Cui Ying Grace Li z3352118 Kaye Chan Tuesday 5PM-6PM

Toyotas Environmental Issue Toyota is one of the worlds most successful automotive compa nies and the most profitable carmaker as it is one of the largest manufacturers of cars in the world. Since the conception of the company, Toyota utilises a Pioneer Strategy, being the first entrant in the hybrid market segments and positions. By choosing such a strategy, Toyota has taken a big risk as this strategy requires a lot of thought but this high risk has proven to have a high return. (http://www.toyota.com.au/toyota/company/history) The Camry Hybrid was the first Australian built Hybrid released in 2010 as concerns for the environment arose. The concern was due to the increasing price of oil as oil accounted for 95% of the global energy used to transportation so the demand was increasing and there were concerns over carbon emissions produced from burning fossil fuels. (Energy Bulletin, 2007 http://www.icaew.com/~/media/Files/Technical/Sustainability/toyota-case-study.pdf) The reason behind the introduction of the hybrid car is Toyotas aim for zero emissions to prevent car pollution without sacrificing car performance as Toyota knew that automobiles were a significant contributor of carbon dioxide emissions and energy use. This posed a threat to Toyota as it was one of the largest car manufactures and there was growing concern for global warming amongst its key stakeholder groups. To address this issue, Toyota needed to acknowledge the potential threat of depleting oil reserves and climate change and come up with a strategy plan or products that meet the needs of future consumers. Toyota became the first manufacturer in the world of a eco-efficient vehicle, the Toyota Prius. The way the Toyota Hybrid works is due to two motors inside the car compared to normal cars that only have one motor, the Hybrid cars are two and a half times more efficient compared to conventional automobiles as it cut the cost for customers as they had to buy less fuel (Graham Smith, Toyota - http://www.icaew.com/~/media/Files/Technical/Sustainability/toyota-case-study.pdf) . The two motors in the Hybrid consist of one powerful electric motor and a quality petrol combustion engine. The reason behind Toyotas success is because they are able to gain a competitive advantage by having a strategic Corporate Social Responsibility (CSR). The CSR is the process with the aim to embrace responsibility for the companys actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stake holders and all other members of the public sphere who may also be considered stakeholders. It is the corporate initiative to assess and take responsibility for the companys effects on the environment and impact on social welfare. The term generally applies to company efforts that go beyond what may be required by regulators or environmental protection groups which Toyota has achieved with the Hybrid cars. It is not a legal requirement to make an environmentally friendly car but Toyota chose to do this by choice. But as previously stated, taking the pioneer strategy has its risks. Initially, Toyotas concept of creating a gasoline-electric hybrid vehicle was received with scepticism however, as of April 2013, Toyotas sales passed the 5million mark and the vehicles account for 14 percent of its global sales <http://www.news.com.au/business/breaking-news/toyotas-hybrid-vehicle-sales-pass5m/story-e6frfkur-1226622785774>. This innovation was hard to duplicated by its competitor; Honda

Cui Ying Grace Li z3352118 Kaye Chan Tuesday 5PM-6PM because Toyota had a two year lead on the technology in the Hybrid vehicles. The difference between the Toyota Prius and Hondas Hybrid car; the Jazz, is the way it utilises the petrol and electric motor. Unlike the Hybrid Prius, the Hybrid Jazz cannot start from rest on electric power alone, only once the car is started by its petrol motor, the electric motor kicks in and it is when moving form a standstill is when petrol is consumed the most. However, by taking the Pioneer Strategy has its drawbacks and this is evident in their global recall for

vehicles manufactured between May 2003 and April 2009 as there was a steering problem and the pump issue. It was found that the steering problem could cause drivers to lose control of the vehicle and the water pump problem could cause to be inoperable. <http://www.abc.net.au/news/2012-11-14/steering-problems-force-toyota-to-recall-27-millioncars/4372072> The company was forced to go into damage control in relations to its safety measures after it was found that their loose floor mats became trapped under the accelerator which was linked to accidents that apparently caused dozens of deaths. <http://online.wsj.com/article/SB10000872396390444799904578047700401681438.html> Toyotas desire to become the worlds number one car maker pushed it to the outer limits of quality control due to its aggressive growth which created unmanageable risk as in 2005, Toyota recalled more automobiles than its sold. <http://business-ethics.com/2010/01/31/2123-toyota-recall-five-criticallessons/> Solutions/Options: Using the data available, it is possible to conduct a SWOT analysis (see Appendix) and establish the following solutions: Rigorous testing NOTE: Mention that Toyota is uses an analyser business strategy as defined by Miles and Snows Four Business Strategies. Their competitive strategy has elements of both cost leadership in their Toyota Camry range and differentiation in their Toyota Prius (hybrid) range. PORTERS 5 FORCES Competitive advantage by: Threat of new entrants LOW: Capital start up costs are very high and new entrants are competing against not just Toyota but many other car makers. Additionally, Toyota has captured the market in hybrid based cars with the most popular hybrid car the Prius. Moreover, start up capital costs are much too high for new entrants to viably be competitive. There is high product differentiation but not when it comes to the Hybrid see Honda article. Bargaining power of suppliers LOW: Toyota has approximately 1700 suppliers therefore allowing them to pick and choose to whom they want their material from. Given that theres an abundance of suppliers,

