The automobile is essential for consumer nowadays as it provides convenience to travel from a place to another place. Hence, mostly everyone will own a car so the fluctuation of petrol price may affect the automobile industry. According to the record of petrol price adjustments in Malaysia announced by the Ministry of Domestic Trade and Consumer Affairs, from April 2017 to July 2018, there is a fluctuation of petrol price in Malaysia. Total industry volume (TIV) declined in the first quarter of 2018, there is a decrease of 135,140 units compared to 140,839 units sold in the first quarter of 2017. This represents that 4.05% or 5,699 units lower than the first quarter of 2017 (Lim, 2018). This shows that when there is a fluctuation of petrol price in Malaysia, it will affect the automobile industry in terms of the decline in vehicles sales performance. The rise in petrol prices plays an important role in the automotive industry because every vehicle needs the petrol helps to run the cars, trucks and others vehicles. So, when the price of the oil rising which also means that the cost will increase as well. Therefore the rising of petrol price is affecting the demand of having a vehicle by the customer. This is because the customer will tend to choose public transport as the transportation fees are cheaper as compare to having their own vehicle as there is the fluctuation of the petrol price.
Besides, National Automotive Policy 2014 is established are expected to make a significant contribution to the overall growth to both country and automotive industry (Industry, 2014). In 2016, the government invested in land public transport infrastructure projects such as the Light Rapid Transit (LRT), Mass Rapid Transit (MRT) and High-Speed Rail (HSR). Therefore, it encourages the enhancement of public transport infrastructure to contribute to the growth of ride-sharing services (Willy, 2018). Due to the public transport offering up to 20 percent cheaper fares compared to others transport service so the people will more be moving towards the usage of public transport compared to driving their own vehicles. This situation has an impact on the growth of the ride-sharing services because most of the people will more prefer to take public transport. This will affect the automotive market in Malaysia as the sales of the automotive industry will drop.
2.1.2 Economic Environment
From the data above, this is the total volume sales in 2014 and 2015, sales figures for April 2015 was fell 23% which dropped 13,554 units from the same period in April 2014 (Lim, 2015). Even though the car dealer try to drop the car price to encourage their consumer to buy new vehicles but the slump in April which showed that the consumer is still adjusting to goods and services tax(GST) (Loh, 2015). Due to their financially become more burdened so it was difficult to attract and persuade their consumer buying a new vehicle. After that, in May 2018 our new government are formed and our Finance Ministry announced that from June 2018, the GST will be reducing from 6 percent to zero-rate. Most of the automotive industry spread the news of zero rate percent GST to their consumer which has brought considerable savings to car buyers. At the same time, Malaysia Automotive Association (MAA) president Datuk Aishah Ahmad mentioned that the volume sales for June were hit the highest recorded in 2018 due to the zero-rating of the Goods and Services Tax (Mahalingam, 2018). Thus, due to the reducing of GST which cause the demand of purchasing vehicles to become higher meanwhile because of the car prices to drop so their consumer have more money and have the ability to purchase new vehicles.
The inflation rate is one of the reasons that will affect the automotive industry. This is because when there is inflation in the country which means the price of the products will increase the too much higher price as compared to usual. For example, an iPhone cost rm3000 during normal time however when there is inflation, an iPhone is double the price which is rm7000. In this case, the customer does not have the purchasing power due to the increase in the price of products.
According to the graph above which shows that the total sales volume in the automotive industry in the year 2017, the sales of the total vehicle is drop for 3450 units compared to the previous year. This incident happens as there is a rise in inflation rate which is from 2.08% in 2016 to 3.8% in 2017 (Statista, 2018). Hence, it is shown that there will be a negative impact towards the automotive industry as the sales have dropped from the year 2016 to 2017. This is happening as customers are feeling burdened when there is the increase in the price of products. Hence, the customer does not have the ability to purchase cars when there is inflation. Besides that, the total vehicles in 2016 are 580,085 unit which is more than 2017 which is 576,635 unit as during 2016 customers have the ability to purchase vehicles (MAA, 2018). However, during the year 2017, customers are having difficulty buying vehicles as their price has increased to very high. Hence, customers willing to buy it after the inflation as it is way cheaper.
