How Would You Analyze Toyota?
The world’s leading automaker and most valuable auto brand, Toyota has been making cars since 1937 and sells them in more than 170 countries. North America is one of its top two markets; the other is Japan, its headquarters. Along with the luxury Lexus brand, Toyota markets the Scion, Corolla, Camry, Avalon, Sienna, Rav-4, Highlander, 4Runner, and Prius, among other models. While the company plans big investments in automated driving and artificial intelligence and posted 2017 operating profits of $17.54 billion, it has been struggling, particularly in North America, due to heavy competition and discounting. Executive Vice President Osamu Nagata says of the North American market, “We still have a lot of work to do there.”25
If you were a top Toyota manager, what strengths, weaknesses, opportunities, and threats would you identify in a SWOT analysis?
Internal Strengths The original “Toyota Way” stressed the values of continuous improvement and eliminating waste, from assembly line to boardroom. This innovative and much-copied Page 198philosophy helped Toyota develop a culture focused on planning, identifying rather than hiding problems, and prizing teamwork. The company’s continued focus on quality and reliability, called the Toyota Production System, has enhanced its image as a strong brand.26 Toyota models regularly make J.D. Power’s rankings for dependability; in 2017, the Avalon, Camry, Corolla, and Yaris were all among Most Dependable Sedans.27
Toyota is also known for its strong research and development, with 17 R&D facilities in eight countries and a research budget of nearly $10 billion. The company is outspent in R&D only by Volkswagen.28 Toyota’s research has led to innovations like its best-selling hybrid car, the Prius. The company also has solid cash reserves,29 and the enormous value of its brand is another strength.
Internal Weaknesses Beginning in 2000, Toyota suffered some widely publicized recalls, due to sticking accelerators (causing a U.S. criminal probe and $1.2 billion penalty) and an array of potential hazards including unstable steering columns and faulty airbags. Things didn’t improve in 2016, when worldwide the company recalled millions more cars, including nearly 6 million for problems with Takata-branded airbags.30 In 2017, the airbag recall continued, and thousands of Tacoma, Lexus, and Prius models were also recalled for various problems. In early 2018, certain Sequoia, Tundra, Camry, Lexus, and Prius models were recalled as well.31 While recalls (including for faulty Takata airbags) are not unique to Toyota, they weakened its image in passenger safety and helped reduce sales.
A Toyota Yaris hybrid.
©Michele Eve Sandberg/Corbis Historical/Getty Images
Toyota currently sells more than half its cars in Japan and North America and earns almost two-thirds of its revenue from these two markets.32 In China, however, the largest car market in the world, Toyota has only 4.5% share, trailing competitors like General Motors and Volkswagen, which also offer many more brands than Toyota’s four.
External Opportunities It’s anticipated that demand for hybrid vehicles will only increase, which will help Toyota profit from the investment it has made in such autos. At the same time, companies all over the world are exploring autonomous cars as the next big opportunity, in a market that could be worth $45 billion within 10 years. Even Google has joined Ford, Tesla, and others in developing the required technology.33 Toyota will need to be in this market as well.
The release of new models, with exciting designs and innovative features, represents a constant opportunity in all Toyota’s markets. The company is also moving aggressively in India, the world’s fifth-largest car market. Its initial forays there, with no-frills models, were unsuccessful, but the company has changed its strategy, targeting an expanding middle class with high-end vehicles like SUVs. “We are now a little successful in India, but it is not enough,” says Akito Tachibana, managing director of Toyota Kirloskar Motor.34
External Threats Fluctuations in currency exchange rates regularly threaten every global company, and Toyota is no exception. Its assembly lines in Japan have been halted more than once when parts suppliers were hampered by earthquake damage, which, along with flooding, remains an ever-present risk. The company could face U.S. tariffs on cars it makes in Mexico, raising prices in North America, if the Trump administration seeks changes in the North American Free Trade Agreement (NAFTA).35 And competitors have had time to catch up with Toyota on quality and safety. Finally, given the number of companies pushing ahead with electric and self-driving cars, and the possibility that the U.S. car market is reaching peak size, Toyota faces a continuing threat from competitors36 and even the possibility of a saturated market.
Respond to the following in a minimum of 175 words:
Read the “SWOT Analysis: How Would You Analyze Toyota?” example on p. 197 in Ch. 6 of Management: A Practical Introduction. In your response:
- Determine the internal strengths that Toyota could make better use of in the future.
- Summarize which internal weaknesses you feel are most important to address.
- Analyze whether Toyota is situated to take advantage of all its current external opportunities.
- Determine which external threats should it prioritize and explain why.