Cui Ying Grace Li z3352118 Kaye Chan Tuesday 5PM-6PM it will make them compete against each other to be able to supply Toyota therefore driving supply costs down. Bargaining power of buyers MEDIUM??: It is low if you consider buyers who want a hybrid vehicle the technology present in Toyotas range exceeds their competitors by up to 2 years (see Honda). Toyota is a reputable brand that is famous for their hybrid car the Prius. However, buyers have low switching costs if they prefer non hybrid cars and have a large variety of different car makers to choose from. Moreover many buyers in Australia tend to purchase second hand cars as cars are known to have very high depreciation costs this means less Toyota vehicles purchased. There is no threat of backwards integration from the buyers given how technologically advanced cars are and the scale and scope of production. Threat of Substitute Products LOW: Whilst there are alternatives to Toyotas cars such as bicycles, motorbikes, walking and buses, they still dont provide the convenience that comes with a car travelling long distances at speeds higher than a bicycle, multiple passengers, ability to transport equipment, etc Maybe give a statistic of cars bought over time i.e. REFERENCE STRENGTHS: Reputation/branding of Toyota it is one of the most popular brands in the world and their hybrid car the Prius is the leading car in the hybrid market. Also refer back to application of Porters Five Forcers in showing that Toyota has power over its suppliers as they have low bargaining power this is because Toyota has over 1400 suppliers to choose from, etc (dont repeat). Toyota also has qualities of cost leadership they produce quality vehicles at a low cost mainly due to their economies of scale and scope. Toyota benefits from cost advantages due to the global presence of the company (give quantitative data e.g. no. of vehicles manufactured per year) and reductions in average cost due to their scale of production of a wide range of vehicles. WEAKNESSES: Whilst Toyota have a strong brand reputation they are also known to have had multiple recalls due to major fatal risks including accelerator pedals getting caught with foot mats, unintended acceleration and breaking issues on uneven roads. There has also been a reported 37 deaths due to Toyotas failure in design causing them to recall over 9.9 million vehicles and paying $US1.1bn over the recalls. Furthermore, Toyota also paid a record $US17.35m fine for failing to promptly notify US authorities of floor mats trapping accelerators of 2010 Lexus models. This section can be expanded. OPPORTUNITIES: Great market presence for hybrid vehicles with more people concerned with their carbon footprint (give example or stats). Overall increasing trend of fuel prices (give stats) benefits their sales in the hybrid range. THREATS: Prius has been put under a negative light in popular culture e.g. south park so this reduces their market capture.

Cui Ying Grace Li z3352118 Kaye Chan Tuesday 5PM-6PM Think of more here http://www.strategicmanagementinsight.com/swot-analyses/toyota-swot-analysis.html

http://www.news.com.au/business/breaking-news/deal-in-us-toyota-recall-case-lawyer/story-e6frfkur1226543920830 http://www.recalls.gov.au/content/index.phtml/itemId/952857 http://usatoday30.usatoday.com/money/autos/2010-02-17-toyota17_ST_N.htm http://www.nhtsa.gov/Vehicle+Safety/Additional+Information+on+Toyota+Recalls+and+Investigations

http://www.toyota.com.au/toyota/sustainability/economic/suppliers Hybrid technology http://voices.yahoo.com/an-evaluation-toyota-motor-company-tmc-information-354371.html Based off the SWOT Analysis and application of Porters Five Forces, it can be seen that one of Toyotas main ethical issues is their repetitive car recalls which has tainted their reputation. Toyotas reaction to these recalls has ranged from paying fines to announcing fixes for any effected cars. In fact they have also gone beyond just fixing but also installing an increased precautionary measure a brake override system. Suggestions for possible solutions: Global marketing campaign to instil confidence back into customers on their safety by engaging in more rigorous testing, additional safety features and openly admitting fault (but also specifically announcing a remedy). Sponsorship with certain celebrities or well known people that have been known to value safety e.g. race car driver that emphasises that they trust Toyotas safety features and braking system. Slowly dropping models that were affected by the accelerator and braking problems and introducing new ones to wipe the slate clean but still maintain the positive and desirable qualities of such models. E.g. aesthetic design, performance, features, affordable prices, etc. Revaluate auditing policy and processes. BALANCED SCORE CARD:

Cui Ying Grace Li z3352118 Kaye Chan Tuesday 5PM-6PM

http://www.nhtsa.gov/About+NHTSA/Press+Releases/2009/Toyota+Announces+Fix+for+Accelerator+Pe dal+Entrapment+Problem

Cui Ying Grace Li z3352118 Kaye Chan Tuesday 5PM-6PM REFERENCES

Cui Ying Grace Li z3352118 Kaye Chan Tuesday 5PM-6PM APPENDIX: