toyota swot

TP015486 - ISOM 2011

Introduction: Toyota is the largest manufacturer of cars in the world, with scores of factories in dozens of countries. Its standing in the automotive world as the most successful and most profitable carmaker is unquestioned.

In sharp contrast, Australia has one of the smallest car industries in the world and while it is one of the oldest, it has never spread its manufacturing wings across the oceans.And yet Australia has played an important role in the development of the world’s largest carmaker over a 50 year period, a length of association no other country outside Japan can match.

It was Australia where today’s world car industry leader first tasted success beyond its Japanese domestic market. It was through Toyota Australia that the Japanese company learned many lessons which have underpinned its global success, and it was Toyota Australia that achieved many breakthroughs within the group: first successful LandCruiser exports, first successful production outside Japan, first finance arm to fund dealers’ inventory and first exporter of the Camry apart from the parent company itself. It is a proud record which has earned Australia a special place in Toyota’s history.

Toyota Australia's origins go back to 1958 when Thiess Brothers began importing the first LandCruiser models for work on the Snowy Mountains Hydro-electric scheme and sold the first Toyota LandCruiser in 1959. Assembly of Toyota cars began in the Melbourne factory of Australian Motor Industries (later AMI-Toyota) in 1963 and within a decade the Corolla and Corona (replaced by Camry in 1987) were well established in the market.The commercial vehicle business became Thiess Toyota in 1971 and achieved commercial leadership in 1979. Meantime AMI Toyota began investing in an engine and stamping plant to consolidate its position as a high local content vehicle manufacturer.

In 1988 Toyota's local operations were unified to form Toyota Motor Corporation Australia and work began on restructuring and strengthening the group as a major step towards achieving international competitiveness and building vital export business. Toyota in 1994-95 consolidated vehicle production at its new world-ranking Altona plant in Melbourne.So after 50 years in Australia, Toyota has grown to be one of Australia’s leading automotive companies. In just five decades, this proud organisation has grown from a patchwork of import, sales, distribution and assembly activities into a major force. In doing so, it has overcome great difficulties, brought forth strong leaders, fostered the talents of many Australians and contributed to the social and economic development of this country. It has been supported by loyal employees, customers, dealers, suppliers and has earned the commitment of governments, and many other organisations and individuals in Australia and throughout the world.

(Toyota Motor Corporation Australia, 2005)

1 Mansoor Iqbal Nagori – UC2F1007BIT

TP015486 - ISOM 2011

Toyota global production in 2006 was more than nine million vehicles. That’s the equivalent of one

car coming off the production line every 3.5 seconds, every minute, every hour, everyday. (Toyota

press UK, 2007)

Timeline:

2010 Hybrid Camry, the first Australian built Hybrid is released

2009 3rd generation Prius is launched

2008 Toyota announces Australian hybrid Camry production from 2010

Toyota Australia achieves all-time sales record - 238,983 vehicles

2007 New TRD Aurion launched in Australia

Tenth-generation Corolla launched in Australia

New export record - 97,688 vehicles

2006 New Generation Camry is launched in Australia

Presenting partner 2006 Commonwealth Games

Shipped 500,000th export vehicle

2005 Toyota Australia builds the world's 10 millionth Camry

The Yaris is launched in Australia, Replacing the Echo

2004 Two millionth locally built Toyota produced

New corporate headquarters in Port Melbourne opened

2003 Toyota Australia's 300,000th vehicle exported

Toyota overall Australian market leader with industry record sales of 186,370

vehicles

2001 The hybrid petrol/electric Prius launched in Australia

100,000th Camry exported to Saudi Arabia


TP015486 - ISOM 2011

2000 Avalon production commences at Altona

Toyota Australia appointed as national Daihatsu distributor

New National Sales and Marketing headquarters opened in Sydney

1999 Victorian Parts Distribution Centre opened at Altona

1998 Altona plant receives ISO 14001 certification (Environmental Management)

1996 First Camry export shipments to the Middle East

1995 Camry enters production at Altona

1994 Corolla is first car built at the new Altona Assembly Plant

Camry is the last car built at Port Melbourne

1992 One millionth locally-built Toyota produced

1991 Toyota becomes Australian overall market leader

1990 Lexus LS 400 launched in Australia

1987 Camry replaces Corona at Port Melbourne Assembly Plant

1981 Altona begins volume production of body panels

1978 First engines built at Altona

1968 Corolla assembly begins at Port Melbourne

1967 Crown assembly starts

1964 Corona assembly begins

1963 Toyota Tiara assembly starts

1959 First Toyota LandCruiser sold in Australia

1958 First 13 LandCruisers imported for use on Snowy Mountains Scheme

(Toyota Motor Corporation Australia, 2005)


