Toyota Motor Coprporation Marketing Report Marketing Essay

Executive Summary

Toyota is a multinational company with its headquarters based in Japan and is a global leader in car manufacturing, along with a number of subsidiaries. It also operates in financial and other business sectors.

Figures in Datamonitor (2010) indicate that the company recorded revenues of JPY20,529,570 million ($205,295.7 million) during the financial year ended March 2009 (FY2009). This was a decrease of 21.9% compared to FY2008. These sources (2010) noted that this had resulted from a decrease in car and parts sales, plus the adverse impact of foreign currency fluctuation rates related to the global economic downturn over the past year.

Datamonitor (2010) and King (2010) stated that the operating loss of the company for the financial year 2009 was JPY461,011 million ($4,610.1 million) during FY2009, as compared to operating profits of JPY2,270,375 million ($22,703.8 million) in FY2008. The net loss was JPY436,937 million ($4,369.4 million) in FY2009, as compared to net profits of JPY1,717,879 million ($17,178.8 million) in FY2008.

This report will include a full market analysis and a set of strategic recommendations to secure Toyota’s short, medium and long term future.

COMPANY/ ORGANISATION PROFILE

Company Overview

Datamonitor (2010) confirms that Toyota Motor (Toyota) is the world’s largest automobile manufacturer. Established in 1937, Toyota has diversified and is engaged in the design, manufacture, assembly and sale of cars, trucks and related parts and accessories together with providing finance to dealers and their customers for the purchase or lease of vehicles. Toyota’s annual report (2009) indicates that financial services cover retail financing and leasing, credit cards, housing loans and insurance services. Other business segments covered by Toyota include transport systems, information technology and communications, housing, marine, biotechnology and e-TOYOTA.

Toyota produces both conventional and hybrid vehicles which sell under

Toyota, Lexus, Hino and Daihatsu brands. Datamonitor (2010) advises that

together with its affiliates, Toyota produces cars, parts and other components through more than 50 manufacturing companies in 26 countries and regions.

Datamonitor (2010) states that total sales for the financial year ending March 2009 was 7,567,356 units as compared to 8,913,939 by the end of the financial year 2008. Out of the total sales, the company sold 2,212,254 vehicles in North America; 1,944,823 vehicles in Japan; 1,061,954 vehicles in Europe; 904,892 in Asia; and remaining 1,443,433 vehicles in other countries.

After settling a labour strike in 1950, Toyota Motor Company executives visited Ford Motor Company the United States and this subsequently laid the basis for Toyota’s philosophy. Employees and management would work together to gain growth and success nationally and internationally. Toyota first summed up its philosophy, values and manufacturing ideals in 2001, calling it “The Toyota Way.” Liker (2004) states that these fourteen management principles and behaviours underpin the company’s managerial approach and production system which cover two principle areas covering continuous improvement and respect for people.

Key Facts

Head Office Address

Toyota Motor Corporation

1 Toyota-Cho,

Toyota City,

Aichi Prefecture 471-8571,

Japan

Phone

0081 565 28-2121

Fax

0081 565 23 5721

Web Address

http://toyota.co.jp

Revenue / turnover

(To nearest 100m ¥ )

209.4. This is in Japanese Yen

Financial Year End

March

Employees

320,590

Sources: FT.com (2010); Datamonitor (2010) and Toyota Motor Company website (2010)

Mission and Objectives

2.3.1 Mission

Toyota’s mission statement is “Make Better Cars and Contribute to Society”. The company focuses on producing high quality items that are better for the environment whilst still appealing to a global consumer.

Established in 1990 and revised in 1997, Toyota has seven guiding principles that their vision and philosphy are based upon. These relate to persuing global growth through innovative management, respecting culture and customs of every nation to enable economic and corporate activities in communities.

The message from top managment on the Toyota’s website (2010) affirms that the company seeks harmony with people, society and the environment. Akio Toyoda (2010), president of Toyota Motor Company affirms that the company’s goal was to be “a good corporate citizen” with the aim of gaining the trust and respect of the international community.

