Practical study in an important part of MBA Program. Keeping this thing in view I was assigned a report on “Competitive Strategy of Toyota Indus Motors”.
In this first place, I wish to thank our learned teacher Sir Liaqat whose erudite guidance transformed the research material into reality. His scholarly touch has been imprinted on my mind to last throughout my career in practical life. He really leaves a lasting impression on novice minds.
I am in fact very thankful to the following gentlemen from Toyota Indus Motors Karachi for furnishing us with great and valuable information.
v MR. SYED IMRAN ANWAR
Assistant Manager Human Resource Department
v MR. JAY MEHTA
General Manager Parts & Spares
v MR. ASAD ALI SHAH
General Manager Imports
v MR. FAISAL
General Manager Marketing
They are very busy and highly professional people whose every second is so precious we took a lot of time from each of them. They listened to my questions with great patience and gave satisfactory answers. In fact, I am greatly thankful to them in that, they helped me to complete this painstaking task. I am grateful to all others who cooperated with me during the research work.
ROLL # 65
Automobile industry is concerned with transporting vehicles which include passenger class, trucks and computers. Following are the key players in automobile industry in Pakistan Toyota, Suzuki, Honda, Nissan, Mitsubishi and KIA, but the main players in this industry are Toyota, Honda and Suzuki and among these, Toyota is the market leader. Indus Motors is a joint venture between the House of Habib (HOH), Toyota Motor Corporation Japan and Toyota Tisushu Corporation Japan.
The company was incorporated on December 17, 1989. It is situated at Port Bin Qasim, Industrial Zone, Karachi. Its annual capacity is 20,000 units per year, expendable to 40,000 units per year. Its estimated project cost including total fixed cost, is Rs. 144,340,000.
Appreciation of Japanese Yen or devaluation of Pak Rupee increase the cost of imported material, which include CKD kits, that account for 75% of the total cost. Tax policies of the government also affect the company. Presently the CVT rate is 6.25% and upon that, they have to pay 40% which causes an increase in the cost of the vehicles.
In political and legal forces, poor law and order situation, especially in Karachi, also affect the country. Political instability in the country and the government’s inconsistent policies, for example, taxi scheme from Nawaz Sharif Government, also produce effect on the Indus Motors. The result of the Taxi scheme is that, 3000 taxis are still present in the market, awaiting sale.
Industry Specific Deletion Target means numbers of parts and spares will be manufactured locally through vendors. Industry Specific Deletion Target specifies that “No Roll Back”. This policy discourage the new entrants because the new entrants will have to start at the deletion level that already exists in the industry.
Suzuki 800CC cars are substitutes for Toyota cars. Because this car is 60% localized, its CKD cost is 62% of total product cost.
In tools analysis I have complete explained Toyota Indus Motors, strengths, weaknesses, opportunities and threats. Government’s inconsistent tax policies, law and order situation and smuggling of cars are major threats to Indus Motor Company. Major opportunities for Indus Motors Company are as follows:
1. Opportunity to expand market of Hi-Ace and Dala because population of Pakistan is rapidly increasing and people are more mobile than before.
2. Stability in Afghanistan provides them opportunity to export their cars to central Asian countries. Major weaknesses of Indus Motor Company are its less capacity utilization, weak dealership network and delays in policy decision.
Major strengths of Indus Motors are their large product line, large market share and easy availability of spare parts.
Existing strategy of Toyota Motors Company is Consolidation, because its market share is decreasing, therefore, they are trying to maintain their market share by adopting different ways.
I have also analyzed the existing strategy of its main competitor Honda Atlas, which has adopted the product development strategy.
