Toyota Motor Corporation has achieved the top rank of automobile manufacturer worldwide. Surpassing General Motor league, Toyota, with its unique leading quality and principles; The Toyota Way, has achieved standard which no other organization can. Undeniable, Toyota has its own micro and macro environmental factors that are affecting their policies. This report will analyze the micro and macro environmental factors of Toyota using SWOT analysis, Value Chain analysis and PESTEL C. Using SWOT analysis, it is derived that the strengths and weaknesses will affect the micro environment where as opportunities and threats will affect the macro environment. Value Chain analysis will identify the unique Toyota Production System (TPS) of out which the Lean Six Sigma methodology was derived from which provide defect free products in the amount needed at the right time. PESTEL C will further analyze the external environment factors which includes the influences of politic, economic, socio-cultural and competitors.
The second part of this report will analyze the role of Toyota towards the Environment. It is recognized that Toyota has put much effort towards their contribution towards the environment as well as providing awareness towards the society. However, each effort taken has its advantages and disadvantages for implementation. This report will evaluate their actions as a responsible corporate citizen towards our environment, employees, wildlife and make recommendations that can be taken to improve the reduction of pollutants and hazardous materials into the atmosphere while preserving our planet for future generations.
Toyota Motor Corporation, established on 28 August 1937 in Japan, is the world's largest automobile manufacturer and ranked fifth of the world's largest corporations in 2008 Fortune Global 500. With more than 70 years of experience, Toyota has excelled by following their unique principles, "The Toyota Way" with its innovation and development prior to the advancement of the new millennium.
Toyota vision as stated in http://www2.toyota.co.jp/en/vision/index.html is "Toyota has sought harmony between people, society, and the global environment, as well as the sustainable development of society, through manufacturing. Since its foundation, Toyota has continuously worked to contribute to the sustainable development of society through provision of innovative and high-quality products and services that lead the times."
However, the recent recession has caused implication to Toyota. It is recorded in the news release on August 4th, 2009, the net revenue of Toyota totaled at 3.836 trillion yen, a significant decrease of 38.3 percent compared to the same period last fiscal year. It is also recorded that the sales of vehicle has decrease in 785 thousand units in the same period last fiscal year <http://www2.toyota.co.jp/en/news/09/08/0804_1.html>.
This report will describe the root of Toyota achievements by using the SWOT analysis which will identifies the internal and external environment factors that influences Toyota policies. In addition, this report will evaluate the eco-environment factors which Toyota has implemented and suggests improvements which will bring Toyota to a new line of Eco friendly policies.
Influences of internal and external environment factorsSWOT analysis
Kotler, Keller, Swee, Siew, Chin, 2006 classified strength and weakness as the internal environment influences whereas opportunity and threat as the external environment influences. Table 1.0 derives the SWOT analysis for Toyota Motor Corporation.Internal Environment Influences
- Elimination of Waste
- Strong Brand Image
- Fast, Disciplined Product Development Cycle
- Production Capacity
- Product Differentiation
The stepping up of Watanabe as the CEO in June 2005 has led Toyota to a profitable returns. His leadership has led the organization to attack costs and waste to reduce operating costs in order to gain higher profit. As the result, the new hybrid technology car, Toyota Prius is developed. By maximizing profit, Toyota has become the industry leader by incorporating Total Quality Management and JIT (Just-in-Time) manufacturing in production line and R&D (research and development).
Undeniably, Toyota had build up a brand image with reputation far exceed the other manufacturers. With continuous effort in producing quality products and providing superior service quality, Toyota has managed to gain customers' satisfaction and brand loyalty worldwide. Despite the downfall in the sales, Toyota is able to maintain their position as the top in the market. A survey on Toyota's customers' satisfaction in 2006 has resulted Toyota in a score of 87 on a 100 point scale on the American Customer Satisfaction Index. This proves that customers are satisfied with Toyota's quality and price.
CLSA's Richter said "General Motor and Ford tend to renew their vehicles on a leisurely six to seven year product cycle. Toyota never lets its lineup get all that old. He adds that, weighted for sales, the average age of Toyota's U.S. model lineup is a mere 38 months."<http://www.autoweek.com/article/20060818/FREE/60816004>. The new model will directly increase the demand of the product thus Toyota will have the ability to charge at higher price and higher profit. In line with ever changing market trends, Toyota manage to keep in tight with the market changes giving them the ability to compete with other manufacturer and attract demand.
