SWOT Analysis

Strengths:

I. New investments:

A). New investment by toyota in factories in the us and china saw profits rise, against the

worldwide motor industry trend which was suffering heavy losses. Net profits

Rose 0.8% to 1.17 trillion yen ($11bn; £5.85bn), while sales were 7.3% higher at 18.55 trillion

yen.

B). Analysis :-

the company had the right mix of products for the markets that it served.

usa believes in ‘living life king size’ and is obsessed with bigger cars.

toyota primarily sold bigger cars like fortuner and qualis in the american market and this was a

great success.

china on the other hand prefers fuel-efficient sedans. Toyota in china marketed and sold cars

like prius, corolla and camry.

this was possible because of much focused segmentation, targeting and positioning of their

products.

Ii. Manufacturing:

A). In 2003 toyota knocked its rivals 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.

B). Analysis :-

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.

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the company maximizes profits through total quality management or tqm which is an

integrative set of principles and behavior adopted by toyota’s management for continuously

improving the quality of products and processes.

the company makes a large range of vehicles for both private customers and commercial

organizations, from the small yaris to large trucks. Therefore, if the demand in one sector

decreases, the company always has other sectors as back up and the chances of a complete loss

are low.

Iii. Strong brand image :

A. Toyota currently sells 70 models of cars under its namesake brand with corolla and prius as

flagship models. Toyota’s brand image is also associated with environment friendly cars as it is a

leader in manufacturing of ‘green’ cars.

Weaknesses

I. Large scale recalls :

A) toyota had quite a few large-scale vehicle recalls over the past few years. The company

recalled 9 million vehicles in 2009-2010 and 7.43 million cars in 2012. Such recalls does not

only hurt the firm financially but significantly damages firm’s brand.

B) analysis:-

recalls have taken place mostly because of safety issues that have not been met or because of

certain defects in the cars produced.

toyota must ensure that the cars produced are faultless and of good quality.

an increase in recalls not only results in losses but also harms the brand image of the company.

Ii. Weak presence in emerging markets :

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A) toyota markets most of its products in the us, europe and in japan. Therefore it is exposed to

fluctuating economic and political conditions those markets. Emerging economies as china or

india make only a small percentage of all toyota’s sales.

Opportunities

I. Hybrid and eco friendly technology :

A) lexus and toyota 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. 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.

B) analysis:-

increasing fuel prices have boosted the demand for more efficient cars. Customers today are

more aware of the harm air pollution by vehicles causes to the environment. Therefore, there is a

big demand for environment friendly cars.

since toyota already has a first mover advantage in making hybrid eco friendly cars, it should

capitalize on this opportunity and invest more on hybrid r&d and produce more environment

friendly cars.

this will result in huge profits and increase toyota’s market share.

Ii. New customer segments :

A) toyota is to target the 'urban youth' market. The company has launched its new aygo, which is

targeted at the streetwise youth market. The vehicle is a unique convertible with inbuilt sub

woofers.

B) analysis :-

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the youth of today have become more independent and wealthy. This has created a big market

for cars. Therefore toyota is trying to capitalize on this opportunity by introducing the new aygo

for the youth. It attempts to capture the dj culture and the nature of dance to market this car.

even though the profits earned through the new aygo are not big, it has helped toyota increase

its market segment, which is crucial for expansion. Moreover, this segment may prove to be

highly profitable in the future.

Iii. Global expansion :

A) toyota is expanding its market share and operations in emerging economies like india and

china. Toyota’s emerging market sales ratio reached 45% in 2011, an increase of 10% in the

three years since we achieved 35% in 2008. The toyota global vision calls for an emerging-

market sales ratio of 50% by 2015.

B) analysis :-

emerging economies have a huge demand for cars. Toyota must make sure it increases its

market share in the developing economies in order to survive and compete in the global scenario.

by increasing localization and strengthening the supply chain system, toyota is slowly

expanding into emerging markets.

Threats:

I. Competition :

A) toyota 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

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in eastern europe. Volkswagen group is strongly growing and gm steps up after its reorganization

to become more competitive than ever.

B) analysis :-

there is nothing much that can be done to curb the rising competition. But, competition can be

fought by introducing new products, slashing prices, increasing market segments and innovation.

toyota has introduced the yaris which is a very cheap car and has also sliced the costs of older

versions of corolla. The aygo and prius are examples of innovative products by toyota.

Ii. Shifts in exchange rates :

A) most of toyota’s revenue and raw material come from foreign countries. The profits earned

abroad must be sent back to japan and converted to yen. Appreciating yen exchange rate against

other currencies means lower profits for toyota.

B) analysis :-

this is a threat, which is very difficult to minimize. Toyota will have to wait till the yen

depreciates but, this will result in delayed payments and increased debts which is bad for the

company.

another solution could be setting up new bases in other countries so that they can enjoy their

profits through the exchange rate of that country.

Other Strategies

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Toyota’s Generic Strategy (Porter’s Model)

Toyota Motor Corporation’s generic strategy is a combination of the cost leadership generic

strategy and the broad differentiation generic strategy. Cost leadership entails minimizing cost of

operations and selling prices. On the other hand, the broad differentiation generic strategy

requires developing business and product uniqueness to ensure Toyota’s competitive advantage.

The combination of these generic strategies supports Toyota’s global reach in all market

segments.

A strategic goal corresponding to Toyota’s generic strategy is to minimize production costs to

attain cost leadership. The company does so through the just-in-time (JIT) manufacturing

method, which is also known as the Toyota Production System (TPS). This method addresses

Toyota’s generic strategy by minimizing waste, inventory cost, and response time. As a result,

the firm achieves maximum business efficiency. On the other hand, Toyota has the strategic goal

of innovation to address the broad differentiation component of its generic strategy. Innovation

leads to unique and attractive products for all market segments. Thus, Toyota fulfills its generic

strategy.

Toyota’s Intensive Strategies (Intensive Growth Strategies)

Market Penetration. Toyota’s main intensive growth strategy is market penetration. This

intensive strategy supports business growth by reaching and attracting more customers in the

firm’s current markets. To fulfill this intensive growth strategy, Toyota ensures that it offers

products for every market segment. For example, the company has sedans, trucks, SUVs, luxury

vehicles, and other product lines for every type of customer. This intensive growth strategy

supports the cost leadership component of Toyota’s generic strategy by enabling the company to

maximize sales volume, which ensures profits despite relatively low selling prices.

Product Development. Toyota uses product development as its secondary intensive growth

strategy. This intensive strategy supports Toyota’s growth by attracting customers to new

products. The company uses this intensive growth strategy in the form of rapid innovation. The

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company is known for its innovation processes. For example, through the Toyota Prius, this

intensive growth strategy empowers the firm to attract customers concerned about the

environment. This intensive growth strategy supports Toyota’s broad differentiation generic

strategy by using innovative products that are attractive on the basis of uniqueness or advanced

features.

Market Development. Toyota already has a global presence. As such, market development is

just a supporting intensive growth strategy for the business. In this intensive strategy, Toyota

grows by entering new markets or selling to new market segments. However, the company

already has presence in most markets around the world. Also, the firm already sells its products

to every market segment. This intensive growth strategy supports Toyota’s cost leadership

generic strategy by maximizing the company’s global market presence.

1. PORTER'S FIVE FORCES

The Porter's five forces are planned to examine and appraise the force of company in the

operating industry. If forces study came to decision that profit were to decreases it shows the

business is unattractive. The three horizontal forces which Porter's analysis examines are new

entrant's threats, rival's threats and substitute products threats. In US market, Toyota initialised

the business with soaring growth. Only 3 cars manufacture in US market in 1950s when Toyota

was entering which shared 95% of the total market. The US market was 100 times larger than

Japanese market and for the manufactures all the dealers were associated with them. The US

companies were having excellent infrastructures and strong financial position. Three different

Japanese companies entered in to the US automobile market which was Toyota, Honda and

Nissan next to each other. In next four decades these companies found a specific way of establish

themselves in the US industry and contend profitably.

