Analysis of Toyota Motor Corporation in the United States

TABLE OF CONTENTS

1. Presentation of the Company22. International Context53. Marketing Mix74. Success, Achievements and Failures115. Conclusion/References13

Chapter 1. Presentation of the Company

General History

Toyota Motor Corporation,JapaneseToyota Jidsha KK,Japanese parent company of the Toyota Group. It became the largestautomobilemanufacturer in the world for the first time in 2008. Most of its nearly 600 subsidiary companies are involved in the production of automobiles, automobile parts, and commercial and industrial vehicles. Toyota Motor Corporation began in 1933 as a division of the Toyoda Automatic Loom Works, Ltd. (later Toyota Industries Corporation, now a subsidiary) a Japanese manufacturer founded by Toyoda Sakichi. Its first production car, the Model AA sedan, was released in 1936. The following year the division was incorporated as the Toyota Motor Company, Ltd., an automotive spin-off headed by Toyoda Kiichiro, Sakichis son. Toyota subsequently established several related companies, including Toyoda Machine Works, Ltd. (1941), and Toyota Auto Body, Ltd. (1945). Today Toyota has assembly plants and distributors in many countries. Its vehicles, some in the form of unassembled units, are exported to more than 140 countries. In addition to automotive products, its subsidiaries manufacture rubber and cork materials, steel, synthetic resins, automatic looms, and cotton and woolen goods. Others deal in real estate, prefabricated housing units, and the import and export of raw materials.[footnoteRef:1] [1: Toyota Jidosha KK, Encyclopedia Britannica, Yamini Chauhan, June 09, 20130]

Company History in the U.S.A

Toyota Motor Sales, U.S.A., Inc. (TMS) is the North American Toyota sales, marketing, and distribution subsidiary devoted to the U.S. market. Founded in 1957 in California, TMS currently employs more than 6,500 people. Its current headquarters in Torrance, California supervises 14 regional offices. Toyota has plans in 2014 to move its headquarters to suburban Dallas, Texas in the next few years.[footnoteRef:2] [2: Jerry Hirsch and David Undercoffler, Toyota to move jobs and marketing headquarters from Torrance to Texas, Los Angeles Times, April 27, 2014]

TMS oversees sales in 50 states of Toyota, Lexus, and Scion products through a network of over 1,200 Toyota dealers (of whom more than 900 also sell Scion vehicles) and over 200 Lexus dealers. TMS develops Toyota's television campaigns and other nationwide marketing materials, and supervises dealer marketing to ensure that dealers present a uniform image. TMS also manages regional distribution, which occurs through 12 parts centers and five vehicle centers. James E. Lentz III is the president of Toyota Motor Sales U.S.A.[footnoteRef:3] [3: http://www.nytimes.com/2008/10/10/business/10prius.htmlNew York Times: October 10, 2008-]

Mission

Toyotas mission statement is the following one:To sustain sustainable growth by providing the best customer experience and dealer support. (Toyota, 2007) Customer satisfaction is the most important driving force for the Toyota Company. By keeping the customer satisfaction at the highest level possible the company is able to provide the highest quality products and services. Toyota is characterized by Kaizen, a Japanese word, which means continuous improvement of its technology, products, and services. Toyota further explains its mission as follows: Around here our values are just like yours. We are hard working. We are active in community. We are creating jobs. We celebrate our diversity. We are building cleaner, greener cars. And this is just the beginning.(Toyota 2007)

VisionTo be the most respected and successful enterprise, delight customers with a wide range of products and solutions in the automobile industry with the best people and best technology.(Toyota 2007) The most respected. The most successful. Delighting customers. Wide range of products. The best people. The best technology.As we can see this goal for the future, the Toyota Global Vision is well-connected with its Mission. The current vision, which reinforces the mission of the company (serving the customers and the society by applying Kaizen) is like a fruit-bearing tree that grows from roots that symbolize Toyotas main values and philosophies.Figure 1. Toyota Tree, Toyota-Global.com.

Chapter 2. International Context

The automobile industry is one of the largest industries and thus it is difficult to work efficiently, progress and maintain a good position. A few decades ago the leaders of this industry were American companies like Ford, General Motors and everybody thought that this cant be changed. However in the present Toyota is the worldwide leader in automobile industry. As mentioned before nearly, 600 companies are involved in the production of Toyota cars in the world, on six continents. This change could not be made without a good strategy. In order to achieve the first position worldwide Toyota needed not just good cars, but also good marketing, design etc. The core value of Toyota is that they produce cars at low price and high quality, but it is also important that they care about the environment, put attention on social media and try to satisfy every person. In order to be more accurate it is important to present the facts which are driving Toyota. The improvement of the company is based on the so called Multi-Faceted Global Strategy. This included Smart Production (by scheduling, buffer stocks), Smart Design, IT and Management of supplier networks, Smart marketing and Responding to demand changes through smart production and design.[footnoteRef:4] [4: AUTOMOBILES: TOYOTA MOTOR CORPORATION William V. Rapp Co-Principal Investigator -The College of International Relations Ritsumeikan UniversityApril 200]

