MBA Course: LEADERSHIP, ENTREPRENEURSHIP, AND INNOVATION
1. Introduction
Toyota Motor Corporation is a Japan-based multinational automobile company specialising in designing, developing, manufacturing, and selling various automobile products and services. The company was founded in 1937 by Kichiro Toyoda, and it has managed to position itself as one of the leading car manufacturing companies in the world. Toyota operates through its financial services, automotive and All Other segments. The automotive segment is responsible for manufacturing, assembling, and selling various vehicles, including trucks, minivans, passenger vehicles, spare parts, and relevant accessories. The automotive segment is also involved in designing and developing intelligent transport systems. The purpose of the financial services segment is to offer lease and purchase financial services to Toyota’s customers and car dealers (Forbes, 2021). Lastly, the All-Other Segment deals with the design, manufacture and sale of housing and telecommunications. The purpose of this report is to analyse the market position, segmentation, and profitability of the company and to describe the company’s main characteristics, its mission, vision and initiatives towards leadership, entrepreneurship, and innovation. The report then assesses the challenges the company experiences in such a competitive environment and the alignment of its strategy to kaizen or continuous improvement. It concludes with a general overview of the company’s performance.
2. Characteristics of the Company
2.1. Toyota in Numbers
Toyota has developed numerous vehicle brands, including internal combustion engine, hybrid, plug-in hybrid, fuel cell electric, battery electric and newly all electric cars. According to Madoh et al. (2019), it was the leading hybrid car seller in 2018 and in January 2020, ‘Toyota passed the milestone of more than 15 million hybrid electric vehicles (HEV) sales worldwide since the Prius was first launched in 1997’ (Toyota passes 15 million hybrid electric vehicles global sales, 2020). Nkomo (2019) posits that Toyota Motor Corporation has over 1000 subsidiaries, including Lexus, Daihatsu, Subaru Corporation, Toyota Canada, Toyota Motor Sales, and Hino Motors. It has a presence in over 170 countries, with North America occupying the most significant market share. The company is among the top global car manufacturers based on sales, market share, and profitability. It currently has a market capitalisation of $219.2B and employs 366.283 people across its branches (Forbes, 2021). According to Carlier (2021), Toyota overtook Volkswagen in 2020 to become the leading automobile manufacturing company by sales and market share, with 9.53 million car sales globally and an 8.5% market share. The company’s total revenue amounted to 250 billion US dollars.
Figure 1: Toyota’s global sales compared to other top-selling global automakers (in million vehicle sales)
2.2. Customers
Most of Toyota’s customers are aged between 30-50 years and belong to the middle-income group. These customers tend to prefer vehicles that offer them value for their money. Thus, Toyota focuses on designing quality, durable, sustainable, reliable, and safe automotive products that satisfy customers’ needs. Toyota Motor Corporation uses different strategies to segment its customers, based on the unique characteristics and designs cars to suit the needs of every segment. Hitosh (2018) mentioned that the company segments its customers based on geographic, demographic, psychographic, and shopping behaviour. This approach has enabled Toyota to establish itself as the favourite automotive brand in the minds and hearts of its customers. After segmenting the customers, the company uses different targeting and positioning strategies to sell its products.
Demographically, Toyota has customers spread throughout the age brackets and financial abilities. For instance, based on age, Toyota designs Celica and Supra brands for customers aged 18-30 years and Alison and Premio brands for those aged above 30 years (Toyota Corporation, 2017). Toyota also designs car brands for different family sizes and needs. For instance, Voxy and Noah are meant for families with over six members, Yaris, and Corolla for families with three members, and Supra and Celica are meant for couples. Toyota’s customers belong to the middle class, upper-middle-class, and the business superclass.
