Toyota’s uses both differentiation and low cost as generic strategies to try and gain a
competitive advantage over their competitors in the automotive industry. The market
scope that Toyota uses is a broad one that encompasses nearly every type of customer
that is in the market to purchase an automobile. Toyota is able to target such a large
market because they have something for everyone. Toyota has four wheel drive trucks
and SUVs for the outdoor types or those who live in areas that face severe weather
conditions, hybrid models like the Prius for the eco-friendly customers that are interested
in saving the environment, along with the standard cars for general, everyday use.
Additionally, Toyota provides vehicles for all price ranges. From the low price Toyota
Corolla line of cars to the high priced luxury line of cars and SUVs with Lexus, Toyota
has something for everyone.
Toyota differentiates on several levels form their competitors. First of all, Toyota has
been very successful in differentiating on the basis of superior design and quality. This
has led to Toyota being able to create a brand image that is very strong and one that
brings to mind quality, long lasting cars when a potential customer sees it. The strength
of Toyota’s brand image has been seen in recent years with the recalls and problems
Toyota faced in dealing with these recalls. Toyota was able to survive these problems
because they had such a long and proven track record of quality and superior. Another,
area that Toyota differentiates is in technology. Toyota was the first successful mass
produce the hybrid car on the market when it released the Prius in 2003. Being the first
to get their hybrid on the market allowed Toyota to gain a large portion of the market
share in the area of hybrid cars.
Along with differentiation Toyota also uses low cost to try and gain a competitive
advantage in the automotive industry. “Toyota is (or was at the time) the low cost
producer in the industry. Toyota achieves its cost leadership strategy by adopting lean
production, careful choice and control of suppliers, efficient distribution, and low
servicing costs from a quality product.”(Michael E. Porter) This quote from Michael
Porter sums up how Toyota achieves this low cost strategy. Through research, it is
evident that Toyota is still the low cost leader in the automotive industry.
Toyota’s current grand strategies are product development and offensive/strategies for
industry leaders. Product development is very important for Toyota due to the fact that
they must come out with new fresh ideas every year in the automotive industry. If you
don’t develop a new design on your products, you will be left behind very quickly. Also,
Toyota is an industry leader and has a lot of power because of this. Toyota stays on the
offensive to keep its market share and defends against others in the industry from taking
their market share. Toyota always stays on the offensive looking for ways to be better
than their competitors. Toyota wants to stay in front of its competitors and take
advantage of any weaknesses they may show and capitalize on them to gain any
advantage they can.
As mentioned previously in the paper Toyota is the low cost leader in their industry.
Recent events have suggested that Toyota has focused too much on low cost, losing
market share and their market positioning of superior design and quality, which
historically they have used a differentiation strategy. For Toyota, the biggest thing they
need to do is make sure that their low cost strategy does not compromise their superior
design and quality.
When looking at Toyota’s grand strategy, they have been successful at product
development. By 2012 Toyota is planning to have more then 20 models that use batteries
to extend fuel economy just like their Prius (Krolicki). Although they have not been as
aggressive in the electric car market recently, like their competitors, they are planning to
release a rechargeable version of their Prius by June 2012 (Krolicki). This re-chargeable
version will position Toyota to attempt to take over as a low cost leader of hybrid
technologies within the market, which supports Toyota’s overall strategy of low cost
(Krolicki).
Due to changes in government policies and the competiveness of the industry, Toyota
was forced to take an offensive strategy. With a series of damaging safety recalls, Toyota
has had to evaluate their current track of superior design which caused them to
temporarily loose track of their former offensive strategy of quality (Krolicki). Recently,
they have been had to work extra hard to get back to their offensive strategy and back to
being the industry leader (Krolicki).
Due to the recent safety recalls Toyota has been temporarily de-railed from their strategy.
They need to get back on track and re-focused and make sure that they concentrate on
what made them unique. In order to make this happen, managers of Toyota are going to
have to focus on company communication and bringing back its former foundation of
making quality cars that are dependable and reliable in addition to modern. The company
found its weak spot when it came to the way the company responded to the recalls. In the
beginning of the recall era, Toyota was very slow in its response. Finally, Toyota
executives made the call to recall more than five million of its own vehicles due to
numerous different issues. At the same time, it was decided to halt all sales of Toyota
vehicles as well until the problem could be addressed. For a car company, this is a huge
deal and one that will affect the balance sheets for years to come. However, Toyota
seemed slow in finding a solution to its largest problem in company history (and in the
industry’s history). With a huge recall and halt in sales, one would assume that
management would be pushing for day and night research, product development, and
problem solving in order to get their product back on the market. Instead, it took Toyota a
little over a week (kbb.com / “Toyota Recall and Sales Freeze”) to find a fix and even
longer to get it out to dealers and Toyota mechanics. The terrible communication within
the company was shown when dealers had no idea or word from the company as to what
the game plans were and when the United States called in several Toyota executives to
congressional hearings where finger pointing began.
The Toyota product development system is known as Lean Manufacturing. Its objective
is to integrate people, process, and technology. Toytoa’s product development procedure
is essentially different from a manufacturing process. Its backbone is not visible, but
knowledge and information which are untouchable. The product development’s cycle
time is much longer than hours. It usually takes weeks or even months. The production
chains are non-linear and multi-directional. Workers are no longer manufacturing
workers but specialists with high diverse technology. This product development strategy
is viable for Toyota. This is because this strategy does help Toyota to prolong the life
cycle of current product. For instance, Toyota Camry is a very successful current product
which is prolonged its life. Camry has been made since 1980s. Camry is set at an middlehigh level of family veichle. After 30 years development, Camry is still very famous all
over the world. This cannot be separeted by Toyota’s successful product development
strategy. One of the key features of the Toyota product development system is functional
engineering managers. They are primarily teachers in the Toyota system, who are the
most technically competent engineers, with the highest levels of experience. Toyota’s
management group is consist of high educated experts. They were all engineers and their
technical excellence is very famous. But recently, Toyota’s product development system
does not work very well. In recent years, more and more recall issues happened and that
hurt Toyota’s reputation very much. Most of these recalls are related to Toyota’s
technical problem. Gas padel is one of the major aspects which leaded to many serious
car accidents. This hurts Toyota’s reputation and brand name very much. However, news
from CNN still says that Toyota announced that they have no responsibility for gas padel
problems and those car accidents. This is really bad for Toyota. Under product
development strategy, what Toyota is supposed to do is to improve its product quality
and technology. Besides, they also need to make sure their products are safety.
Breaking out of the box seems like a viable way for Toyota nowadays. Since 2003,
Toyota Secondary-generation Prius officially unveiled to the press for the first time.
Toyota Prius have been one of the best sale cars for more than 7 years. Even was the
number one selling Hybrid in America with around 140,000 sold just in 2009 when the
auto market with depression. Although, the performance of Toyota Prius was excellent in
the past. Toyota still needs to stronger its advantage by a innovation to receive a
renaissance from all the recall issues. For the 2010 Prius hybrid automobile, the company
redesigned many aspects of the car to stand-out from the fuel economy. For achieving the
best possible fuel economy, the 2010 Prius has extensive aerodynamic features which
includes most parts of the car. They are all designed to minimize drag-inducing air
turbulence. To reduce fuel-guzzling weight, Toyota made the battery an integral
structural part of the car rather than a bolt-on box. Specifically, there are even three
performance modes for the new 2010 Prius, which are EV-Mode, Power Mode and Eco
Mode. By all the changes, Toyota is on his way to receive revive by the innovation
strategy. Furthermore, the innovation of Prius reveals the innovation of using new
technology and new energy.