Introduction: Toyota’s Strategic Management
SWOT analysis can be used for strategic planning for almost any kind of companies (Simerson, 2011). In this paper, it is going to be applied to the current situation of the Toyota Company that is still recovering from the major crisis that began in 2007. Although SWOT analysis cannot be used to provide a detailed description of the company’s expected strategies, it can offer a generalized interpretation of the current situation along with the possible opportunities for future business growth.
Toyota Motor Corporation: Case Study
History
The Toyota Motor Company (Toyota) was established in 1933 when it used to create trucks for military purposes (Heller & Darling, 2012, p. 157). Since the end of WWII, Toyota started to produce non-military cars, both cheap and elite versions. It entered the world market in the mid-1950s and by the end of the 1960s it possessed manufacturing facilities in the USA, Brazil, South Africa, Thailand, and Malaysia (Heller & Darling, 2012, p. 157). Apart from that Toyota started to acquire car manufacturing companies back in Japan (for example, Hino) as it expanded rapidly.
The key points of Toyota’s international marketing included adapting its products to suit the needs of the local customers and paying particular attention to the suppliers. It was the chain of suppliers and its effective management that allowed the rapid growth of the company. Still, in the end it was the mismanagement of the chain that led to the infamous Toyota crisis of 2007 (Andrews, Simon, Tian & Zhao, 2011).
Toyota Supply Management
One of the most prominent Toyota’s achievements is the supply chain it has established. There are four tiers of suppliers in Toyota, the fourth including more than 40,000 entrepreneurs (Andrews et al., 2011, p. 1068). Toyota’s supplier association was the tool used by the company to unite the partners and encourage knowledge sharing between them, to coordinate, supervise them, and to ensure the high quality of the supply. Toyota has always aimed at a long-term partnership, and the association aided achieving this.
Fast Growth
In 2000, the program named the “Construction of Cost Competitiveness in the 21st century” (CCC21) was launched by Toyota (Andrews et al., 2011, p. 1069). It was aimed at decreasing the price of the products by 30 % which was achieved through the expansion of the chain of suppliers (among other improvements). This lead to the increase in sales and Toyota started to grow rapidly. In April 2007, Toyota excelled General Motors and became the largest car manufacturer in the world (Heller & Darling, 2012, p. 159).
Toyota Crisis
The fast pace at which Toyota developed did have its drawbacks. As the chain of suppliers was increasing, it was becoming harder to control. New suppliers were not supervised enough and as the result the quality of the product decreased.
This problem was officially admitted to the public in 2006, but it was not fixed. Since 2007 Toyota car owners started to report having accelerating problems (Andrews et al., 2011, p. 1070). Still, even then Toyota did not appear to direct enough efforts at changing the situation. The displeasure of customers increased, and in 2007 Toyota had to recall 55,000 automobiles, but the problem persisted (Heller and Darling, 2012, p. 159).
It should be pointed out that other large car manufacturers, including the main Toyota rival General Motors, have also recalled their vehicles (Rankin, 2014). Still, the 2007 Toyota recall cost the company more than 2 billion dollars along with its reputation (Andrews et al., 2011, p. 1065).
Toyota was admittedly slow to respond to the crisis and became notorious for it. The first significant effort at rectifying the situation was made in 2010 when the Automotive Center of Quality Excellence was created (Heller and Darling, 2012, p. 166). However, the damage to the company’s reputation was immense, and part of it was caused by the company’s neglect of customers’ needs and its failure to meet its own promises.
Toyota Way
The Toyota Way is the code of conduct that the company adopted in 2001 (Heller & Darling, 2012, p. 157). It consists of a number of philosophical guidelines that included, for example, an instruction to continuously improve the quality of the product, to thoroughly test new technology before implementing it, to learn by reflecting on the past experience, to make decisions slowly but implement them rapidly, to respect the stakeholders. In general, the Toyota Way includes 14 principles that appear most reasonable and, above all, ethical.
