UNIVERSITY OF BRADFORD

in collaboration with
MANAGEMENT DEVELOPMENT INSTITUTE
OF SINGAPORE
Bachelor Of Science (Hons)
In International Business And Management
Applied Strategic Management
TOYOTA MOTOR COMPANY
(Japan)
Done by:
Olesya Glukhova
2009

Assessment of the Strategic Management Models

Strategic Management helps to identify long-term targets by scanning operating

environments, evaluating organizational structures and resources, and matching these
resources to the challenges a firm faces.

Scanning of the environment been performed with the help of the Strategic
Management Models, such as PESTEL, Industry Life Cycle and Porters Five Forces.

PESTEL analysis based on the historical data, and can be used for forecasting. PESTEL
analysis assesses political, economical, socio-cultural, technological, ecological and
legal aspects of the environment. One or more factors will be dominant and impose
more pressure on a firm, thus must be assessed in depth.

Industry Life Cycle helps analyze the general industry condition. At different stages in
the ILC, different opportunities and key success factors are suggested. ILC shows the
general direction of the industry in which a firm is competing and providing guidance
on for strategy planning.

Porters Five Forces have been used to evaluate entry barriers, suppliers, customers,
substitute products and industry rivalry. These five competitive forces influence
profitability and stability of a firm. The better a firm can balance them; the stronger will
be the position of a firm within an industry.

All models in Macro-environmental analysis help to identify threats and opportunities

that company is currently facing or may encounter in future. When identified, a firm
must focus on reducing the threats and exploring the opportunities.

Assessment of internal Toyotas resources had been performed based on Barney and
Hall frameworks. All resources of a firm providing some capabilities and if these
capabilities can be better than competitors they may bring core competencies and

competitive advantage. Toyotas resources were critically examined and the conclusion
been drawn that Toyota has strong competitive advantage in an automobile industry.

Macro and Micro environmental analysis made it possible to identify a Toyotas

position in the market. SWOT Analysis Matrix and The Grand Strategy Matrix were
used to recommend possible future strategy for Toyota. The models provide options for
possible future strategies based environmental factors and internal firms strength. Both
of the matrixes provided several options; other Strategic Management tools were used
for selection of the best strategic option. Selection has been done based on feasibility,
sustainability and attractiveness of the proposed strategies.
The selected option further been analyzed using McKinseys 7S framework to identify
gaps and corrective actions to be taken for new strategy implementation

Lastly, for successful implementation of the proposed strategy, the Balanced Scorecard
had been used to translate the new strategy to all Toyotas stakeholders and the detailed
plan been developed with list of activities with allocation of timeframe for each.

Strategic Management Models been used as a base for the project. This makes it
possible to understand Toyotas present situation and propose future strategy for
growth.

The Purpose of this Project is to analyze Toyotas competitiveness within the

automobile industry and propose a strategy that will consolidate its position as the
market leader & ensure sustained future growth.

Findings of the project

1. The External environment in 2009, present two major Threats for Toyota. One
is the Economic crisis 2008/2009 which resulted in sales slump and
overcapacity. Another threat is the increased competition within the automobile
industry. Details can be found in chapter four.
2. Internal analysis of Toyota shows that the company has a strong competitive
position and has resources to fight the battle. Details can be found in chapter
five.

A summary of the key Findings are presented in SWOT the analysis matrix, Figure 1
and details and comments can be found in chapter six.

Figure 1: SWOT Analysis

Opportunity
Threats
New product development
Economic cycle downturn
Market penetration
Increased pressure from competitors
New markets exploration
Strengths
Weaknesses
Market dominance
Products not highly differentiated
Economies of scale
High fixed costs
Core strengths
Management skills
Innovation processes
Product quality
Source: Adapted from Pearce et. al. (2007), created by Olesya Glukhova (2009)

Recommendation

Bases on the findings, this project recommends a Joint Venture with an established
Chinese auto manufacturer. This will ensure sustained future growth and an increase of
i

market share. India and China are the fast growth markets with excellent potential.
Toyota already has established manufacturing chain in India and is developing it
further. China is the next market that Toyotas rivals are targeting now. To penetrate
into China and obtain significant market share, Toyota needs to tie-up with a partner
that already has a substantial customer database and infrastructure in all the main
provinces. Detailed plans on implementing the proposed strategy are drawn in chapter
seven. The proposed total time for selection and evaluation of the strategic partner is
approximately three month. The proposed total time for implementation process,
including resource allocation, budgeting and training is six month. The proposed total
timeframe targeted for the complete process of integration is eighteen month.

ii

Chapter 1: Introduction

1.1 Name of the Company and Corporate Profile

Toyota Motor Corporation founded in 1937 in Japan.
Toyota operates primarily in automotive business including design, manufacturing and
retail. It has assembly plants and distributors in many foreign countries, and it owns
subsidiaries that produce cars and car parts, trucks, steel, synthetic resins, and industrial
equipment. Its group includes Toyota, Lexus, Daihatsu and Hino brands. Over the years
Toyota has expanded its business profile to other fields of business such as housing,
financing, communications, marine, biotechnology, and others. Full Toyota corporation
profile can be seen in Figure 1.1

Figure 1.1: Toyota Motor Corporation Profile

Source: From Toyota Motor Corp. website (2009)

1.2 Nature of Industry and Products

1.2.1

Nature of Industry

Automobile industry is complex and challenging, especially today, as it faces many

issues: plunging sales, frozen credit markets, global competition, increased gasoline
price and most recent demand to move towards green.
Toyota is the worlds leader in an automobile industry. Almost half of its sales Toyota
gained from Asia region, Japan domestic market contribute 36.4% to total sales in fiscal
2009 year (Toyota Annual Report 2009).
For the first time in 70 years of operation, Toyota incurred losses of USD $4,500
million and negative growth of -20.4% in fiscal 2009 (Toyota Annual Report 2009).
Toyota is coping with these challenges, through innovation and adapting fast to the
changing scenario and has raised its market share in Japanese market to 50% in Oct
2009 (Business Week, 01 Nov).

1.2.2 Products
Toyota Motor Corporation (Japan) is manufacturing sedan cars, SUV, MPV, trucks and
hybrid models. Toyotas wide product range can be found in Figure 1.2.

Figure 1.2: Toyota Products

Allion

Alphard

Auris

Avanza

Aygo

bB

Belta/Vios

Caldina

Camry/Camry
Hybrid

Century

Coaster

Corolla

Corolla Axio

Corolla Fielder

Corolla Rumion /
Scion xB

Corolla Spacio

Corolla Verso

Crown Athlete

Crown Hybrid

Crown Majesta

Crown Royal

Dyna

Estima / Previa

FJ Cruiser

Harrier / Harrier
Hybrid

Hiace

Highlander /
Highlander Hybrid

Hilux Surf / 4
Runner

Ipsum

Isis

Source: Modified from Toyota Motor Corp website by Olesya Glukhova (2009)

Figure 1.2: Toyota Products (continued)

ist / Scion xD

Kluger / Kluger
Hybrid

Land Cruiser 70

Land Cruiser 200

Land Cruiser
Cygnus

Land Cruiser Prado

Liteace

Mark X / Reiz

Mark X Zio

Mark II Blit

MR-S

Noah

Passo

Premio

Prius

Probox

Progrs

Ractis

Raum

RAV 4

Regius Ace

Rush

Townace

Toyoace

Scion tC Sienta

Vitz / Yaris

Succeed

Voxy

WISH

Source: Modified from Toyota Motor Corp website by Olesya Glukhova (2009)

1.3 Processes and Technologies Involved

1.3.1 Processes
Toyota processes include: Technology development, Product design, Manufacturing,
Marketing, Distribution, and Service.

1.3.2 Technologies
Toyota is constantly developing new processes and technologies in car manufacturing
and servicing. Toyota Corporation technological set can be found in Table 1.1.

Table 1.1: Toyotas Technological Set

Environmental Technology
focuses on development and production of eco-friendly cars such as hybrid and electric
models as well as reduction and recycles waste during manufacturing process.
Safety Technology
is one of the competitive factors and Toyotas ambition is to develop world leading
safety technologies in automobile industry.
ITS Technology
strives to combine automobiles with social infrastructures in a ubiquitous-network
society
Personal Mobility Technology
is a development of new, future technologies, some of the products been displayed in
the exhibitions, based on the theme The Dream, Joy and Inspiration of Mobility in the
21st Century
Robot Technology
is highly used in automobile manufacturing.
Source: Adapted from Toyota Motor Corp. website, created by Olesya Glukhova (2009)

1.4 Competitors, Suppliers and Customers:

1.4.1

Competitors

Toyota is a market leader. Currently Toyota has the dominating market share with 50%,
followed by Honda and Nissan. They are the Japanese Big Three Automakers. Figure
1.3 briefly describes Toyotas competitors in the local Japanese market.

Figure 1.3: Competition Overview

Company name

Key corporate factors

Honda Motor Company

Japans number two automaker and the worlds

biggest motorcycle producer. Large portion of
sales comes from automobiles that sold outside of
Japan. Honda has two manufacturing plants in
Japan producing SUVs, trucks, Crossovers, Vans
and energy efficient hybrids.

Nissan Motor Company

Following Toyota and Honda, Nissan is on the

third place in automobile industry in Japan.
Nissan has sixteen production plants in Japan and
manufacturing vide range of cars, trucks, SUVs,
crossovers and hybrids

Source: Adapted from Honda and Nissan corporate websites, created by Olesya
Glukhova (2009)

1.4.2

Suppliers

Toyota has its own network of suppliers for various automobile parts. Toyota is
concentrating only on the development of the main components such as the engine and
new technologies in design and manufacturing. Some of the Toyotas suppliers and
their general information are represented in Figure 1.4.

Figure 1.4: Suppliers Overview

Company name

Parts supplied and general information

Yokohama

Tyres
One of the leading Japanese manufacturers of
tires for high performance, SUV, Light truck,
OTR and passenger cars. Operating worldwide.

Koito Manufacturing

Headlamps

Company

The Koito Group specializes in manufacturing

lighting equipment and electrical goods and has
10 production facilities in 9 countries.

Denso Corporation

Auto parts
Denso, a leading supplier of advanced automotive
technology, systems and components for all the
world's major automakers, operates in 32
countries

Aisin Seiki Company

Transmission
Aisin Group offers a wide range of products
covering almost every automobile-related field,
including drive train, body, brake & chassis,
engine and information related products

Source: Adapted from respective companies websites, created by Olesya Glukhova

(2009)

1.4.3 Customers
Toyotas customers are medium income group of people that values quality and
reliability. Toyota manufactures cars for family usage MPVs, office and individual
usage sedans and those who like off roads trips usage SUV, 4 wheel drives.
High income group addressed by Lexus product line and is not covered in this project.

1.5 Project Objective

Project objective is to propose a strategy to sustain Toyotas Competitive Advantages
and Market Leadership in automobile business in Japan.

1.6 Scope of the Project

This project will be covering only Toyota Motor Corporation Japan and Toyotas
automobile brand line only.

1.7 Project Title

The project title is Sustaining Toyotas competitive advantages in Japans automobile
industry

Chapter 2 Methodology

2.1 The Approach

This project follows Lynchs (2006), the prescriptive approach in developing a business
strategy. Three phases are developed and sequentially connected. Project starts with
Strategic Analyses, which include Macro and Micro environmental analysis and
assessment of corporate vision and objectives. Next is Strategic Development, which
includes development of the strategic options, rational selection from these options and
selection of a strategy, and identification which resourced will be needed for
implementation. And the final phase is Strategy Implementation includes translation of
chosen strategy to all Toyotas stakeholders and detailed action plan.

2.2 Data Sources

This project is based on secondary data sources. Table 2.1 summarizes the sources and
their contribution to this project.

Table 2.1: Data Sources for the Project

Data source

Information obtained

a) TV news

Latest updates on Toyota and the

automobile industry

b) Business magazines

Articles on related topics

c) Business newspapers

Articles on related topics

d) SM text books

Models and theory for project bases

e) Internet corporate websites

Information from the respective company

viewpoints

f) Internet news, financial analyses,

Information from independent sources,

general information

their analyses and comments

Source: Created by Olesya Glukhova (2009)

Chapter 3: Literature Review

3.1 Basis for Literature Review

This project is based on secondary data sources and it is not approved by the company;
thus, primary sources are unavailable.
The project is done with the purpose of better understanding Strategic Management
concepts and to be able to apply it in a real workplace.
Various sources were reviewed for understanding Toyota Motor Co., and the
automobile industry which it is competing in. The structure for this project is based on
Strategic Management text books: Lynch (2006), Hoskisson et al., (2007), Pearce et al,
(2003 and 2007) and others.

3.2 Introduction and General Information on Automobile Industry

Internet, TV news, business magazines and newspapers were used to obtain general
information for introduction part of the project.

3.3 Macro-Environment
Based on the framework of Strategic Management, Macro environmental analyses were
performed with the help of following models:

a) PESTEL analysis framework concept shown in Table 3.1.

