Toyota Competitive Advantage Assignment 2022

Running head: TOYOTA COMPETITIVE ADVANTAGE 1
Building a Competitive Advantage- Toyota Company
Student
Institution

TOYOTA COMPETITIVE ADVANTAGE 2
Introduction
Every business is faced by both internal and external business environment factors
(Barney, 2015). Toyota Company operates in a fierce competitive environment, with the
American, Japanese, German, and South Korean auto manufacturers giving it headache in the
market. Good examples of Toyota’s competitors include Mercedes Benz, BMW, Honda, Audi,
Nissan, and Tesla just to mention a few. However, Toyota has been working hard to position
itself strongly in the market by operating branches in different countries worldwide. In this
report, an examination and discussion of competitive strategies that Toyota Company can adopt
to win competitive edge will be done. To achieve this objective, the costing and financial
strategies for Toyota Company will be applied. Also, the report will identify value chain
strategies used by Toyota Company in gaining competitive advantage. In this perspective, the
Porter’s Model will be applied.
Examine and discuss competitive strategies that manufacturers can use to gain competitive
advantage.
In order to compete other companies such as BMW, Nissan, Honda, and Mercedes Benz,
Toyota Company has to derive new strategies that will increase brand loyalty and customer
attraction and retention in the market.
To begin with, Toyota Company has to consider the cost leadership approach and its
applicability in automobile manufacturing industry. In this strategy, Toyota will look at
becoming the lowest cost-provider in the market (Murray, 2017). As per (Murray, 2017), cost
leadership is achieved through large scale production and thus Toyota needs to exploit large
economies of scale in the industry. In this context, Toyota needs to come up with a way of
charging customers prices lower than what competitors charge especially for spare parts, cars,
and big vehicles (Peteraf, 2014). With this doing, the existing customers get retained with new
customers becoming attracted.
The other strategy is differentiation whereby the manufacturer differentiates its goods and
services from what the competitors are producing. To achieve this, Toyota Company needs to
deliver top quality spare parts, engines, vehicles, car electronics, and car air-conditioning

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compressors to the market and respond to changes in market tastes and preferences through
creativity and innovation (Barney, 2015). With successful differentiation, Toyota Company
would be able to set premium prices over the motor products that they manufacture.
Last is using the focus strategy whereby the manufactures focus their goods and services
towards a specific target market segment. The success of this strategy will depend on whether the
customers have varying wants and needs and that Toyota Company is able to create those
products successfully (Riasi, 2015). In this strategy, Toyota Company will integrate the
differentiation and cost focus strategies in order to achieve increased performance and
productivity in the motor manufacturing industry.
Apply costing and financial strategies for manufacturing and service companies.
Considering the costing and financial strategies in auto manufacturing is a crucial step
and Toyota should adopt this approach to win more competitive edge. In the case of Toyota, the
company should apply the cost based pricing strategy when pricing its wide range products such
as engines, compressors, vehicles, and others for sale in the market. In this approach, a
percentage margin should be added on each brand with the production cost to aid in the
determination of the actual selling price for these automobile goods (Peteraf, 2014).
Also, Toyota should apply full cost pricing strategy which entails a variable that helps in
the determination of fixed costs that the company will use to generate profit and loss statement.
The other costing and financial strategy that Toyota should apply is direct cost pricing and only
variable production costs will be included. (Barney, 2015).
Identify value chain strategies for both manufacturing and service companies.
In an organization, value chain refers to the flow of activities from the production
segment, to the after-sale services, and to the whole process of providing a product/ service to the
customers (Riasi, 2015). Organizations establish different strategies in order to achieve their
strategic plans, and this is the same with the manufacturing firms such as Toyota. In Toyota
Company, value chain strategies include the proper use of human resource during hiring of new
employees, salary increment and determination, and promotional activities. In addition, Toyota’s
optimal use of auto manufacturing technologies in order to maintain vehicles and engines quality

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is another value chain strategy (Riasi, 2015). This adoption of new technologies will boost
Toyota’s creativity and innovation of advanced engines, new car designs, and new auto offers
and hence increase competitive edge in the market. Lastly is the development of right
infrastructure by Toyota to ensure effective and convenient communication and delivery of
products across all global branches.
Discuss (Porter's Model) and categorize (NAICS) the industry of a company the Learning Team
selects
According to (Porter, 2011), the Porter’s model is a system used by managers to analyze
the external business environment of an organization by focusing more on the key forces that
impact on the day to day operations of a company. The Porter’s model has 5 forces namely threat
of new entrants, the bargaining power of suppliers and buyers, threat of new substitutes, rivalry
of the existing competitors, and threat of new substitute services or goods in the market (Porter,
2011). For example Toyota Company who faces stiff competition from BMW, Aldi, Nissan,
Honda, and Land Rover. In this example, Toyota faces a threat for substitute from all these auto
manufacturers as far as vehicles, engines, compressors, and car air conditioners are concerned. In
addition, threat for new entrants such as Scion, Chevrolet, Audi and others who pose stiff
competition to Toyota Company’s market as they are also offering vehicles and of even cheaper
prices to Toyota’s. For Toyota, threat of supplies is not an issue since it has good internal
strategies with particular suppliers. But, Toyota Company encounters bargaining power of
customers as the customers put the auto vehicle manufacturer under pressure to deliver upon
their preferences and demands (Pfeffer, 2016).
Conclusion
In conclusion, competitive advantage is a leading factor towards the success and stability
of a company in the market. The external business environment is beyond managerial control.
The competitive force of a company is a major factor that faces most organizations in the
external operations. In the analysis, the external environment of a business largely influences
critical decisions such as manufacturing and service provision, a good example is Toyota
Company. Therefore, manufacturing and service firms should derive internal strategies that align
to the overall needs, demands, expectations, and preferences of customers in the broader market/

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industry. With this doing, obtaining and maintaining a competitive edge, sustainability, and
strong position in the market will be easy.

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References
Barney, J. B. (2015). Gaining and sustaining competitive advantage (3rd ed.). Addison- MA:
Wesley Reading.
Barnley, J. (2013). Firm resources and sustained competitive advantage. Journal of Management,
17(1), 99-120.
Murray, A. I. (2017). A contingency view of Porter's “generic strategies. Academy of
management review, 13(3), 390-400.
Peteraf, M. A. (2014). The cornerstones of competitive advantage: a resource‐based view.
Strategic management journal. Strategic Management Journal, 14(3), 179-191.
Pfeffer, J. (2016). Competitive advantage through people. California management review, 36(2),
9.
Porter, M. E. (2011). Competitive advantage of nations: creating and sustaining superior
performance (5th ed.). Oxford: Simon and Schister.
Riasi, A. (2015). Competitive advantages of the shadow banking industry: An analysis using
Porter diamond mode. Business Management and Strategy, 6, 15-27.