(PART – I)
THE AUTOMOBILE INDUSTRY IN PAKISTAN SOME STATISTICS ABOUT AUTOMOBILE INDUSTRY
The total registered automotive vehicle (according to 1998 to 1999 data) plying on the roads in Pakistan are bout 3,263,000, which includes 604,000 motor cars starting from the British and European and followed by Englo-American cars, the country has clearly decided in favor of Japanese cars. The country gave an exclusive right in 1983 to one of the Japanese car manufacturers to make a totally local car within Pakistan. This exclusiveness, however, gave way in favor of another Japanese car manufacturer 1992.
The environment made in automobile industry is Rs. 5.344 billion including foreign equity of Rs. 1.532 billion. The industry has total current capacity of 105,500 cars per annum.
The automotive industry contributes an amount of about Rs. 7.233 billion to the government revenue annually besides saving a foreign exchange of US$ 95.5 million per year.
Table: Production Of Locally Produced Automobiles
Light comm.. vehicle
The passenger car industry in this country has great prospectus. The Pakistani population is about 140 million people, and the present rate of car on the road, the average comes to be 232 persons per car, which is far below the normal standards of 109 persons per car among the developing countries, particularly the South East Asia and the developed world, where the average is 8 persons per car. There has been a growth of passenger cars in the country, which were 87,043 for the period 1984 to 1989 and grew to 240,304 including light commercial vehicles during the period 1990 to 1997 at an average growth rate of 7.7% in 8 years or 31.15 since 1994 given diagram shows the number of vehicles per 1000 persons.
KEY PLAYERS IN THE INDUSTRY
Total number of existing players at this time in they industry is five and one is planned (for Seans Yong)
The Table 2 shows the capacity of all these players along with their names. Now the three main players in automotive industry are:
1. Toyota Indus Motors
2. Honda Motors
3. Pak Suzuki Motors
And among these three, Toyota Indus Motors has got a leading position.
TABLE 2: THE ENVIRONMENT OF AUTOMOBILE INDUSTRY
Up to 1000 cc
1000 to 1200
1300 & above
LCV & Jeep
Capacity available for future
INDUS MOTOR COMPANY LIMITED PAKISTAN
Indus Motors is a joint venture between house of Habib (HOH), Toyota Motor Corporation, Japan & Toyota Tsushu Corporation, Japan. The main object of the company, in Pakistan, is to set up a facility for the progressive manufacture of vehicles and components parts.
In line with the Government policy to encourage foreign investment and the participation of the private sector in a free economic environment, the Ministry of Industries invited proposal from foreign automobile manufacturers and private entrepreneurs, for a new automobile project. The project as submitted by House of Habib (HOH) and Toyota was selected due to the popularity and reliability of Toyota Vehicles in Pakistan and was sanctioned on April 30, 1989 and obtained certificate of commencement of business on May 31, 1990. On July 1, 1990, the company was appointed distributor of Toyota vehicles and spare parts (except industrial vehicles).
VOLUME & SIZE
The aim of joint venture is progressive manufacture of Toyota vehicles and components parts with an initial annual capacity of 20,000 units expandable to 40000 units or more to meet the requirements and quality standard of the automotive industry for tile Twenty-first Century. A detailed deletion program envisages a deletion of 55% (average). Deletion for the first year was 21.01%.
The project envisages a total investment o f Its 1412 million, including equity of Rs. 786 million. The estimated project cost includes total fixed cost of Rs. 1,411,340,000; total equity of Rs. 983500000 and total debt of Rs. 428,840000.
LOCATION & FACILITIES
The production facilities are located at Port Bin Qasim Industrial Zone near Karachi on land measuring over 105 acres at a cost of Rs. 37 million under lease by Port Qasim Authority. High quality metalled road to the factory site is available along with other infrastructure facilities provided by authority.
The necessary civil work for production facilities comprise of:
v Paint Shop
v Assembly Shop
v Welding Shop
v Compressor Transformer Room
v Guard Room
v Internal Roads
v Underground & Overhead tanks, etc.
The main factory building & ancillary works are spread over covered area of around 40,000 sq. meters.
