Toyota Motors

Toyota Motor Introduction Toyota Motor Corporation is one of the world‘s leading automakers, offering a full range of models, from mini vehicles to large trucks. Global sales of its Toyota and Lexus brands, combined with those of Daihatsu and Hino, totaled 6.78 million units in CY2003*. Besides its own 12 plants and 11 manufacturing subsidiaries and affiliates in Japan, Toyota has 45 manufacturing companies in 26 countries/locations, which produce Lexus- and Toyota-brand vehicles and components. As of March 2003, Toyota employs 264,000 people worldwide (on a consolidated basis), and markets vehicles in more than 140 countries. Automotive business, including sales finance, accounts for more than 90% of the company's total sales, which came to a consolidated ¥16.05 trillion in the fiscal year to March 2003. Diversified operations include telecommunications, prefabricated housing and leisure boats.

America American Samoa Australia Bahrain Brunei Darussalam China Fiji Guam Hong Kong, China

Europe India Indonesia Israel Kiribati Kuwait Malaysia Nepal New Caledonia New Zealand Oman

Pakistan Papua New Guinea Philippines

Africa

Asia Saipan Samoa Saudi Arabia Singapore Solomon Islands Sri Lanka Tahiti Taiwan Thailand Tonga United Arab Emirates Vanuatu Viet Nam

Toyota International Portfolio

Avalon

Camry

Tarago

Prius

Passenger Corolla

Avensis

Echo

MR2

Sports Camry Sportivo Corolla Sportivo

Rav 4

4 W/D LandCruiser Prado LandCruiser 100

LandCruiser 78 Hiace

Commercial Coaster

Town Ace

Toyota In Pakistan

Celica

Hilux

Kluger

Indus Motors Indus Motor Company (IMC) is a joint venture between the House of Habib , Toyota Motor Corporation Japan (TMC) , and Toyota Tsusho Corporation Japan (TTC) for assembling, progressive manufacturing and marketing of Toyota vehicles in Pakistan since July 01, 1990. IMC is engaged in sole distributorship of Toyota and Daihatsu Motor Company Ltd. vehicles in Pakistan through its dealership network. The company was incorporated in Pakistan as a public limited company in December 1989 and started commercial production in May 1993. The shares of company are quoted on the stock exchanges of Pakistan. Toyota Motor Corporation and Toyota Tsusho Corporation have 25 % stake in the company equity. The majority shareholder is the House of Habib with 50 % of the equity. IMC's production facilities are located at Port Bin Qasim Industrial Zone near Karachi in an area measuring over 105 acres. Indus Motor company's plant is the only manufacturing site in the world where both Toyota and Daihatsu brands are being manufactured. Heavy investment was made to build its production facilities based on state of art technologies. To ensure highest level of productivity world-renowned Toyota Production Systems are implemented. IMC's Product line includes 6 variants of the newly introduced Toyota Corolla, Toyota Hilux Single Cabin 4x2 and 2 versions of Daihatsu Cuore. Quality Policy WE AS A TEAM AT INDUS MOTOR ARE COMMITTED TO FOCUS ALL OUR ACTIVITIES LEADING TO: • MANUFACTURING HIGH QUALITY PRODUCTS. • CUSTOMER SATISFACTION. • SERVICE TO SOCIETY. • MAINTAIN MARKET LEADERSHIP. Environmental Policy WE AS A TEAM AT INDUS MOTOR ARE COMMITTED TO CONTINUOUSLY IMPROVE OUR ENVIRONMENTAL MANAGEMENT SYSTEM TO: • IDENTIFY AND AVOID/MITIGATE THOSE ENVIRONMENTAL ASPECTS WHICH HAVE NEGATIVE ENVIRONMENTAL IMPACTS. • COMPLY WITH ALL APPLICABLE LEGAL, REGULATORY AND OTHER REQUIREMENTS. • ASSIST SOCIETY BY MAKING THE ENVIRONMENT MORE FRIENDLY.

