Management 3: Toyota's Strategic Perspective in UK Automotive

This report offers a strategic analysis of the UK automotive sector, with a specific focus on Toyota. The analysis utilizes the VRIO framework to assess Toyota's internal resources and capabilities, identifying sources of competitive advantage. The Porter Five Forces model is applied to evaluate the attractiveness of the UK automotive market. Furthermore, the report examines Toyota's Corporate Social Responsibility (CSR) initiatives, evaluating their influence on the organization and comparing them to other industry players. The study explores Toyota's competitive position, its strengths in areas like brand image and production systems, and the external factors impacting the industry. The report concludes by summarizing the key findings regarding Toyota's strategic approach and its ability to navigate the complexities of the UK automotive market. It highlights the impact of various forces on the industry and Toyota's strategic choices in response.

Running Head: MANAGEMENT 0
A strategic perspective on
automotive sector in the uk

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Abstract
This report outlines industry environment and internal environment assessment together with
the automotive competitive potential in the UK via some important management framework
and context such as VRIO and Porter Five Forces framework. In case of the automotive
industry, it will help the companies in the industry to identify the attractiveness of the market
as per the above stated competitive forces. With VRIO, Toyota internal and capabilities can
be analysed that is offering its businesses a sustained or temporary competitive advantage or
competitive parity. In order to identify automotive sector attractiveness in the UK, the Porter
five forces model is being used. Later on, CSR responsibilities of Toyota in UK automotive
industry have been assessed and evaluated with other firms and identification of the ways it
influences the organisation act.

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Table of Contents
Introduction................................................................................................................................3
Literature review........................................................................................................................3
VRIO Exploration......................................................................................................................4
Porter Five Forces Analysis.......................................................................................................5
Corporate Social Responsibility.................................................................................................8
Summary..................................................................................................................................10
References................................................................................................................................11

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Introduction
Automotive sector in the UK is an important part of the country economy worth more than
£82 billion turnovers and adding £18.6 billion value to the economy of the UK. The market
size of the industry is very big as over 1.3 million vehicles, 78, 270 commercial vehicles and
more than 2.5 million engines were developed in the UK in 2019 (smmt.co.uk, 2019). In
addition, it also employs nearly 823, 000 people across UK automobiles. In relation with the
nature of the industry, the automobile industry in the UK is in the midst of a period of strong
growth with potential for further expansion. The major players and competitors in the
industry include Honda, Nissan, Toyota and Vauxhall Motors. For this report, Toyota is
chosen as an organisation in the UK automobile sector.
Literature review
Ariyani and Daryanto (2018) stated the significance of VRIO framework with analysing the
internal resources and capabilities of the firm with pointing four key factors lead to firm
resources to become a source of sustained competitive advantage. It presents out business
four main questions as is the resource or capability valuable to consumers, is the resource or
capability in demand and hard to come by, will it be expensive for other firms to replicate the
resources or capability and lastly, does the business have robust structure, system and
processes to take the advantage the resource or capability has. In a simple way, with means,
the resource and capability is setup for constant long-term business success, the great likely
result of the VRIO analysis. The other framework used in the study includes Porter five
forces helps in understanding both the strength of existing competitive position and the
strength of a future prospect where business firm if planning to move forward (Utami and
Lantu, 2014). It relies upon key industry forces influencing the business environment of a
firm such as threat of substitute, risk of new players, and competition among standing firms,
bargaining power of buyers and suppliers.

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VRIO Exploration
In order to analyse Toyota resources and competitive advantage, VRIO model is being used
stands for four questions of value, rarity, imitability and organisation. The VRIO model is
applied on Toyota in the below table –
Toyota
Resouces/Capability Valuable Rare Difficult to
Imitate Organisation Competitive
Context
High production
capacity Yes No No No Competitive
Parity
Efficient process of
manufacturing Yes No No Yes
Temporary
Competitive
Advantage
Innovation in
research and
development
Yes No No Yes Competitive
Parity
Brand image and
popularity Yes Yes Yes Yes Sustainable
advantage
Collaboration and
associations with
complementary
firms
Yes No Yes Yes
Temporary
competitive
advantage
Toyota production
system Yes Yes Yes Yes Sustainable
advantage
Support from
diverse business via
Toyota Group
Yes Yes Yes Yes Sustainable
advantage
International
network of
manufacturing
facilities in strategic
locations
Yes No No Yes Competitive
Parity
Toyota is one of the leading organisations in the markets of the UK which has capabilities
such as innovation, manufacturing and in development with brand awareness. In addition, the

