Toyota was a former division of automatic looms manufacturer Toyoda Automatic Loom Works established in 1933 with the intention to manufacture automobile vehicles. It introduced its first passenger car in 1936. The specific Model AA was cheaper than the vehicles from Ford and General Motors. It later became a standalone company in 1937 but its growth was hampered due to the impacts of World War II. Nevertheless, beginning in the 1950s and further into the 1960s, the company grew alongside the economic boom in Japan. It also gained market success in North America beginning in the 1980s. The company has since become one of the most prominent and largest automakers in the world. This article explores the business situation of Toyota using the SWOT framework to assess strengths, weaknesses, opportunities, and threats.
Analyzing the Internal and External Situations of Toyota Using the SWOT Framework: Strengths, Weaknesses, Opportunities, and Threats
1. Strengths
Management and manufacturing capabilities are the core strengths of Toyota. It established The Toyota Way management principles and the Toyota Product Systems lean manufacturing practice. Furthermore, aside from these capabilities, the company has built, maintained, and expanded further several sources of competitive advantage that have made it one of the biggest competitors in the automobile industry.
Below are the specific strengths of Toyota:
• Notable Brand Reputation: The company is known for manufacturing high-quality and reliable vehicles at reasonable prices that are even cheaper than American and European automakers. It also has a reputation for providing excellent after-sales services while its vehicles are known for their high repairability.
• Established Global Presence: Its vehicles are sold in different parts of the world through its dealership networks. Toyota also maintains regional offices to oversee region-specific operational and marketing requirements. It has also built and run production facilities and dedicated assemblies in certain geographic markets.
• Manufacturing Capabilities: Manufacturing is one of the sources of competitive advantage of this company. It follows lean manufacturing and just-in-time principles while integrating the Jidoka concept of automation and the Kaizen concept of continuous improvement to lower costs while improving quality.
• Diverse Vehicle Offerings: Another strength of Toyota is its wide range of vehicles. It has a particular vehicle for a particular type of market segment. These include affordable vehicles for the entry-level market and premium vehicles for the luxury market, and specific models of sedans, sports utility vehicles, and trucks.
• Strong Financial Capabilities: The company uses its revenues and access to capital for investments in research and development, aggressive marketing activities, and further expansion of its business. These pursuits help maintain its competitive advantage while intensifying the competition in the market.
• Research And Development: It is important to highlight the fact that the research and development pursuits of Toyota have been demonstrated through its Toyota Product Systems, leadership in the hybrid electric vehicle segment, and innovations like the Toyota New Global Architecture and hydrogen fuel cell technology.
2. Weaknesses
It would appear that Toyota is an almost-perfect company because of its management and manufacturing capabilities that have made it one of the most prominent companies in the world. However, like other organizations, it also has its fair share of weaknesses and shortcomings. These internal issues and problems are magnified when Toyota is compared to other innovative automakers and even newer market entrants.
Below are the specific weaknesses of Toyota:
• Issues With Innovation: The company has been criticized for being too slow to adopt new technologies or influence future trends in automaking. Take note that Toyota seems to be less interested in focusing on developing battery-powered electric vehicles and autonomous or self-driving vehicles.
• Perceived Bland Design: Another weakness of Toyota is the emerging public perception of its design philosophy. Its vehicles are criticized for featuring bland and outdated exterior and interior designs compared to the edgier and contemporary designs of European vehicles and even vehicles from China.
• Average Marketing Impact: Some observers have also noted that its promotional campaigns have been uninspiring despite its aggressive marketing activities. The company seems to be focusing on retaining brand awareness but has failed to highlight the unique selling point or value proposition of its vehicles.
• Relative High Prices: The price points of Toyota vehicles are reasonable considering their reliability and strong after-sales support. However, because of the presence of other automakers and the arrival of newer ones with edgier and more feature-packed products, these vehicles have been considered expensive.
3. Opportunities
Toyota remains one of the largest automakers in the world despite its aforesaid weaknesses. The company and its vehicles remain relevant because of its established brand reputation. Nevertheless, considering the future trends in automaking and the entire market for automotive vehicles, there are opportunities that can be explored and pursued to secure the future of the company and maximize its earnings potential.
Below are the specific opportunities for Toyota:
• Electric Vehicle Demand: The demand for electric vehicles is growing as evident from the success of Tesla and the arrival of electric vehicles from newer automakers. Toyota is well-positioned to capitalize on this trend with its hybrid electric vehicles but it can also pursue battery-powered electric vehicles.
• Newer Relevant Technologies: Another opportunity for Toyota centers on novel technologies that are set to shape the future of the market. These include battery-powered electric vehicles, alternative fuel technologies, other sustainable and eco-friendly vehicle solutions, and autonomous driving technology.
• Improved Marketing Efforts: The company can maintain and even improve its branding through relevant and impactful marketing campaigns that include messaging that highlights the value that comes with purchasing its vehicles and other promotional activities that can encourage demand and sales.
• Expansion Into New Markets: It might have a global presence but there are still opportunities in several countries like China and India and other regional markets like South America, Africa, and the Middle East. The company can also explore other products or services related to automaking.
4. Threats
Failure to solve its weaknesses and capture all available opportunities or follow and set new trends can leave Toyota irrelevant in the future. It is important to underscore the fact that the automobile market is highly competitive due to the presence of multiple players that create strong competitive forces. The entire automobile industry is also dependent on technological innovations and is sensitive to macroeconomic factors.
Below are the specific threats to Toyota:
• Intense Competition: The main threat to Toyota is competition that comes from industry incumbents and the arrival of newer players. Take note that Tesla has dominated the electric vehicle segment while Chinese automakers are aggressively expanding their market share with edgier and innovative vehicles.
• Technological Disruption: Rapid advancements in tech can upend the automotive industry and traditional products or business models. Developments in artificial intelligence promote autonomous driving while novel energy storage solutions are creating a strong case for battery-electric vehicles.
• Supply Chain Issues: The presence of other automakers and even other businesses in other sectors or industries, in addition to growing demand, are creating a strain on the supply chain. Geopolitical events, natural disasters, and economic downturns can also disrupt the supply chain and affect production schedules and costs.
• Regulatory Challenges: Another threat to Toyota is the emergence of stringent environmental regulations and emission standards. The company needs to find solutions to address the possible obsolescence of combustion engines. Changes in trade policies can also increase logistics costs and restrict market access.
• Economic Downturn Risks: Toyota operates in the so-called consumer discretionary sector. Vehicles are not essential goods. The demand for these products would decrease during periods of economic slowdowns and instances of recession. The company needs to have a plan in place to go through an economic downturn.