Current Position Of Toyota And Tesla In The Market: A Comparative Analysis

Financial Performance of Toyota and Tesla

Technology and innovation are interrelated with each other, but not complementary to one another. Innovation can also be brought from sources other than technology. However, technological innovation is one of the important parameters for revolutionizing the business productivity (Henderson, 2016). This assignment attempts to develop a report on the current position of the incumbents, Toyota and Tesla within the competitive ambience of the market. In this report, Tesla is the challenger, gaining power and authority to overpower brands like Toyota. 

Toyota

Founded in 1937, Toyota is a multinational automobile manufacturer in Japan. It operates under automotive industry, dealing in automobiles, luxury vehicles, commercial vehicles and engine. In the Financial Year 2018, its production output has been measured as 10,418, 144 units. In the annual report of 2018, the annual revenue has been recorded as 29,379,510 million yen. According to the US dollars, the revenue amounts to 264.7 billion.  The operating income is 2,399,862 million yen and the net incomes totals up to 2,586,106 million yen. Total assets of the company amounts to 50,308, 249 million yen and total equity are 19,430,102 million yen (Toyota.com, 2018). According to the Global Automobile Manufacturer Market 2013, Toyota Motor Corporation occupied 12% market share.

Figure 1: Global Automobile Manufacturer Market 2013

(Source: Toyota.com, 2018)

Tesla

Founded in 2003, Tesla is an American multinational corporation based in Palo Alto, California. It operates under automotive industry, specialized in electrical vehicles, lithium-ion battery energy storage and solar panel manufacturing. According to the annual report of 2017, the production output has been recorded as 101,312 vehicles. Hard efforts of 37543 employees are the reason behind annual revenue being 11.759 billion US dollars. The operation income is -1.632 billion US dollars, indicating that the company in running in loss. Its intensity is reflected from the net operating income, which is -1.961 million US dollars. Total assets of Tesla are 28.655 million US dollars, which reflects stability in the market. However, total equity value is 4.237 billion (Tesla.com, 2018). According to the reports of July 2018, Tesla Motors occupied 1.44% shares of the car and light truck market in the threshold of United States.

Figure 2: Market share of Tesla

(Source: Tesla.com, 2018)

Figure 3: Porter’s five forces analysis of Toyota and Tesla

(Source: Narula, 2014)

For both Toyota and Tesla, competitive rivalry is strong. This is because of the factors like high aggressiveness, differentiation and variety in the cars, cost, style, and brand image and fuel efficiency. Number of large firms is also an issue for competitive rivalry between Toyota and the contemporary brands. This provides competitive advantage to the contemporary brands. Low switching costs strongly influences the buying power of Toyota clients and customers. High quality information and moderate substitute availability of the cars is also a determinant for affectation of the purchasing capability of the buyers (Ravichandran, Han & Mithas, S., 2017). On the other hand, bargaining power of buyers in Tesla is moderate. This is because of low switching costs. Moderate supplier population reduces the threat of substitutes and new entrants.

Market Share Comparison

Table 1: SWOT analysis of Toyota

(Source: Toyota.com, 2018)

Table 2: SWOT analysis of Tesla

(Source: Tesla.com, 2018)

Wide supply chain network of Tesla relates with the diversified workplace culture of Toyota. Seeking effective channels for transactions possesses flexibility to enhance the brand image. Herein lays the appropriateness of the leadership qualities of the managers of Tesla towards regulating the performance of the team members. Demand for innovative technology acts as an opportunity for both Toyota and Tesla to occupy market share in the developing nations. Monarchical government support would provide assistance towards adding to the workforce of research and development. Along with this, it would also enable Toyota and Tesla to deal with financial instabilities like liquidity, high prices among others. Non-compliance to the competitive policies intensifies the threat of competitive rivalry for the incumbents (Dodgson, 2018).

Table 3: PESTEL analysis of Toyota and Tesla

(Source: Morden, 2016)

Political stability in the government is assistance for both Toyota and Tesla in terms of executing the import and export activities. Incentives in this direction lure the personnel of the incumbents to adopt prospective marketing strategies. However, high tax rates, labour costs and inflation obstruct the import and export activities. This disruption deprives the customers of maintaining their preference of low carbon and renewable sources of energy. This is in spite of the improved wealth distribution in the developing markets. Social media is one of the sources, which informs the customers about the automation process and the production of vehicles consuming less fuel (Rothaermel, 2015). Emergence of mobile apps has enabled the staffs of the incumbents to increase the trafficking of the audience towards the brand image.