TP015486 - ISOM 2011

SWOT Analysis:

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 even knocked its rival 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 uses marketing techniques to identify and

satisfy customer needs. Its brand is a household name. The company also maximizes profit

through efficient manufacturing approaches. Example: Total Quality Management.

(Marketing Teacher Ltd 2000 – 2011)

Weaknesses:

Toyota comparatively has less market shared if compared to General Motors. Customers are

not segmented properly which makes them to miss out on some potential new customers.

The company also needs to keep producing cars in order to retain its operational efficiency as

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. (Marketing

Teacher Ltd 2000 – 2011)


TP015486 - ISOM 2011

Opportunities:

Toyota and Lexus 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 research and

development. Toyota is also targeting the urban youth; therefore they are coming out with

various new models which target the streetwise youth market and capture the nature of dance

and DJ culture. (Marketing Teacher Ltd 2000 – 2011)

Threats:

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.

Toyota also 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.

(Marketing Teacher Ltd 2000 – 2011)


TP015486 - ISOM 2011

Toyota Five Forces Analysis:

1. Rivalry between existing competitors:

With the rise of foreign competitors like Ford, Chevrolet and GMC in the 1970's and 80's,

rivalry in the Toyota auto industry has become much more intense. Firms compete on both

price and non-price dimensions. The price competition erodes profits by drawing down price-

cost margins while non-price competition (e.g., new car rebates and interest free loans) drives

up fixed cost (new product development) and marginal cost (adding product features). One of

the other reasons there is such high rivalry is that there is a lack of differentiation

opportunities. All the companies make cars, trucks or SUVs. The competitors are compared

to one another constantly. In recent years there has been significant market share variation,

another indication of rivalry and its very strong threat to profits. (Scribd Inc. 2011)

2. Threat of entry by new competitors:

The presence of new firms in an industry may force prices down and put pressure on profits.

There are, however, barriers to entry that tend to protect established firms. One would expect

the production of automobiles to require significant economies of scale, an important barrier

to entry. The new entrant would have to achieve substantial market share to reach minimum

efficient scale, and if it does not, it may be at a significant cost disadvantage. While the

evidence suggests that economies of scale in the auto industry are substantial, there are also

indications that large size may not be as important as commonly assumed. Nevertheless,

entry would represent a large capital investment to any new firm and the body of research

still indicates that economies of scale represent a substantial barrier to entry. Consequently,

entry is currently a weak threat to profitability. (Scribd Inc. 2011)


TP015486 - ISOM 2011

3. Price pressure from substitute or complementary products:

While five-forces do not directly consider demand, it does consider two factors that

influences demand ― substitutes and complements. Although new cars generally are slightly

price elastic, suggesting few real substitutes (e.g., bus and rapid transit), the demand for a

particular model is highly sensitive to price because of the availability of close substitutes for

a given model. A change in the price of a complementary product (e.g., gasoline, batteries,

and tires) could have a significant impact on the demand for automobiles. The rising price of

gas, an important complementary product, is likely to affect some firms more than others

depending upon the vehicle composition. Recent rising fuel prices are likely to have a more

impact on the firms (GM, Ford Motor and Daimler-Chrysler) whose most profitable models

are energy inefficient pick-up trucks and sports utility vehicles. While Toyota has their hybrid

series of cars which are efficiently using green energy (electricity). On balance, the overall

impact on Toyota profitability from substitutes and complements is weak to moderate.

