Toyota Motor Corporation
Strategic Audit
Laura Betty
Susannah Fletcher
Emily Moss
Terry Bridges
May 5, 2010
Table of Contents
Executive Summary ................................................................................................................... 2
Introduction ............................................................................................................................... 3
External Environment / Industry Analysis............................................................................... 4
Industry Overview ....................................................................................................................... 4
Competitive Forces ...................................................................................................................... 4
Macroeconomic Variables Affecting Industry............................................................................... 4
Internal Environment Analysis ................................................................................................. 6
Business Model ............................................................................................................................ 6
Financial Analysis ......................................................................................................................... 6
Strategic Recommendations and Action Plan .......................................................................... 8
Recommendation 1: Hiring PR Company ................................................................................... 8
Recommendation 2: Incentive Program ...................................................................................... 9
References ............................................................................................................................... 10
Appendix A: Brief Company Timeline .................................................................................... 12
Appendix B: Current Recalls ................................................................................................... 13
1
Executive Summary
2
Introduction
Today, Toyota is one of the top-selling brands in America and is committed to providing quality,
dependability, and reliability through their vehicles. Toyota entered the market in 1935, with the
introduction of the A1 prototype passenger car, with the goal to produce economical and reliable
compact cars. After being unsuccessful with the production of the “Toyopet” they came back
strong in 1965 with the Corona sedan (Toyota, 2010). Today their lineup of cars includes everything
from economy-based models, like the Corolla, to tough off-road trucks, like the Tundra, to the
world’s first gas/electric car, the hybrid Prius. Toyota is one of Japan’s largest automakers and
currently builds half of the cars they produce in the United States.
Kiichiro Toyoda founded Toyota Motor Corporation in 1935 after spending most of his life
dedicated to studying the manufacturing of cars. Currently, Akio Toyoda is the president and
director of Toyota Motor Corporation (Forbes.com, 2010).
* See Appendix A for timeline of company history.
3
External Environment / Industry Analysis
Industry Overview
Competitive Forces
Macroeconomic Variables Affecting Industry
Since the industrial revolution, the automotive industry has played a primary role in the growth of
economies throughout the world. As the automotive industry undergoes fundamental changes it is
confronted by greater challenges. There are four main macroeconomic factors that affect this
industry including gross domestic products (GDP), automotive manufactures’ policies and prices,
weather peaks and recessions, and telecommunications and technology. Of these, the two main are
the automotive manufacturers’ policies and prices, and telecommunications and technology
(Business Reference Services, 2009).
GDP is a measure of all of the goods and services produced in a country over a specific period,
normally a year. The GDP considers the market value of goods and services to arrive at a number
which is used to determine the growth rate of the economy and the overall economic health of the
nation (Smith, 2010). The automotive manufacturing industry is one of the leading industries in the
United States and is vital to the U.S. economy because it contributes greatly to employment and
productivity.
Automobile manufacturers’ policies include manufacturers’ suggested retail price, rebate programs
and incentive programs. All of these policies help automobile dealers form the operating
environment for their business. Manufacturers’ policies have a direct affect on dealerships because
they determine the cost of new vehicles. Often manufacturers offer plans such as rebates, incentives,
and new buyer programs (Business Reference Services, 2009).
Weather peaks and recessions also affect the industry in various ways. The highest selling seasons
for automobile dealers are in the spring and summer. During this time the optimism index rises
141% from the downfall that occurred during the fall and winter months (Business Reference
Services, 2009).
A major factor dealing with expansion of successfully businesses deals with the use of the latest
technology and telecommunication access. The U.S. automotive industry has continued to
experience organizational and technological change and they have also taken steps to increase their
global presence. They have done so by expanding global alliances and collaborating with other U.S.
automakers. The latest e-commerce methods are being used to manage supply chains and replenish
auto makers’ inventories. The Internet is also a big factor in technology for automakers. Vehicle
manufacturers use the Internet to manage sales and consumers use it to become more informed
about their possible future purchases. Online sites help guide car buyers toward specific dealers and
also deliver competing bids for cars, insurance, and financing options. Today, most car
manufacturers and dealerships have their own websites which they use as a main source of
advertising. The use of technology in the auto industry allows companies to expand internationally
(Business Reference Services, 2009).
