Strategic management involves activities that are conducted by a company’s management in regard of resources and performance in the external business environment (Meyer, 2008). For effective strategic management, a company must develop projects and programs that are in line with its mission, vision and objectives, and then allocate proper resources that will facilitate the implementation of the projects and plans (Hamel & Prahalad, 1989).
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Studies conducted by management theorists have shown that successful strategic management has to develop from the stakeholder expectations. Strategic management is very important for multinational companies such as Toyota which operate in a heavily competitive environment. It is of interest to understand how such companies employ strategic management to stay ahead. Therefore, this paper will use Toyota as a case study, and it will establish discuss the company from a strategic perspective.
The paper will particularly establish the following: opportunities that are available for Toyota to move forward in the competitive automotive manufacturing and sales environment; determine the threats faced by Toyota; and establish actions that are being taken to capitalize on the opportunities and address the threats faced.
Opportunities for Toyota to move forward in the competitive automotive manufacturing and sale environment
Toyota Motor Corporation Group (TMC) is a large multinational conglomerate that includes automotive and non-automotive companies (Takahashi, 2011). This section will concentrate on the automotive segment of TMC.
Toyota has a number of strategic opportunities that are mainly attributed to its innovative team. For more than a decade the company has concentrated on developing environmentally friendly cars. Indeed, the world’s most environmentally friendly car is a Toyota (schimitt, 2011). The continued commitment to the development of an environmentally friendly car has developed a good reputation for the Company. Advanced technologies developed by the Company have enabled it to develop environmentally friendly cars. Toyota Prius and Lexus have hybrid variants that are increasing in popularity. Factors such as increased fuel prices are leading to the increased demand for hybrid vehicles, and Toyota is leading the pack.
Toyota uses a special technology for its hybrid vehicles. The innovation is so advanced that other companies have rushed in to purchase it and, therefore, take advantage of the increasing market demand for hybrid vehicles.
This implies that Toyota has an opportunity to grow by producing more environmentally friendly cars (Toyota Group, 2012).
Another opportunity lies in the Company’s practice of producing affordable and yet quality vehicles. With more and more challenges with the global economy, more people are turning to cheaper vehicles that consume less fuel. Toyota is the world’s largest manufacturer of cost effective vehicles and, therefore, has an opportunity to take advantage of the growing market segment.
The company is also undertaking the three pronged integrated approach in which vehicles are fitted with safety features that take into account automotive, environmental and human factors (Rao, 2011).
The three pronged approach has made Toyota vehicles to be much safer compared to vehicles from other companies. This evidenced by a study report that showed a significant reduction in the number of car accidents in Japan, a country whose population predominantly uses Toyota vehicles (Toyota Group, 2012).
Toyota also produces vehicles that target various market segments. For instance, the Company launched the Aygo to utilize the urban youth market. The vehicle is modeled to the streetwise nature of dance and DJ culture (schimitt, 2011). This particular segment is known for much narrow margins and various challenges in branding. Nevertheless, it provides the company with a new opportunity to grow its business.
Threats faced by Toyota
The automotive industry is prone to a lot of competition in both manufacturing and marketing activities. The major threat that faces automobile manufacturing industry as a whole is the rate at which vehicles are recalled. For instance, Toyota recalled 90,000 sports utility vehicles and pick-ups trucks in 2005 due to faulty suspension systems (Takahashi, 2011). The company never disclosed the amount of money it incurred in loses given that some of the vehicles were being used in faraway regions such as US and Europe.
The Company also faces a threat from adverse effects of natural calamities. The economic effects that were caused by the Great East Japan Earthquake are still present. Following the earthquake, the Company suspended most of its domestic operations due to extensive damage that was caused major infrastructure components. Disruption was witnessed across the board, including energy supply, transportation systems, water, gas and communication systems, shortages of supply components, and other damages that were caused to some local subsidiaries located in the disaster region (Meyer, 2008).
The Company has resumed most of its operations in the domestic market but many challenges are still are still being faced. Overall, Toyota was adversely affected by the Great East Japan Earthquake and the duration of the negative impacts is still not clear. However, according to the initial assessments, the earthquake might have caused a significant impact on the Company’s financial operations.
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The Company also faces a significant threat from the world financial services industry, which has been found to be extremely competitive. The increase in financing services for the automobile industry has led to decreased margins (Hamel & Prahalad, 1989). The Company needs to develop proper strategies to prevent effects that will arise due to increased competition in automobile financing. If this is not undertaken, then the company’s financial operations will be adversely affected.
The company has also been a victim of fluctuations in currency exchange rates. The company is specifically affected by fluctuations that involve the U.S dollar, the euro, the Japanese Yen, and to a lesser extent, the Australian dollar (Toyota Group, 2012). Fluctuations in currency exchange rates directly impacts on materials and products that are sold in foreign markets and materials that are purchased from the foreign markets (schimitt, 2011). For instance, the worst effects are usually observed when the Japanese yen strengthens against the U.S dollar. This threat has always been there and sadly, there is very little the Company can do to mitigate the effects.
In the recent past, Toyota has faced a significant threat from new entrants that have posed a tremendous completion in the car market (Meyer, 2008). The rate at which new car manufacturers are being established a cause for worry. New entrants are specifically coming from countries such as China, South Korea and certain countries in the Eastern Europe region (Takahashi, 2011).
Actions that are being taken to capitalize on the opportunities, and to address threats
With all the odds faced by Toyota in the automotive industry, an innovative team has helped the Company to stay afloat and remain ahead of many competitors. Toyota is currently the second largest car maker after General motors. The company has undertaken steps to ensure maximum benefits are gained from the opportunities it has. This includes increased research activities that are intended to improve the hybrid technology. This is in response to the projected growth in the environmentally friendly automobile segment (Rao, 2011).
The Company has also increased the production of affordable vehicles that target the lower market end. The company effectively deals with threat posed by new entrants by offering quality, and time tested products.
In relation to the Earthquake threats, the Company has developed strategies that will ensure that its operations are not brought to an abrupt standstill in the event of such an occurrence (schimitt, 2011).
In regard to unfavorable financial operations, the Company has taken steps to increase unit sales, reduce the residual value of lower vehicle prices, and lower the ratio of credit losses. This challenge is being addressed by increased marketing activity.
The company has used some strategies to try and mitigate the effects of changes in interest rates and fluctuations in foreign currency. The instruments that have been advanced to reduce such effects include increasing localized productions and swapping of interest rates (Toyota Group, 2012).
This paper sought to use Toyota as a case study to discuss strategic management.
The paper has particularly established the following: opportunities that are available for Toyota to move forward in the competitive automotive manufacturing and sales environment; determine the threats faced by Toyota; and establish actions that are being taken to capitalize on the opportunities and address the threats faced.
Toyota remains a leading car maker that has developed a loyal market for its products. However, the Company needs to develop strategies that will help it cope with changes in the external environment.
Hamel, G., & Prahalad, c. (1989). Competing for the Future. Boston: Harvard Business School.
Meyer, D. (2008). Strategy Process, Content and Context,. London: Thomson Learning.
Rao, S. B. (2011). Strategic management. Mumbai, India: Global Media.
Schimitt, B. (2011). Worlds Largest Automakers of 2011 (Pojected): The Race gets A little Tighter. Web.
Takahashi, Y. (2011). Toyota registers surprise profit; Auto maker forecasts 48% growth in fiscal-year earnings as it bounces back from recall-related concerns. New York: Wall Street Journal.
Toyota Group. (2012). Annual Report 2011. Web.