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Toyota Case
Alyssa Puglia

November 20, 2013

Introduction Toyota originated in 1924 strictly creating automated looms. They then invested the profits from this into automobile production. In 1937, Kiichiro Toyota founded Toyota Motors in Japan. 20 years later, in 1957, the company came to America creating 365,000 jobs. There are now about 1,506 Toyota dealerships across America. The North America headquarters is located in Torrance, California. Toyota is comprised of Toyota itself, Lexus, its luxury brand automobiles and most recently, Scion. Toyota is responsible for about 75% of all hybrid automobiles on the road today. The company also won 8 J.D. Power and Associate Dependability Study awards in 2012. About 80% of Toyotas sold 20 years ago are still on the road today. Toyotas present strategies include product differentiation, market differentiation, low price, quality products, safety and sustainability. Vision Statement To be the most successful and respected car company in the world. Mission Statement To attract and attain customers with high value products and services and to provide the most satisfying ownership experience in the world. Goals 1. To honor the language, spirit of law, cultures and customs of every nation 2. To undergo fair and open business 3. To dedicate their business to clean and safe products as well as encouraging creativity and teamwork 4. To strive for stable, long term growth with mutual benefits for partners

Focal Problem Toyotas main focal problem is that they are not an industry leader. Other Problems Toyota is focused on making exciting cars that are appealing to younger customers. They are also trying to maintain their image as the leading green

company in this green movement happening across the world. They experience a large number of recalls.

Financial Analysis Efficiency: There are many ratios that can be used to determine how well a company is performing financially. One of the biggest reasons why Toyota has been so successful is that they are efficient. Efficiency can be looked at through accounts receivable. Toyotas inventory turnover was 12.19 in 2013 and their receivables turnover was 10.61 in 2013. The industry average was about 10 in these areas so Toyota is doing well in that area.

Profitability: Return on sales is one of the best measures of profitability as it shows what percent of every dollar earned by Toyota is actually profit. Return on Assets is the amount of net income divided by the total number of assets the company has. In 2013, Toyota had a ROA of 2.71%. The industry average was about 5.96% so Toyota needs to improve in this aspect of their business.

Liquidity: Liquidity is the measure of how well a company can turn its assets into cash. This determines whether or not a company will have the money to pay off any short term debt. The quick ratio is also a measure of a companys liquidity. A company wants their quick ratio to be over 1 and anything under 1 means that they may struggle with paying off short term debt. In 2013, Toyota has a quick ratio of .84. However, the industry average was .74 so they are doing fairly well in comparison with the rest of the industry.

Five Forces of Competition Power to Customers- Nationally low, Globally Medium Toyotas key customers are young adults from the age of 16 to 25. Nationally customers have relatively low power because motor vehicles are the most convenient form of transportation. In other parts of the world motor vehicles are not the main transportation method or the most convenient.

Power to Suppliers- Low The key suppliers are manufactures that supply the raw materials to make the components of the car such as: rubber, aluminum, steel, and leather. Suppliers have a low power because they rely on the auto manufacturer to purchase their products. Each car manufacturers have many suppliers and do not just rely on one in unparticular. Degree of Substitution- Low to medium There is a low to medium degree of substitution because consumers can use other forms of transportation depending on the region you live in. In the United States automobiles are the most common and convenient form of transportation. Barriers to Entry- High The global automobile industry has high barriers to entry because of the high startup capital, economies of scale are present, government regulations, import fees, experience, and being able to produce a differentiated product. Rivalry- High The global automobile industry has a high degree of rivalry as a result of the abundance of competition. Alternative Generation/Evaluation: Alt 1: Market Development The market development strategy involves selling a companys present products in a new geographic market. One of the weaknesses of Toyota is a weak presence in international markets. Toyota can use this strategy to expand into new locations internationally in order to improve their position in the industry. Toyota has a weak presence in Western Europe and the European Union which is comprised of 28 countries. Expanding here would be a good strategy for them. However, expanding into a new country is costly and not always easy to implement so we would not recommend this strategy.

Alt 2: Product Development (Green Cars) Product Development is the strategy of changing the features of your current products in order to enhance their life cycle. Green cars or eco-friendly cars are very popular one of these days as sustainability is becoming important in society. In order to try and become the leader in the global automobile industry, Toyota needs to develop eco-friendly versions of their current models. There can be negatives associated with this strategy mainly the cost of developing these new green cars. This could be a problem when trying to implement. Alt 3: Market Development (Appealing) The biggest problem for Toyota is that their cars are boring and not very physically appealing with the younger generation of consumers. In order for their cars to be more appealing for early drivers in the 16 to 25 age range, they need to create more stylish cars that appeal to younger drivers. If Toyota can develop a sport style car or even change some of the physical attributes to their current models, there is a lot of potential to generate more interest from younger consumers. We believe this is the easiest and potentially most effective strategy for Toyota to implement.