4
Other factors including pricing, incentive deals, local and national/international factors affect the
retail sales of automobiles. Local automotive competition, plant closings and other substantial
layoffs from local employers, natural disasters, inflation, oil prices, and interest rates have major
impacts on the automotive industry as well (Business Reference Services, 2009).
Toyota’s profitability has been most affected by the recession aspect of these macroeconomic
factors. In 2007 and in 2008, Toyota suffered from a loss of sales due to the poor economic
situation. This was due to the fact that consumers struggled with tight credit markets and soaring
gas prices. Consumers were given low credit ratings which prevented them from getting loans to
purchase automobiles and the high gas prices caused many individuals to avoid purchasing vehicles
(Robert, 2010).
5
Internal Environment Analysis
Business Model
Financial Analysis
6
7
Strategic Recommendations and Action Plan
In the wake of the current recalls and events at Toyota, top management has not been able to
restore the company’s public and brand image (See Appendix B). We believe the company could
take a few steps to help restore the company’s image and return to actually doing what their mission
states. We recommend they hire a public relations company to help restore their public image and
also implement an incentive program.
Recommendation 1: Hiring PR Company
Our first recommendation is for Toyota to hire DB Media Strategies (DB) to help restore their
public image. Doug Bailey, founder of DB, says that DB specializes in crisis and reputation
management (Doug Bailey, 2010). DB covers areas including media training, media management,
speech, editorial, and presentation training, public relations, strategic communications, and crisis
communication (Capabilities, 2010).
In the past DB has worked with clients including Cambridge Health Alliances, Arbella Insurance
Group, The Chiofaro Company, Quincy Medical Center, Lead Check Swabs, and International
Institute (Our Clients, 2010).
DB has years experience dealing with media and public relations which allows them to be able to
prepare their clients to talk credibly with the media. DB also offers the option to have one of their
representatives serve as their client’s company spokesperson. They excel in helping their clients
figure out the best way to communicate their business plans, products, specialties, and goals
(Capabilities, 2010).
DB is known for four attributes: straight talk, honesty, collaboration, and providing good work at a
good price. They tell things the way they are by providing accurate descriptions and giving their best
advice. DB prides itself on its honesty. They may divert the media’s angle or try and interest it in
other stories, but they never outright lie. Among their crisis counselors they have the saying, “Tell it
all, tell it fast, tell the truth.” They also feel strongly about giving the proper time, energy and
patience to work collaboratively with each and every client. They believe that if clients pay for them,
then they should get them. Public relations is not cheap, but DB strives to work as efficiently as
possible with little overhead. They charge a flat fee based on clients’ existing budget and
expectations. There are additional fees for media training and speech writing workshops. They also
provide weekly updates and progress reports to show the client where their money is going (Our
M.O., 2010).
8
Recommendation 2: Incentive Program
9
References
(2010). Capabilities. Retrieved Apr. 20, 2010, from DB Media Strategies Inc., 275 Grove St. Suite 2400 Newton, Ma 02466. Web site:
http://www.dbmediastrategies.com/dbm/Capabilities.html.
(2010). Doug Bailey. Retrieved Apr. 19, 2010, from DB Media Strategies Inc., 275 Grove St. Suite 2400 Newton, Ma 02466. Web site: http://www.dbmediastrategies.com/dbm/About.html.
(2010). Floor Mat Recall. Retrieved Apr. 20, 2010, from Toyota Motor Sales, U.S.A., Inc.. Web site:
http://www.toyota.com/recall/floormat.html.