Focus on sustainable development has enabled both Toyota and Tesla to contribute towards preservation of ecological biodiversity. Latest and modern tools have been adopted for detecting the climactic changes. Several environmental programs have been organized for increasing the awareness towards preserving the greenery of the environment. Typical example of this is the production of vehicles, which consume less fuel. Increase in the standards of the waste disposal methods has enhanced the cleanliness and hygiene of the workplace (Coccia, 2016). Internal patent controls and dealership controls reflects the legal compliance for both Toyota and Tesla. Within the marketing process, focus is placed on consumer safety.

Technology life cycle projects the journey of the businesses through the research and development phase to vital life and the final decline. There are four phases, which describes the technological life cycle. These are: research and development; ascent; maturity and decline. The shape of the cycle is “S”. The following is the technology life cycle of Toyota and Tesla.

SWOT Analysis

Toyota

Technology is crucial in the business of Toyota in terms of catering to the specific demands of the customers. Social media and the mobile apps are the efforts of the research and development team. Informing the clients and the customers, about the production of vehicles consuming less fuel, is the vital stage. In this stage, the trafficking of the audience is the maximum, enhancing the sales revenue and the profit margin (Wheelen et al., 2017). Strategic vision towards adopting effective communication brings maturity in the business. Negligence towards execution of evaluation declines the customers, providing competitive ambience to the contemporary brands.

Tesla

Technology brings in new opportunities even for Tesla. This is because the nature of operation of the incumbent is innovative. Research and development team can enhance the future of electric cars through strategic performance. Controlling the autonomy of the battery would be an effective example of innovation attracting the present generation. Market research relates to the engineering effort, which can avert decline and loss within the business (Nambisan et al., 2017). Social media can be an effective means for accumulating greater market share in the electric cars. Typical example of this can be intimating the clients and the customers about the innovative design, which is proposed to be incorporated in the cars.

Innovation holds the power to alter the business scenario. However, strategic approach is needed for bringing the innovation in a proper manner. The following are the three steps, which both Toyota and Tesla need to incorporate in their business:

Figure 4: 3 phases of innovation model

(Source: Adner & Kapoor, 2016)

At the initial stage, clarity regarding the innovation is crucial. This is done through the analysis of the requirements, which results in the development of prospective ideas about achieving the innovation. Once the ideas are developed, the incumbents undergo the phase of evaluation for examining the appropriateness, feasibility and effectiveness. This is followed by the planning process for execution of the activities related to bringing the innovation.

The second phase is implementation, where, the actual work of innovation begins in the workplace of the incumbents. Here, the activities includes development of prototypes, testing and pilot application of the newly manufactured cars (West & Bogers, 2014). This step prevents malfunctioning and defects before launching. The final phase is that of marketing, which includes production of the orders, launching the product in the market and entry into the international markets.

PESTEL Analysis

Current condition of the incumbent

Figure: Top 10 brands with highest EV penetration rate in Europe

(Source: Karamitsios, 2013)

Tesla has achieved accolades and glory through EV obsession and Clean Technnology. Delving deep into the specific demands of the customers, obsession towards EV has bestowed the capability on Tesla to overpower brands like Toyota. The above figure shows Tesla on the top of the list in terms of selling 100% electric vehicles. In terms of brand, Tesla has achieved 57K, which is 33% growth than the previous sales in EV. By model, Tesla’s model X has enabled the company to achieve 79% growth in the sales revenue.

Solutions to re-emerge in the market

Consideration of the previous performance would be effective in terms of upgrading the standards and quality. Herein lays the effectiveness of evaluation, which would bring to the forefront the drawbacks within the services. Maintaining consistency in the execution of evaluation would secure the market position of both Toyota and Tesla. The employees need to be trained about the proper ways and means of approaching the business. This would directly suffice the aspect of fulfilling the specific needs, demands and requirements of the clients and customers. Technological training would bring automation in the businesses of both the incumbents. Hiring experts for this purpose would be an innovative step.

