Toyota's strengths, weaknesses, and strategic challenges in 2011

Toyota is one of the world's leading automakers. For most of its existence, the company has been unassailable, but this past year has presented the company with a number of challenges. These include plant shutdowns caused by parts shortages as a result of the Japanese tsunami, Japanese consumer spending falling again because of the tsunami, competitive challenges and product quality issues that lead to recalls.

As one of the world's leading automakers, Toyota has a lot of different strengths that it uses to compete in the marketplace. The company has great brand equity. Its brand strength is ranked 11th in the world by Interbrand, #1 for automotive companies and #1 for Japanese companies, with a value of $27.764 billion. The company has a great reputation for value, aligning high quality vehicles with relatively low prices. Another strength is Toyota's market share, which is 11% of the worldwide market, ranking it just behind General Motors (Kitamura, Ohnsman & Ito, 2011). This market share is supported by a strong global distribution network. Another strength is the focus on hybrids, where the company is an industry leader. There are some weaknesses, however. The company lost a lot of production capacity with the tsunami, because many of its parts suppliers were in the affected area (Meier, 2011). The company faced a massive recall because of a steering problem, further hurting the firm (Meier, 2011). Conservative management has put the company in a position where it cannot always react to problems on the ground quickly.

There are a number of opportunities for Toyota. The first is the growing hybrid market, in which Toyota has taken the industry lead. The company also has room for growth in overseas markets, many of which are becoming very good car markets for the first time (India, China and other Asian countries in particular). There is also room for opportunity in the development of new products. There are many threats, however. Toyota has seen its profits affected by a rising yen, as it still has significant domestic production (Meier, 2011). The stagnant Japanese economy is also a problem for Toyota, which must find growth elsewhere. The company is obviously threatened by natural disaster, and as always competition is intense and changes in the political environment can have a negative impact as well.

Analysis

In general, Toyota has excelled at leveraging its strengths to take advantage of opportunities. Its production capabilities helped it to outcompete the Big Three in the United States, where the company now has a strong market share. A more recent example is in the company's ability to capture share in the hybrid market. By gaining first mover advantage, Toyota has by far the best brand in hybrids, to the point where there are waiting lists to buy one in some markets (McWilliams, 2011).

The company's weaknesses, however, have had a strong negative impact this past year. For example, the firm's production halt slowed Prius momentum and affects sales of its more common brands like the Corolla. Toyota is general is struggling to address the external threats and as a result has experienced production outages, and a decline in global market share to the #2 position (Kitamura, Ohnsman & Ito, 2011). Toyota therefore needs to expend more effort warding off threats than it does using its strengths to gain advantages in the marketplace.

Reflection

This Module 3 taught me about the value of undertaking a strategic analysis using formalized tools. These tools, like the SWOT, make you ask questions you might otherwise not have thought to ask. The SWOT is particularly valuable because it asks you to draw conclusions about pairing strengths with opportunities and threats; and defending against weaknesses. This creates four different strategic dimensions, which leads to a number of strategy alternatives. The SWOT does not necessarily help with the prioritization process, but it is a valuable tool for getting ideas on the table, and pieces together different outlooks on the organization to create better strategy.

Works Cited:

Interbrand (2011). 2011 ranking of the top 100 brands. Interbrand. Retrieved December 6, 2011 from http://www.interbrand.com/en/best-global-brands/best-global-brands-2008/best-global-brands-2011.aspx

Kitamura, M., Ohnsman, A. & Ito, A. (2011). Toyota losing market no.1 makes Prius vehicle to escape fading Japan Inc. Bloomberg. Retrieved December 6, 2011 from http://www.bloomberg.com/news/2011-09-11/toyota-losing-no-1-makes-prius-priority-to-escape-fading-japan.html