SWOT Analysis of Toyota's Marketing Strategy

SWOT- Toyota featured in “One Team 2018 Super Bowl Advertisement”

Strengths:

• Strong brand image
• Progressive technology
• Worldwide supply chain
• Rapid innovation abilities
• Strong emphasis on research and development

Toyota is considered to be very popular for consumers due to the company driving a represents a combination of product excellence and cost of ownership that surpasses competitors (Hirsh, Hedlund, & Schweizer, 2003). When it comes to technology, Toyota is known for driving design and purpose and wanting to be at the forefront of the "future of mobility" (Mainwaring, 2018). To do this, Toyota is focused on expanding markets, engaging in new partnerships, and creating products with a purpose (Mainwaring, 2018). Another perceived strength of Toyota is the focus on supply chains. Toyota is said to be experimenting with a combination of technology, and new process approaches to assist their global supply operations to recover with efficient methods from natural disasters (Marchese, 2014). Toyota is also considered to be a stable company in regards to rapid innovation abilities. The company is using its expanded markets for car-sharing, using newly acquired partnerships to drive innovation and impact, and showing change with their products such as vehicles with Hybrid Synergy Drives Technology (Mainwaring, 2018). When it comes to the aspect of research and development, this is another perceived strength of Toyota. Toyota has shown that there is an emphasis on basic research, forward-looking and leading-edge technology development, and product development ("Toyota's Research and Development Organizations," 2012). These concepts are intertwined with each other to establish systems that transform essential components into their vehicles ("Toyota's Research and Development Organizations," 2012).

Weaknesses:

• Organizational structure
• Organizational culture
• Product recalls in recent years
• Dependency on suppliers

According to Bensinger and Vartabedian (2010), Toyota has had issues within its organizational structure.  Former employees believe that the problems started with crucial decision making coming from executives in Japan that ended up causing issues with the safety of vehicles and receiving negative press behind these problems (Bensinger and Vartabedian, 2010). Behind additional problems with the organizational structure was the expansion strategies with United States operations with a focus on increasing assembly plants with also cutting costs and improving the complication of vehicle microchip technology (Bensinger and Vartabedian, 2010). These issues within the structure also led to poor organizational culture and eventually, safety recalls that put a strain on the brand (Bensinger and Vartabedian, 2010). A past safety recall by Toyota affected 2.3 million vehicles with issues surrounding the accelerator pedals, and this was seen to be an issue of dependency on suppliers for components not made in their factories (France-Presse and Freytas-Tamura, 2010).

Opportunities:

• Developing markets in emerging countries
• Growing demand for fuel-efficient vehicles
• Growing interest in advanced electronics in vehicles
• Mounting concern for eco-friendly solutions

When it comes to emerging markets, growth in China, India, and Brazil have surpassed market expectations. China has shown innovation with digital marketing capabilities, India has been focusing on electric vehicles or two-wheeled vehicles, and Brazil has been a front runner for appealing cost to value tradeoffs for positive profit margins (“Emerging Markets,” n.d.). The Vehicle Electrification Market has shown projections to grow by 9.1% and reach the amount of $142.1 billion by the year 2027 improved from the current $71 billion in 2019 (“Vehicle Electrification Markets, 2027 - Demand for Increased Fuel Economy, Low Maintenance Cost, and Improved Performance,” 2019).  The demands behind improved fuel economy, low maintenance cost, and enhanced performance are assisting with the research behind the increasing trend (“Vehicle Electrification Markets, 2027 - Demand for Increased Fuel Economy, Low Maintenance Cost, and Improved Performance,” 2019).  Current vehicles are switching from conventional technology to advanced technology to compete in existing markets as well as drive the focus on the improved vehicle efficiency consumers are seeking with economy friendly vehicle solutions (“Vehicle Electrification Markets, 2027 - Demand for Increased Fuel Economy, Low Maintenance Cost, and Improved Performance,” 2019).