1.Bargaining power of suppliers

The products are standardised suppliers are weak purchasers can incorporate backwards because

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of number of suppliers which result in diffuse or weak customers. The automotive assembly

industries are distinct by this description in Japan and US where both the car manufactures have

work hard to establish the component business. Networks of suppliers were developed by the

Toyota production system which will supply the excellent material quantity and quality required

for manufacturing cars at the right time. This shows the weakness of the suppliers in the

bargaining power in terms of the company. There has been a major effect on profitability due to

the cost of the manufactures inputs like labour, services and raw material.

2.New entrants

Several entry barriers can occur which can be governmental, financial, intellectual and sales

economies. The sales economies was not in favour of the Toyota but was secluded by the laws of

ministry of international trade and industry after world war two. There were no nearly no entry

barriers for US and as a result Toyota employees researching exporting. In US entry barrier to

the dealer business were low which was a plus point for the Japanese companies. For a car

company entry barriers are high. In order to have a minimum efficient sale the new entrants have

to acquire a considerable market share.

3.Bargaining power of buyers

The companies dealing in manufacturing of cars in US were able to vertically integrate and they

were purchasing large supplies from part companies and enjoyed the power by being

concentrated. Manufacturing companies basically operate the supply companies. For example

like Mopar was supplying for Chrysler, Delco division for the General Motors. But in Japan the

companies supplying parts were sharing the administration and workers with the companies who

were manufacturing automobiles which was completely different business approach as compare

to US business. In both countries the dealers were fragment and weak. In comparison to US

industry, Toyota purchase large volume from parts companies and were vertically integrate.

Buyers also enhance their bargaining authority by the right of information from internet. As

corporation has a plenty of certain customers which makes by a little proportion of sales, the

bargain power with the manufactures would be little which lead to a weak threat for the industry

profits.

4.Substitute products threats

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As in both countries U.S. and Japan car were the dominant transportation system but threat of

public transportation was excessive. There is a slightly price elastic in new cars giving rise to

substitute transportation and value of a specific model is highly susceptible due to presence of

close substitute.

5.Rivalry

The complex area in the manufacturing car business is competition between them. The market

growth was slow and the firms were kept on increasing. More intense rivalry in US industry was

emerging between the manufacturing companies from 1970's. The firms compete on price and

non price dimension. By decreasing down the cost price margins the price competition erodes

profits while the fixed cost drive and marginal cost was drive by the non price competition.

Absence of differentiation opportunities lead to an increase in rivalry. All the automobile

companies engaged in manufacturing produce cars, trucks and SUV's which further rise the

rivalry. Strong threat is for profits due to the important market share variations.

RBV AT TOYOTA:Resource Based View is still a hot topic although the theory is more than 20 years old. In this

assignment, we will argue whether resource-based view analysis (RBV) has a strong relationship

with firm's performance, especially in achieving a sustainable competitive advantage. Besides,

this assignment focuses on contention that RBV is the best strategy route in developing a firm's

strategy. RBV will be discussed and evaluated. Generally, RBV focuses on the internal

environment of an organisation and looks for the values that derived from resources, capabilities

and competencies. Based on my analysis, RBV is not the best strategy that can fits all situations

of the company and Porter's industry analysis is needed to complement RBV in order to achieve

a sustainable competitive advantage in different kinds of environment and contexts.

Toyota is one of the examples that outperform among other automakers and maintain its

competitive advantages over others. It becomes the world largest automaker. It utilizes resources

and capabilities and form its competency that far superior to other competitors. Toyota has

differentiated itself from other rivals, such as General Motors by its superior quality and

productivity which allows it to raise the utility of a product. Toyota brand has build confidence

in consumers' perspective and become more convincing. This help to gain the value creation

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among customers. In these ways, firm can charge higher prices and gain more profit. Toyota

pioneered a lean production system that can hardly be imitated and assimilated. It will attain

superior efficiency and product of the firm as the functions can perform its activities that

consistent in high product quality, which leads to differentiation and lower costs. This system

consists of a whole range of manufacturing techniques, for example just-in-time inventory

systems, self-managing teams, and reduced setup times for complex equipment. Toyota utilizes

high-tech performance features and upscale quality to compete in luxury car market with a

supply chain management and low cost assembly capabilities by producing Lexus models. The

pricing advantage compared to Mercedes and BMW models has attracted lots of consumers.