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organisation Toyota having great capabilities and resources helped the company to gain in
long term competitive advantage in the UK automotive industry. As per the VRIO model,
Toyota has competitive advantages from core competencies other than resources and
capabilities. Taking consideration of efficiency in manufacturing process, its results in
Toyota competiveness, however, this capability cannot be said as Toyota core competency as
other automobile companies in the UK including Nissan and Honda have built their own
high-efficiency production processes.
On the other hand, Toyota brand popularity represents it both competitive advantage and core
competency as it supports the organisation competiveness depend on general positive
customer perception in relation to the brands and product. In the UK, Toyota brand image is
more popular in mid-range commercial vehicle with having the second position after Ford.
The market share was noted around 3.2% in December 2019 (marklines.com, 2019).
Similarly, with Toyota just-in-time production system, the company is also gaining long term
competitive advantage as many companies in the UK have tried to recreate the system,
however, none have been able to achieve it in as efficient of a manner that Toyota does. High
production capacity is also a capability that also represents Toyota non-core competency as it
is easily imitable using automation and associated technologies and Ford is also attaining this
competence through applying best practices in operation management. Collaboration with
complementary firm also provides Toyota competitive advantage with creation of
competitive equality in relation with other firms like Ford, Nissan and Honda. Taking an
example, Toyota partnership with Panasonic to make prismatic lithium-ion and next gen
batteries. In the same way, Ford also holds partnership with Rivian to develop its “all-new
battery electric vehicle that suit to the automobile industry (Dearbon, 2019).” Hence, in these
ways, firms in automotive industry hold their core competency with ginning long term
competitive advantage in the industry.
Porter Five Forces Analysis
According to this model, UK automobile industry can be attractive when it combined power
of the competitive forces with raising profitability, however, an attractive market place does
not imply that all firms will enjoy similar level of success. The theory that is being used in
this analysis developed by Michael E. Porter to help different companies in the industry while
developing corporate strategies in align with industry competiveness. In application to
Toyota, it is outlined as follow –

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Threat of New Entrants
There is low threat of new entrants as achieving market share in the UK automobile industry
requires considerable investment in machines, factories and plants. Furthermore, companies
in the UK are making considerable investments in recent decades to improve their delivery of
services, operations and manufacturing. For instance, Toyota unveiled various plans in 2017
for a £240m upgrade to its Burnaston plant last year (Campbell, 2017). The brand value of
Toyota also creates various barriers to entry and as per statista in 2019, Toyota marque was
ranked as the world most valuable car brand with a brand value of approximately 30 billion
U.S. dollars. Ultimately, new players cannot challenge the various brands in the UK
Rivalry among existing
firms is highly intensive
Threat of New Entrants is Low
Threat of Substitute is high
Bargaining
Power of
Buyers is high
Bargaining
Power of
Suppliers is
Low

