Toyota S.W.O.T.

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Toyota S.W.O.T. Analysis

Team 1

Craig Bressler

Brigitte Dockrey

Samantha Frantz

Christopher Patterson

Management 301W

April 18, 2010

Strengths Craig Bressler My team has chosen to do a SWOT analysis of the Toyota Motor Corporation. For this assignment, split up the work and each member is doing a different part of the SWOT analysis. I will be discussing the strengths of the Toyota Motor Corporation. In order to complete this assignment, I will discuss Toyotas strengths as functions. Examples of these functions include but are not limited to; accounting/finance, marketing, operations, and lastly, research and development. The first function that I will talk about is Toyotas accounting/finance strengths. One of Toyotas great strengths is simply how much money they have. Toyota has done a great job at keeping costs low thus allowing for greater profits. A fine example of how financially strong Toyota is can be seen by how they were able to recover from one of the largest automotive recalls ever. This past March, Toyota was able to offer record breaking cash incentives to Toyota customers. Their sales in March shot up 86.8% compared to sales in February. It seemed that by offering high cash incentives, customers had forgotten about the recall and Toyota had bought back their customer loyalty. Another small accounting and finance strength that I will mention is Toyotas investment in new manufacturing plants in the United States and China. These plants have increased Toyotas profits and serve as an example for green manufacturing. A marketing strength of Toyota is how they are able to give back to the community. While Toyota says they believe in Philanthropy, this push to give back to the community also helps to make their company look good in the public eye. Since 1991, the Toyota Motor Corporation has been able to contribute more than $464 million to various philanthropic programs within in the United States alone. Toyota helps to support programs that are focused on

the environment, education and safety initiatives. They feel that this will help to strengthen diverse communities across the United States. Toyota also partners with local nonprofit organizations in the communities where their employees live and work. Toyota has many different operational strengths. The largest operational strength they have is their ability to keep costs low. This particular strength enables Toyota to do several things. The first being that will be able to pass the savings onto their customers by offering lower prices on the products they sell. This will also draw customers away from Toyotas key competitors such as Ford and General Motors and will make it much harder for them to compete against Toyota. Lastly, by keeping the cost down, this will enable Toyota to profit more from the products they sell. Lastly, Toyotas research and development is a strength. Toyota is headquartered in Japan and has 34 manufacturing facilities, importers/distributors, research and development facilities and training centers all over the world on all continents. One of the biggest highlights for Toyota is the achievement of their established reputation for quality and reliability in the products they sell. Toyota is ranked as one of the top companies in the automotive industry. They are able achieve all this as a result of how much effort they put into their business model, their production methods (the Toyota Production System), and their research and development. Toyota is always researching new and innovative ways to stay productive and competitive in todays automotive market. Likewise, they are always trying to achieve new production standards in the quality of their product as well as their ability to keep cost low.

Weaknesses Brigitte Dockrey For Toyota, the floor mats that were used in many of their models was like a pebble that is thrown into a body of water, sending ripples throughout the whole company. Now every aspect of the company has come under intense scrutiny, exposing some of the weaknesses that many thought did not exist. Tragically, it took the death of an off-duty state trooper and his family for both Toyota and the US government agencies to take a serious look at the acceleration issues that had been plaguing Toyota since 2004. The vehicle that crashed was a leased Lexus. It was determined that the cause of the accident was the floor mat. It had moved into a position that caused the gas pedal to get stuck. It was also determined that the floor mats used in the vehicle actually belonged to another model of Lexus. Consumers were told to remove all floor mats while Toyota worked on a fix. However, the removal of the floor mats did not resolve the issues of the sticking acceleration pedal. It soon became clear that the problem was the acceleration pedal itself. The question now is whether the defective gas pedal is the result of faulty design, which would then be traced back to the research and development department; or is it a quality control issue related to the suppliers who manufacture these pedals. All the pedals in question come from the same manufacturer, CTS Corporation in Elkhart Indiana. Nearly 10 million vehicles have been recalled worldwide because at least eight different models use the same acceleration pedal platform. This is done to lower the cost of the vehicles. The design questions do not end here. There is a growing amount of concern that the defect actually lies in the computer hardware or software that controls the gas pedal system.