Marketing A social and managerial process whereby individual and groups obtain what they need and want through creating and exchanging products and values with others. Marketing starts long before the company had a product. Marketing continues throughout the product life trying to find new customers and satisfying the current customers by improving products appeal and performance, learning from product sales results, and managing repeat performance. In case of Toyota producing the automobile industry manufacturing the cars for the Pakistan market for the last many years, with the consideration of needs, wants and demands from the customers. Today every human being need a car in order to fulfill the need of transportation. But this need varies in different terms. Some of the customers buy a car in order to fulfill the basic need of traveling while some customers buy a car in order to fulfill the social need, or may be some other buy a new car for the status symbol. So this different types of buying of consumers reflects what customer actual needs, and what he want and what he demands. Toyota in Pakistan study the customer need in depth to actually understand what the majority of customers demands. Toyota according to the different segments manufacture the different products

OBJECTIVES OF THE COMPANY To be the market leader and satisfy the requirements of its customers, the company has set certain objectives. These are: 1. 2. 3. 4.

Improve Quality Enhance Efficiency Minimize Cost Increase Productivity

Over the previous years, the company has put in its best efforts to manufacture quality cars designed for its customers. To improve their efficiency, the company gives great importance to its human resource as the company believes that satisfied and quality conscious team can produced quality products. The company is using the philosophy of Kaizen for continuous improvement. It has become a way of life for the management of the company by doing these efforts towards their objectives.

Indus Motor Business Portfolio BUSINESS PORTFOLIO: “The collection of businesses and products that makeup the company. “ Business portfolio of Indus motors includes •

Corolla

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HiLux

•

Cuore

•

CBU Unit (completely built up unit)

Corolla, HiLux and cuore are manufacturing in Pakistan, 65% of the car manufactured in Pakistan which includes body and other parts except the engine which is being imported from Japan Known as CKD (completely knocked down) Engine.

Portfolio Analysis: “A tool by which management identifies and evaluates the various businesses that makes up the company.” Techniques or Tools for the Portfolio Analysis: There are two different techniques used for the portfolio analysis: •

Boston Consulting Group Matrix

BCG Approach

•

General Electric Matrix

GE Approach

The Boston Consulting Group Matrix (BCG Matrix) is the best-known portfolio planning framework. The GE / McKinsey Matrix is a later and more advanced form of the BCG. Matrix BCG matrix is a tool that can be used to determine what priorities should be given in the product portfolio of a business unit. The GE / General Electric / McKinsey matrix is a model to perform a business portfolio analysis on the Strategic Business Units of a corporation.

TOYOTA COROLLA BCG MATRIX

STAR 2.0D 2.0D Saloon

CASH COWS SE Saloon GLi

QUESTION MARK Xli 1.3

DOGS

The McKinsey / General Electric Matrix The GE / McKinsey Matrix is more sophisticated than the BCG Matrix in three aspects: 1. Market (Industry) attractiveness replaces market growth as the dimension of industry attractiveness. Market Attractiveness includes a broader range of factors other than just the market growth rate that can determine the attractiveness of an industry / market. Compare also: Porter's Five Competitive Forces model 2. Competitive strength replaces market share as the dimension by which the competitive position of each SBU is assessed. Competitive strength likewise includes a broader range of factors other than just the market share that can determine the competitive strength of a Strategic Business Unit. 3. Finally the GE / McKinsey Matrix works with a 3*3 grid, while the BCG Matrix has only 2*2. This also allows for more sophistication.

Typical factors that affect Market Attractiveness: - Market size - Market growth rate - Market profitability - Pricing trends - Competitive intensity / rivalry - Overall risk of returns in the industry - Opportunity to differentiate products and services - Demand variability - Segmentation - Distribution structure

GROWTH STRATEGIES

Typical factors that affect Competitive Strength of a Strategic Business Unit: - Strength of assets and competencies - Relative brand strength - Market share - Market share growth - Customer loyalty - Relative cost position (cost structure compared with competitors) - Relative profit margins (compared to competitors) - Distribution strength and production capacity - Record of technological or other innovation - Access to financial and other investment resources