Production Per Day = 38 units
Production Per Day Capacity = 80 units
PLANT & MACHINERY
Imported machinery and equipment comprises of:
¶ Pre-treatment and lease coating equipment
¶ Heat Exchanger
¶ Spray Booth
¶ Drawing Oven
¶ Conveyor And Hoist Controlled Equipment And Panel
¶ Mearing And Checking Machines
¶ Inspection, Testing And Controlling Equipment
¶ Pneumatic Tools
¶ Spot Welding Equipment
¶ Air Compressor Generator, etc.
The bulk of imported plant was supplied by Toyota Tsushu (Hong Kong) Company Limited at a Cast of Japanese Yen 1.714 bil11on equivalent to Pak Rs. 328.840 million at that exchange rate:
The remaining cost of imported plant and machinery amounting to Pak Rs. 92.641 million was financed by sponsors' foreign equity . The entire imported machinery and equipment was brand new.
Local procured machinery was comprised of:
¶ Conveyors overhead crane
¶ Vehicle testing equipment
¶ Generator sets
¶ Jigs and fixtures
¶ Welding equipment cables and electrical fittings
¶ Air compressor
¶ Telecommunication system
¶ Computer equipment
¶ Fire fighting equipment, etc.
All local procured machinery was brand new as, well.
BOARD OF DIRECTORS
Chairman Mr. Ali S. Habib
Vice Chairman Mr. Y. Matsumiya
Directors Mr. Mohamedali R. Habjb
Mr. Ashar Wali Mohammad
Mr. Akira Yokoi
Chief Executive Mr. Farhad Zulfiqar
WORKING DEPARTMENTS OF INDUS MOTORS
"It means the process of grouping related work activities into manageable units is called departmentalization." (Mondy R. Wayne and premeaux R.shane P.203)
Departmentalization is being very. Common in every organization as it facilitates the working of the organization. INDUS Motor company \abs a\so adopted. This concept of departmentalization following departments are working out there.
WORKING DEPARTMENT OF DEALERSHIPS
Sale Service Spare Parts Customer’s Satisfaction
White, Black, Red
White, Black, Red
White, Black, British Green, Gray Met, Turquoise Mica.
White, Black, Gold Met, Gray Met, British Green, Turquuoise Mica, Deep Red
White, Black, Gold Met, Gray Met, British Green, Turquuoise Mica, Deep Red
White, Gold Met, British Green, Turquuoise Mica, Deep Red
White, Black, Red
White, Black, Gold Met, Gray Met, British Green, Turquuoise Mica,
Grayish Purple, Black, Gold Met, British Green, White, Turquoise Mica, Deep Red, Gray Metallic
White, Red, Gray
White, Red, Gray
The groundbreaking concept of a synchronized dealership network setup by Toyota and Indus has revolutionized automobile marketing in Pakistan. The motivation behind this concept is to provide the best help to the customer. This innovative concept revolved around the “Toyota 3S Dealership” which encompasses three critical areas, all under one roof.
¶ Spare parts
In Pakistan, 27 such dealerships have been setup, with the latest facilities, repair equipment and machinery, manned by highly skilled and training individuals, in order to provide the customer a hitherto unknown level of service. The dealerships have ready access to genuine Toyota spare parts ensuring that your Toyota always remains a Toyota.
No. of Dealers
a) Toyota Central Motors
b) Toyota Southern Motors
c) Toyota Eastern Motors
d) Toyota Western Motors
a) Toyota Ravi Motors
b) Toyota Township Motors
c) Toyota Garden Motors
Toyota Rawal Motors
Toyota Capital Motors
Toyota Frontier Motors
6. Dera Ismail Khan
Toyota D.I. Khan Motors
Toyota Multan Motors
Toyota Faisalabad Motors
Toyota Sialkot Motors
Toyota Zarghoon Motors
11. Mirpur (AK)
Toyota Azad Motors
Toyota Larkana Motors
PART – II
Because of the continuous change in environment, there is an element of uncertainty in the environment. The environment has become highly complex and dynamic. Keeping this thing in mind, a company must look for a strategic fit between what the environment wants and what the company has to offer, as well as between what the company needs and what the environment can provide. That’s why before an organization begins to formulate strategy, the management must screen the environment and identify external environmental factors, which affect the organization.
