TOYOTAIndustry Analysis – Assignment One

Fatema Obaid

201101371

Fatema Obaid – 201101371

ContentsIntroduction.................................................................................................................................................2

Company Overview.....................................................................................................................................3

Toyota Vision...........................................................................................................................................3

Toyota Mission........................................................................................................................................4

Toyota Logistics Function........................................................................................................................4

Toyota Supply Chain................................................................................................................................5

Industry Analysis..........................................................................................................................................8

P.E.S.T.L.E................................................................................................................................................8

Porter’s five forces.................................................................................................................................10

Recommendations.....................................................................................................................................14

Conclusion.................................................................................................................................................16

References.................................................................................................................................................17

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Introduction

Purpose

This report has a purpose of analyzing Toyota business industry using P.E.S.T.L.E and Porter’s with some

recommendations that would assist Toyota in competing against current and new competitors locally

and internationally.

Terms of Reference

This report that aims to analyze Toyota business was requested by Mr. Wesley Lee, Logistic Tutor at

Bahrain Polytechnic. It will be submitted to Mr. Lee in 21st of October.

Method

The report will have information gathered from many resources. TLB6002 course modules were the

main source for principal information. General information about the business was collected from many

resources from the internet such as articles and journals.

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Company Overview

Toyota Motor Corporation is international Japanese company that produces and sales motor

vehicles. It was founded in August 28th, 1937 by Toyoda family (“Overview”, 2014). Toyota main

headquarter is located in Aichi, Japan. 52 overseas manufacturing companies are involved in Toyota

business (Figure1); and Toyota sales its vehicles around the world in more than 160 countries

(“Worldwide Operations”, 2013).

Figure 1: Overseas manufacturing companies.

Toyota Vision

Innovation besides high quality products and services are the main principles that Toyota apply in

manufacturing vehicles which has to be reliable and up to society development (“Vision & Philosophy”,

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2014). In addition, Toyota is putting effort to improve vehicle’s technologies and applications to develop

eco-cars (“Vision”, 2014).

Toyota Mission

Toyota’s mission consists of statements that are the key developments to new technologies. The mission

includes providing safety and inspiration to customers; enhancing employee’s knowledge and education

to make the company able to provide energetic infrastructure to local communities (“Mission for

Technologies”, 2014.

Figure 2: Toyota house.

Toyota Logistics Function

As an international organization, Toyota has to transport its vehicles overseas to customers and locally

in Japan. Logistics in Toyota not only includes transporting final products, but also it is about

transportations in the production parts (“Production Parts Logistics”, 2014). Toyota use a logistics

production system which is “lean manufacturing system” that aim to minimize inventory and transport

what is needed to customers in the amount and time it is needed; this system is based on Just-in-Time

principles (“Completed Vehicle Logistics”, 2014). Moreover, communication between all Toyota part and

its supply chain is an essential principle to provide high quality services to customers. Rail, vehicle and

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ship are used as transportation modes in local markets; besides, ships are used in overseas

transportations.

Toyota Supply Chain

Toyota has a complex supply chain but a solid one. It has many suppliers, manufacturers of small parts,

preassembly and car manufactures; that all are linked by transportations and including logistics function.

Figure 3: supply chain complex.

Figure 4: car manufacturing supply chain.

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Figure 5: Toyota supply chain management.

Figure 6: Toyota production and sales companies around the world.

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Toyota has a global structure with many production companies (Figure6) in each region which allow it to

reach international markets quickly and provide what customers want with less waste. Dealerships are

spread in Japan to provide Toyota cars to customers. In addition, Toyota has a wide global sales network

that allows it to reach it customers in every region and in most world countries (“Overseas Distributors”,

2013). 172 distributors are spread in 8 regions as following:

Ebrahim Khalil Kanoo B.S.C. is the main Toyota vehicles distributor in Bahrain which imports Toyota

vehicles and spare parts from Japan.

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Industry Analysis

Companies use industry analysis to identify the environmental factors that effect on business externally

and internally (CILT, 2006 e). This report will discuss the P.E.S.T.L.E and Porter’s five forces by applying

them on Toyota Motor Corporation generally in the region of Middle East and specifically on Bahrain

distributor of Toyota motors which is E.K.Kanoo B.S.C.

P.E.S.T.L.E

Is a tool that is used in analyzing the situation of an organization and identifying the external factors that

have an effect on the organization’s performance (Jurevicius, 2013). P.E.S.T.L.E analysis identifies the

political, economic, social, technological, legal and environmental forces (CILT, 2006 e).

