Toyota's Evolution: Strategic Analysis of Production & Competition

This case study provides a strategic analysis of Toyota's production system, contrasting it with conventional mass production and highlighting the advantages of Toyota's approach, such as efficient production processes, teamwork, and flexibility. It examines Toyota's supplier relationship management, emphasizing long-term partnerships and supplier involvement in design, contrasting it with the vertical integration and competitive bidding used by American automakers. The study also explores Toyota's customer relationship management, focusing on gathering customer feedback to design products that meet customer expectations, enhancing customer satisfaction and business potential. Furthermore, it assesses the basis of Toyota's competitive advantage, primarily its productivity and low defect rates, and discusses the imitability and sustainability of these advantages. The analysis concludes by recommending that Toyota focus on developing countries due to their high market growth rates, while acknowledging challenges such as market preferences, political and economic factors, and trade barriers. Desklib provides students access to similar case studies and study resources.

Running head: STRATEGIC ANALYSIS
Strategic analysis
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1STRATEGIC ANALYSIS
Question: 1
As per the case study given, in the early twentieth century, the trend of producing
automobiles was initiated by the American automakers. The model of mass production of the
American automobiles such as Ford and General Motors is to produce limited or single variant of
product in large numbers. This helped them in reducing the cost of the manufacturing by
achieving the economies of scale. The approach of the American automakers is to setting up
similar equipments in producing same components as much as much possible. It reduced the
time being consumed in shifting from one production process to another. On the other hand,
Toyota involves more efficient production process by reducing the time in the shifting of the
production process. Small innovations are being made in order to modify the existing mass
production process of the American automakers. This helped Toyota in reducing the time in
involved in producing a single car.
Another key difference between the production model of American automakers and
Toyota is the work division of the workers. American automakers was having the approach of
assigning workers with single type of jobs and leveraging the expertise being gained by them
over time. On the other hand, Toyota involved the concept of teamwork with assigning each
teams with a set of jobs. This helped in enhancing the diverse expertise of the employees along
with reducing the monotony of them by doing same jobs.
One of the key advantages of the production process of Toyota is the less consumption of
time. With incurring less time in the accumulation of the different processes, the time consumed
in producing a single car is less for Toyota compared to Ford and General Motors. Thus, the cost
of the production process is lower for Toyota. Another advantage for Toyota is the flexibility in

2STRATEGIC ANALYSIS
the production process. This is due to the reason that, initiation of the tem work helped them in
enhancing the different expertise of the employees. This helped them to produce different
variants from the production line compared to the single assembly line for single product in the
Ford and General Motors.
Question: 2
Historically, the dependence of Ford and General Motors on their suppliers is less
compared to that of the Toyota. This is due to the reason that, American automakers initiated the
concept of vertical integration in order to produce majority of the components by own. It was
being believed by them that, having the vertical integration will reduce the dependence on the
external suppliers and the management of the assembly line will be more efficient. In addition,
the remaining components that were not being made were being sourced from the suppliers
through competitive bidding. It helped them to select the suppliers with least price quotation.
On the other hand, Toyota initiated the process of supplier relationship management.
According to their philosophy, efficiency in the production process can only be gained when
their will be long term relationship with the suppliers. In addition, Toyota was more inclined for
sourcing components from the external suppliers in order to reduce the capital investments. In
the due course of supplier management, Toyota brought the suppliers in the design process in
order to determine the feedback from them regarding the new design of the components. They
have also entered in agreements with number of independent suppliers and trained them
according to their need and requirements. Thus, the key difference between the supplier
management of Toyota and the American automakers is the intensity of the supplier in the
production process.

3STRATEGIC ANALYSIS
The difference in the supplier management of Toyota compared to the American
automakers is having multiple advantages. One of the key advantages being gained by Toyota is
the increase in the productivity compared to their American competitors. As per information
given in the case, the vehicles produced per worker of Toyota are much more than other
competitors. This is mainly due to the reason that, major part of the components is being sourced
from outside in ready to use condition. Moreover, due to the sourcing of the materials from the
expert suppliers, the number of defects per 100 cars less for Toyota compared to the American
automakers.
Moreover, the cost of production will also be low due to the fact that, the rate of
procurement from the suppliers will be fixed for the certain period of time. On the other hand,
the cost of production of components for American automakers will get increased with time,
which will eventually increase their total cost of production. Another consequence will be the
relationship with the suppliers. Toyota will have the advantage of having flexible process of
purchasing of components due to the reason that, suppliers are being included in designing new
products. On the other hand, American automakers will have to change their existing production
process of component parts in order to design new products.
Question: 3
Toyota was one of the first companies in initiating the customer relationship management
in the manufacturer’s era. In the seventies, the trend was to sale the products being
manufactured. However, Toyota initiated the concept of adding the feedback of the customers in
designing and producing the vehicles. In accordance to that, they gathered the opinion of the
customers through their outlets and design their new products. Gathering the market data helped

