University of Northampton: Toyota Marketing Audit for China

This report provides a comprehensive marketing audit of Toyota's operations in China, examining both internal and external factors. It begins with an executive summary and table of contents, followed by an introduction that outlines the importance of marketing audits in the current business environment. The report then provides a background on Toyota, highlighting its market share and competitive landscape in China. A PEST analysis is conducted to assess the political, economic, social, and technological factors influencing Toyota's business in China. The internal analysis uses a resource-based view and VRIO analysis to evaluate Toyota's core competencies. Competitive analysis includes strategic and perceptual maps, along with competitor comparisons. A SWOT analysis synthesizes the key findings, identifying Toyota's strengths, weaknesses, opportunities, and threats. The report concludes with strategic priorities for Toyota in the Chinese market, emphasizing market leadership in electric mobility and increased presence in the Asian region. The report's structure and content align with the assignment brief's requirements, including a focus on a single market and the use of quality research to support its analysis.

Running head: MARKETING MANAGEMENT
Marketing management
Name of the student
Name of the university
Author note

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Executive summary
The aim of this report is to discuss about the external and internal business factors relevant in the
Chinese operations of Toyota. In doing so, this report involved PEST analysis to identify the
external factors and resources based view model to identify the internal core competencies of
Toyota. It is identified that there are number of sources of gaining competitive advantages for
Toyota are present. Moreover, it is also identified that competitive position of Toyota is better
than that of their competitors. This report concluded that Toyota will have more priorities
towards achieving the market leadership in the electric mobility segment and increase in more
market presence in the Asian region.

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Table of Contents
Introduction......................................................................................................................................3
Company background..................................................................................................................3
PEST analysis..................................................................................................................................4
Political factors............................................................................................................................4
Economical factors......................................................................................................................5
Social factors...............................................................................................................................5
Technological factors...................................................................................................................6
Internal analysis...............................................................................................................................7
Competitive analysis........................................................................................................................8
Strategic maps..............................................................................................................................8
Perceptual map.............................................................................................................................9
Competitor comparison.............................................................................................................10
SWOT analysis..............................................................................................................................10
Conclusion.....................................................................................................................................12
Reference.......................................................................................................................................13

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Introduction
Effectiveness of the marketing audit or plan is important for the contemporary business
organizations due to the reason that it will help in determining the market situations. Thus, on the
basis of the external and internal market situation, business organizations can initiate strategies
accordingly. In the recent time, marketing audit is gaining more importance due to the increase
in competition and urgency of the firms to stay ahead of their competitors. This report will
discuss about the external factors that can influence the business operation of Toyota in doing
business in China (Lipnicka and Dado 2013). In addition, the internal effectiveness and
capability of Toyota in dealing with the business challenges will also be analyzed, which will
help to identify the gaps between the internal and external aspects for them. Competitive analysis
will be done to identify the market position of Toyota in the Chinese automobile market and how
they are being strategically placed against their competitors. Lastly, SWOT analysis will be done
to identify the key internal negative and positive factors and will be concluded about the strategic
priorities accordingly.
Company background
Toyota is the leading automobile manufacturer in the world and they are reported to be
the largest in the world in terms of the sales volume. As of now, Toyota is having little more than
10 percent of the market share in China. Thus, there is huge potentiality still left for them in the
Chinese market. However, the increasing competition in the Chinese automobile market with the
inflow of new global brands and emergence of domestic brands is increasing the intensity of the
competition for Toyota. On the other hand, being the leading carmaker in the world, Toyota is
having expertise in developing new technologies such as electric and hybrid mobility solutions,