2.1.3 Social Environment
One of the social factors that will impact the automotive industry is the implementation of Grab. In 2012, Anthony Tan- the founder of GrabTaxi has implement grab in Malaysia because the taxi system and safety issues that happen on taxi driver so the founder of GrabTaxi had this idea to introduce Grab in Malaysia in order to create a safer transportation environment (Freischlad, 2016). Hence, it started to attract people to join Grab to become a driver as their permanent job as well as the part-time job. It has shown that there are up to 60,000 Malaysian registered to be a Grab driver (Bernama, 2016). So, the increase in the number of people to become a driver, the demand for purchasing vehicles will increase because the driver needs vehicles as their transportation to deliver their service.
Pollution control is one of the social factors that will impact the automotive industry. Nowadays, people are getting more concern on pollution issues or environmental constraints. Some people will pay more attention to environmental issues such as air pollution, greenhouse effect, ozone layer depletion, climate change and many more that will affect our environment, human, and nation on the earth. These environmental issues are indirectly caused by the automotive industry because the huge amount of pollution is released from the vehicles. That is why getting more and more automotive industry are more concern on this issues so they come up with another type of car in the industry which is the eco-friendly car that it can reduce the air pollution meanwhile it also provides with more option of choice of vehicles type for their consumer to choose. According to the National Green Technology Master Plan and the Electric Mobility Blueprint (EMB) is a welcome development that emphasizes by Malaysia government to switch the vehicles into Green Car (CleanMalaysia, 2017). This encourages the innovation of automotive industry to come up with electric vehicles like Renault Zoe in 2016 (Aaron, 2016). At the same time, the automotive industry will able to build up their image because the people will think that they care for our environment.
2.1.4 Technology Environment
One of the factors that will impact the automotive industry is the implementation of self-parking technology. In 2016, BMW launched a new technology car BMW 7 series which is the world's first series of the car with remote control parking that it can park itself (Makwana, 2016). This technology enables the driver can easily enter into a very narrow parking space without anyone driving. No matter how big or small space is, the sensor is work and control the throttle and brakes perfectly. These innovations affect the automotive industry by encouraging the others competitors also follow their trend to implement this technology in the future.
Another factor that will impact on the automotive industry is implementing of the electric and green car. An economist Dr. Yeah Kim Leng mentioned that Malaysia should more focus new technology of electric and green car in order to reduce the high levels of pollution. The implementation of this innovations which will impact on the demand of petrol in the market because when consumer are more prefer to use electric and green car, it will cause to traditional vehicles to drop when there is less consume of traditional vehicles it means that less petrol will be used because electric vehicles will only need to use electricity in order to used electricity to function. Therefore, this impact the automotive industry because as it switches to the direction of car purchasing by the consumer (Malaysia, 2016).
2.2 Porter 5 Force
2.2.1 The Rivalry among existing competitors in the industry
Firstly, the rivalry among existing competitors in the industry. In this force examines how intense the competition currently is in the marketplace. The importance of this force is the number of competitors and their ability to threaten a company. When there are the larger the number of competitors, meanwhile the competitors can also offer the number of equivalent products and services, then it can degrade the power of a company. On the other hand, where the competitive rivalry is minimal and no one else is doing what you are doing, then you will have tremendous strength and huge profits. (Martin, 2017) The rivalry among existing competitors is strong. Toyota has numerous competitors such as Honda, Nissan, Hyundai, Ford, and others. The rivalry among existing competitors will cause a threat to Toyota because there are too many competitors that they will provide the similar type of vehicles and similar price range of the vehicles. So, Toyota may lose their customer because the customer will have more choices to choose the vehicles they like meanwhile causing their customer to switch from Toyota to another company.
2.2.2 The Threat of new entrants
This force examines how easy or difficult it is for competitors to join the marketplace in the industry. The easier the competitor to join the marketplace, the largest the risk of a business's market share being depleted. Barriers to entry include absolute cost advantages, access to inputs, economies of scale and well-recognized brands. (Martin, 2017)
The threat of new entrants to the Toyota is very weak because it is risky and expensive due to the investment of initial capital is very high that have to establish in production facilities and distribution networks. Furthermore, it is not easy for a new entrant to enter, lead and compete to the Toyota because Toyota has used a lot of time, effort, money and experience to maintain their status and reach to the higher levels as one of the leading company in the world. So, the new entry might need to take times to take the challenges and build a strong reputation to stay competing. Due to all these reasons so it makes the threat of new entrants to the Toyota is low.
