Situational Analysis and Marketing Plan for International Growth

Posted: December 12, 2018

SITUATIONAL ANALYSIS AND MARKETING PLAN FOR INTERNATIONAL GROWTH

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Situational Analysis and Marketing Plan for International Growth

With the ever-increasing competition in global markets, achieving international growth is a difficult task (Gordon 2012, p.123). Organizations have to invest significant resources in research and marketing endeavours to accomplish this. Companies have to swiftly identify new opportunities for growth while at the same time analysing the potential threats related to the possibilities (Gillespie & Hennessey 2016, p.506). This research aims to conduct a situational analysis and to devise a marketing plan for Toyota Motor Corporation. The analysis is geared towards identifying potential opportunities for growth on a global scale.

Situational Analysis for Toyota Motor Corporation

Toyota Motors is a Japanese automobile producer founded in 1937 (Jurevicius 2016, p.1). Toyota sells its cars and related suppliers in most parts of the world, most significantly Asia, Europe, and Northern America. Africa has also emerged as a fast-growing territory for the sale of Toyota automobiles. The most vibrant brands for the company include Lexus, Hino, Daihatsu, and Toyota. The company has been ranked as the world’s leading producer and seller of automobiles. The company competes directly with other players in the automobile industry, such as General Motors, Volkswagen, Nissan, and Honda. As of May 2017, the company had total revenues of $ 249.9 Billion with 348, 877 employees globally (Toyota 2016, p 37).

Toyota's growth in the international space is influenced by the international and external environments and by the way how the company manages these two settings dramatically affecting its success in global growth. The following section analyses the two contexts to identify any possible opportunities and threats for such growth.

Toyota’s Internal Environment

Internal Competencies

Toyota is known as a competent firm in producing affordable automobiles which are of high quality. The company has invested a lot in innovativeness, a fact which has always yielded excellent results in adding value to its products. Toyota has also been efficient in cost management by adopting lean management practices such as Just in Time (JIT), Six Sigma and Kaizen (Jurevicius 2016, p1). Reduced costs are translated to reduced automobile prices hence increasing on affordability. These have enabled the company to develop a sustainable brand thus making the company a market leader in the industry.

SWOT Analysis for Toyota

SWOT analysis is a potent strategic marketing tool for identifying the opportunities open to an organisation by looking at its strengths, prime weaknesses, and possible threats. Toyota enjoys numerous strengths, which emanate from its lean management system and its brand. One of the major forces for Toyota is its overwhelming focus on its research and development (R&D) department (Toyota 2016, p. 17). Toyota can be commended for investing heavily in innovative business processes which help the company in improving its functionality, expanding its product base and improving quality while at the same time fostering environmental and safety compatibility. In the 2015 financial year, the Toyota spent $ 9.37 billion in research and development.  Another strength for Toyota arises out of its strong brand and market position. Toyota's brand has been ranked as the number one brand in the automobile industry. A report by (Interbrand 2016, p. 1) ranked Toyota as the best automobile brand with a brand value of $ 53.6 billion. Extensive production, as well as a distribution network, has also been cited as one of its primary strengths. Its production system which utilises best production practices such as Kaizen and JIT are profoundly behind this fact.

Toyota faces some weaknesses which may hinder its growth endeavours. For instance, product recalls may negatively affect the company's brand image. The company has recalled thousands of vehicles in the past years due to different reasons such as oil leakages and abnormal noise. Another weakness associated with Toyota is its reluctance to produce autonomous cars. Although the world is swiftly tending to focus on autonomous vehicles, Toyota has not invested in them, a fact which may limit its international growth.  Declining sales in some of its critical geographical market segments such as North America and Asia is another massive setback for the company's strives to grow.

