New investment by Toyota in factories in the US and China saw 2005 profits rise, against the worldwide motor industry trend. Net profits rose 0.8% to 1.17 trillion yen ($11bn; £5.85bn), while sales were 7.3% higher at 18.55 trillion yen. Commentators argue that this is because the company has the right mix of products for the markets that it serves. This is an example of very focused segmentation, targeting and positioning in a number of countries.
In 2003 Toyota knocked its rivals Ford into third spot, to become the World’s second largest carmaker with 6.78 million units. The company is still behind rivals General Motors with 8.59 million units in the same period. Its strong industry position is based upon a number of factors including a diversified product range, highly targeted marketing and a commitment to lean manufacturing and quality.
The company makes a large range of vehicles for both private customers and commercial organisations, from the small Yaris to large trucks. The company uses marketing techniques to identify and satisfy customer needs. Its brand is a household name. The company also maximizes profit through efficient manufacturing approaches (e.g. Total Quality Management).
Being big has its own problems. The World market for cars is in a condition of over supply and so car manufacturers need to make sure that it is their models that consumers want. Toyota markets most of its products in the US and in Japan. Therefore it is exposed to fluctuating economic and political conditions those markets. Perhaps that is why the company is beginning to shift its attentions to the emerging Chinese market. Movements in exchange rates could see the already narrow margins in the car market being reduced.
The company needs to keep producing cars in order to retain its operational efficiency. Car plants represent a huge investment in expensive fixed costs, as well as the high costs of training and retaining labour. So if the car market experiences a down turn, the company could see over capapacity. If on the other hand the car market experiences an upturn, then the company may miss out on potential sales due to under capacity i.e. it takes time to accommodate. This is a typical problem with high volume car manufacturing. Opportunities
Lexus and Toyota now have a reputation for manufacturing environmentally friendly vehicles. Lexus has RX 400h hybrid, and Toyota has it Prius. Both are based upon advance technologies developed by the organisation. Rocketing oil prices have seen sales of the new hybrid vehicles increase. Toyota has also sold on its technology to other motor manufacturers, for example Ford has bought into the technology for its new Explorer SUV Hybrid. Such moves can only firm up Toyota’s interest and investment in hybrid R&D.
Toyota is to target the urban youth’ market. The company has launched its new Aygo, which is targeted at the streetwise youth market and captures (or attempts to) the nature of dance and DJ culture in a very competitive segment. The vehicle itself is a unique convertible, with models extending at their rear! The narrow segment is notorious for it narrow margins and difficulties for branding. Threats
Product recalls are always a problem for vehicle manufacturers. In 2005 the company had to recall 880,00 sports utility vehicles and pick up trucks due to faulty front suspension systems. Toyota did not give details of how much the recall would cost. The majority of affected vehicles were sold in the US, while the rest were sold in Japan, Europe and Australia.
As with any car manufacturer, Toyota faces tremendous competitive rivalry in the car market. Competition is increasing almost daily, with new entrants coming into the market from China, South Korea and new plants in Eastern Europe. The company is also exposed to any movement in the price of raw materials such as rubber, steel and fuel. The key economies in the Pacific, the US and Europe also experience slow downs. These economic factors arepotential threats for Toyota.
Thanks to the dedication and hard work of indivduals who make up the Toyota family, Toyota has become the forth biggest automaker in North Amercia. Here you will find some of the many figures behind that fact. More . . . Disclaimer: This case study has been compiled from information freely available from public sources. It is merely intended to be used for educational purposes only.