Toyota Motor Co. Ltd was established in 1937 as a separated company from Toyoda Automobile Loom work. It plays an important role in the world automobile market. Companies must be flexible to respond to competition and market changes (Shrivastava, 1986). This can be realized by coming up with effective strategies that will assist the firm to outdo rivals and thus gain competitive advantage. Competitive advantage is the heart of a firm’s performance in a competitive market.
Strategies used by Toyota to become a powerhouse
Differentiation strategy, which is achieved by creating brands and quality that are superior to other firm’s products and services. The products and services are perceived as unique throughout the industry. Therefore, the clients identify the companies’ products due to their compelling and unique features that cannot be found in other products belonging to the competitors. Toyota used this strategy in coming up with various models that had unique attributes and that were valued by customers (Porter, 1998). In addition, Toyota has the capacity to manufacture products that are unique, this is because the company is able to get various products depending with the market niche. Thus the company is able to meet the market demand at a reasonable price. For example, the Corolla for the middle class and the luxury Sedans. Moreover, in the 1980s Toyota carried out extensive research and development that helped in coming up with a unique luxury Lexus. It was a superior brand that was recognized by customers for its high level of luxury and reliability.
Focus strategy, which involves concentrating on a particular customer, product line, geographical area and channel of distributions. It focuses on narrow segments and help in creating customer loyalty. Toyota in the 1950s used this strategy by focusing on the American market. They came up with the Avalon, Camry and corona. This made them penetrated the American market by concentrating on the needs of the niche market. They became the best non-American corporation over the years and challenged rival companies such as Ford (Porter, 1998).
Cost leadership strategy which requires the firm to convert to the lowest cost manufacturer of a product or service. For firms to succeed in offering the lowest price and attain profitability and high return on investment, it should be well placed to function at a lower cost than its rivals (Porter, 2002). Hence, the Toyota improves its cost for its various products thus remaining ahead of the pack, this is achieved through providing quality products at an affordable prices across the market segment.
Strategies used by Toyota over the years
Toyota over the years has continued using the same strategies in order to gain competitive advantage. Toyota is the world largest manufacturer of automobile in both unit sales and net sales. This has been achieved through the use of various strategies, for example, cost leadership this is achieved through economies of scale and thus spreading the cost. Toyota produces over 5.5 million vehicles per year. In addition, Toyota aims to lower costs such as transportation cost through setting up overseas affiliates and subsidiaries. Thus, reducing freight and insurance cost during shipment (Shrivastava, 1986). Recently, Toyota aim is to produce cars through adoption of various cost reduction strategies such as CCC21, the Construction of Cost Competitiveness for the 21st Century. They also use a differentiation strategy by producing unique automobiles that are valued by customers.
Furthermore, in recent years Toyota uses the value chain strategy, they aim at making Toyota the Total Mobility Service Provider. They connect with their customers by bringing comfort and convenience in customers’ lives and in so doing reinforces the value chain (Porter 1986). For instance, the company initiative by using TS3 card which facilitates the processing and the customer purchases.
The five forces strategies
Toyota strategy fit the environment by focusing on different aspects in the environments such as threats of substitutes. In addition, Toyota is not an island, and thus suffers from its loss of market to its competitors who offers the products which satisfies the similar need. This is especially if the customers are price sensitive and brand loyalty is not an issue.
The bargaining power of buyers this through their ability to force down prices and bargain for higher quality products (Porter, 1998). This especially on online sales as the customers have the freedom of choice over the vehicles, and the company on which to buy from so the switching cost will be low. However, the brand loyalty on Toyota products help customers sticks to their products.
Threats of new entrants also present an aspect that Toyota needs to focus on in order to remain competitive. New companies would enter the market with the desire to gain the market share and gain from the resources (Shrivastava, 1986). Toyota minimizes threats of new entrants by coming up with quality vehicles at affordable prices that influence purchase decisions.
Rivalry among existing firms also affects the competitive advantage of Toyota. In the automobile industry, corporations are normally mutually dependants. Competitive move by one firm brings noticeable effects on its rivals. Thus, Toyota follows the moves of competitors such as Honda and BMW. For example, any price reduction, or increase, the introduction of new product by rival firms is followed by similar moves (Porter, 1998).
The strategies employed by the Toyota auger well with its internal and resources together with competent as it concentrates on its strengths and try to work on the weaknesses. This analysis will focus on the strengths Toyota has used to outdo its competitors. Strength is a factor that could serve as a basis of achieving the company mission and vision. Examples of strengths that Toyota should focus on in order to gain competitive advantage are promotion, prices, products, place, the facilities, recognition, programs and personnel (Hamel, 1996). Toyota has superior technological inventions. In the year 2002, Toyota launched the IMTS, that is, the Intelligent Multimode Transit System, this aids in driving of sensitive Automotives. In addition, Toyota uses skilled and experienced human resources who help in coming up with quality vehicle. The corporation also uses promotions to communicate the benefits and value of their unique and high quality products. They have a well organized marketing network throughout the regions as compared to their competitors (Porter 1986).
In conclusion, Toyota plays an important role in the world automobile market, and so based on the analysis and findings it would be recommendable that the executives of Toyota Corporation concentrate on one generic strategy so as to be successful over the long run rather than concentrate on different strategies (Hamel, 1996). However, still they should come up with ways of coming up with products that offer multi-dimensional qualities that combine various aspects such as quality, style, price and convenience that will make people proud of.
Hamel, G. (1996). Strategy as revolution. New York: Harvard Business Review.
Porter, M. (1986). Competition in Global industries. U.S.A:Harvard Business Press.
Porter, M. (1998). Competitive strategy: Techniques for analyzing industries and Competitors. London: Simon and Schuster.
Porter, M. (2002).Retrospective on Michael Porter’s Competitive Strategy. Academy of Management Executive 16(2), 100-309.
Shrivastava, P. (1986). Is strategic management ideological?Journal of Management, 12(3), 363-77.