Toyota Motor’s Leadership and Growth Strategies


Founded in 1927, nowadays Toyota Motor is a giant in the worldwide automotive industry. The success of the company lies in an implementation of general strategies that entail cost leadership with intensive growth strategies. The general strategy implemented by the company shows an overall approach Toyota uses to compete with rivals in the industry. Growth strategies that support the company’s goals outline the main actions Toyota implements to ensure the steady and competitive growth of their business. Lastly, the cost leadership strategy is what makes Toyota different from other automotive manufacturers as it means providing vehicles that offer great value for the customer at relatively reasonable costs (Thompson, 2015, para. 4).

According to the April-December 2015 Financial Results issued by the company, the sales of the vehicle within the period totaled 1,5 million cars in Japan, 2,1 million cars in North American 600 thousand cars in Europe, 1 million cars in Asia, and 1,2 million cars in other regions (Toyota Motor Corporation, 2016, p. 1).

Leadership

The general strategy implemented by Toyota Motor combines the strategy of differentiation with the cost leadership strategy. Cost leadership entails the minimization of costs that go towards producing the actual products. The company rarely allows itself a luxury to buy any expensive executive facilities and spends a little more than five percent of its revenue on the developing of products and their research. The research is focused on finding solutions that will not be significant breakthroughs, although will set the company apart from its competitors in the field (Thompson & Martin, 2010, p. 200).

Furthermore, the company pays major attention to the development of their prices. Toyota should always be sure that the prices on their products are set up in such a manner so that the customer will always be ready to make a purchase. Thus, Toyota has become a leader in the field thanks to the cost leadership strategy. The corporation sustains its success in few market segments with a variety of cars, outlining that its main goal is providing customers with high-quality but low-cost vehicles (Thompson & Martin, 2010, p. 199).

The primary strategic outcome of Toyota’s cost leadership strategy is the lowering costs on the vehicle production in order to achieve cost leadership advantage among the competitors. The corporation manages to do that by implementing the JIT (just-in-time) method of manufacturing also known under the TPS (Toyota Production System). The TPS method is a strategy that is instrumental in minimizing production waste, costs for inventory as well as the time for response. Thus, Toyota Motor will be able to achieve the top levels of business productivity. Another aspect of Toyota’s strategy is the innovation development that encourages the attractiveness of the new products that offer major value in the most important segments of the market (Thompson, 2015, para. 4).

The leadership strategy has caused Toyota Motor to become the leading automotive manufacturer that incorporates new technologies and materials that were innovative in the field of the vehicle design. On the other hand, the leadership strategy has encouraged the company to change its primary focus to development and design instead of engineering and the steps that go into manufacturing (Strategic Management Report on Toyota, 2015, para. 23).

However, when a company changes its focus to technology, there is one barrier that often arises. This barrier is the change in the company’s culture. Thus, the idea behind the rational production is waste elimination although innovations suggest producing new items in abundance so that the new technology could be properly tested so that any safety risks are eliminated. Finding a balance between eliminating waste and producing products in abundance is a complicated decision that needs to be supported by the leadership goals and strategies (Strategic Management Report on Toyota, 2015, para. 23).

Furthermore, the strategic decisions made by the company also have a major impact on the relationships with its main suppliers. When Toyota changes its primary capabilities and value propositions, its supplier should make appropriate actions to align with the company’s strategy. These changes, of course, will be shown in the quality of the produced vehicles, the safety of their customers as well as their satisfaction.

There are two prevailing views on this topic. On one side, there is an opinion that the strategic changes will lead to the creation of the industry’s by-products. On the other, there is an opinion that the strategic leadership should keep this result in mind while planning any changes. No matter which opinion is correct, alignment is the key to achieving success, namely when it comes to the employee capabilities, ability to quickly adapt and make changes, and corporate culture (Strategic Management Report on Toyota, 2015, para. 25).

Strategic Growth

The strategic growth of Toyota comprises three aspects of development: market penetration, product development, and market development. First, market penetration is an intensive growth strategy that is able to sustain and support the growth of the business by means of attractive perspective customers in the automotive market. In order to sustain this growth strategy, the corporation should be sure that it provides high quality products for every segment of the automotive market.

For instance, Toyota manufactures luxury vehicles, sedans, SUVs as well as other variations of the vehicle that will fit the needs of every niche on the market. Such a strategy targeted at intensive growth is supportive of the cost leadership strategy of Toyota Motor by means of encouraging the company to broaden the volumes of sales.

The product development component of the strategic growth is supportive of the company that is able to create the new attraction for customers. Toyota implements the growth strategy through creating and developing technological innovations. For instance, the intensive growth was achieved by the company when the Toyota Prius was created. The development of a hybrid car has attracted those customers that are concerned about the harmful emissions vehicles emit into the environment. Such a growth strategy is able to support the company by means of using innovative products and technologies that attract customers due to their advanced characteristics and unique capabilities.

