History Of The Hybrid Synergy Drive

Published Date: 02 Nov 2017

Three of Porter's five forces refer to competition from external sources. The remainder are internal threats. Porter referred to these forces as the micro environment, to contrast it with the more general term macro environment. They consist of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires a business unit to re-assess the marketplace given the overall change in industry information. The overall industry attractiveness does not imply that every firm in the industry will return the same profitability. Firms are able to apply their core competencies, business model or network to achieve a profit above the industry average. A clear example of this is the airline industry. As an industry, profitability is low and yet individual companies, by applying unique business models, have been able to make a return in excess of the industry average.

Porter's five forces include - three forces from 'horizontal' competition: the threat of substitute products or services, the threat of established rivals, and the threat of new entrants; and two forces from 'vertical' competition: the bargaining power of suppliers and the bargaining power of customers. This five forces analysis is just one part of the complete Porter strategic models. The other elements are the value chain and the generic strategies. Porter developed his Five Forces analysis in reaction to the then-popular SWOT analysis, which he found rigorous. Porter's five forces are based on the Structure-Conduct-Performance paradigm in industrial organizational economics. It has been applied to a diverse range of problems, from helping businesses become more profitable to helping governments stabilize industries.

PEST analysis (Political, Economic, Social and Technological analysis) describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. Political factors are basically to what degree the government intervenes in the economy. Specifically, political factors include areas such as tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability. Economic factors include economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make decisions. For example, interest rates affect a firm's cost of capital and therefore to what extent a business grows and expands. Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy.

Social factors include the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a company's products and how that company operates. For example, an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labour). Technological factors include technological aspects such as R&D activity, automation, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Environmental factors include ecological and environmental aspects such as weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance. Legal factors include discrimination law, consumer law, antitrust law, employment law, and health and safety law. These factors can affect how a company operates, its costs, and the demand for its products.

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Porter’s five forces model is a framework for the industry analysis and development of business strategy. Three of Porter’s five forces refers to rivalry from external/outside sources such as micro environment, macro environment and rest are internal threats. It draws ahead Industrial Organization economics to develop five forces that conclude the competitive intensity and consequently attractiveness of a market place or industry. Attractiveness in this framework refers to the generally overall industry profitability. An extremely unattractive industry would be one moving toward "pure competition", in which existing profits for all companies are moving down to zero.

First of all, the bargaining power of suppliers is low. There are various types of suppliers in the vehicles industry, including the cooling system, electrical system, braking system and fuel supply system distributed across the globe. However, most vehicle manufactures own many interchangeable suppliers, and also have the ability to produce the components by their own in the short time. Thus, the suppliers do not own the power to change the price.

Next, the Bargaining power of buyers is high. Today, buyers have a lot of information channel, such as the internet, where can easily find the proper vehicle. And, the preferences of the private consumers are important to the vehicle corporations. If automobile Company increases one type, they can also choose other type or the cheaper one. And the vehicle’s buyers can easily find the substitutes, such as walking, and bus.

However, the threat of new entrants is the entrants cannot enter to the automotive industry easily, as automobiles are special products that require a large amount of money on the design and electronic functions. Traditional barriers to entry at some point that were reinforced by measures such as high fixed costs, scarcity of resources, high costs of switching companies, loyalty to particular brands of automobiles as well as high fixed costs. Even in the global sphere, the Toyota brand has been hit to some extent by the rise of new plants and manufacturers from China, South Korea as well as from Eastern Europe which proves the competitive nature of the industry from this angle. Presently there are no direct threats of substitutes in the automotive segment. There are three types of substitution, all there being; product for product, substitution of need and generic substitution.

Toyota's main rivals are Ford Motor Company, General Motors and Honda Motor Co., Ltd. However, the innovative technology that Toyota offers combined with the very loyal customer base and the company's consistent, high-ranking quality marks assures a sufficient competitive advantage. The segment that Toyota occupies, especially the hybrid segment, is experiencing growth due to global economic factors. To sustain market position, many brands were encouraged in their own efforts to bring more hybrids to the market. Yet, new entrants to this segment have tried various strategies without much success. Toyota is a leader in innovative technology, environmental initiatives, and quality. Nevertheless, given the financial situation the threat may come from other non-automobile personal transport or public transport.