The company designs Corolla, Matrix, Prius, and Allion brands for people earning under 25000$ annually. For customers earning between 25000 and 35000$ annually, Toyota targets them with the RAV4, Avalon and Venza brands (Toyota Corporation, 2017). Other customers of the business superclass earn above 35000$, and Toyota prefers to target them with exotic brands, such as the Lexus series. Toyota customers are also spread across all occupations, from small to large scale farmers, employees, and business merchants. Crown and Mark II brands are meant for models branded as a business-people class. On the other side, Corolla and Yaris are meant for white-collar employees and employers, while Tacoma and Thundra pickup trucks are meant for white-collar employees (Toyota Corporation, 2017).
2.3. Supplier Relationship Management
Toyota is among the global companies with reputable supplier relationship management. Its key objective is to establish and maintain a positive relationship with its suppliers by developing long- term collaboration and partnerships. Furthermore, the organisation also embraces diversity and inclusion when dealing with supply chain management issues. For instance, half of its 250 suppliers in the European market are non-Japanese companies (Toyota Corporation, 2017). The organisation aims to provide a solution where everyone benefits and profits from the contract. When developing relationships, this can be achieved using soft and hard key performance indicators. Toyota suppliers are part of the company’s strategy. As the company endeavours to build quality cars and optimise shareholders’ returns, they need to have a source of quality raw materials at the best possible prices.
Moreover, the organisation encourages its suppliers to become more innovative through research and development activities. However, the company draws a line between its strategic development partners and other suppliers. Suppliers are evaluated through regular company-to- company reviews and audits, where they demonstrate their technical skills to Toyota engineers.
2.4. Toyota’s Market Description
Toyota has a global market with a high concentration in Asia. Geographically, the market is segmented into Japan, Pacific Asia, Europe, North America, Latin America, the Middle East, and Africa (Li, 2018). North America is Toyota’s largest market in size, followed by Japan and Asia.
Figure 2: Toyota’s Market Share per Region (Cascade Team, 2021)
The company operates across all continents, considering each region’s specific geographical automobile needs. Toyota Motor Corporation’s products across its markets include vehicles, engines, car electronics, conditioners, stamping dies, and batteries for electric cars. Under the car segments, Toyota manufactures Toyota and Lexus automobile series for consumers with various financial abilities. The Toyota series is the standard and signature product, whereas Lexus is meant for a luxurious lifestyle. The Cabs series is designed for the elderly and people with disabilities (Thomas, 2021). Toyota maintains higher customer satisfaction levels by providing a wide variety of automobiles. For example, passenger vehicles are designed in small, medium, and large sizes to meet the required capacity. They include Corolla, Yaris Tarago, and Aurion. The SUV vehicles include the Landcruiser series, Prado, Rav4, and Kluger. Coasters and Hilux are designed for commercial purposes and pickups for farms and heavy duties (Nkomo, 2019). As a pioneer in hybrid technology, the firm offers most of the models mentioned above in a hybrid version.
Figure 3: Toyota’s operations worldwide (Toyota, 2021)
Toyota has established itself as a giant in the global automobile industry. The company has 71 manufacturing plants globally and 20 R&D centres for innovation and entrepreneurship (Toyota, 2021). The company is not only well-known for its vehicle brands, as it also sells boats and marine engines, fork-lift trucks, and other industrial heavy-duty equipment. Moreover, it invests in biotechnology and agricultural practices such as researching and growing sustainable plants used in its manufacturing process. They are investments that enable the company to produce more environmentally friendly products.
Furthermore, the company shows commitment to sustainability goals through forest planting schemes in China to prevent desertification (Toyota, 2021). Through its financial service segment, Toyota provides financial facilities to help millions of customers purchase and lease cars through loans and credit cards. Toyota has remained true to its culture and philosophy of building a prosperous society through respect, fairness, and harmony with its partners throughout its growth and expansion.
Figure 4: Global car sales by key markets (Cascade Team, 2021)
2.5. Competition
The global automobile industry is quite profitable with sales growing year over year, though, competition is fierce and growing too (Brinkmann, 2011). Toyota has claimed the milestone of the bestselling car company in 1974 and has been able to hold it since then. Its traditional competitors are established car brands such as Volkswagen, Ford, Honda, Nissan, Hyundai, KIA, Mercedes and BMW.
Figure 5: Global automotive market share by brand in 2020
Ford is a famous automobile company that manufactures markets and sells a similar line of cars like Toyota. Its products include cars, trucks, SUVs, Lincoln Luxury vehicles, and electric vehicles, and it provides financial services to customers through the Ford Motor Credit Company. These products compete for the same market as Toyota products. For example, in 2020, Ford sold 2,044,744 million vehicles in the USA, including 898,944 trucks, 837,496 SUVs and CUVs, 193,064 cars, 203,153 vans and 105,410 Lincoln (Centeno, 2021). Volkswagen is another major competitor, possessing solid financial ability, an extensive product portfolio, and a strong brand image that includes passenger and luxury vehicles. Volkswagen Group owns Audi, Skoda, Bentley, Porsche, and Ducati, rivalling Toyota in the Asian and global markets, with Audi and Skoda’s sales volume rising dramatically in Asia. VW sold over 4,122,200 vehicles in the Asia Pacific region in 2020, experiencing a small decline in its sales but was the fastest region to recover from the impact of the Covid-19 pandemic (Car Sales Statistics, 2021).
Although markets such as Europe or the US grow at a stable rate, it is Asian countries such as China that represent a great opportunity for the industry with the sales of the sector growing by double digits(Kachelmaier, 2017). According to McKinsey’s report in 2019(McKinsey & Company, 2019), the car ownership in China is quite low with about 173 out of 1000 people owing a car in comparison to the US, where more of 87% have a car. However, the financial situation changes and so do the habits of people there. Due to this opportunity, many new players emerge from these countries, such as the electric cars manufacturers NIO or Xpeng Motors. One of the traditional competitors in the market is Hyundai, which produces passenger cars, SUVs, and luxurious KIA brands. Hyundai also manufactures multipurpose vehicles, genesis, and eco-friendly brands (Pratap, 2018) and owes its popularity in the Asian market to its technology and large manufacturing base. Its Ulsan manufacturing plant is the largest global automobile manufacturing plant. Another two companies giving Toyota a run for its money in the market are Maruti Suzuki and Honda. Both are renowned for motorcycles and vehicles while their products dominate the Indian and Chinese market even though Japan is their home market. These two companies try to expand their scope, covering customer needs beyond Toyota’s by giving an extra option to customers.
Recently, Tesla has also proved to be a worthy competitor in the manufacturing sector by selling efficient electric vehicles, a market niche that Toyota has exploited through hybrid cars (Pratap, 2018). More specifically, the release of the lower-priced Model 3 by Tesla is a severe threat to Toyota electrified series. Notably, Toyota faces competition from new entrants, such as Xpeng Motors, NIO while there are firms like Apple and Google that are planning to get involved in the automobile industry soon (Pratap, 2018).
Toyota’s ability to overcome its competitors depends on its ability to address its strength, weakness, opportunities, and threats. Toyota’s strengths are its wide variety of cars, extensive financial base, and positive image brand among its customers. The wide array of vehicles allows customers to choose according to their economic, occupational, family, and lifestyle needs. Its sizeable financial base enables it to invest in technology to improve efficiency, cut production costs and provide affordable cars for customers (Nkomo, 2019). The profits will also allow it to invest in advertising and corporate social responsibility initiatives to penetrate the market promptly. Toyota’s opportunities to be explored include the expanding automobile market in developing countries, the increasing demand for eco-friendly vehicles, and collaborations in logistics.
Toyota also has some weaknesses and threats that continuously cause an imbalance to maintain its global leader in automobile production. The liability includes constant recalls of its products for improvement. The large company size and the number of employees also cause management challenges such as poor resource allocation and low equity and asset returns (Nkomo, 2019). Toyota’s threats include the entry of cheap automobile manufacturers from India, China, and Korea. By maximising its strengths and opportunities and effectively managing its weaknesses and threats, Toyota will continue to be a global giant in the automobile industry.
3. Toyota’s Strategy, Vision, Mission, Corporate Values & Objectives
3.1. Strategy and Objectives
Toyota Motor Corporation is managed based on Toyoda’s principles. According to Toyoda, employees should be faithful to their duties and contribute to their overall good. Secondly, employees are supposed to be creative, intellectual and strive to be ahead of time. The third principle is being practical and avoiding frivolousness. Fourthly, the management should strive to create a homelike and friendly atmosphere at the workplace. Lastly, Toyota believes in respecting spiritual matters and being grateful all the time (Toyota, 2021). These principles tie Toyota employees and management to honouring the language and law of regions they operate their business in by engaging in open and fair business activities. They also respect the culture and customs of countries they establish their business and contribute to their social and economic development. The company’s business operations are dedicated to producing clean and safe products by developing advanced technologies to meet customer needs. Toyota fosters an organisational culture that promotes creativity, teamwork, trust, and respect between employees and management (Toyota, 2021). Lastly, growth is pursued through harmony with its partners and stakeholders for mutual benefit.
3.2. Corporate Values
Toyota’s values aim to maximise customer value and create products and services that fully meet their needs. Its core values include acting for others by making the perspectives of its customers and stakeholders the centre of its daily operations. Secondly, integrity is upheld at Toyota by considering how their conduct may impact the company’s reputation among its stakeholders. Operations at Toyota are also driven by curiosity, whereby employees are allowed to ask questions and try out new ways of performing tasks. Thorough observation is another core value promoted at Toyota to discover new practical solutions to the company’s issues (Toyota, 2021). The firm’s employees are also encouraged to improve daily through a continuous quest for improvement. Toyota welcomes competition, respects stakeholders and competitors, and encourages being thankful.
3.3. Mission
Toyota’s mission is to produce happiness for all. To fulfil this mission, Toyota prioritises the satisfaction of its customers by creating products that are affordable and offer value for money. Based on this mission, Toyota aims at designing, developing, and manufacturing better cars with inclusive features that guarantee their customers’ happiness, satisfaction, and freedom of movement (Greenspan, 2020). The company focuses on tackling customer satisfaction issues by identifying customer needs and demands through research and market studies and then exploring appropriate strategies for meeting these demands. Toyota makes customer needs their core research guidelines to innovate new ways of meeting their future needs. As a result, the company produces vehicles that meet consumer preferences based on comfort and safety when travelling (Greenspan, 2020). This mission is achieved in software and hardware designs and partnerships. The company uses the “people-first design philosophy” to design software that operates their vehicles to increase efficiency and customer comfort. Secondly, it creates flexible hardware modules compatible with this software to create a physical platform aiding people’s mobility (Toyota, 2021). Lastly, it partners with customers, employees, suppliers, and the community to produce strategies that create vehicles that maximise people’s happiness.
3.4. Vision
Toyota’s vision is to create mobility for all. Toyota looks forward to being the global mobility leader by enriching people’s lives with safe and responsible mobility. The company strives to exceed its customers’ expectations through innovation and commitment to quality and respect for the planet. Toyota seeks to meet these goals by partnering with people who believe in doing things differently (Toyota, 2021). The company plans to be a global mobility leader by seizing the opportunities presented and investing in future projects to develop new modes of transport and connecting people with technology. It also seeks to enrich people’s lives by creating jobs and investing in social programs. Respect for the planet is shown through the development of eco-friendly cars, whereas customer expectations are exceeded by providing goods and services that fully meet their needs beyond expectations. Lastly, Toyota demonstrates ceaseless innovation by discovering and creating better cars and technologies to supplement comfort in their vehicles.
4. The Company’s Main Initiatives and Good Practice
4.1. Leadership
Toyota Motor Corporation uses a lean leadership model linked to its organisational culture. The company’s culture is built on 4Ps consisting of philosophy, process, people/partners, and problem- solving. The leadership model promotes teamwork, collaboration, and consensus between leaders and employees. The culture is characterised by development and training, open communication, and building trust and respect within the external and internal environment (Daft & Samson, 2014). Furthermore, the culture is divided into internal and external cultures. The external culture focuses on customers, suppliers, and partners, while the internal culture focuses on employees and their involvement in the organisation’s growth. At Toyota, leaders serve the organisation because they put their employees and customers first. Everything at Toyota is conducted the ‘Toyota company’s way’, contrary to the Western top-down management systems where employees exist to take orders and execute their seniors’ mandates.
