Toyota’s Business Environment

Toyota created and revolutionised by Sakichi Toyoda the inventor of the world’s first automated loom in 1918. Sakichi sold his patent for the automatic loom for the sum of £100,000 in 1929 and then donated the proceeds to his son to develop automotive technology at Toyota. Production of the first prototype known as the Toyoda AA passenger vehicle begins in 1936, the Toyoda motor corporation began. The Toyoda family were superstitious and changed the letter ‘d’ to a ‘t’ as the letter ‘t’ only requires 8 strokes and 8 is a lucky number in Japan.

Toyota Motor Corporation was formally founded on 28th August 1937 with a total investment of 12 million yen (approx. £300,000). Toyota is at the heart of global manufacturing, a company that has grown within 70 years to become the leading far eastern and world’s 2nd largest car manufacturer. Toyota a global business, building vehicles in factories on six continents around the world and employing more than a quarter of a million people. The United Kingdom is a key market for Toyota both in terms of sales and manufacturing, building two production centres. Toyota’s automotive business, including sales finance, accounts for more than 90% of the company’s total sales. Toyota totalled 8.81 million units from January 1, 2006 to December 31, 2006 making a new record. The unit sales consolidated to ¥21.03 trillion yen in the fiscal year to March 2006. Toyota is hoping for a 6% increase in the next financial year to over take General Motors and make Toyota the biggest car manufacturer in the world.

Toyota is split up into two sectors:1.Automotive sector- Lexus is Toyota’s brand name for its luxury vehicle division. Group companies owned by Toyota include, Daihatsu and HINO brand vehicles. 2.Non-Automotive – At present, Toyota is active in a number of areas in addition to its core business of automobile manufacturing-Areas including housing, financial services, communications, GAZOO, marine vehicles, biotechnology and afforestation.

This table indicates Toyota sales by destination (units)

Toyota’s goal is to be a “good corporate citizen,” constantly winning the trust and respect of the international community. Continuing in the 21st century, we aim for stable long-term growth, while striving for harmony with people, society and the environment.

The main competitors and relative size of market shareThe world’s most profitable automaker – and soon to be its biggest -has a near 15% global market share and a substantial market share in the U.S, where it sold 2.5 million cars and trucks last year. Many analysts believe Toyota will become the world’s largest auto maker in the 2007 or 2008 calendar-year by overtaking current leader General Motors Corporation, with a stated goal of producing 9.4 million vehicles in 2007. GM vehicle production increased by 1.7 million in 2006 from 7.3 to 9 million total vehicle production. Toyota have a 45% domestic market share in small and standard car segments higher than any other manufacturer in Japan making them unstoppable and very difficult to compete. This is due to a halt in Honda’s growth and companies such as Mitsubishi and Mazda who continue to struggle. The overall car market and competition is colossal and trying to dominate the entire market is extraordinarily difficult; however Toyota are doing an exceptional job, dominating Japan, America and parts of Europe. Toyota’s main competitors are General Motors, Ford, Volkswagen, Honda, Peugeot and Nissan.

The market can be segmented in three regions;

European Car Market – Volkswagen are the far leaders within the European market standing at an impressive 18%, followed PSA Peugeot and Citroen with14%. Toyota has only 5% of the European market at present, less than half of its US position. (http://www.prnewswire.co.uk/cgi/news/release?id=98786)

Asian Car Market- Asian automakers have grabbed more than 30% of the world’s most lucrative car market. An important advantage for Asian carmakers is the greater freedom to build new plants in lower-cost countries rather than in high-cost Germany, France and Italy, where incumbents face pressures to preserve jobs. By 2011 Toyota and Honda will both expand there car building capacity by 20 percent in central and eastern Europe. This poses a massive threat for the European market; however Toyota need to gain traction in Europe to reach its global 15% stake and overtake GM motors. (news.bbc.co.uk/2/hi/business/3116180.stm)

American Car Market- the United states are finding difficult to grow as there car sales are beginning to flatten out. They are now concentrating on Europe sharpening appeal with cost-conscious and green minded consumers. Sales of General Motors in North America have fallen so the company has cut production by 10%. There are many factors affecting American production such as high oil prices plus a less sizzling economy and interest rates rising spells out desperate challenge for American car manufacturers. (www.backboneamerica.net/2006/02/27/the-downfall-of-general-motors) General Motors

Sales of General Motors in North America have fallen so the company has cut production by 10%. There are many factors affecting American production one is high European oil prices then there are job losses in a less sizzling economy and interest rates rising spells out desperate challenge for GM. GM will shed 30,000 jobs and close eight factories is, regrettably, just the beginning. Toyota before to long will knock GM of the perch it has had since 1931 as the world’s largest car manufacturer. General Motors, most experts believe, will eventually emerge as a smaller, more competitive company.

FordFord is Toyota’s other competition; being 2nd biggest in America and 3rd biggest manufacturer in the world, however reports of Ford losing $1.2 billion in the North American division means that Ford our falling fast at Toyota’s feet. Ford have a slight hope if the can close the technology gap with hybrids and other fuel efficient vehicles. Ford is asking government to support them by offering subsidies and increasing tax credits for research and development to support advanced technology for vehicles. This can be the only way back for Ford who is in troubled times.

ThreatsThe 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. 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 capacity. If on the other hand the car market experiences an upturn, then the company may miss out on potential sales due to under capacity. (http://marketingteacher.com/SWOT/toyota_swot.htm)

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 are potential threats for Toyota. (http://marketingteacher.com/SWOT/toyota_swot.htm)

Bibliographyhttp://marketingteacher.com/SWOT/toyota_swot.htmhttp://www.usnews.com/usnews/news/articles/051205/5week.htmwww.toyota.co.ukwww.en.wikipedia.org/wiki/Toyotawww.toyota.com/about/operations/design-rd/locationswww.bluememe.blogspot.com/2005/11/fantasy-island-corporate-edition.html