Course Name : BA (HONS) TopUp

Module Name : Strategic Management

Module Code : BM607
Assignment No. : CW002

Assignment : Organisational Strategic Choice of TOYOTA

Submitted by : Sajedul Islam Chy

ID No. 21414464

Submitted to : Dr. Sheikh Shamim Hasnain

Submission Date : 17th June 2014

Table of Contents
1.0 Abstract................................................................................................................................3
2.0 Introduction..........................................................................................................................4
3.0 SWOT Analysis....................................................................................................................4
4.0 Developing Business Choice................................................................................................5
4.1 Business Focus.................................................................................................................5
4.2 Corporate Choice.............................................................................................................6
4.3 Product development........................................................................................................6
4.4 Market Penetration...........................................................................................................7
4.5 International Choice.........................................................................................................7
5.0 Evaluation of Strategic Choices: SAFe Criteria...................................................................8
5.1 Market Penetration...........................................................................................................9
5.2 Product Development.......................................................................................................9
5.3 Cost leadership...............................................................................................................10
6.0 Strategy Selection...............................................................................................................10
7.0 Stakeholders expectations:.................................................................................................11
8.0 Conclusions and Recommendations..................................................................................12
9.0 References..........................................................................................................................13

1.0 Abstract
The purpose of this paper is to analyze the business environment of Toyota motor
corporation and identifies strategic choices available to the company and their impacts to
the organization. The paper analyzed internal and external environment of TMC using
SWOT framework. It then evaluated business strategies used by Toyota at business,
corporate level and international level. The findings identified strong brand reputation and
innovative culture as Toyotas key strengths while large number of recalls and weak
presence in emerging markets as Toyotas weaknesses. Opportunities include emerging
markets and positive attitudes towards green cars while stiff competition and rising cost
of raw materials as major threats. It further revealed that the use of differentiation and
cost leadership at business level, market penetration and product development strategies
at corporate level and exporting, licensing and acquisition strategies at international level.
The report suggested the use market development strategy to mitigate intense competition
in automobile industry and meets market demands.

2.0 Introduction
This paper analyzes the business environment of Toyota motor corporation and identifies
strategic choices available to the company and their impacts to the organization. Internal
Swot analysis identified strengths and weaknesses of Toyota while external Swot analysis
identified opportunities and threat in external business environment (Henry, 2008). The
paper recommends appropriate strategies to help Toyota meet expectation of key
stakeholders and attain company goals and objectives. Toyota Motor Corporation is
engaged in design, manufacture, assembly and sale of automobiles and related auto parts
and accessories. The company was founded in 1933 and is headquartered in Aichi, Japan
and has grown to become one of the successful and reputable automobile firms in a global
motor industry. It currently employs over 338, 875 full time employees (Toyota Motor
Corporation, 2013).

3.0 SWOT Analysis

Strengths

Weaknesses

Strong brand reputation valued

Large number of product recalls

$30 Billion

Weak

Innovative culture

Strong brand portfolio

Leader in developing green cars

Industry leader in production and

sales
Opportunities

presence

in

emerging

markets

Threats

Positive attitudes towards green

Fluctuations in prices of fuel

cars

Rising cost of raw materials

Acquisitions for business growth

New laws on carbon emissions

Emerging markets

Appreciating Yen against major

Changing needs of customers

currencies

Increase industry competition

Natural disasters

Figure : SWOT analysis of Toyota

Source : Toyota-global.com, 2014

4.0 Developing Business Choice

4.1 Business Focus
Bowmen (1997) strategy clock positions business entity based on value and pricing of its
product and services. The position of Toyota Motor Corporation on the clock is Hybrid
which combines cost leadership and differentiation strategies. Differentiation is used to
provide quality products through innovation to enhance perceived value in the minds of
customers. This has allowed the company to develop car models that are unique in the
mind of customers using resources that promote quality, customers responsiveness and
innovation.

Figure: Bowmans Strategic Clock Analysis

Source: (Bowman, Faulkner, 1997)

Cost leadership strategy in Toyota has increased its market share by offering vehicles at
affordable price to cost sensitive customers. Toyota produces vehicles at low cost and can
reduce price to gain market share from competitors. The challenge of maintaining
profitability and returns by offering lowest price in the market has been addressed by high
asset turnover through reduced per unit cost of production in mass production, innovation

and effective strategy (Toyota Motor Corporation, 2013). Toyota uses standardization
strategy in the design of car with few cases of during the design of cars to reduce
production runs has adverse effects on profitability of Toyota. The company also
maximizes the use of resources and operates strictly on the policy of low cost of
production (Toyota Motor Corporation, 2013).

