Toyota Generic and Intensive Growth Strategies

By /

Toyota is a leading global automobile brand based in Japan. The company has managed a strong international presence through its large sales and distribution network and has achieved high popularity worldwide through a continuous focus on technological innovation. Apart from strong production capabilities, Toyota also has a strong global supply chain which plays a core role in maximizing the efficiency of Toyota’s production system. The automobile industry has grown highly competitive and apart from emerging technologies and the growing demand for environment-friendly products, the market has been made challenging by the growing regulation of the industry by governments worldwide. This is a discussion of the generic and intensive growth strategies that Toyota has employed to find growth in the global automobile market.

Generic Growth Strategies used By Toyota Motors:

The generic growth strategy used by Toyota motors for market growth is a mix of cost leadership and differentiation strategy where the company has differentiated its brand image and product line from its competitors with help of technology and other factors. Toyota’s focus has remained on business efficiency to control operational costs and grow profits. However, cost leadership alone is not sufficient to acquire a competitive advantage in an intensely competitive automobile industry and therefore Toyota also invests in differentiation through branding and technological research and development.

Differentiation:

Toyota has differentiated itself from the crowd of automobile brands on the basis of product quality, technology, and customer experience. Apart from growing its portfolio of environment-friendly automobiles that are low on carbon emissions and better than their competitors in terms of fuel efficiency, the company has also invested in technology in other areas to offer its customers a superior driving experience. Toyota has diversified its product portfolio to include a wide range of products. Its product range sold globally includes sub-compact and compact cars, mini-vehicles, mid-size, luxury, sports and specialty cars, recreational and sport-utility vehicles, pickup trucks, minivans, trucks, and buses. A large and diversified product portfolio that serves various consumer segments has also helped the brand differentiate its product portfolio and business from the leading competitors in the automobile industry.

The company is also developing new more fuel-efficient and environment-friendly models of automobiles. The industry has evolved a lot and grown highly competitive and to stay in the leading position, businesses like Toyota continuously need to analyze customer preferences and changing demand patterns to improve existing models and bring new models to the market. Toyota invests a large sum in research and development each year to grow its market share and find faster growth. Its R&D efforts are mainly directed at achieving higher fuel economy, higher passenger safety, and convenience as well as bringing more eco-friendly vehicles to the market. In 2019, the research and development expenses of Toyota were ¥1,048.8 billion.

Cost Leadership:

In the automobile industry, achieving cost leadership requires focusing upon acquiring cost efficiency.  Toyota has always focused on production and supply chain management such as reducing operating expenses. By adopting efficiency manufacturing and distribution practices, the company is able to keep operating expenses low and this, in turn, leads to managing prices efficiently. This does not mean that Toyota is a price leader in the automobile segment but instead compared to the security, convenience, and efficiency that its products offer, the prices are well within control.

Moreover, the generic strategy used by Toyota is not entirely cost leadership but the brand does employ some aspects of cost leadership to lead in a highly competitive industry where both prices and performance matter for the customers and striking a balance between the two is essential to retain your market share and leadership position in the automobile industry. Toyota has struck a great balance between pricing and customer experience and it is one of the main reasons that while its products are efficient on the one hand, on the other its pricing strategy has also been effective. By mixing the elements of price leadership and technology-based differentiation, the company has been able to achieve higher penetration in the key automobile markets in the world.

Intensive Growth Strategies used by Toyota Motors:

The intensive growth strategies used by Toyota Motors include market penetration, market development, and product development. The company has used these strategies to grow its international customer base and market share in the automobile industry.

Market Penetration:

The market penetration strategy implies selling more of your products in your existing markets. Toyota sells in 190 countries which shows its high level of market penetration. The leading two markets of Toyota Motors are North America and Japan. The US is the leading market for Toyota in North America. In 2019, the company sold 10.6 million vehicles in North America and 9.5 million vehicle units in Japan. Coupled with its cost leadership strategy, deeper market penetration in the key automobile markets and the overall automobile industry has helped the brand achieve a very high level of sales and find profitable growth. This has been Toyota’s strategy since its foundation and the company has established a large and efficient global distribution network to sell its products all around the globe. Market penetration is one of the key intensive strategies used by global brands to grow their market share and expand the customer base.

Market Development:

Market development is the strategy of entering new markets and adding new customers to your existing customer base. However, Toyota has already achieved global expansion and therefore it used the market development strategy during its initial phases of growth. However, the market development strategy has remained key to ensuring the success of its overall business strategy. Some of the leading markets of the world where Toyota has achieved extensive penetration are its domestic market Japan, the US, and China as well as India, Malaysia, and the leading European automobile markets. Now, that the company has achieved its market development objectives, it mainly relies on the other two intensive strategies to secure growth and grow sales throughout the world.

Product Development:

Toyota is known worldwide as an innovative brand of automobiles. Apart from innovation in production and supply chain, the company also focuses on rapid product innovation to bring more fuel-efficient and safer vehicles to the market. Therefore, the company continuously invests in research and development so that its product portfolio continues to stand out amid the heavy competition. Apart from improving passenger safety, the company is also investing in automated driving technology. Through product development, the company has continued to evolve its product range and business model to achieve superior growth in a highly challenging industry environment.

Other Sources: Toyota Annual Report 2019.