The problem lies in the fact that Toyota seems to have failed to implement these principles, and the 2007 crisis proved it. The quality of the products was obviously deficient; the company kept denying its responsibility and, therefore, failed to analyze its actions and learn from its experience (Heller & Darling, 2012; Andrews et al., 2011). The way the company neglected the safety of its customers aggravated the damage dealt to Toyota’s reputation.
In general, one may say that the company is still struggling with the crisis which is not over but instead is in its chronic stage. In order to create a sound strategy for the growth of the business, this fact must be taken into account.
Current Positioning in the Market
According to Andrews et al. (2011) the car manufacturing industry is an oligopoly, and Toyota is one of its most influential participants along with other giants like General Motors, Ford, and Honda. The survival on the market depends on the price, the quality of the products, and the brand loyalty. Apart from that, fuel pricing and local or worldwide economic situations also have their impact on the market (Andrews et al., 2011).
Since the beginning of the century, Toyota’s cars had stayed competitive due to their quality combined with relative low costs; however, the crisis situation has severely damaged the image of the product. Apart from that, it appears that Toyota has had a significant impact on the market in general by setting off the trend of developing cheaper cars. As a result, other car manufacturers have also faced the problem of quality standards as they kept searching for inexpensive materials (Rankin, 2014).
SWOT Analysis for Toyota
The SWOT analysis is a tool of strategic planning that involves characterizing the strengths, weaknesses opportunities and threats of the company; apart from that, the trends existing in the market are described in order to define the possible directions of development.
Therefore, SWOT is devoted to a short summary of the external and internal factors that may determine the future growth of the business (Simerson, 2011). The previous sections include a detailed description of the internal and external factors influencing the company. An attempt at classifying the factors and integrating them in the process of strategic planning will be made in the following section.
Toyota’s Strengths
Among the main Toyota’s strength are its size, power, and impressive market share. Apart from that, the suppliers’ chain that was so extensively investigated in the previous sections is another significant advantage. The company has spent more than fifty years in the market, and it had time to create proper relationships with its partners including other car manufacturers. The experience its managers possess can also be considered an advantage, especially in case the company proves that it is able to learn from its mistakes.
Toyota’s Weaknesses
It is apparent from the information given above that the main weaknesses of Toyota are the persisting quality problems, the difficulties connected with faulty crisis management, and the reputation issues. As it has been mentioned, Toyota is still struggling with the crisis and this point is proved by the fact that last year the company performed another massive recall due to the variety of problems detected in the models that were built before 2010 (Rankin, 2014). While attempts at rectifying the situation are apparently being made, the problem is far from solved.
Market Opportunities
Many of Toyota’s opportunities stem from its advantages. For example, the size of the company results in a better access to all the necessary resources which in turn opens up the opportunities for further development. The relationships with other firms have been used by Toyota, for example, to conduct collaborative research (Agence France-Presse in Tokyo, 2015). Apart from that, a number of opportunities that Toyota may use could be better described as the modern market trends.
Market Trends
Technically, market trends or tendencies can be parts of both the opportunities and the threats existing in the market. It is obvious that adopting the technologies or strategies that have become a trend in the market may allow the company to develop, but any innovation is at least partially a risk. At the same time, a neglected trend very often ends up adopted by a competitor firm and provides it with an advantage.
Therefore, it is not surprising that trends are regarded as an opportunity that has to be taken. Apart from that, trends can also be “trendy”, popular, and adopting those means attracting customers. An example of such a trend is the “green” technology which has been extensively researched by Toyota on its own and in collaboration with other manufacturers, for instance, Mazda (Agence France-Presse in Tokyo, 2015).
This kind of technology is supposed to be both more efficient and less harmful to the environment. Given the growing public concern with the future of the planet and the environmental issues along with the economic crisis that makes cost-saving technologies particularly alluring, participating in this trend should be beneficial for Toyota.
At the same time, the trend of attempting to create cheaper cars that was described above can be less beneficial. This is a challenge that can hardly be turned down since it is already typical for the market; at the same time, with the quality is a priority for Toyota nowadays, which means that the company may follow this trend only to a limit. This particular market tendency can become a threat for Toyota’s future.