Other rivals can hardly imitate them in this low manufacturing costs and differentiated products

(Thompson, Strickland and Gamble, 2010, p.156). Toyota also keeps on learning and upgrading

their resources and capabilities to stay ahead of imitators (Hill and Jones, 2007, p.100). Toyota's

hybrid cars have successfully created new markets add value for the consumers. On the other

hand, rivals are putting their best effort to catch up Toyota. Besides, Apple has also

outperformed itself from other rivals. It produces many products such as iPhone, iPad, iPod and

others. It makes use of the capabilities and heterogeneous resources when innovating the

products and improving them continuously. Constant innovation has made it stand out among

other competitors. It is very difficult for other rivals to copy or imitate Apple's product design

and functionality. Apple's softwares are all specifically developed for its hardwares, the

resources are rare, non-substitutable and hard to imitate. This provides that Apple distinguish

itself from others. Apple is also very well known in its quality which added value to customers

and it had won a larger customer base.

VALUE CHAIN ANALYSIS

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FOR PRIMARY ACTIVITIES :

Inbound: The company almost obtain raw material from third party, they also handle small

parts not manufacture, and keep good relationship with their suppliers.

Operation: Toyota is properly manufactured and assembled, it is known for its reliability and

durability thanks to the efficient operations.

Outbound: They store and distribute their finished products to dealers to make them easily

reachable.

Marketing & sale: They focus importantly on marketing and the promotions variations to

meet what the targeted customers need.

Service: Toyota appreciates and gives value to their customers, so after-sale, maintenance and

other services are included.

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WALLMART

P.E.S.T. ANALYSIS

Political Influences

The political influences in this industry is probably the most burning concern with organizations

going global and many countries restricting the growth of companies by many countries.

European Customs and Regulations heavily hamper expansion plans. FDI in many countries are

still heavily regulated and global companies are yet to set foot into emerging markets like India.

Economic Influences

The recent financial crisis has had a negative impact on consumer spending and outlook.

Disproportionate levels of income and consumer spending in developing countries like India and

China will impact growth of global companies. Exchange rates affect global sourcing and pricing

policies on a day to day basis.

Social Influences

Developing countries are not used to push type marketing and aggressive selling. Bulk buying

patterns predominantly present in USA, is non-existent in Asian countries. Language and cultural

factors is a barrier to globalization. Anti-Globalization movements in the recent past has affected

growth of global companies, especially companies originated USA.

Technological Influences

Development in technology and satellite systems has given a boost to Wal-Mart. Basic

infrastructure still lacks for effective warehousing and distribution, the lifeline of a retail chain.

Key learning

There appears to be legal and social hurdles ahead for global companies. Expansion into growing

and emerging markets throws in tremendous growth opportunity though localization would be a

critical success factor. Infrastructure needs to be developed to support activities of a global

distribution channel to achieve global competitiveness.

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FIVE FORCE’S ANALYSIS

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Internal Analysis

VALUE CHAIN ANALYSIS

Wal-Mart takes care of all the activities internally except partially outsourcing its logistics

requirements. Its systems integration from inventory, to stores, to headquarters to suppliers is the

lifeline of its success. The core activity remains in its bulk buying and inventory management

which supports Wal-Mart’s competitive advantage of pricing and every element shows traces of

cost leadership. Wal-Mart located its discount stores around regional warehouses allowing a

streamlined and low cost physical distribution

Inbound Logistics

Wal-Mart’s primary activity of receiving inventory is planned right from the point of production,

which Wal-Mart is not involved with. Wal-Mart has integrated systems with key suppliers which

communicate in real time data with sales information and stock status so it can replenished in

time. Shipments are timed and slotted and planned in an orchestral way.

Operations

Wal-Mart maintains a lean approach to inventory. Wal-Mart innovated a technique of

replenishment called the Cross-Docking where incoming goods are offloaded into outgoing

trucks directly without stocking them even for a few hours. Most goods pass through the

warehouses within a span of 48 hours, enabling minimum idle time and lowering excess

inventory possibilities. Most of the goods never touch the floor of the warehouse, as goods are

passed on 24 miles length of conveyor belts between incoming trucks to outgoing trucks.