These issues are not present in older cars as they use a cable to control the acceleration. NASA scientists and The National Academy of Sciences will be performing separate studies on the electronics of Toyotas cars as well as the whole auto industry. There is a belief that there may be either a computer design defect or that electromagnetic compatibility or electromagnetic interference may be occurring. All of these revelations do not bode well with Toyotas consumers or its brand name. Consumer Reports has suspended its recommendations for the affected models until all the problems are resolved. Avis has pulled the Toyota models out of its fleet of rental cars until they are fixed. A recent survey by Hall and Partners USA shows that 89% of the consumers questioned were aware of the recalls. The likelihood that a consumer would buy a Toyota has dropped from 75% to 49%. Consumers are once again looking at domestic cars. Toyota is on the verge of losing its reputation of making reliable quality cars for less money. To try and offset this rapid decline, Toyota has written an official apology to its customers and the TV airwaves are now flooded with commercials trying to prop-up its tarnished image. Not only does Toyota have to worry about losing its customers and its brand, it must also deal with those customers and stockholders who claim they have been damaged by the recent events and are filing law suits. To date, there are three different tracks that these lawsuits are taking. The first is the individual suits for the loss of life and bodily injury. There are allegations that the company knew about the acceleration problems back in 2007. Toyota could have installed the same type of break override system that other manufacturers were using, but they decided not to. This override system was not offered to its customers until after the recall and is now being used in its new models. There are also class action suits being filed by the owners of Toyota vehicles who claim that the values of their vehicles have dropped

considerably. Finally, the stockholders of the company are filing class action suits alleging that the company misled its investors about the severity of the problem as well as hiding design defects in the acceleration system. These law suits will certainly affect not only the bottom line, but its reputation and consumer loyalty for years to come. There should also be some concern that the competitive edge of Toyotas product line is slipping. Over the past several years, the gap in the quality between Toyota, Ford and even Chevrolet has all but disappeared. JD Power and Associates ranks them as 6, 7 and 8 respectively. Ford has gone even further by designing cars that are innovating and very appealing. This fact bears out in JD Powers appeal rankings. Ford is listed at 785 and Toyota is at 756, which is well below the industry average of 779. Ford is using all sorts of innovate ideas in designing its new models including the use of Sync, touch screens on the dashboard and I-Pod like controls on the steering wheels. The US manufacturers have also made great strides in designing cars that are smaller and more fuel efficient. The lack luster sales of the Tundra,

Toyotas full size pick-up truck, are another indication that its product lines are beginning to fall short of meeting consumers needs. When a crisis of this magnitude occurs, one has to take a close look at the decisions of management. There are many that contend that in its quest to become the largest global manufacturer, Toyota took its eyes off those processes and controls that gave Toyota its competitive edge. There are admissions that the company would rush through the design process relying too heavily on computer simulations, not enough time on building vehicle prototypes, and not enough time performing quality checks. Because of the rapid expansion, there was a loss of control over its suppliers.

Finally, the tall hierarchal structure of Toyota, as well as the culture in Japan poses a problem for a company that wants to compete in the global market. Japanese firms do not trust foreigners to make decisions, nor do they delegate any authority to them. All the decisions are made in Japan. This is a serious disadvantage for Toyota. They lack the diversity that is needed to compete effectively in the global market. In this type of structure the flow of information is slow and the company is slow to respond to changing conditions. Many top level executives did not become aware of the acceleration problem until after the recalls were made. Like many companies before them, Toyotas success may have led them to become complacent, into believing they are infallible, that their competitors will never be able to touch them. If they are not careful, Toyota may become just another car company.

Opportunities Christopher Patterson As we all know, Toyota is currently in some deep water with the recent amount of recalls affecting the company. So I thought it would be a good idea to sit down and look deeper into what makes the company survives during these tough times. Some people say that they got too big too fast, and others say that Toyota got money hungry and started cutting back on quality to put more money in their pockets. However, I feel that Toyota has started spreading their company into new markets and ventures which allows it to survive during these tough times and may have slightly lost touch with what was really important, safety and quality. I took a look at a few on line polls that have been complete by the general consumer in regards to Toyota and their recent recall. Generally speaking, most people are scared to purchase a Toyota, but at the same time they want to take their chances because they know they are buying a quality product. Right now I am in the market for a new vehicle and am thinking about

a Toyota. Yes I am slightly skeptical towards the purchase, but when you look at Toyotas history and record for quality, it makes me slightly hesitant not to buy one. What company has not has a major recall after one of their products caused an injury or even worse, a death? Exactly, all companies go through these rough patches in their history, but it is because of their past performance that gives them the opportunity to overcome and be back on top (Toyota Forums). If consumers completely stopped purchasing a product just because the company hit some type of rough period then there would be no businesses around anymore. There is an old saying that, no one is perfect, well that goes the same for businesses. In fact, it is more than just the business to blame; it is the consumer as well. If we as consumers did not have such high expectations for the products we buy then maybe some of these automobile manufactures would be able to take their time in designing new models and products? So in theory, consumers can create a new opportunity for Toyota by cutting back on our expectations and allowing Toyota, and any other company for that matter, to increase their overall quality. Additionally, Toyota markets itself to all walks of life. They have small fuel efficient vehicles for the white collar that does a lot of traveling to and from work, as well as the soccer mom who needs a larger capacity vehicle to shuffle kids from place to place. Toyota has even recently gone into the heavier duty side of things and began marketing two trucks for blue collar folk who need a vehicle tough enough to handle whatever they may need to do that day. Whichever the case, Toyota has found a way to create opportunities for themselves by marketing themselves into new territories allowing them to expand their operations. Toyota has always been the underdog in the past never being able to compete with the big dogs, however recently they have just found new ways to come out on top of things. I think it has to do with them not being afraid to take chances. I did some research into why

