Toyota South Africa has moved into a new era in vehicle manufacturing in South Africa as a fully-fledged member of the Toyota Motor Corporation (TMC) global production network. Following a five year multi-billion Rand plant modernisation and revitalisation programme Toyota’s Prospecton manufacturing facility, just south of Durban, boasts the latest in world class automotive manufacturing technologies. Many of these are proprietary TMC systems only recently released for use in Toyota plants outside of Japan. March the 4th 2008 marked a significant new chapter in the history of Toyota South Africa as the company became firmly established as a true volume exporter of vehicles in TMC global proportions. Using the Five Forces model of Michael Porter is a very elaborate concept for evaluating Toyota's competitive position. Michael Porter provided a framework that models an industry and therefore implicitly also businesses as being influenced by five forces. Michael Porter's Five Forces model is often used in strategic planning. Porter's competitive five forces model is probably one of the most commonly used business strategy tools and have proven its usefulness in numerous situations when exploring strategic management model.
The auto manufacturing industry are considered to be highly capital and labour intensive. The major costs for producing and selling automobiles include: Labour - While machines and robots are playing a greater role in manufacturing vehicles, there are still substantial labour costs in designing and engineering automobiles.
Advertising - Each year automakers spend billions on print and broadcast advertising, furthermore, they spent large amounts of money on market research to anticipate consumer trends and preferences.
Replacement Parts Production and Distribution - These are the parts that are replaced after the purchase of a vehicle. Air filters, oil filters and replacement lights are examples of products from this area of the sector.
Rubber Fabrication - This includes everything from tires, hoses, belts, etc.
A significant portion of Toyota's revenue comes from the services it offers with the new vehicle. Offering lower financial rates than financial institutions, the car company makes a profit on financing. Extended warranties also factor into the bottom line. Greater emphasis on leasing has also helped increase revenues.
Barriers to entry
Threat of substitute products
Degree of rivalry
Bargaining power of suppliers - The bargaining power of suppliers is low. There are various types of suppliers in the vehicles industry, including the cooling system, electrical system, braking system and fuel supply system distributed across the globe. However, most vehicle manufactures like Toyota own many interchangeable suppliers, and also have the ability to produce the components by their own in the short time. Thus, the suppliers do not own the power to change the price. Bargaining power of buyers - The Bargaining power of buyers is high. Today, buyers have a lot of information channel, such as the internet, where can easily find the proper vehicle and, the preferences of the private consumers are important to the vehicle corporations. If Toyota increases one type, they can also choose other type or the cheaper one and the vehicle’s buyers can easily find the substitutes, such as walking, and bus. Threat of new entrants - The entrants can not enter to the automotive industry easily, as automobiles are special products that require a large amount of money on the design, electronic functions, and safety issues. And another important issue is the brand loyalty in the car market. Toyota Vehicle always benefits the brand value, and decrease the consumer sensitivity about the price. Rivalry among competitors - The competition in the auto industry is strong. The top eight auto companies have occupy large part of global revenues, and...
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