SWOT And PESTLE Analysis Of Toyota Motors Corporation

December 27, 2023/

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Strengths of Toyota Motors Corporation

SWOT analysis is one of the major strategic tools that help the organizational managers in the identification of strengths and weaknesses of the companies along with the potential opportunities and threats (Yuan 2013). There is not any exception of this fact in case of Toyota Motors Corporation. Toyota Motor is considered as the world’s leading sellers of hybrid electric vehicles. It needs to be mentioned that Toyota has its presence almost all over the globe (toyota-global.com 2017). However, the company is based on Japan. The SWOT analysis of Toyota is shown below:

Strengths

Focus on Research and Development (R&D): Toyota is famous all over the world for their innovative culture. It is one of the major strategies of Toyota to get the competitive edge by introducing innovative vehicles in the market. Toyota has 17 research facilities in 8 different countries all over the world. The three major focus area of the R&D department of Toyota are basic research, development of technology and development of product (toyota-global.com 2017).

Most Valuable Automotive Brand: According to the records of Forbes and Interbrand, Toyota is in the position of 6^th and 5^thmost valuable brand all over the world worth US$42.1 billion and US$53.6 billion in the year 2016. Both of the reports state that Toyota is the no. 1 automotive brand all over the world based on value (forbes.com 2017).

Toyota Production System: The production system of Toyota is one of their major strengths of the corporation. The name of the production system developed by Toyota is Total Production System (TPS) and the main aim TPS is to increase the efficiency of production process by eliminating wastes. It has been seen that TPS is highly successful in Toyota’s production system as it helps Toyota to increase its production efficiency by reducing manufacturing time and cost.

Figure 1: Toyota Production System

(Source: lean.org 2017)

Competence in the production of Hybrid Vehicles: Heavy investment of Toyota in the sector of hybrid vehicle is considered as one of the major strengths of the corporation. In the year 1997, Toyota introduced their first hybrid vehicle called Toyota Prius. In the year 2016, Toyota has been able to sell more 9 million of hybrid vehicles that is more than any other companies are. All the hybrid vehicles of Toyota are very much fuel-efficient. This helps Toyota to gain the competitive advantage.

Weaknesses

Lack of Competence in Automobile Vehicle: The reluctance of the management of Toyota can be seen in the long-term investment in automotive vehicle technology. The company has invested in the processes to reduce wastes, but Toyota has not taken any initiatives in the introduction of fully autonomous vehicle in the future. This can be considered as the major weakness of Toyota.

Large Vehicle Recalls: The recall rates of Toyota is very high and these frequent recalls have been affecting the image of the company. In the year 2016, Toyota has recalled almost 5.8 million vehicles due to faulty airbag. For this reason, Toyota had to cost US$3.4 billion as compensation. It is a fact that these frequent recalls negatively affect the brand image of the company (fortune.com 2017).

Weak Presence in China: China is considered as the world’s largest automobile market all over the world with more than 25 million sold every year. In China, Toyota has to face major competitors from the companies like General Motors, Volkswagen and others. As a result, Toyota has less presence in the vehicle market of China. Toyota only captured 4.5% market share in China. This is a major weakness of Toyota.

Figure 2: Market Share of Toyota in China

(Source: businessinsider.in 2017)

Poor Brand Portfolio: There are four brands under the name of Toyota; they are Hino, Daihatsu, Lexus and Toyota. Out of these four, only Toyota and Lexus has brand recognition all over the world. Thus, it can be seen that the brand portfolio of Toyota is not strong as compared to the other companies. This aspect attracts negative publicity for Toyota.

Opportunities

Rise in Fuel Price in Future: Fuel price has been low in the recent years and this aspect contributes towards the demand of large vehicles like SUVs, trucks and others. However, Toyota is specialists in the making of hybrid vehicles that will be beneficial from the high price of the fuels. Thus, it is an opportunity for the company.

Automobile Vehicle Demand: It can be seen that many companies are working on the automobile vehicles. Based on this, it can be said that the demand of automobile vehicles is going to increase in the near future. For this reason, Toyota has heavily invested in their business so that they can match the future demand.

New Model Release Timing: It is important in the automobile industry that the new modes need to be released at the perfect time to cater to the need of the customers. Companies need to be prepared to do this. It needs to be mentioned that Toyota is well positioned to do so.

Threats

Governmental Regulation: It needs to be mentioned that the automobile industry all over the world is subject to various governmental regulations. In case of Toyota, the increasing governmental regulations are the key threats for Toyota. Due to the increase in regulations, Toyota has to incur large amount of costs. This particular process affects the business operations of the company (toyota-global.com 2017).

Increased Competition: The world automobile market is highly competitive. However, due to the excess production of vehicles, the competition is going to increase further. As a result of excess production, all the automotive companies will try hard to sell those vehicles. This particular aspect will make the automotive market more competitive (forbes.com 2017). Thus, this is a major threat for Toyota.