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automotive industry who have developed their competitive presence in the market long
decade back.
Bargaining Power of Suppliers
In the UK automotive industry, there is low bargaining power to suppliers due to availability
of diverse range of suppliers. Taking an example, Toyota engineering UK consists of 260
parts and resources suppliers centred in Europe and the UK. Furthermore, the company has
maintained the network of nearly 800 suppliers offering suppliers and site services to their
two UK plants (toyotauk.com, 2019). This also shows that that threat if forward integration is
minimum from the suppliers for the reason and these suppliers have to play as per the rule set
by car brand in the UK.
Bargaining Power of Buyers
Buyers in the UK automotive industry revel in great bargaining power as due to availability
of various numbers of players including Ford, Nissan and Honda and this also presents low
switching costs to them. In addition, car-hailing services such as uber and Zipcar also
presenting low cost services to buyers which also poses threats to the whole automobile
industry in the country. As per the research published by Techsci Research on “Global
Mobility on Demand Market Forecast & Opportunities, 2022”, global mobility on demand
market is projected to cross $228 billion by 2022 in context of increasing traffic blockings,
constant steps being taken by various engineering firms and progressively liking of customers
(prnewswire.com, 2017). Hence, this is making brands in UK automotive sector to develop
customer loyalty with quality, design and providing competitive prices.
Threats of Substitutes
There is a moderate threat of substitute considering automotive industry in the UK as with
other modes of transportation including taxis, trains and buses, people can get better
accessibility and convenience. In addition, car hailing market also allows people to travel
around the city without necessary owing to a car and worry for maintenance. However, for
some people, owing a car is a matter of prestige and convenience where daily travellers may
find bus or train as a cheap option.
Rivalry among existing firms

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There is a high competitive rivalry in UK automotive industry pressuring companies to
compete on price element with offering affordable vehicles. The industry is very large and
maturated where Toyota has 5.17 percent market share in July 2019 in comparison with the
other brands such as Ford, Mercedes, and BMW who has captured, 10.09%, 6.46% and
9.47% market share respectively (statista.com, 2019). These firms also investing lot in
research and development to bring a revolution with electric and self-driving cars. Taking an
example, the BMW Group is capitalising nearly €400 million in its Dingolfing vehicle plant
for manufacturing of the BMW iNEXT (bmwgroup.com, 2019).
Corporate Social Responsibility
According to Mason and Simmons (2014), corporate social responsibility (CSR) is an
organisation commitment to managing the social, environmental and economic impacts of its
operations effectively and efficiently with line in public expectations. It places high
importance for companies as if the community does not approve of how they do business, the
goodwill may be affected and ultimately, there will be loss of customers as well as competent
employees. In addition, CSR also enables ethical stakeholder relationships systematically
grow opportunity and wealth in the dynamic competitive environment.
In relation to significance of CSR, Toyota business is supporting to the sustainable growth of
society and earth on an inclusive basis from a mediocre to long time perspectives. The
company endeavours to be a respectable corporate citizen reliable to all the stakeholders with
contributing much to society via its business operations. For instance, in 2017, Toyota Motor
Corporation revealed a new audio-visual subjects website “econohito”, that involves staffs
determined to undertake ecological practices in relation with company environment challenge
2050 (toyotauk.com, 2017). Company different stakeholders including customers, business
partners, employees also expect greater responsibility and initiatives on part of Toyota and
this influence Toyota to conduct stakeholder meetings enabling guests and different
stakeholders to gain first-hand experience of company initiatives. For example, The Toyota
Stakeholders Meeting 2016 was confined at the main office (Toyota City, Aichi Region) and
it was joined by nearly 2,500 individuals comprising secretive stockholders, suppliers, dealers
and many more.
In relation to Carroll’s CSR Pyramid and theory, Toyota is also fulfilling its four
responsibilities including economic, legal, ethical and philanthropic. Considering economic

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responsibility and as per fiscal 2016 year, Toyota has improved profitability, systems and
functional development in various areas while building sustainability operations model.
Furthermore, legal responsibilities of the company also undertaken by Toyota effectively
with goal to confirm that its manufacturing undertakings stance zero ecological risks to native
groups and all divisions of the company follow standard legal areas including labour laws,
product liability law and personal information protection. The ethical behaviour is associated
to company corporate culture strived through the provision of high superiority and cutting
edge services and products. At last, Toyota UK also fulfilling its philanthropy responsibilities
effectively like in 2015, manufacturing at Toyota UK celebrated its reaching of target at £1
million for the NSPCC, that intended to benefit the projects supporting children in North
Wales and Derbyshire (media.toyota.co.uk, 2015).
With studying of CSR reports of different companies in the UK automotive sector such as
Nissan, Ford, Honda and Toyota, it can also be said that they have quiet similar stances in
CSR and their continuous sustainability efforts have enables the company to reach to next
levels of recognition while the world is going through rapid societal and environmental
transformations. The ethics of managers and individuals also help company concerning
revisions with ensuring through information and execution of the updated data. Like in the
year 2016, Toyota competitor Nissan lead work management inspections at merchants, giving
direction about in what way the improvements can be done at those channels where
management methods and practices were identified to be deficient (nissan-global.com, 2017).