Toyota does not outsource successful CEOs and corporate presidents to fill its leadership positions like western companies. Instead, it focuses on internal recruitment to maintain the company’s culture. Practising ‘Genchi genbutsu’ and Kaizen allow the leader to go to the actual place where production activities occur (The Gemba) and witness what happens there in person. This practice enables the leader to lead with facts, motivate from an informed point of view. At Toyota, kaizen is not achieved through workshops but through every day’s small activities. For example, Fujio Cho, the former President, worked under Taiichi Ohno before earning a promotion. Similarly, the current President, Akio Toyoda, served at Toyota for almost four decades. All these leaders have worked under Toyota’s organisational culture, undergone training, and embraced the company’s culture.
In addition, Toyota identifies their natural leadership abilities and encourages them to act and think the Toyota way and align to its practices of connecting with people and develop their Kaizen skills. As earlier mentioned, a leader at Toyota is responsible for developing workers and not merely observing what they do. Leaders at Toyota are servants, focusing on monitoring individual and team performance, taking responsibility for their actions, and holding subordinates accountable. Instead of catching people making mistakes, Toyota leaders seek to ensure that tasks are accomplished based on the stipulated rules and time. This cannot be achieved unless and until a leader connects with the employees, acts as their role model, and positively influences their behaviour, which requires clarity and transparency. According to Shang (2014), a leader at Toyota must have the ability to invigorate and energise others, provide realistic challenges, create opportunities, and foster a sense of accomplishment among employees. Toyota Motor Corporation’s management achieves the above by promoting trust among workers, encouraging two-way criticism, sincere communication, and respecting the dignity of others and their creative potential.
Moreover, the company encourages challenges to change as part of its change management strategy and tries to engage everyone in continuous improvement. At Toyota, people are encouraged to be creative and problem solvers. If an employee encounters a problem in their work, they take the responsibility to resolve it. There is no specific direction that changes take whenever they occur within the organization; they neither come from the top heading upwards nor vice versa. Every individual’s initiative counts in the change process. It is human nature to resist change which is not the case in Toyota; continuous improvement is always at the core of its operations whether there is a challenge or a gap to be addressed or not. The practice at Toyota is that if everything is working, there is a problem, and an artificial need for change must be created.
4.2. Organizational Structure
Initially, Toyota had a rigid centralised global hierarchy whereby all the decisions were made in Japan. Individual branches did not communicate with each other. At the same time, all the proposals had to go through headquarters. However, after the 2009-2010 Toyota vehicle recall crisis, the company introduced a divisional organisational structure based on global hierarchy, geographical division, and product-based division (Gregory, 2018). In the current global hierarchy, Toyota increased the decision-making powers of regional and business unit heads, making the decision-making process less centralised. Despite the advanced capabilities in decision-making, regional leaders still report to the headquarters in Japan. The geographical division segments Toyota’s management into eight regional sections, including Japan, Latin America, the Caribbean, China, the Middle East, Africa, East Asia and Oceania, Europe, and North America (Gregory, 2018). The regional heads oversee decision- making on regional operations and report to the headquarters in Japan. The regional divisions help the company improve product and service delivery based on regional needs and market conditions. The last division is product-based leadership, distributed based on production sections. Toyota has four product sections: Lexus International, Toyota operations for Japan, Europe and North America, Toyota operations for other regions, and Unit Center for transmission, engine, and other functions (Gregory, 2018). This structure of leadership supports the development and innovation of new product brands.
