Strategic Management Case Study: Toyota Motor Corporation Analysis

This report provides a detailed analysis of the Toyota Motor Corporation case study, examining the company's strategic management, objectives, and operational challenges. It explores the macro factors influencing the organization, including political, economic, social, technological, legal, and environmental factors. The report identifies key problems such as declining profits, quality issues, and the limitations of the Toyota Production System in a competitive global market. It delves into the management accounting methods employed, like Kaizen costing and target costing, while also suggesting alternative techniques like standard costing and balanced scorecards to improve performance. The analysis concludes with recommendations for addressing these problems, emphasizing the need for innovation and strategic adjustments to maintain competitiveness and profitability in the automobile industry.

Running head: STRATEGIC MANAGEMENT
Strategic Management
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Executive Summary
The main purpose of this assignment is to analyze the Case study of Toyota Motor Corporation.
The assignment will be focusing on the macro factors affecting the organization and also the
goals and objectives of the company. The report will also be analyzing the problems which are
faced by the organization and the management accounting methods which are applied by the
management of Toyota Motor Corporation.

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Table of Contents
Introduction......................................................................................................................................3
Overview of the Company...........................................................................................................3
Problem Faced by the Company......................................................................................................4
Managing Problems.........................................................................................................................6
Management Accounting Methods..................................................................................................6
Alternative Techniques....................................................................................................................7
Conclusion.......................................................................................................................................8
Reference.........................................................................................................................................9

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Introduction
The main focus of this assignment is to analyze the case study of Toyota Motor
Corporation and identify the problems which the company faces. The assignment will also be
containing possible solutions which are associated with the problems. The case study will be
applying strategic management principles and analyzing the problems which are present in the
operational structure of the company (Hitt, Ireland & Hoskisson, 2012).
Overview of the Company
Toyota Motors Corporation was founded in 1937 and has its headquarter situated in
Japan. The company is engaged in manufacturing of automobiles and the company operates in
more 170 countries around the world. As per estimates the company has an established market
globally and has research and development centers which are located in North America, Japan,
Europe, Asia Pacific and China. The company has developed so much over the years that the
company has in present diversified from manufacturing cars to marine, housing, financial
services, biotechnology and web-based information technologies. Toyota Motor Corporation
aims to capture maximum market shares in automobile industry and also aims to develop the
global markets where the business is currently operating (Toyota Motor Corporation Global
Website., 2018). The company is currently unavailable earn decent profits or be competitive in
the US market. The company is also investing in hydrogen fueled cars which as per the president
of Toyota Motor Corporation, is the future of automobile industry and introduction of such
technology can re-strengthen the position of the company in the industry.
There are certain macro factors which affect the business of Toyota Motors Corporation
which are given below:

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1. Political Factors: The political factors which affect the company are the policies of the
government which can affect the organization (Yüksel, 2012). These factors are largely
dependent on the country in which the company is operating.
2. Economic Factors: These factors include the monetary consideration which the
organization require for operating effectively. Such factors include fund requirements,
loan availability and other similar consideration (Ho, 2014).
3. Social Factors: These factors consist of factors which are related to social consideration
like lifestyle patterns, taste and preference of the customers. Toyota Motors are affected
by such factors when they are operating in other global markets.
4. Technological Factors: These factors refer to technological innovations which can affect
the business of Toyota Motors. As per the case study competitors of Toyota Motors have
invested fuel efficient vehicles and electric vehicles which definitely affects the business
and decision-making ability of Toyota Motors.
5. Legal Factors: These refers to the legal suits which are filed against the company. Such
factors also affect the business.
6. Environmental factors: Such factors include those activities which affects the
organization. The manufacturing activities of Toyota Motors and how it affects the
organization are the things which the company should consider (Gupta, 2013).
Problem Faced by the Company
Toyota Motors have been a leading brand in automobile industries and have achieved
popularity among the customers for the introduction of the fuel-efficient car series. However, the
company have been facing certain problems which the management needs to adhere to
immediately. The company in recent years has struggled be competitive with its rivals due to the

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intense competition between the competitors in the automobile industry. In other words, the
company is having difficulties to keep up the pace of advancement with its competitors. In
addition to this the company operating in US, have lower amount of profits which is at 9% and
the profit rate of the company is falling sharply in the industry which is an indication that the
company’s market share is falling. The operating income of the company as per comparison of
annual reports of 2017 and 2016 shows that the operating income of the company has reduced
from 10% to 7.2% which shows that the company is having certain difficulties in the operations
management of the company. The Toyota Production System (TPS) which has proven to be quite
effective for stable markets is not at all suitable for fast growing, global and competitive
environment. TPS system which the company is using is not sufficient enough for the companies
when operating in global and competitive markets like United States similar European nations.
Another major problem which the company is facing is relating to quality of the cars which is
produced by the company. There have been servals product recalls for car which was mainly due
to production failures. This has affected the overall reputation of the company. The quality of the
products which the company has been manufacturing have deteriorated from previous quality
standard. The company has to recall around 11 million vehicles from the start of the year 2014
which shows that the diminishing standard of quality of its automobiles. The company has been
having problems in three of the brands which have been introduced by the company. Even the
best seller of Toyota Motor Corporation which is Lexus model had to be recalled for faulty
quality. For such purposes Toyota Company has also faced fines which includes a fine of 1.2
million for misleading the customers with the unintended acceleration issues in the cars
manufactured by the company. The problem which the management of the company is facing is
due to operational inefficiency and therefore the management needs to incorporate a plan which