Outbound Logistics

Goods are transferred within 48 hours of receipt from suppliers. The replenishments are also

done twice weekly, which is double the industry’s standard.

Marketing and Sales

Wal-Mart maintains a simple and effective marketing strategy which it has managed to replicate

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globally apart it being the focus of its strategy. The Every Day Low Price (EDLP) is simple and

eliminates unnecessary advertising trying to push sales, as Wal-Mart has successfully sold the

concept to the customers, that it sells its products at the lowest prices, everyday. This is one of

the most interesting attributes of Wal-Mart.

Service

Wal-Mart’s aggressive yet subtle ‘People Greeters’ and in its own fashionable and proud way

‘Aggressive Hospitality’ are the foundations for Wal-Mart’s success in the highly competitive

market.

Infrastructure

Wal-Mart maintains its own fleet of 2000 plus trucks which have scheduled deliveries between

warehouses to stores minimizing delays and over reliance from suppliers.

Human Resource Management

Wal-Mart is the only retailer to be in Fortune’s 100 Best Places to Work. Wal-Mart’s

empowerment of Associates is laudable with instances such as allowing its Associates to get on

the network and lower its prices, nationwide if its found to be higher than its competitors, all this

done without any consultation or permission requests from superiors.

Technology Development

Wal-Mart’s technology and inventory management systems and software are better than the best

in the world and also the lifeline of the organization. Wal-Mart’s early innovations and

experimentation apart from investments light-years ahead of its time into VSAT capabilities have

boosted its success.

Procurement

Wal-Mart’s satellite communication and electronic data interchange links all its stores to over

4000 suppliers creating the finest procurement co-ordinated scenario. Wal-Mart integrates its

supply chain management activities with key suppliers like P&G with direct shipments from

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P&G’s warehouses to Wal-Mart’s stores and warehouses. Wal-Mart inventory management is so

effective that over 70% of its merchandise is purchased and paid for by customers, even before

Wal-Mart has actually paid for the same to its suppliers. Wal-Mart has outsourced a substantial

activity to USSO enabling Wal-Mart to maintain its logistics cost

SWOT Analysis

Strengths

1. Being the largest retailer in the world, with unmatched scale of operations and strong market power over suppliers and competitors. Wal-Mart is the world’s largest company by revenue and the largest retailer in the world.[2] It is also the world’s largest private employer, with more than 2.2 million staff. The company is a retail market leader in the U.S. and is a major competitor in all geographic markets in which it operates.Wal-Mart’s revenue reached US$485 billion in 2015, more than the Carrefour, Costco, Tesco and Amazon.com (US$89 billion) revenues combined. The company employed twice as many people and owned about 5 times more retail space than its top 3 rivals.

Forbes listed Wal-Mart as the 20th most valuable brand in the world in 2015[6], worth US$24.7 billion. No other direct competitor, except Amazon, has made it to the Forbes list of the most valuable brands.

What does ‘being the largest retailer in the world’ mean to Wal-Mart?

Economies of scale. The company can share its fixed costs over many products, which makes Walmart one of the cheapest places to shop.

Efficient and effective use of resources. Wal-Mart can use its resources, such as distribution facilities, information systems, knowledge and other capabilities and skills, more efficiently and effectively over a large number of locations.

Huge gains from implementing best practices. The company can identify better ways of performing tasks, managing stores and hiring new employees and can achieve huge gains by implementing these best practices in its vast network of stores.

Experimenting with less risk. The company can engage in many experiments within its stores or in new store formats without the risk of losing a substantial amount of profits or revenue.

Market power over suppliers and competitors. Due to its size, Wal-Mart can exercise its market power over suppliers by requiring lower prices from them. The company can also affect the competition by selling selected items at a loss, thus driving competition out of the market.

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Weaknesses

1. Labor related lawsuits. Walmart faces labor related lawsuits every year, which costs millions of dollars for the company. It is criticized for poor work conditions, low wages, unpaid overtime work and female discrimination. In addition to litigation costs, corporate’s reputation has been damaged and fewer skilled workers are willing to work for it.

2. High employee turnover. The business suffers from high employee turnover that increases firm’s costs, as it has to train new employees more often. The main reason for high employee turnover is low skilled, poorly paid jobs.

