Industry Trend Analysis and Client Report

Business Contexts and its Management (Industry Trend Analysis and Client Report – Toyota
Motor Corporation)
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 Industry Trend Analysis and Client Report

Table of Contents

Part 1: Industry Trend Report.................................................................................................................1

1.0 Introduction.....................................................................................................................................1
Background.........................................................................................................................................1
Scope...................................................................................................................................................1
1.1 Task One – Identifying Issues.........................................................................................................1
1.2 Task One – Analysis of External and Internal Environment.......................................................2
Components of Industry Sector (External Environment)..................................................................2
Analysis of the Sector.........................................................................................................................3
1.3 Task Two – Internal Environment Competence Analysis............................................................6
Internal Factor Analysis – VRIO Framework...................................................................................6
2.4 Task Three – The Impact and Influence of Change and Culture................................................7
Impact of Implementing Change (Kurt Lewin’s Model)....................................................................7
Influence of Culture on Management Decision.................................................................................8
Effectiveness of Operational Functions – TQM................................................................................8
Stakeholder Analysis and Landscape.................................................................................................9
Summary..............................................................................................................................................10
Part 2: Client Report...............................................................................................................................11
2.5 Task Four – Strategic Planning....................................................................................................11
Benefits of Planning When Formulating Strategy..........................................................................11
Strategy Recommendation (PDCA Cycle)........................................................................................11
Conclusion............................................................................................................................................12
References................................................................................................................................................13
 Industry Trend Analysis and Client Report 1

Part 1: Industry Trend Report

1.0 Introduction

Background

The outbreak of the Covid-19 pandemic has impacted almost every industry adversely

around the world and this is also true for the automotive industry. This is because, before the

Covid-19 pandemic, the sales of automobiles globally were noted to be around 80 million units

in 2017. However, after the outbreak of coronavirus, and the resulting disruptions within the

operations of automobile companies like Toyota, a significant decline in the profits of the

companies was observed and it has been forecasted that the global sales of automobile

companies will further decrease in 2021 to just under 70 million units (Wagner, 2021).

Scope

To address the challenges and problems that have been caused by the Covid-19, the case

study analyses under this report have specifically focused on devising appropriate business

strategies or post-pandemic strategic plan for Toyota to help the company increase its sales and

profitability. The report has also analysed the industry trends and potential opportunities for

Toyota to expand its businesses under the market of electric vehicles where the demand from the

customers is expected to increase in the future significantly (Wagner, 2021).

1.1 Task One – Identifying Issues

After the outbreak of coronavirus and its rapid spread all over the world, many

automobile companies like Toyota were compelled to temporarily shut down their operations due

to the lockdown that was imposed by the governments/regulatory authorities in different

countries (Hoeft, 2021). The supply chain and operations of these companies were also adversely
 Industry Trend Analysis and Client Report 2

affected by this pandemic, which as a result also forced some of the automotive companies to

make their employees redundant (Belhadi et al., 2021).

The overall impact of the Covid-19 pandemic was highly negative for the automobile

industry since worldwide automobile production was observed to experience a sharp decline

from 92 million vehicles (that was recorded in 2019) to 78 million vehicles in 2020 (Statista

Research Department, 2021) (see figure 1). Thus, it is important for companies like Toyota to

devise the right business strategies that enable them to recover from this pandemic and improve

their performance and profitability.

Figure 1: Estimated worldwide automobile production from 2000 to 2020 (in million vehicles) –
Source: Statista Research Department (2021)

1.2 Task One – Analysis of External and Internal Environment

Components of Industry Sector (External Environment)

Upon analysing the external environment or components of the automotive industry, it

can be inferred that it is highly competitive as there are many automobile companies like Ford,

General Motors, Tesla, Honda, etc., that are manufacturing the same types of vehicles (i.e.,
 Industry Trend Analysis and Client Report 3

internal combustion engine, hybrid, and electric vehicles) which are produced by Toyota. This

means that customers have a low switching cost since there are many options for them to

purchase their vehicles (Rao, 2017). Similarly, the income of the customers under the countries

where automobile companies like Toyota operate can also be considered as another important

component of the industry (Dhanabalan et al., 2018).