MARKET PENETRATION PRODUCT DEVELOPMENT

MICRO AND MACRO ENVIRONMENTS Macro Environment The larger societal forces that affect the microenvironment- demographic, economic, natural, technological, political, and cultural forces. These factors represent constraints within which all organizations including the automobile industry must function. The various components of general environment are: 1. Political 2. Economic 3. Demographics 4. Cultural 5. Technological 1. Political Factors Government at all levels is an important component of the general environment no organization or industry is immune from the various decisions made by the government. The Pakistan, Government’s in consistent policies, frequent change in duty tariff and smuggling are main reasons of unstable market conduction. Like other motor companies Toyota is also affected by the current changing policies of the government. Previously the automobile industry had to cope with more than 77000 yellow cabs that were imported during the yellow cabs scheme and was later turned lose to the market after a change of government and the policy scrapped. In 1995, all the previous taxes and duties were rolled into one import duty of 30 percent on CKD kits as well as CBU vehicles. In 1996 the sales tax on CBU was increased cost to 18 percent. In 1997 the ministry of industries and production recommended that duty on CKD be reduced form 40 percent to 35 percent while the car sales should be exempted from CVT and the deletion programme should be accelerated. Just a few days back the general sales tax has been increased to 15 percent promoting more price like. So there is going to be a Rs.20000 increase in vehicles. 2. Economic Forces Government economic policies at the federal level clearly influence the ability of the industries to survive and progress. Inflation is a major economic factor which has affected the Pakistan. Automobile industry including Toyota. The current inflation rate is 21% to 23% annually prices in the auto market were deregulated in 2000 and

grew almost 20 percent to 30 percent per annum to allow Toyota to bring their prices to profitable levels. After three years of “Still Market”, the market picked up. The recent increase of 15 percent sale tax is however, going to result in a price increase. 3. Demographics Forces Society holds a global or summary belief that an organization is proper and worthy of support. Toyota takes pride in being the most trusted name all over Pakistan. Its vehicles are regarded as a status symbol. It is the guiding principles of Toyota which has strongly developed trust in the people. 4. Cultural Factors Toyota respects the culture and customs of every nation and community and contributes to the economic and social development through corporate activities in the communities. Toyota believes in honouring the language and spirit of the law of every nation and undertake open and fair corporate activities to be a good corporate citizen of the world. This is the reason that Toyota is proud of the fact that Pakistani society considers Toyota vehicles to be a symbol of reliability, comfort, luxury and a have to be trusted. 5. Technological Forces Technology is of particular importance because it has been and continues to be the main source of increases in productivity. Despite changes in the means used to motivate people and the variety of incentives that have been offered to stimulated production, the resulting increase has been negligible when compared to that of created by technology. The locally produced Toyota Corolla introduced in May 1993 is now in its 11 th year. Its excellent quality, low maintenance cost and high resale value has won it the support and loyalty of its customers. Product diversification and a wide range of colours has allowed customers to exercise greater options and has sustained this threat. The total company’s product range comprises of 8 variants of Corolla and 5 variants Hilux. As a result of the “Safety First” commitment; for the first time in Pakistan SRS “Secondary Restrain System” Airbags have been introduced in the GLI Automatic and GLI manual models, side impact bars which protect vehicles for side collisions have however been routinely fitted in all Corolla variants since inception. The process of making a car more durable includes “Pitospaate Primer”, total immersion in a catholic Electro-deposit primer, which assures long term anti corrosion and an extra thick colour coat that is better than all others, ensuring that “New Car” look “New” for years to come.

MICRO ENVIRONMENT

The Micro environment consists of those components of the macro environment which are directly relevant to an individual’s organization. An organization’s micro environment includes 1. Customers 2. Suppliers 3. Internal Public 4. Competitors 5. Intermediaries The boundary between an organization’s Macro and Micro environment should not be viewed as static. Changes in the former will inevitably redefine the latter. The various components of micro environment for Toyota have direct influence on its performance. Moreover components of Toyota’s micro environment are also related to its macro environment. 1.

CUSTOMERS Toyota aims at developing loyal customers relationship. For this reappoint tries its best to understand who its buyers are and what are their needs. It tries to listen to its customers, realizing that they may be their best collaborators. Customers feedback drive their product development. To be the market leader and satisfy the requirements of its customers, the company has set certain objectives. These are a) Improve Quality b) Enhance Efficiency c) Minimize Cost d) Increase Productivity Over the previous years the company has put in its best efforts to manufacture quality cars designed for its customers. In Pakistan, more and more people want to experience the unique pleasure of motoring. Exhaustive, in-depth research and consumer surveys conducted over the past years revealed trends of customers and the environmental factors relating to use.