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which will help them in gaining larger market share in the Chinese market in the coming year
(Yoshida and Kojima 2015). The other advantage for Toyota in the Chinese market is their joint
venture with the local partner GAC motors. This is helping them in gaining the key market
insights and lower cost of production due to localization. Competitiveness in terms of cost
leadership is getting increased for Toyota.
PEST analysis
Political factors
In terms of the long term political risks, China is ranked at low level, which denotes that
Toyota is facing lower political risks in doing business in the country. This is beneficial in terms
of their long term planning in the country due to the reason that the more favorable will be the
political factors, the more will be the long term surety for Toyota in getting positive return on
investments (Zhong 2015). However, on the other hand, it is also being reported by the global
economy that China is scoring lower in terms of the political stability. It is reported that China is
scored at -0.25 in terms of the political stability as of 2018 (theglobaleconomy.com 2019). This
is mainly due to the presence of communist type of government in the country. China is also
accused for higher level of intervention in the decision making process of the private entities.
Thus, it is major concern for Toyota in operating in the Chinese market. Toyota is also facing the
challenge of higher corruption in the Chinese market as China is ranked at 40 in terms of the
global corruption index. Another major challenge for Toyota in operating in the Chinese market
is trade war between China and the United States. In the recent time, both the countries are
imposing tariff barriers in importing (Herrmann-Pillath, Libman and Yu 2014). Thus, the
international trade of Toyota from the global export hub of China might get affected. This will

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also affect Toyota in regards to their global sourcing of raw materials. Thus, it can be concluded
that there are number of challenges as well as favorable factors to be faced by Toyota in terms of
the political factors in China.
Economical factors
China is one of the top two countries in the world in terms of the economic growth with
other being the India. This is denoting that market and business opportunities for Toyota in doing
business in the Chinese market are getting increased with time. In addition, it is also reported that
fresh and open market oriented policies are increasingly be initiated by the government of China
to attract more foreign investors (Rithmire 2013). The more will be the open market policies of
the government, the lower will be the business challenges in doing business for Toyota. In terms
of the economical globalization, the latest trend is showing positive growth in China. Since,
2017, it is growing, which is also creating favorable economic condition for Toyota. This is due
to the reason that Toyota is leveraging their Chinese manufacturing facilities as their global
export hub due to the lower cost of resources and with the help of economic globalization of the
market, they are gaining global market opportunities. However, on the hand, it is also identified
that the business freedom for the investors in China is low and as per the reports, the business
freedom in China stands at 25 as of 2018 (theglobaleconomy.com 2019). This denotes that
Toyota is having low business freedom compared to their business in other countries. In terms of
the overall economic freedom also, China is ranked at lower level. Thus, it can be concluded that
in terms of the economic freedom also, Toyota is facing different challenges as well as
opportunities in the Chinese market.
Social factors

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As per the global economy report, China is improving in terms of the social globalization
index and it is increasing since 2010. This is denoting that Toyota is being able to cater to global
customers with having global trends and preferences (theglobaleconomy.com 2019). This is
keeping advantages for Toyota in managing the standardized product portfolio in the Chinese
market as well. China is also the largest country in the world in terms of population and this is
also posing opportunities for Toyota due to the reason that the more will be the population, the
more will be the target market segments for Toyota and more business viability. The lower cost
of human resources is also ensuring that Toyota is having lower cost of operation in China.
However, on the other hand, it should also be noted cultural factors of China are distinctive in
comparison to other countries and this it is important for Toyota in having distinctive marketing
and promotional approach of offering their standardized products in the country. It is also
reported that the unemployment is increasing in China and the country is gaining older aged
people compared to the younger population (Cai and Lu 2013). This will pose challenge for
Toyota due to the fact that the more will be the rate of unemployment; the lower will be the
purchasing power of the customers, which will affect the business potentiality of Toyota (Feng,
Hu and Moffitt 2015). On the other hand, the more will be the older aged population, the lower
will be their purchasing power and requirements for cars and thus it is also another challenge for
Toyota in their Chinese business.
Technological factors
In terms of the technological factors, China is offering huge opportunities for Toyota as
the country is known for cheap and affordable technologies. It is reported that China is steadily
growing in terms of the innovation index since 2013. This is having favorable impact on Toyota
due to the reason that they are gaining access to the latest innovation in their business. However,

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on the other hand, this situation is also posing challenges for Toyota due to the reason that the
more rapid will be the development of technologies, the more will be the incurrence of cost for
Toyota in improving their existing ones. Thus, in the Chinese operation, Toyota is involved more
in coping up with the technological development in the market.
Internal analysis
The internal analysis of Toyota will involve the resource based view in order to have the
understanding about the internal capabilities of them. According to the resource based view, the
tangible resources of Toyota are assets, plants and financial resources. On the other hand,
intangible resources of them include brand value, goodwill and patents and trademarks. The
following section will involve VRIO analysis to measure the extent to which the competitive
advantages being gained by Toyota from their resources.
Valuable Rarity Inimitability Organizational
capability
Financial
resources
 
