Toyota Motor (TYT) SWOT Analysis / TOWS Matrix / MBA Resources
Auto & Truck Manufacturers
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Toyota Motor (United Kingdom)
Based on various researches at Oak Spring University , Toyota Motor is operating in a macro-environment that has been destablized by – competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, challanges to central banks by blockchain based private currencies, wage bills are increasing, increasing transportation and logistics costs, there is backlash against globalization,
talent flight as more people leaving formal jobs, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Toyota Motor can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Toyota Motor, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Toyota Motor operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Toyota Motor can be done for the following purposes –
1. Strategic planning of Toyota Motor
2. Improving business portfolio management of Toyota Motor
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Auto & Truck Manufacturers sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Toyota Motor
Strengths of Toyota Motor | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Toyota Motor are -
Effective Research and Development (R&D)
– Toyota Motor has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Toyota Motor staying ahead in the Auto & Truck Manufacturers industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Auto & Truck Manufacturers industry
– Toyota Motor has clearly differentiated products in the market place. This has enabled Toyota Motor to fetch slight price premium compare to the competitors in the Auto & Truck Manufacturers industry. The sustainable margins have also helped Toyota Motor to invest into research and development (R&D) and innovation.
Digital Transformation in Auto & Truck Manufacturers industry
- digital transformation varies from industry to industry. For Toyota Motor digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Toyota Motor has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Innovation driven organization
– Toyota Motor is one of the most innovative firm in Auto & Truck Manufacturers sector.
Ability to recruit top talent
– Toyota Motor is one of the leading players in the Auto & Truck Manufacturers industry in United Kingdom. It is in a position to attract the best talent available in United Kingdom. The firm has a robust talent identification program that helps in identifying the brightest.
Analytics focus
– Toyota Motor is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Auto & Truck Manufacturers industry. The technology infrastructure of United Kingdom is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Low bargaining power of suppliers
– Suppliers of Toyota Motor in the Consumer Cyclical sector have low bargaining power. Toyota Motor has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Toyota Motor to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Toyota Motor is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Toyota Motor is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Toyota Motor emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Toyota Motor is present in almost all the verticals within the Auto & Truck Manufacturers industry. This has provided Toyota Motor a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Ability to lead change in Auto & Truck Manufacturers
– Toyota Motor is one of the leading players in the Auto & Truck Manufacturers industry in United Kingdom. Over the years it has not only transformed the business landscape in the Auto & Truck Manufacturers industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Toyota Motor in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Superior customer experience
– The customer experience strategy of Toyota Motor in Auto & Truck Manufacturers industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy of Toyota Motor comprises – understanding the underlying the factors in the Auto & Truck Manufacturers industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Weaknesses of Toyota Motor | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Toyota Motor are -
Slow to strategic competitive environment developments
– As Toyota Motor is one of the leading players in the Auto & Truck Manufacturers industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Auto & Truck Manufacturers industry in last five years.
High bargaining power of channel partners in Auto & Truck Manufacturers industry
– because of the regulatory requirements in United Kingdom, Toyota Motor is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Auto & Truck Manufacturers industry.
Products dominated business model
– Even though Toyota Motor has some of the most successful models in the Auto & Truck Manufacturers industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Toyota Motor should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Toyota Motor has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Low market penetration in new markets
– Outside its home market of United Kingdom, Toyota Motor needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Ability to respond to the competition
– As the decision making is very deliberative at Toyota Motor, in the dynamic environment of Auto & Truck Manufacturers industry it has struggled to respond to the nimble upstart competition. Toyota Motor has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High cash cycle compare to competitors
Toyota Motor has a high cash cycle compare to other players in the Auto & Truck Manufacturers industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Need for greater diversity
– Toyota Motor has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Lack of clear differentiation of Toyota Motor products
– To increase the profitability and margins on the products, Toyota Motor needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring in Auto & Truck Manufacturers industry
– The stress on hiring functional specialists at Toyota Motor has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Workers concerns about automation
– As automation is fast increasing in the Auto & Truck Manufacturers industry, Toyota Motor needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Toyota Motor Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Toyota Motor are -
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Toyota Motor to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Better consumer reach
– The expansion of the 5G network will help Toyota Motor to increase its market reach. Toyota Motor will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Toyota Motor in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Auto & Truck Manufacturers industry, and it will provide faster access to the consumers.
Leveraging digital technologies
– Toyota Motor can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Toyota Motor can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Auto & Truck Manufacturers industry, but it has also influenced the consumer preferences. Toyota Motor can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Toyota Motor to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Toyota Motor to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Toyota Motor has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Auto & Truck Manufacturers sector. This continuous investment in analytics has enabled Toyota Motor to build a competitive advantage using analytics. The analytics driven competitive advantage can help Toyota Motor to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Manufacturing automation
– Toyota Motor can use the latest technology developments to improve its manufacturing and designing process in Auto & Truck Manufacturers sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Toyota Motor is facing challenges because of the dominance of functional experts in the organization. Toyota Motor can utilize new technology in the field of Auto & Truck Manufacturers industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Developing new processes and practices
– Toyota Motor can develop new processes and procedures in Auto & Truck Manufacturers industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Creating value in data economy
– The success of analytics program of Toyota Motor has opened avenues for new revenue streams for the organization in Auto & Truck Manufacturers industry. This can help Toyota Motor to build a more holistic ecosystem for Toyota Motor products in the Auto & Truck Manufacturers industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Toyota Motor can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Threats Toyota Motor External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Toyota Motor are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Toyota Motor can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Toyota Motor prominent markets.
Regulatory challenges
– Toyota Motor needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Auto & Truck Manufacturers industry regulations.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Toyota Motor.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Toyota Motor will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Stagnating economy with rate increase
– Toyota Motor can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Auto & Truck Manufacturers industry.
Shortening product life cycle
– it is one of the major threat that Toyota Motor is facing in Auto & Truck Manufacturers sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Toyota Motor in the Auto & Truck Manufacturers sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Toyota Motor high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Easy access to finance
– Easy access to finance in Auto & Truck Manufacturers industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Toyota Motor can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Toyota Motor in Auto & Truck Manufacturers industry. The Auto & Truck Manufacturers industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Technology acceleration in Forth Industrial Revolution
– Toyota Motor has witnessed rapid integration of technology during Covid-19 in the Auto & Truck Manufacturers industry. As one of the leading players in the industry, Toyota Motor needs to keep up with the evolution of technology in the Auto & Truck Manufacturers sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Weighted SWOT Analysis of Toyota Motor Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Toyota Motor needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Toyota Motor is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Toyota Motor is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Toyota Motor to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Toyota Motor needs to make to build a sustainable competitive advantage.