Sample SWOT Analysis: Toyota in the Time of Environmental Sustainability

Business WritingSWOT Analysis
Jan 31, 2022

A SWOT analysis is a technique businesses use to identify their strengths and weaknesses, the opportunities they can take, and the threats that they should mitigate. As one of the most important tools in business analysis, SWOT is crucial to the formulation and implementation of strategies. In the previous example, we conducted a SWOT analysis of the fast-fashion giant Zara . Now, this sample SWOT analysis is about the multibillion car manufacturing company Toyota.

Since its founding in 1937, the Japanese automotive manufacturer Toyota Motor Corporation has achieved astounding success in the automobile industry. Not only is Toyota a popular choice, it enjoys a strong brand image that most sectors of the public can connect with. However, even large successful companies like Toyota are not immune to problems both within and outside of the organization. Many companies as large as Toyota or even larger have gone under before, which is why it is prudent for Toyota and any other organization to stay aware of internal and external environmental forces that influence their operations and profitability. By remaining knowledgeable, a company will be able to respond effectively in a timely manner. One of the most important ways by which an organization can stay aware is by conducting a SWOT analysis. This acronym stands for: strengths, which are internal factors that give a business an edge; weaknesses, which are internal factors that hinder optimal performance; opportunities, which are external factors that a company can take or utilize to its advantage; and threats, which are external factors that can potentially hinder profitability (Blais, 2011). The knowledge that a company gains from conducting a SWOT analysis helps in formulating strategies that leverage, resolve, take advantage, or mitigate these factors (Blais, 2011). In the case of Toyota, analysis shows that the company is still in good shape but it needs to act quickly in developing products that cope with the challenges posed by climate change and competitors if it is to remain relevant and strong in the coming decades.

Toyota Motor Corporation

Officially named Toyota Motor Corporation, Toyota has had what may be easily considered as an illustrious success story. The company traces its origin to the Toyoda Automatic Loom Works, which in the 1920s was engaged in the production of looms for the textile industry. Encouraged by the Japanese government to produce automobiles to aid in the war effort, Kiichiro Toyoda established an automobile division and produced Toyoda’s first automobile in 1934. The company name was then changed to Toyota and Toyota Motor Company Ltd. was officially founded as a new and independent company (Wada, 2020). Toyota became a supplier of trucks and other automobiles to the Japanese government during World War II . However, the economic collapse that followed Japan’s defeat in the war meant extremely difficult years for the organization. The company almost went out of business as the production of units sharply declined, and it was saved only by loans granted by various banks and eventually by the United States’ purchase of thousands of vehicles for the Korean War in the early 1950s. By the 1960s, Toyota’s fortunes had taken a complete turn as the company rapidly expanded around the globe. Markets were penetrated in Europe and the Americas (Assembly, 2007). It also established four other brands under Toyota: Lexus, Daihatsu, Ranz, and Hino. As of current, Toyota produces an average of 10 million vehicles every year (Statista, 2020). It ranks as the largest company in Japan, one of the largest companies globally, and one of the leading automobile manufacturers in the world (Wada, 2020).

Strengths

A review of Toyota’s current financial performance and brand perception reveals that the company has a number of strengths that lend it considerable stability. Firstly, Toyota remains one of the top-selling automobile brands in the world, despite the fact that the COVID-19 pandemic that emerged in 2019 has negatively affected its revenues in 2020 and 2021. Toyota’s financial report in 2018 indicates net revenue of Y29.379 trillion, an increase of 6.5% compared to 2017. The fiscal year 2019 continued the trend with the net revenue climbing to Y30.225 trillion, an increase of 2.9%. However, net revenue went down in 2020, with Toyota earning only Y29.929 trillion (-1.0% decrease), and further declined in 2021 with the company earning just Y27.214 trillion (-8.9% decrease). Despite these setbacks, Toyota has been able to bounce back. The first half of the fiscal year 2022 saw the company earning Y15.481 trillion, which represents a 36.1% increase compared to the same period from the previous year (Toyota Motor Corp., 2022). Toyota’s ability to recoup its losses from the previous year indicates that it is in a financially sound position. In fact, Toyota has recently overtaken Volkswagen as the top-selling manufacturer in 2021, signaling that it still dominates the industry in terms of market share (Davis & Inajima, 2021a). In terms of operations, Toyota is known for its lean management. The company has streamlined the processes that go into its operations, thus keeping costs down and maximizing profitability in the process (Barrett, 2021).