3. Little differentiation. Walmart has no differentiation compared to its competitors, which might hurt the company in the future if commodity prices or average consumer income would increase. In this case, low cost leadership strategy wouldn’t be as effective as it currently is and Walmart’s main competitive advantage would erode.

4. Negative publicity. The company is often criticized for its questionable practices such as bribery of authorities or poor work conditions. Negative publicity damages corporate’s reputation.

Opportunities

1. Retail market growth in emerging markets. Retail markets grew by at least 5% on average in emerging markets in the last year, opening huge opportunities for Walmart’s revenue growth. The business currently operates in Brazil, Mexico, China and India markets. Walmart should increase its presence in these markets to sustain future growth.

2. Rising acceptance of own label products. The sales of private label products have increased by more than 40% over the last 10 years. This reveals increasing consumer acceptance of supermarket chain products compared to national brand products. Walmart has an opportunity to increase the number of private label products sold at its stores and earn higher profit margins.

3. Trend toward healthy eating. The current trend of eating healthier food has resulted in higher demand for grocery products. Walmart has an opportunity to expand its grocery stores to earn more income from this trend.

4. Online shopping growth. Online retail sector grew by 4.7% in the US in 2011, reaching $197 billion. Walmart being the biggest offline retailer has huge opportunities to expand its presence in online retail market. The company can offer convenience to pick up the goods ordered online in its more than 10,000 stores and can offer even lower prices online than at the store. As a result, Walmart can reach more customers and increase its revenue.

Threats

1. Increasing competition from brick and mortar and online competitors. Competitors like Target, Costco, Amazon and Tesco (in UK) are putting huge efforts to eliminate

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price differences that Walmart enjoys. Except the lower prices, Walmart doesn’t differ from other low cost retailers and will experience increased competition from them in the future.

2. Increasing resistance from local communities. Walmart superstores have a negative impact on local retailers and communities. Some of the local retailers are usually forced to close off when Walmart superstore opens in the area. This affects not only the retailers but their families and the community as a whole.

3. Rising commodity product prices. Rising commodity prices squeeze Walmart’s profit margins and erode its competitive advantage. As prices go up, the cost difference between the retailers decreases and competition shifts from price to product and service differentiation.

STRATEGIES

GENERIC STRATEGY

Cost leadership

Analysis of the value adding activities supporting the generic strategy shows clear elements of

cost focus. Low cost leadership helps the firm above average returns in the industry despite

strong competitive forces. Traces of cost leadership are noticeable in the value chain. Wal-Mart

saves costs by holding stocks for less than 48 hours in its inventory. Wal-Mart is known to

negotiate with suppliers for the lowest cost of the product without any frills and marketing

expenses which adds to the cost later. Wal-Mart’s purchase by the truckload saves costs again by

bulk purchasing. Wal-Mart’s inventory handling and logistics distribution with its own fleet of

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2000 plus trucks help attain a cost effective distribution channel than relying on unreliable

suppliers networks which costs in delays.

Differentiation

Wal-Mart appears to have a differentiation strategy. The differentiation strategy is one of

differentiating the product or service offering of the firm, creating something that is perceived

industry-wide as being unique. It can be design or brand image, technology, features, customer

service, dealer network or other dimensions.

High degree of customer service with store greeters and ’10 foot attitude’ policies reaffirms

Wal-Mart’s differentiation from its competitors.

Focus

The third generic strategy advocated by Porter is the focus strategy. The focus strategy is

focusing on a particular buyer group, segment of the product line or geographic market as with

differentiation, focus may take many forms. Wal-Mart right from its foundation located its stores

to out of town areas with small populations. This was a segment ignore by its competitors giving

Wal-Mart an edge over competition by locating itself in a low competitive environment before it

creates competition. Wal-Mart’s focus on the segment of people targeted as well as its location

of stores, does give it an attribute of the focus strategy.

Effective implementation of any of these generic strategies usually requires total commitment

and supporting organizational arrangements that are diluted if there is more than one primary

target. Arguably Porter termed organizations attempting cost leadership and differentiation

together as ‘stuck-in-the-middle’ and it does not lead to competitive advantage and its

sustainability.

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