Threats:

• Increasing market presence of low-cost competitors
• Rapid innovation of challengers
• Highly appraised raw materials
• Tariffs and trade
• Lesser profits

The auto industry has increased competition as innovation is rapid, and combinations of performance and cost are dispensing into the market. The innovation has caused competition in the market to have a strong focus on electric vehicles that are budget-friendly and focuses on globally green vehicles ("Escalating Competition As Electric Vehicles Aim To Become Mainstream," 2017). Government support, in combination with increasing consumer interest in sustainability, is generally viewed as a decisive factor for the growth of the electronic vehicle market ("Escalating Competition As Electric Vehicles Aim To Become Mainstream," 2017). According to Sedgwick (2018), a concern of the auto industry is the high prices surrounding raw materials. According to Sedgwick (2018), natural materials in August 2017 in North America averaged around $2,000 per vehicle, which was an increase of approximately $221 a year prior. Toyota relies on suppliers for bulk raw materials and is affected by the costs of steel, aluminum, and plastic resin as the prices fluctuate (Sedgwick, 2018).  Major threats affecting the auto industry surround the aspect of tariffs and trade issues as raw materials rise, and the importation and exportation of goods continue to see higher tariffs regulated (LaReau, 2018).  According to LaReau (2018), Ford stated they had a profit of $1 billion during the second quarter of 2018, which is reported to be down 50 percent from a year ago due to reduced sales in China, and the underlying effects of the Trump administration's tariffs.

Conclusion:

For Toyota to address the opportunities in the external market, and to address the threats based on competition, the company should focus on building on its strengths with advanced technology and innovation abilities. Significant opportunities and threats consist of demands for fuel-efficient vehicles, growing interest in advanced electronics in cars, mounting concern for eco-friendly solutions, an increasing market presence of low-cost competitors, and rapid innovation of competition. Another opportunity for Toyota is to fine-tune the organizational structure and culture to allow for a more robust planning and decision-making matrix. This could help to eliminate issues with recalls for safety-related items in their vehicles. When it comes to a marketing approach and strategy for the company, Toyota should look to capitalize on its competitive advantages with advanced technology and rapid innovation. The strategic focus should focus on driving an aggressive approach. The reasoning behind this is the company has many internal strengths, and there are also many external opportunities that they can capitalize on (Ferrell & Hartline, 2014). This type of strategy can allow the company to set itself apart as the company has the right brand image for their market. Their brand image has been known to serve a product that has a combination of quality performance and affordability in terms of cost (Hirsh, Hedlund, & Schweizer, 2003). When it comes to the strategy for improved organizational structure and culture, the company should have a strategic focus on a defensive approach. This is due to the internal weakness allowing for external threats to capitalize and gain market presence with issues surrounding recalls and negative press (Ferrell & Hartline, 2014). The organizational structure has caused severe problems with liabilities for negative press due to safety recall issues in the past (France-Presse and Freytas-Tamura, 2010). Also, the lack of proper supply chains that can promote their growth efforts caused for recalls on their products due to an inadequate organizational structure and culture (France-Presse and Freytas-Tamura, 2010). These types of issues can harm a company’s growth and long-term success. A defensive approach in this category can help to eliminate the problems that caused negative publicity in the past for the company.

“Core Competency”

A core competency is described by Ward (2018), as being the ideology behind what a company needs to do to distinguish themselves from other businesses in their respective markets. Previously core competencies were considered to be focused around consumer benefits, had difficulty for the competition to emulate, and could be used with many different products and markets (Ward, 2018). As industries have grown, core competencies have also evolved and have become inclusive of the aspects of quality, customer service, value, innovation, and marketing while companies strive to build a competitive advantage over other businesses in the market (Ward, 2018).