(Scribd Inc. 2011)

4. Bargaining Power of Buyers:

Buyer power refers to the ability of individual customers to negotiate prices that extract

profit from the seller. Individual consumers have some influence over price within a given

dealership, but little power over manufacturers. Customers can easily, and with little cost,

switch to other auto dealers. Furthermore, customers now have access to market information

(prices and costs) from the Internet that enhances their negotiating power. But when you have

many individual customers, each representing a small proportion of total sales, they will have

little bargaining power with manufacturers and therefore pose a weak threat to Toyotas

industry profit. (Scribd Inc. 2011)


TP015486 - ISOM 2011

5. Bargaining Power of Suppliers

Auto manufacturers require labour, parts, raw materials and services. The cost of these inputs

can have a significant effect on profitability. Whether the strength of suppliers is weak,

moderate or strong depends on how much bargaining power they can exert. The auto

manufacturers have large supplier networks that appear to exert little bargaining power.

Nevertheless, the United Auto Workers (UAW), the only supplier of labour, has historically

exerted a great deal of leverage over the benefits and wages provided by Toyota. Because of

this historical dominance by the UAW and the uncertain results of their current negotiations

with Toyota, one has to characterize supplier power, at least in this segment of the Australian

market, as a strong threat to profits. (Scribd Inc. 2011)

The following table summarizes the results of a five-forces analysis of Toyota:

(Scribd Inc. 2011)


TP015486 - ISOM 2011

Toyota-Australia’s supply system:

Toyota Australia exports a total of 50,000 automobile, representing 55% of total Australian

vehicle exports for the year. This has made Toyota Australia’s largest vehicle exporter,

shipping to 33 countries worldwide and ensuring high quality standards in their products. In

terms of supply chain, Toyota has long been recognized as one of the most efficient

manufacturers in the world. It has been proactive in working partnerships with its suppliers to

improve capabilities and increase local part sourcing. In addition, Toyota and its first tier

suppliers also have benefits on the introduction of lean manufacturing into their operation.

With a dedicated supplier development team in place since 1989, Toyota has successfully

implemented lean manufacturing, benchmarking their Toyota Production System process.

Toyota is a leader in the industry in terms of supplier capability development initiatives and a

major contributor to building skills. (Toyota Production System 2011)

The key to Toyota’s success would appear to be their highly effective supplier integration

process that over the past 50 years has enabled the excellence of their internal hoshin kanri

strategic management, cross functional process based management and Toyota Production

System to be shared directly with their direct suppliers. In addition, over time, as the supplier

integration system has been taught to their suppliers the excellence in performance was then

outsourced to second and over time lower tier firms. The primary method to do this has been

the kyoryoku kai or Supplier Association. (Cong Xue. 2009)

Toyota has a system to increase its online supplier’s involvement, share valuable knowledge

and prevent free riders in its supply chain. It was found that in the Toyota system, the

suppliers were developing a “dynamic learning capability” that improved their competitive

capabilities. In this type of network where manufacturers and suppliers are highly involved in

the interactions and learning is known to as “knowledge sharing network.” The effects of

knowledge sharing network on the coordination of supply chain and product customization

forms the basis of Toyota Production System (TPS). Toyota believes it has much to gain from

developing strong ties amongst its suppliers and creating and sharing new knowledge to

increase the efficiency of the entire TPS. The aim is to have members identify themselves as

part of an interdependent economic network. (Dyer, J. H and K. Nobeoka 2000)


TP015486 - ISOM 2011

Key IT Solution:

Making the best use of Information Exchanged:

The automotive industry is geared towards Just-in-time (JIT) manufacturing. JIT in short

deals intimately with all areas of supply chain to reduce inefficiencies in transportation,

processing, inventory and other business processes. In order to facilitate JIT, the automotive

industry developed a fast and reliable communication network for all the key stakeholders

involved, manufacturers, suppliers, importers and dealers, to share information. This industry

driven initiative is called the Australian Automotive Network exchange (AANX). The four

major car manufacturers in Australia are involved in the project. AANX provides IP based

Extranets for the automotive industry in Australia. AANX Operates as a virtual point network

(VPN), an internet-based infrastructure that allows users to send date to each other in a

reliable and secure manner. It is a platform for conducting domestic and international

business-to-business (B2B) e-commerce activities. The main component of the project

consists of:

• A network that is based on available Internet technology

• Operated by agreed and standardized service levels.

• Demonstrating proactive management of trading partner connections

• Practice the best standard of security and privacy for transactions and interoperability

between service providers

(Joseph Baez, Nurhazman Abdul Aziz, Tee Young Chew, Hoh Whay Loh, Cong

Xue. ,2005).


