SWOT analysis of Toyota (6 Key Strengths in 2018)

Ovidijus Jurevicius | July 16, 2018

SWOT analysis of Toyota Motor Corporation

This Toyota SWOT analysis reveals how one of the most innovative automotive companies used its competitive advantages to become the dominant player in the automotive industry.

It identifies all the key strengths, weaknesses, opportunities and threats that affect the company the most. If you want to find out more about the SWOT of Toyota, you’re in the right place.

For more information on how to do a SWOT analysis please refer to our article.

Keep reading.

Company Background

Key Facts
Name Toyota Motor Corporation
Founded August 28, 1937
Logo
Industries served Automotive, Housing, Financial Services, Other
Geographic areas served Worldwide (over 170 countries)
Headquarters Toyota, Aichi, Japan
Current CEO Akio Toyoda
Revenue (JP¥)
(US$)
29.380 trillion (2018) 6.5% increase over 27.597 trillion (2017)
265.398 billion (2018) 4.2% increase over 254.798 billion (2017)
Profit (JP¥)
(US$)
2.494 trillion (2018) 36.2% increase over 1.831 trillion (2017)
22.529 billion (2018) 33.3% increase over 16.906 billion (2017)
Employees 369,124 (2018)
Main Competitors Bayerische Motoren Werke AG, Chrysler Group LLC, Daimler AG, Ford Motor Co., General Motors Company, Honda Motor Company, Nissan Motor, Tata Motors, Ltd., Volkswagen AG and many other automotive companies.

Toyota Motor Corporation (further Toyota) is the world’s leading automaker (often tied with Volkswagen for 1st-2nd place) based in Toyota City, Japan. In 2012, the company was the first automotive company to produce over 10 million vehicles in a single year.

The company operates 4 different brands: Daihatsu, Hino, Lexus and Toyota. Toyota’s brand is the world’s 7th most valuable brand in the world and the most valuable automotive brand, worth US$50.291 billion.

The main Toyota’s markets are Japan, United States and China, where the company sells over 50% of its vehicles. The company produces the best-selling hybrid vehicle Prius.

You can find more information about the business in Toyota's official website or Wikipedia’s article.

Toyota SWOT analysis

Strengths

1. Strong focus on research and development (R&D) leading to some of the most innovative vehicles in the world

Toyota is famous for its innovative culture. The company’s goal on being ahead of its competition by introducing some of the most innovative vehicles in the market has proven to be a successful strategy.

Toyota’s R&D initiatives, especially in producing environmentally friendly vehicle technologies, vehicle safety and information technology, provide it with some of the best strategic advantages.

The company operates one of the largest research facility network among the automotive companies to achieve the best possible results from its R&D expenditure. In total, 15 research facilities in 8 different countries, including Japan, United States, China, Thailand, Australia, Germany, France and Belgium, focus on 3 key R&D areas:[1]

  • Basic research. This area researches basic vehicle technology.

  • Forward-looking and leading-edge technology development. Development of newest technology and components that surpasses rivals’ technologies.

  • Product development. New model development and upgrades for existing ones.

Toyota’s focus on innovation has resulted in one of the highest automotive R&D spending. Toyota’s R&D expenditures were approximately JP¥1.064.2 billion (US$9.613 billion) in fiscal 2018, ¥1,037.5 billion (US$9.579 billion) in fiscal 2017, and ¥1,055.6 billion (US$8.787 billion) in fiscal 2016.[1]

Figure 1. Toyota’s and its competitors R&D spending (US$ billions)
Company 2017 R&D As a % of revenues 2016 R&D As a % of revenues
Toyota* 9.613 3.6 9.579 3.8
Ford 8 5.1 7.3 4.8
Volkswagen 15.8 6.7 14.4 7.3
General Motors 7.3 5 8.1 4.9

Source: The respective companies’ financial reports[1][2][3][4] (Toyota’s latest fiscal year only runs for 3 months in 2018. Most of the company’s financial year is in 2017, so we compare fiscal 2018 with other companies’ 2017 financial year as it is more accurate.)

Among the automotive companies, only Volkswagen spends more on R&D than Toyota. Nonetheless, Toyota uses its R&D budget the most effectively, spending just 3.6% of its total revenue on R&D, while Volkswagen spends 6.7%.

