Ansoff Matrix Analysis of Toyota

Toyota is the most leading Japanese automobile company. By creating more innovative car design and spending billions dollars in advertisement a year, Toyota has appeared in the eyes of many auto consumers worldwide. By producing high quality vehicles at affordable prices, Toyota has built its reputation globally. Toyota has reduced their prices as compared to other automobile makers. Toyota believes that the role of purchasing should be long term at the lowest price and no compromise on the production of quality products. Normally, companies do not want to cut their targeted return and they follow the strategy which is formulated in to the cost + profit = selling price. But Toyota takes a slightly different strategy which is formulated in to the price-cost=profit. Strategic management has a direct impact on its business in all organizations. That’s why Toyota has become leading company in auto industry because of the attractive strategic management policy. Now, Toyota plans to build training centers in different parts of the world, where they can easily train their new workers and managers how to design new cars and assemble them. Toyota is constructing more new factories. Although, it has already plants in 27 countries. When Toyota enters in US, everyone believes that this company will not be able to run a successful business. But, at present Toyota is leading in auto companies worldwide because of its strategic management planning.

Ansoff Matrix Analysis

Ansoff matrix is a four-point grid showing the relationship of a company’s products with its market and the various options the company can take as it charts its course. Ansoff analysis are commonly employed by established businesses which have the financial capability to move forward and are looking for the right strategies to take to ensure business growth. The model shows four possible product-market combinations that can be the bases for determining the appropriate corporate strategy to be undertaken. Combined with the other useful matrices and strategic growth models such as SWOT analysis, Porter’s five forces, BCG matrix and value chain analysis, the Ansoff matrix can be a very useful management and marketing tool.

Market Penetration

  • Suitability: The market penetration strategy is most suitable for growing and emerging markets. But in this case, the car market is already well-established and penetration would be made much easier if the target market is growing. Considering that Toyota is such an established name within the automotive industry, the risk of opting to penetrate the market is not that significant barrier.
  • Acceptability: Management may worry that targeting the customers of rival car manufacturers may result in retaliation and it is likely a retention strategy to be considered as a possible and preferable option. Since a fair amount of costs are involved with implementing this specific strategy, it is expected that Toyota would need to improve both product quality and levels of service, backed by promotional spend. However, if the risk of undertaking such a strategy does not pay off, both shareholders and staff may be cautious. That, on the other hand, would lead to shareholders losing value in their shares and also the employees possibly losing their jobs as a result of the failed venture and lost revenues.
  • Feasibility: The fact that Toyota’s range is one of the largest in the automobile world and already exists in each segment of the car market is determining factor for potential penetration on the market. This suggests that Toyota is in a position to go ahead and penetrate any of these existing markets, where the most likely target market for this strategy would be the small car market which is predominantly aimed at young people.

Product Development

  • Suitability: Given the fierce high competition in the automotive market, it is necessary for car manufacturers to keep up to speed with the latest developments. Toyota, like many other car manufacturers is known for spending huge amounts of money on research and development. It spent the most on research and development of any company in the world in 2008. The company spent $8,994million on R&D, which is 4.4% of sales. Toyota was running an estimated Formula One budget of £190m per season and last year the budget was estimated of $445 million. The company is likely to continue to build on the technology found with the Prius and other ‘new-fuel’ alternatives. Toyota’s Global 21 project, better known as Toyota Prius gives the company first mover advantage. Considering the rapidly vanishing natural resources and more specifically oil, future plans of Toyota include development of Camry Hybrid fueled by compressed natural gas (CNG) which shows that there may be possibilities of using a whole new fuel in the future. Also, TMC is planning to launch 10 new hybrid models by the early 2010s, in various global markets. Another key factor, affecting the market position is the launch of the ‘urban commuter’ battery-electric vehicle (BEV) by 2012. And finally, Toyota has a wide range of small cars already at their disposal that inevitably will continue to enlarge the niche that Toyota occupies.
  • Acceptability: With rising fuel prices, more drivers are likely to be looking for ways to cut the costs of motoring and to drive environmentally friendly vehicles. Moreover, shareholders and managers will be interested in maintaining the superior company image by being environmentally responsible. That is why Toyota continues to spend more on research, in order to fulfill its plan to release more hybrid cars in the future. It is likely that its good reputation that has stemmed from the Prius model will meet the consumers’ needs. Furthermore, the Government will be satisfied about Toyota’s decision to continue with the research and manufacture of new and innovative fuel alternatives.
  • Feasibility: Toyota is clearly serious about developing this new technology further and perceives it as being the future in this industry. They have successfully released the Prius model and therefore it is likely that if they unearth more ground-breaking technology they will be more than capable to launch it in the correct way. Given that Toyota is already making rapid progress on developing new products for the existing car market it is certainly feasible to continue develop in this market.

Considering the two examined strategic options, most likely the best option for Toyota is Product Development for existing market. The company has proved itself and exists in each segment of the car market. Its best option is to continue to develop the brand and the products that are demanded most. Though consumers are becoming more environmentally conscious which enforced the excellent ability of the company to research and develop new fuel efficient technologies. Second, the corporation plans to release 10 new hybrid models in the near future. Toyota has the first mover advantage with hybrid synergy drive and sufficient expertise when developing small, fuel-efficient vehicles and there is an increasing demand for these cars.