Toyota’s Marketing Policy Toyota’s slogan “Reliability n Motion” represents its emphasis son strong trustworthy and life-long automobiles. It has many brand loyal customers and is considered as market leader. In Pakistan, it has aimed at various segments with their variety of models in Toyota Corolla, so customers in every segments can be satisfied. Different classes of Toyota Corolla introduced in Pakistan are; Model Description

Segments

SE Saloon 1600 cc GLi 1300cc Xli 1300cc 2.0D / 2.0D Saloon

Industrialists, Well established Businessman, Professionals. Businessman, Top Level Mgt. of multinationals, Professionals, Government High Officials. Middle-level Executives, Government Departments & Organizations, Professionals, Armed Forces. Professionals, Business Executives who are fuel cost conscious.

Toyota has got an effective Nationwide dealer network comprising of 25 dealers at Karachi, Lahore, Faisalabad, Mirpur, Islamabad, Peshawar, Sialkot, DI Khan, Multan, Quetta and Larkana. This spread of network shows not how Toyota is sincerely busy in developing a company’s customer relationship and winning the hearts of brand loyal as well as attracting potential customers. 2.

SUPPLIERS Suppliers constitute a second component in a typical organization’s micro environment. Toyota has to respond not only to the customers they supply, but also to the sources from which they receive supplies. Suppliers are given importance and respect by Toyota. It continuously aims at developing a strong relationship with its suppliers. This is done to ensure that Toyota suppliers provide quality materials which is the most important factor for Toyota vehicles. Japan, is the major supplier of CBU or completely built up vehicles. Also CKD kits or completely Knocked down Kits are supplied from Japan. CKD kits mainly comprise of the engine of vehicles. The vehicles which are assembled in Pakistan comprise of 65% locally manufactured parts. Toyota Indus aims for good relations with both the local and foreign suppliers. “To achieve maximum level of customer’s satisfaction” is Toyota’s mission. This can be proved by the fact that dealership is authorized to these selective people who offer 3 S’s. That is sales, services, spare parts. This is done to ensure convenience for its customers. They are offering the following services to cater to the needs of their customers: a) One year free servicing from any Toyota service center all over Pakistan. b) Free checkup camps are set annually. c) Spare parts easily available all over Pakistan. d) The dealership network comprises of seventeen dealerships all offering sales, services and spares. e) The customer retention department at the dealerships is also improved and consolidated periodically. The company believes on the fact that favorable supplier relations lead to improve quality, better shipping arrangements early warming of major price changes and

advance information about technological or marketplace developments. So, the aim is to develop friendly, professional relations with suppliers in which both will profit. 3.

Internal Public It is the action, of employees by which a company’s objectives are accomplished. In order to achieve its goals and objectives Toyota makes sure that highly competent and skilled people are employed. Emphases is laid to ensure that the person being hired meet the criterion for the respective departments. Training is an integral part in Toyota’s various departments. Training was intensified and various courses were conducted through the previous year. Technicians at the dealers’ service departments underwent extensive by IMC service departments to improve their skills. Moreover, periodic training of managers is also conducted. This include training camps, short course conducted in various well-known universities, training programs conducted abroad and lectures of foreign exports.

4.

COMPETITORS Market competition is the cornerstone of managerial capitalism. The five forces that shape the degree of market competition operating within an organization’s micro environment are a) Rivalry among existing organization. b) Relative power of customers. c) Relative power of suppliers. d) Threat of new entrants. e) Threat of new substitutes. Presently Toyota is proud to have the most market share. Honda stands second followed by Suzuki and Nissan. Since its start it was only in 95-96 that Honda managed to sale 200 more units of vehicles than Toyota. Still, Toyota is proud to be in a strong position. However to the spirit of competition is strong and this has lead Toyota to continuously try to improve itself, at all levels. Continuous emphasis is laid on to attract more customers, maintains healthy relations with its suppliers and makes efforts to improve technology. Careful strategic planning at al levels has enabled Toyota to achieve the highest market share and have an edge over other automobile companies.

5.

Intermediaries

Banks, Leasing companies and car agents are some of the intermediaries for Toyota. These intermediaries basically giving the boost to the sales of Toyota, by offering the cars to the consumers, in easy installments and making the cars affordable for the customers to the higher extent.

