Strategic Issues At Toyota – A Case Study

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Type of Academic Paper – Case Study

Academic Subject – Management

Word Count – 4500 words


In the contemporary business environment, businesses are continually facing strategic issues that have resulted in either loss of market share and performance, or even liquidation (Freeman, 2010). One of such leading companies is Toyota, which is renowned for being the world’s largest automaker company headquartered in Japan (Hill, Jones and Schilling, 2014).

Even though the company has offered its customers, across the globe, a variety of vehicles, it has surely faced a variety of issues ranging from more car recalls than any of its competitors (Fan, Geddes, and Flory, 2013, p. 101), marketing challenges, pricing strategy, as well as stagnated sales in the home market. Considering all these aspects, the purpose of this study is to evaluate and investigate the overall strategic issues faced by the company, followed by offering a variety of solutions to the business like total quality management, improved marketing activities, competitive advantage based on design and quality, and international expansion.


Toyota, the leading car producer, is amongst the leading automobile companies offering the customers a wide variety of products ranging from mini-sized cars to trucks as well as buses, which are sold in both developing and developed nations (Piotrowski and Guyette Jr, 2010, p. 89).

Considering the overall operations of the business, the company has continually hired hundreds and thousands of employees, even in the financial and economic downturn, where the companies were laying off their permanent and contract-based employees; however, the company overlooked what their competitors were doing and avoided termination of employees based on ethical and cultural values (Connor, 2010).

The company is known for having the strongest car manufacturing facilities, where they have continually believed in offering the customers improved and customised cars that could represent their customers’ lifestyle (Krishnan et al., 2013, p. 417). The multinational company has factories and facilities operating in developing and developed nations and is responsible for assembling and producing vehicles. According to the company’s website, the company has manufacturing facilities located in France, Poland, the United Kingdom, and the Czech Republic (Despeisse, Oates, and Ball, 2013, p. 34). All of these facilities have played an influential role in the success and growth of the business while increasing the overall market share and competitive advantage of the multinational company.

Existing Sources of Competitive Advantage

With respect to competitive advantage, Toyota has implemented a variety of strategies and techniques to increase its overall market share in the industry. For instance, the company’s production process has been argued to be quite strong in comparison to its competitors, which is both efficient and effective in terms of cost (Hesterly and Barney, 2010). Considering this strategy, the company has been able to increase its overall competitive advantage.

More importantly, the business has capitalised upon its cost-saving strength in order to reduce the price of the vehicles offered to the customers in comparison to other competitors operating in the same industry. This implies that the strategy to reduce cost and optimal utilisation of resources has resulted in the creation of a competitive advantage for Toyota (Kindstrom, 2010, p. 486).

Strong cultural advantage has also resulted in the creation of competitive advantage for Toyota. In particular, the devotion of employees in their job, and their desire to improve the company has resulted in the optimal level of performance (Liker and Franz, 2011). Since employees are treated equally and fairly, it has created a legitimate sense of loyalty and respect.

More importantly, the way in which employees value their work is significantly different from American brands, which can even be reflected in the quality of the vehicles offered (Wilhelm and Kohlbacher, 2011, p. 78). As a result of empowering employees, Toyota has ultimately created a strong competitive advantage, which has also encouraged the employees to respect the hierarchical authority that results in quick decision-making and the implementation of the strategic plans in an agile manner.

Strategic Issues at Toyota

Even though Toyota is regarded as the world-leading automobile manufacturer, it has experienced a variety of strategic issues ranging from product recall to marketing issues. Following are some of the most common strategic issues at the multinational company;

Product Recall

In the intensely competitive industry, Toyota has been found to recall more vehicles than any other competitor operating in the same industry, which can even be considered as inappropriate management or lack of interest from the company’s side (Andrews et al., 2011, p. 1071). Even though the company has a reputation to maintain being the largest automobile manufacturer, the lack of ability to assure the quality of products to its customers portrays incompetency of the entire strategic management layer (Liker and Ogden, 2011).