Although, the competitors of Toyota is the financial crisis and the image caused by the recalls Toyota has lost its position as world’s attractive and biggest car manufacturer. So now the company is worried about its position in the eco-friendly and compact car segment. The advancement made by TMC will be equivalent with the competitors like GM. Honda and European manufacturer. The competition is very hard and to keep the position Toyota has to invest in Research and Development.

Toyota is a multinational motor company. It ranks among the best automobile companies in the world. Kiichiro Toyoda is responsible for the formation of the company in 1937. Toyota Automobile was a division of the Toyoda Automatic Loom Works. The government supported the production of domestic vehicles because there was money scarcity throughout the world and also because of the war with China. The first Type A Engine was produced by the company in 1934. This was used to build the first A1 car. Model AA car started to be produced from 1936.

 

Toyota Motor Co. was independently and formally established in 1937. The company was given a new name because it was considered lucky. During the Second World War, the company was engaged in producing trucks for the Japanese Army. The trucks were designed very minimilistically in order to curtail the production cost for example they had only one headlight. Before the war ended, the company’s factory in Aichi was bombed down by the enemies.

 

After the war ended in 1947, commercial production of cars began with the SA model. In 1957, the first Japanese car was exported to the USA. It was known as the Toyota Crown. In the same year was Toyota’s American branch Toyota Motors Sales Inc. and Brazilian branch Toyota Do Brazil SA were formed.

 

The company continued to spread its wings in the 1960s. An establishment was built in Thailand. A research and development wing was formed. It entered into an alliance with Daihatsu and Hino Motors. The 10 millionth car model was successfully produced. It was honoured with the Deming Prize. A Toyota built was developed in Australia. It was the first of its kind outside Japan. The decade passed by with Toyota achieving multiple feats worldwide and had become a well-known name all over the globe.

 

Toyota’s factory for producing or assembling is spread all over the world. It factories are present in countries like Japan, Canada, South Africa, Poland, turkey, India, Australia, Indonesia, United Kingdom, France, Brazil, Portugal, Argentina, Pakistan, Mexico, Thailand, Czech Republic, Malaysia, China, Venezuela, Russia and the Philippines. Toyota’s main passion is producing vehicles with the latest technology. Names of few of the popular Toyota vehicles are Toyota Prius, Camry, Lexus, Toyota Tundra, Toyota Tundra Double Cab and Corolla.

First of all, the pestle of Toyota is political in times of crises the Japanese government is subsidising Toyota. The adoption of new regulations in Europe, concerning the emissions of CO2 and reducing the impact of it on the environment is another issue concerning Toyota. The company continues to exploit its know-how of developing hybrid cars. Also there is political instability in the main oil-producing countries in the world, leading to higher oil prices and less demand for cars.

Next, economic the collapse of the international economy leaded consequently to the falling of the power of the yen, which devaluates the prices of Toyota`s shares on the stock exchange. The economic crisis also diminishes the demand for Japanese electronics and cars. In additions there was a decline in the world buying power and high prices of the crude oil.

Not only that, social is the population in the world as a whole is aging, which means that less people are interested in new car models. Also, as a consequence from the economic crises, more people are using alternative transportation means but cars, and by this again leading to excess production capacity. Then, technological in Toyota is considering building a hybrid-electric system available on every vehicle it sells worldwide during the 2010s. The company is the most innovative company during recent years, due to its vastly developing R & D department. Toyota is aiming at zero waste and zero emissions as an ultimate group goal. The main objective is the continuation of development of hybrid technology and development of hydrogen fuel cell technology.

However, environmental of Toyota is investing heavily in vehicles with lower emissions, for example, the Prius, based on technology such as the Hybrid Synergy Drive. It is considered the most widely rolled-out environment-friendly system in the automotive industry to date. Although, the legal of Toyota in 1998 the United Nations Economic Commission for Europe adopted the Global Agreement on Vehicle Regulations, which leads to limitation of the emissions of CO2, that a car can eject in the atmosphere, from which Toyota Company benefited the most. In addition, some countries impose restriction on foreign countries to enter their markets in order to try to sustain the export and adopt new precautions of the competition law.

Task 2

Introduction

The Value Chain Analysis describes the activities that take place in a business and relates them to an analysis of the competitive strength of the business. Influential work by Michael Porter suggested that the activities of a business could be grouped under two headings. First of all, Primary Activities for those that are directly concerned with creating and delivering a product (e.g. component assembly). Next, is the Support Activities, which whilst they are not directly involved in production, may increase effectiveness or efficiency (e.g. human resource management). It is rare for a business to undertake all primary and support activities.

