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Toyota Prius Defective Design and Recalls Case Study

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Updated: Aug 12th, 2020

Introduction

Company Background

Toyota company was founded by Kiichiro Toyota in 1937 as a spin-off from his fathers company (Ronkainen and Ronkainen 535). It is headquartered in Toyota, Aichi, Japan, though, there are factories in most parts of the world. The company is headed by President Akio Toyoda and the board of Directors. Toyota produces vehicles under five brands. These are Toyota, Hino, Lexus, Ranz, and Daihatsu (Nkomo 6). Its main objectives imply the companys further evolution and increase in the number of sales. At the current moment, it is one of the most profitable cars manufacturing companies as there is a tendency towards the growths of its incomes (Nkomo 9).

Industry Background and Competitive Situation

The fact is that the current competitive situation is complex. A number of car manufacturing companies condition a great level of rivalry. Such brands as Volkswagen, Ford, GM are the main actors who determine the evolution of the market. Volkswagen Group has an advantageous position in Europe, while Ford and GM hold leading positions on the American market. These facts could be taken as their main strengths as there is the opportunity to acquire new customers. However, Toyota has a certain competitive advantage as it is considered the greatest car manufacturer in the world and produces about 7.17 million vehicles annually (Nkomo 9).

Market Structure

The current international car market could be considered the most important and profitable aspect of the world economy. Global sales of vehicles hit 73.9 million cars in 2015 (Kubota para. 6). This sales level guarantees the giant income for the main manufacturers. The current market size is about $700 billion dollars (Ferguson 4). For this reason, this sphere is attractive for the leading actors.

Case problem

Problem Situation Background

Recently the company faced a problem that had a great pernicious impact on its image. The defective design of floor mats resulted in an increased risk to the patients safety. Improperly installed, they could interfere with the accelerator pedal and guarantee the speed gain, which is extremely dangerous (Ronkainen and Ronkainen 536). The problem resulted in the initiation of the procedure of recalls and the negative market response.

Presentation of Facts Bearing on the Problem

The given incident could be considered important as Toyota proclaimed security to be one of the greatest values appreciated by the company. However, the problems of this sort might obviously lead to serious traffic incidents. The negative aftermath of the floor maps defective design should be mitigated by the wise and well-thought-out solution that will be able to satisfy customers demands and guarantee the improvement of the companys image.

Case Issues

Analyzing the given case, there are several important issues that should be given attention. The problem was first discovered in Prius (Ronkainen and Ronkainen 536). This model was given great importance as its main aim was to attract an extra audience and guarantee stable positions on the world market. However, the inability of the given vehicle to assure security to its owners resulted in a decrease in the brands popularity. At the same time, Toyotas main rivals were able to use the given incident and attain some extra revenues by emphasizing their vehicles and their safety and robustness. In these regards, the company announced that it could face losses totaling about $2 billion (Ronkainen and Ronkainen 537). Furthermore, the importance of the problem is evidenced by the fact that the company introduced specific solutions to guarantee the improvement of the current situation and the mitigation of the negative effects. Altogether, these issues contribute to the great importance of the given problem.

Analysis of issues

When investigating the incident, it is also crucial to conduct a precise and comprehensive analysis of the companys main peculiarities. It will contribute to a better understanding of the main incidents roots and help to create a clear companys image.

SWOT Analysis

Besides, applying the concepts of SWOT analysis to the situation, one should admit a number of factors that could be considered Toyotas strengths. The company is known for its high-quality vehicles that are used by thousands of people all over the world. The brand is popular in various states and has stable positions in the international car market. Furthermore, Toyota tends to assure the continuous improvement of its showings to acquire new customers and significant revenues (Ferguson para. 6). The companys policy is focused on the satisfaction of the main customers needs and implementation of innovations. This unique Toyota way could be considered the companys great strength as it guarantees the adherence to the specific policy and creation of the unique brands image. However, Toyota obviously has some weaknesses that also result from its nature.