There are many opportunities still open for Toyota to tap in its quest for international growth. For instance, the automobile industry is growing hence creating new demands for automobiles. The sector was adversely impacted by the economic crisis witnessed in 2008 and 2009 (Gillespie & Hennessey 2016, p. 511). Since 2011, the industry has shown a rebound, and the sector is showing good prospects. The rising demand for automobiles which are fuel efficient is another opportunity which Toyota Company can harness on its quest for international growth. Further, the market in developing countries is sharply growing due to increasing demand for vehicles.

Despite a plenty of strengths and opportunities open to the company, it has to deal with numerous threats as well. For instance, increasing pressure from competitors is one of the threats which Toyota is facing. Thus, Chinese, Indian, and Korean automobile companies are producing low-cost vehicles which threaten Toyota's cars. Further, rising fuel prices may hinder people from purchasing vehicles hence threatening the company's growth strategy.

The SWOT matrix is presented below:

Strengths

  • Overwhelming research and development (R&D)
  • strong brand and market position
  • Efficient production and extensive distribution network

 

Weaknesses

  • Numerous Product recalls
  • Reluctance to produce automatic vehicles

 

Opportunities

  • Growing market especially in the developing countries
  • Rising demand for fuel-efficient automobiles
  • Firm innovativeness can efficiently address new markets needs

 

Threats

•    Competitive pressure

•    Rising fuel prices

 

 

Toyota’s External Environment

The external environment presents both challenges and opportunities for growth. Although the company may have very little, if any, control on the environment, understanding it allows the company to take necessary measures to cushion itself against the threats while at the same time help it to take advantage of the opportunities

The Industry

Over the last few years, the automobile industry has faced severe challenges which have shaped the demand patterns for vehicles. High prices of fuel, as well as growing need to address environmental issues, have formed the kind of cars customers demand. During the 2008 and 2009 economic crisis, the industry faced a major blow after demand for vehicles was severely impacted (Gillespie & Hennessey 2016, p 511). Since the end of the crisis, sales have started to increase again, and there are prospects of even continued growth in the future. Concerning the industry life cycle, the automobile industry is its maturity stage. As a result, innovativeness, quality, affordability and customer responsiveness is what drives growth.

Competitiveness and Market Concentration

The automobile industry is quite competitive with the major companies competing in the sector being Toyota, General Motors, Volkswagen, Nissan, and Ford. The industry is lowly concentrated with the most prominent automobile makers accounting for just approximately 33% of the total revenue globally (Jurevicius 2016, p. 1).

Porter’s Five Forces in the Automobile Industry

Understanding the porter's forces in the industry is critical to Toyota as it enables one to understand the significant factors which may hinder growth efforts in an international scale. The threat of new entrants in the industry is significantly low due to the fact that starting an automobile company requires enormous amounts of capital. Further, most of the automobile companies have already established their image and brand position hence penetrating the market as a new entrant is quite tricky (Sulaiman 2013). Most governments also tend to protect automobile markets by taxing imports highly. In the industry, automobile makers tend to differentiate their products through designs and quality. As a result, Toyota still has a chance to grow internationally without facing stiff competition from new entrants.

The power of suppliers is weak in the automobile industry, as attributed to the fact that there is a high number of suppliers for automobiles. Additionally, the raw materials required in the production process are readily available. Although some suppliers are large, most of them are small, further weakening their bargaining power.

The buyers have a high bargaining power, majorly because they are many. Although most people tend to purchase one car, governments and corporates buy in fleets hence they can bargain for price cuts. Additionally, it costs less or nothing for buyers to switch from one brand to another (Jurevicius 2016, p. 1). Cars are assets of high value hence most buyers are price sensitive. The decision of these buyers tends to depend mainly on the cost of the vehicles. The bargaining power of automobile buyers is further strengthened by the fact that they can easily buy an alternative brand without much inconvenient.

The threat of substitutes is quite weak in the automobile industry. Types of transportation are many hence people can decide to use other means such as planes, motorcycles, and trains. However, most of the substitutes such as bicycles and motorcycles cannot offer parallel convenience.