Smart production, while other companies tried to use more and more automated plants in the production, Toyota remained with its basic philosophy by keeping simple the production with using the human element and the capabilities of it. This philosophy could be seen as conservative but in the perspective of total cost effectiveness is better, being cheaper to hold on. Using law cost machinery is good on the short term but taking into account the cost of maintaining these machinery it can be seen that the use of human resources is cheaper.[footnoteRef:5] [5: AUTOMOBILES: TOYOTA MOTOR CORPORATION William V. Rapp Co-Principal Investigator -The College of International Relations Ritsumeikan UniversityApril 200]

Smart design, as 80% of a vehicles cost is fixed, Toyota tried to work with remained 20%, which practically can be seen as the design costs, so they tried to lower these. A car could be the best, but if it is expensive cant be sold. Thus Toyota developed an integrated concurrent engineering and design group, which has reduced design cost. IT and Management of Supplier Networks, gaining profit doesnt mean only producing smart and designing well, we also need to manage well our supplier relationships. Suppliers have a huge impact on a products price, thus managing the relations with supplier is a critical aspect on a company. Smart marketing, meaning that every company needs to give a good image of its self for the customers in every possible way. Using at the highest possible rate the current channels of advertising and searching for new possible channels it is lethal. Responding to demand changes through smart production and design.[footnoteRef:6] [6: Software as a Tool of Competitive Advantage: Automobile Industry, William V. Rapp]

Beside all these a company needs to search for the best production costs every time. Toyota is one of the best companies in this field. We all can imagine how many parts has a vehicle, so there are many ways to reduce production costs. Toyota produces many parts of a car in different countries, an engine here, a door there, due to tax preferences. The philosophy of responding to chances brings them profit.As we can see due to its sophistication and flexibility in the world, Toyota can be the first one in its industry in one day. Figure 2SWOT Analysis, Toyota 2013- http://www.scoop.it/t/acheteurs-acheteuses-du-siecle-21-

Chapter 3. Marketing Mix

Marketing Mix is one of the most used and best known concepts in modern marketing. Kotler (2007) stated as The marketing mix is the set of controllable, tactical marketing tool that the firm blends to produce the response it wants in the target market[footnoteRef:7]. The marketing mix is the main concept and tool by which a company is able to influence the demands of its services and products. The concept consists of four variables, known as the four Ps: Product, Price, Place, and Promotion (McCarthy, 1978). Today we can count 3 more Ps more precisely: People, Physical Evidence, and Process. However, in this case study we will analyze only the four basic one. [7: Analysis of Toyotas Marketing Strategy in the UK Market, Vol. 5. No. 20, 2013]

Price In 2013 Toyota, the Japanese automobile carmaker has become the worlds second carmaker in terms of profit, quality and reliability. On the US market they have a really strong presence, they are the number two carmaker and they are not very far behind from General Motors Company. To achieve this position Toyota has managed not only to produce high quality products at affordable prices, but also with the use tactful pricing strategies. Toyota is using a differentiation strategy, their pricing strategy is slightly different from the traditional pricing set up of many the other automobile markets. Kiichiro Toyoda, the founder of the company, has realized that in order to be competitive on the US market he has to begin traveling and to make extensive research in the auto industry all around the United States. After successful researches Toyota has developed a new pricing strategy that alters from the traditional one. The traditional pricing strategy is formulated as: the cost + profit = selling price. If a company changes any improvements of their products, services, the cost of production increases and the selling prices will be increased. Companies normally do not want to cut their targeted return and therefore the costs are passed on to the consumer to maintain their profit margin. Toyota modified the traditional formula with a sales - oriented objective. Although the variables are the same, the formula is adjusted strategically into the selling price - cost = profit. Toyota firmly believes that its markets and consumers is what determine the selling price. For Toyota, the waste elimination is the main cost factor and by minimizing this cost factor and by continuously reducing these types of costs, it will result in persevering the company's profit growth. The strategy mentioned above is the main pricing strategy of the company. However, Toyota is using other minor pricing strategies also. One of the minor strategies is that Toyota allowing credit payments under low interests for customers. Another system that Toyota has developed and which is directly connected to their main pricing strategy is the Jidoka ("automation with a human touch.")[footnoteRef:8]. A production system that detects defects and issues in order to obtain high quality and low cost vehicles, which actually means waste elimination and prevention. [8: http://www.toyota-global.com/company/vision_philosophy/toyota_production_system/jidoka.html]

