Toyota Case Study

Toyota is a great company that has been very successful over the past couple of decades. Toyota was founded in 1926 by Sakichi Toyoda, and in 2006, 8.5 million vehicles had been produced. Toyota has surpassed Ford and is on its way on surpassing General Motors. Toyota still has its challenges and that is what the SWOT and Porter’s Five Force Analysis will show (Hill, Jones p. c61-c72).

Starting off with the SWOT Analysis for Toyota is strengths are that in 2005 Toyota’s factories in the US and China saw profits rise. The net profits rose .8% to $11 billion. This is because the company has the right mix of products for the market that it is in. In 2003, Toyota moved ahead of Ford to become the world’s second largest carmaker (http://www.marketingteacher.com/SWOT/toyota_swot.htm).

The weaknesses for Toyota are being able to figure out what customers want. Toyota has to take inconsideration the economy of the U.S., which is one of its biggest clients. The must figure out what people are going to want to buy in the sense of cars. Toyota must keep producing cars to stay in control of what they are doing. If the market goes down then it would be bad for Toyota to have a bunch of made cars sitting around. But, if the market is going well, then Toyota must have the right amount of cars so it can make sales and not lose money (http://www.marketingteacher.com/SWOT/toyota_swot.htm).

The opportunities for Toyota are the new fuel efficient cars that they are producing. With the oil prices reaching record highs, Toyota has the advantage over other car manufactures with their more fuel efficient cars. This is one of their keys to success right now. Toyota is also producing cars that are targeted towards the younger generation of drivers. Much money can be made here also (http://www.marketingteacher.com/SWOT/toyota_swot.htm).

The threats for Toyota are product recalls. In 2005, the company had to recall a significant number if SUV’s and pick up trucks. More recalls like this could be very costly for Toyota. Toyota also faces threats from other car companies entering the market. Economic factors also affect Toyota like the rising cost of materials needed to make a car (http://www.marketingteacher.com/SWOT/toyota_swot.htm).

For Porter’s Five Force Analysis for Toyota starts off with the risk of entry by potential competitors. With things going the way they are right now in the U.S., the risk of an entry in to the car market by an American car company is very unlikely. Toyota must worry about the new companies coming out of the foreign market.

As for the intensity of rivalry among established companies within an industry, Toyota is very close to moving in front of General Motors. Some other foreign car companies like Honda might put some pressure on Toyota, but on the whole Toyota should be pretty comfortable once the surpass GM.

Toyota must keep on producing vehicles that car customers want to buy. They must figure out what these buyers demand in a car. Once they tackle this then they can be successful, but if they don’t produce what they buyers want then they will not reach their goals.

Supplies are becoming more and more expensive. The bargaining power of suppliers is very important for Toyota’s survival. Toyota must produce and sell their vehicles so they have the profits to buy the materials that they need to build their cars. With out money they can’t buy supplies, which lead them to not producing vehicles.

The closeness of substitutes for Toyota’s products would be the manufacturing of electric vehicles. With oil prices being so high, more electric car companies are beginning to start production. This would be Toyota’s biggest threat. Another threat would be if people just stopped buying cars altogether and walked or rode their bikes. Buses and other forms of public transportation is also a threat toward Toyota.

After examining Toyota’s financial ratios, I can see that they are in pretty good shape. Their Debt/Equity Ratio, Current Ratio, and Quick Ratio are all above or within the industry average. This is a very smart company, and they know how to invest and use their money wisely (http://www.hoovers.com/toyota/--ID__41889,period__A--/free-co-fin-income.xhtml).

Overall, my concluding remarks on Toyota are very good. They have been doing nothing but rising ever since they started. They are a major threat to the American car companies and it is because they have the smarts and technology to make very good cars. They have always been known for having cars that last forever and get great gas mileage. They are what the majority of car customers are looking for right now, and not many other companies have been able to emulate what they have been able to do. I only see Toyota moving forward until they are at the top of their industry.

Works Cited Hill, Jones. Strategic Management. Houghton Mifflin Company, 2007. Pages C61 to C72. http://www.marketingteacher.com/SWOT/toyota_swot.htm http://www.hoovers.com/toyota/--ID__41889,period__A--/free-co-fin-income.xhtml