Toyota SWOT Analysis Organizational Analysis

Toyota SWOT Analysis

Organizational Analysis of the Strengths, Weaknesses, Opportunities and Threats of Toyota Motor Corporation

Toyota Motor Corporation is one of the largest and most diversified auto manufacturers globally today, with supply chains and production systems that span across over 70 nations with sourcing, procurement and quality management systems unified to their manufacturing centers. The high level of complexity inherent in these operations have made it essential for Toyota to create one of the most advanced supply chain management systems globally, the Toyota Production System (TPS) (Dyer, Nobeoka, 2000). This system is the galvanizing force of their entire operations and is so complete in its coverage of supply chain operations, it takes approximately one year to get suppliers up to speed and to the point of meeting quality standards on it (Toyota Investor Relations, 2012).

The TPS is a foundational element of the mission and mission of Toyota as well. As is stated in the company's annual reports and on the investor relations area of their website their mission is "To attract and attain customers with high-valued products and services and the most satisfying ownership experience worldwide and in key markets including America " (Toyota Investor Relations, 2012),. To attain these high levels of customer satisfaction, all aspects of the Toyota business model must be synchronized to deliver the greatest levels of reliability possible at the lowest costs. The vision statement of Toyota as also defined in their financial statements is "To be the most successful and respected car company worldwide and in key markets including America" (Toyota Investor Relations, 2012). Despite the recalls that occurred in the 2010 and 2011 timeframe, Toyota continues to reinvest in and continually look for how they can best improve worldwide Total Quality Management (TQM) performance, taking into account House of Quality, Lean Six Sigma and quality functional management initiatives, all aimed at increasing the reliability of their vehicles by driving up the quality levels of suppliers (Takahashi, 2010). Toyota launched an extensive internal audit of their own to determine the factors surrounding the recalls and learned that specific factories had taken shortcuts and at one point had not performed supplier audits of incoming components in well over two months (Minhyung, 2010). Internally Toyota had lost sight of its core values of product quality within the plants that had been the catalyst of the faulty products being produced that led to the globally embarrassing vehicle recalls (Johar, Birk, Einwiller, 2010). Toyota is a very resilient, very analytically-driven culture and took the lapse in quality as a major challenge to improve. This became the catalyst of a renewed emphasis on quality and an even more stringent level of supplier quality management processes, procedures and systems (Toyota Investor Relations, 2012). The intent of this analysis is to evaluate the strengths, weaknesses, opportunities and threats of Toyota Motor Company. The strengths and weaknesses will be analyzed from the internal environmental perspective, and the opportunities and threats from the external environment standpoint. Of the most potentially debilitating factors the company is facing today, product recalls and product quality could have a very detrimental effect on the value of the brand over time, a factor Toyota mentions in their quarterly filings with the United States Securities and Exchange Commission (SEC) (Toyota Investor Relations, 2012). As Toyota is a very analytically-driven organization that has a strong engineering emphasis, their filings with the SEC also indicate their greatest potential growth is ahead of them with their intensive spending on research and development (R&D) in hybrid and hydrogen vehicles (Toyota Investor Relations, 2012). Presented below is an analysis of the strengths and weaknesses of Toyota followed by an assessment of their opportunities and threats.

Analyzing Toyota's Strengths and Weaknesses

Of the many exceptional strengths that Toyota has today, one of the most difficult to imitate by competitors is their Toyota Production System (TPS) that orchestrates suppliers globally, all unified to a demand-driven production schedule (Dyer, Nobeoka, 2000). The accuracy and precision of this foundation for supply chain management, optimization and supplier quality management has been also responsible for the company having the ability to branch quickly into new technologies as well. The TPS is used for sourcing hybrid- and hydrogen-based technologies that quickly are incorporated into prototypes and the next generation of vehicles. The TPS has become one of the primary factors the company relies on to fuel its second major strength, which is its exceptional level of research and development R&D) expertise and ability to execute quickly across heir global development centers, all orchestrated at being the leader in their chosen vehicle markets (Toyota Investor Relations, 2012).