The environmental variables are as follows:
1) Economic forces
2) Politico-legal forces
3) Technological forces
4) Socio-cultural forces
Economic factors are those, which regulate the exchange of material money, energy and information. Following economic variables have affected the automobile industry as well as Toyota Indus Motors.
Inflation means, “Average rise in prices of commodities”. According to Economic Survey of Pakistan. (1997-9f)), the inflation rate in Pakistan is about 9%. The main reason of this rising trend is devaluation of currency by the State Bank of Pakistan.
In July 1993, rupee was devalued by 7% in Oct. 1995 7 % ; in 1996 devalued two times, once in September when Rupee was devalued by 3.65% and then in October when it was devalued by 5%. Further devaluation took place in October 1997 and June 1998, which were 8.71% and 4.4% respectively.
Due to this turn by turn devaluation, the input costs have increased and Toyota has been affected by these devaluations because the main component CKD it (Complete Knocked Down) unit is imported from Japan that amounts to 75% of the cost of total assembled car.
EFFECT ON PURCHASING POWER OF PEOPLE
Due to inflation, the purchasing power of people has also decreased and buying behavior has resulted in significant decrease in the sale of Toyota cars (as shown by the table).
APPRECIATION OF JAPANESE YEN
Margins were lower as cost increased due to Japanese Yen appreciation.
Government tax policies have severely affected the auto industry. During 1996 two mini-budgets were announced by Government of Pakistan, first in October 1996, which increase the input cost due to imposition of service charge. In the second budget, which was imposed in March 1997, though the Government reduced the Sales Tax from 18% to 12.5% and abolished 2% pre-shipment inspection charges, but duty on CKD kits remained high affecting production cost and CVT (Capital Value added Tax) continued to hamper smooth working of industry, also Toyota Indus Motors. Presently, the CVT rate is 6.25% (both for tax and non-tax payers). The government announced import duties at the rate of 40% to 35% but all these measures affected Toyota Indus Motors as well as the industry. The CVT rate though party rationalized, was still not sufficiently favorable to stimulate increase in sale of Toyota motors.
Moreover as indicated by sources t in Toyota Indus Motors, the earning of Indus Motors is presently subject to 30% taxation whereas Honda Atlas Cars has to pay only 5% tax on its turnover by virtue of its plant location in a special industrial zone. Honda’s corporate tax exemption will last till the end of year 1998. This is serious competitive disadvantage for Indus Motors and reciprocal advantage for its main competitor, Honda.
DEMAND TO GROW IN LINE WITH GNP
Vehicle demand in the country has posted a CAGR of around 7% over the last ten years with a forecast average GDP growth rate of 5% per annum over the medium term, in line with its long term historic growth. They expect demand for cars to grow at a little under 5% per annum over the same period. Pakistan has one of the lowest number of vehicle per capita among the developing world and therefore, offers a lot of room for demand growth. Slower forecast growth in the upper segment market of only 5% per annum is indicative of the tougher competition ahead for Indus and other manufacturers of larger engine cars.
POLITICAL AND LEGAL FORCES
LAW AND ORDER
According to sources from Toyota Indus Motors, the state of economy is far from satisfactory Law and order situation is adversely affecting the company. The law and order especially in Karachi, is adversely affecting production, as far as the demand for new vehicles is concerned.