Marketing Research

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Primary research Survey Research SACB (Sales Activity Control Board) Experimental Research Experimental Drive of HiLux Experiments on SRS Bag for safety purposes Research Instruments Questionnaires

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Secondary Research

SWOT ANALYSIS In formulating sound strategic plans, an organization must assess its internal strengths and weaknesses in relation to the external opportunities and threats it faces. An effective strategy will take advantage of an organizations strengths and opportunities at the same time it minimizes or overcomes weaknesses and threats. Regular assessment and SWOT analysis is thus given importance. STRENGTHS 1. Toyota has become the generic name in the Pakistan market. Whenever the company launches the new car in the market it has always the great support of the already market orientation so the car introduced by it easily covers the introduction stage. People have a lot of trust for their name and this is why Toyota is the leader in automobile industry. 2. Toyota has a great strength for its 2.OD car, Toyota is the hot selling diesel engine car in Pakistan and is the only company offering the diesel engine in this category of cars. 3.

The important edge over the company editors are the ample availability of the spare parts in the markets. The price of spare parts is comparatively low and availability all over the country has proved to be beneficial for the company.

4.

Toyota is a financially strong company. This can be seen by analysis of the financial reports of the previous years.

5.

Toyota vehicles have got a much stronger resale value than other car in Pakistan. This is why people prefer to buy a Toyota.

6.

Toyota vehicles are made according to the Pakistani environment. No doubt the other cars are available but Toyota has an edge because it has learnt

various conditions of the Pakistan environment and people. So new additions and changes are proving to be successful. 7.

Toyota has an edge over others because it is the only automobile company in Pakistan, while offers many variants of its vehicles. Also Toyota offered many variants of colors.

8.

Toyota is proud to have a successful team of competent managers and skilled workers. Extensive training have enabled the employees to perform outstandingly.

9.

Toyota is the only company having the most sophisticated network of dealerships where customers are treated by professional dealers. There are seventeen dealers in Pakistan where sales, service and spare parts are offered, leading to convenience for the customers.

WEAKNESSES 1. There is some weakness in the case of ergonomic interior of Toyota corolla as well. The power steering is not speed sensitive and the air conditioning system in severe heat is in-effective. Interior dimensions are less and heavy body and small engine sometimes create problems in hilly areas. 2.

There are some weaknesses in the dealership network. The dealers sometimes tend to deviate from the recommended course of action and principles of Toyota. This results in customers complaints sometimes.

3.

The company is besieged with internal operating problems which are not very serious. Because of dependency on Toyota’s principles delivery of cars is done after 4-6 months. This is because CKD kits are ordered four months before and once they arrive from Japan, assembly and delivery takes some more time.

4.

A lot of effort is pull into the sales forecasting because of the changing political and economic scenarios. For this reasons inventory has to be kept low.

5.

The company feels that one weakness is the changing policies of the government and also the 30% cash L/c margin. This has lead to an adverse environment.

OPPORTUNITIES 1. Export is a major opportunity for Toyota Indus Motors. Vehicles were exported to Bangladesh just once in order to prove the plant capacity and efficiency of the company. This should be started again.

2.

The contract with the government departments e.g. Motorway Police, Shaheen Force and the digniteries where corolla has an opportunity to deal with the business markets along with dealing in consumer markets.

3.

Toyota can do better by focusing on segments much more than presently being done.

4.

Toyota should also try to lower its price of Corolla in the segment where Honda city has penetrated.

5.

It can offer discounts to Government departments and large organizations on purchase of its vehicles in more quantities.

6.

Success of the manufacturing of Daihatsu coure is a major opportunity for Toyota to excel further careful planning and the right time to launch the new car can prove to be a success.

THREATS 1. Even though Toyota enjoys the position of being the no.1 automobile company, still it faces some threat from competitors especially Honda. Honda has adopted aggressive strategies for capturing the market. 2.

Even though Toyota keeps a careful eye on the changing trends, still the changing customer needs and trends can prove to be a threat.

3.

A major threat is the changing political and economic scenarios of Pakistan. Changing government policies affect the company’s performance. Devaluation of rupee adverse shifts in foreign exchange rates, trade policies of government’s is a threat. Moreover the company is threatened by the ongoing rate of 30% cash L/c margin.

4.

Import of re-conditioned cars is also considered as a threat for the company.

5.

The planned car manufacturing plants of Hyundai and Daewoo can prove to be tough competition for Toyota if they are successful.