Toyota is one of the most successful automobile companies in a global perspective. The success of Toyota is successful because of effective strategies adopted by the company over the course of its existence that saw the company expand its operations to a global level (Sako, 2006). This paper investigates the strategies that Toyota has used over the years and provides an analysis of how effective the strategies fit in the external environment and the internal environment of the firm.
The automobile industry is a dynamic one; this implies that Toyota has to put much emphasis on meeting the global market demands, while at the same time focusing on achieving the efficiency in management of internal operations. A balance between the two strategies played a significant role in enabling Toyota to realize its business goals and objectives within the external and internal environment. With the dynamic nature of the automobile industry, Toyota had to revolutionize its strategies in order to meet the changing needs of its customers from the diverse global context. An analysis of the changes in Toyota strategies during the course of its existence reveals that Toyota focused on rapid expansion during the post war times. After laying emphasis on international marketing, the company’s strategic approach was to establish plants in various regions within the globe, with the intent of producing cars adapted to meet specific regional requirements (Duane & Hoskisson, 2008). In other words, the market segmentation strategy played a significant role in influencing Toyota’s international sales. An integration of the market oriented strategy and effective internal management played a significant role in success of Toyota over the years. An important aspect of the Toyota strategies is that it helps the company in maintaining its competitive advantage through strategy strength and strategy scope. In this context, Toyota’s strategy scope refers to the internal environment of the company that is fully responsible for the creation of effective policies that the firm implements in the external environment defined by strategy scope (Hino, 2006).
Strategy strength focuses on the supply side with a focus on the core competencies of the company, which in this case is the Toyota’s effective internal management. Porter generic strategies identify the demand side as playing a significant role in determining the target market of a company’s product. The adoption of the market-oriented strategy is one effective strategies that Toyota used in meeting the diverse requirements of its customers in various regions of the globe through designing cars to meet the regional requirements of a particular market segment. Focusing on market segmentation plays a significant role in increasing the market share of a firm. Toyota’s success in the global automobile industry is due to regional market segmentation, with the trends of production depending on regional requirements. in addition, Toyota segments its customers depending on levels of income, evident by the onset of production of luxury cars and other regular cars for middle and low income earners. Such approach to segmentation is effective since the company focuses on meeting all its customers’ requirements basing on region and levels of income. Therefore, it is evident that the market-oriented approach suitably fits the external environment of the company, which in this case is the company’s customer base in the global context (Sako, 2006).
An analysis of internal environment of Toyota reveals that the company focuses on effective management practices to foster efficient implementation and execution of the formulated policies. With this regard, Toyota relies on the cost leadership strategy, implying that the company aims at increasing its market share through production of cars that are affordable to its clienteles who are price-sensitive. This implies that Toyota aims at producing cars with the lowest prices in the market. The challenge associated with this strategy is that it is difficult for a firm to maintain profitability if it is offering its products at the lowest prices. Maintaining profitability and high returns is a significant constraint that Toyota must address. In order to counter this, Toyota’s strategy aims at realization of high asset turnover through reducing the cost of production per unit automobile, with the hope of enjoying the benefits of producing in large scale (Toyota Motor Corporation, 2009). Mass production is an effective strategy that Toyota deploys in order to achieve high profitability while producing low cost cars in the market. In addition, Toyota bases on the idea of standardization with minimal cases of customization during the design of cars. This plays a significant role in reducing production runs that may affect the profitability of the company. Recently, the company adopted a strategy to reduce the cost of production and maximize on the available resources that the company has. Toyota operates on a strict low cost of production policy (Toyota Motor Corporation, 2009).
It is evident that Toyota’s market oriented and an effective management strategy fits efficiently in the external and internal environment of the company. This results to the realization of the company’s goals and objectives without impeding the effectiveness of its external policies aiming at improving the market share and meeting the requirements of its clientele.
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