Strategy Analysis

BO WANG FAN ZHANG KANGKANG YANG

VADIM ROMANOV YASHU SHARMA
 Agenda
• Overview of Automobile Industry • Porter’s Five Forces Analysis
Industry Summary Threat of new entrants
Toyota Corporation Bargaining power of buyers

• Challenges and Problem Facing Threat of substitutes

External Challenges Bargaining power of suppliers

Fully Market Competition Intensity of rivalry among competitors

Inner Problem Facing

• SWOT Analysis
• The strategy of Launching Prius
• PESTLE Analysis
Prius Introduction
Political / Economical / Social-Cultural / Technological / Legal / Environmental
Strategy Decision

Strategic Importance of Prius • Strategy Evaluation

 Overview of Automobile Industry
• Industry Summary
Global motor vehicle production was 49 million units and 644 million units
was used in the worldwide by that time. United States ranked in the first place
with about 9 million new registrations while Japan followed behind with more
than 4 million fresh registrations. There were almost 12 main manufactures
who occupied 80% of global automobile market.

• Toyota Corporation

Toyota is the 3rd rank of the World’s largest vehicle. In the world largest
vehicle seller country: US Toyota has 8.5% market share as the highest foreign
automaker. It is the biggest car company in domestic car market shares.
 Challenges and Problem Facing
EXTERNAL CHALLENGES FULLY MARKET COMPETITION INNER PROBLEM FACING

• Governmental • Lack of innovation

Declining in the domestic market
Increase the fuel efficiency.
share.
• Regulatory • Weak product planning
Improve the average miles per
gallon of each manufacture’s car Lack of creativeness and diversity
output. of product promotion and technical
revolution.
Focus on the tailpipe emissions of
hazardous pollutants. • Delay in shifting production
overseas
• Global Leadership
Increasing globalization trends Shortages of business
promoted many companies specialization and differentiation in
pursued cross-border acquisition. the worldwide.
 The strategy of Launching Prius
• Hybrid system: A gasoline-
electric hybrid system
combined an internal
combustion engine’s, high-
speed power with the clean
efficiency and low-speed
torque of an electric motor.
• Saving fuel and reducing
emission pollution.
Prius
Strategy Decision
• Launching the Prius would be a
wise choice in that appropriate
time period.
• With the competitive advantages
among the whole industry and the
specialization in the producing
technology, it would be a huge
success in the background of
promoting the concept of the new
car in 21st century.
• It could meet the need of society
development and regulations.
• Obviously it brings a revolution
in the technological developing
process.
• It would be a good opportunity
to develop the business that
can meet the needs of
sustainability and stability of
the corporation.
• It would give a good example
of business differentiations.
Importance
Porter’s Five Forces Analysis

Threat of Setup costs are so high that the threat of new entry is low .

New
There are significant economies of scale, so the threat of new entry is low .

There is a significant product differentiation, and the threat of new entry is low.

In automobile industry, newcomers face difficulty in accessing distribution channels.

Entrants The threat of new entry is low.

Bargaining The buyer has choice in this industry, so the bargaining

power of buyer is high.
Power of The item consists of a big percentage of total buyer’s

Buyers cost, so the bargaining power of buyer is high.

 Porter’s Five Forces Analysis

Threat of Car has more utilities than other substitutes such as motorbike, the
threat of substitution is low.

Substitutes The price of substitutes is lower than automobile, such as train tickets,
the threat of substitution is high.

Bargaining Power The profitability of suppliers is significantly affected by the automobile industry,
because the inputs in our business is unique. The bargaining power of suppliers is low.

of Suppliers Automobile industry company is important to suppliers, so the bargaining power of

suppliers is low.

Intensity of rivalry
The competitors are diversified, for example, Ford is strong in trucks, BMW is more
focused on sporty function of cars. Intensity of rivalry among competitors is high.

among competitors
The whole automobile industry is growing rapidly, the forecasting shows that the
production will increase to 50% by 2010. Intensity of rivalry among competitors is
high.
• Best Fuel Efficiency of any midsize car
• Good performance compared to non-
hybrid vehicles.
• Appeal of the most recent innovation.
• Continuous R&D on technology
development.
SWOT
• The Car for the 21st century.
• Marketplace acceptance.
• Commitment to environmental
protection.
• The cost was substantial since the technology was new
and most of the components had been developed from
scratch.
• PROCO engine development stopped in the early
1980s because PROCO could not be mass produced.
• The engineers were focused on developing the new
technology and could not devote resources to cost
reduction.
• High price as compared to non-hybrid
cars.
• Risk of failure.
• Competition in technology development.
 • Government: increase the fuel efficiency of their vehicles, in part to control emissions and in part
to slow the depletion of oil supplies and mitigate concerns about reliance on oil imports.
• Foreign trade regulation: many nations adopted trade barriers to slow automobile imports,
especially from efficient Japanese.
• Political stability: There is a threat in the fuel shortage as it was in 1973.

• The automobile industry would experience the

• Tailpipe emissions of hazardous decrease because of the financial crisis.
pollutants. Political
• Interest rate, the inflation and the cost of living would
be the factor that can bring a obvious effect to the
• Strengthen the environment industrial situation.
Environmental Economical • Sales stability and appropriate pricing could help to
protection law promote the Prius.
• Competition of the market showed a urgent demand
PESTLE of the launch of Prius.

• Increase the average miles per gallon

(mpg) of each manufacture’s car output.
• Strengthen the environmental
protection laws.
• Example: In 1990, the California Air
Resources Board (CARB) adopted a Zero
Emission Vehicle (ZEV) program.
• Resource and environment will be the most concerned factors
Legal Social- Cultural in the next century.
• The whole society begin to realize and change the trend, the
need of customers is leaded by the tendency.
• Saving the resource and reduce pollution to the environment
Technological
become much more needed

• Lowering emissions and increasing fuel economy is the new trend for automobile industry as
people are concerning more and more about environment and efficiency. Some technologies
have been developed in order to meet this new trend, such as improved gasoline engines,
diesel engines, electric vehicles and fuel cell vehicles.

• Toyota believe that “resources” and “environment” should be the key concepts of new car in
the 21st century. And the hybrid technology is proposed by Toyota, which they called “Prius”,
to improve fuel efficiency and reduce particle emission which is environmental friendly.
Evaluation of Strategy

In conclusion, the automotive industry is attractive especially

after the new hybrid technology launching. Under the impact
of macro-environmental forces, except the legal issue, Prius
has significant opportunity and strength to develop more
advantages and win the market share as a new environment
friendly and resource saving car.
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