A Strategic Review of Toyota
in Europe
UP807150, UP773405, UP877699, UP919743, UP821660, UP800215
Order of Presentation…
• Introduction to Toyota
• Environmental Analysis
• Internal Resources
• SWOT Analysis
• Options for future development
• Final recommendations for future development
• References
Introduction to Toyota
• Toyota was founded in 1936 in Japan
• Toyota started selling cars in Europe in 1963
• In 1992 Toyota began full production of cars and engines in the UK
• Toyota has invested over 9 billion euros in Europe since 1990
• Toyota’s HQ in Europe is in Brussels, Belgium (Toyota, n.d.)
• Toyota’s market share has fluctuated between just under 4% and
4.4% as the biggest Asian brand in Europe by volume (Bekker, 2018)
Environmental Analysis
• PESTEL Analysis
• Porters 5 Forces
• Industry life cycle
• Strategic group analysis
PESTEL Analysis
POLITICAL
LEGAL
ECONOMICAL
PESTEL
SOCIAL
ENVIRONMENTAL
TECHNOLOGICAL
Political
• Brexit – thousands of jobs at risk, uncertainty around Brexit is halting investment
into the automobile industry (O'Carroll & Topham, 2018)
• Trade Tariffs - world trade organisation tariffs of 10% (Foster & Kirkup, 2017)
• Government Instability - Countries including the UK and Spain have low political
stability (MacDonald & Majeed, 2011)
Economical
• Fuel Costs - UK are experiencing the fastest rise in fuel prices for 18 years (Wallace,
2018)
• Tax - A rise in tax may lead to companies in Europe having to pay higher levels of
business tax
• Income Rates - Wage increases in Europe may lead to increase in disposable
income (Trade Economics, n.d.)
Social
• Health Awareness - People becoming healthier and living longer due
to increase in physical activity
• Environmental Attitudes - Increase in people looking to purchase
electric and hybrid cars to look after the planet
• Demographic Change - Europe has seen an increase in population
(World Population Review, n.d.)
Technological
• Social Media - Use of social media has continued to rise in recent years
• Production Methods - New technology advancements may lead top
improved production methods
Environmental
• Carbon Emissions - Shift in trend towards low carbon emission vehicles such as
electric cars and hybrids
• Raw Materials - The raw materials initiative that came in during 2008 indicates that
their must be a fair and sustainable supply of raw materials (European Comission,
n.d.)
• Waste & Noise - There has been an increase in awareness regarding noise pollution
Legal
• Advertising Laws- Under EU law misleading advertisement is not allowed
Employment Laws- Conditions of employment must be followed, e.g. equal pay,
working hours and working conditions all need to meet EU regulations
• Health & Safety- Health and safety legislations must be followed by businesses
when operating within the EU(European Comission, n.d.)
•
•
•
Small compared to big companies
such as Toyota
Certain part may be difficult to make
Cost of switching may be high,
negotiating contracts
Threat of
entry: low
•
•
•
•
Economies of scale, experience curve
Lots of capital required, R&D
Brand image is important
Market saturated
PORTER’S 5 FORCES
Bargaining
power of
suppliers:
medium
•
•
•
Trains, planes, buses, walking
Lots of other brands
Low cost cars and eco friendly
Competitive
rivalry: high
Threat of
substitutes:
medium
Bargaining
power of
buyers:
high
•
•
•
Many alternatives, saturated market,
very little diversification (Augsburg, 2016)
High access to information
No switch costs
Supplier Power (Low to Medium)
• Suppliers influence prices
• Raw materials – homogenous, easy to swap
• Oligopolistic concentration in key technical car components
Buyer Power (Medium to High)
• Many alternative brands within the market
• High levels of brand loyalty
• High access to information and comparison through the internet
• Low switching costs
Threat of new entrants (Low)
• Brand image - crucial within the industry in relation to quality and reliability
• Start up costs - high which requires high levels of capital
• Strict regulations in terms of government policy
• High R&D costs
Threat of substitutes (Medium- High)
• flying, trains, buses and cycling
Competitive Rivalry (high)
• The automobile industry is a very competitive industry, companies in the industry
include BMW, Audi, Toyota, Mercedes, Ferrari etc.
