Overview

Who is Toyota?

History

Global Expansion

Company Mission & Principles

The Auto Industry

Porters 5 Forces

Threats and Opportunities

Application of Technology

Competitive Stategies
Who is Toyota?

A Japanese car company who is a market leader
in manufacturing some the world’s most affordable
and reliable cars.

Founded by Kiichiro Toyoda

Brands:
When it Began
1935
1st A1
prototype
passenger
car
1937
Formerly
established
1950
Toyota Sales
Established in
Japan
Toyota’s Global Expansion

1957: Toyota expanded its business to the
U.S.A. with Toyota Motor Sales U.S.A. Inc.

15 years later: manufacturing cars in the U.S.
Company Mission
“To make safe and reliable vehicles at
an affordable price.”
Toyota 5 Main Principles

Always be faithful to your duties,
thereby contributing to the Company and to the overall good.

Always be studious and creative, striving to stay ahead of the
times.

Always be practical and avoid frivolousness.

Always strive to build a homelike atmosphere at work that is
warm and friendly.

Always have respect for God, and remember to be grateful at all
times.
The Auto Industry

A platform where the world’s motor vehicles are designed,
developed, manufactured and sold.

Auto industry declined in 2008

Steadily regaining its strength through 2010

Ever changing to accommodate environmental conditions
and trends.
The Auto Industry

According to Grist magazine, Auto sales
account for 20% for all retail sales in America
and the industry generates about $10 billion
dollars in tax revenue for the country.
Leaders of U.S Auto Industry
Market Share
Sales of cars and light trucks
Genral Motors
19%
29%
Ford Motors
17%
15%
11%
9%
Chrysler LLC
Honda
Toyota
Others 23
Manufacturers
What is happening?
Why Porters 5?
Understand
the Market
Develop
Competitive
Strategy
Porters 5 Forces Model
Buyer
Power
Threat of
New
Entrants
Rivalry
Supplier
Power
Threat of
Substitutes
Ranking low to high with 1 being the lowest and 5 being the highest.
Rivalry
HIGH (5)

The big 5 dominate the market.

Little product differentiation.

Rivals have strong brand
names (Honda, General
Motors).

Globalization of the Auto
industry increases competition.

Brand awareness is similar to
rivals.
Opportunities: product differentiation, competitive collaboration
Threat of New Entrants
LOW (2)

Plenty government
regulations.(emissions,
safety.)

Congress Bill mandating
corporate fleet average fuel
economy (CAFÉ)

Expensive R&D for more
Eco friendly cars.
Threat of New Entrants

High initial start up costs.

The market is filled with loyal
customers.

Greater advantages from
economies of scale.
Opportunities: further investments in R&D
Supplier Bargaining Power
LOW to MEDIUM (2-3)
 Toyota contractual
agreements and partnerships
with many of its suppliers.

Switching costs are not very
high.

Suppliers also provide raw
material for other smaller
industries.

Many supplier rely on few
automobile manufacturers to
purchase their products.
Opportunities: further build switching costs, acquire more suppliers
Buyer Bargaining Power
Low to Medium (2-3)

Buyers have many options in car
manufacturers.

Toyota has a strong image.

Strong rival brand images as well.

Switching costs are low as many cars
are comparable with Toyota’s prices.

Toyota provides a large purchase item.

Consumers do not generally buy in bulk.
Opportunities: increase buyer switching costs, build brand loyalty
Threat of Substitutes
LOW (2)
 More convenient than substitutes.

Some substitutes can be more
costly.

Public transportation is nonexistent in many areas.

Some are less efficient than
vehicles.

High gas prices
Opportunities: Manufacture more alternative energy vehicles,
Threats

Toyota’s biggest threat is its Rivalry.
Opportunities
Product
Differentiation
Competitive
Collaboration
More
alternative
energy
vehicles
Acquire more
suppliers
Build supplier/
buyer
switching
costs
Application of Technology

Develop new automobiles that uses alternate
energy sources.

Implement more automated processes in
manufacturing.

Eliminate costs affiliated with assembly and
production to provide an even cheaper product
to consumers.
Competitive Strategies for Toyota
(1)

Alliance Strategy:- Toyota should form alliances with
companies to create more high-tech and
environmentally friendly cars and with suppliers to
further reduce supply costs and keep supplier
bargaining power at a minimum.
Benefits:
○ Prevents 100% absorption of R&D costs.
○ Facilitates innovation.
○ Continues to provide quality products at reasonable costs.
Competitive Strategies for Toyota
(2)

Innovation Strategy:- Create new and improved
products.
 Develop a program where employees are allowed to be
creative and share their ideas for new products.
 Develop strategies to attract younger, more creative
minds.
Benefits:
○ Always creating new products to stay ahead in the market.
○ May provide some level of differentiation from competitors.
Competitive Strategies for Toyota
(3)

Differentiation Strategy
 Introduce new colors and interiors at no additional
costs.
 Include more features in the standard models.
 Create a “Toyota Experience” instead of simply
selling a product.
Benefits:
○ Distinguishes the brand from others in the market.
Competitive Strategies for Toyota
(4)

Consumer Intimacy
 Toyota should further develop its consumer
order process and gather more information
on consumers to better build consumer
relationships.
Benefits:
○ Allows Toyota to fulfill consumer desires to meet
consumer expectations precisely.
References
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
General Motors. Fuel Cells. 2008. 13 September 2010
<http://www.gm.com/vehicles/innovation/fuel-cells/>.
Gross, Daniel. "A Successful Turn." 3 September 2010. Newsweek Web site.
13 September 2010 <http://www.newsweek.com/2010/09/03/a-successfulturn.html>.
McCurdy, Dave. "WHY THE HEALTH OF THE AUTO INDUSTRY MATTERS
TO YOU." 12 November 2008. Grist Magazine Web site. 12 September 2010
<http://www.grist.org/article/why-the-health-of-the-auto-industry-matters-toyou>.
Toyota. "Annual Report: Toyota." July 2010. Toyota Web site. 13 September
2010 <http://www.toyota.co.jp/en/ir/library/annual/pdf/2010/index.html>.
Toyota. Timeline: Toyota. 2010. 11 September 2010
<http://www.toyota.com/about/our_business/our_history/timeline.html>.
Wall Street Journal Market Data Center “Auto Sales” 1 December 2010. 2
December 2010 <http://online.wsj.com/mdc/public/page/2_3022autosales.html>.
Welch, David. "The Auto Industry's Second-Biggest Fear." Business Week 15
January 2008.