2.2.3 The Bargaining Power of Customers
If the bargaining power of customers is high, they influence the profitability of the market by imposing their requirements in terms of price, service, quality, and others. Choosing clients is crucial because a firm should avoid being in a situation of dependence. The level of concentration of customers gives them more or less power. Generally, their bargaining power tends to be inversely proportional to that of the suppliers. (Jurevicius, 2013)
The bargaining power of Toyota's customers is strong. This is because there are a lot of choices type of vehicles from different car industry that the customer has options to choose from. In addition, the switching cost is low so it causes high probably that the customer will switch to another brand. Moreover, in this technologically advanced era, the customer can get the vehicles information, advertisement or offer from different companies' websites so the customer has their freedom to make their own choice and choose the vehicles they like meanwhile the customer will always make the comparison. For example, the customer is very sensitive to the price vehicles so when they found that Honda offering the similar car at similar prices as Toyota then it may cause that their customer will more prefer to go for Honda which Honda may even offer a cheaper price than Toyota. Hence, due to all these issues which increase the bargaining power of Toyota's customer so Toyota will lose their loyal customer.
2.2.4 The Bargaining Power of Suppliers
The bargaining power of suppliers is very important in a market. Powerful suppliers can impose their conditions in terms of price, quality, and quantity. On the other hand, if there are a lot of suppliers their influence is weaker. One has to analyze the number of realized orders, the cost of changing the supplier, the presence of raw materials, and others. (Jurevicius, 2013)
The bargaining power of Toyota's suppliers is weak. This is because there is a large amount of supplier in the automotive industry that will supply like metals, raw materials, and others meanwhile in globally as well. Due to Toyota is one of the leading company in the automotive industry so it will not be an issue for Toyota switch to a new supplier. For example, Toyota is more emphasis on the timely operation and superior quality of materials from their suppliers. If the supplier does not meet the standard that set by Toyota or the price that supplier set is too high then it may cause Toyota to look for a new supplier or even change their supply chain market in another country because they can even find better in quality or cheaper supply price. At this situation, the supplier will be a loser in the market and have low bargaining power in Toyota so supplier should have a good relationship with Toyota (Schweinsberg, 2017).
2.2.5 The Threat of Substitute Products or Services
Substitute products can be considered as an alternative compared to the current supply on the market. These products appear due when the current state of technology or innovation evolves. The products of existing companies are thus replaced by different products. These products often have a better price/quality relation and come from sectors with higher profits. These substitute products can be dangerous and companies should anticipate coping with this threat. (Ogutu, 2015)
The threat of substitute products for Toyota is moderate. One of the threats which may let the customer switch Toyota car to substitute product is the public transport, second-hand car, bicycle and others types of transportation. Due to the switching costs are low and in the certain situation that it might give some people to find it more convenient to use substitute product like public transport but for some people who live in the city might think that to have their own car is more convenience. The reason why some of the people prefer to use substitute product because it cost lesser and are more affordable if compare to buy a car especially for those people in the middle class. But at the same time, Toyota in order to moderate this threat, Toyota had implemented the eco-friendly car like Toyota Prius which mean that less petrol will be used and the car will cost less so their customer can afford it.
3.0 Internal Analysis
3.1 Value Chain Analysis
The primary activities of Toyota's value chain which include inbound logistics, operations, outbound logistics, marketing and sales, and service.
Firstly, one of the aspects of the Toyota value chain is inbound logistics. Inbound logistics use just-in-time (JIT) manufacturing method and the function is to reduce waste, response time and inventory costs. For example, JIT helps Toyota to improve the process of fitting the component parts together and the process of production meanwhile in order to reduce the waste and collect the unutilized as their inventory. In additions, inbound logistics is Toyota get the raw material from the supplier which to keep or accumulate it in the store or warehouse until it will be used in the production process in the future. Moreover, due to Toyota do not have their own producer to produce raw material that is used in assembling the car like metal, steel, and accessories. So, Toyota has always kept and maintained a good relationship with their supplier in order to maximize of using the raw material and order the raw material all over the world. Therefore, inbound logistics is one of the important aspects that uses just in time method to help Toyota to manage their raw materials and control the inventory which in order to attain their production process efficiency and productively.
Second, the operation mainly focuses on the process of manufacturing and fitting the component part together of motor vehicles. Other than that, operation activities may incorporate tuning the engine, structure the engine parts and final engine tuning. However, due to well-designed in the operation processes by Toyota, Toyota Motor has built up and kept up the image of manufacturing reliable and durable vehicles. However, one of the reasons for the success of Toyota's manufacturing sales is because they well-planned in their operating system and overall implementation. Besides that, Toyota has developed an operating system which is the Toyota Production System (TPS). TPS can be referred to as a lean manufacturing system and just in time system which to produce a quality vehicle as to fulfill their customer based on their requirement. One of the concepts of TPS is called jidoka system, it is used to maintain the quality of product and prevent from the defection problem. Its function is when the system found that there is a defection in the machine then it will automatically stop to produce and solve the problems. So, operational stability is one of the important parts in TPS is it used to check up the entire production process and maintain the quality of their products and make sure everything is transforming into the final product form.