Value Chain Analysis is one way of identifying which activities are best undertaken by a business and which are best provided by others ("out sourced"). A business undertakes is directly linked to achieving competitive advantage. For example, a business which wishes to outperform its competitors through differentiating itself through higher quality will have to perform its value chain activities better than the opposition. By contrast, a strategy based on seeking cost leadership will require a reduction in the costs associated with the value chain activities, or a reduction in the total amount of resources used.

SWOT is a tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, straightforward model that assesses what an organization can and cannot do as well as its potential opportunities and threats. The method of SWOT analysis is to take the information from an environmental analysis and separate it into internal (strengths and weaknesses) and external issues (opportunities and threats). Once this is completed, SWOT analysis determines what may assist the firm in accomplishing its objectives, and what obstacles must be overcome or minimized to achieve desired results.

SWOT can help management in a business discover about, What the business does better than the competition? What competitors do better than the business? Whether the business is making the most of the opportunities available? How a business should respond to changes in its external environment? The aim of any SWOT analysis is to identify the key internal and external factors that are important to achieving the objective. These come from within the company's unique value chain. SWOT analysis groups key pieces of information into two main categories, such as internal factors and external factors.

The internal factors may be viewed as strengths or weaknesses depending upon their effect on the organization's objectives. What may represent strengths with respect to one objective may be weaknesses for another objective. The factors may include all of the 4Ps; as well as personnel, finance, manufacturing capabilities, and so on. The external factors may include macroeconomic matters, technological change, legislation, and socio-cultural changes, as well as changes in the marketplace or competitive position. The results are often presented in the form of a matrix.

SWOT analysis is just one method of categorization and has its own weaknesses. For example, it may tend to persuade its users to compile lists rather than to think about what is actually important in achieving objectives. It also presents the resulting lists uncritically and without clear prioritization so that, for example, weak opportunities may appear to balance strong threats. It is prudent not to eliminate too quickly any candidate SWOT entry. The importance of individual SWOTs will be revealed by the value of the strategies it generates. A SWOT item that produces valuable strategies is important. A SWOT item that generates no strategies is not important. In many competitor analyses, marketers build detailed profiles of each competitor in the market, focusing especially on their relative competitive strengths and weaknesses using SWOT analysis. Marketing managers will examine each competitor's cost structure, sources of profits, resources and competencies, competitive positioning and product differentiation, degree of vertical integration, historical responses to industry developments, and other factors. Marketing management often finds it necessary to invest in research to collect the data required to perform accurate marketing analysis.

Figure : Value Chain Analysis

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Figure : SWOT Analysis

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Toyota's value chain is so well developed that it makes the company more profitable than the three largest automobile companies in the USA. (Henry, 2008)[1] The main strengths of Toyota's value chain are in the inbound logistics, due to the usage of Just-in-time production method, because it minimizes inventory cost. The other most valuable part of the chain is the Human resource. The employees are perceived as Human Capital. Toyota's HR department is aware that happy employees translate into better job performance. This equates to the kind of increased production and quality that renders satisfied. Toyota is positioned in the moderately low-price, high volume market. The company has managed to overcome mobility barriers and entered the luxury market with its Lexus brand, which is now competing with BMW and Mercedes. (Henry, 2008).

Value chain of toyota (porter)1. Primary activities Inbound logistics Receiving, storing, and disseminating inputs. E.g., warehousing, inventory - toyota in obtaining raw materials, they do not process their own, or create your own, they use a third party, they handed the small parts, such as leather seats, steering wheel, tire, to local companies, but to the nature of strategic importance, like a machine, they import from Japan (center), its all to maintain the quality standard that was created toyota, - Toyota put on the assembly system in the process, it has led to toyota raw material supply for its assembly,, need a place to store supplies, or warehouse, to avoid piling up too many assets, Toyota to forecast demand.