According to sources from Toyota Indus Motors, the presence of smuggled cars in the market is affecting the vehicles sales, and also the government's recent policy to legalize these cars as short-term strategy for revenue collection to meet the IMF dictated revenue collection target of
Rs. 305 million, will hurt the industry in t11e years to come. Though, exact number of smuggled cars, those; on roads' with fake registration numbers or without any registration at all and those piled up on and around Pakistan's borders especially with Afghanistan, in Baluchistan and NWFP, is not available but sources from Indus Motors put it at 50,000. Of these, 30,000 are already in use. While the rest will eventually find their way on the roads through legalization.
For an entire car industry which is producing only about 35,000 cars on average per year, the legalization of the smuggled cars will cause an indispensable damage to it. Because Indus Motors is the leading company in the industry , this act will severely damage its market share.
Not only Indus Motors is suffering but also overall industry is suffering from the political instability in Pakistan. This political instability has acted like threat to the industry because of inconsistent policies of taxation, tariff and regulating duties.
Also, political instability in Afghanistan has caused the loss of opportunity for Indus Motors to export the vehicles to Central Asian countries. The reason being that Karachi is the nearest port to Central Asian countries.
The after-effects of Yellow Cab Scheme are still being felt because 3,000 taxis are still present in market, awaiting to be sold.
Indus Motors has experienced a determinable effect during the period 1994-95 and still is expected to produce undesirable effect on Indus Motors, due to the reason that. these vehicles were and are being released with nominal duty in position. The result of this Taxi Scheme (1994-95) was that the overall volume of passenger cars reduced due to imbalance; caused by
Socio-.cultural forces regulate the values, norms. and customs of society.
Indus Motors has believes in customer, satisfaction that's, why it produces cars that exactly match the buyers' needs and demand. It produces cars for the upper segment of market. They produce Toyota GLI for status conscious people, According to them, the land lords, industrialists and doctors are the people Who perceive its value.
Indus Motors tries to foresee in future. They say that people are becoming more price conscious and want low fuel consumption and high mileage f1om their car.
Another socio-cultural factor which affects the Toyota Indus Motors is the increasing education rate. Due to this people become more quality conscious as well as price conscious. So Toyota Indus Motors Company is doing its best to improve the quality of its products as well as price reduction policies.
Technological forces make problem solving inventions. This is very important factor, you have to assess that how you made advancement in technology. Indus Motors is making new technological change in its cars. Keeping in view the environmental conditions.
Michael E. Porter, an authority on competitive strategy, contends that a corporation is most concerned with the intensity of competition within its industry. Basic competitive forces determine the intensity level. "The Collective strength of these force," he contents, "determines the ultimate Profit potential in the industry," 'v here profit potential is measured in terms of long-run return on invested capital. . The stronger each of these factors is,
the more companies are limited in their ability to raise prices and earn greater profits.
Porter mentioned five factors or forces. A strong force may be regarded as a threat because it is likely to reduce profit. In contrast, a weak force may be viewed as an opportunity because it may allow the company to earn greater profit. In short-run, strong forces act as constraints on a company's In the long-runs however, a company, through its. choice of
Activities. strategy , may be able to change the strength of one or more of the forces to the company's advantages.
In scanning its industry, a Corporation must assess the importance of its success of the following five force.
New entrants to an industry typically bring to the new capacity, a desire to gain market share and substantial resources. They, therefore, are threats to an established corporation. 1'he cl1reat of entry depends on the presence of entry barriers and the reactions that can be expected from existing competitors. Some of the barriers to entry are:
ECONOMIES OF SCALE
Economies of scale are the cost advantages associated with large size. In care of Toyota Indus Motors, its overall capacity is 20, 000 units per year, but it is presently operating at 5000 units per year. Out of total production cost, CKD kit amounts to 75% of total cost. Whereas its main competitor Honda with operating capacity of 10000 units per year and presently at 5000 units per year and out of its total production cost CKD kit amounts to 65% of total cost. From this data, it is obvious that Indus Motors has not achieved economies of scale because of producing cars at higher cost relating to its competitor, which is also presently operating at 5000 units per year, but incurring less cost.