The orientation on innovations and outstanding quality results in the high price of all vehicles. This fact decreases the rates of the companys evolution as it is difficult to attract customers who belong to other social groups. Moreover, the complexity of the manufacturing process results in the increased importance of qualified staff which also makes the product cost higher. This aspect poses certain threats. Yet, the company might face great losses because of its inability to find new customers and outlets needed to sell vehicles. Additionally, the high level of rivalry conditions the necessity to create new approaches to price policy. However, the nature of the company makes it a complicated task. At the same time, there are still numerous opportunities for the company to evolve. The high quality of its products attracts a certain category of people who appreciate it and who will continue buying cars of the company. In other words, the existence of a certain targeted audience provides numerous opportunities for the companys further evolution as it guarantees the stable level of incomes. Portfolio Analysis

Furthermore, the analysis of the elements of the companys product mix could also provide the crucial information needed to evaluate the case and create the efficient solution. Besides, investigating the given aspect of Toyotas functioning, we could predict its blistering further growth. The fact is that the company has a number of product lines and allied companies that could help it to face any serious problem and survive. At the moment the brand Toyota also incorporates Lexus and holds leading positions (Nkomo 7). These vehicles are considered rather popular and could be perceived as the element of luxurious lifestyle. This status could be used to guarantee stable incomes and achieve a notable increase of sales by emphasizing its unique image. The alterations of the marketing mix are essential for the company as they determine its prosperity and profitableness. Yet, the companys great success evidences that it managed to determine the optimum allocation of its sources to assure that they will be used in the most efficient way (Nkomo 7). Finally, when speaking about the portfolio analysis, the company’s ability to measure its own market share with that of the main competitors and outline the relative market share helps it to create the efficient strategy which aims at achieving a certain competitive advantage.

Financial

As stated above, Toyota sustained certain losses because of the appearance of the problem with floor maps and accelerator pedals. Besides, it still remains a powerful actor which could influence the market greatly. According to its official statistics, the company expects to sell 9,76 million cars and light trucks globally (Kubota para.2). The given sales level will obviously guarantee the great revenue. Toyota states an operating profit of 353 billion yen (“Annual Financials for Toyota Motor Corp. ADR” para. 5) which is higher than ever. In these regards, investigation of the given aspect of its functioning proves the companys great financial power as it is still able to introduce new models and compete with the main rivals. The companys profitability also remains high. Its financial power comes from the stable level of sales, brand popularity and its ability to provide customers with the high-quality products.

Product life cycle

Finally, investigating Toyota company, one should also mind its concern about the product lifecycle. It has already been mentioned that the company adheres to its own unique way that implies the positive brand image. For this reason, it is extremely vital to guarantee the clear and efficient product lifecycle. The vehicles manufactured by the company go through the examination procedure to assure that they correspond to the companys high standards (“Life Cycle Assessments (LCAs)” para. 6). However, Toyota also provides the recycling procedure that will help to mitigate the negative impact its functioning has on the environment. In general, the company tends to implement environmentally friendly technologies into its functioning to obtain the image of an organization that cares about the planet. It could b taken as the part of their brand. That is why the product lifecycle is given great attention.

Altogether, the companys analysis proves its great competitive and financial powers and highlights the possibilities for the further evolution. However, it is still crucial to suggest the efficient solution to the existing problem.

Works Cited

n.d. Web.

Ferguson, Edward. 2016. Web.

Kubota, Yoko. . 2012. Web.

Life Cycle Assessments (LCAs). n.d. Web.

Nkomo, Thembani. n.d. Web.

Ronkainen, Susan, and Ikka Ronkainen. Toyota Incident. n.d.

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IvyPanda. (2020, August 12). Toyota Prius Defective Design and Recalls. Retrieved from https://ivypanda.com/essays/toyota-prius-defective-design-and-recalls/

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IvyPanda. 2020. "Toyota Prius Defective Design and Recalls." August 12, 2020. https://ivypanda.com/essays/toyota-prius-defective-design-and-recalls/.

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IvyPanda. (2020) 'Toyota Prius Defective Design and Recalls'. 12 August.

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