In this Toyota SWOT analysis, you will learn about the triumphs and struggles of Toyota, one of the top 10 largest companies in the world. Specifically, we will use the SWOT analysis tool to dive into the following:
- Toyota’s Strengths
- Toyota’s Weaknesses
- Toyota’s Opportunities
- Toyota’s Threats
If you’re new to SWOT analysis, the way we look at strengths, weaknesses, opportunities, and threats while performing a SWOT analysis is different from the way we traditionally view these words. But don’t worry, each section explains what these words mean in the context of SWOT analysis. Now, before we dive in, let’s look at three main ways the article will help you:
- Improve Critical Thinking: Learning to use the SWOT analysis framework through this example will help you develop your critical thinking and problem-solving abilities.
- Develop Business Knowledge: A business operates in a complex environment of many parts that interact and integrate in subtle and obvious ways. SWOT analysis helps you understand these intricacies; thus, developing your business knowledge.
- Decision Making: Making decisions is a core skill people in management must possess. However, personal bias influences decision making. A tool like SWOT analysis, which forces you to look at all dimensions, negates this bias and leads to better decisions.
So, if you’re interested in honing your critical thinking, business knowledge, and decision-making skills, you’ll want to read our SWOT analysis for Toyota. Let’s get started.
What are Toyota’s major strengths?
In the SWOT analysis scheme, Toyota’s strengths are internal factors that help Toyota maintain its success in the auto industry. These are the reasons why Toyota is so successful today:
- The Toyota Way: Toyota’s operations follow the principles of continuous improvement and respect for people. These principles boost productivity and foster innovation. They also inspired the concept of lean management. For many decades, these principles have formed the core strength of Toyota.
- Fuel Cell Patents: Automobile companies are pursuing the vision of zero-emission vehicles through two main technologies – hydrogen fuel cells and electric vehicles. Toyota owns around 5,680 global patents related to hydrogen fuel cells. These patents put Toyota in a strong position in the zero-emission vehicles market.
- Solid-State Battery Pack: In addition to fuel cells, Toyota is also actively researching and developing technology for electric vehicles. Toyota is unveiling its revolutionary solid-state battery in 2021. The company claims the new battery pack will extend the maximum EV range to 500 km on a single charge. Plus, it charges from 0 to 100% in 10 minutes. What’s even more impressive – Toyota developed the technology four years ahead of schedule.
- Hybrids: While Toyota develops competencies in clean energy vehicles, it’s consolidating its position in hybrid vehicles. Toyota makes some of the most reliable green cars in the market. Until the reliance on fossil fuels can be eliminated, Toyota’s hybrids will be an attractive option for environmentally conscious buyers.
- Strong Stock Performance: The pandemic-triggered economic slowdown hit automakers hard. Despite this, Toyota’s stocks fared better than most car manufacturers. While General Motors’ stocks fell 64% from peak to trough, Toyota’s stocks showed only a 15% fall. This shows the company’s resilience.
Among these strengths, the prime reason why Toyota is so successful is the company’s commitment to continuous improvement. All the other strengths stem from this core strength.
What are some of Toyota’s weaknesses?
As a tool, SWOT analysis looks at weaknesses as internal factors that prevent or slow down growth. Here are some of Toyota’s weaknesses:
- Recalls: Although Toyota sets the standards for quality control, its design and production aren’t flawless. For instance, early this year, Toyota recalled 700,000 vehicles because of a faulty fuel pump. Such situations devalue the people’s trust in the brand and can undo decades of goodwill.
- Strikes: Adhering to strict quality control standards while maintaining high productivity and profitability at times puts the management at odds with the labor. Recently, the workers at a Toyota manufacturing plant in India went on strike due to labor problems. Such issues debilitate the company’s ability to meet market demands.
- Rigid Hierarchy: Toyota follows a rigid hierarchy where the orders flow in one direction – top to bottom. The rigid hierarchy allows better control, it does stifle creativity and flexibility.
- Partial Global Presence: Toyota has strong sales in the US, Europe, and Japan. However, it doesn’t boast similar sales figures in Africa, South America, and the Middle East. For Toyota to be a truly global company, it cannot leave these regions unexplored.
- Technology Gap: As far as future-tech goes, Toyota is playing catch up with Tesla. In a teardown of the Tesla Model 3, engineers found Tesla’s technology 6 years ahead of Toyota and Volkswagen.
What’s unique about Toyota is its ability to learn from weaknesses and become stronger than ever. In that regard, the weaknesses presented above could give Toyota a great edge if they’re able to overcome them.