Industry Lifecycle
Henry Ford introduced the
Ford Model T in 1908 and
ford moved into the European
car industry in 1911 (Binder &
Rae, 2018)
Following WW2
the total world
output increased
by 10 fold within a
35 year period
(Binder & Rae,
2018)
In France 3 major firms,
Renault, Citroen and Peugeot
emerged in the 1920’s (Binder
& Rae, 2018)
The introduction stage of the car
industry started in 1867 in France
when the 1st steam car hit the
road (Gerbeau, 2005)
Over the past 30 years the car
industry has hit the maturity
stage of the industry lifecycle,
this is clear as recently as
firms in this industry have
spent almost all their energy
on advertising and on price
wars, not product innovation
(Gerbeau, 2005)
In order to extend the lifecycle of the car
industry companies are going to have to adapt
to meet changes in consumer trends, for
example the shift towards electric and hybrid
vehicles
During the 70s and 80s
the shakeout stage of the
car industry took place
and companies such as
American Motors and
Checker went out of
business
It can be seen that the car industry is
declining somewhat, for example sales of
passenger vehicles in China dropped by
5.8% in 2018. Furthermore, sales in Europe
fell by 8.1% (Partington, 2019)
INDUSTRY LIFECYCLE
• Mature “forever”
• Cyclical (Johnson, 2017)
• Economical growth
(TradingEconomics, 2019)
• Consumer spending
(TradingEconomics, 2019)
• Acquisitions and mergers
(Augsburg, 2016)
Strategic Group Analysis
Porters Value Chain
Logistics & Operations
• effective and efficient operations
• LEAN
• just-in-time, andon, kaizen, jikoda, Kanban, pull system throughout operations
• Reengineering
(Toyota, 2019)
Value Chain Analysis of Toyota
Primary Activities:
Operations- Toyota has several R&D sites and has
several distribution channels across the world which
supplies its customers (Toyota, n.d.).
Marketing and Sales- Toyota invests heavily into
marketing and promotion, especially in the form of
advertisement. This can be seen as in 2015 and 2016
the company invested $4 billion in advertisement. Its
because of this high level of advertisement why the
companies brand is well known and well represented
(Shirouzu, 2018).
Support Activities:
Technology Development- The company has great
production technology which is why Toyota is globally
known for its phenomenal engineering and technology
which produces high quality vehicles (6Sigma, 2017).
VRIO
Value: The company holds massive experience in manufacturing, selling, designing and distributing cars and have
utilised this strength to penetrate into a different segment of cars, such as luxury and budget shoppers (Toyota Europe,
2019).
Rarity: The company has successfully mastered the capability of making the processes rare and developing a
competitive edge for the company (DmillsToyota, 2019).
Imitability: The company has kept the designs very simple and easy to put together or take them apart. This
simplicity also enables the company to make cheaper and efficient manufacturing (DmillsToyota, 2019).
Organisation: Toyota has manufactured vehicles for many decades with increasing market share, revenues and the
position as the market leader. The company has structured itself in a way to attain sustainable success (Toyota Europe,
2019).
SWOT Analysis
STRENGTHS
WEAKNESSES
OPPORTUNITIES
THREATS
Strengths:
• Strong focus on research and development (R&D)
• Recognisable and valuable brands
• Toyota’s production system
• Highly competent company in electrified vehicle production
• Toyota’s 2050 environmental challenge
• Historically Toyota produce highly dependable vehicles
Weaknesses:
• Lack of competence in autonomous vehicles
• Negative publicity due to large number of vehicle returns
• Poor brand portfolio
Opportunities:
• Wage increases in Europe
• New technological advancements
• Trend towards the want and need of hybrid and electrical vehicles
• Population increase in Europe
• Rise of social media as a form of advertisement
Threats:
• Brexit- Thousands of jobs at risk
• Tariffs
• Government insecurity in certain European countries
• Tax increases
• Rise in fuel costs
• Shift in Europe towards a healthier lifestyle
ANSOFF Matrix
• Market Penetration- This will involve Toyota creating a growth
strategy featuring existing products in existing markets. This could
be done through the introduction of sales promotion, personal
selling or through competitive pricing strategies.
• Product Development- Toyota are innovating with the
introduction of the electric car. The company could increase their
production levels of this product within Europe to meet the surge
in demand for electric vehicles.
• Market Development- This will involve creating new distribution
channels or exporting. A strategy like this will be great in the long
term for the company as the growth of the distribution channel
will increase efficiency of marketing.
• Diversification- This will involve Toyota branching into new
markets using new products, this will require a surge in resources
which will require a huge financial investment which may not be
viable due to the risk of the strategy.