Human resources   
Patent and trade
mark
   
Brand value   
Technologies   

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As per the above VRIO analysis, it is identified that there are number of resources that
are helping Toyota in gaining competitive advantages. Financial resources are adding value by
enabling them in further investment and development. It is also identified that being the leading
brand in the world, Toyota is having the access to huge financial resources and they are capable
enough in making out the best from it. Furthermore, human resources of Toyota are also adding
value due to the reason that productivity and performance of the employees are determining the
organizational effectiveness of Toyota. They are also inimitable in nature because the individual
skill sets of the employees cannot be imitated and Toyota is having the access to skilled and
specialized employees in place. In terms of their organizational capability, Toyota is known for
their lean management and higher employee performance, which denotes that they are capable
enough. Patent and trademarks are the major sources of competitive advantages for Toyota as
they are adding value by initiating distinctiveness in the value proposition, are rare as not all the
car brands will have the access to same technologies and patents and they also cannot be imitated
and as patent will restrict others from copying (Gehani 2016). Thus, the organizational capability
for Toyota is getting enhanced. It can be concluded that Toyota is capable enough in terms of
their internal competency and is capable enough in dealing with the external challenges.

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Product diversity
Price
Toyota
Volkswagen
Honda
Competitive analysis
Strategic maps
As per the above strategic group above, it is identified that Toyota is placed on the basis
of affordable pricing and product diversity. This is due to the reason that majority of the cars of
Toyota are affordable and mass market models while on the other hand, Toyota’s product
portfolio ranges from hatchbacks, sedans to MUV and SUVs. Furthermore, Volkswagen is
placed on the higher price points compared to Toyota and Honda is having lower price diversity.
Thus, cost leadership is the major positioning point for Toyota.

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High quality
Low quality
Expensive Price effective
Toyota
Volkswagen
Honda
Hyundai
Perceptual map
According to the above perceptual map, Toyota is positioned as the durable, quality and
affordable brand while their core competitors such as Volkswagen is also positioned as higher
quality brand but with higher price points. On the other hand, Hyundai is also positioned as the
cost effective brand but their quality and durability is not a positioning point as Toyota. Thus, it
can be concluded that product quality is another positioning point for Toyota.
Competitor comparison
The two closest competitors for Toyota are Honda and Volkswagen. Competition for the
market leadership position is between Toyota and Volkswagen. It is identified that while Toyota
is known for durable and mass market cars, Volkswagen is known for higher quality and

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premium cars. Honda on the other hand is known for their designs and newer technologies and
fuel efficiencies. In addition, it is also identified that Volkswagen is having their major market
share in the European region, Toyota is having their major market share in the American region
and Honda is having the market leadership in the Asian region (Timmer et al. 2015). However,
the average profitability of Volkswagen is more due to their premium pricing. In the recent time,
merger of Renault and Nissan is also posing challenges for Toyota in managing their global
leadership position.
SWOT analysis
Strengths One of the major strengths of Toyota is their global positioning and presence
across the different countries. This is helping them in catering to larger customer
segments and more sales volume (Simao and Lisboa 2017). In addition, the
positive brand value of Toyota is also helping in gaining competitive advantages.
This is due to the reason that cars of Toyota is perceived as quality and durable,
which is helping in pushing the sales of new products in the market.
Weaknesses The major weakness for Toyota is their lack of market presence in the premium
segment. Toyota is only managing leadership position in the affordable segment
and thus their brand value is not extensive (Fan, Geddes and Flory 2013). Toyota
is not having market leadership status in some major economies such as India.
Even though they are global leader but they are missing out in some major
countries and markets.
Opportunities The major opportunity for Toyota lies at the electric mobility. They are already
having cars such as Prius and initiating to launch pure electric cars in the near
future. This will help them to tap the growing demand for electric cars in