In particular, the company had to recall more than 5.8 million vehicles from both local and international markets due to potentially faulty installation of airbags inflators (Reuters, 2016). The brand recall was primarily due to the pressure from the US authorities, where more than 50% of the airbags installed within the Toyota vehicles were defective.

The brand recalled by Toyota included one of its bestselling models; Corolla, as well as Vitz. As a result of brand recall, the company is in constant financial assistance to pay the huge liabilities associated with the brand recall and has been in meetings with the customers as well as the potential sponsors to discuss the options of survival in the contemporary business environment (Kumar and Schmitz, 2011, p. 244).

From the case of brand recall, it is evident that lack of management’s interest and faulty installation of airbags have become a strategic issue, which can even result in loss of market share and brand image; thus leading to a significant decline in the competitive advantage of the brand against its competitors.

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Marketing Strategies

Marketing has also become a rising concern for multinational companies. Since the company has been continually recalling brands for a variety of issues, the consumers have shifted their attention from the purpose of Toyota over others available in the marketplace (Hurst, 2011).

Considering this, the company’s marketing team has found it extremely difficult to convince the existing and potential consumers to purchase the vehicles (Feng, 2010). Since the company’s brand loyalty has been continually but into question, the company has adopted a variety of marketing strategies, which can be argued to be ineffective in changing the mindset of the consumers.

In particular, the company has embraced a variety of marketing initiatives ranging from traditional television and radio marketing to the hiring of public relations specialists to help the company revamp its strategic position in the automotive industry (Bernstein, 2010). Moreover, the company has continually bought advertisements on search engines available over the internet to change consumers’ mindsets when they use the search engine to look for information related to automobiles.

However, all the strategies have not produced any significant results that the company can call an achievement in the intensely competitive marketplace (Bernstein, 2010); therefore, the overall marketing strategies and techniques can be considered to be ineffective, and the company must focus on effective marketing strategies and tactics to change the overall perception of the brand across the global consumers.

Pricing Strategy

            Over the years, Toyota has pursued a cost leadership strategy for its competitive advantage in the automotive industry (Cusumano, 2010). In particular, the company has remained focused on reducing the costs and its associated elements from its entire operations ranging from suppliers to the logistics and delivery of the final products to the consumers (Kohli and Suri, 2011, p. 569). This is also evident in the case of Europe, where the company has adopted a low-cost leadership strategy to remain ahead of competitors while increasing the brand’s competitive advantage.

However, the low-pricing strategy has become a strategic issue for the company for a variety of reasons. For instance, the low pricing strategy has encouraged the company to purchase low-quality airbags and accelerators, which ultimately resulted in brand recall from across the globe (Hurst, 2011). Though consumers prefer low-cost automotive in the economic uncertainty, they have overlooked the company for the use of sub-standard materials. This has ultimately become a rising concern for the business, which eventually reduced the loyalty and devotion of the consumers with respect to the brands offered by Toyota.

Stagnated Sales

            In the year 2016, the sales of Toyota remained stagnated, and even the management expected the sales to remain flat in the year 2016 at 10.11 million vehicles (Reuters, 2017). Moreover, the recent decision of Britain to leave the European Union further decreased the company’s sales figures resulting in the loss of global sales title to Volkswagen.

In particular, VW sold a total of 5.04 million vehicles in the initial 6 months, whereas the company was only able to sell 5.02 million in the same quarter; however, the company was able to record an outstanding operating revenue and profit. In particular, the company’s net income for the first quarter increased by 10 percent (i.e. $5.27 billion); meanwhile, the revenue increased by 9.3 percent to approximately $56.94 billion (Reuters, 2017).

Despite the stagnating sales, the company was able to increase its profitability, which could be argued as the offset from favourable currency rates. In particular, Yen’s increase in comparison to the US resulted in an increase of the operating income by $1.43 billion (Greimel, 2015); otherwise, the company would have experienced a rapid decline in its operating income (AutoNews, 2016).

The stagnated sales can also be associated with the company’s negative reputation for using sub-standard materials in the vehicles offered, which has ultimately reduced the interest of the customers with respect to purchasing the brand in comparison to other alternatives available in the marketplace.

