Comprehensive Analysis of a Fortune 500 Company: Toyota Motor Company
Comprehensive Analysis of a Fortune 500 Company: Toyota Motor Company
Competitors
-Toyota’s main competitors are comprised of: Volkswagen, Ford, Mitsubishi, and Hyundai which are notable names with their own influence on the industry.
-Toyota values innovation which has made for high spending on research and design, but the company believes the investment is justified as it will churn out positive results correspondingly.
In evaluation with its competitors, the only other automotive company to spend more on R&D is Volkswagen. However, Toyota’s R&D expenditure is more effective, as it only makes up 3.6% of its total revenue, whereas Volkswagen spends 6.7%. Thus, Toyota can spend less on R&D to match the revenue of its rivals.
Investment in R&D has facilitated Toyota’s competitive advantage over its adversaries and made it of the largest automotive manufacturers in the world by bringing the latest technologies to its consumers.
-Toyota’s competitive advantage is amplified by its reputable name, as it is world recognized and trusted in providing durable vehicles.
-The efficient and effective Toyota Production System has resulted in the highest operating profit margin of 8.2% amongst its competitor with Volkswagen having 6% or General Motors’ at 6.2%.
The following figure displays the operating margins of Toyota’s main competitors, with Toyota in the lead. This indicates that the operating cost for Toyota are lower thanks to its lean production system.
-An area where Toyota could improve in is its Return on Equity (ROE) and ROA (Return on Assets) as it is low in comparison with its peers. Honda Motor (4.8 %) and Nissan (8%) have a higher ROE than Toyota (2.7 %). This goes to show that Toyota is not utilizing shareholder money to the utmost potential, which could tamper shareholder value and their confidence in the company’s handling of resources.
-Toyota will reap benefit from partnership with BMW forged in 2012, to collaborate strategically to optimize technology in the fields of a fuel cell system, future sport vehicle, lightweight advancements and power-train electrification. The combined technical competency of the two companies will accelerate the innovations produced, champion the duo amongst competition and result in increased revenues as well as cost savings.
-The global automotive market is intensely competitive. Increased globalization of the world has introduced more players to the game. Increased competition could result in lower vehicle sales and large inventory, which could -induce downward pricing, influencing the financial state of the company.
-Toyota has a high production capacity, of 10 million cars per year, making for fierce competition for its counterparts.
Industry
Industry Overview:
Toyota Motor Corporation is a part of the automotive industry which has been subject to tumultuous change with the shift to fuel efficient cars that favor the environment. Some