STRATEGIC MANAGEMENT FOR TOYOTA - Essay Example

?STRATEGIC MANAGEMENT FOR TOYOTA Overview In line with the need for Toyota Corporation to have a workable strategic management option for the runningof its competitive trade, this paper is prepared to suggest a suitable option for the company. The selection of the strategic management option is based on a number of factors, most of which are based on the company’s currently market position in relation to the market position of its competitors. In effect, the strategic management option is being undertaken for the sake of helping the company gain competitive advantage over its key competitors (Pollard, 2009). Pirttimaki (2007) has stressed that even though the annual revenues of Toyota Corporation could be said to be greater than any of its competitors, the company does not lead in all aspects of the industrial competition. This is because the car making industry in itself has several divisions, all of which must be competed for to gain global dominance. Some of these competitive components that the company engages in with its competitors include luxury vehicles, automobiles, commercial vehicles, motorcycles, and engines (Gilad & Gilad, 2008). Generally, the selection of the strategic management option shall be undertaken while critiquing against a specific model to justify why it is the best that the company can have. The model to be used in the critique is made up of three major sections namely suitability, acceptability and feasibility. Under each of the sections, there shall be sub-components against which the strategic option shall be tested with. The model to be used has been simplified below. The Differentiation Strategy The strategic management option selected for Toyota Corporation is the differentiation strategy. On a very broad note, the differentiation strategy can be said to be one that requires companies to manufacture products and services that are different and more attractive from what their competitors offer (Brouard, 2006). To effectively engage in the differentiation strategy, there are three major factors that companies must consider. In the first instance, the need for good research and development (R&D), and innovation has been recommended. This means that the company must be in a position to critically research on its market segment to identify variables within the market that constitute the needs of consumers. As the R&D takes place, it is important to also ensure that there is massive innovation that is directed at the need to meet consumer request and demand with style and flex. This is because as all competitors identifies the needs of consumers, it is he that has innovation with the needs that catches the eye of the consumer most (O’Hara, 2008). Secondly, it is important for companies undertaking the differentiation strategy to have the ability to deliver superior quality products and or services (Gilbane Report 2005). This is indeed a very centralized aspect of the strategy because quality remains a very crucial measure for competitiveness in contemporary global market and for the undertaking of competitive global engagements (Pirttila, 1997). This is because according to Ghoshal & Kim, 2006), the consumer behaviour of most people is changing of cost consciousness to quality consciousness. It would therefore take companies to set their quality apart be gain competitive advantage. Finally, companies that desire to pursue differentiation strategy must be ready to undertake effective sales and marketing. The reason for this is that on a competitive market such as the one that Toyota finds itself in, almost all other competitors also engage in R&D and the delivery of high quality products and services. In effect, it is those who can effectively market and sell their quality and innovative products and services that really get to the customer (Alvesson & Skoldeberg, 2000). Application of the Model to the Differentiation Strategy Suitability Suitability generally refers to the question of whether or not the selected strategic management option is the right one for the company in question. To test for suitability, the question of whether the strategy addresses circumstances in which the organisation, which is Toyota Motor Corporate, operates must be asked. In this sense, it can easily be said that Toyota Motor Corporation is faced with such a type of competition in which innovation remains a driving force in determining success. Particularly for the manufacturing of motor vehicles, there is now a global trend where so much attention is given to the subject of sustainable production, where manufacturers can ensure that their products guarantee environmental friendliness (Hamrefors, 1999). In light of this, the differentiation strategy can be said to be highly suitable in helping the company come up with innovative technologies that can guarantee that its products are well suited to be eco friendly. In line with the investigation of the suitability of the option, it is also important to pose the question of the relation that the option has with the strategic position of the company. Presently, Toyota Motor Corporation can be said to be having a strategic position that places it right at the doorstep of everyday vehicle user (Global Intelligence Alliance, 2004). What this means is that the company is concerned with producing different kinds of vehicles that can meet the economic needs of as many people as possible (Tyson, 2010). Meanwhile, names like Tata Motors and Mitsubishi easily come up as competitors who are also using the same strategic position (Stenmark, 2006). In line with this, the need for Toyota to set itself differentiated from its competitors is particularly important and inevitable. This is because in a situation where the strategic positions are the same, it takes consumers the need to base on the differentiations that are created among products from competitor to make a selection of their preferred companies to do business with (Achterberg, 2001). Acceptability The model in use also makes use of the need to question the acceptability of the option selected by looking at the readiness of the company to adjust to the option given key company profile. The issue of expected performance outcome therefore comes up as a very variable for consideration. On the issue of return, the 2012 operating income of the company was identified to be ?1.320 trillion; out of which a profit of ?962.1 billion was earned (Hannula & Pirttimaki, 2005). In effect, the differentiation strategy must be in a position to guarantee that these values, especially the profit of the company will go up. As of 2012, the total asset of Toyota Motor Corporation was ?35.483 trillion with total equity of ?12.773 trillion. There should therefore