Market Threats
The greatest threat existing in the oligopolistic market is the competition. While Toyota’s size and power are an advantage, the fact that several other competitors have equally big market shares and similarly famous brands is much less helpful. At the same time, one should take into account that the competitors are also capable of making mistakes.
For example, General Motors’ faulty ignition switches may have caused 13 deaths and resulted in a massive recall in 2014 (Rankin, 2014). While the reputation of Toyota has been damaged by the 2007 crisis, it is still a competitive and powerful player in the market.
The Essential Areas of the Strategic Plan
It is hard to deny the fact that the company’s weaknesses are crucial. The crisis of both quality and reputation demands consistent efforts aimed at eliminating them. At the same time, the company’s strengths are providing it with enough resources that may assist in fighting the company’s weaknesses. Finally, the trends existing in the market are extremely hard to ignore.
Being one of the major competitions, Toyota cannot help but respond to the challenges offered by other market players and create challenges of its own.
Toyota’s Strategy Analysis: Method and Evaluation
The strategic plan of the future development of Toyota must be based on the fact that the current state of the company needs to be improved. This may be achieved by increasing the quality of the products (with the help of the Automotive Center of Quality Excellence) which will slowly lead to improving the company’s reputation.
It is obvious that the company has all the resources needed to improve its production process. However, restoring the reputation of the business is going to be a more challenging task. It could be completed by a more extensive and aggressive promotion of the Toyota Way which it includes most ethical and reasonable suggestions (Andrews et al., 2011).
Unfortunately, it is impossible for the company to stabilize first and then proceed to grow the business. The competitiveness of the market would not allow it, which means that in addition to eliminating its flaws, the company should continue to develop new products and implement new technologies in order to keep expanding the business. The existing trends should be used to the company’s advantage albeit carefully since the current issues Toyota has should not be aggravated.
It could be useful to point out that SWOT is a truly widespread but extremely criticized methodology. For example, throughout its existence the method has been characterized as vague, oversimplified, elusive, superficial, non-prioritized, and generalized (Helms & Nixon, 2010).
At the same time, all these drawbacks can be used for the benefit of the strategic planning. As such, the generalized and simplified character of the method allows concentrating on the big picture and general view on the positive and negative factors and their potential interaction. As a result, it cannot provide detailed information about the company’s future but it may be useful for preliminary analysis and may give insights regarding the future of the business which was the aim of this paper.
Conclusion: Toyota’s Future Strategic Plans
Toyota’s SWOT analysis has allowed us a glimpse into the main factors that may affect its further development. Despite the fact that the methodology can only provide generalized results, we have found out that one of the main Toyota’s concerns is its current weaknesses caused by the 2007 crisis.
Apart from that, Toyota seems to be using the current trends existing in the market in order to keep expanding and developing. The possible plan for the future growth of the business should be aimed at restoring the position of the company after the crisis along with responding to the market’s challenges in order to keep up with the competitors. Despite the fact that Toyota is experiencing a crisis, it cannot afford any kind of respite.
References
Agence France-Presse in Tokyo. (2015, May 9). Toyota and Mazda reportedly cooperating on green car technology. The Guardian.
Andrews, A., Simon, J., Tian, F., & Zhao, J. (2011). The Toyota crisis: an economic, operational and strategic analysis of the massive recall. Management Research Review, 34(10), 1064-1077. doi:10.1108/01409171111171474
Heller, V., & Darling, J. (2012). Anatomy of crisis management: lessons from the infamous Toyota Case. European Business Review, 24(2), 151-168. doi:10.1108/09555341211204017
Helms, M., & Nixon, J. (2010). Exploring SWOT analysis – where are we now?. Journal Of Strategy And Mgt, 3(3), 215-251. doi:10.1108/17554251011064837
Rankin, J. (2014, April 9). Toyota recalls more than 6.5m cars over steering and seat problems. The Guardian.
Simerson, B. (2011). Strategic planning. Santa Barbara, Calif.: Praeger.