Essay

Strategy comparison: Toyota vs. Volkswagen

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Module
Strategic Management

Institution
Anglia Ruskin University (ARU)

The study aims to assess the strategic decisions, choices and strategies of two competitors in the car manufacturing industry – Toyota and Volkswagen. The severe rivalry and industry dynamics, combined with excessive need for innovation and competitive advantage at all stages of operation, requir...

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Uploaded on August 25, 2021
Number of pages 16
Written in 2015/2016
Type Essay
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Table of Contents
Abstract........................................................................................................................................................1
1 Discussion and Analysis.............................................................................................................................1
1.1 Industry overview...............................................................................................................................1
1.2 External analysis.................................................................................................................................2
1.3 Organisational overview and core competencies...............................................................................3
1.4 SWOT analysis.....................................................................................................................................4
1.5 BCG matrix..........................................................................................................................................6
1.6 Impact & strategic choices on branding, products and market decisions...........................................7
1.7 Ansoff matrix......................................................................................................................................8
1.8 Competitive Profile Matrix (CPM).....................................................................................................11
2 Conclusions and recommendations.........................................................................................................13
Bibliography................................................................................................................................................14

Abstract

The study aims to assess the strategic decisions, choices and strategies of two competitors in the
car manufacturing industry – Toyota and Volkswagen. The severe rivalry and industry dynamics,
combined with excessive need for innovation and competitive advantage at all stages of
operation, require organisations to carefully consider the applicability and implications of all of
their strategic choices as they could have a dramatic impact on their market position and
competitiveness in the industry. A variety of strategic assessment tools have been used, including
Porter’s Five Forces, PEST analysis, competence identification, SWOT analysis, BCG matrix,
Ansoff matrix and competitive profile matrix.

1 Discussion and Analysis

1.1 Industry overview

To begin with, the analysis focuses on the industry and its main characteristics. In order to assess
the attractiveness of the industry, Porter’s Five Forces analysis is performed by evaluating a
variety of demand and supply market forces, as well as, industry structure characteristics. Thus,
Porter’s Five Forces requires a thorough understanding of the bargaining power of buyers and

, suppliers, threats of new products and substitutes and the level of competition within the industry
(Porter, 1979). A brief overview of the industry analysis is presented in table 1. In general, the
automobile industry is characterised with an average level of attractiveness. Car manufacturers
benefit from low level of bargaining power of suppliers and threats from new entrants. On the
other hand, the threat of substitutes, the increasing bargaining power of customers and especially
the existing extremely high level of competitive rivalry lead to decreased industry attractiveness.

Table 1 – Industry analysis

Element Characteristics Overview
Bargaining -Large number of suppliers WEAK
power of -Supplied materials are easy to access and substitute with alternatives
suppliers -Suppliers do not threaten forward integration
Bargaining -A large number of buyers and some of them are large of size (corporations and STRONG
power of governments) which increases their power
buyers -Buyers can choose from many alternatives
-Most buyers are price sensitive
Threat of -Many substitutes available and usually they are cheaper and more AVERAGE
substitutes environmentally friendly
-Nevertheless, substitutes cannot offer the same level of convenience
Threat of -Large capital requirements and legal barriers serve as effective entry barriers WEAK
new entrants -New entrants, who are initially small of size, cannot achieve economies of scale
-Trade barriers (tariffs, quotas, etc.) prevent new entrants at some geographic
markets
-Brand and product differentiation by existing companies prevent new entrants
Competitive -Many competitors and matures industry with low growth (2.5%) VERY
rivalry -Very costly to leave the industry STRONG
-Existence of loyal customers which makes it difficult to expand the market share

Source: Nkomo (2015)

1.2 External analysis

The automobile industry does not operate in isolation from the external environment. For this
reason, it is important to analyse the relevant political, economic, social and technological
(PEST) factors that influence industry trends and determine the actions of Toyota and
Volkswagen, respectively. These external forces deliver numerous opportunities and threats to
both organisations.

, Table 2 – PEST analysis

Factor Discussion
Political -Many countries still impose trade barriers which limit sale growth
-Political instability in EU (risk of Brexit), geopolitical tensions, military actions in
Middle East: all of them adversely affect car demand
Economic -Very low global growth which inhibits customer demand
-Exchange rate uncertainty posing risks to car manufacturers
-Historically very low interest rates and low unemployment that support car demand
and facilitating borrowing
-Volatile energy prices which create uncertainty
Social -Global population growth that supports car demand
-Changes customer preferences in developed countries towards more fuel-saving and
eco-friendly vehicle which demand new innovations from producers.
-Trends for increasing environmental concerns
Technological -New technological developments that facilitate the introduction of new alternatives,
such as hybrid vehicles
-Increasing use of robots that decrease production costs

Source: Nkomo (2015); Price Waterhouse Coopers (PWC) (2015)

The brief overview of the external environment suggests that the existence of a challenging
global framework. Thus, car manufacturers need to take into account not only the current industry
issues, but to also consider a variety of political, economic, social and technological determinants
that influence the choice of production, distribution, market demand, consumer trends and
methods of production. In this context, Toyota and Volkswagen are required to apply plausible
strategic choices that support organisational development in a turbulent industry and external
environment.

1.3 Organisational overview and core competencies

Toyota was established in 1937 and currently includes several brands: Toyota, Lexus, Hino and
Daihatsu. Toyota achieves $213 annual sales revenue and has employed more than 333,000
people globally. This is the largest cat manufacturer in the world with a share of almost 11%
(Nkomo, 2015). The core competence of the company is selected to be the production of high
quality vehicles at reasonable prices, thus providing the highest value to customers (Nkomo,
2015). The distinctive competence of the business organisation is its own manufacturing system
named Toyota Production System (TPS), based on the foundations of lean manufacturing.

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