Figure 6: Toyota’s Organization Structure
4.3. Entrepreneurship at Toyota
Entrepreneurship and innovation skills have played a significant role in the tremendous growth of Toyota Motor Corporation. Entrepreneurship refers to the process of primarily identifying business ideas before investing in them with the hope of gaining profit. Toyota’s entrepreneurial activities can be analysed through the Cantillon, the Schultz, and the social enterprise school of thought theoretical frameworks. According to Cantillon’s theory, an entrepreneur is a factor of production that provides labour for accomplishing company tasks, saving resources required to pay employees. Kiichiro Toyoda established Toyota Motor Corporation in 1937 as a department under Toyota Industries with the aim of manufacturing automobiles. He started by building a Type A engine to power the first Toyota car. Working at his father’s company, Kiichiro Toyoda acquired adequate automobile development knowledge and skills, saving the resources required to study the art of making cars (Toyota, 2021). Since the invention of the first Toyota car, the company has invested in entrepreneurial activities to pursue its objectives and currently has brands such as Lexus and Toyota series.
The social enterprise school of thought is concerned with social entrepreneurial initiatives. According to this approach, companies engage in social initiatives such as charity and other corporate social responsibility activities with the hope of expanding their market base and profitability (Bravo, 2016). Over the years, Toyota has invested in social enterprises via education institutes to promote literacy in society. For example, United Negro College Fund and the National Centre for Family Literacy are the famous institutions established by Toyota to provide high-quality education for children from low-income families (Toyota, 2021). Such initiatives make the company look philanthropic, and customers will prefer their products over other companies.
The Schultz theory suggests that entrepreneurs have authority over issues affecting the business. Hence, they can change the course of the business to achieve the desired goal. In the light of this theory, entrepreneurs must anticipate, be prepared to manage, and implement changes in the business environment. The company might require extra resources to implement changes based on consumer needs. The changes such as the increased demand for meeting sustainability goals and the high demand for Toyota cars prompted the company to pursue various objectives such as expanding and manufacturing hybrid vehicles. Venturing into hybrid car production gave the company a competitive advantage over its peers, such as General Motors cementing its position among the leading automobile manufacturers.
Consequently, Toyota has expanded its global presence by opening branches in Africa, Europe, North America, Asia, and Australia to bring products and services closer to its customers. The company is taking risks to invest in charity initiatives, new ventures, and expanding its network, thus increasing its market share and cap. Therefore, entrepreneurship is a crucial component for the success of a company.
4.4. Innovation
Innovation has been integral to success at Toyota Motor Company right from its foundation in 1937. At Toyota Motor Corporation, innovation started with the invention of the Type A engine used to power the first-ever Toyota car. Over the years, Toyota has invested in research and development to promote innovation. At Toyota, innovation can be analysed through the contingency and Schumpeter theories and the Knight’s approach. According to the contingency theory, an organisation must provide goods and services that satisfy the market needs (Oshita et al., 2017). The main driver of innovation at Toyota is customer need. Despite being in the industry for over eight decades, the company focuses on consumer needs and then designs cars to meet the evolving needs. For example, Toyota initiated the Innovative International Multi-Purpose Vehicle project (IIMV) to optimise the manufacturing and supply of multipurpose vehicles (Nkomo, 2019). Similarly, Toyota produces diesel engine vehicles for Thailand, gasoline for Indonesia, and manual cars for the Philippines and India. Also, the company designs SUVs for use in desert areas.
The Schumpeter theory associates innovation with entrepreneurship, whereby the company invents new products without copying others. Based on this theory, innovators are social and economic leaders in business anticipating profits from their innovative products meant to satisfy the needs of customers (Bailey et al., 2018). Toyota has aimed at producing products that add value to customers. For example, the advanced parking system helps inexperienced drivers park in crowded cities. By installing such systems in vehicles, inexperienced drivers opt for such automated cars than manual cars from other companies (Mainwaring, 2018). As a result of solving customer needs, the company’s sales increase and translate to more revenues.
