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BM627 | Managing Innovation in Business | Strategic Analysis Of Toyota



You are required to identify an organisation of your choice, ideally based in the market sector or industry where you hope to start your professional career. You should then conduct an innovation audit that examines the organisation’s past, present and future innovation activities and capabilities.

Apply an evaluative approach to a range of business data, sources of information and appropriate methodologies in identifying drivers of innovation within a business and its environments;

Analyse and illustrate how organisations and their leaders can successfully plan and prepare for innovation;

Critically discuss the importance of organisational knowledge, knowledge transfer and cross functional co-operation in order to analyse and assess innovation capability and blockages;

Actively engage in the identification of a new product/service for a chosen organisation and identify the key activities required for its successful development;

Conduct an innovation/organisational development audit appropriate for the introduction of the new product/service.

You are to identify an organisation that will ideally be in the market sector you wish to work in once you graduate.

In this first assignment, your task is to conduct an innovation audit of the selected organisation to examine the organisations innovation history; the present level of innovation activities; and future innovation requirements.  The audit will factor in wider macro and competitive environment factors as well as upstream and downstream supply chain participants.




1. Introduction

Toyota Motor Corporation or Toyota is a Japanese multinational organization that operates in the automobile industry. The headquarter of the company is located in Toyota Aichi, Japan. The organization was founded in the year 1937 by Kiichiro Toyoda for the purpose of manufacturing automobiles. The company had a huge employee base of 364,445 members in the year 2017. The organization has been able to acquire the fifth largest position in the automobile industry in the same year in terms of the total revenues (Toyota.com. 2018). Toyota has also been named as the first organization to manufacture greater than 10 million vehicles every year. The organization had reported the production of its 200-millionth car in the year 2012. Toyota was considered to be the topmost listed organization in the market of Japan. The organization is the market leader in the world in terms of the sales of hybrid electric vehicles. Toyota has also become the leader in the automobile industry based on the production of hydrogen fuel-cell vehicles (Toyota.com. 2018).

The Toyota Motor Corporation belongs to the automotive industry. This is an industry which is mainly involved in the manufacture, development, designing and selling of motor vehicles. The automotive industry is considered to be a huge part of the economy of countries where the organizations operate. The revenues that are generated by the organizations belonging to this industry are able to contribute to the economic benefits of a country. The automobile industry had started its operations in the year 1860. United States had been the world leader in the automobile sector. The total production that is made by the country is high and has helped the company to lead the world in the automobile sector (Andreeva and Kianto 2016). The leadership of the automobile industry was then taken over by Japan in the year 1980. The two countries have been providing huge competition to each other from the year 1980 in the automobile based industry. China has also been a huge player in the automobile industry from the year 2009 to 2012. The most important regulation that has been dominating the automobile industry are the safety based rules. The safety of vehicles is an important factor that affects the ways by which the manufacturers are able to protect the customers from any type of risk. The automobile organizations therefore need to comply with the regulations that are formulated for the safety related qualities of the vehicles (Baumgartner and Rauter 2017).

The report is based on the analysis of a famous car model of Toyota named Toyota Avensis. The first model of this car was launched in the year 1997 in the United Kingdom. The analysis in the report will thereby provide insights to the To

yota Motor Corporation for the launch of a new model of the car which is based on half electric and half gasoline engine.

2.Analysis of the organizational resources with the help of SWOT

Toyota has been successful in implementing advanced technologies in the products that have been manufactured by the company. The organization has implemented the concept of alternative sources of energy, systems based on the safety of products, robots that are required to provide human assistance and new modes of transport that can be used by customers. The company has always focussed on the development for future. The environmental technologies that have been used by Toyota are based on the electric and the hybrid vehicles. The fuel cell technology is used by Toyota for providing eco-driving based opportunities to the customers (Bergh et al. 2014). The Smart Mobility society is another concept that is being used by Toyota which is based on connecting cars, people and the communities which can further help in the creation of a happy and secure society. Automated driving is another technology that has been implemented by Toyota recently. This technology helps the consumers to move in a safe, free and smooth manner. the Toyota New Global Architecture or TNGA has been introduced by the company for building better quality cars which are able to revolutionise the development based framework of vehicles. The intelligent systems of transport are built by Toyota for providing safer driving options to the customers which is also much more convenient in nature (Bettis et al. 2014).