Despite Toyota's capabilities to enter markets worldwide, the main production plants are situated in Japan and United States whereas other locations are mainly assembling plants. Even in Malaysia, Assembling Services Sdn. Bhd., assembling plant for Toyota, is only putting parts produced from other countries to form the finished products. Thus, the shipping cost of the parts will be incurred in the product and directly affect the price.
Even though there are various Toyota's models, Toyota's cars are too market oriented. As promoted in the advertisement of Toyota Vios, it projected the idea that it is a car suitable for all people regardless of age. As Toyota backed down from niche marketing, Toyota losses the potential of people who demand for unique cars suitable for their current status.
- New Hybrid Technology
- Lower Fuel Consumption Models
- Toyota Aygo Attracts Demand of Youth
- Market Saturation and Competition
- Reducing Profit due to Exchange Rate
- Increase in Selling Price due to Taxation
In relation to going green plans, Toyota has rise up to the challenge by producing a new hybrid car, Toyota Prius. A much awaited development by Toyota has given Toyota the advantage to compete with other hybrid cars that are already in the market such as Honda Civic Hybrid model. With this new technology, Toyota will gain the upper hand in gaining a whole new market share. As the matter of fact, Toyota's hybrid technology proves to be a success with Ford purchasing the technology to be incorporated in their Explorer SUV hybrid model
Compromising to the rising of fuel price, research and development are continuously leaning towards lower fuel consumption. Similarly, Toyota continues to strive in producing cars with low fuel consumption as if will attract consumers. By continuously redesign of the current model to consume less fuel, Toyota can achieve a higher demand in the market as the fuel and tax prices rises.
Toyota Aygo, with the appearance projected as a sporty and fun car, has created a new market share targeting the younger and women driver. With the new slick design and its implementation of a new technology which reduces fuel consumption, it has become the by far attractive car among these target market. It is the top hip car in the UK market proven as the BBC Top Gear Magazine 2005 awarded it the Car of the Year title <http://www.carpages.co.uk/toyota/toyota-aygo-06-12-05.asp>.
With supply exceeding the demand, the market has become saturated. In addition, besides Toyota, there are other competitions with other manufacturer such as Honda and Hyundai. With rising competition from other manufacturer, price becomes the main element that society considers when buying a new car. Besides that, the competition from the second hand cars industry which proves to be cheaper compared to new cars has cause the profitability to reduce.
The inconsistency in the FOREX has caused the profitability of Toyota to decrease. The unstable rates have reduced the expected returns based on the selling time to the paying period.
The recent recession has led society to hold on to their cash flows and minimize major expenses that will increase their household burden. Thus, buying of new cars is left out of the topic or being prioritized as an unessential investment. This will affect the sales of vehicles evidently to Toyota as people will opt for cheaper cars for the time being.
Even though Toyota is a world recognized brand, Toyota is still known as foreign cars manufacturer in other countries besides Japan. Thus, duties and taxation will be incurred in cars. Evidently the prices of Toyota's cars in Malaysia are higher compared to other countries of World Trade Organization (WTO). As the result, competition with other manufacturer as well as local car manufacturer such as in Malaysia, Proton, will cause Toyota to lose its price competitiveness.
Influences of Micro and Macro Environmental Factors in Malaysia
It is undeniable that in a country, organization's behaviors are affected by the micro and macro environmental factors. These can be identified through the value chain analysis which identifies the internal environment and PESTEL C, the external environment.Value Chain Analysis
Michael Porter model of value analysis is a tool for identifying ways to create more customer values (Kotler, P., Keller, K.L., Swee H.A., Siew M.L., Chin T.T., 2006, page 39).
This model suggests the process from receiving materials to produce into the final product to be sold to the consumers. Toyota manufacturing capabilities lies in their efficient Toyota Production Systems (TPS). The lean manufacturing elements enable Toyota to ultimately reduce wastage and improve problems solving quality in their production department. As suggested, Toyota production system relies heavily on Jidoka (autonomation) and Just-in-Time concept. Jidoka conducts problem solving by analyzing the root cause a problem where as Just in Time concept allows Toyota to produce what is needed at the time required.
