Literature Review
Established in 1937, Toyota Motor Corporation is an automobile manufacturer based in Toyota, Aichi, Japan. Toyota Motor Corporation is the fifth largest company in the whole world and comprises more than 300,000 employees. The company has been engaged in the sale of commercial vehicles, minivans, passenger cars and related accessories. Some of the brands are- Lexus, Toyota, Hino and Daihatsu. The annual revenue of Toyota Motor Corporation is 213 billion dollars. Toyota Motors has a wide variety of small cars in its portfolio. The steeply rising prices of cars have been the major factor in change of consumer preferences. Toyota Motor Corporation is a leader in the automotive industry.
The paradigm shift in the behavior of consumers with relevance to purchasing of small and hybrid cars in an emerging economy like Indonesia has been studied. The rise in the income of an affluent class, induces a buyer to purchase differentiate products. The retail price of a car is directly proportional to per capita income, rising fuel prices and innovation. According to Dutta, Disposable incomes are the determinants of predisposition to purchase automotive products (Dutta, 2011). In the West, the automotive revenue has shown a decline and this can be highly attributed to the financial crisis. The manufacturing cost and retail price of a car is largely influenced through the incentives and consumer demand. Japanese car-makers are into manufacturing of fuel efficient models and attracting the high profile locals is a prime concern. The Toyota Company aims to expand its production in Indonesian markets and mitigate risk factors by understanding the local needs of the people. The Japanese Car manufacturer has a centric focus to alleviate the currency impact, by increasing the output by 50 percent. The strategic approach to project management is a very complex approach. The strategic management approach shows a high frequency of automobile firm managers adopting the Porter five forces model and other strategic models to assess the firms competing strategy with others. The project management of an automobile is a tedious task and requires the company to adopt powerful weapons.
According to Bible and Bivins, the conventional projects are focused towards the operational performance and efficiency. The automobile companies need to adopt step by step approaches for transition from conventional project management to new modern project management (Bible, M and Bivins 2012). The strategic management approach involves dealing with different principles which are applied by managers during a formulation of a project plan and its execution. These principles include- leadership skills, integration with the different processes, adapting to the new models, formulation of a strategy and executing the projects. In order to become a strategic leader, a firm must focus on the paradigm shift from a conventional model to new modern approach. The company needs to articulate its competitive advantage clearly. The product must be defined in clear and comprehensible forms. This will be visible in the end results. According to Piccotti, the customer needs must be identified at different stages of the product launch in the market with respect to the price at which product is offered (Piccotti, 2018).
The Successful Market dominance of Toyota in Indonesia- Case Study
As per the project estimates and planning statistics, more than 25 percent of project failures are due to the absence of executive sponsorship. This is mainly due to wrong defined goals and responsibilities which constitute more than 15 percent. The company must adhere to use the pre-defined project management approach and enhanced success as measured through the quality, scope, budget and advantages. A PMO can drive the project successfully. The enterprise may experience greater complexity of inter-linkage which may enhance the satisfaction of stakeholder but may lead to conflicts. According to Muller, Gluckler and Aubry, a project failure may happen due to several reasons (Muller, Gluckler and Aubry, 2013).
The first practice is to identify whether an organization requires project management organization or not? How a company operates and different segments are operating across the different systems. If the implementation of any significant project or changes in strategy requires different level of costs, then a lot of benefit can be derived from the Project Management office. According to Aubry, the larger is an enterprise project and bigger is the cost associated with it, the greater the advantage derived through the Project Management Organization (Aubry, 2010). Conventionally, the Toyota Motor Corporation management roles have been distinguished. The problem may appear at different stages, but the firm looks for a determined goal to be effectively responsible. The firm needs to emphasize on achieving the determined goal and develop different approaches to problems. The firm’s attention must be on how to effectively utilize the human resource and bring a degree of consistency within the firm. This is achievable by cost outlays and planning and proper staffing and organizing within a firm. The conventional project shift requires the firm to execute a set of directions which are conceived at top management levels.
The project scope must be defined within an enterprise and this includes the schedule, resource optimization, controlling system and monitoring of external and internal variables. The success of the project is largely dependent on how the project will meet the allocated time, desired performance and budget. The Toyota Motor Corporation must look for external variable through which it can enhance the market opportunities. The company needs to address the external threats based on the number of opportunities identified. The automobile innovation and technological advancements can be of great benefit. The firm must be prepared to cope with environmental changes According to Stankovic and Djukic, the automobile industry is undergoing through the environmental transformation process. The changing role of industry leaders must be identified into a given environment. The firm has its own vision, objectives and roles which are to be achieved by a leader in a given setting. The automobile industry must inspire employees and management system to create loyal customers. The real challenge is to create a combination of strong management action with leadership qualities. The organizations must learn to adapt themselves to the changing needs of the consumer and the environment (Stankovic and Djukic, 2015). A firm must learn about how to exchange the roles between two extreme-the stable environment and changing environment. Toyota Motor Corporation shows significant opportunities in growth and stability. The prime indicators behind cash generation are high market share and usage of cash with respect to market growth rate. A company must be able to produce and sell innovative products at a price which is lower than the competitor’s price to gain the market leadership. As soon as, the product is categorized under the stars, the company is destined to be profitable. According to Schroder, the efficiency model is applicable to companies which seek experience and volume. The efficiency model is simple to understand and easy to assess the market share of automobile products (Schroder, 2012). The adoption of a fuel-efficient model in an emerging market like Indonesia has been explored in the case study below.