Products Generally Toyota offers a wide variety of products, both tangible and intangible ones, starting from their vehicles to warranties. Toyota has approximately nineteen car models and they are broken down to different categories: Sedan, Trucks, SUVs/Van, and Hybrid. Toyota offers both new and used vehicles and the option to custom build your own vehicles.[footnoteRef:9] [9: http://www.ranker.com/list/full-list-of-toyota-models/reference]

There are three important aspects that we have to emphasize when analyzing Toyotas products as a group element of the marketing mix. The first one is about customers interests. The company has invested 22.2 million$ to a research center (Calty Design Research) in order to gather data on the community expectations of Toyota.[footnoteRef:10] This number would seem a lot to invest, however, it shows that for Toyota, their customer expectations and needs has the highest priority. [10: http://www.toyota-global.com/company/history_of_toyota/75years/data/automotive_business/products_technology/technology_development/design/details_window.html]

Another important product development is the Hybrid product line. The first Toyota hybrid cars was developed back in 1997 and being marketed in year 2001 in the US market. With the emergency of resource management and the rising oil prices Toyota future orientation (we cant forget that we are talking about a Japanese corporation) was able to develop a vehicle, the Toyota Prius Hybrid which consumes a gallon at 48 miles. The development of the Hybrid cars is still on process, they are designing newer and newer models with more efficiency. The last but not the least aspect about Toyotas product is diversity. Toyota offers different products, customized products for their customers. The company is using a combination of generic strategies (Porters Generic Strategies)[footnoteRef:11]. The narrow, focus strategy is also used by Toyota. They were able to catch a niche market, more precisely the car racing fans by offering racing cars, parts and gears. The most famous ones are the NASCAR Racing cars. [11: http://www.quickmba.com/strategy/generic.shtml Porters Generic Strategies. ]

Promotion Toyota utilizes a variety of promotional strategies in order to increase their sales volume. One strategy is the low APR promotion. In this strategy Toyota aims to reach the consumer segment of the car-buying market that will be financing a purchase. The low APR offers entice consumers to buy a new vehicle at reduced interest rates, sometimes even offering 0% offers to credit-worthy consumers. This is an important promotional tool because the lower interest rate will lower the monthly payment. There are two positive sales benefits of this promotional technique: 1) some consumers who would have stayed home may go shopping for a car because of the promotion; and 2) some buyers will purchase more options because they can afford more car because of the lower payment. Many of these low APR offers include other incentives, such as no-money down, which is essentially a secondary promotion of the main promotion. [footnoteRef:12] [12: http://www.toyota.ca/toyota/en/promotions/national-promotions]

Above the ARP promotion system Toyota is using other promotions like billboards, celebrity endorsement, and other pull strategies. These mostly are mass produced and they appears in media forms. The advantage of pull strategies is the flexibility, easy implementation and effective sales generating. The most used pull strategy by Toyota is concerts. Toyota has organized many concerts within the US and the tickets were free or had a really low cost.

Place As mentioned before the managers of Toyota has realized the importance of customers. Customers are always at the first place. Thats why Toyota has developed a unique supply chain management system. They have a lot of dealership networks and retail outlets for distributing their products. The emergence of E-commerce has been applied to the Toyota placement. However the e-commerce in the automobile industry didnt influence the on-place sales as in other industries because even if the customers are able to view various models and designs at the internet they still have to go to the dealership or to the retailer and purchase from there. As of the end of Dec. 2013, Toyota conducts its business worldwide with 52 overseas manufacturing companies in 27 countries and regions. Toyota's vehicles are sold in more than 170 countries and regions.[footnoteRef:13]. The products are currently being sold in the right outlets, the company has five distribution channels which are connected to the Toyota car development. For their customers Toyota has added a new feature, an advantage of customizing the cars because the most cars are made to order. The company representatives are working directly with the dealers and because of this customers have the possibility to give feedback on the new vehicles. [13: http://www.toyota-global.com/company/profile/facilities/worldwide_operations.html] Figure 3 Overseas Manufacturing Companies

Chapter 4. Success and Failure

Success

Toyota is the leader in the automobile industry as we sad, the road to this was hard, there were failures, but they made it. We will mention a few things that made them successful in America. The first and the most important one is long-term planning, while many companies try to respond to current trends, Toyota tried to develop for the future also. The best example is the Prius model, which is a hybrid car. When it was lunched a gallon of gasoil wasnt as expensive as these days, but with the current market trends hybrid cars are more demanded and this model helped Toyota to take a commanding lead in hybrid technology. While General Motors is cutting salaries, benefits and fires peoples, the rival Toyota is rising and opening new plants and creating jobs. In 2006 the Japanese automaker reported a 34 percent increase in their profits and an increased sales to 15% at global level.[footnoteRef:14] They were able to realize the importance of offensive strategies rather than defensive ones in the years of economic regression. [14: http://www.nbcnews.com/id/11221072/ns/business-cnbc_tv/t/behind-wheel-toyotas-success/#.VIL8aIuUcuI]