Apart from its strong financial position and big market share, Toyota also continues to enjoy a strong brand image. Toyota is not considered a luxury car, except for its higher-end Lexus brand. However, it has been associated with affordability, efficiency, and longevity, making it a practical choice for first-time buyers and veterans alike. Consumers like Toyota because they are relatively inexpensive yet durable and easy to maintain, with parts and service centers widely available (Business Insider 2013; Boudette 2022). Even its luxury brand Lexus has become a favorite among more affluent buyers (Pavlik, 2020). In a way, Toyota has earned a reputation for giving consumers high-quality performance at reasonable prices. The combination of Toyota’s strong financial performance, huge loyal following, and excellent brand image gives it an edge over many of its competitors and keeps it on top of the automobile industry.

Weaknesses

While Toyota certainly has a lot of strengths that should help maintain its dominant position in the automobile industry, it is not without its weaknesses. One of these is its just-in-time (JIT) inventory system, which has recently become a weakness as far as the current pandemic is concerned. Toyota began implementing the JIT system as early as 1938, and this has proven to be of great advantage when it comes to keeping costs down. With inventory arriving just in time for use and as based on demand, Toyota was able to manage costs associated with moving and storing inventory (Parashar, 2016). But the just-in-time system only works when the supply chain is streamlined and highly efficient. Disruptions in the supply chain can potentially cause delays, especially since this system leaves little margin for eventualities. The COVID-19 pandemic that began in Wuhan in China and spread across the globe in a matter of months transformed JIT from a strength to a weakness. For example, an outbreak anywhere in the supply chain can potentially disrupt Toyota’s operations, and indeed this has already happened when Toyota’s supplies were affected by a single case in Southeast Asia (Davis & Inajima, 2021b). Toyota is by no means the only company affected by the pandemic. The pandemic’s impact on the global economy proves that no business is insusceptible. Nevertheless, Toyota’s adherence to the JIT system makes it especially vulnerable, thus highlighting the need for additional measures that will allow the company to rely on just-in-time while having safety valves in place.

Opportunities

While it is difficult to imagine if there are opportunities left for Toyota to pursue given its top position in the automobile industry, there are still new avenues that the company can take advantage of. One of these is increasing its electric vehicle sales. Toyota is already one of the top-selling brands when it comes to hybrid cars and has been a pioneer since it released the Toyota Prius in 1997. By 2017, it had already sold over 10 million hybrid units (Toyota Motor Corp., 2017). Although sales have been impressive, they still pale in comparison compared to regular gasoline cars. Furthermore, hybrid vehicles are more popular in developed countries. This means that Toyota can still increase its sales of hybrid cars by marketing its advantages over regular cars. Moreover, it can penetrate other markets where hybrid cars are yet to become more popular among consumers. This is especially important considering how consumers are becoming more aware of their carbon footprint and the role of fossil fuels in the rise of the  greenhouse effect . In particular, Toyota needs to focus on their research and development as well as marketing divisions, considering how despite the high sales the company is not necessarily the first brand that comes to mind when the topic is on hybrids.

Threats

The bid to increase sales of hybrid cars and penetrate new markets should not merely be seen as an attempt to take advantage of opportunities; it should also be regarded as a way to mitigate threats, which come in the form of potential loss of market share to other brands. As hybrid cars increasingly become the choice of consumers in multiple markets, the competition also gets tighter. Right now, Toyota has a considerable share of the market for hybrids, but it can still suffer losses given the lightning speed of technological innovation. In fact, Toyota often fails to make it to the list of top brands for hybrid cars based on quality alone (Elliot 2019; Goodwin 2022). Finally, many governments including the United States are currently considering implementing carbon taxes. If passed, these laws will inevitably impact the transportation sector, raising the price of regular fuel vehicles and fuel prices while incentivizing more sustainable alternatives (Leard, Linn, & Cleary, 2020). Companies will undoubtedly scramble for the market that these laws will create, and thus Toyota must prepare to capture a sizable share through innovation and sound strategies.