Toyota is successful and found some very interesting points. For starters, most companies feel their employees are lazy and expensive, Toyota sees them as part of their team, and realizes that if it was not for them then the company would not be where it is today. Also, Toyota uses a Just-in-time production method, which allows it to keep costs down because they do not need large storage facilities to stock extra replacement parts. These are just two of the many reasons why Toyota has gotten to where they are and have the opportunity to continue to grow (Toyota History). Threats Samantha Frantz The threats for the Toyota Company start off with product recalls as a problem for vehicle manufacturers because this can affect how many vehicles that company sells. With Toyota there were a large number of vehicles recalled because of the brakes and in the past because of the floor mats and front suspension and now peoples perception of that type of car is changing. The quality of the vehicles is questioned now because of all the recalls. It is said that they created the North American Task Force which will help with the quality of the vehicles so that problems will hopefully be caught before the vehicles are sold to customers. Most car markets face rivalries. Toyotas biggest rivalry is Honda Motor Company. The prices between the two companies are very competitive. But, not only Honda is a competitor but companies that are being created in other countries such as: Japan, South Korea, and Germany. With all these other car markets being created or that are booming with business now that Toyota has had so many recalls can affect the Toyota business. Competition increasing daily goes in with the competitive rivalries because with all these companies becoming larger the competition is getting larger. Competition is a major factor in the

threats of the vehicle business because it can cause certain car markets such as Toyota to decrease in sales. Increased prices in raw materials are also a threat to Toyota. The steel and other raw materials are continuing to rise but finding fossil fuels is becoming harder and harder. Those materials are becoming scarce. The prices of raw materials are increasing and this can slow down the production process. All of this causes Toyotas profitability to go down and business will slow down. With the economy the way it is today vehicle manufacturers are going to be affected. People cant afford to buy expensive, new vehicles, let alone afford to replace parts in vehicles they own now. Some car manufacturers are being forced to shut down all over the world to cut down on costs. Employment is also slimming down because of the recession. Owners cannot afford to have so many employees because they need the money to keep the businesses running. Also due to the economy the raw materials are being affected so they both tie in together. All of these economic factors can cause a change in the production of cars and the sales of them also.

Team Recommendations/Strategies Consumer Reports very recent dont buy recommendation for the Toyota Lexus GX 460 is just another indication that Toyotas goal to become the number 1 car manufacturer in the world has negatively affected both its brand name and its reputation for building quality, low cost vehicles. The events of the past several months should be more than enough to alert the powers that be in Toyota that changes are needed. After reviewing and considering each team members contribution to the SWOT analysis, the team has made the following recommendations.

One of the first things Toyota needs to do is change its goal from becoming the number 1 global car manufacturer and go back to its core principles of making quality, reliable, low cost cars. Toyotas foray into the full-size pickup market and now the large SUV market has not gone well. Given the current economic conditions, for the time being, Toyota should discontinue these lines and concentrate on what they do best, manufacture cars. Toyota will also need to address the progress that Ford, GM and other car manufacturers have made in quality, mileage ratings and appeal. They are no longer light years ahead of the competition. If they want to capture a larger portion of the younger consumer market they will have to redesign some of their models and add some of the new technological gadgets that this market uses. Toyotas most loyal market is the older consumer. Toyota has an opportunity to cater to this loyal but aging market by designing cars and adding features that will make driving safer for them. Toyota needs to take a serious look at its R&D area, especially as it impacts safety. The issues that need to be addressed include the allegations that they are relying too heaving on computer simulations. Toyota has the fastest development cycle, turning out new models on average of every 38 months. Considering all the safety issues that have come to light in the last few months, it is time to slow the process down and spend more time on testing the actual models before they go into production. This is especially true because todays engines are being controlled more by computers and software. Finally, the corporate structure of the company needs to be changed. All the power is located in Japan. This is a major disadvantage for any company that wants to succeed in a global market. The type of hierarchical structure that is in place here hinders the companys ability to respond effectively to changes in the environment. This became very obvious in Toyotas slow

response to the floor mat/acceleration pedal crisis that was occurring in the United States. The managers in the US were not allowed to make recall decisions. The company needs to decentralize their operations and give more power and control to the managers in the different geographic markets. This will bring more diversity and fresh ideas into the organization and combat any type of group think that may be occurring in Japan. If the managers in each geographical area are given the latitude to make decisions that pertain to their individual markets, the company will be able to deal with all the external forces more efficiently and effectively. It would also avoid the publicity nightmare that occurred because corporate Toyota responded too slowly to what was happening in the U.S.