This means that Toyota needs to spend less on R&D to generate the same amount of revenue than its key rivals.

Huge, efficient R&D spending has allowed Toyota to gain a competitive advantage over its competitors and to become one of the largest automotive manufacturers in the world by researching and introducing the leading-edge technology and vehicles to the consumers.

2. The most valuable and one of the most recognizable automotive brands in the world

Toyota Motor Corporation was incorporated in 1937 and since then, has become one of the most recognizable brands in the world.

According to Interbrand[5] and Forbes[6], Toyota’s brand is the world’s 7th and 9th most valuable brand worth US$50.291 billion and US$44.7 billion, accordingly. In both lists, it is the most valuable brand out of all automotive companies.

Figure 2. Automotive brand ranking by Interbrand
Ranking (Automotive) Brand Brand Value (in US$ billions) Overall brand ranking in 2017
1 Toyota 50.291 7
2 Mercedes-Benz 47.829 9
3 BMW 41.521 13
4 Honda 22.696 20
5 Ford 13.643 33
6 Hyundai 13.193 35
7 Audi 12.023 38
8 Nissan 11.534 39
9 Volkswagen 11.525 40
10 Porsche 10.129 48

Source: Interbrand[5]

Brand value is closely related to brand reputation and recognition. Toyota, which produced and sold 8.964 million vehicles in 190 countries in 2018 alone, has one of the widest consumer reach in the world.

Manufacturing, research and sales operations worldwide, combined with a huge number or vehicles sold, as well as advertising spending has helped the company to create one of the most recognizable brands in the world. Brand recognition helps the company to introduce new products to the market more easily and with fewer costs.

Toyota brand is also one of the most reputable brands in the automotive industry. Over its 75 years’ history, the company received hundreds of awards accolades in vehicle design, safety, environment-friendliness and manufacturing operations.[7]

In 2018 alone, the company has received 7 IIHS (Insurance Institute for Highway Safety) Top Safety Picks 2018 awards (more than any other automotive company) for its Toyota Corolla, Prius, Camry, Avalon, Highlander and RAV4 vehicle models as well as 4 other Top Safety awards for Lexus models.[8]

The company received more 2017 J.D. Power Vehicle Dependability Awards than any other brand.[9] In addition to the awards for its vehicles, the company ranks the 2nd on the Carbon Clean 200 List, which ranks the companies according to their efforts to transition to clean energy.[10]

Toyota’s brand and recognition provides the company with a competitive edge over competitors as few other automotive brands are so well-known and reputable.

3. Toyota Production System

Toyota production system or TPS is a manufacturing system developed by Toyota. The system’s philosophy is to ‘eliminate all waste from manufacturing process’. The system was based on Just-in-Time concept.

TPS has become very successful in allowing the company to increase production efficiency, decrease manufacturing time and simplify its processes. All of which resulted in lower costs and better quality vehicles.

Figure 3. Toyota Production System

Toyota production system

Source: Lean Enterprise Institute[11]

Due to the TPS, Toyota’s operating profit margin of 8.2% is the highest when compared to its largest competitors Volkswagen’s operating profit margin of 6% or General Motors’ operating profit margin of 6.2% (in 2016).

Figure 4. Toyota and its largest competitors’ operating profit margin comparison (in percentages

Toyota production system

Source: Respective companies’ financial reports[1][3][4]

The graph shows that Toyota constantly enjoys higher operating profit margins than Volkswagen or General Motors. This means that costs of running the business are much lower for Toyota, which is most likely the result of the company’s production system.

Toyota’s production system is unique and is very hard to replicate. It is a strength few rivals can match.

Access the full analysis... more Toyota strengths, weaknesses, opportunities and threats

Published: July 16, 2018
Format: PDF + PowerPoint
Pages: 25
Words: 5,000
Charts/tables: 12
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Table of contents

  • Company Overview
  • SWOT Analysis
  • Strengths
  • Weaknesses
  • Opportunities
  • Threats
  • Summary
  • Sources

Sources

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About Ovidijus Jurevicius

Ovidijus is the founder of SM Insight and the lead writer since 2013. His interest and studies in strategic management turned into SM Insight project, the No.1 source on the subject online.

He's been using his knowledge on strategic management and swot analysis to analyze the businesses for the last 5 years. His work is published in many publications, including three books.