Knight’s approach is similar to Schumpeter theory, and it also views an innovator as an entrepreneur who ventures into risk activities to shield others from potential risks. Based on this hypothesis, Toyota ventured into innovating hybrid cars to meet sustainability goals and help reduce environmental pollution by diesel engines. This risk enabled Toyota to gain a competitive edge in the market compared to other automobile manufacturers. Toyota has overtaken other automobile manufacturers like Ford and Volkswagen due to innovation. However, it should be noted that in as much as innovation gives Toyota a competitive advantage over other automakers, it comes with risks such as increased cost of operation and rapid changes in technology which can render a considerable investment obsolete in a short time.
5. Final analysis
5.1. Toyota’s future challenges
Toyota Motor Corporation’s future challenges are associated with attaining sustainability goals because the organisation manufactures and sells products that emit harmful gases into the atmosphere. These challenges revolve around Toyota’s business aspects, its exploration of new products and technology, and its duty in enabling communities and individuals to improve and conserve the natural environment (Toyota, 2021). The company faces the challenge of reducing carbon dioxide (CO2) emission into the air, water conservation, improving material flow, and biodiversity protection.
First, the company faces the challenge of ensuring zero CO2 emissions from their new vehicles. Toyota seeks to reduce emissions from their vehicles by 90% by 2050. It aims at meeting this challenge by developing next-generation car models with low or even zero carbon emissions. The next- generation cars include hybrid electric vehicles, plug-in hybrid electric vehicles, battery electric vehicles, and hydrogen fuel cell electric vehicles (Butt, n.d). In addition, Toyota endeavours to make its diesel and gasoline-powered engine vehicles more energy efficient. The second challenge is eliminating CO2 emission from the life cycle of their products, eliminating CO2 emission during the manufacturing process and when users use the vehicles (Toyota, 2021). Toyota aims at eliminating CO2 emissions from the manufacturing of material and components used from suppliers, dealers’ activities, and disposal and recycling methods for overused vehicles. The company seeks to mitigate this challenge by replacing diesel as the preferred fuel among its partners along the supply chain (Toyota, 2021). Moreover, Toyota needs to reduce emissions from its manufacturing plants by improving the technologies used in manufacturing vehicles and switching to alternative power sources.
The company also faces the challenges of minimizing and optimizing water usage in the production process. Due to the difference in water availability across its active regions, Toyota needs to conserve water supplies by minimizing the water used in manufacturing its products and recycling used water (Butt, n.d). Another challenge Toyota faces is reducing the pressure on limited natural resources by establishing effective recycling systems. The increasing population, economic growth, and the need for a convenient lifestyle put a lot of pressure on resources. The company needs to use them sparingly for the benefit of all individuals (Toyota, 2021). After reducing CO2 emissions and optimizing water and material usage, Toyota needs to co-existence with nature by conserving natural forests and promoting biodiversity. Notably, Toyota has launched several initiatives to preserve the ecosystem, such as planting trees in China, agricultural plantations in Indonesia, and promoting environmental education.
5.2. Strengths, Weaknesses, and Overall Performance
Strengths and weaknesses are crucial for the success of every global manufacturer and seller, and Toyota is not an exception. The company’s leadership and technology have been the reason for its strengths and shortcomings in the industry. The current organisational structure provides flexibility and enables the company to respond to regional issues regarding consumer needs. The structure allows Toyota to improve the quality of its products through entrepreneurship and innovation while it remains a global leader in the automobile industry. Toyota’s strength in leadership includes “The Toyota Way” operation principles which support continuous improvement in productivity and innovation. This concept also inspired lean management, which has been the company’s core strength for many years.
Toyota’s strengths include Fuel Cell Patents, Solid-State Battery Pack, and Hybrids in innovation and entrepreneurship. Currently, automobile, and commercial companies pursue zero emissions through electric vehicles and hydrogen fuel cells. Toyota already owns almost 5,680 hydrogen fuel cells patents globally (Sudhakaran, 2020). The patents place Toyota as a front runner in attaining Zero emissions. Furthermore, they put the company in an advantageous position for collaborating with other companies by supplying them with Carbon-free energy.
