strategic-management

182 ALEN BADAL
Toyota operates in two segments: Automotive and Non-Automotive Operations.
Toyota models include the Corolla and RAV4. Its financial service helps consumers subsidize
vehicles and mortgage loans. Toyota provides financing to dealers. Other operations
include designing and manufacturing of prefabricated housing and information technology
related businesses. The company operates an e-commerce marketplace known as
Gazoo.com and sells vehicles in Japan, North America, Europe, and Asia. However,
Toyota experienced a 40 percent decrease in revenues in February 2009 compared to
2008. Honda and Nissan experienced similar figures with a decrease of 38 percent and
37 percent, respectively.
Toyota is focusing on its all-new Prius, which promises fuel economy to exceed the
current model’s 48 mpg. Also, Toyota will become the first automaker of a hybrid-only
luxury car: the Lexus HS250h, with fuel economy of 40 mpg.
Industry Analysis
The auto manufacturing industry has been crushed of late by the global economic recession
as consumer demand for new autos has plummeted. Consumer confidence is the lowest in
40 years, and unemployment rates exceed 10 percent in many areas. Unavailability of credit
and high unemployment have pushed automakers to rethink methods of producing and selling
cars. Automakers have faced rising costs of health care and pensions. The Big Three hope
to gain further concessions from the United Auto Workers regarding labor costs, among others,
in times of hardship. The Big three also suffer from an oversupply for dealers.
The few consumers purchasing vehicles are doing so for practical reasons, with a
focus on fuel efficiency, durability, and carmaker’s sustainability. Consumers are
concerned over the Big Three’s possibility of going out of business in terms of voided
warranties. According to CSM Worldwide, an automotive research firm, light vehicle
production exceeded the production of cars and trucks in North America and Europe by
an estimated 16 percent and 14 percent, respectively.
Many banks are just not making car loans. This situation has been detrimental to
auto firms. In 2008, the Big Three began offering lowered interest rates or zero percent
financing to lure buyers. Ford, Chrysler, and even Toyota are offering employee prices to
consumers.
The auto industry has experienced a shift from trucks and SUVs to hybrid and small
fuel-efficient vehicles. The government bailout money is diminishing, and Ford has
exhausted its credit lines.
Emerging Automotive Markets
While the economy in the United States slowed and new car sales drastically declined,
Russia’s grew 15.1 percent, Brazil’s 15.5 percent, China’s 12 percent, and India’s 5 percent,
respectively, in the third quarter of 2008. GM and Ford have had some success in markets
outside the United States. GM achieved 61 percent of total revenues in the third quarter of
2008 outside of North America. Ford is counting on China for sales as is Volkswagen, AG.
The Future
Ford’s midsize 2010 Fusion in August 2009 set a monthly sales record for the model for
the fifth consecutive month. A sedan redesigned for the 2010 model year, the Fusion
competes with the high-volume Toyota Camry and Honda Accord in one of the biggest
segments of the U.S. auto market. “It’s a very tough segment to be in. It’s been dominated
by the imports over the last several years,” Chantel Lenard, Ford’s global small and
medium car group marketing manager, said in an interview. “We are starting to break
through and break that grip the imports have had on that segment.”
The Fusion has a long way to go to meet the U.S. sales volumes generated by the
Toyota Camry and Honda Accord. Through July, sales of Ford’s Fusion totaled 102,756 in
2009, while Camry sales totaled 184,216 and Accord totaled 160,817. Both the Camry and
Accord cracked the top 10 in cars bought under the U.S. government Cash for Clunkers
incentive program that ended in August 2009. Ford reported strong Fusion sales in the
program, but it did not crack the top 10 list.