Strategic Management: Toyota
Strategic management is one of the key duties of the managers of a business organization and it entails all the initiatives that the management puts in place to ensure that the business achieves its mission, vision and long term objectives. Strategic management can therefore take place at all levels within the business. In this regard there are different types of strategies that businesses can employ at different levels within the organization. Strategies can be corporate, functional or business or operational in nature. Business strategy deals with all measures that the organization puts in place to ensure sustained competitiveness in its products and services. Sustainability refers to the ability of the product or service to command market leadership for a long period of time. Toyota has been a household name in the automobile industry and remains one of the most popular brands in the car manufacturing. The firm has been able to penetrate markets across the world with its cars. Toyota was established in the early 1930s and has held on the market since then despite stiff competition from other manufacturers. This case study will seek to analyze the strategies that Toyota has been using for all that period and how the strategy fits well with the companies SWOT.
This is one of the strongest tools that businesses use in evaluating the internal and external capabilities that enables organizations to enjoy a competitive advantage over the rivals.SWOT analysis mainly deals with strengths and weaknesses as well as threats and opportunities that a business has. The strengths and the key capabilities unique to the organization and enables it achieve its goals easier. The weaknesses on the other hand are the negative aspects that will affect the achievement of the organization goals. The threats are the external factors that may affect the achievement of the business objectives. The opportunities are the other external capabilities that have not been explored but can lead to full realization of the organization objectives when explored. Toyota has been for a long time invested heavily in the international markets through strategic partnerships and alliances. As the company was evolving ones of its key development factors was its ability to collaborate with other companies and share the expertise. The company’s recent expansion programs in china and the US in 2005 led to increase in its profits by 0.8% .The Company’s early product development were mainly learned from Chrysler and Chevrolet. This clearly shows Toyotas strong commitments to acquisition of skills and expertise from other related companies. Other major points of strength for Toyota have been product diversification excellent segmentation by offering products for a whole range of customers. The company has also heavily invested in technology that leads to efficiency and effectiveness in its operations. This is done through total quality management. These initiatives have seen Toyota rise to the second position as in terms of world car manufacturer rankings by 2005 (Griffin, 67).
Although Toyota boosts of such significant strengths in the automobile market, the firm has to contend with a number of waekenesses.Toyota entirely depends on the manufacture of cars and although the company has been able to diversify within the car manufacturing, its has been forced to invest a lot of resources in production plants and training of labor force. The costs of operation have therefore remained high and this can only be offset by high level of revenues. The economic recession experienced in 2008 and 2009 was a major set back for Toyota as it continued to incur these costs in the absence of viable sales revenues. This is a clear indication that unfavorable economic conditions can greatly affect Toyota. Its global expansion to the international markets has also affected the company from global issues such as political instabilities in some countries, fluactuations in the world currencies and economic downturns.
The fortunes of the company have been falling in the past few years and these have subjected it to certain threats:
Although Toyota has been for a long period of time commitment itself to quality and efficiency in its operations the demand for its products and the need for mass production to achieve the reasonable margin have sometimes been done at the expense of quality and hence the company has experienced a huge number of recalls on its cars with a total of 880000 in 2005 alone. This is a major threat as the rivals can use this to eliminate the company from the market. The company image has therefore been eroded by the recent developments. Toyota has been for the few decades positioned itself as the champion of the alternative and fuel efficient cars. The firm was also known for its cheaper models and was able to penetrate the emerging markets but the level of competition has since increased with rivals developing cheaper and energy efficient models. In the wake of such threats the company has been forced to change its market targeting and given the high number of youths in the urban areas of the world the company has been aligning all its strategies towards the urban youths in order to capture the large numbers. Due to stiff competition in the western markets the company has recently geared its marketing operations in the emerging markets and developing countries such as Asia, Africa and South America. These are the key areas of opportunities that the company explores to match the competitors. The firm has also stepped up on its advancement in technology and has recently merged with tesla motors to reignite its technological capabilities.
Strategy that Toyota uses:
The company has been able to use a number of strategies during the long period it has existed. According to Porters generic strategies, a company may apply one or a combination of the following strategies depending on the key objectives to be met. They include differenciation, focus and cost leadership. These strategies will also depend on the market forces that are applicable in a particular industry. The industry forces that may affect the operation of the strategies may include buyer power and consumer behaviors in general; the rivalries in the market and stiff competition, the threat posed by substitutes and the entry barriers. Toyota has been for a long period engaged in strategic partnerships with other companies with the most visible cases seen in its expansion strategies in the US. The firm ultimate goal has been to share new technologies and remain a leader in its product innovations. The firm’s emphasis on total quality management and heavy investment in technology to enhance mass production can be attributed to a cost leadership strategy. As firm employs high level of technology production effeminacy is enhanced and hence the costs of production are reduced. These benefits are normally passed to the consumers and hence a firm is able to create sustained cost leadership. The firm has also to some extent combined focused differentiation by concentrating on low end energy efficient models of cars. The firm has been able to create customer loyalty and market penetration by using this strategy (Nilsson and Rapp, 7).
How strategy fits with external Environment:
After analyzing the external environment it was clear that the major threats to the company’s competitiveness was competition from the rivals, the high number of recalls which is occasioned by poor quality and the general global economic conditions. The SWOT analysis was also able to identify technological innovations, exploration of emerging markets and developing countries and further strategic partnerships as the possible opportunities for the company. The main strategy of the company ahs been identified as cost leadership. The emerging markets will create high number of customers while technology will reduce costs of production and enhance productivity. A combination of high productivity and high sales will lead to high profitability and hence the company will be able to succeed as a cost leader. The company will also able to reduce the effect of competition by concentrating in these new markets and also getting reasonable funds from the profits to undertake marketing activities.
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Coca Cola has been a household name in the beverage and soft drinks industry and the brand name commands respect across the world. The company has been able to remain at the top of competitors like Pepsi. The main strategies that the company has been applying differentiation as its main strategy and this is supported by cost leadership and focus. Product differentiation is the ability to make a product that the customers are able identifies from the rest and as such Coca Coal products are easily recognizable in the market. Product differentiation leads to customer loyalty and hence the company is able to leverage on its sales. The company has in the past invested a lot of resources in branding its products. One of the key areas of branding has been on its bottles which have been clearly differentiated from the rivals. The branding strategy has been further demonstrated in all aspects of the company including its trucks and vans, promotional T-shirts, caps, bill boards and other forms of publicity. The company brand has been further enhanced by a well organized network of distribution across the world. The company ensures that its products can reach customers in all corners of the world and to the most remote areas. In this regard more than 685 million people consume coke products per day. With a larger network of distribution the firm is able to realize its revenues and these benefits are passed on to the consumers through better pricing. Coke has therefore stood out to be a cost leader in the industry. Although the firm has been able to diversify on its products through different flavors and colors, the quality has remained intact and any customer who uses Coco Cola experiences the exceptional taste that has been maintained for a long period of time. This therefore points at a focus strategy and it leads to the retention of the customers (Sadler and Craig,14)
Categories of the strategies:
According to porter generic strategies, there are four main industry forces that influence the strategy that a firm uses. They include buyer force, entry barriers, supplier power and rivalries. As mentioned earlier Coca Cola main strategy has been to differentiate its products from the rivals. It has therefore managed to achieve this through customer loyalty that is exhibited by its customers across the world. The loyalty has made it difficult for existing competitors and even new entrants to capture the market. The resultant of this has been a market with very few competitors. The buyers have developed preference to the product due to the quality hence the company the power over prices and hence it can make the appropriate margin from pricing strategy. The customers have been fully attached to the product hence the rivals cannot penetrate the market. The effect of differentiation has allowed the company to also pursue cost leadership strategies by charging low prices and also focus on its product as the level of competition is quite low(Porter,62).
Although the company has been able to succeed in pursuing the three strategies, it has to contend with challenges associated with global operations. The firm has to deal with a very complex structure that spans from top management to the lowest ranking distributors and hence decision making is quite slow. The effects of economic rescissions in the world greatly affect the consumption of its products.
The firm has however remained successful in the strategies it has so far employed and therefore remains competitive in the global market.
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