Strategic Management Essay
Toyota Motor Corporation is a famous Japanese multinational corporation, and is considered the world’s second largest automaker of automobiles, trucks, buses, robots, and providing financial services. When Toyota and other Japanese carmakers entered the American market, they were not considered as a threat to the American auto industry because it was believed their cars had no appeal to American consumers However, in the 1970s, due to several problems like environmental regulations, and quality control issues with American cars, a good number of American car owners began searching for alternatives to poorly made American cars.
In response to these changes, Toyota and other Japanese carmakers aggressively marketed their cars to Americans as being fuel-efficient, environmentally friendly, and having better build quality than American cars. In addition, Toyota marketed their cars with commercials involving young Toyota drivers jumping in the air. As a result, the Japanese’s marketing campaign along with continuing problems from the Big Three auto manufacturers, allowed import cars to make up about 20 percent of the US car market by 1980. Stage1.
General Motors, Ford and Daimler-Chrysler focused in the late 1990s on mergers and acquisitions for improving their business positions to meet future challenges. Toyota, meanwhile, centered its business strategy on technological innovation and persistent environmental product development. The price of oil was not especially high during the 1990s when Toyota started its hybrid car program. Oil prices were below US $20 barrel in 1994 and were to fall to a 50-year low around 1997 when the Toyota Prius was first sold in Japan.
Clearly something else was driving Toyota and other Japanese companies to invest so heavily in hybrid car development. There are three probable reasons: 1 . High petrol taxes in Japan, due to the Japanese government wanting to reduce the dependence of Japan on imported oil. While this would have certainly driven the Japanese development of hybrid cars, petrol was cheap in the key US market at this time. 2) The potential to gain a market advantage by developing the key technologies required to successfully commercialize hybrid cars, and then owning these developments via patents.
3) The expectation that ownership of these key fuel savings technologies would become very valuable when world oil prices rise from the lows of the mid-1990s, which was a fair long-term assumption to make during this period. Stage2: Decision Making Process: In 1994, the executive team acknowledged the potential threat of depleting oil reserves and climate change and change their strategy or products to meet the needs of future customers. Course of Action:
Toyota set up a group tasked with meeting the challenge of creating a vehicle for the 21st century, which would work within the parameters of natural resource constraints and environmental issues. Commitment to course of action: Toyota pioneered the concept of Hybrid (petrol/electric) technology to mass produce the world’s first eco-efficient vehicle, the Toyota Prius. Evaluation of decision/re-engineering: The first prototype of the car had even faced starting problem. It took almost six months to roll the car. Finally, when the car started, it moved for a few yards only.
It was hard to imagine that Toyota, which was known for its efficient production systems, was facing such trouble. Initially it felt that ‘Prius’ was a case of technological problems, impossible demands and multiple miscalculations. It proved how a great company could overcome obstacles and turn a dream into reality. Though ‘Prius’ represented only a small fraction of the nine million cars and trucks that the Japanese company planned to produce in 2006, it would be the first vehicle to provide a serious alternative to internal combustion engines, designed for a world of scarce oil and was branded as ‘The car for the future’.
Stage3: Toyota carefully studied the US market and sees there is a growing oil crisis and foresees a need for change in the structure for cars, converting their needs to oil saving cars. While American car manufactures lacked producing such cars, then Toyota caught that opportunity and tried to occupy this niche market. By 2002, it was being sold in North America, Japan, Europe, Hong Kong, Australia and Singapore. Analysts opined that the demand for hybrid cars would rise because of the unstable oil prices and the growing need for environment friendly products.
Post Evaluation By examining the external environment and acknowledging the potential threats of depleting resources and increased concern over environmental issues, Toyota have turned a threat into a business opportunity, boosting their reputation both as an environmentally conscious and as technological innovators and established themselves as leaders in this growing market. The car industry faces many complex issues, but the introduction of the Prius provided Toyota with a competitive advantage. RoadMap to the development Process of Toyota Prius.
Stage1| Stage2| Stage3| Executive level| 1 Expressed concern about the future of the automobile2. Embarked a new project called G21 to the team3. Communicated the vision and priorities to the team| 1. The executive team acknowledged the potential threat of depleting oil2. Challenged the team for the innovation of new model using new technology| 1. Toyota unveiled the Prius in Japan in October 1997, two months ahead of schedule. 2. Made strategy plans for introducing cars to US and other prospective continents| Management and Team level| 1.
Engaged in improving the existing internal combustion engine technology2. Started making refinements to the existing technology | 1. Team committed to the course of action using hybrid technology. 2. Came up with around 80 alternatives. 3. Identified numerous problems — heat, reliability, noise, and cost. 4. Narrowed the list to four models. 5. After endless fussing and tweaking, the team finally reached 66 miles per gallon — the 100% mileage improvement. | 1. Team has started putting efforts towards with second and third generation Prius.
2. Redesigned the model for making it more appealing to the consumers. | Marketing /Sales Team| 1. Identification of the growing oil prices. 2. Identification of Growing middle class around the world. | 1. Raised the concern that Premium price for the hybrid would make it impossible to sell. 2. Challenged with building consumer technology awareness. | 1. Devised new marketing ways to cut down dealership costs in US. 2. Devised new ways to boost the sales through internet, relied on grass-roots marketing, and public relations events|.
Subject: Plug-in hybrid,
University/College: University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Date: 15 February 2017
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