Conclusion

This SWOT analysis of Toyota reveals that the company is at the moment secure in its position as a leading car manufacturer. Its sales volume has been consistently high, it has bounced back from its losses due to the COVID-19 pandemic, and its market share and brand image are intact. However, measures are needed to mitigate the vulnerabilities of its just-in-time inventory system. To manage the threats from competitors and changing legislation due to climate change, the company must be prepared to respond to the rising demand for sustainable vehicles as brought about by changing consumer preferences and new legislation. Capturing emerging markets will enable Toyota to simultaneously take advantage of opportunities and stave off threats. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat.

Although the SWOT analysis is a vital tool in business analysis, it is not the only instrument that students should learn how to use. Others are the PESTLE analysis, the marketing mix and marketing plan, business model canvas, and Porter’s Five Forces among others. If these require too much for you, do not hesitate to get writing help from the professional writers of CustomEssayMeister. Our expert writers will help you complete all your projects in no time at all.


References

Assembly. (2007, February 6). The creators of Toyota’s DNA. https://www.assemblymag.com/articles/84596-the-creators-of-toyota-s-dna

Barrett, E. (2021, August 2). “How Toyota kept making cars when the chips are down.” Fortune. https://fortune.com/2021/08/02/toyota-cars-chip-shortage-semiconductors/

Blais, S. P. (2011). Business analysis: Best practice for success. John Wiley & Sons.

Boudette, N. E. (2022, January 4). “Toyota topped G.M. in U.S. car sales in 2021, a first for a foreign automaker.” The New York Times . https://www.nytimes.com/2022/01/04/business/toyota-car-sales-2021.html

Business Insider. (2013, February 2). Toyota is once again the best auto brand in America . https://www.businessinsider.com/toyota-has-best-brand-perception-2013-2

Davis, R. & Inajima, T. (2021a, January 28). Volkswagen loses title of world’s top-selling carmaker to Toyota . Bloomberg. https://www.bloomberg.com/news/articles/2021-01-28/toyota-unseats-vw-to-become-the-world-s-top-selling-automaker

Davis, R. & Inajima, T. (2021b, September 1). How a single COVID case rocked the world’s biggest carmaker. Bloomberg. https://www.bloomberg.com/news/articles/2021-09-01/how-one-covid-case-upended-toyota-s-just-in-time-supply-chain

Elliott, H. (2019, January 8). Which electric car is right for you? Bloomberg. https://www.bloomberg.com/news/articles/2019-01-08/who-makes-the-best-hybrid-and-electric-cars-and-suvs

Goodwin, A. (2022, January 10). Best electric cars to buy 2022. AutoExpress. https://www.autoexpress.co.uk/electric-cars/86169/best-electric-cars-buy

Leard, B., Linn, J., & Cleary, K. (2020, September 10). Carbon pricing 202: Pricing carbon in the transportation sector . Resources for the Future. https://www.rff.org/publications/explainers/carbon-pricing-202-pricing-carbon-transportation-sector/

Parashar, J. (2016, May 30). Why Toyota’s just-in-time method is critical to its success. Market Realist. https://marketrealist.com/2016/05/toyotas-just-time-method-critical-success/

Pavlik, T. (2020, August 20). Why do people choose Lexus over BMW and other luxury brands? Motor Biscuit. https://www.motorbiscuit.com/why-do-people-choose-lexus-over-bmw-and-other-luxury-brands/

Statista. (2020). Toyota's retail vehicle sales from 2017 to 2020. https://www.statista.com/statistics/267274/worldwide-vehicle-sales-of-toyota-since-2007/

Toyota Motor Corporation. (2017, February 14). Worldwide sales of Toyota hybrids surpass 10 million units. https://newsroom.toyota.eu/global-sales-of-toyota-hybrids-reach-10-million/

Toyota Motor Corporation. (2022). Financial Results. https://global.toyota/en/ir/financial-results/

Wada, K. (2020). The evolution of the Toyota production system. Springer Nature.

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