Table 3.1: PESTEL Analysis

Factor
Political
Economic

Could include:
e.g. government support and involvement in businesses
e.g. interest rates, exchange rates, national income, inflation,
unemployment
Social
e.g. ageing population, attitudes to work, income distribution
Technological
e.g. innovation, new product development, rate of technological
obsolescence
Environmental
e.g. global warming, environmental issues
Legal
e.g. competition law, health and safety, employment law
Source: Adapted from Lynch (2006)

10

b) Industry life cycle concept in Figure 3.1

Figure 3.1: Industry Life Cycle

Growth

Introduction
Demand

Technology

Products

Manufacturin
g&
Distribution

Trade
Competition

Key Success
Factors

high-income
buyers

increasing market
penetration

few companies

entry, mergers &

exits
design for
manufacture;
access to
distribution;
building the
brand;
process
innovation

Maturity

Decline

mass market,
knowledgeable
replacement,
customers
repeat buying
competing
standardization;
well-diffused technological knowtechnologies
rapid process
how;
innovation
quest for technological improvements
commodities the
poor quality;
design & quality
standardization
norm
wide variety;
improves;
lessens
frequent design dominant design
differentiation;
changes
emerges
efforts to avoid
commoditization
by branding
heavy
capacity
emergence of
short
overcapacity;
shortages;
overcapacity;
production
re-emergence of
mass production; deskilling of
runs;
specialty
competition for
production.
high-skilled
channels
distribution
long production
labor;
runs;
specialized
distributors carry
distribution
fewer lines
channels
manufacturing shifts from advanced countries to poorer countries

product
innovation;
establish
credible image
of firm and
product
category

shakeout;
price competition
cost-efficiency
through capital
intensity, scale
efficiency, and
low input costs;
high quality;
fast product
development

price wars;
exits
reduce
overheads, buyer
selection;
signal
commitment;
rationalize
capacity

Source: Adapted from Lynch (2006)

11

c) Industry attractiveness concept in Figure 3.2

Figure 3.2: Industry Attractiveness Model

Source: Adapted from Pearce et. al. (2003)

12

d) Porters Five Forces Model concept in Figure 3.3

Figure 3.3: Porters Five Forces Model

Source: Porter (1991)

Strategic management models were used to carry out Macro environmental analysis to
identify Threats and Opportunities for Toyota.

13

3.4 Micro-Environment
Strategic Management concept used to analyse a firms resources (tangible and
intangible, please see in Table 3.1) that provide capabilities and can lead to core
competencies. VIRO framework in Table 3.2 helps to identify which core competencies
are sustainable and can lead to competitiveness.

Table 3.1: Internal Resources of a Firm

Tangible Resources:
Financial
Organizational
Physical
Technological

Description
The firms borrowing capacity
The firs ability to generate internal funds
The firms formal reporting structure and its formal planning,
controlling, and coordinating systems
Sophistication and location of a firms plant and equipment
Access to raw materials
Stock of technology, such as patents, trademarks, copyrights,
and trade secrets

Intangible Resources:
Human
Knowledge, trust, managerial capabilities and organizational
routines
Innovation
Ideas, scientific capabilities, and capacity to innovate
Reputation
Reputation with customers, brand name
perception of product quality, durability, and reliability
reputation with suppliers
Source: Adapted from Barney (2002) and Hall (1992), created by Olesya Glukhova
(2009)

Table 3.2: VIRO Framework

Quality of the
competitive
advantage
Valuable

Description

Resources that enable a firm to conceive or implement strategies

that improve efficiency or effectiveness
Rare
Resources that can not be possessed by large number of
competing firms
Imperfectly imitable Resources that have a combination of three reasons: unique
historical conditions, causally ambiguous, and social complex
Organisationally
Resources that are strategically supported by a firm and make
supported
them either rare or imitable and non-substitutable
Source: Adapted from Barney (2002)

14

3.5 Strategic Evaluation and Strategy Formulation

SWOT analysis matrix (Figure 3.5) and The Grand Strategy matrix (Figure 3.6) were
used to understand Toyotas position in automobile industry and develop strategic
options. Further, these options were subjected to selection process. Lastly McKinseys
7S framework, Figure 3.7, been used to identify what actions need to be taken and what
resources Toyota will be needed for implementation of recommended strategy

Figure 3.5: SWOT Analysis

Source: Pearce II et.al. (2007)

15

Figure 3.6: The Grand Strategy Matrix

Quadrant II
1) Market Development
2) Market Penetration
3) Product development
4) Horizontal Integration
5) Divesture
6) Liquidation

Quadrant I
1) Market Development
2) Market Penetration
3) Product development
4) Forward Integration
5) Backward Integration
6) Horizontal Integration
7) Concentric Diversification
Quadrant IV:
1) Concentric Diversification
2) Horizontal Diversification
3) Conglomerate Diversification
4) Joint Venture

Quadrant III
1) Retrenchment
2) Concentric Diversification
3) Horizontal Diversification
4) Conglomerate Diversification
5) Divesture
6) Liquidation
Slow Market Growth

Strong Competitive Position

Weak Competitive Position

Rapid Market Growth

Source: Christensen et al., (1984)

Figure 3.7: McKinseys 7S Framework

Source: Lynch (2006)

16

3.6 Strategic Implementation

According to Lynch (2006), successful implementation requires identification of
general strategic objectives, formulation of specific plans, resource allocation and
budgeting and monitoring and control procedures. The Strategic Implementation
process can be found in Figure 3.8. Kaplan and Norton (1996) also suggest that strategy
should be understood by all companys stakeholders. Balanced scorecard concept in
Figure 3.9 been used to translate recommended strategy to Toyotas stakeholders.

Figure 3.8: The Basic Implementation Process

Source: Lynch (2006)

17

Figure 3.9: Balanced Scorecard

Source: Kaplan and Norton (1996)

18

Chapter 4: Macro-Environmental Analysis (Japanese Market Only)

4.1: Environmental Basics

To begin with the Macro-Environmental analysis, basic factors such as market size,
market growth and market share have to be assessed first.
a) Market size Large. Total domestic annual sales in Japan for 2008 USD
$96.255 mil. Toyotas 34% market share in 2008 brought USD $32.727mil
(Toyotas Annual Report 2009).
b) Market growth Shrunk by 30% in 2009, Toyota production down 28%
(Bloomberg press 13 May 2009).
c) Market share Toyota expanding its market share in Japan and by October 2009
acquired 50% of domestic market (Business Week, 01 Nov).

4.2: Dynamics of the Environment

Analysis of the degree of turbulence in the environment in 2009 is made based on
Ansoff matrix of assessing the dynamics of the environment according to Lynch (2006).
a) Changeability Automobile industry depends on the global Economic scenario
which is highly dynamic. However, events which affect automakers are
reasonably familiar similar cycle is repeated every few years.
b) Predictability Rapid changes in international economy need a rapid response.
The future trend in the domestic (Japanese) market can be predicted based on
general global trends and needs of the global consumers.
Both factors - changeability and predictability of the environment in automotive
industry keep turbulence at moderate or medium level.

4.3: General Environment

The best tool to assess the general environment is a PESTEL framework. Although a
PESTEL analysis relies on historical events, it can be well used in forecasting the
future. Table 4.1 combined general environmental analysis and its implication for
Toyota and other automakers.

