Toyota was determined to create an MVP vehicle for emerging markets, such as Asia, in 1999. The sales of its Hilux trucks have been declining in Japan, which also indicated the need to move to a different strategy with this model. The main elements of Porter’s diamond model are: “Firm Strategy, Structure, and Rivalry; Factor Conditions; Demand Conditions; and Related and Supporting Industries” (“Porter Diamond,” 2022). In this case, Toyota’s strategy was to use the just-in-time production approach that it transferred from its Japanese facilities to other countries as the firm’s strategy and structure. Demand Conditions were centered on the emerging East Asian Market while showing that the demand for Toyota’s pickup truck has decreased, which means that the company has to consider either replacing this model with another one or stopping production altogether. Related Supporting industries are Toyota’s suppliers, who are responsible for providing the company with spare parts in time when the production of the new vehicle begins. The rivalry was intense due to competition from Korean manufacturers. Related and supporting industries were the suppliers of Toyota, who had to adhere to the just-in-time model of the firm.
Next, Porter’s Five Forces help explore the competition in the market the firm wants to enter. Since Toyota operates in the international market, and it is important to consider Porter’s Five Forces to evaluate the outside conditions impacting this firm. In terms of competition in the industry, Toyota faces high-level competition from other car manufacturers, mainly Korean firms. However, there is a low threat of new entrants since car manufacturing is a complex business requiring much investment and technology development. In this case, customers’ power is high, considering the declining demand for the particular type of vehicle Toyota produces. In terms of the power of suppliers, Toyota relies on its suppliers and their ability to produce and deliver parts on time when the production begins and therefore; therefore, the power of suppliers is high. Finally, the threat of substitute products, even in the emerging market, is low since cars are not easily replaced by other vehicles or public transport. Considering Porter’s Five Forces model, Toyota’s position in the market is not good since it is affected by both customers’ and suppliers’ bargaining power.
Porter’s Value Chain’s first element is inbound logistics, which focuses on its just-in-time and kaizen production methods for Toyota. Regarding human resources, there would not be an issue in finding factory workers and training them if the Japanese specialists set up the manufacturing processes and partnered with local companies. Technology development was important for this IVM project since Toyota had to offer good new models to the emerging Asian markets instead of loading off the ones that did not sell in other markets. Procurement would have to be localized to source parts from Asian suppliers due to regional economic issues, such as the devaluation of the Baht. The inbound logistics would therefore rely on Toyota’s ability to build manufacturing facilities in East Asia and change its distribution model. Operations adjustment would include how the business transfers its vehicles from the operational facility to the emerging markets in Asia and other markets. Outbound logistics meant that Toyota had to change the way it distributes vehicles between the East Asian and developed markets. Marketing and sales rely on the ability to compete with emerging Korean brands, which offer cars at a lower cost. Next, the CAGE analysis for the Toyota case is presented in Figure 1 below.
Figure 1. CAGE
The analysis below presented in Figure 2 showcases the main strengths and weaknesses of Toyota and how these will affect the company in the future.
Figure 2. SWOT
Reference
Porter Diamond. (2022). Web.