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Summary
In the lime light of above discussion, the automotive industry of the UK is going through
constant variations in relation with its external environment and industry forces. However,
high barriers to entry into the UK automotive market is beneficial to both Toyota and other
automotive firms. However, from future perspectives, car manufacturers need to invest more
electric vehicles in and charging stations due to increasing environmental concern in the UK.
This requires them to develop effective relationships with the various suppliers relatively in
the same country to reduce relevant and respective costs. In the end, these practices will help
them to gain a competitive edge on one another while achieving a better economy of scale.

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References
bmwgroup.com. (2019) BMW Group invests 400 million euros in Plant Dingolfing for BMW
iNEXT [ONLINE] Available from:
https://www.press.bmwgroup.com/global/article/detail/T0303346EN/bmw-group-invests-
400-million-euros-in-plant-dingolfing-for-bmw-inext?language=en [Accessed 18/02/2020].
Campbell, P. (2017) Toyota invests £240m to upgrade car plant in boost for Brexit Britain
[ONLINE] Available from: https://www.ft.com/content/b541ba46-0a2e-11e7-97d1-
5e720a26771b [Accessed 18/02/2020].
Dearbon, M. (2019) RIVIAN ANNOUNCES $500 MILLION INVESTMENT FROM FORD;
PARTNERSHIP TO DELIVER ALL-NEW FORD BATTERY ELECTRIC VEHICLE
[ONLINE] Available from:
https://media.ford.com/content/fordmedia/fna/us/en/news/2019/04/24/rivian-500-million-
investment-ford.html [Accessed 18/02/2020].
marklines.com. (2019) UK - Flash report, Sales volume, 2019 [ONLINE] Available from:
https://www.marklines.com/en/statistics/flash_sales/salesfig_uk_2019 [Accessed
18/02/2020].
Mason, C. and Simmons, J. (2014) Embedding corporate social responsibility in corporate
governance: A stakeholder systems approach. Journal of Business Ethics, 119(1), pp.77-86.
media.toyota.co.uk. (2015) TOYOTA FUND-RAISING FOR THE NSPCC BREAKS
THROUGH £1 MILLION TARGET [ONLINE] Available from:
https://media.toyota.co.uk/2015/04/toyota-fund-raising-for-the-nspcc-breaks-through-1-
million-target/ [Accessed 18/02/2020].
nissan-global.com. (2017) SUSTAINABILITY REPORT 2017 [ONLINE] Available from:
https://www.nissan-global.com/EN/DOCUMENT/PDF/SR/2017/SR17_E_All.pdf [Accessed
18/02/2020].
prnewswire.com. (2017) Global mobility on demand market is to cross $228 billion by 2022
[ONLINE] Available from: https://www.prnewswire.com/news-releases/global-mobility-on-
demand-market-is-to-cross-228-billion-by-2022-300539221.html [Accessed 18/02/2020].

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smmt.co.uk. (2019) UK Automotive [ONLINE] Available from:
https://www.smmt.co.uk/industry-topics/uk-automotive/ [Accessed 18/02/2020].
statista.com. (2019) Toyota car market share in the United Kingdom (UK) from January
2014 to July 2019 [ONLINE] Available from:
https://www.statista.com/statistics/300465/toyota-car-market-share-in-the-united-kingdom/
[Accessed 18/02/2020].
toyotauk.com. (2019) Supplier Relations [ONLINE] Available from:
https://www.toyotauk.com/toyota-in-the-uk/supplier-relations.html [Accessed 18/02/2020].
Utami, R.M. and Lantu, D.C. (2014) Development competitiveness model for small-medium
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Sciences, 115(21), pp.305-323.