Market development is the last feature of Toyota’s growth strategy. Despite the fact that the company is widely known on the global automotive market, the market development aspect of the growth strategy is instrumental in supporting and sustaining the business. Within the market development, Toyota expands by means of entering new market niches and selling new products to those niches. This aspect also supports the cost leadership strategy by the means of broadening the presence of the company on a global scale (Thompson, 2015, para. 7).

Competitive Advantage

There is strong competition in the global automotive market which forces Toyota to compete with the automotive giants and sometimes struggle for capturing a market share that belongs to the company. Thus, Toyota combines its capabilities to create and sustain a unique and recognizable market image that will capture the attention of potential customers thus giving a massive advantage over the company’s major competitors in the field.

Toyota constantly monitors the actions of its competitors in order to improve the quality of the offered products and lower the costs. By implementing the monitoring, Toyota was able to achieve success in the segment of mini cars, namely with models like Prius and Aygo that have much lower prices and lower consumption of fuel. The development of these models has created a competitive advantage that captures new consumers as well as satisfies their unique needs (Batal, 2014, p. 11).

On the other hand, Toyota also provides for the luxury segment of the automotive market with its Lexus brand. Lexus is the division of Toyota Motor that offers luxury vehicles to fit the needs of a market niche that wants to buy higher-class vehicles. However, because the company runs Toyota and Lexus at the same time, the strategic management should be divided into two various directions. The strategy of the Lexus brand can be described as the differentiation strategy while the Toyota brand requires cost leadership implementation (Mun, 2010, p. 141).

Opportunities and Coping With Threats

There is an option for Toyota to start targeting a new market niche – the youth. Despite the fact that the market is very competitive, Toyota has already created new vehicles to target this market. For instance, the Toyota Aygo possesses all the characteristics that are able to capture the attention of the youth.

The present market encourages the emergence of new technological innovations that are environmentally friendly. Within the critical importance of taking care of the environment, the new products are appreciated by the customers that do not want to pose any threat to the environment. Toyota and Lexus vehicles are highly appreciated on the modern market due to them being efficient and environmentally friendly (The Cost Leadership Strategy Is Achieved by Toyota, 2015, para. 8).

In a crisis situation, Toyota has a special department of public relation that handles any situation and outlines the main objectives that will aid in solving the arising problem. To develop the effective crisis development strategy, the following three points should be kept in mind. The first point is connected with the crisis termination while the next two points are linked to the credibility restatement and restoration as well as the building of the company’s reputation.

The most important methods of coping with crisis situation involve the management’s connection with the media as well as the NGOs (non-government organizations) the company usually offers assistance to in a form of funding. Moreover, the company’s management should also be responsible for the implementation of new strategies suggested by the customers. The customer’s suggestions can be used for improving the company’s image as well as convincing the public that the company is constantly implementing new advances to recover from a crisis (The Cost Leadership Strategy Is Achieved by Toyota, 2015, para. 11).

Recommendations for Further Development

Toyota Motor Corporation should continue the implementation of its growth and leadership strategy in order to make its management base stronger as well as increase the corporate value. In order to quickly adapt to the rapid changes that occur in the automotive market, Toyota should also promote the implementation of the reforms linked to cost structure. To be specific, the company should sustain a tough corporate framework through the means of cost lowering as well as business enhancement in the markets that operate in the developed countries.

Pursuing the development and production of efficient and environmentally friendly vehicles and delivering them to the global market will sustain the company’s competitive advantage. By acting on new developments, Toyota should target its efforts toward the creation of three units of business that include solutions that include new handling equipment, the key components of car engineering and electronics as well as the mobility aspect in the field of vehicle development. Furthermore, in order to ensure an effective management on a large worldwide scale, Toyota should take action to include diverse groups into the sphere of human resources (Nikomo, 2013, p. 7).

Apart from focusing on customer safety, Toyota Motor Corporation should also place priority on the compliance enforcement that also includes following the regulations. Furthermore, an instrumental solution for attracting new customers to the company is the participation in social activities and the support of the social organizations. In general, Toyota has been the leader in its industry for the last five years and acquired a share in the market that will be complicated to receive. A change of focus on smaller and efficient cars that the company produced at fairly low costs will continue to support the development and growth of Toyota on the global scale.

References

Batal, R. (2014). Strategic Analysis and Implementation for Toyota Motor Company. Web.

Mun, H-C. (2010). Global Business Strategy: Asian Perspective. Danvers, MA: World Scientific. Web.

Nikomo, T. (2013). Analysis of Toyota Motor Corporation. Web.

Strategic Management Report on Toyota. (2015). Web.

The Cost Leadership Strategy Is Achieved by Toyota. (2015). Web.

Thompson, A. (2015). Toyota’s Generic Strategy & Intensive Growth Strategies. Web.

Thompson, J., & Martin, F. (2010). Strategic Management: Awareness and Change (6th ed.). Cheriton House, UK: Cengage Learning. Web.

Toyota Motor Corporation. (2015). TMC Announces April-December 2015 Financial Results. Web.