There are other aspects that lead to a success in the US market:[footnoteRef:15] [15: http://www.advancebusinessconsulting.com/advance!/strategic-alignment/strategic-alignment-business-cases/the-rise-of-toyota.aspx]

Studious speediness, often suppliers claim that for Toyota takes forever to make a decision, but this is because they examine every option. Open mind, Toyota wants to learn continuously, they arent ashamed if they do not know something, but they are ready to learn from their competitors. Obsession with waste, they arent satisfied even if they have the best performances, every time they want to do it better, cheaper. Humility, they doesnt want to be in the front, people in Toyota work for each other, for the success of the whole, not for personal goals.Failure Toyota is a successful company, although they also have failures as other companies too. One failure is that Toyota wants internal communication to be simple, for example they want to summarize background information, objectives, analysis, action plans and expected result on a single paper, while they have made a very complex internal social network, because they want everyone to know everything. The conservative view of Toyota, which brings pluses also brings minuses. The established practices overtime could be changed, but they do not want this to be permanent. Also one of Toyotas hugest failure is the recall of 1.8 million vehicles in America in 2013, because of the safety defect which were hidden from the public, beside of the cost of repairing and the damage in the companys image, Toyota had paid also the largest criminal penalty by an automobile producer.[footnoteRef:16] [16: http://www.justice.gov/opa/pr/justice-department-announces-criminal-charge-against-toyota-motor-corporation-and-deferred]

Another failure of Toyota is that they had to recall more than 6.5milllion cars spanning nearly 30 models - including 2.3 million in North America and 35,000 in the UK - after they discovered a number of issues. The car manufacturer found in some models airbags can deactivate, seats may move and steering columns could break.[footnoteRef:17] [17: http://www.dailymail.co.uk/news/article-2600363/Toyota-recalls-35-000-cars-UK-airbags-fail-seats-steering-columns-break.html]

Other failures were like bureaucracy, when Toyota was expanding to America they had an American leader there, but when they had to replace him, they chose a Japanese, and because of this Toyota lost its key bridge between the mother management and various USA constituencies and also its ability to respond rapidly to the problems. The weak management is also a problem, while for years the company was led by world class professionals, in the present they chose wrong, mostly on a paternalistic way. This brings failures, more people without knowledge and also means the lack of experience and the waste of values.

Chapter 5. Conclusion

Toyota is Japanese multinational company, founded in 1934, which is the leader, most profitable automaker in the world. In order to get this status they needed hard work, creativity. One important part of Toyotas rise was entering the American market. In conclusion, with competitors like Ford or general Motors it was hard for Toyota, but they succeeded, there are many parts of this success. First of all they have clear ideas, they know what to do and how to do it. They produce cars at low costs which satisfy their customers. Their vision, mission, strategy are built on each other and every part of the company works for the success of the whole. Their Multi-Faceted Global Strategy, beliefs, attitude are all basic attributes for a company to succeed. Secondly, they have failures of course, but they are ready to learn from these and correct in the future, as well as they are ready to learn from their competitors. In our opinion they have to make some changes in the marketing mix, mostly in the promotion part otherwise they can easily lose market share in the highly competitive US market. The company might need to improve their extensive and continuous research methods in order to better understand the possible shortcomings and changes that can affect their pricing strategy. Finally, they always want to do it better even if they work is good and this is the most important to be the best in your field. Toyota gives example for all the companies and they showed in America that everyone is capable to win on the opponents, competitors field.

References:1. Toyota Jidosha KK, Encyclopedia Britannica, Yamini Chauhan, June 09, 20132. Jerry Hirsch and David Undercoffler, Toyota to move jobs and marketing headquarters from Torrance to Texas, Los Angeles Times, April 27, 20143. Toyota May Make Prius a Brand and Widen the Model Lineup- New York Times: October 10, 20084. AUTOMOBILES: TOYOTA MOTOR CORPORATION William V. Rapp Co-Principal Investigator -The College of International Relations Ritsumeikan UniversityApril 2005. Software as a Tool of Competitive Advantage: Automobile Industry, William V. Rapp-20096. Analysis of Toyotas Marketing Strategy in the UK Market, Vol. 5. No. 20, 20137. Behind the wheel of Toyotas success-Mary Thompson-NBC News 20098. Criminal Charge Against Toyota Motor Corporation- Department of Justice- March 19, 20149. Toyota Corporation homepage and other unanimous articles linked above.

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