The strengths that Toyota has in R&D is also seen in how well the company manages its diverse series of technologies, ranging from small, highly efficient internal combustion engines, to the large-scale truck and commercial vehicle engines and the latest advanced in hybrid technologies (Toyota Investor Relations, 2012). The R&D prowess of Toyota is very significant and is considered among the most advanced throughout the global automotive industry today (Rechtin, 2010).

Another significant strength Toyota has is their pervasive production and distribution network. The extensive supply chain systems is managed via the Toyota Production System (TPS) as mentioned earlier (Dyer, Nobeoka, 2000). This specific strength is with regard to their network of production centers located throughout Asia, Europe, the United States and Australia (Toyota Investor Relations, 2012). The Toyota production network is designed to minimize the latency or lag time between getting an vehicle produced and approximately 7,000 dealer locations Toyota has globally. By designing their production network to be aligned with specific market needs and requirements, Toyota has successfully been able to create a foundation for advanced Kanban and lean manufacturing production processes by unifying their production and distribution centers (Druke, Grubner, 2010). This optimizes the production center's efficiency and makes the entire manufacturing operations more customer-centric than any other auto manufacturer in operation today. The combining of the production network, distribution framework of dealers and distributors globally and the Toyota Production System (TPS) has made Toyota a formidable competitor in all markets they serve. All three of these strategic systems also combine to create a highly effective knowledge management and knowledge sharing platform as well. The combination of demand management data from the production system and quality management information from TPS serve to create a highly effective predictive modeling system of production yields that are a core part of how Toyota measures and manages profitability (Toyota Investor Relations, 2012).

These many strengths that Toyota has are also reflected in how these three strategic systems are combined to strengthen and continually underscore the customer experience and brand of the company (Rechtin, 2010). As the mission statement says that the company is dedicated to an exceptional customer experience, the combining of these three systems are designed to translate that mission into actual experiences for every customer. Only by integrating these three systems together of production, distribution and the TPS can Toyota keep delivering vehicles that meet and exceed customer expectations over time (Rechtin, 2010). The integration of these systems is key to the company being profitable as well.

The weaknesses of Toyota include declining sales in key geographic segments including Asia and Europe, an exceptionally high number of recalls relative to competitors and a customer service deficiencies in dealerships throughout the United States. Starting first with the lack of sales throughout key markets in Asia and Europe, Toyota was late with the 2012 models in these key geographies, missing the prime selling season at the close of 2011 and into the early months of 2012. Toyota missed these market windows as a direct result of the lack of quality management on the Toyota Camry and Sienna product lines (Toyota Investor Relations, 2012). For the first time, the lack of oversight specifically for quality management led to Toyota having to reduce their sales forecasts as well, underscoring just how connected both of these elements are in their business model. Toyota completed a thorough audit of all their quality management initiatives internally, including an analysis of their Total Quality Management (TQM), Six Sigma, Kanban and lean manufacturing process workflows and found that oversight at key plants had led to the rapid decline in quality (Druke, Grubner, 2010).

What this analysis also showed was that the brand was being immediately and severely impacted by the lack of quality, even before the sales were (Toyota Investor Relations, 2012). The Toyota brand perception is so tightly intertwined with quality that its reputation suffers before its profits do. Toyota executives immediately began to re-evaluate each of their quality management initiatives, completed audits as was mentioned previously, and re-designed their Total Quality Management (TQM) framework to have greater accountability and reporting within it than ever before. In addition, the TPS was integrated in real-time to the quality management systems of all suppliers globally, so any plant manager at any time could see immediately what the quality levels were by each specific component, assembly and subassembly (Toyota Investor Relations, 2012). All of these elements were taken into account in how the company redesigned itself to address these significant internal weaknesses.

Analysis of Toyota Opportunities and Threats

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.