Topics: Toyota, Strategic management, Hybrid electric vehicle Pages: 35 (8916 words) Published: February 15, 2011
Critically evaluate Toyota’s strategic development since the 1980’s using the suitability, feasibility and acceptability criteria. Pay particular attention to the most strategic developments.

After 71 years since its foundation Toyota Motor is one of the leading car manufacturers in the world, having overtaken GM and Ford in terms of production volume in 2007 (OICA,2008). Toyota has in fact successfully penetrated global markets and established a world-wide presence by exploiting its productivity, its highly synergistic performances as well its policies in supply chain.

Since its starts Toyota has always pursued an aggressive cost leadership strategy, which has allowed a small company to sustain competitive advantage against large competitors.

Toyota’s seed of success can be traced back to the second post world-war when the company started to experiment new ways to improve production, reduce costs and increase quality.

Clearly the automotive industry is an industry where economies of scale and scope are fundamental therefore volumes of sales are important to reduce unit costs. The problem with Toyota was that it was a small company competing with large competitors. Is in this situation that Toyota started to build and create basis for competition. Toyota found new flexible production methods to achieve mass production efficiencies with small production volumes.

The Toyota Production System which is a pillar of the “Toyota Way” has enabled Toyota to become the largest car manufacturer in 2007 (Reed, 2008). The company’s meticulous attention to details and to eliminate inconsistencies and waste at each stage of production was an important step in cost reduction. Toyota is in fact able to reduce lead time cost while improving quality. Particularly relevant to their cost leadership strategy JIT inventory and the pull system allowed the company to improve returns on investments by reducing inventories and producing only the required amount, avoiding overproduction.

Thanks to its unique resources and core competences of the highly skilled team of engineers and the strong vision of its founder Toyota was able to exploit its leadership in low-cost, taking also advantage of the favourable microenvironment (oil shock) and successfully penetrate the US and the European markets, following what Bowman what describe as a low-price route. The improved quality and reliability of Toyota’s cars allowed the company to further advance its position in the late 1980’s to when perception of their cars changed to that as being even more reliable and of better quality of their European and American counterpart available though at lower price than competitors’ offerings.

• 1980’s Toyota entrance in the luxury market segment

In 1980’s Toyota shifted their attention to luxury automobiles which competed directly against established American and German luxury cars. Toyota started to project the car in early 80’s, conducting market research on both consumer and dealer side in 1985 which resulted in the first Lexus appearance in 1989. (Toyota history: corporate and automotive) Toyota ‘s Lexus model, which stands alone from the rest of the Toyota range was in fact competing against manufacturers such as Jaguar and Mercedes.

Toyota’s move to penetrate the new up-scale market segment was suitable as it addressed the lagging luxury sales in that period. Both Lincoln and Cadillac had both fallen; Lincoln was relegated to the limousine and car service trade, and Cadillac had destroyed its reputation with the 4-6-8 engine. (Toyota history: corporate and automotive). On the other hand Mercedes' quality was fairly low and Audi was suffering from the "unintended acceleration[1]" fiasco (Audi History).

It was time for Toyota to create both a luxury car and a luxury brand.

From a marketing standpoint it was also suitable as Steve Sturm, group vice president of Toyota North America, noted ; Toyota was introduced in 60’s and...

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