Natural Disaster: Toyota has many production facilities in China, Japan, Thailand and Indonesia. It can be seen that all these countries are often affected by different natural disasters like tsunami, earthquake, floods and others. Thus, it can be observed that this is a major threat for the business of Toyota. These are the major threats of Toyota.

PESTEL analysis is another major strategy that helps the business organizations to assess the effects of external business environments on the companies. This is a very important process as it helps in the development of business strategies. In PESTLE analysis, six major external factors are Political, Economic, Social, Technological, Environmental and Legal (Yüksel 2012). In case of Toyota, all these external factors have their negative effects on the company. The PESTLE analysis of Toyota is shown below:

Political Factors: The political situation of Japan well suits the business operations of Toyota. It needs to be mentioned that the government of Japan has started the scheme of subsidizing people for the use of hydrogen cars and it has created major business opportunities for Toyota as Toyota first introduced world’s first hydrogen car (ft.com 2017). Most of the countries in which Toyota operates have a stable political condition and it works as major opportunities for Toyota. In addition, the introduction of Free Trade Agreement is a major boost for the operations of Toyota (cargroup.org 2017). It can be seen that the free trade agreement of Japan with other major countries has created the opportunity for Toyota to improve their market penetration. In the recent years, the governments of all over the world are promoting eco-friendly cars in order to prevent the negative effects of pollution on the environments. This particular aspect provides Toyota the opportunity to improve the products so that they can cater to the needs of customers all over the world.

It can be seen that Toyota has established its business with United States as the value of dollar is stronger than yen (travelex.com 2017). For this reason, the major growth in the world’s largest economies always provides the growth opportunities for the companies like Toyota. As per the earlier discussion, it can be seen that the automotive industry of the world is highly competitive. For this reason, companies like Toyota have to face major economic problems like prices wars, inflation, budget regarding R&D and others. It can be observed that Toyota takes massive advantage of the business in United States, as the value of yen is less than the value of dollars. In addition, increased economic growth can be seen in major developing countries and it provides economic advantage to Toyota as it has collaboration with those developing countries. Thus, it can be observed that Toyota enjoys major economic advantages.

Weaknesses of Toyota Motors Corporation

In this context, it needs to be mentioned that Toyota has a negative record of recalling large number of vehicles in the past years (forbes.com 2017). For this reason, Toyota has to pay massive amount of compensation to their customers as a result of these recalls. This major social factor affects the business of Toyota. Apart from this, the culture of the states and countries has an influence on the buying behaviour of the customers. For this reason, Toyota will have more business opportunities in the countries or states where people are prone to the use of hybrid cars (forbes.com 2017). At present, people all over the world are showing their interests in hybrid cars and it provides business opportunities to Toyota. However, the widening wealth gap is a matter of concern for Toyota as the company is focusing less on the middle class. Toyota needs to remember the fact that middle class is the main source of revenue for Toyota

According to the earlier part of the study, it can be said that Toyota is the market leader when it comes to research and development. Keeping in view the fuel and energy scarcity, Toyota has developed alternative fuel consumption vehicle with the use of latest technologies. In addition, Toyota is working on the development if next generation hybrid cars those will be more fuel efficient and cost saving (forbes.com 2017). Apart from this, with the help of latest technological developments, Toyota has been able to develop modified engines with lean burn, direct injection gasoline and CNG engines. Thus, it can be observed that the boom of technologies have been creating major business opportunities for the automotive companies like Toyota. In addition, the rise of e-commerce has been a major help for the company. In this process, the aspects of cybercrimes can be considered as major treats for Toyota.

One of the major reasons for the development of great products by Toyota is environmental commitment of the company. Toyota has been taking major initiatives to reduce the effects of environmental pollution. As a part of these initiatives, Toyota has launched the challenge of zero carbon dioxide emission by the year 2050. The major objective of this challenge is to reduce the carbon footprint by 90% (toyota-global.com 2017). Another major objective of this strategy is to develop the kind of car engines that will provide extra mileage with minimum emission of carbon dioxide (environmentalleader.com 2017). Thus, the aspect of climate change provides Toyota with major opportunities as the company has the chance to develop more environment friendly products. Moreover, it can be observed that Toyota has fare opportunities to improve business performance with the help of process efficiency. Overall, it can be said that Toyota is an environment-friendly company.