(2010). Pedal Recall. Retrieved Apr. 20, 2010, from Toyota Motor Sales, U.S.A., Inc.. Web site:
http://www.toyota.com/recall/pedal.html.
(2010). Our Clients. Retrieved Apr. 20, 2010, from DB Media Strategies Inc., 275 Grove St. Suite 2400 Newton, Ma 02466. Web site: http://www.dbmediastrategies.com/dbm/Clients.html.
(2010). Our M.O. Retrieved Apr. 19, 2010, from DB Media Strategies Inc., 275 Grove St. Suite 2-400
Newton, Ma 02466. Web site: http://www.dbmediastrategies.com/dbm/M.O..html.
Business Reference Services. (2009). Modern Global Automobile Industry. Retrieved Mar. 25, 2010, from
BERA. Web site: http://www.loc.gov/rr/business/BERA/issue2/industry.html.
Forbes.com LLC™. (2010). Akio Toyoda. Retrieved Apr. 19, 2010, from Forbes. Web site:
http://people.forbes.com/profile/akio-toyoda/80520.
Robert, M. (2010). US Market for Toyota Automobiles. Retrieved Mar. 29, 2010, from Go Articles,
Canada. Web site: http://www.goarticles.com/cgi-bin/showa.cgi?C=2536026.
Smith, S. E. (2010). What Is GDP? Retrieved Mar. 29, 2010, from Wise Geek, Phoenix. Web site:
http://www.wisegeek.com/what-is-gdp.htm.
10
Toyota. (2010). From 1957 to the 21st Century Toyota Moving Forward with America. Retrieved Mar. 30,
2010, from Toyota, USA. Web site:
http://www.toyota.com/about/our_business/our_history/.
Toyota. (2010). 50 Years in the U.S. Retrieved Mar. 30, 2010, from Toyota, USA. Web site:
http://www.toyota.com/about/our_business/our_history/timeline.html.
11
Appendix A: Brief Company Timeline
YEAR
1935
EVENT
Birth of Toyota Motor Corporation with A1 prototype passenger car
1936
Toyota’s logo is established
1937
Toyota Motor Co., Ltd. established in Japan
1947
Begin building BM truck, SB small truck, & SA compact passenger car
1950
Toyota Motor Sales Co., Ltd. established in Japan
1955
Toyopet Crown, Toyopet Master (taxi use), & Toyopet Crown Deluxe introduced
1957
1972
August 25: two Toyopet Crowns imported into US
October 31: Toyota Motor Sales, U.S.A., Inc. established
Beginning of manufacturing operations in US
1986
Vehicle production begins in US
1999
Toyota is listed on NYSE
2000
1st Toyota hybrid sold in US
2006
Highlander Hybrid, Toyota’s 1st hybrid SUV is introduced
2007
Tundra, full-sized pickup, arrives in showrooms
From: http://www.toyota.com/about/our_business/our_history/timeline.html
12
Appendix B: Current Recalls
Recall
Floor Mat Pedal
Entrapment
Date of Recall
Toyota
Lexus
September 29, 2009
2007-2010 Camry
2005-2010 Avalon
2004-2009 Prius
2005-2010 Tacoma
2007-2010 Tundra
2008-2010 Highlander
2009-2010 Corolla
2009-2010 Venza
2009-2010 Matrix
2006-2010 IS 250
2006-2010 IS 350
2007-2010 ES 350
Sticking Acclerator
Pedal
January 21, 2010
Certain 2009-2010 RAV4*
Certain 2009-2010 Corolla*
2009-2010 Matrix
Certain 2007-2010 Camry*
Certain 2010 Highlander*
2007-2010 Tundra
2008-2010 Sequoia
*Highlander hybrids and Camry hybrids are not involved in this recall. Further, Camry, RAV 4, Corolla and Highlander
vehicles with VINs that begin with “J” are not involved.
(Floor Mat Recall, 2010) & (Pedal Recall, 2010)