1. Taku Mizusawa
BUSMHR 4490
Toyota
Toyota Motor Corporation was founded by Kiichiro Toyoda in 1937. Toyota is one of
most recognized company world-wide in automobile industry. Toyota conducts its business
worldwide. 53 overseas manufacturing companies in 28 countries and regions. It is most trusted
brand in the import automobile category, longest-lasting vehicles of any full line automative
manufacture, and most fuel-efficient full-line automative manufacture awards. Primary strength
factor for Toyota is its production system known as TPS (Toyota Production System). Many
scholars study about TPS due to its excellence production system. It is no exaggeration to say
Toyota changed the way of manufacturing vehicles. Shown in Exhibit 1, among all of the other
major car manufacturing companies, Toyota is profitable company.
PORTER’S FIVE FORCE
Looking at environment of automobile industry, we could conclude that automobile
industry is not attractive. Toyota must stand out among other competitors. Rivalry force is strong
due to number of small and big firms to compete in automobile industry. There are about
hundreds of car manufacturing companies in the world including small and big firms. Substitutes
force is moderate. People can choose not to use automobile. They can use public transportation
such as train, bus, and taxi instead of car. Power of supplier is relatively low. There are many
suppliers for car manufacturing. Suppliers must rely on manufactures to sustain their business.
Power of buyers is moderate. People can switch to other brands easily and adopt easily which
leads to moderate force of switching cost. Also, buyers’ preference could influence products.
Especially price and features. Threat of new entry is low. Capital cost is high such as building
facilities. Also, incumbent firms advantages of recognized brand and know-hows in the industry.
Internal Analysis
Toyota have been profitable for decades. Provides high quality cars with reasonable
price. Toyota has been profitable for this past 2 years. Numbers of sales increased from 2014 and
has been increasing in Japan and North America for past 4 years. By conducting internal
analysis, we could see why Toyota is successful. Core competency of Toyota is TPS (Toyota
2. Production System) shown in Exhibit 3. This unique production system TPS composed with
Heijunka, Kaizen, Just-in-Time (JIT), and Jidohka enables Toyota to produce high quality car
with low cost.
VRIO framework can provide us Toyota’s competitive advantage in automobile industry.
Key factor is as mentioned, Toyota’s unique production system. Toyota is able to provide high
quality cars with reasonable price because of its low cost to manufacture. Sophisticated
production system responds quickly to changes of customer demand. Two concepts of
production system, Jidoka and JIT (Just-in-Time) can efficiently and quickly produce vehicles of
high quality, one at a time, that satisfy customer requirements. Human resource culture which
Toyota is something that many organizations strive to replicate. It is also known as lean culture
or Toyota culture. It is a culture that Toyota build it up through decades and is hard to replicate.
Every employee gets training in factory to learn about lean manufacturing to get the insight of
Toyota’s core competence. Brand name is one of essential factor for Toyota. It is well
recognized all over the world for providing high quality and safe cars with reasonable price.
Looking into value chain framework, we could identify how Toyota creates value. Key
driver for Toyota to gain value is heavily weighted in operation activity. TPS functions in
operation activity. Toyota increased expenditures of R&D from 2010, indicating reaching out for
more customers and developed technology. As a result, Toyota ranked 9th out of 500 largest
companies to generate high profits in 2014.
Recommendation
By conducting SWOT analysis, we can say that Toyota is not efficiently using their
assets. Also, technological innovation affects number of sales for automobile companies. I
recommend Toyota to pursue their business strategy of cost leadership. Environment-friendly
such as hybrid technology, safety technologies are not hard to imitate. It is hard to differentiate
automobile products these days since all of the cars are being sold with same standardized
components. To make difference among other automobile companies is with price, as mentioned,
Toyota is well recognized for its high quality and low price cars. As a result, number of cars they
sold is increasing for past two years. I would hardly recommend Toyota to keep their business
strategy as cost leadership.
4. Exhibit2
Competitors/Rivarly High Many othercompanies
Abouthundreds
automobile companies
includingsmall andbig
firms
Matured industry
Substitutes Moderate Publictransportations
(train,bus,air plane)
Motorcycle
Bikes
BargainingPowerof Suppliers Low Suppliersrelyontheir
contracts withfew
companiesthatthey
supply.
Notconcentrated,there
are manysuppliersin
the industry.
BargainingPowerof Buyers High Low switchingcost
Many otherbrands to
choose
Consumerpreference
couldchange the
features
Numberof price
consciouscustomer
increased
Treat of NewEntrants Low Requireshighcapital
investment
Incumbentfirmshave
advantage of brand
recognition
Advantagesfor
incumbentfirmswith
theirsupplier
5. Exihibit3
Exhibit4
Resources/Capabilities Value Rareness Imitability Organization
Toyota Production
System
Yes—Produces
reliable carswith
lowcost
Yes—Production
systemdonot
vary among
automobile
industry,but
Toyota usesits
ownmethodto
produce cars
Yes—Many
companiestried
to replicate it
but failed.
Yes—Beenusing
since 1960s
Human Resource Yes—
Sophisticated
lean
management
humanresource
leadstoefficient
production.
Yes—Many
companiesoften
outsource
humanresource,
but Toyotatrains
theiremployees
Yes—Itishard to
imitate culture
of Toyota.Also
as knownas TPS
culture
Yes—Evenif its
headquartersin
the US iswell
organized
Brand Yes—Reliable,
highquality,and
reasonable price
Yes Yes Yes
6. Exhibit5
PrimaryActivities SupportActivities
Inboundlogistic—Toyotausesthirdparty
for raw materials,theydonotmake own
raw materials
Operation—ToyotaProductionSystem
Outboundlogistic—Toyotadistributes
the finishedproductstodealersthatthey
have contract with
Marketingand Sales—Toyotahascontrol
overtheirdealers,workingwithdealers
and usingadvertisement,theyexpose
theirproducts
Services—Strongpost-purchase services
Firminfrastructure—Accounting,
Financial planner
Human resource management—Toyota
culture,education&training,diversity
Productand technologydevelopment—
Create and developthe technologyfor
customersthatalreadyexist
Procurement—Sustaininggood
relationshipwithsuppliers
Exhibit6
Toyota LeanManufacturing
http://www.toyota-global.com/company/vision_philosophy/toyota_production_system/
