Porter’s 5-Force Analysis of Toyota
Threat of New Entrants – Low
Entering a car manufacturing market is very costly and risky. The initial capital investment is extremely high, while the competition between the companies is very intense and dominated by the well established companies.
The well-known brand, unshakable market presence in various segments, and large size gives Toyota a competitive advantage over new entrants in the auto manufacturing industry.
Threat of Substitutes – Medium
As the industry trends indicate, the customers still have a solid reliance on the used car market. Considering the fact that economy has not fully recovered, a significant part of the car demand is taken by the used car industry.
With the ability to cut costs more efficiently than its competitors, Toyota has narrowed the price gap between the used cars and its own automobiles. Therefore, compared to its peers, the substitution with the used cars is less of a danger for Toyota.
Rivalry Among the Competitors – High
Considering that the automotive industry represents an oligopoly (especially in United States) the constant competition for the market share and industry dominance is prevalent. Continuously increasing competition is fueled by the higher consumer expectations and anticipation for the lower prices.
Want to know where our essays come from or request removal of an essay? Click here. Although Toyota has rather strong cost cutting strategy, the recent natural disaster has put an additional pressure on Toyota’s costs. Recently, the Detroit Three have been offering higher sales discounts to counter price competition, which puts Toyota under a heavier burden of efficient production and cost cutting strategies. Yet, Toyota remains a leader in the low cost manufacturing, while its production system caused other car-manufacturers to change the way they operate.
Buyer Power – Moderate
The recent trends indicate that the consumers are prone to seek...
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