toyota case individual project 1

1Toyota Case Individual Project

Toyota Case Individual Project

Name

Institution


Abstract

Toyota Corporation developed the lean production concept that made it an industry leader

in area of productivity and quality. The advantages that the system presented propelled the

corporation to the top of the industry. However, Toyota appears to be losing its position as the

most productive company in the automobile industry. It is also experiencing difficulties dealing

with competition. The main problem in Toyota’s case is that the company is losing its

competitiveness. This paper examines the causes of this problem using model such as PEST,

Five Forces Analysis, Value Chain Analysis, Resource-Based-View and the industry fitness

landscape. The paper also identifies alternative strategic options that Toyota can use to address

the competitiveness problem. The paper recommends that Toyota adopts the Blue Ocean

Strategy as this strategy will guarantee sustainable source of competitive advantage for Toyota.


Summary of Facts

Before 2009, Toyota Corporation was a market leader in the global car industry and role

model in areas of production and quality management. The path to the realization of this status

began when Toyota made a shift from the mass production system to the lean production

philosophy. The corporation noted that long production runs that were characteristics of the mass

production system resulted in a large number of defects. The monotony that comes with

assigning specialized tasks to employees also generated defects. Similarly, since assembly

workers were not responsible for quality control, they had little incentive to minimize defects. In

addition, mass-production system was unable to accommodate consumer preferences.

Toyota set out to establish a production system that would reduce setup times, which

enable the firm to reduce inventory and enhance product quality. Toyota also reorganized the

workplace where workers were assigned to teams and trained to execute multiple tasks. Line

workers were also empowered to conduct inspection and recommend improvement initiatives.

This reorganization led to the development of a flexible workforce. Toyota also developed the

Kanban system that ensured that outsourced inputs got to the firm’s manufacturing plants just in

time and not before time. The firm also focused of organizing the supply system. The firm

decided to focus on assembling and the manufacturer of core parts and divested other in-house

supply operations to form quasi independent entities. It also recruited independent firms and

established long-term supply relationships with them. Toyota worked closely with suppliers as

part of its product development and quality improvement team. In 1980, Toyota outsourced 73%

of components which enabled the firm to reduce risk, take advantage of lower wage scale, and

find stable and high quality supplies.


Toyota also strengthens distribution and customer relationships in order to bring in

customers into the design and production processes of the firm. Toyota offered sales and service

training to its dealers so as to use them to create long-term relationships with customers. The

new production system resulted in increased labor productivity, a reduction in defects, and the

ability to offer greater product variety. After achieving success in the domestic market, Toyota

decided to venture into the international market. In 1986, the firm established a successful joint

venture in the United States. Toyota had over 14 vehicle assembly in North America by the year

2012. The company also expanded to Europe, South Africa, Australia, and South America. In

2004, Toyota overtook ford to become the second largest car company in the world and, in 2008,

it overtook General Motors to take position one. Toyota was able to navigate the international

market by building flexible and global networks that enable it to respond to the needs of different

regions (Galbraith, 2000). The firm had 48 production facilities in over 26 countries in the world,

in 2008. The company also recording a $17.5 billion profit in 2008. Toyota had also established

itself as a quality leader. However, Toyota’s fortunes began to decline after 2009.

The emergence of the lean production concept killed the mass production concept as many

automobile firm shifted to the lean concept. This trend is in line with the concept of creative

destruction. The concept of creative destruction explains the process of industrial evolution that

creates new structures leading to destruction of old one (Foster & Kaplan, 2000). In 2009,

Toyota’s sales in the U.S. went down by 42%. Toyota sales also declined in other markets such

as China. This decline was mainly due to the financial crisis. After the crisis, Toyota competitors

emerged much stronger. Hyundai-Kia of South Korea had become more profitable than Toyota

and produced more vehicles per employees, in 2012. This trend suggest that Toyota maybe

losing its position as the most productive automobile company. Volkswagen and General Motors


also came out of the financial crisis much stronger aided by the well positioning in the Chinese

market. These companies have found ways of enhancing their operations and competing against

Toyota. While first mover advantage and royalties allowed Toyota to retain the top position for

years, competitors have found ways of innovating around Toyota’s advantages.

Statement of the Problem

The main problem in this case is that Toyota is losing it competitiveness in the global

automobile industry. Competitiveness refers to the ability of a given firm to sell products in a

given market relative to the ability of other firms (Dunmore, 2001). The loss of competitiveness

is evident in a number of problems that the case present. The first problem is loss of market

share. Toyota is losing its share of the global automobile market to competitors such as Hyundai-

Kia, Volkswagen, and General Motors. In 2012, Hyundai-Kia ousted Toyota to become the most

profitable company. Market share is a significant share indicator of the competitiveness of a

given firm. Another significant indicator of the competitiveness of a firm is the trade volume.

From the case, it also evidence that the trade volume of Toyota have gone down. The firm’s sales

declined after the financial turmoil forcing the company to reduce production capacity and lay-

off workers.

Analysis of the Causes of the Problem

The competitive position of a firm is affected by both organizational and external factors.

Therefore, managers need to conduct an analysis of the firm’s internal and external environment

in order to determine the cause of the problem.

External Environment Analysis


The external environment refers to events that the company’s management cannot control

but which have noteworthy effect on the operations of the business. The external environment of

a business falls into two categories; the general environment and the industry environment

(Saloner & Shephard, 2001).

a. General Force Analysis

The general environment comprises of forces that affect all business that operate in a

given market (Saloner & Shephard, 2001). These general forces may are often classified into

political, technological, economic, and social-cultural. Some of these forces are evident in the

Toyota case.

Political Economic Social Cultural Technological

Anti-Japanese Sentiments in China

The 2008 financial crisis

The strengthening of Japanese yen

Changing consumer preferences

Globalization

Diffusion of production technologies

In the political sphere, a significant force that has contributed to the declining

competitiveness of the Toyota Corporation is the anti-Japanese sentiments in China. China

emerged as the world’s largest automobile market in the world after the financial crisis. This

trend presented an opportunity for Toyota’s competitors to increase their market share, and

strengthen their financial and market position. Toyota has not been able to tap into the

opportunities presented by the Chinese market because of the anti-Japanese sentiments within the

Chinese market.


In the economic scenes, two major forces have contributed to Toyota’s problems. The

first force was the 2008 financial crisis. The crisis had a severe effect on the purchasing power of

consumers in Toyota main markets such as the U.S.A. and Europe. Toyota sales declined rapidly

during the crisis forcing the firm to reduce production capacity and downsize its workforce. The

second force is the strengthening of the Japanese Yen. The strengthening of the Japanese

currency impacted Toyota’s product costs unfavorably. While Toyota has established numerous

production facilities outside Japan, most of the parts are made by Japanese suppliers. The

strengthening of the current increased the cost of producing supplies; hence, it had a negative

effect on the competitiveness of the company.

In the social arena, changing consumer preferences have affected Toyota’s

competitiveness. Toyota brands became popular because they providers consumers with cheaper

and cost –efficient transport solutions. However, customers’ preferences have now changed.

Customers are demanding flashier models, which they are able to find in Toyota’s competitors.

In 2004, Toyota produced the Scion cars in order to respond to this change. However, the Scion

brand has not been able to out-compete the brands offered by Hyundai-Kia and Volkswagen. In

the technological environment, the diffusion of production technologies has played a significant

role in reducing Toyota’s competitiveness. In the past, Toyota exercise monopoly over efficient

production technologies which gave the firm a comparative advantage. However, competitors

have now learnt and implemented these technologies leading to the erosion of Toyota’s

comparative advantage.


b. Industry Analysis

The industry environment refers to events that affect only the players that are operating in

a given industry. These forces affect the competitiveness of a given firm. Porter’s identify five

forces that affect a firm’s profitability. These forces include rivalry, buyer power, supplier

power, threat of substitutes, and threats of new entrants (Ghemawat, Collis, Pisano & Rivkin,

2001).

RivalryIndustry has many playersCompetitors’ have significant capabilities There are many exit barriersExistence of spare capacity

New EntrantsHigh investment costEconomies of scale among existing firmsHigh level of product differentiation Lack of access to distribution channels

Buyer PowerMany customers Customers order in small volumesMany firms supplying the vehiclesLimited threat of backward integrationLow switching costs

Supplier PowerThere are few unique inputsThe suppliers are many and small in sizeThere competition for the input from other industries Cost of switching suppliers is high

SubstituteThere many alternatives for fulfilling customers’ transportation needsSubstitute’s performance cannot match company productsLow switching cost


Rivalry is the force that had the most significant effect on the competitiveness of Toyota.

The analysis identifies that the automobile industry comprises of numerous prices that have

unique and strong capabilities. Companies such as Hyundai-Kia and General Motors have

overtaken Toyota in terms of productivity. The industry also has exit barriers in the form of

write-offs, closure costs, relocation difficulties, and impact on related businesses. Large exit

barriers increase rivalry within an industry. In addition, the global automobile industry has spare

capacity. Current production capacity is greater that available demand. This feature increases

rivalry within the industry.

Toyota’s competitors have managed to replicate Toyota’s production strategies hence

eroding the comparative advantage of the firm. Hyundai-Kia has overtaken Toyota as the most

productive automobile company. This trend is in line with the concept of the innovator’s

dilemma. The innovator dilemma concept explains that a successful firm that has established

products and systems may also be pushed aside by new firms that get better and become serious

threats (Christensen, 1997). The concept suggests that even the nest-managed companies are

susceptible to failure.

The threat of new entrant is not significant as the industry has high investment cost, high

level of product differentiation and economies of scale among existing players. The industry also

has limited access to distribution channels as most manufacturers have their exclusive

distributors and dealers. This means that new entrants have to establish their own channels. The

power of buyers and suppliers is relatively low as industry has many customers and suppliers.

The threat of substitute is also low as available substitute do not provide similar utilities to

vehicles. Rail, water, and air transportation are the closest substitute to road transportation,

which is the main need that the automobile industry fulfills. Cars offer superior performance as


they convenient, less costly, and fulfill other needs such as communicating the consumer’s

status.

The Internal Environment

The company internal environment refers to factors or events that within the control of

the management team. These factors also have a noteworthy effect on the competitiveness of a

given firm. There are more than a few frameworks for analyzing the internal environment of a

given firm:

a. The Value Chain Analysis

The value chain model suggests that organization develop a competitive advantage by

streamlining its activities in order to add value to consumers. The value chain model separates

the business value chain into five primary activities and four secondary activities.

Customer services: Toyota adds value by training distributors on customer service.

Marketing and sales: Toyota adds value through pricing, branding, advertising, and providing customer value.

Outbound logistics: Toyota creates value by establishing plants in consumers’ region and establishing an elaborate distribution channel

Operations: Toyota creates value for shorten production cycle and adopting JIT model of operating. Toyota also reduces cost by minimizing defects.

Inbound logistics: Toyota creates value by training suppliers and establishing long-term relationships with them.

Infrastructure: Toyota own modern and sophisticated factories that have robotic system. Toyota factories are also located in different regions enabling them to localize products

HR Management: Toyota adds value by training employees to perform multiple tasks and empowering them to participate in quality assurance and product development.

Technology Development: Toyota adds value by developing technologies that enhance efficiency, performance and safety of customers. Toyota also develops technologies that enhance its processes.

Procurement: Toyota adds value by outsourcing over 73% of its inputs. This helps the firm to minimize risks, concentrate on core activities and promote quality and reliability of supplies. It also reduces the firm’s

capital requirement.


The value chain analysis suggests that Toyota achieves it competitiveness through both

cost leadership and product development. Cost leadership is whereby the firm reduces it costs so

as to create value for offering low prices to consumers (Porter, 1985). Elements of the cost

leadership strategy are visible in Toyota’s inbound logistics, operations, outbound logistics,

procurement, human resource development and infrastructure components of the value chain.

For instance, Toyota has given line employees the authority to inspect and stop production when

they identify a major defect so as to reduce the cost of rework.

Differentiation strategy is where the firm adds value by incorporating unique attributes

that add value to consumers to its products (Porter, 1985). Elements of the differentiation

strategy are evident in all components of Toyota’s value chain. For instance, at the inbound

logistics, the firm has adopted the Just-in-time concept of receiving supplies which make it easy

for employees to conduct inspects and trace defects. At the technology development activities,

Toyota focuses on creating technologies that enhance efficiency, performance, and safety of its

products. In customer service, Toyota has trained its dealers on customer service so as it can use

them to develop long-term relationship with customers. However, the recent product recall has

derailed Toyota from the strategy. The recall tarnished Toyota’s reputation of being the leader in

quality management.

b. Resource-Based View

Resource-Based View (RBV) is a model that considers organizational resources as key

determinants of competitiveness. Valuable and rare resources contribute to the competitive

advantage of the firm by enabling the firm to perform certain activities better than competitors

(Collins & Montgomery, 1996). For instance, huge financial resources give an organization the


power to market, acquire competitors, or develop new products. The RBV model also considers

the capabilities of firms. Capabilities are assortment of skills, systems, and practices that a given

organization develops over time. Hayes and Pisano (1996) argue that organization can use their

capabilities to enhance their competitiveness. The resource can only give the organization a

competitive advantage when there are valuable, rare, non-substitutable and inimitable.

The VRIO analysis shows that most of Toyota’s resources are valuable but not rare or

inimitable. This may also be a cause of Toyota’s declining competitiveness in the automobile

industry. Toyota’s valuable resources and capabilities include an efficient supply system,

marketing capabilities, a vast distribution system, finances, technological capabilities, supplier

relationship, and human resource. Out of all these resources and capabilities, only supplier

relationship and human resource are inimitable. Human resource and supplier relationship are

inimitable because they are product of complex interaction of numerous technical and human

factors. These factors include the culture of the organization, the organization’s structure,

Valuable Resources and capabilities1. Efficient supply system 2. Operational efficiency3. Vast distribution system4. Finances5. Technological capabilities

Rare Resources and capabilities1. Supplier relationship2. Human resource

Competitive AdvantageCustomer serviceOperational excellence Differentiated products and services

Performance


leadership and many others. Resources such as a vast distribution system and operational

efficiency are easy to replicate. In fact, competitors have found ways of replicate Toyota

operational efficiency advantages.

Industry Fitness Landscape

Traditional strategic model such as PEST, the Five Forces, Value Chain Analysis, and the

RBV take a linear approach in evaluating the competitiveness of a given firm. This is models are

not very realistic as firm’s competitiveness is affected by an interaction of complex factors. The

Industry Fitness Landscape (IFL) is a model that attempt to examine the competitiveness the firm

by analyzing the interaction between the firm and other agents within the industry. The IFL

model suggests that firms within a given industry seek to enhance their fitness in order to reach

the peak of the industry landscape. Fitness refers to the firm capacity to compete and survive.

These organizations that are able to learn and adopt new practices and events so as enhance their

fitness and reach the peak. Organizations that are unable to learn become extinct.

According to the IFL theory, firm have the same ability to learn and adapt as living

things. When a firm introduces a fitter strategy, other firms within the industry try to imitate the

strategy or innovate to surpass the fitness gap so as to enhance their survival. This theory

explains Toyota’s loss of competitiveness. Toyota introduced production concepts that redefined

the competitive landscape of the automobile and the larger manufacturing industry. Other players

within the industry had to respond to the changes in the industry structure by either imitating

Toyota’s strategies or innovating to surpass the advantage gap that was created by Toyota’s lean

systems. The evolution process took many years in what is known as the adoptive walk.


The industry evolution process does not only arise from the interaction among

competitors. It may also originate from the interactions between firms and other agents such as

customers, labor unions, suppliers and governments. The IFL theory also suggests that different

industries have different rates and directions of change. These changes affect the direction and

topography of the fitness landscape. This implies that firms need to take landscape scanning

before pursuing an adaptive walk. The theory also proposes that competitive advantages of firms

are temporary and relative. Consequently, firms need to make continual improvements with a

velocity that is greater than that of competitors. This may be another cause of Toyota’s loss of

competitiveness. Maybe Toyota did not make changes at rate that is faster than competitors.

Summary

Internal and external factors are behind Toyota’s declining competitiveness. The generat

factor analysis reveals that the anti-Japanese sentiments in China, the 2008 economic crisis, the

appreciation of the Japanese yen, changing customer preferences, and technological diffusion are

some of the factors behind Toyota’s declining levels of competitiveness. The industry analysis

suggests that increased rivalry is the most noteworthy cause of Toyota’s problem while the

internal analysis shows that the imitable nature of Toyota’s resources is the cause of declining

competitiveness. The industry fitness landscape model suggests that the loss of competitiveness

is as result of evolution of competitors and Toyota’s inability to change at a rate that is faster

than competitors.


Alternative Solutions

a. Coopetition

Toyota can use various strategies to regain its competitiveness. Coopetition is one of

these strategies. Coopetition is a term that describes cooperative competition. This strategy

encourages firms within a given industry to compete and cooperate. It borrows from the

principles game theory where organization leaps optimal benefit when they decide to cooperate

than when they pursue a dominant strategy (Bowser, 2007). Coopetition strategy entails moving

away from the ‘winner-take it all’ contest to a structure that facilitate both competition and

cooperation. This new approach requires firms to create systems that leverage relationships to

develop maximum value in the market place. Firms and their stakeholders cooperate and

compete in order to create optimal value. According to Nalebuff and Brandenburger (1996),

cooperation creates value while competition divides it up. They emphasize that the success of

most corporation is dependent on the success of others, yet these corporations must compete to

capture value created in the market and protect their interest.

Toyota can solve its competitiveness problem by adopting the coopetition strategy.

Competition within the automobile industry has resulted in excess capacity and downward effect

on prices. Players in the industry can overcome this challenge by developing relationships that

entail sharing of information and technology. This relationship will enable industry players to

identifying new opportunities for growth; hence, reduce saturation. Hamel & Prahald (1996)

argue that the capacity to build and manage coalition is critical determinant of a firm share of

influence in a given market. Toyota needs to strengthen it relationships with suppliers,

customers, regulators, labor unions, complementors, and rivals among other agents. The


development in the technological field provides an opportunity for Toyota to strengthen its

relationships with other industry players. These technologies can enhance connectivity and

knowledge sharing within the industry. Toyota must assess the industry and identify players that

have interest that are complementary in nature and create mutually beneficial relationships.

b. Blue ocean strategy

Another strategy that Toyota can use to increase its competitiveness is the blue ocean

strategy. This strategy was developed by Kim and Mauborgne as alternative to Porters Five

Forces model. Kim and Mauborgne (2005) argued that the Porter’s Five Forces model was an

approach that kept companies in the “red oceans” where competition is fierce and merciless.

They argue that the key to success for businesses is to redefine the competition terms and

moving to the ‘blue ocean.” The goal of the blue ocean strategy is to make competition irrelevant

by creating uncontested market space. The strategy encourages firms to reconstruct market

boundaries, focus on the big picture and reach beyond existing demand. Kim and Mauborge

(2005) have replaced Porter’s Five Forces with four actions: reduce unfavorable factors,

eliminate unpleasant factors, raise favorable factors, and create pleasant factors.

Blue ocean creation may be driven by technological pioneering or value pioneering. The

blue ocean strategy creates brands and bran equity. Kim and Mauborge (2005) also pointed that

firms can only create a blue ocean by taking actions that affect their value proposition and cost

structures favorably. The strategy dispels the notion that low cost and differentiation strategies

are mutually exclusive. Companies realize cost savings by eliminating or reducing factors on

which the industry competes. They also increase value proposition by creating elements that the

industry has never offered. Firms that create blue oceans reap significant benefits as the strategy


creates enormous cognitive and economic barrier to imitation. Firms reduce costs further by

developing economies of scale as superior value continues to increase sales volumes.

c. The Innovation Strategy

The innovation strategy focuses on encouraging advancement in service, product,

processes, or technology by investing in research and development activities. The International

Fund for Agricultural Development (2007) has defined innovation as “a process that solves

problems or adds value on new ways.” Therefore, an action must be new, cost effective and

useful for people to consider it as an innovation. The goal of the innovation strategy is to ensure

that the organization mainstreams the culture and capabilities of innovation. Organizations that

pursue the innovation strategy create an environment that is friendly for staff to innovate. The

organizations focus on developing and motivating their workforce. They also focus on other

organizational elements such as the environment, processes, and outcomes.

The innovation strategy can assist Toyota to enhance its competitiveness by making it a

leader in areas such as product development, operations, financing, and customer service

(Christensen, 2003). Some innovations create a competitive advantage by assisting a firm to

identify a new market opportunity or by serving a market segment that others have ignored.

Porters (1990) point out that competitors eventually overtake any firm that stops innovating and

improving its products, systems and processes. Toyota can pursue the innovation strategy by

building innovation capabilities, nurturing relationships, embedding innovation processes into

the firm’s core business practices, and creating a supportive organizational environment.


d. Diversification

Diversification is also a popular strategic option for improving the competitiveness and

performance of a given firm. This strategy entails expanding from the company’s core business

into other product markets (Collins & Montgomery, 1996). Diversification adds value to the firm

by reducing systematic risk. It helps the firm to enhance its debt capacity, avoid industry specific

risks, improve the utilization of company assets and technology, manage competition, and

increase productivity (Pandya & Rao, 1998). Diversification strategy is often suitable for markets

with little opportunity for growth. Firms operating in this market have no option but to look to

other market in order to grow.

