Toyota: Competitive Analysis and Social Impact Business Project

This project provides a comprehensive analysis of Toyota's global business operations, market position, and strategic capabilities. It begins with an introduction to Toyota, followed by a comparative analysis of its competitive position in various markets using Porter's Five Forces and an inside-out approach. The project then explores the VRIO framework to assess Toyota's strategic capabilities. It also delves into the considerations the company should address when creating social impact, including a set of ethical standards. Furthermore, the project evaluates and analyzes academic theories related to the chosen areas, discussing what Toyota needs to consider improving its business performance, including a TWOS matrix analysis. The report concludes with a summary of findings and recommendations for Toyota's future strategies.

Running head: BUSINESS PROJECT
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Table of Content
Introduction-....................................................................................................................................2
A brief background to the organization- Toyota.........................................................................2
1 Comparative Analysis of Toyota’s competitive position in its various market............................5
(Inside-out approach)...................................................................................................................5
Strategic capabilities: - VRIO framework...................................................................................8
2. Consideration should the company look at when trying to create social impact.......................16
A set of ethical standards...........................................................................................................16
3. Evaluating and analyzing academic theories related to the chosen areas and discussing what
Toyota needs to consider improving their business.......................................................................24
Critically evaluating and analyzing academic theories.............................................................24
Discussing what Toyota needs to consider enhancing their business performance..................25
TWOS matrix.............................................................................................................................27
Conclusion.....................................................................................................................................30
References and Bibliography.........................................................................................................32

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Introduction-
The present report provides a detailed analysis about how a global organization runs its
operation establishing a stable position in the market and gaining competitive advantages. It is
certain that when running operation in a global market, the organization has to think broadly,
several internal external forces and factors are there that can affect and drive the performance of
the organizations. As each market has been dynamic and competitive in terms of needs,
economy and competition, the organizations are observing the push of modifying each
operational element. In order to review each of these external and internal factors with practical
scenario, the following report considers the car manufacturing organization Toyota, which has
distributors over 25 with 3500 sales outlets (Toyota 2018). Such increasing strength enables the
organization to gain global reputation and this global reputation is necessary for Toyota’s
European sales. However, Toyota is interested to perform a research on its market because due to
globalization and the changing market forces, the operation of Toyota could be at stake.
Therefore, the organization wishes to know the factor both in external and internal environment,
which can influence Toyota’s future operation. The purpose of the report is to derive a proper
understanding about how an organization operates in a global environment safeguarding its
operational intent.
A brief background to the organization- Toyota
The global car manufacturing organization was established in 1937 in Japan. The
organization sells its vehicles in approximately 190 nations and regions but their major markets
for automobiles are Japan, North America, Europe and Asia. Since the inception of the operation,
Toyota observes a growing state in its business. Within a short period, the organization has

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become a largest car manufacturer in Japan with the market share over 40% (Toyota 2018).The
major products of Toyota is four door corolla sedan, Vitz, Aygo, Eitos, Vios, Axio and many
more. The organization continues to grow especially in European market and in other complex
markets and then in 2000, the organization delivered over 10 million cars to a customer in
Germany.
This mass delivery of vehicles helped Toyota to strengthen and create a sustainable
position in the European market. The total market share of Toyota in United Kingdom is
approximately 3.5%. The growth of revenue of Toyota is recorded 27,594,192 but this figure is
certainly less, the revenue recorded in 2016 around 28,403,118 (Financials.morningstar.com
2018). Toyota is presently pursuing a multiple approach to safety. This means for its visions of
“zero traffic causalities”, the organization Toyota is involved in the activities in three different
areas such as safe vehicle development, formulation of safe traffic environment and create
pedestrian awareness (Dyer, and Nobeoka 2000). Furthermore, as the demand of automobiles
kept increasing, the suppliers increased the price of materials and parts; thereby, to meet
suppliers demand and consumers’ demands, Toyota had to lower its operational strategy. Toyota
applied lean production model approach, where the company used six-sigma model, controlled
the waste in section of the operation, and enhanced the overall performance. However, as the
market is dynamic, Toyota must focus on modifying its strategies.
Global Automobile industry
Bailey and De Propris (2017) mentioned that due to the rapid development of technology
and consumer demands, the global automobile industry is rapidly developing. Particularly, the
global sales of passenger vehicles are predicted to hit 78.9 million in 2018. Along with China