Political factors Political factors effect on people’s health, workforce’s environment and

technology quality. Toyota is producing environmentally friendly cars that use

less fuel; which is good for E.K.Kanoo and Toyota’s customers as fuel prices in

Bahrain and the region is cheaper than other countries in the world. However,

the political issues in the region “Arab spring” would not allow people to

purchase expensive automobiles as the political situation is not stable.

Economic

factors

Economic factors are affected by the economic cycle which affect directly on the

supply and demand (CILT, 2006 e). Developing the infrastructure after Qatar

announcement of hosting 2022 world cup will change the economy. Toyota is

affected by the economic factors which include insurance tax, inflation and

economic growth. E.K.Kanoo has seen a decline in sales because of political

issues and shortage of stock in 2011; however, sales are starting to grow again

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and Toyota market share is increasing (UK essays, 2014).

Social factors Social factors include the demographic of country, culture perspectives and

career altitudes. Population is growing in Bahrain the region which will increase

the need for cars; however, the climate issues and GCC standards to save the

environment restrict E.K.Kanoo. Therefore, E.K.Kanoo is importing more

environmentally friendly cars that would not pollute the environment. Besides,

Toyota has to produce more vehicles that adopt with the environment.

Furthermore, as the public transport in Bahrain is not efficient and due to

cultural minds, the need for cars is increasing.

Technological

factors

New technologies effect on the organization and the customer too; as it increase

innovation and improve the product quality. Besides, it can reduce costs; or

example, new hybrid cars made by Toyota can reduce the costs of fuel use by

customer which will benefit customers in having cars with cheaper price on the

long term and it will benefit E.K.Kanoo as sales will increase. In addition, Toyota

plaza is a modern and large service center in Bahrain that provides after selling

car services to Toyota customers.

Legal factors Legal factors affect directly on the organization, as government is responsible in

setting rules and regulations. In Bahrain, E.K.Kanoo cannot import electric cars

nowadays as there is an economic growth issues in the region and the country.

In addition, government controls the number of cars being imported to Bahrain

in every shipment and during a period of time. E.K.Kanoo has to follow the rules

set by government or it would get into trouble. Moreover, regulations set by

Toyota internationally have to be followed by E.K.Kanoo, as it is a dealer for

Toyota in Bahrain; this includes changes in prices and operations.

Environmental Environmental factors are about saving the environment from pollution. As

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factors global warming is becoming greater and it is changing the weather, the weather

in Bahrain would change in the coming future which would effect on the rate of

purchasing cars that harm the environment and operate on fossil fuel. However,

E.K.Kanoo is taking steps to minimize these factors by installing an

environmentally friendly exhaust system to all imported cars; which minimizes

the percentage of polluting air. Furthermore, E.K.Kanoo is dealing with

organizations that recycle wastes and it signed contracts with them to disposal

its wastes which include oil, spark plugs, packaging boxes and tiers (UK essays,

2014).

Porter’s five forces

The Porter’s five forces were set by Michael Porter; it is a tool that identifies the power of each business

party in a commercial situation (CILT, 2006 e). This model is useful for organizations aiming to move

forward against rival firms as it helps in more understanding the organization position and the seeking to

position(Mind tools, 2014). Porter’s five forces consist of:

Supplier Power.

Buyer Power.

Barriers to entry.

Threat of Substitutes.

Degree of Rivalry.

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Figure 7: Porter's five forces.

Supplier Power – Low

to Moderate.

The supplier power in motor vehicles industry is low; as they consist

of specialist small firms concentrate in one product such as tiers,

cooling system or steel. Toyota buy massive quantities from suppliers

to manufacture cars which gives it the power as being a larger firm

that sell final products. Toyota has the power of substitute its

suppliers and could produce its own parts if any problem occurs;

which make supplier fear from losing a large customer like Toyota.

In the case of E.K.Kanoo as a dealer and Toyota as a supplier; Toyota

has all the power and control most of the operations because Toyota

manufacture and own cars and it is an international organization that

many wants to deal with. Besides, it is a one supplier which gives it

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the power of being the one and only supplier of Toyota. However,

E.K.Kanoo is a recognized distributer in the region and Bahrain with

having a car warranty and free service packages; this was owned

because of the good services and network provided.

Buyer Power – High. The buyer power is high. As living standards in Bahrain is not high and

the market is derived by prices, customers choose the lowest possible

price for good quality products. In addition, customers now can buy

vehicles online which give them the power to access information.