4STRATEGIC ANALYSIS
them to offer the products, which will meet all the requirements and expectations of the
customers effectively.
One of the positive implications being gained by Toyota from the initiation of the
customer relationship management is the positive branding in the market. This is due to the
reason that, offering products according to the exact need and expectation of the customers
helped them to enhance the level of customer satisfaction. In addition, it also helped Toyota to
enhance their business potentiality. For instance, as per the information given in the case,
customer data being gathered by the sales team helped Toyota in staring the process of exporting
their cars. Initiation of the export of the cars helped Toyota to have less impact from the decline
in the sales in the Japanese market in seventies. The market potentiality of their new products got
increased due to the reason that, new cars were being made after considering the feedback from
the customers. Gathering customer data set the designers in Toyota to design inexpensive and
reliable cars with low fuel consumptions.
Question: 4
The basis of the competitive advantages for Toyota is the productivity. As discussed
earlier, the productivity and effectiveness of the assembly line of Toyota is more compared to
their competitors. Thus, it is easier for Toyota to offer their cars in competitive prices in the
market. Another competitive advantage of Toyota is the less number of defects per 100 cars over
their competitors (Li, 2013). All these competitive advantages are being gained due to the
effectiveness of their internal management of assembly line.
The effectiveness of the internal management of Toyota is imitable by other competitors.
This is due to the reason that, automakers such as Ford and General Motors are also having years

5STRATEGIC ANALYSIS
of experience in this sector and by determining the organizational process of Toyota, they can
also implement in their management. In the case, it is discussed that, in the recent times, the
difference between Toyota and other automakers in terms of productivity and defects is rapidly
reducing. Thus, it is imitable.
Question: 5
Toyota will be able to sustain their competitive advantages provided that, they will
enhance the organizational productivity in accordance to the current situation. For instance, the
current era is of updated and latest technologies and automation. Thus, it is important for them to
initiate the use of latest technologies, which will further help them in enhancing the productivity
of the production process. With the initiation of the latest technologies, the rate of defects will
further get reduced in the process. Thus, the competitive advantages can be sustained. However,
some sort of challenges such as labor issue in regards to the automation will create barrier for
Toyota in sustaining their competitive advantages.
Moreover, with the effective process of supplier and customer relationship and feedback
management of Toyota, it is more likely that they will sustain their competitive advantage over
their competitors. As discussed in the previous sections that the cost of production of Toyota is
far less than that of American automakers, it will help them in sustaining their competitive
advantages in the future also. In addition, Toyota is having diverse product portfolio ranging
from heavy vehicles for the American market to cost efficient and lighter vehicles for developing
markets, which will also enhance their competitive advantages over others. This is due to the fact
that, majority of the American automakers is having heavy vehicles in their portfolio, which may
not be acceptable in all the regions around the world.

6STRATEGIC ANALYSIS
Question: 6
In the future, Toyota should concentrate more on the developing countries rather than the
developed countries. This is due to the reason that, in the recent time, the market growth rate of
the developing countries such as India is more than that of the developed countries. In addition,
the automobile market of the developed countries is already saturated with less probability of
market potentiality. On the other hand, the automobile market of developing countries is rapidly
growing. Thus, focusing the developing countries will help Toyota to increase their market
opportunities. Targeting the developing market will have its own advantages. Toyota is already
having lighter and fuel efficient vehicles in their portfolio. Hence, these vehicles will be the
proper and perfect choice for the developing markets, where the social inclination towards fuel
efficiency is more. It will be an opportunity for Toyota to have the largely untapped market
present in the developing regions. Entering the developing markets at this point of time will help
them to be the early bird in the region.
However, there will be various challenges to be faced by them in targeting the developing
countries. One of the key challenges is the market preferences of the developing countries. This
is due to the reason that, the developing markets are more inclined towards fuel efficient and
affordable and small city cars compared to the higher end and heavier vehicles preferred by the
developed markets (Shende, 2014). Thus, it will be difficult for Toyota to offer diverse products
in different regions. Another challenge to be faced by them is the recent issues in the global
political and economical scenario. Risk of terrorism and political conflict between the countries
will cause negative impact on the business operation of Toyota. In the case, it is already
discussed that, the business of Toyota in China is affected from the anti-Japanese sentiments of
the people.

7STRATEGIC ANALYSIS
Economical factors such as origination of the global crisis will further reduce the market
potentiality for Toyota. In the current era of globalization, economic crisis is having holistic
impact on every country like one happened in 2008 economic crisis in the United States. This
will have negative impact on the business operation of Toyota. Political issues will also have to
face by Toyota. There are various countries, which are having huge market opportunities but
having trade barriers in place by their respective governments. In order to cater to these markets,
Toyota will have direct invest and set up their manufacturing facilities. This may hold more risk
in the long term for them.

8STRATEGIC ANALYSIS
Reference
Li, J. (2013). Continuous improvement at Toyota manufacturing plant: applications of
production systems engineering methods. International Journal of Production Research,
51(23-24), 7235-7249.
Shende, V. (2014). Analysis of research in consumer behavior of automobile passenger car
customer. International Journal of Scientific and Research Publications, 4(2), 1.