The ability of Toyota to comprehend high demand lies in the capability of Toyota to assembly and to provide efficient after sales service to customers. With service centre and showrooms deployed nationwide in strategic location, Toyota managed to accommodate to the high demand in the market. Moreover, the comfortable and sophisticated infrastructure has provided a suitable environment for customers and employees to conduct in business activities. Thus, the advanced firm's infrastructure enables Toyota to firmly grasp their operations, marketing and sales, and services activities. Currently, Toyota has 51 3S outlets nationwide <http://web10.bernama.com/auto/newsDetail.php?id=301861> compared to Perodua which have 37 service outlets nationwide <http://web10.bernama.com/kpdnhep/news.php?id=247225&&vo=25>, Toyota proves to be able to provide a better overall service compared to other competitors.
In the article of Human Resources Development <http://www.toyota.co.jp/en/environmental_rep/03/pdf/E_p80.pdf>, Honorary Advisor Eiji Toyoda says, "Because people make our automobiles, nothing gets started until we train and educate our people." By living to this standard, it is assured that Toyota's employees are highly trained both in products and services to provide customers satisfactions beyond expectations. The fully trained personnel enables Toyota to provide quality customers service. Evidently, Toyota is ranked top at the J.D. Power Asia Pacific 2008 Malaysia Customer Service Index (CSI) Study. Figure 2.0 shows the result of the index.PESTEL C
Despite the effort to perfecting internally, Toyota is affected by the external environment in both positive and negative manners.
As the step to enhance manufacturing industry in Malaysia, a requirement is drew out for the used of local content in the finished product. Table 2.0 states the percentage of local content parts required.
- Local content is based on a point system, not on volume (different parts are assigned a point value by the GOM).
- Local content requirements for non-Proton assemblers include 30 mandatory items -- ranging from mud flaps to shock absorbers to exhaust systems.
- Malaysia has not defined its policy commitment to eliminate mandatory parts and local content requirements as part of the WTO TRIMs Agreement
Thus, Toyota has to select subsidiary to manufacture parts for their product. Such arrangements are risky as Toyota will not be able to monitor their parts quality and can cause faulty products to be build into the finished products.
The newly implemented National Automobile Policy drafted to rise up potential of local manufacturer, Proton and Perodua. This policy provides funds to enhance competitive advantage of local manufacturer. The downside to such policy is that Toyota may not be able to enjoy such benefits thus losing out to the Malaysia's automobile manufactures.
However, Perodua will be at the advantage to this policy. With Perodua incorporating the design of Daihatsu into their product, such as Perodua Viva and Daihatsu Mira Avi or Perodua Myvi and Daihatsu Boon, Perodua manage to obtained 25% of market share in 2004 <http://www.daihatsu.com/news/n2005/05052601/>. Such action will boost the technology of Perodua and strengthen Perodua competitiveness against Toyota.
Despite Toyota's efforts to reduce the operating cost to meet up with the price competition, Malaysian government tends to protect its local manufacturer, Proton and Perodua by imposing high taxation on Toyota's cars. Such barrier of entry has disabled Toyota to compete solely on price. Table 3.0 shows the taxable amount on Toyota's car. As cost of production has increased due to tax and simultaneously faced tremendous pressure from other manufacturers, Toyota's decrease their profit to draw out their price advantage.
From the luxurious end of Toyota's cars, Toyota Prius or Toyota Camry, to the economical models, Toyota Vios, Toyota proves to be able to produce cars suitable for people from all walks of life. In addition, the implementation of seven sitter cars, Toyota Avanza, Toyota Wish, Toyota Innova and Toyota Rush, to the two sitter car, Toyota Aygo, has met expectation of both the large and small families.
In the automobile industry, it is obligatory to meet with intense competition. Similarly, Toyota faces competition in Malaysia not only from local manufacturer but also foreign importer. This has caused the profitability of Toyota to decrease to compete in price. However, there is also positive implication to such competition. As designs and technologies are improving, Toyota managed to produce cars by offering what other competitors cannot. By monitoring the strengths and weaknesses of competitors' products, Toyota can continuously improve their product that will astound the consumers.