19

Table 4.1: PESTEL Analyses (Japan)

Legal

Environmental

Technological

Sociocultural

Political

Economical

Factor

Current environment

Threats/Opportunities for Toyota

Japans economy heavily depends on

export. Economy crisis (2008-2009) set
Japan into recession. Its national debts
equal to 170.4% of GPD or $ 7.47
trillion
Export in 2009 decline by more than
40%, cars export to US down by 71%
Japans GDP growth negative 7.2%
Unemployment rate hit highest in past
three years 5.7% in July 2009
Consumer expenditure down by 1.1%
Currency fluctuation Japanese Yen
kept strong in currency exchange
(Trading Economics 2009)
Japan supported automakers with
subsidies on car purchase during crisis
till November 2009
Europe and America also provide help to
automotive industry
However,
some
countries
took
protectionism policy and increase import
barriers for cars (Eg. Russia doubled
import taxes)
Changes in lifestyle made an automobile
a necessity
Dual income often results in additional
car in the family
New trends demand for eco-friendly,
fuel-efficient and electric automobiles
Technology
development
allows
innovation and improvement in car
production. Automotive industry R&D
focuses on fuel efficiency, combined
energy sources and safety of the cars.
Technology development include hybrid,
CNG, LPG, and electric cars
Environmental issues become popular
nowadays and force automakers look for
new ways in contribution to saving Gaia.
Manufacturers ought to reduce waste,
improve efficiency of their products,
reduce
energy
consumption
and
generally become greener

Main threat for automakers in 2008-2009.

Due to gloomy economic outlook demand for cars
reduced, causing overproduction, excess capacity
and idle resources.
Consumers postpone purchase of new cars and
looking for cheaper options.
Strong yen made Japanese cars less competitive in
the global market affecting export of Toyotas cars.

All cars must be tested on safety aspects

before they reach consumers
Employment and safety law has to be
taken
into
consideration
in
manufacturing process
Products safety issues must be assessed
by automakers

Potential threat
Political support locally helped to reduce threat of
economic crisis (2008-2009)
Potential threat may come from protectionism
policies of Toyotas primary export markets

Opportunity for automakers to develop new

products and enjoy first-mover advantages and
super normal profits from such products
Toyota successfully introduced fuel-efficient
models
Opportunity for automakers.
New technologies help to develop more
sophisticated products, increase efficiency and
reduce waste in automobile production

Opportunities for automakers.

Assessing environmental issues early can bring
company to the superior performance and profits
(Eg. Toyota Prius is the best selling and most
popular hybrid car model in Japan and Europe)
Toyota works on renewable energy sources,
recycling waste and combined technology to
produce eco-friendly cars
Opportunity for big established automakers
Testing equipment is costly and imposes barriers
for small companies that wish to enter auto-market

Source: Adapted from Lynch (2006), created by Olesya Glukhova (2009)

20

4.4 Industry Life Cycle

An industry life cycle analysis helps to identify the stage of the evolution process in the
given industry. According to Porters framework, automotive industry can be classified
as a mature industry; details in Table 4.2.

Table 4.2: Industry Life Cycle Analysis

a) Cars are generally becoming a necessity and their appeal is to a mass market with
repetitive buying behavior.
b) Customers are knowledgeable and price sensitive and looking for better value and
switching brands.
c) Car manufacturers invest heavily in R&D to sustain competitive advantage in the
industry. Technological advances allow improvements in products and processes
involved in car manufacturing.
d) Toyota is a market leader in the automobile industry and it is working on cost
reduction to sustain its position.
e) Profits are under pressure. Comparison analysis on the global scale, shows that
managing costs in areas of purchasing of raw material, production and delivery of
finished goods is essential. Accordingly to Larry Kudlow, in 2007 GM sold 9,370,000
vehicles and incurred loss $38,730 mil while Toyota sold 9,366,418 vehicles and made
profit of $ 17,146 mil. The economic crisis 2008/2009 hit automakers badly reminding
carmakers that cost control is the major issue. 2009 second quarter Toyota incurred a
loss of $ 861 mil. while Hyundai posted profit of $ 697 mil.(Business week, 23 Oct,
2009)
f) Competitors emphasize on quality and safety of cars. There is little product
differentiation and therefore car makers attempt to innovate in such areas as safer
design, comfort, and fuel efficiency to attract customers.
g) Another aspect that valued by customers is after-sale support servicing and spare
parts availability. In the Asian region, Toyota spare parts availability and price
affordability is still the best. This makes Toyota cars maintenance easier and cheaper.
This builds customers confidence and loyalty.
Source: Adapted from Lynch (2006), created by Olesya Glukhova (2009)

21

Although the automobile industry is in maturity stage, technological change is bringing

elements of growth and is revitalizing an old industry. Companies that constantly work
on innovation ultimately influence the growth curve of the automotive industry.

4.5 Industry Attractiveness

Automobile industry is currently at the medium attractiveness based on PESTEL
analysis and Toyota, being the market leader, has high business strength, taking this
equation to plot in the Table 4.3. Toyota is been advised Invest and Growth, but also
careful watch out for its competitors.

Companys Competitive Position

Table 4.3: The Industry Attractiveness-Business Strength Matrix

High

Invest and
growth

Medium

Invest and
growth
Selective
investment/
monitor
position
High

Low

TOYOTA
Invest and growth
suggests:
1) Build selectively on
strengths
2) Define implications of
leadership strategy
3) Avoid vulnerability
fill weaknesses
Selective investment/
monitor position
Harvest or Divest

Medium

Selective
investment/
monitor
position

Harvest or
Divest
Harvest or
Divest

Low

Market Attractiveness
Source: Adapted from Pearce II, et al. (2003), created by Olesya Glukhova (2009)

4.6 Key Success Factors

As the automobile industry has been identified in its maturity stage, following key
success factors should be considered in allocation of recourses by auto makers:
a) Safety of the cars
b) Reliability of cars

22

c) Maintainability spares availability and easy replacement

d) Environmentally friendly green move
e) Cost efficiency and high utilization of fixed assets
f) Scale of production
g) Low input cost
h) Low labor cost
Car manufacturers need to assess these essential factors to achieve success in the market
and deliver value to their customers. Key success factors require optimum allocation of
resources and innovation. Toyota is constantly working on new developments by
improving safety and technology.

4.7 Competition within Industry

Porter (1991) had identified five forces of competition within an industry. Modern
approach added one more competitive force from compliments, making it six forces of
competition. Investigation of forces and its implications are summarised in Table 4.4

23

Table 4.4: Six Forces of Competition within Industry in Japan

The threat of
supplementary
products

The extent of
competitive
rivalry

The threat of
substitutes

The threat of potential

new entrants

The bargaining
power of buyers

The bargaining
power of
suppliers

Factor

Current environment

Level of threat for Toyota

Many suppliers
Substitutes are available; firms are offering
similar products at lower prices
Suppliers provide only some parts, and not
main components of automobiles
Processes
of
automakers
protected
internally
Wide variety of cars with little
differentiation in products and prices
Selling price is an important factor in
purchase decision
Switching cost for customers is low.
Toyota owns the distribution network and
there is no threat of backward integration.
Cars production required high capital
investments due to: minimum economy of
scale in production, building distribution
channels and infrastructure of support
services, high R&D and advertising
expenses
Automobile industry associated with certain
risk and therefore customers choosing
established automakers that they trust,
making it unlikely to switch to a newly
established company
Public transport, motor vehicles, and other
mode of transport may become substitute
for cars
However, car obsolescence is not seen in
near future