This is because, after the outbreak of the coronavirus, a significant number of people

were unemployed in different countries as organizations were forced to halt their production and

close their businesses temporarily to prevent the spread of this virus. This, as a result, compelled

many companies to make their employees redundant, causing a significant decline in both the

income and demand of the people for goods and services that also include expensive products

like vehicles (Han et al., 2020).

Analysis of the Sector

Market Size

By analysing the market size of the global automobile industry, it can be stated that the

industry has reached its saturation point due to high competition, especially within the market of

commercial and passenger vehicles (Rao, 2017). However, despite this saturation, including the

problems created by the Covid-19 pandemic, it is still expected that the total available market

(TAM) in the global automobile industry will increase to around US$ 25,719 million in 2025

from US$ 20,321 million which was recorded in 2020 (PR Newswire, 2020).

Whereas, the value or size of the serviceable available market (SAM) under TAM that

Toyota targets in its geographic reach (i.e., market share) is around US$ 8,692,168 as of 2020

(Roberts, 2021). Whereas, the Serviceable Obtainable Market (SOM), which is related to selling

electric vehicles, that Toyota can capture in the coming years under SAM is approximately US$
 Industry Trend Analysis and Client Report 4

803 billion (Wagner, 2021). This is because it is expected that in 2027, the market size of electric

vehicles will reach US$ 803 billion, which in turn, will offer an opportunity to the company to

increase its sales and profitability.

Stage in Economic Cycle (Business Cycle Analysis)

Upon conducting a business cycle analysis for Toyota, one can infer that currently the

markets or countries where Toyota is conducting its operations are going through the trough and

recovery phases. This is because in several countries, like India (Nair, 2021), where Toyota sells

its passenger and commercial cars, both the GDP level, as well as the demand for expensive

products (like vehicles) have been noted to decline and reach their lowest points. This is because,

in some countries, the cases of Covid-19, including the resulting fatalities of people are still

rising, which as a result, has compelled the governments in these countries to maintain their

decision related to imposing a complete lockdown (Coibion et al., 2020).

This, in turn, has made it difficult for many businesses in these countries to resume their

operations by reopening their workplaces, which as a result, has also compelled them to make

their employees redundant to save their cost since they are not able to increase their production

and output. These high cases of Covid-19 were also the reason behind the increase in the

unemployment rate around the world from 5.373 percent that was recorded in 2019 to 6.471

percent in 2020 (World Bank, 2021) (see figure 2).

 Industry Trend Analysis and Client Report 5

Figure 2: Unemployment, total (% of total labour force) (modelled ILO estimate) – World Bank (2021)
However, in some countries (like China) where the cases of Covid-19 have reduced and

where the governments have allowed the businesses to resume their operations, it is expected

that the economies of these countries will recover (Wang and Zhang, 2021). This, as a result, will

also increase both the employment level, as well as the demand of the people in these countries

for expensive products like vehicles that are sold by Toyota. Thus, it is important for Toyota to

sell its expensive vehicles (including electric vehicles) under those countries that are going

through the recovery phase of their economic cycle, and sell less expensive cars under those

economies that are still going through the trough stage.

Market Opportunities

As stated earlier, there is an opportunity for Toyota to expand its operations under the

market of electric vehicles. This is because, in the coming years, the demand for electric cars is

expected to increase, primarily due to the changing preferences of the people with regard to

avoid the purchase of those vehicles having traditional internal combustion engine, which are
 Industry Trend Analysis and Client Report 6

known for increasing pollution level and causing scarcity of non-renewable resources like fossil

fuel (Moon et al., 2018).

