Determinants of EntryBy entering into car manufacturing market is very costly and risky as the initial costs required a large capital investment on technologies, economics of scale and accessibility to distribution channels has restricted the entry of new entrant to the industry.
Toyota is a popular brand and constant market presence in different sectors with largesize that allows Toyota to have a competitive advantage over the new entrants in the automobile industry (Toyota Motor Co. 2013). An automotive manufacturing facility is very specialized and probably unable be tooled in the event of failure or malfunctioning. Although these barriers are substantial, established companies are entering into the industry through partnership or merger with other companies (Donald et al., 2005).
However, a domestic establish with limited awareness in the new market such as Asia, Africa and South America have the likely of rival between a public base and global organization that had monopolized in these markets, although they know the barriers to enter into the market is high. Determinants of Supplier Power
In automobile industry, the suppliers are likely to be minor than an organization and therefore tend to sell to various automakers. The network or suppliers and manufacturer are diversified, as they provide essential elements for car assembly and nearly all of the automakers rely on the supplier’s timely process and stellar quality. Both of them then form into long-term contract.
However, if the manufacturers are able to find another supplier that given a lower price with the same quality compare to the existing supplier, they will automatically switch into the new supplier andpurchase the goods from them. Therefore, the suppliers do not own the power to change the price.
Determinants of Substitution ThreatThe threat of the substitute products to Toyota is fairly mild. Although, we know that there are other alternative transportation such as Air, Bus, Train and etc. For example, Air, by using airplane to the destination that people desire by saving more time or even Train such as bullet train that had been used in Japan, from place to place, such as from round trip from Tokyo to Hokkaido is less expensive when compare to the same trip by a fuel consumed Toyota Prius (Donald et al., 2005).
From what had conducted above, Toyota does not face any prospective threat from substitute products as the type of service offered from other automobile industry are dissimilar from the type of services offered by other means of transportation.
Determinants of Customer PowerThe bargaining power of consumer has been increasing from time to time within the automobile industry becausenowadays consumers have many channels such as the internet, where they can easily find the proper vehicle that they want. Besides, preferences of consumers are important to vehicle business. For example, MVP vehicle such as Estima and Alphard, consumer can choose whether the type they like by comparing the prices and also the specification as well as the fuel consumption. Thus, there is a high bargaining power of customers.
Determinants of RivalryIn the automobile industry, the level of competitive rivalry has been high as firms, such as Nissan, Honda, BMW and Mercedeces, pursued to differentiate their products to attract new customers in order to retain business and reduce customer from switching to another substitute. The sign that catch customer’s eyes are the outlook of the car and therefore the innovative of the car is important towards the company.
Of the top the manufacturers of 2010, American manufacturers conquered over 90 percent of the car industry. However, Toyota has stood out as the leadingmovers by increasing market share since 1980 and has increased the market shares to 13.38 percent over the last two decades, which signifies a yearly raise of 2.5 at average over the last 3 decades. This indicates that Toyota’s success can be qualified to their low price and high quality values which is part of their 14 Toyota ways approach (Liker, 2004). Thus, rivalries among the competitors in automobile industry are high.
Strategies of ToyotaToyota Motor adopted cost leadership as their business strategy to achieve its visions: “low cost and higher quality product”. They have reconcile high quality with low cost to toughen the three core functions of quality maximization, cost minimization and human resources development in support of regional strategy, product strategy and business-sector strategy and shape a solid.
Moreover, Toyota states that they have fewer defects than other manufacturer such as Honda and Nissan. Meanwhile, they only need 13 person-hours to assembly a car and other manufacturer required about 20. The reason is because they dispose waste at every stage and speed up the delivery system to save time.
Also, Toyota does not implant expensive executive parts and only spends 5 per cent of sales revenue on research and development, focusing on a search for continuous improvements that is the “way-of-life” as Toyota struggles to ensure its cost are always the cheapest that consumers are willing to pay.
Toyota that uses both cost leadership and product differentiation strategies to deliver its products and services to different groups of target customers. Toyota’s advantage is in product differentiation (Alan, 2009). By comparing to its competitors, Toyota has the fastest way through investing in technology which is able to produce new products in the market.
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Liker, J.K. (2004), The Toyota Way, McGraw-Hill, New York, NY.
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Toyota Unveils Global Vision 2013, TOYOTA, viewed on 21st March 2013
Toyota Motors Corporation: An overview of the Company’s Strategic Management 2011, ilokabenneth.com, viewed on 21st March 2013.
Train, K.E. and Clifford, W. (2007), “Vehicle choice behavior and the declining market share of US automakers”, International Economic Review, Vol. 48 No. 4, pp. 1469-96.