Bargaining power of suppliers is low

Being the biggest auto manufacturer in Japan,
Toyota exercises its buying power over
suppliers. Production of Toyota in fact affected
its suppliers operations; when Toyota reduced
production, its suppliers also had to reduce their
output (The Japan Time, 07 Mar, 2009)
Bargaining power of buyers is high due to
similarity of the products and prices
Toyota developed its own distribution network
to reduce bargaining power of buyers through
direct distribution and competitive pricing.
Toyota reputation and quality are helping it to
keep its customer loyal to its brand
The threat of potential new entrants is low
Auto production has high barriers of entry and
exit. Set up a car production line requires a high
capital investment and minimum economy of
scale. Exit barriers are also high, as the car
production assembly can not be easily diverted
for manufacturing other products. Furthermore,
new entrant will need to set-up the
infrastructure of distribution and support
services channels as well as prove its product
reliability
The threat of substitutes is low
High fuel cost may push more people to public
transport; however, it will not create a real
substitute for cars. Car is a necessity that
owners value for its convenience, flexibility and
even status
Fierce competition
Automakers competing on innovation and
prices
Require development of sustainable competitive
advantage to stay in the industry

Many competitors, some are similar size as

Toyota, fighting for bigger market share
Market is saturated with slow growth
Fixed costs are high
Differentiation is small; competitors
providing comparable value balancing cost
and quality
Exit from industry is very costly
Supplementary products are insignificant to
the car manufacturing business
Companies that producing GPS, DVD
players, and other accessories wont be able
to start car production due to high entrance
cost and expertise required in car
manufacturing

Not a threat for automakers

Source: Adapted from Porter (1991), created by Olesya Glukhova (2009)

24

4.8 Competition Analyses

In order to understand Toyotas position in the automobile industry, it is necessary to
analyse major or immediate competitors and their profiles in depth. Japans the Big
Three Automakers include Toyota, Honda and Nissan. Tables 4.5 and 4.6 provide
details on Toyotas two competitors.

25

Table 4.5: Competitor Analysis Honda

Present
strategies

Links with
other
organizations

Products and services

Past record
of
performance

Resources

Objectives

General
information

Merits

Honda Motor Analyses

Honda has been founded in 1946, based in Tokyo, Japan. Currently it is a second
largest automaker in Japan right after Toyota. Honda develops, produces, and
manufactures various motor products, ranging from small general-purpose engines
and scooters to specialty sports cars. The company major segments: Motorcycle,
Automobile, Financial Services, and Power Product and Other.
Honda Motor Co., Ltd. operates under the basic principles of "Respect for the
Individual" and "The Three Joys" commonly expressed as The Joy of Buying,
The Joy of Selling and The Joy of Creating. "Respect for the Individual" reflects
our desire to respect the unique character and ability of each individual person,
trusting each other as equal partners in order to do our best in every situation.
Based on this, "The Three Joys" expresses our belief and desire that each person
working in, or coming into contact with our company, directly or through or
products, should share a sense of joy through that experience.
Total assets: USD $124.98 billion
Employs : 181,876 people worldwide
Revenue in 2008: USD $133,364 million which came to Net profit of USD $6,667
million
Growth YOY in 2008 was 1%
The first production automobile from Honda was the T360 mini pick-up truck
Honda was the first Japanese automobile manufacturer to release a dedicated
luxury brand, Acura in 1986
During economic crisis increased sales by 1% while Toyota insured losses
Products: motorcycles, automobiles, power products
The Automobile segment include passenger cars, minivans, multi-wagons, sport
utility and mini cars.
Honda has won many awards for initial quality and customer satisfaction.
Honda automobiles are reliable and generally fuel efficient
Products quality is good, though perceived to be lower than Toyota
According to Hondas CEO, hybrid model Insight is disappointing for Honda. This
is directly opposite to Toyota Prius hybrid. Although Prius is more expansive than
Insight sales of Toyota are much higher.
Not linked to other automobile companies

Honda pursuing market development trough cost leadership strategy.

Honda plans to reduce cost and move flexibly around by shifting operations to the
countries of demand: moving production to China as a cheaper alternative while
using only 70% of capacity in Japan and reducing the number of car models sold
only in Japan
Honda also target to increase market production and market share in China by 100
car dealership a year; this year already increased by 16%.

Source: Adapted from Lynch (2006), created by Olesya Glukhova (2009)

26

Table 4.5: Competitor Analysis Nissan

Present
strategies

Links with
other
organizations

Products
and
services

Past record of
performance

Resources

Objectives

General
information

Merits

Nissan Motor Analyses

Nissan has been found in 1931 under the name of Datsun. The Nissan name was
first used in 1930 and Nissan Motor as a company emerged in 1934. Nissan is the
third largest automaker in Japan, right after Toyota and Honda. Nissan models
include sedans, pickups, sports cars, and SUVs. Almost 45% of its stakes owned
by Renault
Nissan vision: Enriching peoples life"
The mission is to enrich people's lives, building trust with our employees,
customers, dealers, partners, shareholders and the world at large. Restructuring the
company to reduce cost.
Going towards green by putting electric car development at the high priority
Total assets: USD $124.98 billion
Employs : 186,336 people worldwide
Revenue in 2008: USD $93,070 million which came to Net profit of USD $2,580
million
Growth YOY in 2008 was (4.7%)
From 1993-2002 Nissan partnered with Ford to market a consumer-friendly
minivan: The Mercury Villager and the Nissan Quest.
In 1966, Nissan merged with the Prince Motor Company, bringing into its range
more upmarket cars, including the Skyline and Gloria
From 1950s Nissan expanded into worldwide markets.
In 1999, Nissan was facing severe financial difficulties, and entered in an alliance
with Renault S.A. of France. Now Renault controls more than 45% of Nissan.
Products: Automobiles, engines, electronics, communications, etc.
Nissan, with its GT-R model, has won one of Japans most coveted award - Most
Advanced Technology Award at the Car of the Year Japan Awards 2008 - 2009.
Alliance with Renault since 1999
Car production in China in cooperation with Gongfeng Motor Croup Co

Nissan pursues market development and penetration through its environmentally

friendly cars. Nissan going aggressively towards electric cars and plans to setup an
electric-car manufacturing plant in Guangzhou, China
Nissan targets 20% growth in China in 2010.

Source: Adapted from Lynch (2006), created by Olesya Glukhova (2009)

27

4.9 Customer Analyses

Toyota customers are all those who people who travel by car. However, potential
customers also include people who travel by public transport, taxis and motor vehicle.
Toyota Motor Company covers different market segments. High income people are
targeted by Lexus brand, industrial segment that require heavy machinery and
commercial vehicle by Hino brand, cheap mini vans by Daihatsu. The widest group of
middle income people is targeted by Toyota brand. Toyota brand covers large market
segments and therefore it has the most product variety in its portfolio to appeal to a
variety of consumers.