Industry Related Factors and Toyota

            With respect to the industry, Porter’s Five Force model has been applied as it focuses on depicting the overall effect of the external factors on the company as well as the industry in which the company operates. Following is a brief analysis of the industry factors and their overall effect on the strategic issues of the company;

Competitive Rivalry

            The foremost industry factor relates to the intensity of competition within the industry, where it was found that the automotive companies are aggressive against their competitors with respect to innovation and marketing (Laudon and Laudon, 2011). Moreover, the company has to compete against a variety of firms, which have differentiated their offerings based on quality, fuel efficiency, costs, and other variables. Considering this, the company has been in competition with only a handful of firms, which implies that the company must focus on increasing its competitive advantage by addressing the company-related strategic issues (Zapata and Nieuwenhuis, 2010), which could help in improving its overall strategic position in the industry.

Bargaining Power of Customers

            The customers of the company have a direct impact on the revenues of the business. This aspect of the model focuses on determining the influence of buyers on the overall business. In this regard, it can be stated that the company’s consumers can easily switch from Toyota to any other firm competing in the automotive industry with no additional costs with respect to the purchase of new cars.

Since a variety of substitutes are available in the marketplace and consumers have access to information through the internet, the consumers can easily determine the vehicle that they want to purchase (Cole, 2011, p. 29). In this regard, Toyota has differentiated its products based on convenience and price factors, which has resulted in making the brand quite prominent across the globe (Danes and Lindsey-Mullikin, 2012, p. 296). However, the company must continually remain focused on ensuring that the vehicles are in accordance with the expectation and preferences of the customers across the globe.

Bargaining Power of Suppliers

            The availability of suppliers and their overall ability to provide the company with the required materials can have a significant impact on the performance of the business. In the case of Toyota, it is evident that the company has a vast number of suppliers to work with based on the global reputation of the business (Marksberry, 2012, p. 281). Since the company has the available supply that is used in the manufacturing of products, it has significantly reduced the bargaining power of the suppliers.

Moreover, the suppliers of the business do not have much impact on the business as factors like forwarding integration or ownership are rarely to be seen in the suppliers operating in the global automotive industry (Matsuo, 2015). Considering this, the overall impact of the bargaining power of the suppliers, in the case of Toyota, is moderate.

Threat of Substitutes

            In the majority of the cases, customers have a wide variety of options with respect to substitutes available in the marketplace. Considering this, the substitutes available for Toyota include public transportation and bicycles; however, their availability in the sub-urban areas has created a superior demand for Toyota based on price and convenience factors (Litman, 2014). Since the company has differentiated its products based on the aforementioned factors, customers can readily purchase from a variety of vehicles offered by the company; thus reducing the overall impact of this factor on the performance of the company. However, the company must readily address the threat of substitutes by making its products more durable, convenient, and affordable for the customers (Litman, 2014).

Threat of New Entrants

Since the company operates in the automotive industry, the threat of new entrants has significantly decreased as the costs associated with establishing, maintaining, and growing are significantly higher (Cusumano, 2011). Moreover, the new entrants are required to follow the industry standards, which further reduce the threat to a significant extent. Considering this, the overall threat of new entrants in the case of Toyota is significantly low.

Solutions for Strategic Issues

From the aforementioned discussion, it is evident that the company i.e. Toyota, has faced a series of strategic issues, which have resulted in the loss of competitive advantage and reputation of the business in the intensely competitive business environment. For instance, the company had to recall millions of its vehicles based on defective airbags installed, which ultimately resulted in the loss of loyal customers. Considering the strategic issues discussed earlier, the following are some of the most important solutions that the business could take into consideration to revamp its overall image and competitive advantage in the contemporary business environment;

Total Quality Management

Total Quality Management (TQM) has always remained the foremost priority of Toyota in the automotive industry throughout its 75-years history and has been widely appreciated for its lean production system. However, the recent product recall indicates that the company is somewhat lacking in ensuring the quality of the products that are available in the marketplace.