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can improve the situation. The problem is quite severe as the reputation of the company is being
harmed. The company needs to reestablish its name in the market by improving the overall
quality of the products and also avoid situations which may result in product recalls. The
decreasing profits and falling profit rate of the company is significant problem which should be
dealt by the management immediately as possible. The management also needs to come up with
a strategy which can provide an edge to the business in the intense competition which the
company is facing. The problems which are given above have to be seriously considered by the
company as the company needs to increase the profitability of the business and moreover combat
the situation of competitive pressure. If the problems are not dealt with in the current
circumstances than it might also affect the going concern principle of the company in the long
run.
Managing Problems
The problems which the company is facing is to be handled by the top-level management
of the company. The top-level management of the company needs to formulate a plan whereby
the company can manage the problems. The president of the company is of the opinion that the
company can re-strengthen the financial position of the company in the industry by means of
innovations. The future products of the company as per the case study consist of hydrogen fueled
cells which can be used to run cars and thus it will be saving large amount of energy resources.
Management Accounting Methods
The role of management accounting in any business is closely related to business
planning and decision-making procedures. Over the years, there has been significant amount of
development in management accounting aspect as new tools have been developed which uses
computer aided techniques. In the case of Toyota Motors, the company has been leading in

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management accounting innovations and uses techniques like kaizen costing, target costing and
improved styles of performance of management.
The company utilizes techniques like Kaizen Accounting, target costing and other similar
techniques which are used for performance management of the company. Kaizen costing
techniques refers to the cost reduction techniques which allows the management to control the
costs of the company as per the management’s budget (Sani & Allahverdizadeh, 2012). Target
costing refers to the cost techniques which is used to determine the product life cycle cost. The
technique involves setting a target for a product after deducting a desired profit margin from the
market prices of the product (Drury, 2013). The management is engaged in innovation activities
which can improve the overall operations of the business. The basic advantage of target costing
techniques is that the management is able to target a particular product and allocate cost and
resources accordingly to such a product. The method which are utilized by the management for
the management accounting are effective, however the company profits have decreased from the
previous year’s profit and therefore the management of Toyota Motors Corporation should
introduce new methods of management accounting in order to improve the overall efficiency of
the business. The management can use techniques likes marginal costing, process costing
techniques to measure the costs effectively.
Alternative Techniques
The management of Toyota Motor Corporation have the option of using other
management accounting techniques. The techniques which can be used by Toyota Motors for
improving the operational performance of the company are standard budgeting techniques,
marginal costing techniques, application of balance scorecard (Klychova, Faskhutdinova &
Sadrieva, 2014). The management of the company can use standard budgeting techniques to set a

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standard for both costs and revenues which are to be followed by the employees and respective
departments and on the basis of which actual results will be measured. The basic advantage of
using standard costing techniques is that the company will have a set standard on the basis of
which actual results are to be measured and any variances which arises between standard and
actual can be investigated by the management and corrective actions can be taken to improve the
situation. The company can also use balance scorecard. Balanced scorecard is used as a
performance metrics in strategic management and it can indicate the results of various decisions
as taken by the management. The application of balance scorecard which are adopted by the rival
companies like General Motors, Honda Motor Company and Nissan Motors. At the heart of
manufacturing in Toyota is the Toyota Production System (TPS). The system was innovative in
the way it is designed to ensure the capacity to manufacture a wide range of products without
sacrificing continuity in the production process. As the company is involved in manufacturing
processes, standard costing techniques will be perfect as it will be able to keep a close track of
the overall production and efficiency and also identify variances which are present and take
corrective actions for the same.
The management of the company needs to implement standard costing techniques as it
will be able to improve the performance of the different departments which will take the
company closer to the organizational goals of the business. The company will be able to keep the
costs and profits which are incurred and earned in check while using standard costing techniques.
Conclusion
Therefore, from the above analysis of the case study of Toyota Motors Corporations, it
can be justified that the company needs to improve the operational structure especially when

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operating in global countries which have a competitive market. The problems which the
company faces can be handled by using standard costing techniques.
Reference
Drury, C. (2013). Costing: an introduction. Springer.
Gupta, A. (2013). Environmental and pest analysis: An approach to external business
environment. Merit Research Journal of Art, Social Science and Humanities, 1(2), 13-17.
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2012). Strategic management cases:
competitiveness and globalization. Cengage Learning.
Ho, J. K. K. (2014). Formulation of a systemic PEST analysis for strategic analysis. European
academic research, 2(5), 6478-6492.
Klychova, G. S., Faskhutdinova, М. S., & Sadrieva, E. R. (2014). Budget efficiency for cost
control purposes in management accounting system. Mediterranean journal of social
sciences, 5(24), 79.
Sani, A. A., & Allahverdizadeh, M. (2012). Target and kaizen costing. World academy of
science, engineering and technology, 6(2), 40-46.
Toyota Motor Corporation Global Website. (2018). Toyota Motor Corporation Global Website.
Retrieved 17 March 2018, from http://www.toyota-global.com/
Yüksel, İ. (2012). Developing a multi-criteria decision making model for PESTEL
analysis. International Journal of Business and Management, 7(24), 52.

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