In this regard, there is also an opportunity for Toyota to utilize the blue ocean strategy by

entering the market of self-driving cars or unmanned vehicles where it can face less competition

(Zakharenko, 2016). This is because only a few automobile companies are manufacturing

unmanned vehicles and these cars are still sold in fewer quantities commercially. Thus, by using

the blue ocean strategy to exploit this market, Toyota can gain benefits by increasing its sales

and profits successfully (Zhao et al., 2018).

1.3 Task Two – Internal Environment Competence Analysis

Internal Factor Analysis – VRIO Framework

To analyse the internal factors of Toyota in order to determine its competitiveness, the

VRIO framework has been used in this section of the report (see below figure). The framework

of VRIO examines the capabilities and resources of a company with respect to their value,

organization, rarity, and imitability that, in turn, assist in giving the organization a sustainable

competitive advantage (Herder, 2021). When it comes to Toyota, its resources, technologies, as

well as its employees indeed play a crucial role in adding value for the customers.

This is because, Toyota is known for manufacturing different types of commercial and

passenger vehicles that give safety, comfort, and value for money to its target customers.

Moreover, the resources of Toyota are also rare, especially related to its usage of Toyota

Production System, as well as R&D technologies, which in turn, has allowed the company to

produce different types of vehicles as per the specifications and requirements of its customers

(Smith, 2019).
 Industry Trend Analysis and Client Report 7

Figure 3: VRIO Framework – Source: Herder (2021)

Furthermore, the resources, especially the knowledge and skills of the employees of

Toyota are also cost to imitate by the competitors. This is because it would take a significant

amount of time for Toyota’s competitors to acquire the same resources or knowledge that the

company is using to produce its commercial vehicles. In addition to this, Toyota also possess

organized management systems like Kaizen, Just-in-Time, Jidoka, etc., that have helped the

company to improve the quality of its vehicles and efficiency of its production processes, leading

to enhanced organizational performance (Chiarini et al., 2018). Thus, the findings of both the

external and internal analysis of Toyota are clearly depicting that there is an opportunity for the

company to utilize its existing competencies, resources, and capabilities to manufacture electric

vehicles (including unmanned cars) to improve its profitability after the Covid-19 pandemic.

1.4 Task Three – The Impact and Influence of Change and Culture

Impact of Implementing Change (Kurt Lewin’s Model)

In this section, Kurt Lewin’s model has been used to explain how Toyota can increase its

production of electric vehicles so that it can capitalize on the growing demand for these cars in

the coming years (Hussain et al., 2018). In this regard, the company will have to prepare its
 Industry Trend Analysis and Client Report 8

workers (i.e., unfreeze stage) by providing them training related to manufacturing electric cars,

including unmanned vehicles.

After this, Toyota will also have to address the uncertainty of its employees and help

them to accept the change (i.e., change phase) related to increasing its reliance on electric

vehicles. For this purpose, the company can reward its employees for accomplishing their goals

and accepting the change as promptly as possible. Finally, Toyota will also need to ensure that

the new working methods related to manufacturing electric cars are followed by employees in

the long run (i.e., refreeze stage) (Enyedi, 2018).

Influence of Culture on Management Decision

To take appropriate management decisions related to recovering from the Covid-19

pandemic by increasing the production of electric cars, Toyota will have to adopt a task culture

which has been explained under the theory of Charles Handy as action and task-oriented culture

(Handy, 1976). By adopting this culture, the company will be able to become more responsive

since task culture promotes the empowerment of employees, as well as teamwork. This as a

result will allow Toyota to become more responsive, take effective actions, solve problems, and

achieve its goals related to producing novel electric vehicles to meet the demand of its

customers, successfully.

Effectiveness of Operational Functions – TQM

To manage quality, Toyota utilizes the approach of “Kaizen” which means continuous

improvements and it also follows the concept of “customer first”. This, as a result, has enabled

Toyota to manufacture its passenger vehicles by meeting both the needs and expectations of its

customers successfully (Morgan and Liker, 2020). Thus, the same effectiveness in operational
 Industry Trend Analysis and Client Report 9

functions can also be maintained by Toyota for producing electric vehicles where it can also

involve its employees to manufacture unmanned vehicles.