Considering this, the company must reintegrate and re-evaluate its total quality management approach with respect to continuous improvement and total participation, where the employees must be encouraged to share their opinions and feedback regarding the strategies that could be undertaken by the company to reduce the quality issues (Anvari, Ismail, and Hojatti, 2011).

Moreover, the company is also recommended to implement an emergency protocol with respect to brand recall. Since the company has recalled more than millions of its vehicles, the company failed to set a predefined procedure that ultimately resulted in inconvenience for the customers as well as the management. The convenience factor could also help the company to regain the lost trust of customers while helping them to understand that the company is doing its best in ensuring that the vehicles offered to them are safe and in accordance with their preferences and requirements (Zink, 2012).

The re-evaluation of the total quality management and lean management would allow the company to improve its overall operations while reducing the level of defects in the vehicles offered to the customers. This could further help the business in changing the mindset of the customers with respect to the recent product recall. Moreover, it could also help the business to regain the trust of the customers, which could result in improved performance and profitability; thus increasing its overall competitive advantage in the automotive industry.

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Improved Marketing Activities

The company has been using traditional marketing activities and initiatives being the largest automotive company across the globe; however, the use of traditional marketing activities can be considered to be ineffective with respect to the stagnant sales (Shirouzu, 2010). Considering this, the company must consider modern means of advertising i.e. the use of social networking platforms to increase customer awareness about the low-cost vehicles offered by the business.

For instance, the company can capitalise upon its resources with respect to the use of Facebook and Instagram. Since social networking websites has become the priority for millennial, the use of both the aforementioned platforms can help the business in influencing them to purchase the vehicles in accordance with their needs and demands (Berthon et al., 2012).

Moreover, the use of social networking platforms would allow the business to reach global customers, which implies that it could not only be used for marketing purposes but can also be used by the company to ensure that the customers remain updated about the newly introduced products and services offered by the business.

Moreover, social networking platforms can also be used for brand recall. Since the company has continually been recalling their brands in the international marketplace, the social networking websites can help the business to publically apologise for the inconvenience and could inform where the customers could take their cars for maintenance (Weinberg and Pehlivan, 2011, p. 278).

This could help in regaining the trust of the customers while influencing them to purchase the brands more frequently in comparison to others available in the marketplace. More importantly, the social networking platforms could become the foremost priority of the business based on the fact that advertising through social networking platforms is cost-efficient, and has a global reach; thus resulting in increased sales and profitability of the business.

Improved Design and Quality

Design and Quality, though, have remained the foremost area of interest in the case of Toyota; the company must also focus on increasing the environmental performance of its vehicles, which implies that the company must focus on highly fuel-efficient engines that are in accordance with the corporate social responsibility standards (Rutledge, Xu, and Simpson, 2010).

Considering this, the company must leverage its position in the market for improving the fuel efficiency improvements over the vehicles offered by the competitors. Since the customers are more interested in purchasing vehicles that are fuel-efficient and offer superior quality, Toyota can capitalise on its years of experience in this matter resulting in improved brand reputation and loyalty amongst the customers.

The company can further improve the design and quality of its vehicles by employing Atkinson Cycle in its engines, which could result in the reduction of waste heat and increased expansion ratio; thus resulting in superior thermal efficiency. Moreover, the company can further improve the overall fuel efficiency in the vehicles through the use of Variable Valve Timing-intelligent Electric technology (VVT-iE), which could help in improving the combustion, while reducing the loss (Siczek, 2016).

Moreover, the company must ensure that the vehicles are eco-friendly; otherwise, customers might overlook the vehicles offered by the company, which is evident from the case of Volkswagen, where the customers banned the purchase of the vehicles based on the fact that it had negative environmental footprints (Hu et al., 2012). Taking this into consideration, the company can increase its competitive advantage by focusing on eco-friendly designs and superior fuel efficiency.         