In this globalizing world, societies have become more environmentally aware and opt for higher quality of life. Similarly, Toyota has taken drastic changes towards their technology and operations in line to such changes to provide an eco-friendly experience to both consumers and employees. Toyota proves to be aware of the damage of passengers' vehicles towards the environment. The diagram below shows the ratio of emission of CO2 in transportation category.
Adapted from database on greenhouse gas emissions by National Institute for Environmental Studies/Greenhouse
As part of the steps in environmental sustainability, Toyota has draft out initiatives in terms of their technology, manufacturing and social contribution. Below list the missions of Toyota towards environmental sustention.
- Further reduce CO2 emissions in Toyota's global operations
- Promote the development of technologies to achieve the best fuel efficiency performance in each country and region
- Promote the development of clean-energy vehicles, and encourage their effective introduction to ensure wider market acceptance
- Develop technologies to respond to the diversification of energy and fuel sources
- Promote initiatives to improve traffic flows using a variety of networking technologies
- Reduce CO2 emissions in the production and logistics activities of each country and region
Realizing the initiatives has their own advantages and disadvantages, Toyota should pursue to upgrade their ability to not only produce an ultimate eco car but also provide environmental awareness towards the employees as well as the communities. This report will analyze and evaluate the effort which Toyota has pursued and suggest improvements in their operations towards becoming an eco-friendly organization.Technology
As the step taken to reduce the emission of CO2, Toyota has developed Toyota Prius. Toyota Prius has taken the hybrid system that uses alternative power sources alongside petrol to produce power. As worlds number 1, Toyota has managed to lead by example to modify vehicles to a whole new level towards environmental efficiency. Such steps prove to be beneficial not only towards the environment but also towards the competitors. In example, Toyota has sold their hybrid technology to Ford for improvement in their new line of vehicles. With this effort, automobile manufacturer can adapt to the culture change towards being more environmental friendly.
Toyota Prius has proven to be the adverse improvement to Toyota cars. However, the price that is place does not justify their initiative to become eco-friendly. Toyota Prius price is set higher and to be marketed as a niche product. Such price only allows high income class of society to be in benefit. Some can only question whether Toyota is truly eyeing on the benefit of the environment or for high profit. No doubt that the creation of new technology requires high investment, however, it is vehemently more important that Toyota focus on sustaining the environment rather than taking advantage of new product to ensure that Toyota retain their first position in the market.
Undeniably, hybrid technology has proves to benefit the environment. However, in the long run, it does not justify the fact that hybrid technology still emits CO2 that can damage the ozone. None the less, what is seem impossible before has become a reality. A Japan organization has managed to produce water powered cars <http://waterpoweredcar.com/>. However, such technology is still immature and the combustion of hydrogen is unpredictable. Toyota, with their advance research and development, should take into account such technology into their vehicles. It is undeniable that with their expertise and advance machineries, Toyota is the most capable manufacturer that can produce this invention. Such step can ensure that the future vehicles produce zero CO2 and thus become the ultimate eco car that Toyota is pursuing.Manufacturing
- Recycling program
- Tsutsumi Plant Initiative (Japan)
- Tsutsumi Plant Initiative 1: Using Renewable Energy
- Tsutsumi Plant Initiative 2: Afforestation at Plant site to conserve Local Ecosystems and to contribute to the Local Community
- Tsutsumi Plant Initiative 3: Energy and Resource Conservation Activities
- Toyota U.S. Manufacturing Initiatives
- Toyota has reduced water usage per vehicle by 20% since 2003 and continues efforts to improve water management.
- Through the aggressive use of waste management and recycling, North American plants have reduced their landfill waste by 96% or more since 1999.
- Toyota is continuing to evaluate materials from renewable resources such as a plastic made from corn and natural fabrics for vehicle interiors. For example, Toyota has introduced soy oil-based polyurethane foam for use in passenger seats in the Corolla and the Lexus RX.
- Currently, the End of Life Vehicle (ELV) recycling/recovery rate is over 90% with a goal of 95% ELV recycling/recovery by 2015.
- The use of metal returnable shipping containers in parts distribution network has saved over 30 million pounds of wood, 10 million pounds of cardboard, and $20 million in packaging costs, since the program launched in 2003.
- Toyota has extensive programs to reduce the use of substances of concern (SOCs) in vehicles, minimize undesirable emissions from manufacturing operations, and further improve vehicle emission standards.
Sustention of environment does not stop by achieving the ultimate eco car. Ultimately, production plants do cause environmental issues towards the ecosystems. In the manufacturing application, in line with their motives to eliminate waste, Toyota has implemented recycling plans for their vehicles. Toyota produces easily assemble and dissemble components which can be recycled to be use in the new vehicles lifecycle. Other initiatives taken are through wastewater recycling and reduce of usage of substance which can endanger the ecosystems. Below diagram illustrates the Toyota recycling plans.
In imposing environmental sustainability internally, Toyota's employees have taken initiative to clean up the environment around their manufacturing plants. Such activities not only can benefit the local resident in higher quality of life but also create environmental awareness among the employees. Moreover, Toyota has implemented three initiatives in the Tsutsumi Plant as listed below
Toyota uses solar panels in their plant as an alternative power source. The output of our solar panels will be roughly 2,000kW, the highest level for any automobile plant in the world. This eliminates about 500 kiloliters of crude oil that a thermal power plant would consume annually, which is equivalent to roughly 2,500 drums of crude oil a year (1 drum = 200 liters).<http://www.toyota.co.jp/en/environment/sustainable_plant/solar/index.html>
Toyota plants trees around their manufacturing site as the step to sustain the environment and ecological systems for natural habitat for the wildlife. On top of that, Toyota promotes environment issues to the communities by allowing public gathering and on site education in their facilities.
As a part of elimination of waste, this initiative takes the role to underline the reduction of usage of harmful substance as well as reduce wastage of water by recycling.
Moreover, Toyota U.S. has initiated the 5r's; refine, reduce, reuse, recycle and recover energy as the steps for green manufacturing. The results of their initiatives towards eco-friendly plant are as below.
In inducing environmental awareness towards the employees, Toyota has conducted cleanup activities around the manufacturing plant to provide a healthy environment to local residents. Moreover, Toyota will reward their employees which have been participating in providing ideas to make Toyota a green manufacturer. Such actions will motivate the employees to create a better working environment. Such actions can boost public awareness towards the action that can be done in order to help increase environment quality. By performing for the better of the local resident, the public will be privilege and will be glad that Toyota is located in their location.
Certainly, the effort of eliminates waste does improve the environmental quality. Similarly, this effort reduces cost for Toyota. By recycling usable components of a vehicle, the manufacturers of the components will have lower sales. Alternative manufacturers will have lower competitive advantages and reduce their employees in their organization. This will leave working forces to be jobless. Along with the recession, working forces will ultimately be the first to suffer.
However, improvement can be done by cumulating suggestion on improvement from the public. As the matter of fact, public resident will have a wholesome idea on environmental issues compared to the organization. Along with problematic health issues, public will be more aware to the threats that may endanger their lives as well as their future generation. As such their suggestions will have more rationality towards the improvement of their standard of living.
Toyota actions towards eco-friendly organization do not stop in their internal operations. Their contributions toward the public can be seen worldwide.
- Japan: Forest of Toyota
- Philippines: Rainforest Restoration Initiatives
- Malaysia: Toyota Eco Youth
- China: Beating the Desert
- Ecuador: Greening Galapagos
- Poland: Toyota Schools for Sustainable Development
- United States: The Toyota Living Streams
In the effort to sustaining environment, Toyota Motor Corporation identifies that forest is none the less important to both human and wildlife. The Toyota Foresta Hills Model Forest initiative taken provides experiments and research towards how human can wildlife and coexist and the importance of forest towards local residents. As part of the efforts of expand the Forest of Toyota, Satoyama Learning Institute Eco-no-Mori House was created. This institute provides understanding to the visitors on co-living of human and wildlife trough exhibition.