Third, after completing the operation process will going to outbound logistics which is transferred the final products to the dealers, wholesalers, and customers. Outbound logistics have the responsibility to make sure that all the finished goods are in the good conditions that no other subsidiaries company are allowed to involve in the distribution process and control to deliver the vehicles with fully loaded off the truck from the factory to the retailers or branches around the world. So, it shows that they are well control in legal department that they not allow the third parties to involve in the distribution process which to avoid their competitors to copy their ideas or design of their product. In addition, every branch has their own showroom to place the vehicle in order to let the customer reachable to their products. The outbound logistics is responsible for handling technical support, quality and abroad logistics meanwhile they have to ensure the product can ship in the right way and at the right time.
Forth, every implementation does not mean that every buyer will notice it there is a new product is launching so this is where the marketing and sales department have to put effort. Toyotaâ€™s marketing and sales department will focus on promo the new innovations and the efficiency of the vehicles to their targeted or loyalty customer meanwhile have to target their potential customer which will consider to purchase it. At the same time, Toyota's marketing and sales department also emphasize on highlighting the promotion program and marketing method which is Toyota's marketing and sales department can communicate and updates their news through their websites, social media, newspaper, TV advertising, magazine or radio. One of the method that it can attract the customer effectively which is Toyota invite a famous actor as a brand ambassador to advertise a new launching vehicle through the mass media. As in the result, it proves that the customer will easily to know there is a new vehicle are launching in the market. In this situation, marketing and sales play an important role in the company that will affect the sales and the reputation of the company meanwhile mass media can communicate in a very wide area which is a good platform to attract their customer that structure the entire marketing process.
Lastly, the services which are the last aspect of the primary activities of Toyota's value chain. In this stage, one of the services is to obtain the feedback from their customer which include complaints from the customer, car maintenance, repair service and others. Toyota knows that their customer is one of the important factors that to drive the company successful so Toyota appreciates to their customer and provide the after sales service and maintenance service. Hence, the services department also plays a vital role in the company which the company must ensure that the service department is providing a good quality of services. So, service provided by Toyota is necessary for value chain because it shows that Toyota is enhancing and maintaining the value of product after they delivered so the company will sustain their competitive advantage in the market.
For the support activities in Toyotaâ€™s value chain which is procurement, technology, human resource management and firm infrastructure that support the entire value chain
One of the support activity in Toyotaâ€™s value chain which is procurement management. The procurement activities which include the company buying goods, raw materials or equipment from the supplier. Hence, in order to achieve these procurement activities, Toyota should use outsourcing method or e-purchasing. At the same time, If Toyota can well manage this procurement management which will benefit to the company that helps the company to save costs as well as they can ensure the quality of the raw materials from the supplier which in order to produce a efficiency and good quality vehicles.
Technology in Toyota's value chain is important this is because it helps Toyota constantly keep innovate, implement or develop the vehicles with cheaper price and good quality to sustain and lead to competitive advantage in the market. Technology department of Toyota should strongly emphasize on R&D to improve the quality, safety, and functionality of the vehicle to protect and ensure their buyers are drive safely after they purchase. For example, Toyota has implemented a safety technological system which called Pre-Crash Safety, the function of this system is to predict the problem and prevent it which can help to reduce and avoid from the damage or the risk happen. So, as Toyota is strongly focused on developing R&D which will uphold their value in the market as well as can produce more innovative vehicles and lead to breaking the sales record in the market.
Human is one of the important resources in the entire Toyota if without human resources Toyota which may not lead them successful in the market. Human Resource Department of Toyota mainly focuses on recruitment, selection, and provide training and development. This is important because the human resource has managed to recruit a right person at the right place due to the employees are considered to produce a good quality vehicle. Besides that, Toyota had to implement Lean Production System in order to use their workforce to produce their products more efficiently and productively. So, Toyota should more emphasize on the human capital and always provide the training, rewards to expand their capability as well as improve their skill in technology. This system will retain their employees are more willing to contribute to the company meanwhile it increase their workforce to produce more quality and productivity of the products which help Toyota lead competitive advantage in the market.
