Analysis Of Toyota Business Model
Key Activities
The Value Proposition Toyota offers to customers is providing the safest, highest quality product, limiting the footprint on the environment. Understanding what the customer wants and expectations of the vehicles are the goal of the Research and Design facilities Toyota has implemented globally. Toyota has spent 1 Trillion yen, (1 Billion USD) in research and development learning what customers want and expect for performance, design, and reliability for a vehicle.
Revenue Streams - Attached in Appendix A, is a photo of which region generated the most revenue for the fiscal year 2018. As indicated by photo most revenue comes from Japan, but the second most stemming from North America. It is understandable to be successful in the home country, but success in North America indicates the trust and appreciation consumers have for the brand.
Key Partners
Partners - Under the Toyota Motors group, the company sells different vehicles, Toyota, Lexus, Daihatsu, and owns a portion of Suburu. Toyota has many key partners in Japan and North America, the company recognizes all partners distributing awards each year. Among some of the partners in North America are Samsung Electronics and Bridgestone America. In Japan, Toyota is a partner with Aisin Seiki Company, who provides most components to Toyota. Suppliers- Toyota is very selective when choosing a supplier collaboration. The company respects Human Rights, Promoting Environmental Activities, Bribery Prevention, and Approaches toward Mineral Use. Attached in Appendix B, is a list of suppliers in North America recognized for its performance for collaboration in 2009. There are a combined 219 companies that supply some components to the manufacturing process of Toyota. The total value of purchased components in 2017 was ~3.6 Billion Dollars .
Toyota Partners with Community-based companies in programs in many different aspects. Toyota has partners supporting homeless shelters, providing smarter meal plans to workers, environmental impacts, scholarships, etc. Appendix C is a sample of programs Toyota has collaborated with to give back to the community. One is promoting local food choices, and another is a Leadership in Energy and Environmental Design (LEED) facilities owned by Toyota. Many programs Toyota has teamed with Partners to perform Key Activities reflecting the values of Toyota.
Toyota has also been in discussion with companies like Microsoft Corporation and Uber Technologies in attempts to form a partnership on Self-Driving cars, Toyota is late entering this segment of the market, compared to competitors like Nissan, GM, and Volkswagen. Motivations for Partnership - Toyota is attempting more mergers and acquisition to gain access to information on self-driving technologies, and to procure new automotive technologies. Toyota has also been in discussion with companies like Microsoft Corporation and Uber Technologies in attempts to form a partnership on Self-Driving cars, Toyota is late entering this segment of the market, compared to competitors like Nissan, GM, and Volkswagen.
Key Resources
Distribution Channels - Toyota has numerous amount of fabrication centers across the world. As shown in Appendix D Toyota has found itself operating within 51 bases in 26 different countries. The map indicates a red dot represents research and design factories and green representing manufacturing factories. Unlike traditional companies, having scripted on the vehicle “made in Canada” or “made in Japan” it is simply “Made by Toyota”. This shows the quality of the product, and the status of the company to be reliable or a high-quality product.
Physical Resources - A major corporation like Toyota has numerous amounts of Physical Resources; the product is a physical resource. Attached in Appendix E is the Balance Sheet for Toyota end of the Fiscal year 2017 & 2018. The list shows assets, liabilities, and equity. Physical resources include Land, Facilities, Transportation Vehicles, Machinery, Equipment, etc. Intellectual Resources: Preparing for the future with the investments into Research and Design Toyota has numerous amount of Patents; Appendix F is an attached list of some of the ideas Toyota has Patented. An interesting patent is the “Flying Car”. Human Resources: Since 2002 Toyota Institute established a Human Resources Development Organization, since 2003, the program has been modeled in Toyota institutions in North America, Europe. Asia, Africa, and Australia.
Value Propositions
Toyota value proposition delivered to the customer is safety, quality, innovation, and reducing an environmental impact. This is demonstrated through the principles of Toyota “Customers First” and “Quality First”. Toyota has been recorded in the industry to have the most durable car. Long lasting, with an average life of some models exceeding 200,000 kilometers, the safety features is one feature Toyota honors. The Five main principles Toyota introduce to the employees is passed from Sakichi Toyoda, Founder.