Also, there are many alternatives available in the market that

customer could choose from if the company raises its prices.

Toyota tries to decrease the buyer power by cutting costs and

providing vehicles that are with high quality and new technologies.

Barriers to entry –Low. New firms cannot enter the car manufacturing industry easily because

it cost lot of money and it is risky. High capital requirements are

needed. Besides, car customers intend to by loyal to brands that are

familiar in the market for long time.

E.K.Kanoo were the first to introduce the vehicles market in Bahrain;

this build a strong fundamental infrastructure on customers mind as

to be a new innovation that is reliable, safe and with good quality.

Threat of Substitutes –

Medium.

Threat of substitutes is considered low to medium in Bahrain as there

are no sufficient public transports that customers could rely on and

the hot weather does not give people who are living in Bahrain the

option of riding bikes or walk.

However, locals are going towards used cars as substitutes especially

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that the economy is still recovering. Toyota with its strategy of cutting

costs is trying to minimize the gap between its vehicles and second

hand vehicles.

Degree of Rivalry –

High.

The degree of rivalry is high internationally, regionally and locally.

Most of the global revenue is occupied by the current vehicle

companies. Korean cars manufacturers are entering the market

strongly with the new car designs and technologies that are suitable

for youth and families at competitive prices. In addition, American

brands have loyal customers and compete strongly with Japanese

brand. Moreover, Chinese brands are entering the international

markets which will increase the number of competitors.

Nissan is the main competitor for Toyota in Bahrain because of the

pricing strategy that they use which is giving them the opportunity to

lead the market. Also, Toyota is facing strong competition on the

designs of vehicles with Nissan and other Korean brands; the

dominant will be the one who produce more youthful and sporty

designs.

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Recommendations

Based on the industry analysis above using P.E.S.T.L.E and Porter’s five forces; that has analyze Toyota

current position in the market and identified the external factors that Toyota is facing or could face in

the near future and would affect in its performance especially in Bahrain and the Middle East region; the

following recommendations are need to be considered in order for Toyota to exist longer in market

against its competitors.

Toyota has a strong fundamental infrastructure in the region and Bahrain as it is one of the first

motor vehicles companies that have been introduced to the market. Toyota has to maintain its

level in producing cars and concentrate on its system which is Toyota Production System; which

focuses on the quality of cars being manufactured.

In order for Toyota to compete against its competitors and have a step forward, it needs to

maximize the number of skilled labor by providing training courses for staff to ensure the

quality standards.

Also, Toyota has to put priority for customers before the number of cars purchased especially

that the market is getting larger and the competition is increasing.

In order for Toyota to have steps over its competitors, it has to consider the present and future

of hybrid and electric cars as the prices of fuel is increasing; in addition, it needs to develop new

cars with new strategies and technologies that are more environmentally friendly and start

manufacturing them the increase the awareness of customers.

Toyota could introduce more technologies in cars that would ease the driving process such as

new technology that allow the car to park itself; especially that the world now is depending on

technology and it is getting smarter.

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Taking in consideration most of the customer’s feedback about the car performance will

increase the knowledge about what Toyota’s customers want and will minimize the

dissatisfaction.

Toyota has to produce new cars with new sporty, luxury and youthful designs that is suitable for

both youth and families as most competitors are moving towards this strategy such as Nissan,

Kia and Hyundai.

E.K.Kanoo as a distributor and dealer of Toyota in Bahrain and the Middle East has to compete

with other Toyota dealers in the region by providing higher quality services for customers

especially after selling services for maintenance; besides, training staff to be skilled and

professional in their jobs.

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Conclusion

Toyota is a significant vehicles manufacturer in Japan and the world. It has built a strong fundamental

floor for it brand internationally. New firms entering the cars manufacturing industry will face huge

problems in competing with Toyota. In addition, the competition between the existing car

manufacturers is increasing especially with the emerging of new smart technologies in the world and

changing of customer’s mindsets towards more luxuries and sporty cars. Furthermore, the increasing of

fuel prices will increase the competition and might result in new organization entering the car

manufacturing industry that are specialists in manufacturing environmentally friendly vehicles that

would consume less fuel or operate on electricity using fuel cell technology or lithium-ion batteries.

Toyota has to be aware of its competitors and try to be a step forward than them especially Nissan,

Hyundai and Kia as their market shares is growing quickly.

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