Last but not least, firm infrastructure is related to developing a strategic planning for the company. For example, Toyota used Management Information System(MIS) to create a strategic planning to manage and control every department in the Toyota such as operation, finance, and others department. Management Information System enables Toyota to assembly and gathering all the information together which make the things can go smoothly or even make it more productively meanwhile it can benefit their employees to save time. This system helps management to make the decision due to it will collect all the data nicely so it will reduce the waste time. For example, Toyota uses the robotic system to control the robot effectively as they no need to worry because all the information is under the management information system. Therefore, the employees can manage the robotic to make the process of the production efficient and faster. So, firm infrastructure is important and it is not individually but it will support every department of the company so the well strategic planning is necessary used in Toyota.
4.0 TOWS Matrix
-The demand of Green Car O1
-Collaboration with Grab O2
- Existing competitors T1
-Strong R&D Base S1
-Strong legal department S2
-Well quality control S3
-brand image S4
-Implement a new technology that not easily copy by the competitors
-Beat the assisting competitors
-Lack of skilled workers W1
-Ineffective services W2
-Hire and train people with the essential technical skills
-Low selling prices with the high-quality product and innovative product
Maxi-maxi strategies are the strategy that uses the company strength to maximize the external opportunity. Toyota has its strength in emphasizing R&D to improve the quality, safety, and functionality of the vehicle to protect and ensure their buyers are drive safely after they purchase by keeping innovating new technology for their product. In addition, another strength of Toyota is emphasizing on their rules and regulations on their legal department. For example, Toyota does not allow the third parties to involve in the distribution process, in this situation means that Toyota is controlling their rules and regulation very strictly. While nowadays, the environment issues become serious issues that are concerned and highlighted by the government and their customer so that it creates an opportunity for Toyota to implement a new technology vehicle to fulfill the increase in the demand of green car by the customer. This strategies that combine both strategies and opportunity are able to avoid people or their competitors to copy their idea and their design of products.
Maxi-mini is a strategy that the company uses their strength to reduce their external threats. There are two strength in these strategies which is a strong R&D base and have well quality control. Toyota uses R&D to improve the quality, safety, and functionality of the vehicle. Hence, another strength in Toyota is they are good in quality control that Toyota is very concerned with maintaining the quality of product that enables them to produce a reliable and durable vehicle. As we know that there are several competitors of Toyota such as Honda, Ford, Nissan, and others. However, it creates the threats of existing competitors which may affect Toyota. By combining the strength and threat, it enables Toyota to beat the assisting competitors due to Toyota have strong in the quality product so that their customer which may not easy to change their current product to another.
Mini-maxi is the strategies that using the external opportunities to enhance the internal weaknesses. A business may have a good external opportunity but it cannot be used because of the internal weaknesses. Due to the fluctuation of oil price and environmental issues which causes the opportunity for the increase in the demand of green car. However, Toyota through this opportunity and they started increasing their production that implements and introduce their new technologies such as eco-friendly car but the company has a weakness which is the lack of some skilled workers that required in the production. So, the strategies that possible use in this cases is the Human Resource Department have to recruit people with highly skilled and always provide training with essential skills to those lack of skill.
WT strategies usually used by those company that is not really good and stable position. Mini-mini is the strategies that the company minimize the weaknesses and to avoid the external threats. One of the weaknesses of Toyota which will be the services that provided by Toyota services department. When Toyota provide ineffective service that will affect their customer have a bad feedback to the Toyota. In this cases, it creates the threats of existing competitors that Toyota may lose their loyal customer that their customer is not trusting to their products anymore so their customer may switch to their competitors. The strategies of providing low selling prices with a high-quality product and innovative product are able to minimize both weakness and threats of Toyota.
Based on the TWOS analysis, the best strategies that can be implemented in Toyota is Maxi-maxi strategies. These strategies are used to maximize the external opportunities by internal strength. The strength of Toyota has strong Research and Development to create innovative products and have a strong legal department to give a protection of the company products' design ownership. So, by combining of this two strength and opportunity it will able to provide a strong protection to the company's product because people are not easily copying their ideas or design of their product. Hence, the rules and regulations in the legal department are important because if they do not take it seriously on follow the rules which may bring a lot of negative impacts. For example, they do not have strong rules and regulations which may cause their copyright will be stolen by their competitors. And their competitors copy their ideas as their own ideas and implement the products at the same time with Toyota and even offer a lower price than Toyota. In this cases, it will cause the customer may go and choose their competitors because competitors normally will have a relatively lower price than Toyota. So, the recommendation for this strategies will be the company should more emphasize the company's rules and regulations.
...(download the rest of the essay above)