Opportunities for Toyota Motors Corporation

According to the earlier part of the discussion, it can be seen that Toyota had to recall large number of cars due to various defects. Due to these recalls, Toyota had to pay US$1.1 billion in order to settle the lawsuits in the year 2012 (telegraph.co.uk 2017). The main reason of those lawsuits was product liability and negligence. As there were many defects in the cars of Toyota, many people had to die due to accidents. Apart from this, another lawsuit was filed against Toyota due to the breach of warranty. Thus, from the above discussion, it can be seen that Toyota had to face major legal suits. Apart from these lawsuits, it can be seen that Toyota operates their business operations by complying with all the rules and regulations. In this context, it needs to be mentioned that Toyota has to face with some major difficulties while complying with the legal and statutory regulations.

Toyota has to face the effects of major external environmental factors. All these external factors have major influence on the strategic development of the company. Porter’s Five Forces model helps the business organizations in the assessment of the effects of external environments on the business organizations. The five major elements of Porter’s Five Forces model helps in the analysis and evaluation of the effects of different external environmental factors on the companies (Dobbs 2014). The analysis of Porter’s Five Forces for Toyota is shown below:

Competitive Revelry: In this section, it is required to mention the fact that world automotive industry in highly competitive due to the presence of some large corporations. All these firms in the automotive market are highly aggressive regarding their business and marketing activities. Apart from marketing activities, these companies compete with each other on the ground of technological innovations, brand names and others. It can be seen that most of the companies operate in the same market and this aspect increases the intensity of competition. Thus, it can be observed that Toyota has to face major competitions in the automobile industry. Some of the major competitors of Toyota are Honda, Hyundai, Volkswagen, Ford and others (forbes.com 2017). It can be seen that all these companies are growing in a fast pace. For all these reasons, Toyota has to compete with high variety of companies that differentiate thorough efficiency, cost, fuel efficiency, style, brand image and others. Hence, based on the above discussion, the risk of competitive rivalry is very high, as Toyota has to compete with major competitors.

Threats to Toyota Motors Corporation

Bargaining Power of Customers: It can be seen in the automobile industry all over the world that the bargaining strengths of the customers are very high. There are some major reasons behind this. It can be seen that the customers of automobile industry has several option while they decide to buy a vehicle. As a result of immense competition, different automobile companies are providing the customers with different products. In this regard, it needs to be mentioned that the switching cost of buyers in the automobile industry is low. Most of the automobile companies are providing almost similar products in almost similar price (forbes.com 2017). In the recent market, customers can get information about their products easily so that they can make their own choice. However, Toyota has the necessary technological and innovative advantages. For this reason, Toyota still enjoys the satisfaction of their customers by providing them innovative and quality products. Overall, it can be said that the customers of automobile industry have strong power to control the demand and supply in this particular industry. Thus, based on the above discussion, it can be said that the bargaining power of the customers are high in the automobile industry.

Bargaining Power of Suppliers: In the automobile industry all over the world, the bargaining power of the suppliers is not so strong. There are several reasons behind this. It can be seen that there are large number of suppliers in the automobile industry. However, it needs to be mentioned that the size of these supplies are small or moderate. Due to this reason, the suppliers are not able to integrate themselves further; because of these reason, the suppliers of Toyota are not able to control the company. In addition, it needs to be mentioned that sue to the presence of large number of suppliers, Toyota get the option to choose from a large number of suppliers. Toyota has the power to set the prices for their suppliers. It needs to be mentioned that the bargaining power is higher when the suppliers are fewer. However, this is not the case in case of Toyota (marketrealist.com 2017). Hence, the above discussion shows that Toyota enjoys the bargaining power of the suppliers and thus, the bargaining power of the suppliers is low.

Threat of Substitutes: It needs to be mentioned that there are immense competition in the automobile industry all over the world. Due to this, most of the companied deliver similar kind of products in almost similar prices. On the other hand, the customers of this industry do not has to bear high switching cost. However, it needs to be mentioned that the middle class families always cannot afford to buy the hybrid vehicles of Toyota. For this reason, various public vehicles seem less costly to them. However, Toyota has considered this threat and has developed low fuel consumption vehicles that are affordable for the middle class families. Apart from the public vehicles, there is not any substitute products of the motor vehicles of Toyota. With the help of effective strategies, this particular threat can be diminished. All these substitute products of Toyota are less convenient and the customers find it that using the products of Toyota is more convenient than using the substitute products. Thus, based on the above discussion, it can be said that the threat of substitutes for Toyota is moderate.

Political Factors affecting Toyota Motors Corporation

Threat of New Entrants: Some specific factors are required for the new companies while entering into the automotive industry. First, it is required for the new companies to have large amount of capital invested in the foundation and management of the new businesses. After that, the new companies are also required to spend large amount of money in supply chain, marketing, distribution channels and others. Apart from this, the new companies will require to develop innovative products in order to grab the market share. Thus, this force can be considered as less significant for Toyota. For all these reasons, it is difficult for the companies to enter into this automotive industry. Thus, for these above reasons, the threat of new entrants is low for Toyota.

References

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