Problem-solving is durability. Investing in a vehicle, the life expectancy is a critical choice when choosing a car. Although the life of average does not exceed 200,000 KM, consumers report Toyota Corolla will take you over 300,000 Kilometers, honoring the commitment of providing a reliable vehicle. (
Getting the job done - Toyota takes pride in being one of the world’s largest car manufacturers. The impression of providing customers with a high-quality vehicle was a philosophy from the founder of the company. Toyota’s model of the Toyota Corolla sold ~1.2 Million globally. The model has been debated among car enthusiasts as the best car. Toyota Camry has sold ~780K, proving again, Toyota is a trusted brand.
Price- The average small car vehicle has a price tag of ~ $17,000. This is a fair price as competitors such as Nissan, GM Chevy, and Ford are all priced around either the same or a little lower.
Brand/Status - The Brand Status of Toyota is described through the Value Proposition. The Slogan Customer’s First Quality First shows again, how Toyota has impressed many consumers being a strong brand. The company is committed to providing a safe, durable, trusted vehicle.
Customer Relationships - Establishing an online presence through the direct website, social media platforms, or other forms of communicating with customers is cost effective. Limiting positions or having shared responsibilities between jobs reduces the amount of labor. The effectiveness of having this established is organic data and can be stored for company records.
Co-Creation - Toyota has recently patented an idea of a “self-driving car”. Toyota has begun funding this development in 60 factories across the world, having engineers prepare for the future. The parts connected to the idea will be used through companies Toyota has acquired; this confirms the business cycle of Toyota reducing costs. Prior to the funding, the company was using crowdsourcing for funds for research.
Customer Segments
Mass Market: Toyota is a Japanese company, with strong roots in its native land. Shown in appendices H, this is the main Target Market. This mass market of Japan influences the business decisions of Japan. This target market is the number one source of revenue, followed by North America. The two regions have different needs and want.
Niche Market: Toyota has collaborated with Oath, an event planning organization to reach millennials with the Toyota Brand. Millennials are buying fewer cars than older generations, the partnership was to promote Toyota community involvement, and to encourage a younger generation to choose a Toyota.
Diversified: Toyota has diversified its production line making cars in all sorts of sizes (Small, Medium Sedan, and Large) it fabricates Hybrids, Trucks, and SUVs. The company has also diversified its product line through making Transport Trucks (Small, Medium) and Forklifts.
Channels
Dealerships - There is ~ 1500 Toyota, Lexus, or Scion Dealerships in North America. Having these many storefronts in North America is a great way to grow in the market. It allows customers to engage with the dealerships and a vital part of the business model. Buying Experience - The buying experience of a Toyota is something special. Toyota has the second most loyal customer base in the industry to Ford, The average Toyota buyer is a lifelong buyer, as the brands quality and customer service convince the buyer the competitors cannot match this offer. Revenue Streams There are many ways to pay for a vehicle. Toyota has its own financial service to set customers up with a payment program. When buying a car, it Is safe to purchase warranty; Toyota offers 36 months on Basic Coverage, and 60 months for Power Train and Rust Coverage, see appendices I for a sample.
Cost Structure
The cost structure of operating multiple facilities across the globe is expensive, the obvious fixed costs being land, buildings, machinery, and equipment and, intellectual rights (patents, copyright, etc.). Variable costs include components for vehicles, as Toyota owns a portion of the suppliers it is involved with doing business. The purchasing power of Toyota is effective during negotiations, the company is the second largest vehicle manufacturer in the world, this provides an opportunity for Toyota to receive a discount when dealing with suppliers.
Analysis
Toyota’s customer service is outstanding; once a customer joins the Toyota family, Toyota then begins to prove why it is such a trusted brand. The financial document of the fiscal year 2018, proves the company is growing with a growth rate of 7.9% operating income. The company has a good turnover rate in FY2018; the production was very accurate to sales. The company invests heavily into research and design determining what customers’ wants and expectations help the company with future development. The company also has a return on asset and equity of 13.9% and 5.4% FY2018. The company has approximately 96% of revenue coming from automobiles. Understanding the model, Toyota is recognized as a superior brand. The company understands how important customers are to the future success of the company.