TP015486 - ISOM 2011

By connecting to AANX, the benefits reach beyond tangible gains such as cost savings. Some

of the benefits include:

• Pervasive supply chain communications

• Rapid application deployment across the supply chain

• Lower cost of EDI

• Faster Business Cycles

• Simpler integration into trading partners' and customers' online e-business systems and

strategies

Network Structure:

AANX is a multi-provider, virtual private network where service providers compete for

customers and at the same time conform to standard service quality requirements such as

security. Every trading partners share a similar physical infrastructure of the AANX. Within

the framework, all electronic conversations traverse a secure and private connection between

two trading partners. (Joseph Baez, Nurhazman Abdul Aziz, Tee Young Chew, Hoh

Whay Loh, Cong Xue., 2005).

Risks: As for every computing network, AANX holds the risk of getting hacked for various reasons.

There are two extremes: absolute security and absolute access. The closest we can get to an

absolutely secure machine is one unplugged from the network, power supply, locked in a safe

and thrown at the bottom of the ocean but that cannot be the case for AANX as multiple

numbers of transactions keep happening all day long so it has to stay connected with millions

of other networks. Even a secured internet is a bad neighbourhood now, and it isn't long

before some hacker will tell the computer to do things like self-destruct, after which, it can

give an overall bad reputation.

Like for example in Japan, Sony Corp's handling of a massive Internet security breach is

becoming a public relations nightmare reminiscent for Toyota Motor's as there is high

security breach threat on Toyota Japans network. (FOX News Network, 2011).


TP015486 - ISOM 2011

Security:

As shown in the diagram, Equant and Connect Internet Solutions provide communication

services for the network. Key trust is the certificate authority and vendor for providing IPSec

security services. (Joseph Baez, Nurhazman Abdul Aziz, Tee Young Chew, Hoh Whay

Loh, Cong Xue., 2005).

Key trust provides the AANX network with four major security functions:

1. Secured Data Transmission - IPSec protocol is used to provide secure communication over

public and private data networks. It is implemented through encryptions for permanent and

dialup connections.

2. PKI Digital Certificates - The use of Public Key Infrastructure (PKI) certificated within the

AANX network enables all participants to achieve a high level of confidence when making

transactions on the network;

3.KeyTrust Professional Managed Services - Defines and verify network service levels and

certification criteria;

4.AANX Community Directory - Central policy repository used by security gateways when

sessions between trading partners are established.

(Joseph Baez, Nurhazman Abdul Aziz, Tee Young Chew, Hoh Whay Loh, Cong Xue.,

2005).


TP015486 - ISOM 2011

The network is the company:

Australia's car manufacturers have started to implement major improvements to their

production management systems in order to deliver real-time communications across the

entire supply chain. With the introduction of AANX, key stakeholders are able to link the

company's critical business systems that will in turn increase efficiencies and cost savings

across all business divisions. Moreover, managers will have real-time visibility into different

aspects of the organization. Commerce Plus is the central trading solution for AANX. It can

significantly streamline the supply chain by allowing companies to collaborate and trade via

the Internet. (Joseph Baez, Nurhazman Abdul Aziz, Tee Young Chew, Hoh Whay Loh,

Cong Xue., 2005).

Recovery:

A backup system ready for use at any time of the year would be the best recovery I can suggest for the AANX network. Although natural hazards are unpredictable, this can cause a lot of problem for AANX network.

Like for example Toyota Motor Corp Japan said it could take until the end of the year before production has fully recovered to levels before the massive earthquake and tsunami on March 11 devastated Japan, disrupting the supply of key parts. (The Victoria Times Colonist. 2011)


TP015486 - ISOM 2011

Conclusion:

With the arrival of the technology and development of Information Technology, computer

mediated processes have undoubtedly changed the traditional supply chain management

through the Toyota Australia to carry out their supply chain operations in the automotive

industry. The analysis of the supply chain has improved significantly over the period of time,

within the operation of IT. But still the use of IT on supply chain, results in weakness even

after having benefits. The technology keeps changing year by year which is why supply chain

will always need improvement to technologies current formation.


toyota swot

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