4.2 Corporate Choice

Ansoff Matrix is an important tool which used to analyze the strategy of a company to
develop its business enlargement (Meldrum and McDonald, 2007). Also Ansoff matrix
identifies four types of corporate strategies namely market penetration, market
development, product development and diversification. Toyota adopts market penetration
and product development strategies. It however emphasizes product development strategy
where new car models are developed for existing market.

Figure: Ansoff Matrix

Source: Meldrum & McDonald, 2007

4.3 Product development

Intense competition in automobile market requires car manufacturers to keep pace with
latest developments. Toyota is highly innovative and spends colossal amounts of money
on R&D. For instance, in 2008 the company spent $8,994 million representing 4.4
percent of its sales revenue making Toyota the worlds biggest spender in R&D in 2008
(Behura, 2009). TMC launched the Prius model recently and is expected to discover more

ground-breaking technology (GPUpdate.net, 2009). TMC is developing Camry Hybrid

fueled by natural gas to counter in response to the vanishing fossil fuel and has recently
introduced 10 new hybrid car models. It launched urban electric commuter battery
electric car and has a wide range of small cars that continues to enlarge its niche market.
TMC considers technology as the future of automobile industry.

4.4 Market Penetration

TMC is using market penetration strategy in growing and emerging markets of China,
India, South Africa and Brazil where it is not well established. Toyota is established brand
name in the automotive markets, and the risk of penetrating into existing market has no
significant barrier (Plunkett Research Ltd, 2009). The highest range of Toyotas
automobile which exists in every market segment facilitates penetration of TMC in
existing markets with new products. The company is in good position to penetrate
emerging markets with current range of car models especially fuel efficient small cars
market aimed at young people.

4.5 International Choice

Exporting strategy is used to sell the products of Toyota to global markets. However,
Toyota has wholly owned manufacturing plants in China, Thailand and Indonesia
producing products for the countries and surrounding nations. Acquisition of Car
companies in recent past has allowed it to grow its global business. It intends to acquire
additional firms particularly in emerging markets to enhance access to new markets, gain
new skills and assets (Medeiros, 2007).

5.0 Evaluation of Strategic Choices: SAFe Criteria

In a company strategic management is responsible to implement strategic choices which
pushes the company toward achieving its targeted position in the market (Lynch, 2012).
During the analysis of strategic choice, the strategies will be assessed by focusing they
could hold top position of Toyota in the market.
Evaluating strategic options entails ascertaining their suitability, acceptability and
feasibility. Suitable strategies should be able to addresses the mission of Toyota, utilizes
opportunities and mitigates threats to the company. The mission of TMC is to be the
leader in the way of future mobility, enrich the lives of people in the world with the safe
and most responsible ways of moving people. Acceptability is evaluated against the
interest of various stakeholders in the automobile industry and TMC. Strategies should
address the needs of customers, suppliers, shareholders, buyers, the community,
government and so forth in terms of returns, risks of failure and working conditions for
employees. Feasibility is assessed on available resources such as capital, time,
technology, workforce, access to market and expertise needed to implement the proposed
strategies.

Strategic choices

Suitability

Acceptability

Feasibility

Market Penetration

High

Moderate

High

Product development

High

High

High

Market development

Moderate

Moderate

Low

Diversification

Low

Low

Low

Cost leadership

High

High

High

Differentiation

High

Moderate

Moderate

Focused differentiation

Low

Low

Low

Figure : SAFe Criteria of Toyota (Johnson and Scholes, 2002)

5.1 Market Penetration

Suitability: This is suitable in growing and emerging markets. Automobile market is
well-established and use of penetration is appropriate in the growing target market of
Eastern Europe, Asia, Latin America and Africa. Furthermore, Toyota is such a well
established brand in the car market and this significantly reduces barriers to penetrate
these markets (Medeiros, 2007).
Acceptability: Market penetration strategy targeting customers of rival company like GM
is not acceptable because it may induce retaliation hence retention strategy is the
preferred option. Implementing market penetration involves cost of improving product
and service quality backed by marketing promotion. This strategy should be accepted in
Toyota only if the risk involved is less that pay off otherwise it could lead to loss of
shareholders losing value and of possible loss of jobs due to the failed venture and lost
revenues.
Feasibility: The strategy is feasible because TMC has the largest range of automobiles
and already exists in every segment of car market hence high potential penetration on the
market. This means that TMC is in good position to penetrate existing markets, especially
targeting cost sensitive customers and young people with fuel efficient cars.