28

4.10 Summary of Opportunity and Threats from Macro-Environment

Summary on the Macro-environment is presented in Table 4.7 with comment on
whether it presents opportunity or threat for Toyota.

Table 4.7: Summary of Findings from Macro Environmental Analyses

Factor

Opportunity or Threat for Toyota

Potential large market size and hence a strategic opportunity. Slow but stable growth

basics

in the resent years, except for the last years economic crisis, keeps the automobile
industry relatively attractive. Toyota is dominating Japanese automotive market with
50% market share and working towards increasing it.
Opportunity
The automobile industry is relatively stable and predictable. Reliable future forecasts
Dynamics

Environmental

Environmental

Opportunity

can be made and a strategy can be developed with a small degree of flexibility.

Threats and some Opportunities

Analysis

PESTEL

Significant threats are coming from current economic downturn and its
consequences.
Opportunities may come from new technological advances which can improve
automobile products and manufacturing processes.

Industry Life Cycle

Opportunity, if not taken may become threat if competitors will utilize it first
The automobile industry is in a mature stage but still requires ongoing investment
to keep restoring growth. Opportunities are:
-

process innovation

product refinement and

service enhancement

Attractiveness

Industry

Opportunity
According to Industry Attractiveness matrix, investment and growth is advised
through: building selectively on strengths, define implications of leadership
strategy, avoid vulnerability fill weaknesses.

Source: Created by Olesya Glukhova (2009)

29

Table 4.7: Summary of Findings from Macro-Environmental Analyses (continued)

Factor

Opportunity or Threat for Toyota?

Factors

Toyota needs to upgrade its key success factors regularly to sustain its
competitiveness.

Threat
Forces

Competition within automobile industry is very intense and thus requires sustainable
competitive advantage
Other threats from competitive forces Toyota manages to balance well
Threat
Analysis

Competitors

Porters Five

Key Success

Opportunity, that can become threats if not addressed

Toyotas major competitors are very close behind and trying to overtake each other.
Toyota needs to closely monitor its competitors and continuously make new
developments to sustain competitiveness.

Source: Created by Olesya Glukhova (2009)

30

4.11 Key Macro-Environmental Findings that have Impact on Project Objectives

External Environmental analyses uncover two major threats that Toyota must address.
Summary of key findings and its implications are in Table 4.8.

Table 4.8: Key Findings that have implications on this project

Source

Key Findings

Implications for Toyota

Table

Economic crisis reduce disposable

Affordability of Toyota cars affected,

4.7

income

customers looking for cheaper

alternatives

Table

Competition is very strong

4.7

Toyota needs to continue investment in

product innovation and service
upgrading to sustain its
competitiveness

Source: Created by Olesya Glukhova (2009)

31

Chapter 5: Internal Analysis

5.1 Internal Resources and Capabilities
5.1.1 Vision, Mission and Guiding Principles
Vision, Mission and Guiding Principles shows what Toyota is trying to achieve and
what its employees believe in. Table 5.1 provides this information.

Table 5.1: Toyotas Vision & Mission and Guiding Principles

Vision and Mission
Vision: The Right Way Forward
Mission: Make better cars and contribute to the society

Strong commitment to put customer first, practicing genchi genbutsu, and providing
high-quality vehicles at an affordable price.

Toyotas goal shared by each and every Toyota employee who works, humbly and
seriously, believing in brighter automotive future.

Valuing the satisfaction and happiness of each and every stakeholder.

Guiding Principles
1) Honor the language and spirit of the law of every nation and undertake open and fair
corporate activities to be a good corporate citizen of the world.
2) Respect the culture and customs of every nation and contribute to economic and
social development through corporate activities.
3)

Dedicate ourselves to providing clean and safe products and to enhancing the
quality of life everywhere through all our activities.

4) Create and develop advanced technologies and provide outstanding products and
services that fulfill the needs of customers worldwide.
5) Foster corporate culture that enhances individual creativity and teamwork value,
while honoring mutual trust and respect between labor and management.
6) Pursue growth in harmony with the global community through innovative
management.
7) Work with business partners in research and creation to achieve stable, long-term
growth and mutual benefits, while keeping ourselves open to new partnerships.

Source: Adapted from Toyota Annual Report 2009, created by Olesya Glukhova (2009)

32

5.1.2 Financial Performance

Based on financial analysis and stock ratings, Toyotas financial performance is strong.
Close cost monitoring bring Toyota to the top in the automobile industry. During the
economic crisis Toyota the first big carmakers announced profits and recovery in
November 2009.

5.1.3 Organizational Analysis

Toyota developed a system that nurtures employees and provides clear directions.
Employee support and a desire to constantly improve, create a strong culture which
brings competitive advantage in human resource and organizational strength.
Toyota Production System or as many call it now Thinking People System can be
found in Figure 5.1. TPS has become a model that many organizations are adopting.

33

Figure 5.1: Toyota Production System

The TPS House was developed by Taiichi Ohno and Eiji Toyoda to make it possible to
explain Toyota's evolving system to employees and suppliers. The aim of TPS is to eliminate
all muri, mura, muda (overburden, unevenness, waste) from the operations. It is a system that
uses the PDCA approach to involve everyone in solving problems and improving quality, cost,
delivery, safety, and morale.

TPS is the Operational Blueprint for a Lean Enterprise

The organizations that have implemented Lean most successfully have adopted TPS as their
operational blueprint. They have studied and understood the system, renamed it to take
ownership of it as their own system, and adopted as pure a form of TPS as possible

Make what the customer needs, when it is needed, and in the right amount

Minimize inventories

Separate machine work from human work and fully utilize both

Build quality into the process and prevent errors from happening

Source: Adapted from Toyota Motor Corp by Olesya Glukhova (2009)

34

Figure 5.1: Toyota Production System (Continue)

The Toyota Production System
Long a symbol of Japan's leadership in logistics and supply chain best practices, the Toyota
Production System (TPS) stresses the importance of continuous improvement (kaizen); and of
matching supply to demand to reduce inventory, eliminate waste, and ultimately lean the supply
chain from supplier to consumer.
As Japan embarks on a new age of global trade, aspects of TPS inevitably surface in the growth
of this industry, given increasing importance to lean supply chain management and demanddriven logistics.
An overview of the core tenets of Toyota's lean philosophy:

The Foundation
Heijunka: An approach to level production throughout the supply chain to match the planned
rate of end-product sales.
Kaizen: A Japanese term for continuing improvement involving both managers and workers. In
manufacturing, kaizen relates to finding and eliminating waste in machinery, labor, or
production methods.

The Left Pillar

Just In Time (JIT): An inventory system that controls material flow into assembly and
manufacturing plants by coordinating demand and supply to the point where desired materials
arrive just in time for use. JIT is also an inventory reduction strategy that feeds production lines
with products delivered just in time. Developed by the auto industry, it refers to shipping goods
in smaller, more frequent lots.

