What is competition like in the mini-car segment of the European automobile industry? What do we learn about the nature and strength of the competitive pressures Toyota Motor Europe (TME) faces from doing a five-forces analysis?
Competitive Rivalry – Major European competitors include VW, BMW, Ford, Fiat, and PSA (the holding company that owns the Citroen and Peugeot brands). Toyota enjoys a very loyal customer base. The company has consistent, high-ranking quality marks.
New Entrants – The mini-car segment is undergoing renewed growth due to global economic factors. To sustain market position in a slow growth market, many brands have tried or will try to enter this segment. New entrants to this segment have tried various strategies without much success.
Buyer Power – The European mini-car segment represents low buyer power. That is, the switching costs are high while the average length of ownership is long. Also, reputation and services/features are important to buyers, which further weaken buyer power.
Substitute Products – Toyota is a leader in hybrid technology, environmental initiatives, and quality. These facts coupled with the narrow selection of substitutes, decreases the competitive pressures associated with substitute products.
Supplier Power – Because Toyota is one of the few firms that produces mini-cars in the target price range (10,000) with suitable features, it enjoys relatively strong supplier power. The competitive outlook for Toyota in the mini-car segment of Europe remains good. While competition is strong, Toyota has key competencies that allow the company to succeed in this environment.
Is competition in the mini-car segment of the European automobile industry best described as global or multi-country? Why? Which type of international strategy is TME using in its international operations? Competition in the mini-car segment of the European auto industry is best described as multi-country because:
• Buyers in different countries seek different attributes Sellers vary across countries • Industry and competitive conditions differ across countries Toyota is using a global competitive approach in its operations. That is, many of the same rivals in the automobile industry have a presence across different borders with a special emphasis on markets with large sales volumes. Global companies must do well in these markets or risk losing market position. Toyota has achieved global success by transferring its key competencies and brand recognition across many countries.
What do you see as the key success factors for firms in the European mini- car segment of the automobile industry? Key success factors in the European mini-car segment include
What forces are operating that have the power to alter the nature and structure of competition in the mini-car segment of the European automobile industry? The driving forces
Based on the information in case Exhibits 1, 3, and 4, how well are the Toyota in general and, more specifically, the Aygo positioned to compete against rivals in the mini-car segment? Does the Aygo compare favorably to other mini-cars and to similar cars made by Toyota’s partners (i.e., the Peugeot 107 and the Citroën C1)?
What does a SWOT analysis reveal a bout TME’s situation? Just how attractive is the company’s situation and position in European mini-cars? How successful has TME’s joint venture with PSA been? Why did TME choose this method to enter into the European mini-car segment of the automobile industry? How has TME’s competitive position been strengthened by this alliance? Has it been weakened in any way?
Based on your analysis of the industry and TME’s situation, what challenges will TME face in attempting to reach its goal of selling 100,000 Aygos annually? Do you think the company’s marketing strategy will be effective in enabling the company to meet this sales goal? Why or why not?
What actions would you recommend to TME’s top management team to improve the company’s competitive position and make the Aygo a resounding success?