What are some opportunities for Toyota?
When conducting a SWOT analysis, all external factors enabling Toyota’s growth are considered Toyota’s opportunities. Some of these opportunities are:
- Flying Car Project: Japanese startup SkyDrive successfully conducted the first manned test flight of its flying car. Toyota is one of the companies backing SkyDrive. Although SkyDrive has to overcome many technological and regulatory hurdles, Toyota believes its investment in the company would pay off.
- Smart Cars: Toyota is working on self-driving systems such as the Guardian and the Chauffeur. These systems aim to make driving safe and convenient for people not experienced enough to drive (Guardian) or able to drive due to old age (Chauffeur). Toyota is still unsure how the markets would react to its self-driving options. But, with technology in every area moving towards enabling convenience and ease, Toyota’s plan for autonomous vehicles is a smart one.
- Nanomaterials: Toyota AI ventures recently invested in Carbice, an Atlanta-based nanotech developer. Nanomaterials have a wide range of applications ranging from making vehicles lighter, stronger, more durable, quieter, cooler, and safer. For example, Toyota has invested in Carbice to help solve issues that high temperatures cause in the car’s electronics. Toyota should continue making such investments.
- Cloud and AI Technology: Many sectors are leveraging the combination of cloud-based and AI technology to improve ways in which it serves its customers. Automotive-based cloud technology is growing at 19.88% and is projected to touch nearly $70 billion by 2022. So, cloud and AI are important opportunities Toyota should seek to leverage.
- Big Data: Automakers are using vehicle-generated data in interesting ways such as predictive maintenance, use-based insurance, and autonomous driving. As one of the largest car manufacturers in the world, Toyota is sitting on a goldmine of data.
Toyota’s biggest advantage is its budget for research and development. This year, Toyota plans to spend $13 billion on R&D. This budget allows for Toyota to invest in future technologies that will give the company an edge in the world of clean technology.
What are the biggest threats to Toyota?
Although a threat can mean many things, in SWOT analysis a threat is an external circumstance that stops progress. Some of Toyota’s threats are as follows:
- Brexit: With just days for the UK to negotiate a trade deal with the EU, a no-deal Brexit would add 10% to the cost of imported cars. Also, increased tariffs will negatively impact Toyota’s car factories in the UK.
- Trailing Tesla: Toyota may be one of the largest car manufacturers in the world. But, it isn’t the most valued; Tesla is the most valued automaker. At the time of this writing, Tesla’s market cap is 175% higher than Toyota’s. Although the President of Toyota dismissed Tesla for not being a “real” car company, Tesla sure is giving Toyota stiff competition in the post-fossil fuel tech.
- COVID-19 Restrictions: Japan, the USA, and Europe account for 66% of Toyota’s sales. The pandemic has severely impacted these regions. Measures to prevent the spread of the virus have caused economic recession and unemployment. Until the governments administer the vaccine on a large scale, COVID-19 would continue to threaten Toyota’s growth.
- Economic Crisis: In the second quarter, Toyota’s profits dropped by 74%. In a statement Toyota issued, the company expects the weakness to continue impacting performance in the foreseeable future.
- Competition: Toyota’s rivals Tesla and Volkswagen are matching Toyota’s stride for stride. Toyota can’t afford to slip. Falling back now would be a critical hit. For instance, a venture capitalist investor says Tesla’s evaluation could soar to $2 trillion in the next three years. What would Toyota do to match this growth?
Among these threats, the most significant one is the threat the competitors pose. Issues arising from the pandemic will resolve in a couple of years. But Toyota’s biggest competitors – Tesla and Volkswagen – are here to stay. If anything, the competition will intensify.
Toyota SWOT Analysis: Conclusion
90 years of dedicated pursuit of excellence has propelled Toyota to the forefront of the auto industry. A leader in production, sales, and research, Toyota plays a vital role in bridging the gap between the fossil-fuel era and the clean-energy era.
The company’s operation philosophy – The Toyota Way – is its biggest strength. And the promise of a cleaner future is its biggest opportunity.
However, a traditional organization at its core, will Toyota’s rigid hierarchy enable it to adapt to a new future? Also, how will Toyota handle the rapid rise of Tesla? Time will tell whether Toyota overcomes these weaknesses and threats.
If you would like to improve your business knowledge and sharpen your problem-solving skills, look at other SWOT analysis examples. And if you would like to learn what is a SWOT analysis, check out our SWOT analysis templates and how-to guide.