyota 25 . Indiana. Mississippi has been put on hold owing to the financial crisis that erupted in late 2008.Toyota (NA) – Manufacturing Development Efforts • Toyota has a large presence in the United States with five major assembly plants in Huntsville. San Antonio. and Buffalo. Texas. Kentucky.

as well as electric cars. Alabama plant will be converted to the mass-production of additional advanced hybrid automobiles. • Given projected industry demand and current overcapacity.Toyota (NA) – Manufacturing Development Efforts • A portion of the Huntsville. Mississippi assembly plant before 2014. there are no plans to start to build the Blue Springs. 26 .

and new technologies. – 100% expense items 27 .Toyota (NA) – Key Aspects of Strategy • Toyota marketing will emphasize affordable prices (from low production costs). This will be 20% of total strategic costs.

Toyota (NA) – Marketing Effort Details • No automotive rebates or financing discounts will be given on new technology cars. • Sponsorship deals will remain at the current level (for example. sponsorship of sports events). 28 . • Continued dealer incentives will remain in place.

• A major advertising campaign emphasizing the creation of NA jobs. 29 . • A major advertising campaign emphasizing the substantial environmental benefits of new Toyota products. • Dealership new product displays will be created.Toyota (NA) – Marketing Effort Details • A major advertising campaign emphasizing the new technologies that will be available.

Our cars will significantly lower your operating expenses. (Massive advertising will take place prior to and during the introduction of the GM’s “electric” Volt model.Toyota (NA) – Sample Advertising Themes 1) We already have electric and hybrid technologies well under way to give you a wide variety of new environmentally friendly products.) 30 . starting next year. We plan to rollout superior products over the next five years at reasonable prices.

31 .Toyota (NA) – Sample Advertising Themes 2) We are increasing R&D every year from our current $8+ billion annually. We are serious about the future. Both hybrid and electric technologies have places in the future. This will allow us to offer exciting new cars at reasonable prices.

This will be 14% of total strategic costs.Toyota (NA) – Key Aspects of Strategy • Toyota will strengthen its distribution network. – 20% expense items – 80% capital expenditures 32 . providing guidance on selling/servicing new technology automobiles.

33 .Toyota (NA) – Distribution Network • Cost-sharing of dealers’ new maintenance equipment will be implemented. we must reduce our dealer network by 5%. • Significant training will be provided to dealer mechanics to service new technology automobiles. • Through incentive payments.

Toyota (NA) – Key Aspects of Strategy
• Toyota will re-open component plants that were closed during the deepest part of the recession. Toyota will also establish an adequate supplier network. This will be 18% of total strategic costs – 100% capital expenditures

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Toyota Case Pro-forma Financial Statements

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Toyota Pro-Forma Income Statement
In $ Billions or % 2008 2009 2010 2011 2012 2013

Revenue
COGS

263.8
214.8
81.5%

211.0
179.8
85.2%

225.5
187.2
83.0%

245.2
201.1
82.0%

260.6
212.9
81.7%

277.3
232.0
83.7%

100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Expenses
Taxes (35% of Net) Net Inc. After Tax

22.7
8.6% 9.1 3.4% 17.2 6.5%

32.1
15.2% 0.0 0.0% (0.9) (0.4%)

37.2
16.5% 0.1 0.1% 1.0 0.4%

34.1
13.9% 3.5 1.4% 6.5 2.7%

28.8
11.1% 6.6 2.5% 12.3 4.7%

32.5
11.8% 4.4 1.5% 8.4 3.0%

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5 3.2% 1.8% 14.3% 37.4 4.2% 2012 9.6 0.5 3. % of total revenue 2008 9.0 4.1% 4.0 0.5 0.8% Interest Expense % of total revenue Total Expenses % of total revenue .4 0.7% 8.3 2.1 0.1% 0.8 11.9 0.2% 32.0% 0.3 3.6% 11.6 4.0% 2013 10.2% 10.5% 2.4 5.7% 7.5 11.6 0.7% 7.1 13.5 3.8% 0.3% 28.2% 1.8% 0.7 8.4 4.1% 2010 9.8 3.2% 10.4 2.1 15.0 0.Toyota Pro-Forma Expense Detail In $ Billions or % General & Admin.0 2.3 4.3% 0.4 3.6 0.3 2.1 2.7 0.0 0.5% 2009 9.4% 6.2 16.0% 0.4% 5.3% 32.6% 0.2% R&D % of total revenue New Processes % of total revenue Marketing % of total revenue Distrib.0 0.0 0.5% 0.2% 22.7 0.9% 10.1% 2011 9.3% 0.9% 0.0 3.6 0.0 2.3% 6.3% 2.9% 5.3% 34.5 4.0 1.4% 6./Training % of total revenue 0.7% 5.

8 billion Actual 2008 Total Assets $324.3 billion Calculated 2013 Total Assets $340.9 38 .0 billion 2013 Forecast Sales $277.Calculation of New Strategic Assets According to the Case Guide Formula • • • • • Actual 2008 Sales $263.1 billion 2013 Total Assets – 2008 Total Asset = New Assets Needed • $16.1 billion plus 30% fudge factor to account for increased process capital/R&D = $20.

0 1.8 3.0 2010 2011 2012 2013 Total 0.0 7.0 8.6 20.5 3.9 36.0 4.5 Grand Total 39 .5 3.9 6. processes & plant openings Distribution Total Cash-Flow Needs (losses & 3B annual dividend) 2009 0.8 2.6 6.9 15.0 9.9 3.0 15.0 3.Toyota – Strategic Capital and Other Non-Expense Costs $ in Billions Capitalized R&D New tech.9 2.0 3.4 4.9 3.5 4.4 1.5 3.5 4.0 7.0 1.0 3.

8B $36.0B $7.5B $7.5B $7.0B Total $24.0B $6.5B $9.8B 40 .0B $6.0B $6.Toyota – Sources of Strategic Funds Pro-Forma Income Stock Debt Total Raised 2009 2010 2011 2012 2013 N/A $1.0B $11.5B $9.0B $1.0B $1.8B $5.8B $6.

9 Expenses $billion 8.0 4.0 0.Toyota – Total Strategic Financial Effort Capital Expenditures $billion R&D Process Improvement Plant Opening Marketing Distribution Total 0.4 9.9 0.5 39.0 8.9 18.6 20.9 8.5 0.9 0.9 8.2 % of Total 24% 24% 18% 20% 14% 100% 41 .4 6.3 Total $billion 9.0 5.5 6.

5 36.6 37.Toyota – Actual and Pro-Forma Balance Sheet (In $ Billions) Year 2008 2013 Assets 324.0 100.0% 344.3 63.4% 217.5 63.0% Liabilities 205.9 100.0% 42 .0% Shareholders Equity 118.6% 127.

Toyota (NA) Case Overall Strategic Direction

Strategy Group Maps

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Toyota Case – Strategic Group Map Automobile Industry (Now)
32

31
Corporate 30 Average Fuel 29 28

HONDA

TOYOTA

Transition Segment vw

Empty

High Innovation Segment

Legacy Segment NISSAN High Efficiency Segment GM
FORD

Economy 27 (mpg) 26

25 Also a proxy for 24 innovation

CHR
95%

75%

80%

85% COGS/Revenue

90%

The lower the percentage the higher the efficiency

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Toyota Case – Strategic Group Map Automobile Industry (In 5 Years)
32 TOYOTA
HONDA

31
Corporate 30 Average Fuel 29 28

Transition Segment vw

Empty

High Innovation Segment

Economy 27 (mpg) 26

GM NISSAN High Efficiency Segment

Legacy Segment

25 Also a proxy for 24 innovation

FORD

CHR
75% 80% 85% 90% COGS/Revenue 95%

The lower the percentage the higher the efficiency

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Toyota (NA) Case Industry Analysis 46 .

make the long-term outlook for the industry extremely good for competitors who are prepared. The economic crisis is having a severe affect on demand. Significant cost pressures affect the industry.Toyota (NA) – Industry Analysis Conclusions The industry is in poor condition. in four to twenty years. However. 47 . eventual technological developments.

nonpickup trucks. or durable on-road four wheel vehicles. 48 .Toyota (NA) – Industry Definition (Repeated from Beginning) • This industry includes companies that massproduce (500.000 units per year) cars. mini-vans. SUVs. for sale in North America (Canada. These vehicles must have an engine of some sort. and the USA). pick-up trucks. and buses are excluded. vans. Recreational vehicles. Manufacturing or assembly can take place anywhere in the world. Mexico.

Toyota (NA) – Summary of the Five Most Important Industry Characteristics 1) Market Growth Rate : -4% 2) Number of Competitors in Industry: • Estimated 20 • Concentration Level – Top 4 have 70% market share (moderately concentrated) 49 .

Major breakthrough innovations occur every ten years. (Note: Past trends have included safety and quality.) Fuel efficiency would also include automobile production with advanced materials. New technologies are major and spread rapidly because all of the major companies have been investing in developing these technologies.Toyota (NA) – Summary of Important Industry Characteristics 3) Fuel efficiency is the major technology/ innovation trend in the industry. 50 .

and owners keeping their automobiles longer. long design-toproduction cycles. 5) Stability of Demand: It is cyclical and seasonal 51 .Toyota (NA) – Summary Of Important Industry Characteristics 4) Special Industry Problems: Problems include fluctuating gas prices. government regulations/ standards pressures.

6 Million Units Market Growth Rate : -4% Stage in Industry Life Cycle : Mature Number of Companies in Industry: 20 Companies – Top 4 have 70% market share – Top 7 have 86% market share 52 .Toyota (NA) – Industry Characteristics • • • • Market Size : 19.

53 .000 (approximate 8% drop in dealers since 2005) – Rental companies: 100 – Fleet buyers: 500 • Ease of Entry: Difficult – distribution limits.Toyota (NA) – Industry Characteristics • Customers: – Automobile dealers: 30. and commitment of current companies make entry into North America difficult. excess demand.

but consistency unknown. New technological features are major.Toyota (NA) – Industry Characteristics • Ease of Exit: Difficult • Technology/Innovation trends: Fuel efficiency including hybrid or alternative energy powered automobiles. rapid. – Current breakthroughs based upon 15 year R & D efforts (Toyota as an example) – Cross-company licensing 54 . Stronger and lighter automobiles with advanced materials.

and new technologies. 55 . based upon size (compact versus large). based upon quality. Advertising to establish differentiation is heavy. and standard versus luxury.Toyota (NA) – Industry Characteristics • Product Characteristics: Differentiated. performance. car versus truck versus SUV. Some differentiation occurs across manufacturers.

0% ROS.Toyota (NA) – Industry Characteristics • Scale Economies: All manufacturers in the industry have achieved economies of scale.) • Estimated Capacity Utilization: 65% • Estimated Industry Profitability: 1. 1.7% ROA (Ford. (This is based upon estimated assembly and manufacturing plant sizes.) 56 . & Chrysler are bringing industry averages down. Estimated minimum efficient plant size cost is $1.0 billion. GM.

Seasonal • Special Industry Problems: Fluctuating gas prices. and owners keeping automobiles longer.Toyota (NA) – Industry Characteristics • Stability of Demand: Cyclical. government regulations/standards pressures. 57 . long design-to-production cycles.

rental car companies. motorcycles): Weak • Buyers (dealers. and fleet purchasers): Weak • Suppliers: Strong – Unions: Very Strong – Equipment and parts manufacturers: Weak 58 .Toyota (NA) Five Competitive Forces Summary • Rivalry: Very Strong • Potential Entry (foreign manufacturers with no sales in North America): Weak • Substitutes (used cars.

– Volume is important. 59 . – Product demand is growing slowly. – The industry has high fixed costs.Toyota (NA) Five Competitive Forces • Rivalry: Very Strong – Competitors are dissatisfied with market share.

– Brand preferences and customer loyalty are high. 60 . An example would be China’s Cherry brand cars. – Economies of scale are high.) – Incumbents have high dedication to the industry.Toyota (NA) Five Competitive Forces • Potential Entry: Weak (foreign governmentbacked entry exists.

Toyota (NA) Five Competitive Forces • Substitutes: Weak (used cars. motorcycles) • An extremely low percentage of rental car companies or fleet buyers acquire substitutes. 61 . but generally only as trade-ins. Dealers do purchase used cars. Thus. – Substitutes rank low on quality and performance. our focus will be on the dealer networks. There are concerns about their condition.

Used car sellers do not make enough profit to allow downward price negotiations.Toyota (NA) Five Competitive Forces • Substitutes (continued) – Substitutes are not coming from high profit industries. – There is a low price structure for substitutes (which is outweighed by the first item above). Both used cars and “some” motorcycles are less expensive. 62 .

and fleet purchasers) – Buyers are not concentrated and do not purchase in large volumes. – There are high switching costs (dealer switching from one manufacturer to another). 63 . relative to automobile manufacturers.Toyota (NA) Five Competitive Forces • Buyers: Weak (dealers. rental car companies. – Products represent a significant portion of buyers’ costs and is important to the quality of buyers’ products/services.

Toyota (NA) Five Competitive Forces • Suppliers (Unions): Strong – Suppliers’ services are important inputs to your business. – Suppliers are dominated by a few concentrated unions (with multi-year contracts). (Robotics is a growing exception.) 64 . – Few substitutes exist for suppliers’ services.

) 2. Regulatory Influences/Government Policy Changes: Unfavorable – Fuel efficiency standards will reduce industry profits over the next five years. This is particularly important. given the capital intensive nature of the industry and attempts to develop new technologies 65 .Toyota (NA) – Industry Driving Forces 1. Changing Industry Growth Rate (Projected three-year recession): Unfavorable – Reduced industry profits and sales. (Long-term it will be beneficial.

However.Toyota (NA) Industry Driving Forces 3. this would be a favorable force. driving force #2 is much stronger than this driving force. the current decrease in demand limits pricing and causes underproduction (increasing costs). 66 . Taken separately. which is strong): Favorable – This increases industry profitability. Thus. Increases in Efficiency (Although slowed by union power.

Toyota (NA) Case Industry Segment Analysis 67 .

quality and distribution issues may affect foreign entry even into the legacy segment. Potential new entrants would most likely enter the legacy segment. particularly if they were foreign state-supported. The most attractive segment is the high innovation segment. However. The least attractive segment is the legacy segment made up of very large companies that have high operating costs due to historical patterns. 68 .Toyota (NA) – Industry Segment Analysis Conclusions There are essentially three major segments in this industry. followed by the high efficiency segment.

Toyota Case – Strategic Group Map Automobile Industry (Now) 32 31 Corporate 30 Average Fuel 29 28 HONDA TOYOTA Transition Segment vw Empty High Innovation Segment Legacy Segment NISSAN High Efficiency Segment GM FORD Economy 27 (mpg) 26 25 Also a proxy for 24 innovation CHR 95% 75% 80% 85% COGS/Revenue 90% The lower the percentage the higher the efficiency 69 .

Toyota Case – Strategic Group Map Automobile Industry (In 5 Years) 32 TOYOTA HONDA 31 Corporate 30 Average Fuel 29 28 Transition Segment vw Empty High Innovation Segment Economy 27 (mpg) 26 GM NISSAN High Efficiency Segment Legacy Segment 25 Also a proxy for 24 innovation FORD CHR 75% 80% 85% COGS/Revenue The lower the percentage the higher the efficiency 70 90% 95% .

• A strong support team with the ability to handle any and all customer issues. • Becoming more cutting edge with their products and services.Dell– High Innovation Segment Minimum Success Factors • An ability to sell products at competitive to “low” prices due to minimal stock based on the ease of website ordering. 71 .

” • Heavy commitment to marketing as we have realized we need to market more to stay competitive in the industry. • Customer loyalty is a must as we introduce our “Buy Back Program.Dell– High Innovation Segment Minimum Success Factors (continued) • A heavy commitment to focused our new Research & Development plans. 72 .

as well as GM’s ability to survive. – Market leadership: It is only slightly behind Toyota in North American market share. – Design Capabilities: It has strong new car styling capabilities. – Reputation: It has made significant investments quality improvement systems. 73 .Toyota (NA) Primary Competitor – General Motors • Strengths: – Size: It affects the economy and the political world. – Physical Presence: The company is well known and has a worldwide presence.

Toyota (NA) Primary Competitor – General Motors • Weaknesses: – GM has inefficient operations and a high unit cost. For example. GMAC was involved in derivatives trading which lost large amounts of money. – GM must bear a large amount of Delphi Corporation’s post-GM divestiture liabilities. 74 . for example). – There have been negative effects of GMAC’s recent performance (49% owned by GM). – It faces significant financial pressures due to several recent annual multi-billion dollar losses. – GM divisions have overlapping offerings (Buick and Chevrolet.

– GM has significant union legacy costs. – Severe cash flow problems are causing the sell-off of significant assets.Toyota (NA) Primary Competitor – General Motors • Weaknesses (continued): – GM has overcapacity in the North American dealer network. – There is probably an inability to negotiate further significant union concessions. 75 . – GM has a very weak management team. – GM is overemphasizing truck and SUV lines.

Ford • Strengths: – Ford has skills in manufacturing and selling trucks and SUVs. 76 . – They have significantly improved quality over the last decade.0.Toyota (NA) Primary Competitor . – They have a good reputation and attract the “Buy American” segment of the industry. – They have adequate short-term cash flows with a current ratio of approximately 2.

Toyota (NA) Primary Competitor . – Labor union constraints are similar to those of GMNA. 77 . – They are weak in product innovations. – The product line is too narrow.Ford • Weaknesses: – They have structural cost problems which have led to significant losses and an overall long-term weak financial position.

Brand recognition. Good Management.Toyota (NA) Primary Competitor . 78 . Superior dealer network.Honda • Strengths: – Superior skills in engine design. – – – – Good financial position.

79 .Toyota (NA) Primary Competitor .Honda • Weaknesses: – Relatively small established distribution network (constrains already smaller market share.) – Limited commitment to breakthrough innovations.

Toyota Case Company Analysis 80 .

81 . but weakest. • It has superior financial strength and very high market capitalization .Toyota – Company Analysis Conclusions • Toyota is in the dominant position in the industry and has outstanding management. • It is positioned to take market share from the second largest. • It has a head start in bringing new technologies to the market place. competitor (GM).

82 . • Although Toyota has roughly 1½ the worldwide revenue of GM.Toyota – Financial Trend Analysis Conclusions • Toyota has a superior position on almost all financial indicators. it has 22 times the market capitalization. poor conditions. • Ford and GM are in similar.

• The slide backgrounds – ROE for companies which have negative equity in a are not consistent. thousands should be in • Numbers that do not billions. year should not be plotted • The color code for a for that year. plotted as zero instead of left blank. each data point are For example: $10000000 missing from the slides.Instructor’s Notes on Common Financial Statement Errors • Some labels are missing • Numerical amounts for or not in proper format. 83 . company changes from – Missing numbers are slide to slide. make sense are plotted.

Hopefully data will be available for the company which you have chosen as your major competitor. When the data for one of the companies differs dramatically from the other two. The following charts for Net Profits (after taxes) are an example of this. 84 . If not. add an additional chart without that company. select another company which has data available.Financial Trends – Instructor’s Note You should plot three companies on each slide.

Toyota Case 85 .

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Toyota Case (Without GM Data) 87 .

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Toyota Case – You Should Determine Why this Slide is Incorrect 101 .

34 $325. except stock price) Total Current Assets $84.37 $227.67 $170.48 $89.00 $88.68 $119.87 $128.44 $275.38 $108.92 $99.76 $100.26 $119.86 Total Assets $211.29 $76.24 $149.25 $99.50 $74.90 $128.65 Total Stockholders‘ Equity Revenue per Employee $78.89 102 .10 Year-end Stock Price (Adjusted for Splits) $74.22 $85.82 $121.16 $100.43 Not available $84.17 $91.27 2004 2005 2006 2007 2008 Total Current Liabilities Total Liabilities $72.09 $244.Toyota Motor Corporation Only Other Five-Year Historical Data (in Billions.81 $200.84 $138.

Toyota – SWOT Analysis 103 .

and process-based benefits) • High quality products and systems • No legacy labor union commitments • Good brand recognition for stylish cars • Strong management team • Worldwide manufacturing and distribution network • Strong supplier relationships 104 . supplier cost.Toyota Potential Strengths • High innovation with substantial R&D focus • Excellent financial position • Extremely cost-efficient on a per car basis (labor cost.

Toyota Potential Weaknesses • Relatively small presence outside of Japan and the USA • Perceived in the USA as a “Japanese” company rather than a multi-national or global company 105 .

• Toyota could focus upon the market for smaller more fuel efficient cars in North America by using new technologies. GM and/or Ford) in the North American market. 106 . • Toyota could take advantage of the severe economic times to attack weaker companies (e. g.Toyota Potential Opportunities • Toyota could make a major thrust to serve emerging markets (e. g.. China and India) using North American production and assembly facilities.

such as airplane engine manufacturing. • Toyota could compete worldwide (including North America) by focusing on current technology cars.Toyota Potential Opportunities • Toyota could invest heavily to significantly speed the apparent long-term development of an environmentally clean (hydrogen cell) car. 107 . • Toyota could use its efficient quality-oriented systems to enter new markets.

Toyota Potential Threats • A deeper than anticipated worldwide economic slowdown • Low gasoline prices • Increased unionization of North American operations • Consumers keeping cars for a longer period of time 108 .

Toyota Potential Threats • Strong government support of legacy manufacturers (Chrysler. such as Honda or Mercedes-Benz • GM introducing a breakthrough electric car with major infrastructure problems (charging batteries) solved 109 . Ford. GM) • Increased competition from other large companies.

Toyota – Generic Strategy • Differentiation based upon: – a desirable product line. and – important innovations (hybrid technology) 110 . – a strong brand image.

Toyota – Value Chain Analysis • Manufacturing/Service-Related Activities • High quality and competitively-priced cars (production operations) • Customer brand image. for example owning a Lexus is a status symbol (marketing and sales activities) • High MPG and environmentally-friendly products (Product R&D) 111 .

service/repair service 112 .Toyota – Value Chain Analysis • Forward Channel Activities • High quality distributor and dealer networks • High quality parts.

Toyota Distinctive Competence • High innovation with substantial R&D focus Although other large competitors have invested similar amounts in R&D. Toyota is more focused. 113 . Toyota is able to bring breakthrough innovations to the marketplace more quickly. but at the same time maintain an unwavering commitment to long-range efforts.

Toyota VIRO Analysis Sustainable Competitive Advantage • Valuable – Yes (there is a demand for these products) • Inimitable – Yes (within the 5-year timeframe) • Rare – Yes (unless GM’s electric car proves to be a success) • Organizationally capable of utilizing the distinctive competence – Yes 114 .

Toyota – Key Stakeholders • The top six institutional investors (banks and insurance companies) own 31% of the shares outstanding • The top institution owns 10.html • The founding Toyoda family 115 .2% http://www.jp/en/ir/stock/outline.toyota.co.

but the cars will be manufactured in an environmentally responsible way.Toyota – Sustainability Issues Toyota should continue its very highly-ranked sustainability efforts. 116 . New products will not only reduce harmful emissions when customers operate their cars.

Environmental concerns normally rank higher than ethical and social justice concerns. Toyota generally is ranked near the top on most worldwide ranking lists.Toyota – Sustainability Issues There are a wide variety of sustainability sources and rankings. Despite this. 117 . Since there is no generally accepted method of assessing sustainability. the wide variety of sources is often confusing.

http://www. 118 . Toyota Motor.sustainability-index.Toyota – Sustainability Issues Company comparison prepared by : SAM Research Inc. http://blogs. is very useful.bnet.com/ethics/?p=247 Automobile Manufacturers. Member of DJSI World. A clear picture of Toyota’s efforts.com/djsi_pdf/djsi_world/CompanyBiographies/Bios04/ Select Toyota near the bottom of the list. researched by an independent organization. Please review the follow three page PDF file. Analyst: Aino Piekkola. It should be studied and discussed. Sustainability Leader.

Toyota – Ethical Issues Some Stakeholders which should be considered • • • • • • • • Labor unions Union members Non-union workers Retirees Suppliers Communities Automobile owners Stockholders • • • • • Bond holders Salaried employees Governments Dealerships Repair shops How should they be ranked? 119 .

End of Case 120 .

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