Toyota is a leading manufacturer of automobiles based in Japan. The company is known globally for its focus on engineering and innovation. It is among the most competitive automobile brands with a strong competitive advantage compared to its rivals. Toyota is a global company and sells a large range of vehicles including cars, SUVs and pickups. In 2021, the company generated 27.2 trillion Yen in net revenues. Apart from technological innovation and lean manufacturing, there are several factors that drive the competitive advantage of the company.
In this VRIO analysis, we will analyse the core competencies of Toyota and how the company has maintained a strong competitive advantage.
VRIO is an acronym for Valuable, rare, inimitable and organized which denotes the four key characteristics of a core competency that lead to a sustainable competitive advantage.
VRIO ANALYSIS OF TOYOTA
| Core competency | Valuable | Rare | Inimitable | Organized | Competitive advantage |
| Large product portfolio | Yes | No | No | Yes | Partial advantage |
| Technological innovation | Yes | Yes | Yes | Yes | Competitive advantage |
| Global presence | Yes | No | No | Yes | Partial competitive advantage |
| Manufacturing Capabilities and methods | Yes | Yes | Yes | Yes | Competitive advantage |
| Brand equity | Yes | Yes | Yes | Yes | Competitive advantage |
| Supply chain management | Yes | No | No | Yes | Partial competitive advantage |
Large Product portfolio:
Toyota offers a large and diverse portfolio of automobiles including cars, SUVs and Pickups to cater to the needs of various customer segments. The company has continued to improve its product range and several of its product models are among best sellers in the US and many other leading markets. The company also offers a nice range of electric car models. While the automobile industry has grown highly competitive, a large product range can be a source of advantage since it helps cater to the needs and preferences of various customer segments. From entry level competitively priced cars to luxury segment cars and SUVs, Toyota offers a highly diverse range of automobiles. Its premium models are especially popular in the advanced markets of the world.
Technological innovation:
Toyota’s growth and worldwide fame is mainly driven by its focus on technological innovation and the ability to make high performance and safe vehicles. The company is renowned worldwide for making sturdy vehicles that are great in terms of performance as they are in terms of design and aesthetics. Toyota places a strong emphasis on research and development and invests a huge sum into research and development each year.
In 2021, the company invested more than 1 trillion Yen into research and development. It has established eight research and development centers in Japan as well as five in the US, and three in Europe and China each. It has also established a research and development center in Thailand. Its strong research and development network has played a key role in helping the company improve its performance in various areas including vehicle performance.
Its strong focus on research and development offers it a source of sustainable competitive advantage. BY focusing on innovation, the company has continued to improve its existing models as well as bring new models that cater to customer needs worldwide better. As the demand for electric models is growing worldwide, Toyota is also focusing on environment friendly innovation.
Global presence:
Toyota is a global brand with its headquarters in Japan. The company has established a strong global manufacturing and distribution network and sells its cars across more than 170 countries and regions. Apart from Japan, the company has a strong foothold in several markets including the United States, China, Europe and the other regions of Asia Pacific.
Its manufacturing network spans 27 countries apart from its domestic market Japan. The company has also established more than 50 manufacturing plants overseas. Toyota caters to a global customer base through its global distribution network. It is a well known brand of automobiles in most corners of the world. A strong presence in most corners of the world through its distribution networks, showrooms and offices, has helped the company maintain strong brand awareness and drive its competitive edge stronger.
Manufacturing capabilities and methods:
Toyota’s strong manufacturing capabilities are also a key driver of competitive advantage for the brand that has enabled higher efficiency and superior performance for the brand. The manufacturing system used by Toyota has been studied and appreciated worldwide. Its manufacturing system is known as the lean manufacturing or Just in Time system. It is a production control system that is based on years of improvements, the main objective of the system being the manufacturing of vehicles in the fastest and most efficient manner. While this production method is quite efficient and advanced in itself, it is not so easy to imitate either making it an important source of sustainable competitive advantage for the brand. The Just In Time production system focuses on making only what is needed, when it is needed and only in the required amount . It reduces wastage, improves production efficiency and also helps bring production costs under control. In this way, while Toyota has managed higher production efficiency, it has also reduced its operating expenses.
Brand equity:
The automobile industry has grown highly competitive and in order to become a market leader, a company needs to build strong brand equity. Toyota has achieved strong brand equity through its focus on quality, innovation and customer experience. Quality can be a strong driver of demand and market expansion. Toyota’s focus on vehicle performance and passenger safety have helped it win the trust of millions of customers worldwide. Strong brand equity has translated into strong sales and high popularity.
Toyota focuses on various aspects of its business to maintain a strong reputation and continuously improve its business position. The company is known worldwide as a responsible and ethical business. Strong brand equity has helped it achieve a market leading position in the automobile industry. Its brand equity is also a source of sustainable competitive advantage for the brand.
Strong supply chain:
In the automobile industry, managing the supply chain efficiently can also help companies achieve a strong competitive advantage. Continuous supply of raw materials is essential to efficient production and sales of automobiles. Toyota’s suppliers are located in various corners of the globe from Asia to Europe and the US. The company collaborates with its suppliers to ensure the availability of high-quality raw material for production of efficient vehicles. While its supply chain management is a valuable resource, it is not inimitable since other vehicle brands have also invested in building a strong supply chain. Its supply chain offers only a partial competitive advantage. However, it plays a key role in the business success of Toyota.
A few last words:
Toyota is renowned worldwide as a leading automaker with a strong global footprint. The company has achieved a strong competitive advantage through its continuous focus on innovation and customer experience. It has achieved strong brand equity by earnings consumers’ trust worldwide in various markets from the US to Japan, China and in many other European markets and the Asia Pacific region. Apart from its engineering and production technology, its manufacturing and supply chain have also played a key role in helping the brand achieve a market leading position. Its diverse product portfolio is also a crucial driver of the brand’s demand and popularity in most corners of the globe. Overall, the company is in a strong competitive position and poised for faster growth in the future.