Toyota is an automotive industry that was recognized during the year 1937 and is headquartered in Toyota City, Japan. Toyota is a universal market-leader in the sale of hybrid electric vehicles and the largest company to adopt hybrid vehicles worldwide.
The company is also a market leader in hydrogen fuel-cell vehicles. The company is Japan’s largest automobile manufacturer and second in the world next to Volkswagen. This brand outshines in technology, manufacturing, and supply chain management. The strategy used for production has been welcomed as among the best in the whole industry. Apart from its technological abilities, sales network, and global manufacturing, the company also managed its human capital well.
The company has maintained a continuous focus in all its areas and has led to a consistent performance over finance for the past many years. Toyota has become a highly competitive brand and invests a large in research and development. The company has joined with top institutions to further have its research in Robotics, AI, and autonomous driving. There is always a great demand in the automotive industry and is expected to boom in the coming years.
The SWOT analysis of Toyota differentiates all the main strengths, weaknesses, opportunities, and threats with which it can grow more. Read out this article, to get an understanding of where Toyota stands.
The SWOT analysis of Toyota indicates the strengths of the company in which it is good and what distinguishes it from its competitors, its weakness that is a hurdle for the company to perform well and that must be its focus area. It lists its opportunities that the brand can use to increase its market share and brand value. It also throws light on the threat that has the potential to harm the brand.
To make sure that Toyota meets the long-term competitive advantage it must address the various concerns highlighted in the SWOT analysis of Toyota.
Let us discuss on the SWOT analysis of Toyota.
Strengths in the SWOT Analysis of Toyota
- Brand Equity – The main strength of the company is the brand equity. Over the years, Toyota has been able to develop strong brand equity. Being a top vehicle brand, Toyota’s focus has always remained to win customer’s trust. An automobile industry needs to establish trust with the customers to retain a good brand image. Toyota is the most trusted brand in the world. This brand is mostly preferred by many people across the world and is considered as an innovative brand. Its success is seen from its product quality, customer service, and driver safety parameters included in the vehicle. Having high brand equity indicates higher customer loyalty and having a better reputation. Due to these positive facts, it shows a strong financial performance for the brand.
- Great Use of Technology – With regard to technology, Toyota is considered one of the leading players in the automotive industry. The company has about 69 manufacturing facilities out of which Japan has about 16 facilities and 40 in Asia. It has about 16 Research and Development centers across the world. With the great use of technology, Toyota has managed to set up and an effective production system and is considered the best in the world. Toyota’s production system is called TPS or lean production system. Over the years, Toyota has worked effectively to get the highest production efficiency.
- Research and Development – Toyota has invested a good amount in research and development and innovation has been its focus. It is the main source of its competition. The brand’s focus is to bring better vehicles. Toyota also invests in producing human-centric and safe automated driving technology. Having entered various innovation techniques is the main strength of the brand. The company has involved in partnering with the University of Michigan, MIT, and Stanford University to carry additional research on robotics and automated driving. These steps are taken by the company to make it beneficial for the future of the drivers. Every year, the company invests a huge amount in the research and development area.
- Supply Chain Network and Distribution – Toyota have effectively managed the supply chain and distribution network. Each vehicle that the company produces is made from many parts sourced from suppliers that are situated across the world. Toyota maintains an excellent supply chain network and works in close collaboration with its suppliers. It has also maintained a strong and long-term relationships with the suppliers, and this helps to control the production costs. The company has about 167 overseas distributors to distribute its products across the world. Toyota has a large and global distribution chain that requires to cooperate closely with distributors and dealers. Toyota has managed its supply chain well and its distribution network. Toyota’s distribution network is divided into eight main regions like Latin America, North America, Europe, Asia, China, Africa, and the Middle East. This distribution network is also the main sales channel for the company.
- Large Product Portfolio – Toyota is the topmost producer of vehicles and produces a large range of vehicles. The product portfolio is huge and varied. The company produces SUVs, sedan vehicles, sports vehicles, minivans, hatchbacks, trucks, station wagon, and buses. It has also ventured into producing marine vehicles like boats and sports cruisers. The company also owns the premium brand vehicles, Lexus. This brand has a wide range of popular premium cars. Also, Toyota has bought a wide range of hybrid cars.
- Global Presence – The company is essentially a global brand. Toyota’s products sell their automobile to almost 170 countries. Having a strong global presence is indeed a big strength of the company and has led to higher sales and revenue. Also, to maintain a global business, Toyota has maintained its manufacturing facilities in many countries worldwide. Also, it has many research and development sites across the world.