2.3.2 Objectives

Daniels, et al (2008) state that competition within the car industry is aggressive and companies wanting to survive have to adjust their strategies according to environmental conditions. Over the past seventy years, the car industry had grown from a fledgling industry to the multi- national conglomerates of today.

In Toyota’s 2009 annual report, The Right Way Forward, Akio Toyoda, President of Toyota Motor Company states that customer requirments and expectations change over time. This means that companies like Toyota need to change according to consumer deamands and expectations. The volatile global economy and the concerns over quality and recall of their Avalons had affected Toyota’s image and reputation. The company’s objectives are to provide high quality items at affordable prices. Liker (2004) advises that this has been achieved through the company’s committment to the Customer First and genchi genbutsu (on-site, hands-on experience) philosophies.

To ensure continued success, Toyota re-structured their manangment team and Kageyama (2010) states that Toyota had invited four academic and consumer experts to maximise synergy between Toyota’s quality-related departments and its legal teams, expand employee training to develop a greater customer empathy, relating to product concerns, and allow greater participation by external industry experts.

Market Analysis

Marketing Mix

Brassington and Pettitt (2007) confirm that the role of the marketing function is to develop a strategy which enables the organisation to achieve its marketing

objectives. A marketing strategy would identify customers and the creation of a marketing mix would target the customers in the relevant market. Whilst a marketing environment may be uncontrollable, companies may influence certain aspects. With regards to Toyota, these may include competitive influences designed to foster loyalty or the development of new technologies. Forces within a mix may be inter-related and therefore opportunities may be created. The table is a marketing mix for Toyota.

Price

Highest quality cars at low unit costs.

Toyota effectively target market segments to ensure customer’s needs are met.

Pricing strategies are different at Toyota. Their annual report (2009) reflect that profit is obtained when costs are deducted from the selling price, rather than the conventional way that the selling price reflects the costs of the item with the profit added on.

Just-in-time processes ensure minimum wastage.

   

Place

Consumers want reliable, quality products at a low price. Toyota offers the same product and services globally, effectively achieving global economies of scale. This has been done through understanding customers’ taste and needs married to global efficiencies in production, procurement, development and marketing.

Promotion

Marketing also teams with international consultants. Toyota is dependent on these consultants for market analysis that sifts relevant data regarding marketing campaign results to allow future improvement. Therefore in-depth relationships are developed with several established consultancies. To be effective, consultancies are made to feel that they are part of the business and really understand what the company is trying to accomplish.

Toyota has the reputation of producing high quality cars at affordable prices. Marking their products is conducted through innovative pricing strategies.

As a global brand name, Toyota finds it easy to promote their products.

Product

Kotler (1999) confirms that Toyota market researchers stood outside large parking lots and watched how customers loaded groceries in their car boots. Based on this research, they re-designed the boot to provide more room and easier sliding of packages.

Toyota’s strong brand name influences customer perception.

Process

Toyota has developed a spread of ideas to encourage customer retention using its ‘Kaizen’ approach of small ongoing improvements.

Within marketing, the company continually measures marketing programmes against industry standard key performance indicators, to predict and clearly focus its future directions. The Toyota way is to be innovative, do not repeat mistakes and utilise their successes to ensure continued development.

Board-level reviews of key performance indicators relating to market place consumer responses ensure marketing teams know they are being scrutinised.

Toyota understands overall corporate financial health is dependent on the financial health its component parts. A weak supplier may function adequately, but due to market forces could be forced out of business. Toyota wants suppliers that are well established and capable of contributing to the entire enterprise.

Liker and Meier (2005) state that Toyota believes lean manufacturing

processes are not just price reduction programmes but a way of creating challenging environments that allow suppliers to flourish.

People

Customer-facing staff trained to ensure they were informed and empowered to help customers. Staff are encouraged to spend as much time as necessary resolving customer issues.

Web changes. The original Toyota.co.uk website had little customer interaction. By design it was an online brochure to interest and attract prospective new customers. The updated Toyota website was given an owner’s section, offering customers the ability to renew their Club Toyota membership online, useful e-mail reminders covering service, MOT, insurance and car tax renewals.

