• Unstable Political and Currency Exchange Rates – As Toyota is a huge multinational company, any changing in unstable political and the currency exchange rates are one of the most significant issues as it directly effect and generate a reduction in revenue and profit margin of the organization.
• Green Vehicle Technology Trend – Opportunities are mainly the same in the automotive industry, which involved in innovation and technological trends. Nowadays, majority of customers around the globe tends to have a greater interest in eco cars or hybrid cars. Hence, this is a good chance for Toyota to raise the investments in research and development in order to innovate its green vehicle technology.
• Diversification – As Toyota already has very strong brand recognition, so this is a good opportunity for the company to grow easily in this emerging markets. The company of Toyota can invest further in researching and developing for more diversified range of products and services in order to attuned to customers needs. Diversification can help to increase customer base earlier as there are new sales and revenue channels.
• Aggressive Competition – There is a strong and intense competition in terms of both models and pricing among several brands in the automotive industry through product technological innovation as well as market share since they are directly compete against Toyota. However, this threat is already occurring for Toyota as several vehicle brands such as Kia, Hyundai and Honda are now producing eco cars and hybrid cars at quite comparable models and prices (Fogelson, “10 Top Competitors for the 2018 Toyota Prius”, 2018).
• Rise of raw materials and labor costs – Toyota has faced the issues of the increase in raw material and labor costs over the past years. High operational costs in the company lowered the level of Toyota’s net revenues, profit margin and also affect the sale price.
• Economic Slowdown – As Toyota operates and conducts its business in different countries and regions, changes and instability of economic and political of each country are also another important factors that appeared in a negative way. Thus, these obstacles slowdown the growth rate of Toyota in the entire globe.
Thus, this might obviously shown that in order to lower the weaknesses and enhanced its growth, Toyota’s management team have to applied various forms of strategies and policies in order to maintain its reputation and brand image in the market among other automotive competitors.
Industry Analysis of Toyota Motor Corporation
Porter’s five forces
It is a well-known method used to analyze an automotive industry in an effective way and also used to maximize the company ability to satisfy customers’ needs and expectation. This approach includes of five elements such as bargaining power of buyers, bargaining power of suppliers, threat of new entrants, competitive rivalry and threat of substitutes.
Bargaining Power of Buyers – The bargaining power of the buyers is considered high due to the presence of several competitors in the vehicles industry that offer similar products and similar prices. Customer loyalty is highly important for Toyota Company because customers are knowledgeable and able to make their own choices in this competitive market. Thus, in order to maintain the customers is to maximum scope of automotive players such as Toyota Company need to offer excellent quality of vehicles at quite lowest cost as compared to other vehicle manufactures. Only then, the brand reputation and loyalty of the company of Toyota Motor Corporation might be maintained in the market among others.
Bargaining Power of Suppliers – The bargaining power of suppliers is extremely low due to the numerous options of suppliers for Toyota. This factor provides chances for Toyota to have a well control over its suppliers. As Toyota is a very huge multinational organization, it is essential for all related suppliers to retain Toyota Company as the loyal customers in order to reduce the rate of switching over towards other competitors.
Threat of New Entrants – The threat of entrance of new players within the automotive industry is extremely low. Entering the automotive market is extremely challenging due to a very high initial capital investment and the intense competition between the well-established brands. The high costs of supply chain, distribution, marketing and developing a new company in the automotive market are highly important obstacles entry. As the large firm, exploiting economies of scale helps to lower Toyota Company’s fixed costs. These competitive advantages of Toyota would make huge pressure on new players. Therefore, Toyota Company retaining its position as one of the best vehicles makers in the world.
Competitive Rivalry – In the automotive Industry, the rate of competitive rivalry is extremely high in terms of both business and marketing due to the existence of several competitors. The majority of the players desire to offer technological innovation products to maintain the sustainability and reliability in the market for a long period of time. Thus, it might obviously show that the company of Toyota need the high investments on research and development so as to present its innovative products to customers. Only then, the company will become successful in maintaining its top position among other players in the market.
Threat of Substitutes – The threat of substitutes is moderate in this segment due to the factors of low switching costs and low convenience in using substitutes. There are various substitutes for Toyota products include public transportation such as uber taxi, metered taxi, sky train and underground. However, these substitutes are considered moderate, as there is an absence of public transportation in some suburban areas. Hence, Toyota has fulfilled the core need of buyers by launching eco cars and hybrid cars that consume much less fuel.
Analysis of The Impact Presented by Five Key Drivers
In the age of economic downturn, sustainability is the main concern for every company operating in various segments. Thus, to survive in this aggressive world from the negative influences of the key environmental drivers, several types of strategies can be implemented. These strategies are shown as below: