Marketing Report on Toyota Motors

From:

To:

Date:

Word count:Phase I: 1107Phase II: 2006

Total Word Count: 3154

Table of Contents …………………………………………………………………. Page #

Introduction ……………………………………………………………….……….……..4

Method …………………………………………………………………….……….……..4

1.0 SWOT Analysis …………………………………………………….……….……….5

2.0 Competitor Analysis ………………………………………………….……….…….6

3.0 Market Analysis ………………………………………………………….…….…….6

3.1 Porter’s Five Forces Analysis …………………………………………….…….…..6

3.1.1 Threat of New Entrants ……………………………………………….…………..6

3.1.2 Bargaining Power of Suppliers ………………………………………….………6

3.1.3 Bargaining Power of Buyers …………………………………………………….6

3.1.4 Threat of Substitute Products ………………………………………………..…7

3.1.5 Intensity of Rivalry among Competitors ………………………………………..7

4.0 Environmental Analysis …………………………………………………………...7

4.1 Political ………………………………………………………………………………7

4.2 Economic ……………………………………………………………………………7

4.3 Social ………………………………………………………………………………...8

4.4 Technological …………………………………………………………………...…..8

5.0 Company Analysis ………………………………………………………………….8

6.0 Customer Analysis ………………………………………………………………….9

Summary …………...…………………………………………………………………….9

Phase II ………………………………………………………………………………….10

1.0 Market Objectives ………………………………………………………………….10

2.0 Target Market ………………………………………………………………………..11

3.0 Market Position of Toyota Motors Corporation ……………………………………12

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4.0 Developing a Strategic Focus …………………………………………………..12

5.0 Market Program ……………………………………………………………………13

5.1 Product Strategy …………………………………………………………………...13

5.2 Price Strategy ………………………………………………………………………13

5.3 Location Strategy …………………………………………………………………..13

5.4 Promotion Strategy ………………………………………………………………...14

5.4.1 Role of Promotion Strategies in Building Long-Term Customer Relationship 14

6.0 Marketing Implementation Analysis …………………………………………….16

7.0 Conclusion …………………………………………………………………………17

Bibliography …………………………………………………………………………….18

Online References……………………………………………………………………...19

Journals ………………………………………………………………………………….21

Appendices

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Introduction

The following study examined the marketing and operational practices adopted at

Toyota Motor Corporation. In order to carry out this study, this marketing report was

divided into two main phases; phase I and phase II. The phase I encompassed of the

situational analysis of Toyota Motors. On the basis of findings from situational analysis,

the phase two was developed. The phase II of the study consisted of marketing plan for

the company.

Method

This study was conducted by using all the available secondary data resources. The

secondary data was mostly in the form of books, online articles, social media, and

research papers etc. The information derived from these resources was then used to

conduct the thorough marketing analysis of Toyota Motors Corporation. On the basis of

the analysis recommendations were given.

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Phase I

1.0 SWOT Analysis

Internal Factors Strengths Weaknesses

Management Experienced, competent Centralized Decision making

Products Hybrid products Expensive

Marketing Mixture of marketing tools Costly process

HR Skilled people Turnover rate

Manufacturing Outsourcing Suppliers

Finance Market leader Low dividend payout

(Appendix A)

R&D R&D units Expensive

External Factors Opportunities Threats

Demographic Buyer stability. Customer perceptions

Competition stiff competition,

differentiated products

Lack of differentiation

Technological Latest technology Costly, may get obsolete

Economic Economic prices Economic fluctuations.

Legal Complying with rules and

regulations

Changing legal & regulatory

framework.

2.0 Competitor Analysis

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The competitor analysis examines the competitors and the factors that give competition

to a firm. The competitor analysis seeks to find the answers of the questions (Ferrell

and Hartline, 2007). The top three competitors of Toyota Motor Corporation are Ford

Motor Company, General Motors Company and Honda Motor Co., Ltd respectively

(Hoovers, 2011). [Appendix B].

3.0 Market Analysis

3.1 Porter’s Five Forces Analysis

3.1.1 Threat of New Entrants

The threat of new entrants is very low in the industry due to varying reasons. Among

them are the entry level barriers, mature industry, capital requirements, prices, product

lines, distribution networks etc.

3.1.2 Bargaining Power of Suppliers

In the auto mobile industry, the bargaining power of suppliers very low. There are large

numbers of suppliers that are ready to provide and produce product parts that it makes

it quite difficult for the suppliers to charge high prices and obtain high profits against

their supplies

3.1.3 Bargaining Power of Buyers

The bargaining power of the buyers in automotive industry is moderate to high. The

buyers usually purchase any brand from any manufacturer. The sales and revenues of

these manufacturers are dependent on the customers. They have to keep their buyers

happy in order to maximize their own profits.

3.1.4 Threat of Substitute Products

Threat of substitute products is very high in this industry because of the large number of

substitutes available to the buyers. These substitutes may be bikes, cycles, train, buses

etc. depending on the geographic location of the customers.

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3.1.5 Intensity of Rivalry among Competitors

The level of competition among the established counterparts in the industry is very high.

Most of the products offered by one company are not different from that of other

manufacturers. One main reason for this stiff competition is may be due to the less

opportunities available in the markets to differentiate.

4.0 Environmental Analysis

4.1 Political

The laws and regulations passed by the government have affected the industry many

folds for example the safety Acts etc. These Acts have forced the car manufacturers to

pay more attention the customer safety (David et al, 2004). There was stiff political

pressure on the Toyota Motors from US government in late 80’s which resulted in the

shift of some of their manufacturing units in US states to comply with their requirements

(Japan Times, 2007). In 2005, Toyota wanted to start one of their manufacturing units in

Southern States of USA but it had to face government regulations regarding labor

(Krugman, 2005).

4.2 Economic

After global economic crises in 2008, top three companies suffered great losses and

almost collapsed. The analysts feared the complete collapse of auto industry (Edwards,

2008). Flint (2010) reported that the automobile industry is playing major role in the

recovery of the economic crisis by manufacturing and offering jobs to the people.

Toyota Motors has consistently earned large sum of profits and has been the top car

manufacturer in Japan with above 40% market share (Japan Economic Update, 2001).

Despite being number one in the industry by sales, it is not immune to the economic

crises. The company has faced serious troubles in the form of declining sales, product

recalls etc. in the year 2007 and 2008 (Knowledge @ Wharton, 2009).

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4.3 Social

Large numbers of people choose to purchase big vehicles compared to the passenger

ones. Fetto (2001) specified that the trends in the buying behavior of people depend on

their needs, ability to purchase and the prices of the cars. Most people today likes to

buy trucks, minivans, SUVs etc. wherever Toyota goes, it acknowledges the culture of

that country by embracing the societal norms, values, and principles in order to develop

the trust level in these societies. Due to its flexibility towards the cultural norms of a

country, the people regard it as a symbol of reliability, comfort and trust (Toyota, 2011).

4.4 Technological

Technology plays an important role in the success of the automobile companies. The

current trend in the markets shows that large numbers of companies are engaged in the

manufacturing of hybrid products and the green vehicles. Toyota believes in change

which can be bring about by embracing innovation. The company is currently employing

the latest technological advancements in the manufacturing of its eco-friendly, fuel

efficient cars (Toyota, 2011).

5.0 Company Analysis

Toyota Motors Corporation or TMC is a Japanese Firm with its stocks listed in the stock

exchanges of Tokyo, New York, and London. It specializes in the manufacturing of cars.

Among the top three automobile manufacturing companies, Toyota is the largest car

manufacturing company by production (Schmitt, 2010) and sales (Kendra, 2009;

Korzeniewski, 2009). The market capital of the company in US markets is equal to

131.13 billion dollars, making it the top car manufacturing company in USA (NYSE:TM,

2011).

It is currently operating on five internal principles challenge, Kaizen, Genchi Genbutsu,

Respect and Teamwork (Toyota Way, 2001).

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6.0 Customer Analysis

The products offered to the customers are of diverse nature and range. The customer

base of Toyota includes people from every income group. It caters the car needs of all

the customers around the globe. The customer base includes all the social groups,

income level, age groups etc. Retail distributors’ sale the products of the company

around the globe. The company also offers direct purchasing from their factory outlets as

well as through online and toll free numbers (Booz, 2007). The customers can purchase

the products anytime of the day, month or year. Most of the people buy the products after

obtaining driving license from the authorities. The selection is based on the product

offerings, nature, customer needs and wants (Flanagan, 2007).

Summary

Toyota is a global leader in the automobile industry for sales and manufacturing. Its

main advantage is its differentiated products. Top competitors of the company are Ford

Motor Company, General Motors Company and Honda Motor Co., Ltd. There is a stiff

competition among the existing market players, the bargaining power of suppliers is

very low due to the large number of suppliers in the markets, and the buyers have high

bargaining powers due to the availability of substitute products in the markets.

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Phase II

The findings from the phase I will be used to propose the set of marketing objectives,

and strategies that can be applied in the Toyota Motors Corporation for the purpose of

maximizing revenues and market shares globally. The phase two consists of the

marketing objectives, markets targeted by the company, market position of the

company, growth strategies, and competitive advantage of the company as well as the

marketing mix for the Toyota Motor Corporation.

1.0 Marketing Objectives

According to Dobni (2002) the size of an organization and its ability to manufacture

products gives it edge over competitors. Toyota is an automobile manufacturing giant

with over 500 subsidiaries in the markets (Toyota Global, 2011). It caters the needs of

large number of individual and corporate customers thus requiring it to deliver large

numbers of its products. The size of the company enables it to meet the diverse needs

of their customers and markets.

Toyota is the pioneer in introducing and using the principles of total quality management

in the production and design of its products. They believe in providing high quality

products. The company do not like to compromise on the quality of their products (David

et al, 2004). According to Armstrong and Kotler (2002) the manufacturing of high quality

products and offering products at stable prices without pressurizing the competitors can

increase the customer loyalty towards the particular company. They further noted that

Toyota is following this principle very well.

According to Mullins, Walker and Boyd (2010) Toyota is trying to utilize less engineering

platforms for assembling its products. This helps the company to cut off some of its

production costs. The company is thinking to utilize all the available methods and

modes to improve the costs associated with the production, and assembly of its

products in its various business units.

The proposed marketing objectives of the Toyota Motor Corporation are:

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Increase market share over the long term

Market penetration

Expansion of the business operations in the Chinese Markets

Customer centric products

Highlight the product features

Offering more environment friendly products

Low priced, high quality products

2.0 Target Market

The products offered by Toyota Motors Corporation are designed to target specific

markets to meet the needs of customers. The products are designed and developed on

the varying range of criteria. The general criteria for designing the products includes

speed, performance, capacity, internal appearance, quality, fuel consumption, mileage per

gallon, and exterior appearance like colour, shape, windows, etc. The cars catering the

needs of young generation who represents the adventure seeking segment of the markets

includes high speed, two door, two seat model cars, small, convertibles etc. while the

models designed for the families includes five seat cars, etc. (Thomas, 2001).

The company was blamed previously in the American markets for providing products that

lacks latest design and innovations. This increased their focus on the design of more

innovative cars to cater the needs of the customers in the American markets. The latest

models like Primus and Hybrid cars have been made by keeping the customer

preferences in view and the future. This resulted in the huge volumes of sales and

revenues to the company (Takahashi and Linebaugh, 2008).

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Overall performance and quality standards adopted by the company are giving hard

time to its global counterparts. If the current market operations and positioning of the

company stayed, then it will be a market leader soon.

3.0 Market Position of Toyota Motors Corporation

Toyota is among the top three automobile manufacturing companies in the world.The

market capital of the company in US markets is equal to 131.13 billion dollars, making it

the top car manufacturing company in USA (NYSE:TM, 2011). Toyota is the largest car

manufacturing company by production (Schmitt, 2010) and sales (Kendra, 2009;

Korzeniewski, 2009). The products offered to the customers are priced low in exchange

of high quality products. This is the most important factor that has increased the market

share of the company over the years. Toyota is striving to have the largest market share

by the end of year 2013 with the number of its successful strategies.

4.0 Developing a Strategic Focus

Toyota is currently using the product differentiation strategies to penetrate the markets

and it is evident that this strategy is working very well for the company. The

differentiation strategy means to develop a product or a service that offers unique

products to the customers in comparison with the offerings of the counterparts (Porter,

1980).

The company can further utilize the low pricing strategies for its products in order to

obtain the competitive advantage over its competitors. Large number of its competitors

are offering products at high price this is mainly due to the reason that their cost of

production is very high. The cost of production is high at Toyota as well but it is trying to

use lesser assembly lines for its products in order to minimize the costs associated with

it. This will improve the overall cost of production for the company. If it masters the low

cost of production strategies then it will be able to market its products are lower prices

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and will remain profitable. Toyota is taking the advantage of low cost production at the

emerging markets and is penetrating there as well. These low cost production units will

further lower down the cost of production to many folds.

5.0 Market Program

This program consists of the four marketing mix – product, price, place and promotion-

activities designed to meet the market requirements and the access to the products and

services.

5.1 Product Strategy

The company is currently working with the mass production strategy which helps it sell

large number of markets globally. It has now started to develop hybrid products as well but

it is suggested not to engage in the mass production strategy for these products because

the demand is low and the costs associated are very high.

5.2 Price Strategy

The company is known for developing high quality products to its customer base charged

at reasonable price. It can use strategically developed pricing strategies - by using price

differentiation for different regions.

5.3 Location Strategy

Toyota is a global manufacturer of the vehicles. It has outsourced most of its work in the

developing markets to excel the cost leadership in the markets. It can increase its market

presence and market shares by expanding its business units to the other countries as well.

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5.4 Promotion Strategy

The promotional strategy is vital to the success of a company in the today’s competitive

environment. Toyota can promote its products by using the large number of available

promotional tools in the markets.

5.4.1 Role of Promotion Strategies in Building Long-Term Customer Relationship

Promotion is done to increase the awareness of the product as well as to persuade

consumer to give preference to a specific brand in his decision making process. There

are number of promotional tools which are available to manager which can be used for

the purpose of influencing and altering consumer behavior. Following are some of the

tools which can be used by manager to build long-term relationship.

1. Advertising. It is defined as paid presentation of a brand where sponsor can be

clearly identified. The primary benefit of advertisement is that it can make use of

different media. Similarly, it has large market reach than other promotion tools.

Telecom companies excessively make use of advertising to promote their

products and services. For this purpose, they allocate a large amount of

resources in their budget (Assael, 1998). Toyota can promote its products by

advertising the product features, prices, and by the creation of the customer

centric ads.

2. Sales Promotion. It is another effective way to promote one’s product. Using

sales promotion, companies can induce customer to make purchase. This is

quite relevant in telecom sector as it can be used to make sales of

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complementary products and packages. Sales promotion is used by companies

to increase sales in short-term (Liao et al., 2009).

3. Personal Selling. Sales force is responsible to conduct personal selling. CRM

can play essential role in personal selling. It can provide salesmen with the

relevant information which can be used to close the deals. As personal selling

entails direct interaction and communication between consumers and sellers,

CRM can enable organizations and their sales force to provide customized and

personal service. Such service goes long way in building sustainable relationship

with customers (Liao et al., 2009).

4. Publicity. Publicity is the below the line promotional methodology which is

directed on the consumers without letting them know about it (Kotler, 2009).

Publicity is mostly free of charge and it is a part of public relations maintained by

the company to obtain the favorable reviews of the customers, employees,

stockholders, government officials, and society in general (Berkowitz et al, 2000).

Once publicity is done, it cannot be repeated. It is an unconventional method of

promoting products and service. It is usually non-paid communication using

different mediums but organization indirectly incurs publicity costs. However, it

can create both negative and positive perception about the brand (Trauth & Pitt,

1992).

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6.0 Marketing Implementation Analysis

The main focus of Toyota should be expanding its market presence globally. For this,

reaching the markets of China and Europe will be highly beneficial for the company.

The company will also be highly concerned about the existing as well as the local

competitors from these markets. The main advantage it has over its competitors is the

differentiated product portfolio which gives it unique selling point in the markets. This

USP will help Toyota to face the stiff competition with the counterparts. If it engages in

the establishment of new business units and franchises in the new markets, it will be

able to penetrate the markets easily with the help of these business units.

The management of Human Resource Department is the most crucial to the success of

this market penetration plan. It must make sure that it gives value to its employees and

workforce. The highly motivated employees and staff is regarded as an asset to the

companies. They help the company to achieve its objectives and goals both

quantitatively and qualitatively. Toyota Motors Corporation can maintain the level of

motivation among its employees by employing reward and recognition system all over

its business units as well as by giving training to them to educate them about the latest

trends and techniques. Effective communication system within the offices can improve

the employee and employer relationships. Likewise, it should make sure that its HR is

highly equipped with the latest technical skills required to perform their jobs.

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7.0 Conclusion

This study was aimed to conduct the marketing analysis of the Toyota Motors

Corporation. In order to obtain the desired result, the report was divided into two main

phases. The phase one dealt with the situational analysis with reference to the

customers, environment, SWOT analysis and the market analysis of Toyota Motors

Corporation.