Competitive rivalry in the industry is very intense. Competitors are moderate, and the industry is large and in its mature stage.  Most customers tend to show loyalty to their brands.  Leaving the industry is quite costly hence forcing most companies to stay put in the industry. Although competitors differ in size, they tend to compete for different markets (Alon 2016 et al., p. 478). As a result, companies such as Toyota can tailor their products to fit the expectations of their target markets.

Marketing Plan for Toyota

Market Targeting and Segmentation for Toyota Customers

Customers of Toyota are diverse as they range from the high income to low-income earners. Further, the customers are spread all over the world. Understanding this is paramount to devising a marketing plan that can cater for the needs of all customers (Gillespie & Hennessey 2016, p 505). To address these needs, Toyota has innovatively created a wide range of products ranging from the small cars to big vehicles and trucks. The demand for Toyota products is informed by different factors, with some of the most important including incomes, age, social status and geographical locations. The implication of this is that customers always seek to satisfy different needs while purchasing the products offered by Toyota.

The diversity in the customers creates a need for market segmentation and targeting. The global market is therefore divided into different market segments. Toyota's customers can be segmented either geographically or demographically. Regarding geographical segmentation, Toyota can segment its market according to geographic zones. For instance, some regions that can be used for segmentation include Asia, the North America, Europe, and Africa. The type of cars demanded by most people in Africa is different from the kind of vehicles requested by their counterparts in countries in Europe (Sulaiman 2013). Segmenting the markets allows Toyota to manufacture automobiles which can efficiently meet the needs of customers. Demographically, Toyota customers can be divided according to age and social class groups. The young people tend to demand cars which are different from the type of vehicles requested by the older people. While the married people may want to purchase big cars which can accommodate their families, young unmarried people may only want to buy small cars.

Strategy for International Markets

To efficiently forge ahead in the international market, Toyota needs to implement a plan that focuses on these markets. Ideally, the company usually imposes business strategies which have been mostly developed by Japanese specialists. In particular, the aspect of Kaizen which denotes continuous improvement is very vibrant among Toyota's strategies (Sulaiman 2013). Toyota should implement this plan across different international markets. Customers all over the world are seeking products which can meet their specific needs. It is also eminence noting that the taste of customers is changing very fast. To address all their needs, Toyota should continuously innovate and improve the quality their products. With this perspective, Toyota can capture the rising international markets. Toyota should also focus on producing cars which are more environmentally friendly. In most countries, especially the developing countries, the issue of environment is of high concern. To dominate in these areas, Toyota should design vehicles which emit fewer pollutants.

Marketing Mix for Toyota

The 4Ps of marketing (place, promotion, product, and pricing) are very significant in determining the success of a brand. Expanding into new markets as well as increasing new market share in the international market requires Toyota to effectively strike a balance between all the four aspects of marketing.

Product Strategy

Toyota is known for its quest to produce quality products, a fact that has made the company to be ranked as the best brand in the industry. The company offers its customers with both intangible and tangible products in the form of warranties and cars and car parts. The high-quality vehicles produced by Toyota are desirable in the eyes of most customers hence giving them a competitive edge over the close competitors. To improve its markets, the products of Toyota are quite diversified.  The company produces four significant categories of vehicles which include the passenger vehicles, commercial, hybrid and SUVs, and 4WDs. The role played by this diversification in international market growth cannot be underestimated (Hollensen 2017, p. 612). Different global markets demand a different kind of vehicles. Diversifying the cars serves all social classes.  The people who belong to the high social class can purchase the hybrid cars such as Camry and Prius as well as the SUVs such as Land cruisers and Prado. On the other hand, the passenger vehicles can be targeted to the low-income markets such as India and African countries where the demand for passenger vehicles is high (Sulaiman 2013). To grow its market share in the European nations, Toyota should focus more on the Hybrid cars in these countries.

With the ever increasing prices of fuel, people are seeking alternatives that can save then on gas. More so, Toyota can take such an opportunity for international growth. Through continuous quality improvement of its products, the company can focus more on producing affordable hybrid vehicles. Most of the hybrid cars in the market are out of reach of the pockets for most people, especially in the developing countries. Toyota can use its lean management to cut on costs of production which would translate to reduced prices for the products.  Furthermore, this can significantly increase the company’s share in the international market.

Place and Distribution Strategy

Toyota can be praised for its continuous efforts always to ensure that the target audience quickly accesses its products. To reach its diverse set of customers, Toyota makes use of dealerships. Dealerships should be built at places which have steady economies and that have a high population growth (Toyota 2016, p. 21). Toyota can increase its international market by focusing on economies such as China, where the company has a low presence so far.  China has grown to become a robust economy hence increasing Toyota's presence in the country can pay off. The company should also expand its presence in countries such as India and emerging African economies such as South Africa.

Promotional Strategy

The promotional strategy for Toyota should cover all marketing communication tactics to increase its presence on a global scale. Primarily, the company can use the following promotional activities: advertising, sales promotion, advertising, and direct selling. Personal and direct selling should be used in the dealerships where products are directly promoted to potential customers (Schlegelmilch 2016, p. 232). Toyota products should also be promoted through the use of various advertising media such as TVs and websites. The social media has also become a useful platform for promoting products. In this regard, Toyota can use social media tools like Facebook, YouTube, and Google Play ads to increase its global awareness especially when rolling out new products (Gordon 2012, p. 123).

Pricing Strategy

The prices for Toyota products are widely varied depending on vehicle model and product line. Toyota should make use of both Value-based and market-oriented pricing strategies. According to the value-based approach, pricing is based on the value of a product (Keegan 2014, p413). The market-oriented plan sets prices depending relies on prevailing market conditions as well as the prices of competitors. The developing countries demand vehicles which are of high quality yet affordable. Toyota can use its innovativeness and its cost-leadership strategy to grow its international market.

Conclusion

Growth in the international space is influenced by internal and external environments. Situational analysis for Toyota has revealed that there are both strengths and opportunities which the company can leverage to increase its international market share. However, some threats and weaknesses in the company should be addressed.  The marketing plan has outlined the market segmentation and marketing mix strategy that Toyota can use to grow its international market space.

 

 

References

Alon, I., Jaffee, E., Prange, C., and Vianelli, D., 2016. Global Marketing: Contemporary Theory, Practice and Cases. 2nd Ed. McGraw-Hill Higher Education, Chapter 15.

Gillespie, K and Hennessey, D., 2016. Global Marketing. 4th Ed. Routledge, Chapter 16, pp. 505-535.

Gordon, R., 2012. Re-thinking and re-tooling the social marketing mix. Australasian Marketing Journal (AMJ), 20(2), pp. 122-126.

Hollensen, S., 2017. Global Marketing. 7th Ed. Pearson Ed, Chapter 17

Interbrand, 2016. Best Global Brands 2016 Available at:

<http://interbrand.com/best-brands/best-global-brands/2016/ranking/> [Accessed 10/23/2017]

Jurevicius, O., 2016. "SWOT analysis of Toyota." Toyota SWOT analysis. Available at:

https://www.strategicmanagementinsight.com/swot-analyses/toyota-swot-analysis.html [Accessed 10/23/2017]

Keegan, W., 2014. Global Marketing Management. 8th Ed. Pearson Ed. –Chapter 14. pp. 401-426.

Schlegelmilch, B., 2016. Global Marketing Strategy. Springer, Chapter 9.

Sulaiman, T., 2013. Toyota Targets Growing Consumer Market in Africa. Reuters. Available at:

https://www.reuters.com/article/us-africa-summit-toyota/toyota-targets-growing-consumer-market-in-africa-idUSBRE93806Y2013040 [Accessed 10/23/2017]

Toyota, 2016. Form 20-F. Available at:

<http://www.toyota-global.com/pages/contents/investors/ir_library/sec/pdf/20-F_201603_final.pdf> [Accessed 10/23/2017]

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