The Right Pillar

Jidoka: The concept of adding an element of human judgment to an automated equipment. In
doing this, the process becomes capable of discriminating against unacceptable quality, and the
automated process becomes more reliable.

Source: Adapted from Toyota Motor Corp by Olesya Glukhova (2009)

35

5.2 Summary of Strength and Weaknesses from Micro-Environmental Analyses

Summary on Toyotas Internal Analysis shown in Table 5.2.
Findings from these analyses show Toyotas strong position in automotive industry. Its
internal resources drive company to the competitive advantage within the industry.

36

Table 5.2: Internal analyses

Competitive
Advantage
Cope
competencies
Pass VRIO

YES

Good distribution

Products that are of

good
value
for
money

Human
advantage

Superior efficiency

Superior technology
and quality

YES

YES

Capabilities

Strong
financial
support

Effective
organizational
structure
Strong organizational
culture
Sophisticated
distribution networks

Analyses

Total Shares
Outstanding
1.6 bil
Earnings/Sh
are (6.12)
Volatility
(beta)

0.72
Debt/Equity
Ratio 1.26
Resilience
and capacity
for
investment

Resources

Financial

Management:
Toyota Production
System in Figure 5.1
is
explaining
in
details
Toyotas
managements style
Customer service:
Toyota
provides
customer
service
support true trained
staff
which
is
available 24 hours
Demand
driven
logistics
Lean supply chain
Organizational

capital

Products that are

of good value for
money

Strong Branding

Employee loyalty

Superior
innovation

Customer loyalty

YES

YES

YES

Innovative
technologies
Development of
sophisticated
equipment and
products
ITS

Reputation
of
reliable brand
Perception of high
quality products and
value for money

Toyota
group
companies
in
Japan supported
by
Toyota
Central Research
& Development
Laboratories,
Inc., with its
expenditure of Y
904.0 bil in 2009
is a leading
R&D in Japan

The
highest
Reputation Ranking
by
Reputation
Institutes
annual
Global Pulse 2008
Study
Third in Automobile
and Parts Sector
Ethical
Ranking
(30.09.2009)
by
Covalence
Toyota Brand Value
32,070mil by Swivel

Innovation

Reputation

Valuable, Rare, Inimitable, Organizationally supported

Sophisticated
Product and design Motivating,
equipment
and quality and reliability involving
technologies
Robotic technologies employees
in
organizational
growth
and
improvement,
employee retaining
even during crisis
Toyota
has In 2009 Q2, Toyota Toyota practicing
corp. employee
manufacturing plants Motor
in many countries all registered 227 new empowerment to
around the globe and patents and ranked nurture creativity,
in
on
the continuous
equipped with new 1st
worldwide scale by improvement, and
technologies
On
Its total Fifed Assets Dr. Jonathan Butler innovation.
one
in his Portable Fuel average
Y 10,435,805 mil
employee
Unfortunately
for Cell Survey 2009)
10
Toyota, its fixed (http://www.fuelcellt contributes
per
assets are not flexible oday.com/media/pdf/ suggestions
year and 99% of
and cant be switched surveys/2009these
are
to other usage then portable-free.pdf)
implemented.
car production
Physical

Source: Created by Olesya Glukhova (2009) from various sources

Technological

Human

5.3 Key Micro-Environmental Findings that have an Impact on the Project

Objectives
Internal analysis shows that Toyota is in a strong competitive position. Summary of key
findings and its implications are in Table 5.3.

Table 5.3 Key Findings from Macro-Environmental Analysis

Source

Key Findings

Toyotas strengths/weakness

Table

Internal Strengths in :

Strength

5.2

Branding and customer loyalty

Competitive advantage in key areas

Product quality and innovation

keeps Toyota a world leader in

Human capital

automobile industry

Sophisticated distribution and

servicing
Table

Products not perceived to be highly

Weakness

5.2

differentiated

Require constant innovation to

differentiate its products

Source: Created by Olesya Glukhova (2009)

38

Chapter 6: Strategic Evaluation and Implications on Strategy Formulation and

Development

6.1: Evaluation of Current Position and Selection of Strategic Options

In order to formulate a new strategy, the current situation has to be assessed and
analysed. This part of the project summarises major findings from Macro and Micro
environmental analyses (Table 4.8 and Table 5.3) and with the help of strategic
management applications, draws possible options to sustain Toyotas competitiveness.
SWOT analysis shows Toyotas current position; presented in Table 6.1.

Table 6.1: SWOT Analysis

Opportunity

Threats

New product development

Economic cycle downturn

Market penetration

Increased pressure from competitors

New markets exploration

Strengths

Weaknesses

Market dominance

Products not highly differentiated

Economies of scale

High fixed costs

Core strengths
Management skills
Innovation processes
Product quality
Source: Adapted from Pearce et. al. (2007), created by Olesya Glukhova (2009)

As can be seen from SWOT analyses Toyota faces serious threats from the external
environment but has good internal strengths. Using this information to plot into
Pearces SWOT Analysis Matrix, Toyota would be in the Cell 2, which supports a
diversification strategy. Please see Table 6.2.

39

Numerous environmental opportunities

Cell 1:

Supports a turnaround-oriented strategy

Supports an aggressive strategy

Cell 4:

Cell 2: TOYOTA

Supports a defensive strategy

Supports a diversification
strategy

Major environmental threats

strengths

Cell3:

Substantial internal

Critical internal weaknesses

Table 6.2: SWOT Analysis Matrix

Source: Adapted from Pearce II et al., 2007 by Olesya Glukhova (2009)

To test the appropriateness of the diversification strategy and to draw more strategic
options for Toyota the Grand Strategy Matrix (by Christensen, et al., 1984) is used. As
Toyota has a strong competitive position and the market growth is slow in the
automobile industry, Toyota is placed in Quadrant IV. Table 6.3 confirming that
diversification or a joint venture can be a good strategy for Toyota.

Weak Competitive Position

Rapid Market Growth

Quadrant II
Quadrant I
1) Market Development
1) Market Development
2) Market Penetration
2) Market Penetration
3) Product development
3) Product development
4) Horizontal Integration
4) Forward Integration
5) Divesture
5) Backward Integration
6) Liquidation
6) Horizontal Integration
7) Concentric Diversification
Quadrant III
Quadrant IV: TOYOTA
1) Retrenchment
1) Concentric Diversification
2) Concentric Diversification
2) Horizontal Diversification
3) Horizontal Diversification
3) Conglomerate
4) Conglomerate Diversification
Diversification
5) Divesture
4) Joint Venture
6) Liquidation
Slow Market Growth
Source: Adapted from Christensen et. al. (1984) by Olesya Glukhova (2009)

Strong Competitive Position

Table 6.3: The Grand Strategy Matrix

40

Quadrant IV provides four options for Toyota:

1) Concentric Diversification Toyota has already diversified its product mix and
includes: sedans, SUV, MPV, minivans, trucks and heavy machinery. Toyota
also covering other customer segment, using Lexus line for high income group.
Concentric diversification has been taken care of by Toyota.
2) Conglomerate Diversification - Toyota has diversified its business portfolio
into financing, housing, communication and other business (full diagram
presented in chapter 1) Conglomerate diversification also has been taken as an
option by Toyota previously.
3) Horizontal Diversification
4) Joint Venture
Last two options offer fast increase in market share. Toyota can consider both options
for its further growth.