Indulging in alliance with the members of trade union would be assistance in terms of dealing with the financial instabilities of inflation, high exchange rates and tax tariffs. More it would enable the incumbents to control the other operational costs. Market research would be effective in terms of seeking prospective communication channels. This would improve the customer relationship. Innovation in the greener technology would be helpful in terms of catering to the environmental preservation.

Surveys and feedbacks from the clients would be a means for improving the nature of business for both the incumbents. Within this, legal compliance is crucial in terms of averting the illegal scandals and issues. Social media would be a means for promoting the products and services, enhancing the brand image. Installing privacy cookies in the profile of the clients and the customers would be effective in averting the instances of cyber crimes. Post training tests would enable the managers of both the incumbents to estimate about the progress in the competitive market. Performance appraisals would lure the employees to produce effective performance, which would be assistance towards reaching to the benchmark level of performance.

Technology Life Cycle

Toyota needs to make noticeable improvements in the production system. Here, the main focus is on quality of the cars, which are produced. Organizing trainings on quality assurance would prove beneficial in upgrading the standards of performance. Producing more number of hybrid cars would increase the sales revenue. This would address the increasing prices of oil. Plans can be made for manufacturing fuel efficient cars, which would help Toyota in accumulating greater share in the Asian market.

Conclusion

Strategic approach is beneficial for both Toyota and Tesla in terms of maintaining their position within the competitive ambience. Awareness about the external influences enables the personnel to plan the infrastructural development accordingly. Technology is one such means, which possesses flexibility to bring automation within the business and lure more number of customers.  Consistency in research and development results in the production of innovative car designs, enhancing the brand image of both the incumbents.

References

Adner, R., & Kapoor, R. (2016). Innovation ecosystems and the pace of substitution: Re?examining technology S?curves. Strategic Management Journal, 37(4), 625-648.

Coccia, M. (2016). Radical innovations as drivers of breakthroughs: characteristics and properties of the management of technology leading to superior organisational performance in the discovery process of R&D labs. Technology Analysis & Strategic Management, 28(4), 381-395.

Dodgson, M. (2018). Technological collaboration in industry: strategy, policy and internationalization in innovation. Routledge.

Donate, M. J., & de Pablo, J. D. S. (2015). The role of knowledge-oriented leadership in knowledge management practices and innovation. Journal of Business Research, 68(2), 360-370.

Goffin, K., & Mitchell, R. (2016). Innovation management: effective strategy and implementation. Macmillan International Higher Education.

Henderson, C. Q. (2016). TECHNOLOGY & INNOVATION. Montana Business Quarterly, 54(1), 22-22.

Hill, T. (2017). Manufacturing strategy: the strategic management of the manufacturing function. Macmillan International Higher Education.

Karamitsios, A. (2013). Open innovation in EVs: A case study of Tesla Motors. 67(1), pp 15-23

(https://pdfs.semanticscholar.org/af23/f5dd51db88e2751efd4f835b7588bd838843.pdf)

Morden, T., 2016. Principles of strategic management. Routledge.

Nambisan, S., Lyytinen, K., Majchrzak, A. and Song, M., 2017. Digital Innovation Management: Reinventing innovation management research in a digital world. Mis Quarterly, 41(1).

Narula, R. (2014). Globalization and technology: Interdependence, innovation systems and industrial policy. John Wiley & Sons.

Ravichandran, T., Han, S. & Mithas, S., 2017. Mitigating diminishing returns to R&D: The role of information technology in innovation. Information Systems Research, 28(4), pp.812-827.

Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.

Tesla.com (2018), About us, Retrieved 22^nd August 2018 from https://www.tesla.com/

Toyota.com (2018), About us, Retrieved 22^nd August 2018 from https://www.toyota.com/

West, J., & Bogers, M. (2014). Leveraging external sources of innovation: a review of research on open innovation. Journal of Product Innovation Management, 31(4), 814-831.

Wheelen, T.L., Hunger, J.D., Hoffman, A.N. and Bamford, C.E., 2017. Strategic management and business policy. pearson.

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