be a justification that the differentiation strategy can bring about the needed growth. Rightly said, it can be identified that the differentiation strategy will bring about a new strategic position where the company can target specific group of consumers with customised manufacturing that can guarantee higher unit price of products for an eventual increase revenue and profitability. Stakeholders hold a very important place in the determination of the strategic management option that will work for a given company. This is generally because stakeholders must ensure that their interests are protected in the option that is selected. In terms of stakeholders, shareholders and suppliers are two important parties that can be mentioned. As far as shareholders are concerned, they would consider the option as acceptable if the option can guarantee higher earning on their dividends (Merriam, 2008). This means that the eventual profit that would come from the option must be one that is higher than previous sales. In the case of Toyota, engaging in a differentiation strategy would mean that there will be two major strategic approaches where both the rich and poor can be given major target by manufacturing user specific cars. This way, the quantum sale that the company will make will go up and guarantee the expected dividends for shareholders. On the part of suppliers, they will accept the option if the request for supply of raw material is not outside their domain of supply. This is a point that may pose a little challenge for the differentiation option for Toyota. Feasibility Feasibility of the strategy generally questions the workability of the option. From this knowledge, it would be asked whether the strategy can be made to work in practice. Quite interesting, there are competitors like BMW who have set out differentiations with car manufacturing inventions that were hardly thought to be feasible. A typical example of this is the BMW i3 which is a very typical electronic car that is powered by electric power. Such inventions are motivations to Toyota that other forms of differentiations that target the high class in society are feasible. But the real issue with workability rests with the company’s human resource and ability for the company to ensure that they have the best of team of innovative and intrinsically motivated engineers. As far as employees are concerned, they are expected to play two major roles to make the differentiation option feasible. First, they are expected to have the ability to visualise or innovate (Klemp, 2008). Secondly, they must be in a position to turn their dreams into materiality or being initiative. Once this can be guaranteed, there will be no fear on the feasibility of differentiation plans. Having noted the role of employees to produce innovative products, the question of link to strategic capability also comes in to discussion. Ideally, the strategic capacity of the company must be in a position to contain the differentiations that the company wants to create. One of the areas of strategic capabilities that usually act as a determining factor as to whether or not the option can be possible is the general capital allocation that the company gives to research and development and production in general. Luckily at Toyota, the Annual Report for 2012 captures the company as dedicating as much as 5% of its working capital to research and development (Tyson, 2010). Once such preparedness exists, there can be the assurance that the company will willingly devote funds to the differentiation program even if the option is going to come at an extra cost to the company. The strategic capability of Toyota is therefore welcoming to the differentiation option and thus makes it feasible in line with the company’s market capital. Recommendations From the analysis of the differentiation option that has been selected for the company so far, there are several factors that make the option acceptable, feasible and suitable for the needs of the company. The only area where there seem to be a challenge however has to do with the acceptability on the part of suppliers to supply differentiating raw materials that may demand that a new line of production be undertaken by them. Once such a situation exists, there could be possible delays with supplies, which may create shortages at unexpected times during the supply chain. To avoid this, it is strongly recommended that the company will devise a strategy that does not make it reply on only one supplier for the supply of differentiated raw materials. With all said and done, it can be concluded that the differentiation strategic option that has been mentioned for Toyota is one that meet the current market needs of the company as well as the internal and external factors that determine the successful implementation of the option. Quite importantly, with the cost leadership option becoming more and more common with other competitors, it would be important for the company not to select this but set itself focus apart through the use of differentiation option (Loshin, 2001). Conclusion The movement of goods and services from one place to another plays a very important role in the day to day running of businesses. Individuals also move from one place to another to engage in personalized activities and transactions. The movement of people, goods and services constitutes the need for transportation. Within the supply chain, transportation remains very crucial in determining the rate of success that will be associated with the distribution channel. Consequently, the transportation industry remains a very crucial one in modern day globalised services (Gilad, 2003). The transportation industry comes in different paradigms, crucial among which is the manufacturing of vehicles. In terms of vehicle manufacturing is concerned, Toyota Corporation can be identified as a very important global competitor that is sometimes identified to be the global leader in car manufacturing (Shaw, 2008). This stage of global leadership did not come as an accident but as a result of carefully emitted strategies and plans. Quite interestingly, the place of Toyota on the global continues to be critically challenged with the performance of equally excellent and performing competitors (Solberg, 2005). The presence of the said competition calls for the need for Toyota Corporation to have in place a sound strategic management option that is based on the company’s strengths, weaknesses, opportunities and threats. Reference Achterberg, M 2001. “How culture affects information sharing in an organization.” dmDirect.com. 3(4) 223-34 Alvesson, M. & Skoldeberg, K. (2000) Reflexive methodology: new vistas for qualitative research. 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