In strengths, new investment by Toyota in factories in the US and China saw 2005 profits rise, against the worldwide motor industry trend. Net profits rose 0.8% to 1.17 trillion yen ($11bn; £5.85bn), while sales were 7.3% higher at 18.55 trillion yen. Commentators argue that this is because the company has the right mix of products for the markets that it serves. This is an example of much focused segmentation, targeting and positioning in a number of countries. In 2003 Toyota knocked its rivals Ford into third spot, to become the World's second largest carmaker with 6.78 million units. The company is still behind rivals General Motors with 8.59 million units in the same period. Its strong industry position is based upon a number of factors including a diversified product range, highly targeted marketing and a commitment to lean manufacturing and quality. The company makes a large range of vehicles for both private customers and commercial organizations, from the small Yaris to large trucks. The company uses marketing techniques to identify and satisfy customer needs. Its brand is a household name. The company also maximizes profit through efficient manufacturing approaches (e.g. Total Quality Management).

Next, weakness is being big has its own problems. The World market for cars is in a condition of oversupply and so car manufacturers need to make sure that it is their models that consumers want. Toyota markets most of its products in the US and in Japan. Therefore it is exposed to fluctuating economic and political conditions those markets. Perhaps that is why the company is beginning to shift its attentions to the emerging Chinese market. Movements in exchange rates could see the already narrow margins in the car market being reduced.

The company needs to keep producing cars in order to retain its operational efficiency. Car plants represent a huge investment in expensive fixed costs, as well as the high costs of training and retaining labour. So if the car market experiences a down turn, the company could see over capacity. If on the other hand the car market experiences an upturn, then the company may miss out on potential sales due to under capacity i.e. it takes time to accommodate. This is a typical problem with high volume car manufacturing.

Then, opportunities Lexus and Toyota now have a reputation for manufacturing environmentally friendly vehicles. Lexus has RX 400h hybrid, and Toyota has it Prius. Both are based upon advance technologies developed by the organization. Rocketing oil prices have seen sales of the new hybrid vehicles increase. Toyota has also sold on its technology to other motor manufacturers, for example Ford has bought into the technology for its new Explorer SUV Hybrid. Such moves can only firm up Toyota's interest and investment in hybrid R&D.

Toyota is to target the 'urban youth' market. The company has launched its new Aygo, which is targeted at the streetwise youth market and captures (or attempts to) the nature of dance and DJ culture in a very competitive segment. The vehicle itself is a unique convertible, with models extending at their rear! The narrow segment is notorious for its narrow margins and difficulties for branding.

Lastly, threats in Toyota Product recalls are always a problem for vehicle manufacturers. In 2005 the company had to recall 880,00 sports utility vehicles and pickup trucks due to faulty front suspension systems. Toyota did not give details of how much the recall would cost. The majority of affected vehicles were sold in the US, while the rest were sold in Japan, Europe and Australia.

As with any car manufacturer, Toyota faces tremendous competitive rivalry in the car market. Competition is increasing almost daily, with new entrants coming into the market from China, South Korea and new plants in Eastern Europe. The company is also exposed to any movement in the price of raw materials such as rubber, steel and fuel. The key economies in the Pacific, the US and Europe also experience slowdowns. These economic factors are potential threats for Toyota.

Task 3

Introduction

This well-known marketing tool was first published in the Harvard Business Review (1957) in an article called 'Strategies for Diversification'. It is used by marketers who have objectives for growth. Ansoff's matrix offers strategic choices to achieve the objectives. There are four main categories for selection. In market penetration the market existing products to existing customers. This means increasing our revenue by, for example, promoting the product, repositioning the brand, and so on. However, the product is not altered and we do not seek any new customers.

In market development the market our existing product range in a new market. This means that the product remains the same, but it is marketed to a new audience. Exporting the product, or marketing it in a new region, are examples of market development. Next, product development is a new product to be marketed to our existing customers. Here they develop and innovate new product offerings to replace existing ones. Such products are then marketed to existing customers. This often happens with the auto markets where existing models are updated or replaced and then marketed to existing customers.

Lastly, diversification is where the market completely new products to new customers. There are two types of diversification, namely related and unrelated diversification. Related diversification means that they remain in a market or industry with which we are familiar. For example, a soup manufacturer diversifies into cake manufacture (i.e. the food industry). Unrelated diversification is where we have no previous industry nor market experience. For example a soup manufacturer invests in the rail business.

Ansoff's matrix is one of the most well know frameworks for deciding upon strategies for growth.

Figure : Ansoff Matrix Strategy

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Ansoff's Product/Market Mix

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In market penetration, suitability is the market penetration strategy is most suitable for growing and emerging markets. But in this case, the car market is already well-established and penetration would be made much easier if the target market is growing. Considering that Toyota is such an established name within the automotive industry, the risk of opting to penetrate the market is not that significant barrier.