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United State is considered as the largest automobile market with respect to production and sales.
Almost 6.9 million passengers vehicles were sold to United State in 2016 (Schulze, Paul
MacDuffie and Täube 2015). In addition, US became a potential market during 1999-2000, when
the competitor Ford launched its assembly car line car production to produce its mass-Model T
(Harwit 2016).
However, the car manufacture, Ford still tops the list of popular passenger cars and its
most popular passenger car is Ford Focus, which was considered to be as the bestselling car
worldwide in 2016. On the other side, in terms of revenue, the major brands such as
Volkswagen, Toypta and Daimler remain at the top of major automobile markets in 2016. On
the other side, Bosch, Continental, Denso and Magna operate automobile supplier industry.
Furthermore, it is also observed that some global initiatives such as Paris Agreement, enable
several nations around the globe are paying attention to stricter emissions controls on emerging
vehicles models. Some of the leading carmakers such as Ford, Volkswgen, Tesla and Toyota are
going to expand their business into “electric mobility sector”. Hence, Germany is predicted to
lead with the proposed electric production to reach some 1.3 million by 2012 (Timmer et al.
2015). The following figure shows the recent market size of global automobile industry.
Moreover, at the end of 2025 or 2030 just the electric cars will be allowed in China. Petrol cars
will no more exist in the nation. Considering such upcoming tends in automobile innovation
Toyota and Tesla has focused on spending more on research and development. Google and
Mercedes have developed their self-drive cars. It has been predicted by the automobile company
that electric cars is deemed to cost 10 times less than internal combustion engines to charge.

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Figure 1: Global Vehicle market share of the world’s largest automobiles in 2016
(Source: Financials.morningstar.com2018)
1 Comparative Analysis of Toyota’s competitive position in its various market
(Inside-out approach)
Porter’s five forces
Threats of new entrants: (Low)- European market is already facing several challenges
including instable economy due to Brexit, loss of UK’s suppliers, the pressure of referendum in
the coming year. Therefore, if a new organization wishes to enter the market, it requires a large
amount of capital. The existing car manufacturers’ already have a sustainable brand image in the

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market. Thereby Langfield‐Smith and Greenwood (1998) mentioned that high retaliation can be
possible from the existing firms like Toyota, Ford Motor and GM motor. Nonetheless, Kaplan,
and Patterson (2008) commented that one significant opportunity that new entrants might
observe is low market share concentration such as Toyota (10.2%), Volkswagen (9.6%), Ford
(5.6%) and others (67.7%) (Chiarini and Vagnoni 2015). On the other side, Asian market, the
threats of new entrants remains moderate. This happens as the nations in Asia are presently
welcoming the foreign investors as the purpose of country’s business development. Monden
(2011) argued that existing brands like Nissan, Ford and Toyota have invested a huge amount to
maintain their market status. Thus, the entry could be difficult but Toyota must consider the fact
organization with increasing financial strength can enter the market. For instance, the electronic
car manufacture enters Asian market -India in last year.
Figure 2: Porter’s five forces analysis
(Source: Monden 2011)

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Suppliers’ power (Low)- The demands of vehicles are increasing in each market across
the world as the evolution; consequently, the number of suppliers are also increasing. Liker and
Convis (2011) particularly, mentioned that automobile companies in the recent time tend to use
another type of materials such as plastics but to some extents. On the other side, in Asian market,
the bargaining power of suppliers remains low as new suppliers are still entering the market. The
majority of the suppliers in the car-manufacturing sector are offering cooling system, breaking
system, fuel supply as well as breaking system. On the other side, Taj and Morosan (2011)
mentioned that suppliers network is diversified and they provide significant elements for car
making and most of the car producers tend to depend on suppliers’ operations and stellar quality.
Therefore, it can be mentioned that suppliers do not pose any threat of forward integration for
Toyota both in Asian and European market.
Bargaining power of customers (high)- Bargaining power of car purchasers are
comparatively high due to increasing number of brands in the market. In European nations, like
in Germany, most of the car buyers are the individuals buying one car but governments and the
business tend to buy large fleets; certainly, they have the power to bargain for low price. Most
importantly, as the numbers of car manufacturers in the sector are abundant, it does not really
cost too much to switch to other brands or to start using other type of transportation. Particularly,
in the Asian markets, the purchasers remain price sensitive; thus, their decision is often biased on
how much a vehicle may costs. Nonetheless, Plambeck (2012) arguably mentioned that the cost
cutting approaches through lean management practices that Toyota applies in its operation
certain decreases the cost of buyer power and put its cars into a more profitable or advantages
position compared to its competitors. Particularly, Matsuo (2015) mentioned that in Asian

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market, the growing demands of hybrid cars offer cheaper alternatives for the operating cost
doubled with increasing expectation of product quality.
Threats of substitutes: (Low)- It is certain that there are several alternatives or types of
transportation including bicycle, motorcycle, buses and trains but those substitutes rarely provide
the same convenience as cars. The alternative kind of transportation may cost less, as well s
sometimes are environment friendly but compared to demands of cards, these substitutes just a
minor threat. On the other side, Toyota in a largely populated market in Asian like Bangladesh
has the maximum market share (53%) and the organization is also ranking top in terms of
transportation convenience (Heller and Darling 2012).
Competitive rivalry (High)- State of competition in the car manufacturing sector is
comparatively high because due to the growing demands of vehicles globally, each market has
increasing number of competitors. For example, particularly, in the European market, the major
competitors like Volkswagen, Ford, GM, Nissan and other some luxury brands like BMW,
Tesla (Liker and Convis 2011). On the other side, in the Asian market, Toyota face a tough
marketing challenges due to the presence of the rivals like Chevrolet, Honda, Tata motor, and
other regional but large brands. Matsuo (2015) estimated that competition in the present market
will further increase, as there is a high demands of vehicle in the global market.
Strategic capabilities: - VRIO framework
Number of
variables
Valuable Rare Imitable Organized
Production Yes, in some
European market
such as Germany,
No Yes Yes

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Norway and in
Asian market like
Indonesia, Toyota
gained highest
production in the
shortest time.
Organizational
Strategy
Yes, Yes, Just in time
production of
Toyota is a
popular strategy
and now used by
many companies
but Toyota’s
approach is very
rare
NO, several firms
in the automobile
sector have tried to
regenerate the
system but they
are failed to do it
in an efficient
manner, which
resulting in the
loss of investment
Yes
Pricing strategy Yes, because
Toyota’s low
pricing strategy
helps to increase
sales by keeping
the production cost
low
Yes, most of the
manufacturing
organizations tend
to maintain a low
production cost to
keep a competitive
edge in the
operation.
Yes Yes
Competitive
implication
Yes, because
Toyota always
No No Yes, as Toyota has
been using this

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apples short-term
approaches as the
base for gaining
competitive
advantages.
approach since its
inception, it helps
the firm to run the
operation in a
proper way.
Table-1 VRIO framework for Toyota
(Source: Matsuo 2015)
PEST
Political environment: As put forward by MacDuffie (2013), the governments in the
European market tend to offer tax rebates as well as other incentives to the customers to buy
Toyota’ cars. The government is favorable towards Toyota, as the firm has a consistent
involvement in the CSR activity (Sturgeon and Van Biesebroeck (2011). By collaborating with
the governments of European nations, the organization is promoting education. Thereby, Toyota
hence has the scope for gaining competitive advantages, as other brands do not have this
governmental back up to gain competitive advantages. Particularly, Pavlínek and Žížalová
(2014) highlighted the fact that the governments in 203 launched the tax cut rates from 5-15% on
the cars with emerging less amount of CO2. Toyota in this stage is a step ahead because the CO2
emission initiative helped the firm to receive governmental backup. On the other side, in the
United State, the governments in the recent time imposed strict new fuel-efficiency standards;
thereby, the organizations Toyota is looking forward to capitalize because this measure could
certainly boost sales (Matsuo 2015). Car innovations will reach to an exceptional level in the
upcoming years focused on the fact that electrons are simpler to move than diesel and petrol and
the solar charging power stations will offer refills at zero marginal cost. Toyota intends to

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develop cars with such advanced feature in the future years that will almost eradicate popularity
of its petrol cars. Tesla has planned to develop its semi-autonomies autopilot system at the end of
the year that will consider Autopilot as “super high priority”. In addition, it has also been
observed that companies such as Google, Uber and Ford are experimenting to launch self driving
car technology at the end of 2025.
Economical environment: Due to Brexit, the economical positions of few nations in the
Europe are not favorable. However, in the UK market, Toyota has been hit by the recession,
where the company recorded the loss of 6 billion in 2015, which is probably the biggest loss in
its 60 year of history (Dhingra et al. 2016). Moreover, UK’s exit from EU, made economy more
vulnerable because the consumers do not set the benefits of owing a personal car. Consequently,
the demands of personal cars started decreasing. On the contrary, Bailey and De Propris (2017)
mentioned that the world is currently in the midst of a financial crisis, which is probably the
major reasons behind the collapse of large US banks. This has affected the world’s automobile
industry showing a decrease of car sales. The automobile industry is anticipated to undergo
drastic technological transformation over the upcoming years till 2025 to 2030. For instance,
Google and Ford are planning to develop cars that will have rear mounted aerial that will attain
allocation information from inbuilt GPS satellites. Moreover, cars in future will also come with
ultrasonic sensor with one rear wheel that can monitor movement of cars. Such electric cars are
observed to have internally inbuilt altimeters, gyroscopes and tachometer that will have accurate
measurements on car’s position. This will combine in offering the cars with highly accurate data
those are required for its safe operation.