Final recommendations for future
development
•Market Penetration is the best strategy for Toyota
1. Increased promotion (Especially of Hybrid vehicles) using
social media
2.Increase distribution channels
3.Price adjustment of hybrid vehicles
•
Product Development/diversification could also be another
suitable strategy.
The UK government is targeting an 80% reduction in all
greenhouse gases by 2050, comapared to 1990 levels.
Hydrogen has the highest specific energy density of any nonnuclear power source. It is inexhaustible and non-toxic; it can
be created using many sources, stored indefinitely and can be
shipped relatively easily. Although going through testing and
R&D is costly, Toyota may look to move into hydrogen powered
vehciles in a similar fashion to their earlier innovation with
their hybrid vehicle the Toyota Prius in 1997.
References
6Sigma. (2017, March 23). 6sigma.us - Benefits of Toyota Production System (TPS). Retrieved 2019, from 6sigma.us: https://www.6sigma.us/six-sigma-articles/benefits-of-toyotaproduction-system-tps/
Bekker, H. (2018, January 17). 2017 (Full Year) Europe: Best- Selling Car Manufacturers and Brands. Retrieved 2019, from Best Selling Cars.com: https://www.best-sellingcars.com/europe/2017-full-year-europe-best-selling-car-manufacturers-and-brands/
Binder, A., & Rae, J. (2018, August 2). britannica.com - Automotive industry. Retrieved 2019, from britannica.com: https://www.britannica.com/technology/automotive-industry
DmillsToyota (2019). VRIO Analysis. Retrieved from DmillsToyota Website: https://dmillstoyota.wordpress.com/2017/02/18/vrio-analysis/
European Comission. (n.d.). ec.europa.eu - Misleading and comparative advertising directive. Retrieved 2019, from ec.europa.eu: https://ec.europa.eu/info/law/lawtopic/consumers/unfair-commercial-practices-law/misleading-and-comparative-advertising-directive_en
European Comission. (n.d.). ec.europa.eu - Policy and Strategy for raw materials. Retrieved 2019, from ec.europa.eu: https://ec.europa.eu/growth/sectors/raw-materials/policy-strategy_en
Foster, P., & Kirkup, J. (2017, February 24). telegraph.co.uk - What will Brexit mean for British trade? Retrieved 2019, from telegraph.co.uk: https://www.telegraph.co.uk/news/0/whatwould-brexit-mean-for-british-trade/
Gerbeau, P. (2005, October 13). open.edu - Lifecycle of the car industry . Retrieved 2019, from open.edu: https://www.open.edu/openlearn/money-management/management/businessstudies/lifecycle-the-car-industry
MacDonald, R., & Majeed, M. T. (2011). Causes of corruption in European countries: history, law, and political stability. Glasgow: Business School - Economics, University of Glasgow.
O'Carroll, L., & Topham, G. (2018, June 26). The Guardian.com - Brexit uncertainty puts thousands of jobs at risk, car industry warns. Retrieved 2019, from The Guardian.com:
https://www.theguardian.com/politics/2018/jun/26/brexit-uncertainty-putting-860000-jobs-at-risk-warns-car-industry
Partington, R. (2019, January 9). theguardian.com - Chinese car sales fall for first time in more than 20 years. Retrieved 2019, from theguardian.com:
https://www.theguardian.com/world/2019/jan/09/china-car-sales-fall-for-first-time-in-more-than-20-years
Porter, M. (2008). The five competitive forces that shape strategy. Harvard Business Review. Jan 2008. 79-93
References Continued…
Shirouzu, N. (2018, June 21). uk.reuters.com - Exclusive - Toyota, pressed to innovate, is cutting marketing costs to fuel research. Retrieved 2019, from uk.reuters.com:
https://uk.reuters.com/article/uk-toyota-china-dentsu-exclusive/exclusive-toyota-pressed-to-innovate-is-cutting-marketing-costs-to-fuel-research-idUKKBN1JG3KH
Toyota. (n.d.). toyota.co.uk - Our History. Retrieved 2019, from toyota.co.uk: https://www.toyota.co.uk/world-of-toyota/careers/tgb-history
Toyota. (n.d.). toyota-global.com - Globalizing and Localizing Manufacturing. Retrieved 2019, from toyota-global.com: https://www.toyotaglobal.com/company/vision_philosophy/globalizing_and_localizing_manufacturing/
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