5.2 Product Development

Suitability: This strategy is suitable owing to the intense competition in automobile
market requiring car manufacturers to keep pace with the latest developments. Toyota
spends huge money in R&D to develop new products required in the market. Secondly,
the strategy is suitable due to vanishing natural fuel hence the need invest in developing
fuel efficient, electric and hybrid cars fueled by natural gas (Behura, 2009).
Acceptability: Developing new products is acceptable due to rising prices of fuel, rising
demand for environmental protection and tough economic times that prompts customers
cut the costs of motoring and use vehicles with minimal air pollution. Managers and
shareholders will accept this strategy to enhance brand image of Toyota by being
environmentally responsible. Furthermore, most governments are encouraging use of
hybrid and electric vehicles and this will increase sales of Toyota Cars and generate
higher returns needed by stakeholders.

Feasibility: TMC views technological development as the future of the company and
motor industry. The company is expected to discover several ground-breaking
technologies after Prius model to remain competitive in the market. Product development
is feasible given the technology and the expertise of Toyotas work force. It has made
rapid progress in product development and is certainly feasible to grow in automobile
market (Medeiros, 2007).

5.3 Cost leadership

Suitability: Cost leadership suits organizational mission of leading the way in mobility
by providing affordable cars to the world population. It will aid the company to penetrate
into the leading automobile market of China by providing cheaper cars than competitors.
Acceptable: Cost leadership shall be acceptable to shareholders and price sensitive
customers to increase profit margin and affordable cars respectively. It will be embraced
by shareholders to mitigate rising competition and high cost of metals used as raw
material in car manufacturing.
Feasibility: It is feasible given the level of technology in Toyota Motor Corporation.
Toyota has rapid progress in technology and is certainly feasible to realize cost leadership
position in automobile industry (Medeiros, 2007).

6.0 Strategy Selection

Product Development and cost leadership are suitable, acceptable and feasible in Toyota
Motor Corporation (Johnson, Scholes, & Whittington, 2008). Product development is the
best strategy to be pursued by Toyota to develop new models for existing market. This is
because Toyota has proved its worth in innovation and exists in every market segment of
automobile market and can easily develop its brand and new cars based on market
demand. Current consumers are increasingly becoming conscious about environmental
protection which requires firms in automobile sector to develop environmentally friendly
cars and new fuel efficient technologies. Second, the rising cost of life and rising fuel
prices demand customers to reduce motoring costs using fuel-efficient vehicles. Cost
leadership is recommended business level strategy to mitigate the rising competition and

increase market share in emerging markets where Toyota has minimal presence. Cost
leadership will allow Toyota to offer quality cars at affordable price to price sensitive
customers in emerging markets and increase its market share.

7.0 Stakeholders expectations:

Stakeholders are those person, group of people or organization who are involved with
organization and may possibly implement significant authority also influence more than
the strategy (Johnson and Scholes, 2002). Stakeholder expectations are followingStakeholders
Owner
Employees
Customers
Creditors
Suppliers
Community
Government

Primary expectation
Secondary expectation
Financial return
Added value
Pay
Satisfaction and training
Supply good and services
Quality
Credit worthiness
Payment on time
Payment
Long term relationship
Safety and security
Contribution of quality
Compliance
Improved competitiveness
Figure : Stakeholders expectation
Source : Johnson and Scholes, 2002

8.0 Conclusions and Recommendations

It is evident that Toyota Motor Corporation is one of the leading automobile companies in
the world today. The company has a strong brand name in the global market with US,
Canada, Europe and Japan accounting for most of its market share. Automobile industry

is dynamic and innovative culture has enabled Toyota to develop cars that meet the
market. Swot analysis identified strong brand reputation, brand portfolio, industry
leadership and innovative culture as Toyotas key strengths while large number of recalls
and weak presence in emerging markets as Toyotas weaknesses. Opportunities include
changing customer needs, acquisition of other firms emerging markets and positive
attitudes towards green cars while stiff competition, natural disasters, the risk of exchange
rate and rising cost of raw materials as major threats. The use of product development and
cost leadership strategy is recommended to enable Toyota produce automobiles that meets
the needs of the market and complies with environmental requirements and expand its
market share in emerging markets.

9.0 References
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(2013) TOYOTA

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from

http://economictimes.indiatimes.com/RD-spend-Just-4-Indian-cos-in-

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(2013) Toyota

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