The innovation strategy of Toyota is mainly based on the search for solutions which are creative in nature and are elegant and unique as well. The car world was conquered by Toyota when other large companies like, Ford and General Motors have not been in a good position. The company has been able to become the leader in the global automobile industry with the help of the ways by which it has operated since its inception. The small innovative steps that have been taken by the company has been able to create its profitable position in the automobile industry. The research and development based activities that are conducted by Toyota Motor Corporation have been able to formulate innovative strategies (Bettis et al. 2016). The design of the products is considered to be the face of innovation strategy for Toyota. The design centres of Toyota Motor Corporation are responsible for the creation of innovative strategies that can be implemented within the products. The organization has been successful in maintaining the balance between acceptability in the market and creativity. The designs of the products of Toyota are aimed to be kept real and resonant so the company is able to maintain its position in the industry. Competition is blended with creativity for the purpose of building the innovation strategies in Toyota (Chen, Delmas and Lieberman 2015).

PESTLE analysis of Toyota Motor Corporation

Political factors –

The operations of Toyota are based on the political situation of the countries in which the company has its operations. The regulations that are formulated by the government affect the revenues and profitability of the company. The political stability of the market is an important factor for the proper operations of Toyota Motor Corporation (Karadag 2015).

Economic factors –

The economic trends in the countries are important factors that affect the ways by which the company operates. The prices of the cars are controlled with the help of the economic situation and the buying capability of the customers. The growth rate of the economy is an important factor that affects the successful operations of Toyota Motor Corporation (Hill, Jones and Schilling 2014).

Social factors –

The social factors and the preferences of customers are important factors that have immense effects on the profitability of the company. The increasing interest of the customers in the hybrid cars and electric cars affect the types of cars that the company offers to the customers (Simon, Fischbach and Schoder 2014).

Technological factors –

The technological factors have high influence on the revenues of Toyota as it is a technological business organization. The rise in the use of ecommerce has affected the revenues of the company to high levels. The company thereby has the opportunity to increase its ecommerce capabilities.

Legal factors –

The legal systems of the countries affect the policies that are formed by the company. The complexity of the consumer laws and the environmental laws of the different countries can affect the products that are offered by Toyota to the customers all over the world (Engert, Rauter and Baumgartner 2016).

Environmental factors -

The ecological factors are considered in the strategic decisions that are taken by the company. The changes that have taken place in the climate and the increased emphasis on sustainability of the business are important for deciding the types of products that are offered by Toyota. The production of environment friendly cars has been provided much more importance in the recent times (Durand, Grant and Madsen 2017).

SWOT analysis of Toyota Motor Corporation

Strengths –

Toyota has a strong human power which has been helpful for the growth of the company. The human resources of the company are present all over the world which has been a huge strength for Toyota. The organization has invested in the human resources which has been helpful in providing high returns (Durand, Grant and Madsen 2017). The culture of the company is also innovative in nature and Toyota has been able to implement the functional strategies and advanced operations in an easy manner. The image of the organization in the automobile industry has been strong which has been able to keep Toyota ahead of the competitors. The diversified portfolio of Toyota has been another major way of maintaining a strong position in the industry. The efficient global supply chain of the company is also a major strength of the company (Dagnino, King and Tienari 2017).

Weaknesses –

The organization is heavily dependent on the suppliers which somewhat slows down the entire production based process. The green vehicle technology that has been developed by Toyota has not been successful in attracting consumers from the markets of various countries. The company has received some amount of negative publicity which has been a major reason behind the loss of revenues of Toyota. The brand recognition of the company is always not quite strong which can be a weakness for the proper operations of Toyota (Engert, Rauter and Baumgartner 2016).

Opportunities –

The growth that has been shown by the automobile industries of the developing nations is an opportunity for the expansion of the product line of Toyota Motor Corporation. The changes that have taken place in the perceptions of the customers and their inclination towards purchasing cars that are friendly towards the environment. The increase that has been seen in the environmental pollution has been a major concern for the automobile industry. Toyota Motor Corporation has been implementing new technologies which are related to decrease on the impact on environment. The company thereby has huge opportunities to increase the production of environment friendly vehicles which are used for the purpose of reducing the degradation of the environment (Frynas and Mellahi 2015).

Threats –

The increase in number of competitors has been a major threat for the successful operations of Toyota Motor Corporation. The major competitors of Toyota in the industry are Ford, Volkswagen, Hyundai and Mitsubishi. This has made it tough for the company to form a strong position in the industry. The high prices of the raw materials are a major cost to the company. The high costs have thereby led to the lower profits of the company. The profits of the company have lowered due to the increase in number of organizations manufacturing similar products and the high costs of raw materials (Hill, Jones and Schilling 2014).

3.Explanation of the resources

Physical resources

Toyota has been able to differentiate itself from the other organizations in the automobile industry with the help of its unique physical resources. The company utilizes the capabilities and resources so that the competency can be formed as compared to the competitors in the market. The brand of the company has been able to build confidence among the customers of Toyota. The value creation process among the customers has also been quite easy for the company. Toyota is a company which has pioneered in lean production based systems. The high technology based performance of the company and the upscale quality of the cars is an important physical resource of Toyota. The physical resources of the company have also enabled the innovation capabilities of the company in the automobile industry (Hubbard, Rice and Galvin 2014).

Financial resources

The financial strength of Toyota Motor Corporation is an important factor for the steady growth of the company. The liabilities of the organization have increased with the increase in income. The prices of raw materials of the company have been increasing and this has led to the lack of revenues. Toyota Motor Corporation has been expanding in other markets which has led to the increase of the operations of the company in the domestic and the international markets as well. Toyota Motors has been able to expand its operations with the help of its strong financial position (Karadag 2015). The inventory turnover of the company has also been improved with the help of the efficient operations of Toyota Motor Corporation. The organization has plans to further expand its operations in other areas which can help in the advancement of the net working capital of Toyota. The technological investments that have been made by Toyota Motor Corporation have been helpful in the creation of the competitive advantage of the company in the automobile industry. Toyota has led to the production of the hybrid vehicles which includes the electric vehicles and the hybrid gas or electric vehicles. The organization is able to increase its position in the market with the help of its zero emission vehicles (Kenworthy and Verbeke 2015).

Human resources

The management of Toyota Motor Corporation has always relied on the selection of right people for different positions in the organization. The company has been able to differentiate between the applicants who will be capable of achieving the harmony between duties and the requirements of the job. The development of the human resources of the has been able to develop the processes of the company in an effective manner. The administration of the company has been successful in developing and them improving the human resources (Michael, Storey and Thomas 2017). The working environment that has been created by the company for the employees is effective and is also able to provide them with career opportunities within the organization and in the future as well. Toyota has also organised many educational programs which have been helpful in the improvement of the employees. This has further helped the company to create a loyal base of employees and reduced turnover as well (Morschett, Schramm-Klein and Zentes 2015). The three major activities that have been a major part of the management of human resources in Toyota are, the benefits and compensation that are provided to the employees, the labour relations and the employee relations and the health and safety based activities. The reward based systems that have been designed by the company are also an important part of the ways by which the company has been able to maintain the human resources. 

Intellectual capital

The management of knowledge in the company is an important step that has been taken for ensuring the growth of Toyota Motor Corporation. The operations of the company had started growing quite fast and this had increased the needs for the management of knowledge. The management of Toyota is aware that creation of the knowledge is important for the aggregation of the information. The management thereby aims at altering the data and convert it into information which has can be used by the company (Sakas, Vlachos and Nasiopoulos 2014). The company thereby aims at improving the process of knowledge management which can help the management to take the important decisions. The different knowledge enablers that have been used by Toyota are, introducing the knowledge vision, handling the conversations, establishment of the appropriate context and further globalizing the local knowledge. These enablers of knowledge have been introduced by Toyota which has helped in the effective management of knowledge (Simon, Fischbach and Schoder 2014).