Free quarterly re-vamped Club Toyota magazine to all private customers with cars up to five years old. Issues carried a Toyota range spread showing customers how easily they could change cars without changing their brand. This was sent with a personalised letter, with the content driven by individual customer knowledge.

Customer experience surveys were re-designed as 75% of customers failed to complete and return them because they looked intimidating and complicated.

Liker and Meier (2005) confirm Toyota’s philosophy is to ensure ‘team associates’ (staff) have a strong sense of shared purpose within as strong culture. This is also applied to business partners who become an extension of Toyota. Both staff and business partners are encouraged to challenge the ‘status quo’ and this is central company development.

SWOT Analysis

Strength

Weakness

Market leader in hybrid technology

Toyota City allows greater flexibility with regards to design, production, and R&D

Brand recognition allows company to charge premium prices.

Unit prices are comparably low due to Toyota’s production system.

A well established distribution chain.

Little experience in electric car

technology.

A failure of product quality will

adversely impact sales and discredit product branding.

Pension deficits will negatively affect cash supply. This may have an effect on other company areas, e.g. R&D.

Opportunities

Threats

Good name reputation allows for

possible partnerships.

Increased consumer environment awareness will heighten interest in eco-friendly products.

New market opportunities.

Foreign manufacturers.

Rigid mentality with regards to

business openness and transparency.

Green legislation has product cost impact.

Global currency market fluctuations.

PESTLE Analysis

Adcock (2000) states that a PESTLE analysis raises awareness of threats and helps identify future issues in order that actions can be taken to avoid or minimise the

effect. Detailed below is a PESTLE analysis for Toyota.

Political

Globally Toyota has benefited from governmental financial assistance e.g. tax breaks.

Foreign trade regulations vary from country to country (or trading blocks EU/NAFTA).

Environmental protection laws are almost world-wide, but vary in severity and compliance protocols, this will affect cost to the company.

Taxation policies vary from country to country (or trading blocks EU/NAFTA).

Employment laws are usually local specific and vary in their requirements.

Government stability varies across the globe and for various reasons (social/political/economic).

Economic

Opening of plants in various countries mean economic benefits to the

local community.

Investments would be affected by business cycles as cash flow varies

between national economies.

Interest rates are globally at an all time low as countries deal with the current economic downturn. Toyota will be affected in all of its basis across the globe as money supply is squeezed by national governments.

Toyota, at the moment, benefits from an employer’s market as unemployment increases the workforce available can be cherry picked for the best employees. Pay will also be affected.

Sociocultural

Communities benefit from Toyota’s involvement in the community. Toyota’s policy is to support the community. This is accomplished through financail donations and community partnership schemes.

The consumer has become more ‘green’ and changes in lifestyle now reflect this with the need for hybrids, fuel efficient cars and range differentiation (budget to luxury).

Technology

Spending on research and development is essential for Toyota to increase its technological advantage in hybrid vehicles. Additionally other fuel / green technology should be developed.

Toyota partners government’s and industry suppliers with a focus on developing technology.

Legal

The Pruis situation fully vindicated Toyota’s committment to product quality and acceptance for liability where failures occured. Safety is paramount to Toyota and its corporate image.

Toyota fully complies with national employment laws (including health and safety legislation) where enacted. This ensures corporate social responsibilities are met.

Environmental Factors:

Environmental legislation – are almost world-wide, but vary in their scope and severity. Compliance protocols and costs will therefore vary.

Toyota’s development the hybrid range shows a commitment to environmental issues including fuel efficiency and energy use.

Conceptual Mapping

In today’s global environment there has been a greater awareness of, and demand for, environmentally friendly cars from consumers.

After doing a detailed search for hybrid cars that are currently on the market, the results have been mapped using price and effiency (mpg) for the axis.

What the diagram shows is that Toyota’s Prius hybrid has the highest effiency (at 50mpg) while still being at the lower end of the price scale. As confirmed by Unknown (2010), the diagram also shows that there are no serious competitors for hybrid cars that are effienct and luxurious – a niche segment that would attract the company/corporate car market.

Porter’s 5 Forces

Porter (2008) argues that the key aspect of a companyh’s environment is the industry or industries in which it competes. These would determine the profit potential of the company and are shown below:

An analysis of Toyota indicates:

High entry barriers coupled with other costs indicate the threat of new players in this market is low.