Based on the findings obtained from the above mentioned market frameworks, the

phase two was completed. Phase two consists of the marketing objectives for the

company, marketing Mix, promotional tools and their relationship with the customer

preferences, strategic focus of the Toyota Motors, its market position, the targeted

markets and the analysis of the marketing objectives implementation.

The finding of the study suggested that Toyota Motors is a market leader with respect to

its sales and manufacturing capabilities. It is offering differentiated products to its wide

range of customers globally with its high quality product priced at low price.

Some of the suggestion given in the study was that Toyota Motors should expand its

business operations in China and Europe. It can master the low cost leadership by

improving its manufacturing practices in order to maximize its market share. It was also

suggested that It should focus on the production of environmental friendly products.

Likewise, the company should engage in the promotional activities centered at the

product features, pricing and the customers.

Moreover, it was suggested that Toyota Motors Corporation should give value and

importance to its customers.

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Appendix A

Toyota Motors News Release 2010

Notice Concerning Dividends for FY2010

Toyota Industries Corporation today announced a resolution of the Board of Directors meeting held on April 28, 2010, concerning the dividends for FY2010 as follows. It will be proposed at the 132nd Ordinary General Meeting of Shareholders to be held on June 23, 2010.

1. Details of dividends

Year-end dividend

for FY 2010(Proposal)

Recent forecast(As of September

23,2009)

Year-end dividend

for FY 2009(Actual)

Record Date March 31, 2010 March 31, 2010 March 31, 2009

Dividend per share

20.00 yen Undecided 10.00 yen

Total amountof dividends

6,231,000,000 yen

—3,115,000,000

yen

Effective date June 24, 2010 — June 22, 2009

Source of dividends

Retained earnings

—Retained earnings

2. Reason for the dividend amountToyota Industries' dividend policy is to meet the expectations of shareholders while giving full consideration to business performance, funding requirement and focusing on dividend payout ratio. Toyota Industries plans to pay a year-end cash dividend of 20 yen per common share.

[Reference]

Detail of dividends through the fiscal year Dividends per share (yen)

Interim dividend Year-end dividend Annual dividend

Dividends for FY 201010.00

(Actual)20.00

(Proposal)30.00

(Proposal)

Dividends for FY 2009(Actual)

30.00 10.00 40.00

Source: http://www.toyota-industries.com/news/2010/100428dividend/

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Appendix B: Financial Information

Toyota

Production output 7,308,039 units (FY2011)

Revenue ¥18.99 trillion (FY2011)(US$235.89 billion)

Operating income ¥468.28 billion (FY2011)(US$5.82 billion)

Profit ¥408.18 billion (FY2011)(US$5.07 billion)

Total assets ¥29.818 trillion (FY2011) (US$370.3 billion)

Total equity } ¥10.33 trillion (FY2011)(US$128.32 billion)

Employees 317,734 (2010)

Source: Toyota Motors Consolidated financial results [http://www.toyota-global.com/investors/financial_result/2011/pdf/q4/summary.pdf]

Ford Motor Company

Revenue US$128.954 billion (2010)

Operating income US$7.149 billion (2010)

Net income US$6.561 billion (2010)

Total assets US$165.693 billion (2010)

Total equity US$-642 million (2010)

Employees 164,000 (2010)

Source: Form 10 K Ford Motor Company [http://www.sec.gov/Archives/edgar/data/37996/000115752311001210/a6622311.htm]

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General Motors

Revenue US$ 135.592 billion (2010)

Operating income US$ 5.084 billion (2010)

Net income US$ 6.172 billion (2010)

Total assets US$ 138.898 billion (2010)

Total equity US$ 36.180 billion (2010)

Employees 209,000 (2010)

Source: Form 10-K General Motors [http://www.sec.gov/Archives/edgar/data/1467858/000119312511051462/d10k.htm]

Honda Motors

Revenue US$120.27 billion (FY 2009)

Operating income US$2.34 billion (FY 2009)

Net income US$1.39 billion (FY 2009)

Total assets US$124.98 billion (FY 2009)

Total equity US$40.6 billion (FY 2009)

Employees 181,876

Source: HMC [http://www.wikinvest.com/stock/Honda_Motor_Company_%28HMC%29/Data]

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