6.2 Evaluation of Strategic Options

The next step in strategy development is evaluation of strategic options. The two
suggested option horizontal diversification and a joint venture need to be tested on
their suitability, feasibility, acceptability, consistency, business risk and attractiveness
to stakeholders. Table 6.4 analyses and provides conclusion that Joint Venture is a
better strategic option for Toyota.

41

Table 6.4 Evaluation of strategic options

Strategic
option

Criteria for evaluation

Suitability

Feasibility

Acceptability

Consistency

Business Risk

Attractiveness to
Stakeholders

Diversification No

Yes

No

No

No

No

Require allocation of

Toyota has resources

Diversification may

To sustain

High risk, new

A new direction of

resources to the new

and innovative

cause Toyota lose its

competitiveness,

diversification

business requires

business which is risky

technology to pursue

competitiveness in its

Toyota needs to

strategy may not

capital and then takes

in current economic

a new business.

core automobile

compete on its core

work and allocated

time to gain profits.

business due to a lack

business rather than

resources will be

of focus.

try a new business.

wasted.

situation.

Joint Venture

Yes

Yes

Yes

Yes

Yes

Yes

Faster penetration into

As a market leader

Opportunity with

Surrounding

Low risk, joint

Joint venture is a way

new markets

Toyota is an

small amount of risk.

circumstances are

venture is a

of expanding

Increase in resources

attractive partner for

favorable for moving

revocable alliance

business opportunity

and power through

a joint venture.

into new growing

and therefore

and increase business

collaboration without

markets. Toyota can

imposes low

volume and profits.

capital investment,

raise market share a

business risk. If not

providing flexibility.

joint venture with an

successful can be

established firm.

separated back
without losses.

Source: Created by Olesya Glukhova (2009)

6.3 Analysis of Current Strategy and Proposed Strategy

Based on the evaluation presented in Table 6.4, a Joint Venture is less costly and is
better option in current economic situation. To ensure support from the firms
stakeholders, a Joint Venture is the suggested new strategy for Toyota. Joint Venture
can be later converted into Merger or Acquisition if it is very successful. Using
McKinseys 7S framework, Table 6.5 highlights differences between current and new
strategy and actions that need to be taken for successful implementation.

Table 6.5: McKinseys 7S Framework Analysis

McKinseys Present
7S
Strategy
Cost
Strategy
leadership
through
Wholly
owned
business

System

TPS

Proposed
strategy
Cost
leadership
through
Joint
Venture
overseas

Adopted
TPS

Fit/Misfit
Misfit

Misfit

Actions to be
taken
Require
selection,
evaluation
and choice of
strategic
partner,
follow by
integration of
two firms
Required
technology
installation
and staff
training
None

Lean
Lean
Fit
organization organization
Highly
Skills and
Misfit
Required
Staff
skilled and
knowledge
training
knowledgea is lower
ble
Teamwork
Teamwork
Fit
None
Style
Task
Task
Fit
None
Shared
Culture
Culture
Values
High and
Not hi-tech
Misfit
Required
Skills
technology
training
advanced
Source: Adapted from Lynch (2006), created by Olesya Glukhova (2009)
Structure

Resources
needed
Financial,
People

Financial,
People,
Technology

None
Financial,
People

None
None
Financial,
People

43

6.4 Recommendation for Strategy

Findings in this report are suggesting a Joint Venture strategy for Toyotas growth.
Chinas fast growing market is an attractive opportunity. Toyota needs to choose an
established Chinese domestic partner to introduce Toyotas products to the mass
market.
Japanese technology is more sophisticated than Chinese and therefore would require
training and upgrading employees skills and knowledge as well as introduction of
technologies and training on its usage. Chapter 7 provides detailed plan for
implementation of a Joint Venture.

44

Chapter 7: Strategic Implementation

7.1 Strategic Implementation

Situation analysis have been described in chapter four and five, and a summary of the
major findings can be found in chapter six, SWOT matrix.
The Mission of Toyota has been introduced in chapter five, including its guiding
principles.
Toyota is a public listed company and any strategic decision must be understood by its
shareholders and other stakeholders in order to secure their support
A concept developed by Kaplan and Norton (1996), The Balanced Scorecard helps to
translate the strategic decision to all stakeholders of a firm. Please see Figure 7.1.
The main objective for each of the four group:
1. Financial perspective to increase sales by 10% per year
2. Customers perspective reliable and affordable cars
3. Internal business process perspective enhance productivity by improving
processes in car manufacturing
4. Learning and growth perspective provide training and career growth
opportunities to its employees.

In order to successfully implement the chosen strategy, Joint Venture with Chinese
carmaker, Toyota needs to develop a detailed plan which includes resource allocation
and budgeting. Timetable can be found in Table 7.1.

45

Table 7.1 Balanced Scorecard for Toyotas Joint Venture

KPI
Volume
growth
Leadership in
automobile
sector (China)
Profitability
Value of
business

Measures
and Targets
Sales up 10%
in per year
Market share
increase to
30%
ROI up 5% in
two years
Share price up
by 3%

KPI
Favorite
carmaker
Best cars
Best Value

Best Service

FINANCIAL

Measures
and Targets
Keep 1st place
in rating
Repeated
purchases
Most
competitive in
equation price
and benefits
0 complains

CUSTOMER

STRATEGIC
DIRECTION
Join Venture Overseas
- Best carmaker
- Best value provider

KPI

Measures
and Targets
Supply chain Cost cut by
efficiency
5%
Sales and
Return on
Marketing
advertisement
effectiveness 95%
Showrooms
In major
location
provinces
After service
Remote
support
assistance
24/7
INTERNAL BUSINESS
PROCESS

KPI
Staff
commitment
Adaptability

Measures and
Targets
2% turnover
rate
Multi-skilled

Creativity
and design

Staff
suggestion
encouragement
Cross-cultural Respect for
understanding others values
and believes
LEARNING AND
GROWTH

Source: Adapted from Kaplan and Norton (1996), created by Olesya Glukhova(2009)

46

The Conclusion
This project has analyzed Toyotas competitiveness in the automobile industry. The
firms strong position provides an opportunity for growth.
Macro environmental analysis for the automobile industry presents major threats such
as economic downturn and increasing competition. These threats can be overcome by
continuous product improvement.
Micro environmental analysis of Toyota confirmed the firms substantial strength.
Toyota is a world leading carmaker with a strong reputation for quality and reliability of
its cars.
Based on the Strategic Management Models the project suggests deploy Toyotas
resources towards fast growing market of China. To minimize risks it is advised to seek
a Joint Venture with an established Chinese carmaker in order to instantly obtain access
to the market and increase its market share.

47

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