Toyota is a market leader in production of hybrid technology cars in Indonesia market. Toyota Motor Corporation began producing cars in 1977. The company entered into collaborative partnership with Astra Motors to capture the low income groups of Indonesia. The statistics from 2008 to 2012 shows a clear lead of Toyota Motor Corporation in Indonesia market. The production has shown a significant rise from 1, 99,000 units 4, 09,000 units.
According to Yao, Nishijima and Pan, the Indonesian market is a hotspot for automotive industry and invites low cost car manufacturers from all over the globe. The Toyota Motor Corporation is the fourth largest manufacturer of fuel efficient cars. With a GDP of 932 USD billion, the Indonesia market pulls greater opportunities for foreign investors. The average income of a consumer is 1, 80,000 USD annually. The great efforts made by the Toyota Corporation and Government have been able to appeal the masses. The company has launched Toyota Avanza at a discounted price of $16000. A constant implementation of innovation throughout all its multipurpose vehicles is its present goal (Yao, Nishijima and Pan, 2016).
The population of Indonesia that has a purchasing power capacity (PPC) lies between the age group of 25 to 60 years. In next 10 to 20 years, the country is expected to grow into a highly urbanized market. The consumer is encouraged to make an investment towards the loyalty products and greatly influenced through lower interest rates. The Government has launched low incentive schemes for its consumers and recreating the administration system. The Indonesia car market is expected to grow by 2020 and a backbone of the present system. The segmentation of a consumer with respect to a car market ranges from its purchasing power, annual income and buying preferences. There is a constant concern to create consumer confidence and demand for different segments in the automotive industry (Sergey Sosnovskikh, 2016).
The Toyota Motor Corporation has depicted its core competence in producing the great quality automobiles. The Toyota Motor Corporation provides a satisfactory value to its customers. This is highly attributed to innovative operational methodologies. The automobile industry is revolutionizing at a fast pace wherein the automobile competing to find a better place for their products. The company has adopted the cost leadership technology. With context to above, SWOT and PESTLE analysis of Toyota Corporation has been given (Takami, 2014).
Strength-Brand Recognition-The Company has a strong position in the market and has been able to gain competitive advantage in different geographies. The company’s market share in Japan is 45.5 percent, Asia-13.4 percent, North America-12.2 percent. The company has future plans to expand into international markets (Lavanya, 2012).
Weakness-Product Recalls-The Company’s brand image has been largely affected due to the product recalls. For instance, in year 2011, the company recalled 111,000 automobile models of Lexus brand and has recalled 181,000 models in Japan alone.
Opportunity-Growing automotive industry-The automotive industry has shown a decline in year 2008 and 2009. The automotive industry has shown growth by 8 percent in the year 2012 which provides an opportunity to Toyota Motor Corporation to increase the customer base. According to the forecasts made, the company is expected to have a double digit growth.
Threat-Competition from new entrants-The automotive industry is competitive. This is mainly due to intensified globalization. There are a number of variables that show the effect on globalization variables like pricing, safety, customer service, reliability and others (Fleming, 2013).
Political Factors- Significant factors in a macro environment includes- free trade agreements and government support towards ecofriendly automobiles.
Economic Factors -Toyota Corporation has immense opportunity to increase its exports via Japan due to weakness of the Japanese currency Yen. Toyota Corporation finds immense opportunities to increase the business in the United States (Gur et al., 2018).
Socio-Cultural Factors-Toyota Corporation finds immense opportunities in providing a wide range of products to increasingly satisfy the needs of customers through electric and hybrid vehicles.
Technological Factors-Toyota Motor Corporation has immense opportunities in increasing its e-commerce capabilities and exploiting the sales of its third party providers. The company is also involved with engaging the customers through the mobile apps and enhancing the corporate image (Imaizumi et al., 2018).
Legal Factors-Toyota Manufacturing Corporation has an opportunity to grow with infringement of IPR as government is lacking intellectual property protection rights. In addition to this, the company is exploiting to offer safe and satisfactory products that exceed its customer laws. This dimension presents legal factors for any firm.
The external variables that have been identified in the SWOT Analysis and PESTLE analysis have been creating a number of opportunities for the firm. The firms should focus on the product development for exploiting the opportunities in the firm.
The Portfolio Matrix is a model developed in the early 1970s. This is an evaluation technique that is classified into 4 different categories based market share and market growth. The market growth will show industry attractiveness and market share represents the competitive advantage. The allocation of resources can be done effectively and utilizes as an analytical tool in product management, brand marketing and strategic management and others. The preliminary idea behind portfolio matrix analysis is that the company must have a larger market share and this will show the direct impact on the product market.
- Dogs- The Company having products with low growth and low market share is categorized as Dogs. The company will not be able to generate any cash for the company and must find appropriate ways to eliminate those products. For instance- Toyota Motor Corporation has withdrawn Cressida and Qualis from its product category.