In 2007, Toyota has been engaged in tree-planting activities in the town of Peablanca, Cagayan Province (about 500km north of Manila), located in the north of the Filipino island of Luzon.The forest in Peablanca provides water sources for the city Tuguegarao to be consumed and for agricultural purposes. However, the logging and slash and burn agricultural methods has cause deforestation in that area. This joint project involving Toyota, the Department of Environment and Natural Resources in the Philippines, the Peablanca Municipal Government, and Conservation International (CI), an environmental NGO seeks to provide reforestation using tree planting techniques developed in China to provide an environmentally friendly environment and survival for local communities
In 2001, UMW Toyota Motor in Malaysia launched the Toyota Eco Youth program for high schools near the company's headquarters. The program underlines the environmental improvement projects which are participated by high schools to stimulate environmental awareness within the youths of today. With joint implementation of Toyota and high schools, the program receives high praise from the government and affected neighboring countries like Indonesia to coincide with such program in 2006.
In Hebei Province, near Beijing, China, where severe desertification is occurring, Toyota launched a project in 2001 to combat the desertification jointly with Tokyo-based NGO Green Earth Center in accordance with the Sino-Japanese 21st Century Greater Beijing Reforestation Model. This project emphasize on planting trees as well as preventing desertification. Efforts were put into indirect reforestation such as the introduction of a trial dairy farm and the construction of methane gas production facilities.
The Galapagos Island has a tremendous diversity of life and fragile ecosystem. Along with a tanker oil spill, the local environment has received extensive damage. With the request of World Wide Fund For Nature, Toyota Motor North America has supported the WWF's Sustainable Galapagos arts, science and technology research project since August 2001. Besides providing financial support and oil recovery vehicles, the Galapagos Energy Blueprint, was formulated to address issues concerning power supply, fishing, tourism and transportation. Sustainable Galapagos is intended to supply renewable energy with little environmental impact and to prevent the reoccurrence of oil spills.
Participated by Toyota companies in Poland, United Kingdom and Czech Republic, Toyota Schools for Sustainable Development strives to promote and support activities that contribute to the betterment of local environment in each country. Mobilizing volunteers and providing grants to schools and local community, activities were conducted to identify opportunities for local environmental improvements. <http://www.toyota.co.jp/en/social_contribution/environment/schools_for.html>
Emphasizing on preserving water resources, Toyota Motor Manufacturing Kentucky (TMMK) has plays its role contributing to the environment since 1988. In conjunction to a habitat-improvement program conducted by the Kentucky Department of Fish and Wildlife Resources, Toyota has participated in conducting activities to restore and sustain the natural environment. Through its participation in the habitat-improvement program, TMMK planned and constructed the Toyota Living Stream, an educational exhibit at the Salato Wildlife Education Center operated by the Department of Fish and Wildlife Resources.
Such actions have proves to benefit the human and wildlife. By including local communities into their actions, local communities can not only benefit from environmental improvement but also realize the fact that environment plays a huge role in survival. Restoration of natural habitats for wildlife can prevent wildlife extinction and to balance the ecosystems. Moreover, reforestation steps can prevent further global warming and restoration of ozone to take place. This can help provide a balance ecosystem that both human and wildlife can coexist effective while both species survive in this world.However, actions are only taken where Toyota plants are located. Undeniably, there are countries which are excessively in need of help. With recent natural disaster, many are left homeless and natural habitats were damaged. It is vehemently important that Toyota should play a part in not only restoring natural habitat for wildlife but in participation to aid and provide financial support for people, aiding of reforestation and rebuilding infrastructure in countries like Indonesia. Covering the instant need of people and future prevention of global warming effects, Toyota can strive to provide social contribution that will affect both human lives and wildlife.
As the world's no 1 automaker, Toyota has proved its competitiveness to maintain their position by achieving the top ranking in Fortune Global 2009 report. With continuous effort that strives to provide service and quality beyond expectation, Toyota will be able to achieve high standards of excellence compared to other competitors in providing customers' satisfaction and loyalty. Toyota awareness towards global environment issues has resulted into the advancement of technology and social contribution towards the communities. With the cooperation of Toyota and local communities within each country and the surround regions, it is hoped that global environmental issues will not be a crisis to mankind in the future. The preservation of our planet should be the responsibility of every industry leader for they are ones who will lead by example for the rest to follow.
- Chit Shen Liow, 089084508/1, Contemporary Development in Business and Management