Porter’s 5 Forces Analysis of Toyota
Toyota Motor Corporation is one of the highly reputed companies that have dominated the automobile industries greatly. It is a Japanese company that is greatly involved in design, manufacture, assembling and sales of cars, commercial vehicles, minivans and related products since its formation in 1937. It has been dominating the automobile industry for long and it is annual revenue as of 2013 was about $213 billion and it has employed approximately 330000 people.
The automobile industry has been competitive ever since and Toyota has worked hard to overcome most of its rivals. Despite increased competitive rivalry, the automobile industry has also faced skyrocketing fuel prices and day to day growing environmental concerns. These two factors have impacted consumer predilections away from pick-up trucks that consumer a lot of fuel to smaller and fuel-efficient cars.
A lot of changes have been experienced in the industry and Toyota has been adapted extremely well with car and vehicle sales increasing on daily basis. For any green investors trying to make a mark in the industry, conducting Porter’s 5 analysis of Toyota has been a great strategy to learn from the market. By conducting Porter’s five analyses, it is easy to access where power or great opportunities lie in an industry. There are five essential forces that have made Toyota a reckoning force in the automobile industry. This includes;
- Power of suppliers- The bargaining power of suppliers in the automobile industry is low. Majority of suppliers in the industry offer cooling system, braking system, fuel supply system and electrical systems globally. Unfortunately, these suppliers do not have the power to rule the market as Toyota and other vehicle manufacturers own many compatible suppliers and can also produce their own automobile products.
- Threat of new entrants- It is not easy to enter and dominate the automobile industry. Companies like Toyota and others have used a lot of money to maintain their status and reach those ranks. Toyota also has been able to cut costs than its competitors on used cars and core automobiles, and so, it is not easy for new companies to enjoy such privileges.
- Power of buyers- There many buyers in the automobile industry and their bargaining power has been great. Information on vehicles has been abundant thanks to internet and more buyers can learn more about their vehicles tastes as well as compare prices. Buyers can also find out more on fuel-efficient cars that Toyota has made available and compare them with what other manufacturers are offering.
- Threat of substitutes- With the ever-changing trends in the automobile industry, customers still rely on used cars that Toyota is widely known for. The demand for these cars has risen rapidly and Toyota has utilized these opportunities immensely.
- Competitive rivalry- There has been high or prevalent competition for market share in the automobile industry. This has fueled consumers’ demands and anticipation for lower prices on automobile products. Despite Toyota having a strong cut cost plan, it has experienced pressures on its products costs.
Like any company that wants to enjoy great profits margins, Toyota has continued with its efforts to strengthen its management platform and raise its corporate worth. It has also focused on developing and manufacturing environmental conscious products that also gratifies consumers’ needs easily. In essence, Toyota has outperformed the industry over years and gained matchless market share and there is more to come from the automaker.
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