Stakeholder Analysis and Landscape

The internal stakeholders of Toyota can include its employees, investors, directors, and

managers. While the external stakeholders of the company can include its customers,

government, and suppliers (Rowland, 2017). The stakeholder map has also been highlighted for

Toyota in the below figure. As indicated by the figure, Toyota needs to keep its customers,

directors, and employees engaged since they have a high influence on the performance of the

company.

Figure 4: Stakeholder Map

They are also important for Toyota to accomplish its organizational goals related to

improving its performance after the Covid-19 pandemic. Whereas, Toyota also needs to keep its
 Industry Trend Analysis and Client Report 10

suppliers informed about its decisions as they have low power but high interest under the

company’s operations. While Toyota needs to keep its investors and government satisfied since

they have high power with regard to helping the company in attaining necessary financial and

non-financial support for producing electric vehicles.

Summary

From the above-conducted analyses, it can be concluded that despite the problems that

have been caused by the Covid-19 outbreak, there is still an opportunity for Toyota to increase

its profits by manufacturing and selling electric vehicles. In this regard, the company can use its

existing capabilities, resources, and technologies and promote a task-oriented culture to meet the

demand of the customers for electric vehicles, which is expected to increase in the coming years.
 Industry Trend Analysis and Client Report 11

Part 2: Client Report

2.5 Task Four – Strategic Planning

Benefits of Planning When Formulating Strategy

There are several benefits that organisations like Toyota can obtain by creating

appropriate strategic plans before formulating their strategies. For instance, one such benefit of

the strategic plan is related to assisting organizations in defining their directions and establishing

realistic goals and objectives in line with the vision and mission of their companies (Arend et al.,

2017). Moreover, strategic plans also help employees to know what they are required to do,

which in turn, enables them to work effectively to enhance the operational efficiency of their

companies. Furthermore, continuous improvements in strategic plans can also benefit businesses

like Toyota to become more proactive rather than reactive while adapting to changing market

conditions (Bryson and Edwards, 2017).

Strategy Recommendation (PDCA Cycle)

To create a post-pandemic strategic plan in order to recommend an effective business

strategy for Toyota, PDCA Cycle (i.e., plan-do-check-act) has been used in this section of the

report (Johnson, 2016). The details of the plan are provided below:

 Plan: As stated earlier, there is an opportunity for Toyota to capitalize on the rising demand

for electric vehicles for which it can plan to change its working process, perhaps by reducing

its reliance on those vehicles that are made by using internal combustion engines. This can

also include creating unmanned vehicles.

 Do: To implement the plan, Toyota can utilize its existing technologies and production

processes to manufacture electric vehicles. This can also include the provision of training to
 Industry Trend Analysis and Client Report 12

the employees so that they become more familiar with producing electric vehicles (including

self-driving cars).

 Check: In this stage, Toyota can check the performance of its strategies related to

manufacturing electric vehicles and self-driving cars by measuring its sales revenues and

profitability (Singh et al., 2016).

 Act: Finally, by assessing its performance, Toyota can also take appropriate actions to

further improve its strategy and make possible corrections in its plan. An example of this can

include changing the pricing strategy of the electric vehicles (perhaps by decreasing them) to

increase the sales revenues and profits of the company better than competitors.

Conclusion

By considering the above analyses, it can be concluded that before devising the right

strategy, Toyota will have to create an effective strategic plan to provide appropriate direction to

the employees and help the business in achieving its goals related to capitalizing on the potential

increase under the demand of electric vehicles in the future. Moreover, by devising an effective

strategic plan and making continuous improvement within its strategies in response to the

changing market condition, Toyota can also become more successful in addressing the

challenges and recovering from the damages that the Covid-19 pandemic has caused for the

entire automotive industry.

 Industry Trend Analysis and Client Report 13

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