Apart from the Hydrogen fuel cells, Toyota is leading to launch the first solid-state battery and become the first company to sell electric cars equipped with solid-state batteries. The solid-state battery is planned to increase the electric vehicle range to 700 miles in a single charge (Toyota Ireland, n.d). The mass production of such batteries increases Toyota’s profitability as new and existing automobile firms seek patents to employ its technology in manufacturing and using these products.
Finally, hybrid cars are another area of Toyota’s strength in innovation and entrepreneurship. Toyota has consolidated its position in developing hybrid cars, thus developing consumer competencies. As the struggle to eliminate fossil fuel engine cars continues, Toyota hybrid cars remain the best option for affordable, environmentally friendly cars (Sudhakaran, 2020). Being strong in these areas will allow the company to improve and maintain its position in the industry and resilience in terms of performance in the stock exchange.
There exists a weakness in Toyota’s leadership in the global hierarchy structure where regional and product-division heads must consult with the headquarters before approving critical decisions. The process slows down decision-making, leading to delayed progress in innovation and entrepreneurship projects. The increased decision-making involvement of regional heads reduces the headquarters’ control over the overall organisation. Another weakness that Toyota has suffered for a long time is product recalls. The company announced a recall of Toyota Yaris and Lexus for fuel pump faults, and such incidents reduced consumer trust in the brand. They may destroy the company’s reputation built over the years. Toyota also faces a technology gap challenge after the entry of Tesla in electric car manufacturing (Sudhakaran, 2020). The company is playing a catch-up game with Tesla after research found Tesla’s Model 3 to be six years ahead of Toyota’s electric cars.
Due to the recalls, the company’s brand has suffered some damage and some consumers switched to alternative brands in the market. Making service recovery in such a situation is an uphill task, and the company’s marketing team is finding it hard to change consumers’ perceptions of Toyota (Choi and Lee, 2018, p.1688). The corporation uses traditional media such as radio and television to drive the brand’s message. They have also employed digital marketing techniques like Search Engine Marketing and Email marketing, although none of these efforts has gained the needed traction for the company.
- Recommendation: Strategy to pursue continual improvement
This analysis informs us that Toyota’s legacy has been dented by product recalls. This problem can be avoided by conducting practical tests at every production stage. The car model prototypes should be subject to appropriate failure analysis to eliminate potential problems. Test drives should also be done under different climatic and weather conditions to ensure products are suitable for all regions (Ojo, 2014). It is also essential to double-check the competence of all suppliers to ensure they meet the company’s technological requirements. Where necessary, Toyota should provide support systems for their supplier, contractors, and software developer to reduce errors in the development components (Ojo, 2014). Toyota can also scrutinise its supply chain to ensure the safe delivery of vehicles to owners. Furthermore, the company should adjust its culture and structure to optimise its decision-making and problem-solving flexibility.
6. Conclusion
Toyota has come a long way to become a global leader in the automobile industry. The company has established itself in over 170 countries and territories with numerous vehicles brands for customers to choose from based on their financial abilities, occupation, and personal needs. Through its philosophy, values, mission, and vision, Toyota has ventured into different segments of the automobile industry, from diesel and gasoline engine vehicles to hybrid cars. Building this legacy through various leadership eras, innovation, and marketing strategies has taken decades. Toyota has employed multiple initiatives to fight off competition from automotive giants such as General Motors, Volkswagen, Honda, and Suzuki. However, the company owes its success to continuous research into consumer needs and demands which directs its manufacturing operations to design vehicles that meet consumer needs and provide value for their money. Its commitment to entrepreneurship has also played a crucial role in its expansion beyond Japan. As a risk-taker, Toyota has dared to invest in establishing new branches globally, corporate social responsibility activities, and creating value for customers, which have led to more revenue for the company and expansion of its market base. For Toyota to continually improve its products, it is recommended that the company reduce its organisational structure’s rigidity to increase efficiency in decision-making. It is also recommended that the company increase efficiency in production processes to reduce product recalls that affect its brand image.
