TOYOTA MOTORS: Strategy of resources and environment

They were correct in focusing their plan on two key concepts, “resources and environment”. The first concept helped focus company finances and restructuring strategies. The second concept helped Toyota renew its image, meet consumer trends and government policies. (this article was written in 2009)

When Toyota Motors introduced the Prius hybrid car at the end of 1998, it concentrated on two key concepts, “resources and environment”, to raise its global market share. They expected to produce 1000 units per month for the first three annual cycles. This was a very ambitious target considering they had experienced technical problems with their hybrid power train. As the new company president, Okuda felt this car was an opportunity to change the company’s image. However, he knew there were several problems that needed to be resolved: how to maintain Toyota’s remarkable market position in the 21st century, and how to grow overseas and be known as a value brand in the existing competitive automaker world? The first challenge was to change Toyota’s corporate culture into a young aggressive company; second, to penetrate new markets; and third, to align company values with growing environmental concerns. To do this, they required a complete company makeover to fix problems such as weak product planning, declining domestic market shares, and delays in shifting production overseas. For example, Toyota had to increase spending on dealers` incentives and advertising, especially in developing countries, which were considered to have a huge potential for increasing product demand. In order to achieve these goals, Toyota required new product designs, production configurations and marketing strategies.

Goals:  To conceive the car for the 21st century to survive in the competitive automaker market and achieve greater brand recognition overseas.

Focus: Resources and environment as a market positioning.

Culture: Toyota used to have a conservative corporate culture. They were perceived as being followers rather trend setters.

Strengths: Known for its prowess in marketing and sales as well as its production efficiency, as well as having the lowest number of problems per 100 vehicles. They also have good internal communication amongst employees and a long-standing concern with environmental issues.

Weaknesses: Toyota had not aggressively shifted production overseas as their competitors had.

Market share: Its annual domestic unit sales reached one million in 1962. Its exports reached a cumulative total of 10 million vehicles in 1979. In 1994, they surpassed a 7% market share in North America, higher than any other automaker.

Customer Analysis: Cars offered aspirational value in addition to a basic mode of transportation. Consumers made purchasing decisions based on the style, color, and concepts in addition to functions and pricing.

Competitor Analysis: Competition in the industry was largely regional with manufacturers developing appropriate designs for market share demands in their regions. Car companies commonly imitate each other’s products, ideas and innovations, but this did not provide long-term advantages. USA was the largest national market with General Motors, Ford and Chrysler respectively. GM was the world’s largest producer in 1994. Its strategy was to offer a full array of models, but it had concentrated on mid and full sized cars. They also built a small car named “Saturn” but the company was less efficient in product development. Ford was second to GM in vehicles sales and revenues but it had difficulty in unifying U.S and European operations. Chrysler was good in domestic markets but its image regarding quality was poor. In Europe, Volkswagen was the largest automobile manufacturer, whereas in Japan, Nissan was the second largest automaker but it had weak marketing. Honda was the third largest automaker and the world’s largest manufacturer of motorcycles.

Macro-Environmental Analysis

The total number of motor vehicles in use worldwide was 644 million units. Automobile sales were cyclical, falling during economic downturns and rising during the periods of strong economic performance. Automobiles were subject to many governmental regulations because of public concerns over safety, traffic congestion, air pollution, and fuel scarcity. Governments had implemented many regulations to avoid these problems and also to encouraged manufacturers to improve their fuel efficiency. On the social and cultural front, public concern over emissions of dangerous gases that were destroying the ozone layer caused world leaders to discuss about climate changes

Conclusion

Although the Prius hybrid car was an opportunity to change the company’s image, Toyota was going to have to work hard to reach their long-term goals and maintain their sales and revenues up with market standards. They were correct in focusing their plan on two key concepts, “resources and environment”. The first concept helped focus company finances and restructuring strategies. The second concept helped Toyota renew its image, meet consumer trends and government policies, but their ambitious production target was a daunting challenge considering the technical problems they had experienced with the hybrid power train. It was a huge risk to trust a car that was not even technologically ready and that was supposed to be the new image of Toyota. To maintain a remarkable position in the 21st century market, Toyota had to transform its company image into a young aggressive company. With a complete company makeover they started to solve their problems planning promotional strategies around the world, increasing domestic market share, approaching young people and new costumers, as well as developing overseas production to avoid delays. Toyota increased heavy advertising expenditures in order to grow overseas, reach new global markets, and be known as a value brand in the existing competitive automakers world.