Operational Excellence: Amazon

When it comes to operational excellence Amazon, uses powerful software that allows customers to buy products around the world as well as efficiently receive items with some products arriving in less than 24 hours through Amazon Prime (“7 companies that forever changed the face of process excellence,” n.d.) To drive the reliable operational excellence, Amazon uses algorithms to personalize experiences for shoppers that competition has failed to become an equivalent match or process (“7 companies that forever changed the face of process excellence,” n.d.).

Product Leadership: Apple

When it comes product leadership, Apple uses three management policies to drive high quality and technologically sophisticated products with the use of one profit and loss statement, has a small product line, and develops products in unusual ways (Colvin, 2017). When it comes to a small product line Apple, has capitalized on ensuring concentrated efforts and time are focused on a few products to strive for getting the products right versus an abundance of products that would use resources and energy in different directions Colvin, 2017). Additionally, the aspect of developing products in unusual ways has separated the company from others as there is focus on bringing various groups together that help to create multiple customer experiences from their products such as hardware, software, interfaces, online experience, and packaging with one person assigned to oversee development of them all for the best experience and outcome possible.

Customer Intimacy: Johnson & Johnson

When it comes to customer intimacy, Johnson & Johnson recognizes the power of using specialists that work directly with consumers. The company is focusing on developing a diverse and global supply base (“Our Strategies to Deliver Value,” 2019). The ideology between the company’s approach is to work and develop partnerships with global suppliers that reflect the diversity of the company’s patients and customers (“Our Strategies to Deliver Value,” 2019). Additionally, the investment in this category has been over a billion dollars annually since the start of the Supplier Diversity Program in 1998 (“Our Strategies to Deliver Value,” 2019). Based on the core competencies outlined by Ferrell and Hartline (2014), Johnson & Johnson appears to use this program to discover customer needs and drive customer relationship mindsets to build a diverse customer-based market focused on customer intimacy.

“Boston Consultant Matrix”- Walmart

The Boston Consultant Matrix is a model used as a framework for analyzing products according to growth and market share (Martin, 2018).  According to Martin (2018), the matrix has been used for nearly 50 years to help the business gain insights on what products best help them capitalize on market share growth opportunities. The Boston Consultant Matrix needs data on market share and growth rate of products or services, and then is segmented into four quadrants of Stars, Question Marks, Cash Cows, and Dogs (Martin, 2018). Within Stars, the products that have the best market share and generate most profits are considered stars (Martin, 2018). Cash Cows are business units, or products that have a high market value compared to low growth prospects are considered cash cows (Martin, 2018). Dogs are units or products with a low market share in conjunction with the flat growth rate are considered dogs (Martin, 2018). Question Marks are high growth prospects but little market shares (Martin, 2018). When it comes to Walmart and understanding their segmentation strategies, the Boston Consultant Matrix can be useful with the determination of proper market understanding with the use of stars, cash cows, question marks, and dogs.  When it comes to Stars, the Walmart Supercenters are the stars of their product segmentation with high market growth and market share. Walmart Supercenters are the backbone of the Walmart domain as there are 3,302 of them out of 4,711 total stores in the United States (“Number of Walmart Stores and an analysis of related Store Data,” 2018). The Question Marks of Walmart is in the Walmart Neighborhood Market and the Walmart Fuel Store. The reasoning behind this analysis is in regards to the high market value, but low market shares based on market population (Martin, 2018). The Neighborhood Markets have been viewed as successful due to the store predominantly being a grocery store with household supplies or health items for sale (“Number of Walmart Stores and an analysis of related Store Data,” 2018).  Currently, Neighborhood Markets are the second largest United States market as they encompass 704 stores out of 4,711 total stores in the United States (“Number of Walmart Stores and an analysis of related Store Data,” 2018). The Walmart Fuel Store is considered a Question Mark, as this is a new opportunity that consists of a 4,000-square-foot Walmart convenience store, that offers more services and products then coffee, snacks, or fuel (“Number of Walmart Stores and an analysis of related Store Data,” 2018). The one aspect that leaves this in the question market category, for now, is the lack of growth as it is a newer innovation for the company.  Depending on how sales and market viewpoints go, this segment can expand and grow towards a portion of Walmart that has the potential to be a cash cow. A dog of Walmart is the Walmart Express segment, which is a smaller version of Walmart focused on grocery (“Number of Walmart Stores and an analysis of related Store Data,” 2018). This segment has had declines in sales from 2016 and is now no longer being expanded or invested in (“Number of Walmart Stores and an analysis of related Store Data,” 2018).  The attention is now going into strengthening the Supercenters and the Neighborhood Markets (“Number of Walmart Stores and an analysis of related Store Data,” 2018). As of 2018, Walmart Express only has two locations out of the 4,711 Walmart locations in the United States (“Number of Walmart Stores and an analysis of related Store Data,” 2018). This model is essential to marketers as it will allow a company to focus on strategies that will capitalize on market share growth opportunities, from understanding the internal strengths and weaknesses of its products. In the case of Walmart, the focus was on segmentation that allows a more in-depth analysis of the value of their products with market shares and market value.

“Product Life Cycle Model”- Apple

The Product Life Cycle Model is a model used as a framework for analyzing product sales and getting insights on the maturity stage of products and industries (Spencer, 2009). The model provides information on expected future sales growth and the strategies that should be applied (Spencer, 2009). The Product Life Cycle Model has four stages with introduction, growth, maturity, and decline (Spencer, 2009). Additionally, some of the considerations at multiple stages of a product are focused on product development, pricing, distribution, and promotion of products (Spencer, 2009). The goal of the primary purpose of the introduction stage is to establish a market and drive consumer demand for the products (Spencer, 2009). The focus for the growth stage is to build brand loyalty and increase market share presence (Spencer, 2009).  The primary concern of a company during the maturity stage is defended market shares, and continue to maximize profits (Spencer, 2009). The final stage of the product life cycle model is the decline stage, and the model focuses on attempting to encourage progression, reforming, or replacement of the product (Spencer, 2009). When it comes to the introduction stage, Apple has products such as the HomePod, MacPro, AppleCard, and the Apple Arcade. Apple Arcade is a new product that is being released and is going to try a different approach by using game subscriptions. The product will focus on allowing development for new and innovate games that will be used across Apple platforms such as iPhone, iPad, Mac, and Apple TV (“Coming to the App Store this fall,” 2019). With the growth stage products that are newer but are gaining market value and shares are products like the AirPods, Apple Watch, Apple TV+, and Apple News+. According to Allegro (2019), Apple AirPods are the second best-selling Apple product. What makes this a perfect fit for the growth stage is that it is a relatively new product with a launch from two years ago. Also, the product is growing with gaining increased search ratings with Google by approximately 500% from December 2016 to December 2017 (Allegro, 2019). Within the maturity stage are Apple products that have had a bit of history and have shown to be staples within the product line with the iPhone, iPad, MacBook, and the iMac. At this stage, the iPhone X is the newest staple product for the Apple iPhone line. But, there have been issues regarding the smartphone industry declining, causing Apple’s iPhone sales to drop by approximately 30% in the first quarter of 2019 (Potluck, 2019).  At this stage for the iPhone if changes in the market value and shares do not change the company can be facing a need for replacement or redesign of the product. When it comes to the decline stage, products like Time Capsule, Xserve, and iPad Photo have been discontinued. But, one product that had multiple discounted stages is now being released with a redesign, which is the iPod Touch. This looks to be a product extension of the decline stage. According to Brown (2019), sources within the Apple supply chain, have indicated that a new iPod Touch is in the works to be recreated and resemble the iPhone X phone models. This model is significant for marketers as it will give proper insights on what stage a product is when attempting to market the product. For example, at the introduction stage, marketing strategies would be vastly different than a product in the maturity stage. Marketers can use this model in order to evaluate external threats and opportunities in their respective market segment to see how the company can align its strategic focus for the best possible outcomes.

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