Toyota the Launch of Aygo

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1) What is competition like in the minicar segment of the European automobile industry? What do we learn about the nature and strength of the competitive pressures Toyota Motor Europe faces from doing a five-forces analysis?

Toyota Motor Corporation is one of the biggest car manufacturers in the world. From 2000 to 2005 the sales units have increased from 2.5 million to 7.97 million. With 35 percent of the total market capitalization in the automobile industry, the Japanese firm is becoming more than a serious competitor for General Motor which is the world largest car manufacturer. In spite of this excellent situation, Toyota is still developing his firm around the world by setting ambitious goal such as “to reach 15 percent global share in 2010”. Developing in Europe is one of Toyota strategy to meet this goal. The brand has launched a first European car, the Toyota “Yaris” which was such a success that the company decided to repeat the experience but in the minicar automobile segment. This segment exists for a long time in Europe. Nevertheless it became popular only for few years. Several factors such as economic uncertainty, high unemployment and increasingly high fuel prices have boosted this segment in Europe. Today the big automobile brands are fighting to gain market shares and increase their sales in this specific segment.

To know how the competition is in this segment and to learn about the nature and strength of the competitive pressures TME faces we have to do a five-forces analysis.

Rivalry among competing sellers

The minicar segment is a fragmented industry and price competition is likely to be severe. The rivalry is intense because of the number of competitors in this segment. Fiat, Hyundai, Renault, Nissan, MCC, Volkswagen, Audi, BMW, Peugeot and Citroen are all big brands competing on this segment. The rivalry is intensifying year after year because of the increasing number of competitors entering in this segment and because they are becoming more equal in size and capability. The rivalry is also intense because every competitor have launched their own minicars and everyone is racing to differentiate their product from rivals by offering better performance features, higher quality, more resistant product or green issues products. Thus, the minicar segment is a competitive battlefield in which the competitors are prone to employ whatever weapons they have to improve their market positions and improve their profitability. All the competitors develop strategies to gain competitive advantages over rivals. We can add also that this segment is competitive because when a competitor makes a strategic move or launch a new product that produces good results, its rivals respond immediately with offensive or defensive countermoves. For all those reasons, we can say that the competitive pressures associated with the market maneuvering and jockeying for buyer patronage that goes among rival sellers in the industry are strong.

Threat of new entrants

The first thing to say is that a lot of existing automobile firms have the means and ample resources to become strong competitor in this minicar segments or in Europe. Nevertheless the minicar segment is considered as nearly saturated and as a difficult market because of the low prices which provide low margins. Big brands, such as Mercedes-Benz, who tried to enter this market, have recorded big losses. Some others have met big difficulties in profitability and never reached sales target. For instance, even if the Toyota Lexus satisfied European customers, its sales were below the expectations. Another example of the difficulty to success in this segment is the difficulty of big Japanese manufacturers, such as Honda, Mazda, Suzuki..., to increase their unit sold and market share over the years. Besides, some of them have seen their unit sold and market share decreasing since 2000. Moreover, when an automobile firm enter this segment costs are high to launch a...
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