Strategic capabilities

Toyota has its headquarters and main operations in Japan where the efficient production systems have been introduced. The major components that are a part of the strategic potential of Toyota is based on the delivery chain of the company. The strategic capabilities of the company have increased with the help of the efficient supply chain of the company. The increase competition levels have further led to the increase in the strategic capabilities of the company. The expansion of automobile organizations in other countries has increased pressure on a Japanese producer like Toyota Motors. The management of the company is capable of thinking in a progressive manner and further manage the innovations that have been made by the company (Somsuk and Laosirihongthong 2014). The organization believes that automated facilities of production has increased the reduction of costs based on labour. The strategies that have been implemented by the company have been able to provide a competitive advantage in the automobile industry. The management of the company has been capable of managing the production based standards of Toyota. The working environment of the organization has been a major advantage that has been provided to Toyota. The company is thereby successful in maintaining its competitive position in the market with the help of the strategic advantages (Steinbach et al. 2017).

Value chain analysis

Inbound logistics –

The parts that are required for production are supplied by the international and the local suppliers of Toyota in this stage. The components are provided by the suppliers from various countries like Thailand. The innovation capabilities are shared by Toyota with the suppliers.

Operation –

The second stage of the value chain of Toyota Motors Corporation is based on the ways by which the parts are assembled in the production plants after they are provided by the international and the local suppliers. The just-in-time process is used for manufacturing of the products that are offered by Toyota. Lean manufacturing process is a major strength of the entire production based process of Toyota (Theriou 2015).

Outbound logistics –

The delivery of the finished goods is a part of the third stage. The company delivers the products based on demands that are placed by the customers.

Marketing and sales –

The fourth stage is based on the ways by which the company aims at communicating the products that are manufactured with the customers. This helps Toyota to increase the awareness of its products among the customers (Trigeorgis and Reuer 2017).

Services – The last and final stage of the entire value chain is based on the services that are provided to the customers by Toyota. This stage mainly starts after the products are purchased by the customers. This stage plays an important role in helping the company to maintain a loyal customer base.

4. Industry analysis

The automobile industry can be analyzed based on the Porter’s five forces that can affect any industry or sector.

Threats related to the new entrants –

The economies of scale are high which leads to the lack of huge number new entries in the industry. The product based differentiation is high and the capital requirement is also quite high for the automobile industry. The costs related to switching is high and access that is required to the distribution channels is high which acts as a barrier to new entrants.

Threats related to substitute products –

The substitute of the products that are offered by Toyota is low which is an important factor that can affect the industry. In the current scenario the competition and the substitutes have increased (Wheelen et al. 2017).

Suppliers power –

The automobile organizations like Toyota have huge number of suppliers which have further been able to decrease their power. The current situation in the automobile industry also depicts that the suppliers have less power over the operations of an organization. The number of suppliers are higher as compared to the total number of top rated organizations. This has further reduced the power of bargaining of the suppliers (Trigeorgis and Reuer 2017).

Power of the buyers –

The power of the buyers in the automobile industry has been moderately high. The power is however increasing and in the modern situation the buyers have huge power. The buyers have the option to move from one company to another if they are not satisfied by the products and the services that are offered to them. The buyers thereby have the ability to leave the brand if the products are not up to the mark. The power of buyers has increased due to the huge number of companies that are constantly entering the automobile industry (Somsuk and Laosirihongthong 2014).

Intensity of the rivalry –

The large number of organizations that exists in the automobile industry has further increased the rivalry levels among them. The organizations thereby need to deal with the competition that has occurred in the industry due to the number of companies. The products that are offered by these organizations are also quite similar in nature and this has also increased the rivalry between them. The target market for the companies is also quite similar which is the reason behind high levels of competition among them. The competition levels are thereby based on the prices that are offered to the customers and the services that are offered by them as well (Hubbard, Rice and Galvin 2014).


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