Current depressed market conditions have reduced the bargaining position of buyers / consumers.

Alternative product choices. The automotive market suffers from the real threat of competition.

Industry suppliers carry little negotiating power and rely on car manufacturers production output. Suppliers are therefore acutely dependent on car manufactures as they have no vehicle production capacity themselves.

The automotive industry is highly competetive, with little growth and new players rarely emerging. Established companies are almost “set in stone”.

However, current global economic conditions could be the catalyst that changes the established order above.

There are huge barriers to entry, not least capital availability, but new car manufacturers can materialize and claim a share of the world market. Budget vehicles from South East Asian manufacturers may well impact lucrative regional markets.

Dealership sales to the public – dealers are offering various discounts schemes, trade in incentives and in some cases government backed scrappage schemes. All indicate a wealth of consumer bargaining power.

Energy uncertainties, fuel costs, the credit crunch and an increase in green issues may induce the public to opt for mass transit systems when commuting or travelling.

Industry suppliers negotiating position may not be as inefectual as it first appears. The suppliers and manufacturers are interdependent neither are solo performers. In some cases it may even be bebeficial for manufacturers to consider financial aid to suppliers to guarantee supply chain integrity and quality.

Indusrtry competion. Recent high visability events regarding product quality have placed Toyata at a competetive disadvantage. Aggressive expansion into Toyotas market share by competitors would not be unexpected.

The above opposing scenarios serve to highlight that: Porter’s 5 forces differ according to the environmental variables that are likely to impact on the companys business operating area.

Strategic Recommendations

Short Term

Public image improvement. Damage limitations – corporate – mind set.

Corporate image and brand integrity are paramount. A product shortfall or quality failure needs to be dealt with quickly, efficiently and without needing to bring in specialist consultants. The Pruis debacle demonstrated how a badly handled situation can quickly escalate out of control with resultant corporate image and financial damage.

Recommendations:

Customer concerns regarding possible product defect to be identified and collated quickly for senior management scrutiny.

Remedy to be formulated, tested and issued within agreed timescale for rapid customer service response.

Legal liability to be acknowledged but not become an obstacle to customer service / issue resolution.

Product enhancements / improvements. Maximise sales potential.

Recommendation:

Develop in-car entertainment / navigational system with industry leader. Look to standardise high-end entertainment system throughout Toyota range. Each regional area to partner with recognised brand for consumer awareness, e.g. in South East Asia partner with Sanyo and in Europe, partner with Blaupunkt.

Medium Term

Further develop market penetration of sub Saharan Africa and increase dual dealership agreements.

Recommendations:

a) Fully utilise output capacity of recently modernised Prospectron facility at Durban.

b) Actively pursue dual dealership / franchise agreements in Africa to boost brand recognition and market penetration.

Currently Toyota Motor Company has no motorcycle product range.

Recommendations:

a) Expand R&D into motorcycle concept product.

b) Seek partnership arrangement with established brand leader of budget/ mid range motorcycles. These may include Benelli, Gilera, Piaggio or

Vespa.

c) Target sales maximisation in sub Saharan Africa for low cost / budget

motorcycles to meet consumer need for cheap personal transport in

developing economies.

There are no hybrid cars that are fuel efficient and luxurious, at a reasonable price.

Recommendation:

Develop a car that is suitable for a company car fleet, or executives

Long Term

Improve capabilities of environmentally friendly vehicles.

Recommendations:

Continue to develop hybrid potential both technically and by expanding range from mid-size car to include both budget and high-end vehicles.

Expand R&D to include all electric options with emphasis on developing new

and improved power cells / re-charging technology.

Successful sub Saharan market penetration by motorcycle venture should lead to development of environmentally friendly models based on proven hybrid technology.

Actions to be taken regarding top managment. Need to change their mind set – accept wrong doing.

Currently Toyota subscribe at an operational level to the Kaizen concept of incremental continuous change.

Recommendation:

Kaizen to be applied to senior management with a veiw to changing cultural mindsets. Senior management must be proactive not reactive to better plan and respond to dynamic situations.