- Cash Cows-the company having products with lower growth rates and high market share is categorized under this category. These products are categorized as yesterday stars and form the basis of the company. The company needs to invest a little cash to keep these products (Tsaturyan and Muller, 2015). For instance-Toyota Motor Corporation needs to maintain the small cars like Daihtsu in its portfolio and Corolla Sedan for a different customer base.
- Problem Children- The products which show low share in a high growth market are regarded as Problem Children. Most of the startups start with problem children. These products show high potential to become the star and also turnaround to a cash cow and sometimes, a dog. For instance-Toyota Motor Corporation shows the low share of Scion in USA and Diesel engine cars in south East Asia (Mohammad Arabzad an, 2012).
- Stars-The products that show high market share in a high growth market are categorized as Stars. These products generate high amount of revenue for the company. These products are market leaders of business. Products with large aggregate of cash generation and consumption leads to a bigger market share. A company must focus on holding the market share or it will turn to be a cash cow. For Instance- Prius Hybrid, and Land Cruiser SUV are some of the cars under the brand Toyota Motor Corporation, which are categorized as Stars (Balasubramanian, 2009).
The portfolio matrix represents the strengths and weaknesses with relevance to the company’s profitability and cash inflows and outflows. The need of Portfolio matrix in a company is because of management of cash flows.
The automobile demand is tied with disposable incomes, vehicle prices, innovation and diesel prices. The Porter’s five forces model have been enumerated below with context to Toyota Motor Corporation-
- Threat of New Entrants
- The company faces a few legal barriers from the existing companies.
- The large amount of investment is required for the sustainability of the firm.
- The new entrants can bring innovative cars; the industry can face high retaliation by existing companies.
- Products are differentiated by quality of engineering and product design.
- Small companies cannot achieve economies of scale easily.
- New entrants will have access to distributors and suppliers (Aaker, 2006).
- Supplier Power
- The Raw material is widely accessible to the companies.
- The suppliers are large in numbers, but with reduced capital structure.
- The company does not face any threat of forward integration from suppliers.
- Buyer Power
- There are many buyers in the automobile industry.
- Buyers are mainly individuals, whereas government and corporate buyers prefer buying cars at low prices.
- The buyer power is strong as switching costs to another brand is low.
- Buyers are sensitive in decision making and can easily respond to alternative car brands (Petit, 2012).
- Buyers are not threatened with backward integration.
- Threat of Substitutes
- Substitutes will provide the same level of convenience to customers.
- Substitute products are cheaper and environment-friendly products.
- Competitive Rivalry
- The competition level is moderate.
- The consumers are brand conscious and firms compete for loyal customers.
- When a firm plans to leave the industry, the firm may incur huge losses.
- The company can have moderate threat of being acquired through the competitor.
The Project Management Office, also known as PMO is a working department within a business enterprise that helps in maintaining the project management standard within an organization. The PMO endeavors to standardize and repeat the project execution. The Project Management Offices act as the source for guidance, documentation, practice of project management and executing the project (Martins and Martins, 2012) s.
- Provides repeatable, long term and tangible business advantages.
- Streamlining the culture with corporate strategy.
- The company must be able to adapt to the strategic shifts.
- The company must enable high-performance within the organization.
- The integration of data through corporate strategic projects is possible through the implementation of the balanced scorecard.
- Enabled resource sharing, tools and technologies and methodologies for the enterprise successfully.
- Identification and development of methodology, best standards and providing oversight to project staff.
The general types of project management offices as recognized are-Controlling, Supportive and Directive Project Management Offices.
In a supportive project management office, the PMO will offer the best ideologies and practices. In a controlling project management office, there are certain defined measures for the execution of the project. There are certain company procedures, templates and reporting system. In a directive Project management office, the PMO directs the project management for the completion of work and control the execution of the project undertaken (Hobbs and Aubry, 2008). A few points in the light of the above three types of Project Management offices can be enumerated as below-
- The PMO can be external or internal. Internal PMO bridges the gap between iterative development and agile development. These PMO is effectively common in the organization which is running large programs through business method transformation (Hurt and Thomas, 2009).
- External Project management office has similar qualities to internal but are really good at communicating with stakeholders and customers.
- PMO-Project Management Offices can completely change the digital revolution due to which artificial intelligence has taken a pivotal role in various organizations. PMO existing within one enterprise can amalgamate one function with project strategy, project evolution and enterprise governance (Bredillet, Tywoniak and Tootoonchy, 2018).
Conclusion
The Toyota Motor Corporation must take concentrated efforts for strengthening the management platform and enhance the corporate image. The Toyota Motor Corporation must promote the cost and business structure for creating a robust management platform that can respond to the changing market conditions. The Company must present a streamline structure by reducing the fixed costs and creating a business credentials in the market. The company must focus on accelerating the business expansion into emerging countries by understanding the consumer needs of different markets. Toyota must strive to establish the production facilities in Asia and decreasing the overall cost of the supply chain. This is how the company can become closer to emerging markets (Shih, Patel and Ma, 2014).
References
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