Diversification strategy is highly relevant in Toyota’s case. Toyota’s problems have

originated from industry problems such as increased competition. Diversifying into other

products can help the organization to avoid the problems that are specific to the automobile

industry. It will also enable the firm to enhance its competitiveness by boosting the firm’s

financial position through the expansion of revenues and assets. Diversification will also help

Toyota to reduce variability of income by developing multiple sources of income. Toyota can

either pursue a concentric diversification strategy or a conglomerate diversification strategy

(Collins & Montgomery, 1996). Concentric diversification entails developing new businesses

that are closely related with firm’s core business. For instance, Toyota may opt to venture into

the manufacturing of industry machineries, locomotives, aviation engines, turbines, and other

energy production equipments. This form of diversification will allow Toyota to make use of its

technological and technical capabilities in production. Conglomerate diversification entails

establishing businesses that are totally unrelated to the firm’s core business. For instance, Toyota

may decide to venture into real estate or banking industry.


e. Vertical integration

Vertical integration is another strategic option that available to Toyota. This strategy

entails bringing downstream and upstream assets into the control of the firm (Collins &

Montgomery, 1997). Firm achieves vertical integration by either acquiring suppliers/

distributors, merging with them or establishing own supply and distribution operations. Vertical

integration increase the competitiveness of the firm by increasing economy of scale and

controlling competition by limiting access to supplies and distribution channels (Saloner,

Shepard, & Podolny, 2001). Toyota can exercise vertical integration by acquiring its suppliers

and dealers. It can also develop its own distribution and supply system.

f. Horizontal integration

Horizontal integration entails joining the firm’s operations with that of competitors either

through merger or acquisition. Horizontal integration enhances the competitiveness of the firm

by eliminating potential competitors, increasing economies of scale, and reducing costs. Toyota

can execute this strategy by acquiring or merging with significant competitors. This will give the

resultant firm greater competitive power, as well as, reduce the level of rivalry within the

industry.

Recommended Solution

This paper recommends that Toyota adopts the Blue Ocean Strategy. This strategy work

is both an analytical and a remedial framework for developing a competitive position (Kim and

Mauborgne, 2005). First, Toyota must capture the current state of events in the known market

space. This will allow the company to understand where competitors are currently investing and

the factors that they are currently competing on in products, service, and delivery. The analysis


will also reveal what customers are receiving from the existing competitive offerings on the

market.

The second part entails the remedial part of the strategy (Kim and Mauborgne, 2005).

Toyota needs to identify what customers are not receiving in the market, as well as, eliminate

and reduce factors on which existing players are competing. Toyota needs to strategically shift

the canvas of the industry. The corporation can do this by moving attention from competitors to

alternatives and from existing clients to non-clients. It should focus on redefining buyer value

rather than competing on the values that have currently been defined by the industry.

Justification

The external environment analysis revealed that the global automobile industry has

become very competitive. There are many large operators competing for a stagnating market.

Globalization is making it difficult for even the most resourced company to control competition

through horizontal and vertical integration. The industry fitness landscape analysis show that

competitors have either found ways of imitating Toyota’s lean manufacturing strategy or

circumventing the advantages that the production system created. Consequently, the industry

fitness landscape is shifting. Toyota needs a strategy that will enable it to influence the landscape

rather than reacting to changes.

Designing a successful strategy is a never-ending quest. It requires effective strategic

thinking and a process of continuously asking questions and thinking through issues in a creative

ways (Cusumano & Mardikes, 2001). The Blue Ocean Strategy will encourage Toyota to seek

creative solutions to existing problems. It will encourage the corporation to identify uncontested

market place rather than compete for existing and saturated space. It will enable the firm to get to


the future first. Getting to the future first will enable Toyota set standards and capture royalties

from owning intellectual property. It will also enable the firm to establish the rules by with other

firms will have to compete (Hamel & Prahald, 1996).

The Blue Ocean Strategy also considers the complexities of the business environment

rather than taking a linear approach like traditional strategy. It considers interaction and reactions

between agents within the industry. It seeks to make it difficult for competitors to imitate the

strategy by creating a complex cognitive and economic barrier. This feature will ensure that

Toyota gets a sustainable competitive position.

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