Case Analysis Toyota and the Automobile Industry
Toyota challenged the US car industry to develop quality compact, fuel efficient, economic vehicles at an affordable cost. They utilized the philosophies of American statistician Dr. William Edwards Deming to improve design, product quality, testing and sales. With such a strong history in quality and production efficiency will Toyota be able to recover from the current recall scandals? How should Toyota present itself to the consumer as it attempts to rectify this growing situation? How can they reinvigorate their sales and convince the public they can still provide a quality product?
The automobile industry "is considered to be highly capital and labor intensive.Ã¯Â¿Â½" Majority of the revenue in this industry comes from selling automobiles but the parts market is highly profitable as well. Profitability of companies in this industry depends on the manufacturing efficiency, the quality of the product, and the marketing with which the product is advertised.
Demand for automobiles is driven by employment and interest rates. Porter's Five Forces model is helpful in determining the intensity of competition and the level of profitability in a given industry and the Five Forces of Competition Framework for the automobile industry is shown below in Figure 1.
Toyota Motor Corporation (Toyota) is a multinational corporation headquartered in Japan. Toyota is the world's largest automaker and has the US largest sales. Toyota also owns and operates Lexus and Scion brands and has a majority shareholding stake in Daihatsu and Hino Motors, and minority shareholdings in Fuji Heavy Industries, Isuzu Motors, Yamaha Motors, and Mitsubishi Aircraft Corporation.
Figure 1: Porter's Five Forces Model - Automobile Industry
During the oil crisis of the 1970's American's began to turn to smaller cars with better fuel economy. The American car manufacturers did not make the transition to smaller...