- Most Valuable Brand – Ever since its formation, Toyota has become the most valuable and recognizable brand in the world. As per the Forbes, Toyota brand is seventh and ninth in the world having the brand worth of about $50.291 and $44.7 billion. As per the list of both, it is the most valuable in all the automotive companies. Brand value is related to brand recognition and reputation. The brand has sold about 8.964 million vehicles in about 190 countries. Toyota has the largest customer reach in the world. Having researched, produced, and sold many vehicles across the world together with the amount spend for advertising has helped the company to create a recognizable and reputed brand in the world. When a company is recognized well with its brand, it helps the company to release new products to the market more easily and with less cost.
- Awards and Recognition – Toyota brand is the most reputed brand in the world’s automotive industry. Having been in the industry for about 75 years, the brand is quite proud of its achievements and has received many awards for its vehicle design, environment friendliness, safety, and manufacturing operations. During the year 2018, the company has received about 7 Insurance Institute for Highway Safety (IIHS) Top Safety Picks awards for its vehicles Toyota Corolla, Avalon, Prius, RAV4, and Camry. It also received the Top Safety awards for its Lexus models.
Weaknesses in the SWOT Analysis of Toyota
- Product Recalls – Over the past years, Toyota had to produce much products recalls. While the main concern for Toyota is a driver safety and quality, it does hurt the brand’s image. During the year 2017, the brand was compelled to recall about 2.9 million vehicles due to airbags fault. Also, it has faced many such recalls over the past. This is indeed a big weakness for the brand because as it deals with the automobile, the customer would be at risk for such faults.
- Weak Position in Asian Markets – Toyota has not expanded in the Asian markets as related to the competitors. This is also a weakness for the brand because the Asian markets are the most up-to-date market for various automotive brands. Toyota should focus to set up its brand and increase its brand value in markets like India and China.
- Dropping RoA and RoE – During the year 2017, Toyota had a drop in RoA and RoE as compared to the previous year. The consistent drop in this would impact the company’s performance.
- Hierarchy Organizational Structure – The global hierarchical organizational structure prevents a lot of flexibility of the regional operations. The hierarchy that is maintained at the global level is quite tough to handle when there is an issue to solve.
- Organization Culture’s Secrecy – The company’s secrecy culture is also a great weakness for the company as it reduces the response time to address any emerging issues.
Opportunities in the SWOT Analysis of Toyota
- AI and Digital Technology – As Toyota is venturing into new technologies, it should also include AI and digital technologies to get more opportunities with regards to supply chain management and marketing. The company can make use of these to engage its customers and suppliers. Toyota can make use of digital technology and AI to create a great customer experience. Also, these technologies can be used for customer engagement and to get higher retention rates.
- Autonomous Vehicle Technology – The vehicle brands excel in autonomous vehicle technology. Among the world’s brands, they are in an aggressive race to get autonomous vehicle on the roads. Investing in this area would bring more opportunities for the brand. Hence, Toyota should be able to make this a priority and venture into this. Most of its competitors are already into this.
- Entering into Asian Markets – The most up to date for vehicle brands is the Asian markets. While India and China have grown to be the leading vehicle market in the world. Toyota sees many opportunities for growth and does see a potential of growth in these markets. Both these markets are quire attractive for their brand and are currently being dominated by its competitors. So, investing in these markets for marketing and customer engagement would bring a lot of opportunities for the brand.
- Diversification – Toyota is basically a big brand of automobiles and marine products as well. Apart from entering excellent technologies, the brand is strong in its finance. It finds new opportunities in investing in new areas and create more varied products and services. The company would see more opportunities and new sales channels on diversifying its products. This would also help them to increase their customer base and grow more.
Threats in the SWOT Analysis of Toyota
- Regulatory Threats – The automobile industry sees a major challenge with the various laws and regulations. They have a huge pressure from law and regulatory agencies that they must adhere to. When there is a rise in regulatory pressure, it has led to an increase in operational costs. Also, having high legal pressures would create things more difficult for any business. Moreover, brands need to be more cautious on the compliance and laws. So, the company sees more threats in these areas.
- Competitive Pressures – The automotive industry has an intense competition. The market has many automobile brands and all brands are innovative with their products, look for more market share and growth. This has led to a huge competition. When there are more and more competitive pressures, this would lead to more operational costs and an increase in expenditure on marketing.
- Increase Cost of Raw Materials – While the cost of raw materials and labor increases, there is a threat to the brand. This would affect the profit of the company.
The SWOT analysis of Toyota mentioned in this article has highlighted the main strengths of the brand that comes up from its brand value, including of technology in its products, focus on its research and innovation, supply chain management, distribution network, huge product portfolio, and its international presence.
The company’s weaknesses are seen in its product recalls, having a weak market in the Asian markets, and dipping in the RoE and RoA. The company sees a huge opportunity in venturing in new technologies related to AI, autonomous vehicle technology, entering into Asian markets, and diversification. Toyota sees a threat from the various regulatory norms, competitors, and the rising cost in raw materials and labor.