Acceptability is to management may worry that targeting the customers of rival car manufacturers may result in retaliation and it is likely a retention strategy to be considered as a possible and preferable option. Since a fair amount of costs are involved with implementing this specific strategy, it is expected that Toyota would need to improve both product quality and levels of service, backed by promotional spend. However, if the risk of undertaking such a strategy does not pay off, both shareholders and staff may be cautious. That, on the other hand, would lead to shareholders losing value in their shares and also the employees possibly losing their jobs as a result of the failed venture and lost revenues.

Feasibility is the fact that Toyota's range is one of the largest in the automobile world and already exists in each segment of the car market is determining factor for potential penetration on the market. This suggests that Toyota is in a position to go ahead and penetrate any of these existing markets, where the most likely target market for this strategy would be the small car market which is predominantly aimed at young people.

Next, is about the product development, in suitability is given the fierce high competition in the automotive market, it is necessary for car manufacturers to keep up to speed with the latest developments. Toyota, like many other car manufacturers is known for spending huge amounts of money on research and development[8]. It spent the most on research and development of any company in the world in 2008. The company spent $8,994million on R&D, which is 4.4% of sales. (Behura, 2009) Toyota was running an estimated Formula One budget of £190m per season and last year the budget was estimated of $445 million. (GPUpdate.net, 2009) The company is likely to continue to build on the technology found with the Prius and other 'new-fuel' alternatives. Toyota's Global 21 project, better known as Toyota Prius gives the company first mover advantage.

Considering the rapidly vanishing natural resources and more specifically oil, future plans of Toyota include development of Camry Hybrid fueled by compressed natural gas (CNG) which shows that there may be possibilities of using a whole new fuel in the future. Also, TMC is planning to launch 10 new hybrid models by the early 2010s, in various global markets. Another key factor, affecting the market position is the launch of the 'urban commuter' battery-electric vehicle (BEV) by 2012. And finally, Toyota has a wide range of small cars already at their disposal that inevitably will continue to enlarge the niche that Toyota occupies.

Acceptability with rising fuel prices, more drivers are likely to be looking for ways to cut the costs of motoring and to drive environmentally friendly vehicles. Moreover, shareholders and managers will be interested in maintaining the superior company image by being environmentally responsible. That is why Toyota continues to spend more on research, in order to fulfill its plan to release more hybrid cars in the future. It is likely that its good reputation that has stemmed from the Prius model will meet the consumers' needs. Furthermore, the Government will be satisfied about Toyota's decision to continue with the research and manufacture of new and innovative fuel alternatives.

Feasibility in Toyota is clearly serious about developing this new technology further and perceives it as being the future in this industry. They have successfully released the Prius model and therefore it is likely that if they unearth more ground-breaking technology they will be more than capable to launch it in the correct way. Given that Toyota is already making rapid progress on developing new products for the existing car market it is certainly feasible to continue develop in this market.

Considering the two examined strategic options, most likely the best option for Toyota is Product Development for existing market. The company has proved itself and exists in each segment of the car market. Its best option is to continue to develop the brand and the products that are demanded most. Though consumers are becoming more environmentally conscious which enforced the excellent ability of the company to research and develop new fuel efficient technologies. Second, the corporation plans to release 10 new hybrid models in the near future. Toyota has the first mover advantage with hybrid synergy drive and sufficient expertise when developing small, fuel-efficient vehicles and there is an increasing demand for these cars.

At last about future recommendations for Toyota is to be more ruthless in utilization of its early leadership in the commercialization of hybrid systems and electric-vehicle technology. Although every other giant carmaker will launch new hybrids and purely battery-powered vehicles, or is preparing to, Toyota is convinced that it is still ahead of the pack. Within a few years there will be a hybrid version of every car Toyota makes and there are plans to extend the Prius brand to cover a range of innovative low- and zero-emission vehicles. Toyota has to stop making so many dull cars with all the appeal of household appliances. (The Economist, Dec 10th 2009). The company has to focus more on safety standards, in order to avoid bad publicity. Also, it can acquire few small companies, to reinforce its market position and expand the company. Another strategic option for Toyota is to separate its hybrid models into a separate brand that will target customers that are more environmentally friendly. Given that currently the world is still recovering from the financial crisis, a new brand, offering moderately cheap, environmentally friendly and efficient car would be perceived very well.