Toyota is the world's leading patent holder in hybrid vehicle technologies, having over 85% of all patents registered in the U.S. Patent Office, in addition to holding over forty different patents in other registries throughout Europe and Asia. This is a formidable platform for growth in this high-growth emerging line of business. Hybrid technologies can reduce carbon emissions by over 60% in the latest engine prototypes the company has produced, and can also contribute to a 45% reduction in Total Cost of Ownership (TCO) for fleet care providers (Toyota Investor Relations, 2012). This has led to Toyota winning several awards for innovation and thought leadership in the areas of hybrid technology. In addition, Toyota has invested in a rapid prototyping production process that allows them to create, test and manufacture hybrid-engine-based vehicles in 35% less time that the traditional production cycles of internal combustion engines with 30% less cost (Rechtin, 2010). While the main sections of Toyota had been mired in quality management problems and challenges, the hybrid division had been setting a record pace on perfecting production and quality management systems and workflows. The net result is the world's most efficient and cost-effective series of production workflows that when combined with the TPS framework are projected to have over 80% of the global market for hybrid engine parts, aftermarket sales and service and new vehicle sales by 2015 (Rechtin, 2010). The Prius line of vehicles is the first generation to have the hybrid technologies included within them, with additional vehicle series planned for 2013, 2014 and 2015 that will have advanced hybrid and safety features never seen before in a vehicle, incouding the experiential Google self-driving mechanisms Toyota and the search engine company are partnering to produce (Toyota Investor Relations, 2012). Toyota also has potential opportunities to provide hybrid engine technology to BMW and Ford, two companies vitally interested in working with the company on creating jointly developed hybrid vehicles. The most significant opportunities for Toyota are in the area of hybrid technologies, both in their own vehicles and those of their partners.
The threats Toyota faces are sobering and challenging to deal with, even for a corporate their size. The most significant threat they have is the continual onslaught of global competition including the rise of Korean competitors Kia and others (Toyota Investor Relations, 2012). Additional threats include the Yen and its continually fluctuating nature on global financial markets. The Yen is the primary currency that Toyota relies on for its operations and accounting throughout Asia. While is operations in the U.S. are indexed to the dollar, there is very significant threats from the fluctuating nature of global currencies. This is the most uncontrollable threat the company faces as currency fluctuations can have a drastic impact on the overall performance of economics. It is not surprising that Toyota lists this as the most severely disruptive threat in their filings with the SEC in their financial reports (Toyota Investor Relations, 2012). Another significant threat is the continual increase in government compliance and regulation requirements in the largest markets that Toyota competes in. These include greater levels of compliance to environmental standards in Europe especially which are causing the costs per vehicle to increase by as much as 15% across all manufacturers today (Rechtin, 2010). This continues to escalate with the U.S. soon to follow with very significant costs on auto manufacturers to ensure a very high level of environmental compliance. This threat is actually a strong catalyst of the growth of hybrid technology, an area that Toyota dominates today with the majority of patents issued globally.
Based on this SWOT analysis, Toyota needs to follow the strategic direction of even tighter integration of their manufacturing network, distribution system, and TPS system within their hybrid engine research and development and eventually full-scale production of planned vehicles. Toyota needs to unify the manufacturing network, distribution system and TPS system on a regional basis, accentuating its value with a Quick Start Program for those suppliers critical to their hybrid engine development.
In conjunction with these strategies the company must embrace a quality management initiative that is entirely focused on hybrid technologies, ensuring that the mistakes made in the past never happen again. There will need to be audits on a weekly basis of every manufacturing center and accountability to the incoming inspection liens to make sure there are no recalls on their hybrid product lines. If Toyota can mange to integrate quality into the three strategically critical systems that drive their profitability, the company will have set the foundation for market dominance of hybrid engine production and vehicle distribution adn selling dominance for the next decade.
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