International Expansion

Over the years, the company has expanded its manufacturing facilities in developed nations, which has helped in satisfying the demands and requirements of the customers in the most effective manner. Considering this, the company can expand internationally by focusing on the development of manufacturing facilities in India. India is amongst the most developing nations in the Asian region, and the direct presence of the company would present the business with an opportunity to better meet the demands and requirements of the customers in the most profitable manner (Arnold et al., 2016, p. 22).

This would also help the business in improving its sales based on its years of experience in the automotive industry. Since the customers in India are price-sensitive, the presence of the brand would increase Toyota’s appeal in the region, and the company would be in a better position to meet the external demands as the labour in India is relatively cheaper than in developed nations. This implies that international expansion of the business can also help the business to revamp its stagnated sales while allowing the business an opportunity to increase its overall competitive advantage.


Toyota follows a low-cost pricing strategy and has focused on the cost-leadership generic strategy for the attainment of competitive advantage against its rivals in the automotive industry. Considering this, the company has successfully developed a loyal customer base; however, the recent brand recall has become problematic for the business and its overall competitive advantage (Yan, 2010, p. 515).

Considering this, it would be recommended for the business to focus on changing its pricing strategy, which could provide the business with sufficient capital to work on its defects and issues in the existing models offered to the customers. In particular, it would be recommended to use a competitive pricing strategy, where the price of the vehicles should be in accordance with its fiercest rivals.

Since the company has a loyal customer base and years of experience in the industry, customers are more interested in the purchase of vehicles based on the convenience and quality of the products (Yan, 2010, p. 515). Therefore, the company is in the perfect situation to change its pricing strategy in the contemporary business environment.

The change of pricing strategy from low-cost to competitive pricing would help the business with its focus on continuous improvement and superior quality vehicles. More importantly, it could help the business in increasing its profitability and revenues generated from the sales of vehicles across the globe (Hinterhurber and Liozu, 2012).

Though the change in pricing strategy can influence the immediate sales of the vehicles, it would help the company to improve its sales in the forthcoming years as the majority of the companies that Toyota competes with, have relied on either premium pricing strategy or competitive pricing strategy; thus the change in the pricing strategy could help the business to be at par with the closest rivals.


Conclusively, Toyota is amongst the world’s leading vehicle producers across the globe, with manufacturing facilities in both developed and developing nations. The company offers a wide range of vehicles, where the priority remains of the convenience and accessibility of the vehicle to the consumers. However, the company has faced a series of strategic challenges resulting in the loss of business profitability and sales.

The most prominent challenges faced by the company included; brand recall, marketing challenges, pricing strategy, and stagnated sales in the home market. Through the analysis, it was found that the company has 75 years of experience in the industry, yet the company had to recall millions of its vehicles based on the quality of material used within the vehicles.

Considering this, it was proposed that the company must focus on re-evaluating its total quality management practices, and must encourage the employees to share their opinions and feedbacks while developing an emergency protocol for its brand recall. This would allow the business to improve its standards, which could help in convincing the customers that the vehicles are safe and convenient for their usage.

Moreover, the company failed to address the issue effectively through its marketing initiatives. For instance, the company used traditional television and radio advertisement for convincing the customers to purchase the vehicles, yet the company saw stagnated sales across the globe. With respect to marketing initiatives, the company also hired public relations specialists, but it failed to change the perception of the customers with respect to the automobiles offered by the company.

In this regard, the company was recommended to consider the use of social networking platforms to reach global customers without bearing the extra cost. The use of social networking platforms like Facebook and Twitter can also help the company in creating awareness related to the newly introduced vehicles, which could ultimately result in improved performance of the business.

Pricing has also become a strategic issue for the business. The company has focused on the use of cost-leadership strategy, which has offered the business a competitive advantage over its rivals in the automotive industry; however, the changing business environment has presented a series of strategic issues for the company with respect to its pricing strategy.

With respect to the pricing strategy, the company was presented with a solution of changing its pricing strategy from low-cost to competitive pricing as it would present the company with an opportunity to increase its level of revenue generated from the sales of the vehicles, and would offer the company with an ability to improve its overall quality and design of the products offered in the automotive industry.


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