Alternative Evaluation Matrix

+= Good -= Bad Product Development (Green Cars) Product Development (Cars more Appealing) Market Development (Western Europe) Vision Focal Problem (Not appealing) + Cost Risk Long Term Profit + Easy to Implement +/Total

4.5 + 1.5 4.5 + 1.5 5+ 1-

+/-

Recommendation After analyzing all of the strategies we believe that the market development strategy would be the best choice for Toyota. Developing a more stylish physical appearance to their models would generate more interest from the younger generation of consumers and fix one of their major problems in an easy and cheap manor. Implementation of Market Development for Younger Generation To implement market development, Toyota will release a new model automobile called Geo-Logic. It will be aimed at young adults ages 16 to 25. Safety will still be of great importance as a first car is usually partly funded by ones guardians. Features will include an automatic crash response, full car airbags, roadside assistance and blind spot mirrors. Toyota will still uphold a positive reputation by assuring dependability and safety. However, this new model will have an edgy exterior to appeal to the younger generation with a sleek design, custom rims, panoramic double sun roof, optional color interior and turbo engine. Estimated price would be about $30,000. Although this may seem pricey for a first car for most, the safety benefits make this automobile an investment as Toyotas are very dependable. The tagline for marketing will be The New Generation of Toyota to get young adults to think of Toyota as something more than a grandmas car. This strategy would only be implemented in the United States as a trial run before bringing it to the global market especially because the power of customers is lowest in the United States.

The New Generation

Of Toyota
Sporty, stylish, fast, dependable and just for you. Customize yours today.
Corporate Social Responsibility Toyota is socially responsible by providing traffic safety education activities, producing of fuel efficient automobiles, developing technologies with a low biodiversity impact, protecting ecosystems and rainforests and providing community concerts. References http://www.bizjournals.com/profiles/company/us/ca/torrance/toyota_motor_sa les_usa_inc/31942 http://biz.yahoo.com/ic/43/43972.html http://www.hoovers.com/company-information/cs/companyprofile.Toyota_Motor_Sales_USA_Inc.0cbb4992ced1deda.html http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?tick er=6201:JP http://www.toyota.com/ http://www.toyotafinancial.com/ http://www.toyota-industries.com/

APPENDIX 1
Industry Analysis Definition: Global automobile industry

Key Competitors: General Motors, Ford, Toyota, Chrysler Group, Honda, Nissan, Hyundai, Kia, Subaru, BMW

Past Industry Strategies- Product differentiation, market differentiation, low price, high quality products

Present Industry Strategies: Product differentiation, market differentiation, low price, quality products, safety and sustainability.

Importance of Innovation: High importance of innovation because a vehicles functional features are continuing to change with advancements in technology.

Industry Dynamism: The industry is dynamic because the constant change in the design of the vehicles and advancements in technology.

Concentration: High concentration because there are only a few large-scale competitors.

Mature Industry: The automotive industry has been around many years and has an established market presence

Government Impact: High government impact because of the many rules and regulations put on the industry such as: safety standards, fuel economy standards, emission standards, and import regulations.

Key Customers/Suppliers: The key customers are young adults from the age of 16-18. The key suppliers are manufactures who supply the raw materials to make the components of the car such as: rubber, aluminum, steel, and leather.

Other Groups: Environmental groups

Current Problems: With fuel prices on the rise, there is an increased awareness for protecting the environment. There is a vast amount of competition and government regulations that restrict business procedures. The economy is still recovering from the recession and consumers are using their vehicles longer than ever before.

Current Opportunities: Advancements in technology, new vehicle designs, and globalization. Also helping to protect the environment by producing more efficient cars.

Future Direction: The automobile industry is not going anywhere any time soon. Key Success Factors: O Economies of scale O Quality O Reliability O Customer service O Safety O Fuel efficiency O Reliability on technology O Design O Price

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APPENDIX 2
SWOT Strengths Brand Reputation Leader in Green car developing Wide range of varying cars

Weaknesses Large number of recalls Small amount of production in emerging markets Low Market share in Europe Lack of youth appeal

Opportunities Going Green Global Market Advancements in Modern Technology

Threats Constantly changing Fuel prices Emission Standards Intense industry competition

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Exchange rate fluctuations Government rules and regulations