Brand identification creates as barrer to entry by forcing entrants to spend heavily to overcome existing customer loyalty. The main differentiating factor in the overall industry for Toyota cars is its customer's brand loyalty. Toyota vehicles are running on the roads of Pakistan since 1967. Its spare parts are cheaper. Its after sale service is cheap and good. It has got a household brand name.
The need to invest huge financial resources in order to compete creates a significant barrier to entry, for example, R& D. Toyota Indus Motors Company spends a lot of amount on R&D, which is shown by their product development program.
Switching costs are the one-time costs facing a buyer when that buyer switches from one supplier's product to another if these switching costs are high, a new entrant must offer a major improvement in cost or performance to entice a potential customer to change from its current supplier. So Toyota Indus Motors Company is also creating a switching cost by its better customer service, product differentiation strategy , product design and
durability of its product.
Deletion policy is what number of parts and spares will be manufactured locality through vendors. It is actually that "how much the car is localized". This deletion policy is set by Engineering Development Board of Pakistan. It gives a specific deletion target (either companies specific or industry specific to the companies in the automobile industry. The industry specific deletion policy (instead of company specific deletion policy acts as an entry barrier for the new entrant in the automobile industry).
An industry specific deletion program requires fixation of a minimum level market for all firms in the same industry based on the previous year achievement and target for the maximization level of deletion. Thus new industrial units have to start from the level of deletion already achieved in that industry. The Industry Specific Deletion Program (ISDP) therefore requires new entrances to tart at that deletion levels that have already been achieved in the industry. In the tecr!1S this specifies "No Role Back". This policy discourages the new entrance with the result that a monopoly situation has been created with absolute domination of Japanese vehicles.
RIVALRY AMONG EXISTING FIRMS
Competitors will also be concerned with degree of rivalry between themselves in their own industry. How intense is this competition? What is it based upon? The degree of rivalry is based on the following.
THE EXTENT TO WHICH
COMPETITOR ARE BALANCE
Whatever their number, where competitors are o f roughly equal size, there is the danger of intense competition as one competitor attempts to gain dominance over others. In the car industry, competition in the upper segment market is on the increase. This, when seen in conjunction with the fact that the market itself is projected to grow at slow pace (small engine size market expected to grow at 9% per annum and upper segment market is expected to grow at 5% per annum) puts a dampener on. Indus, out performance potential, given some impeding competitive disadvantages. Indus and Suzuki have been marketing their larger engine size cars longer than the two relatively new entrants, Honda and Nissan. However, both Honda and Nissan are competing on price & quality and are making further encroachment into Indus’ share. Price competition has set in the industry due to which no player is ready to pass on all cost increases to the consumer.
In case of Indus Motors Company, its overall capacity 20000 units per year, but it is presently operating at 5000 units ref year. On the other hand, Honda' s overall capacity is 1000 units per Year and it is presently producing 5000 units per year. So Honda is utilizing its capacity in a best way than Toyota Indus Motors Company and amortizing its fixed costs.
According to Indus Motors Comral1y sources, during the next year they will double their production up to 10,000 units per year, which. reduces their per unit cost. Hence in the short run the company probably will produce more than market demand at the current price and may reduce its price hoping that it can recoup its cost from a greater number of sales, within the country as well as outside the country.
THREAT OF SUBSTITUTION
In effort, all corporations within an industry compete with firms in other industries that produce substitute products. Substitute products appear to be different but can satisfy the same need as another product.
In case of Indus Motors Company, the substitute of its Toyota ca is Suzuki car by Pak Suzuki Motors Company. It has posed and posing a great threat to Indus Motors company because of following reasons.
1. Suzuki Motors Company established in 1984 and since localized its cars by about 60%. Its CKD kit cost is 62% of total production cost. It is preparing its motor car up to 800cc and 1300cc, because of highly localization percentage the price of its car is less than the ones serving upper segment are market.
2. In the future according to (Article in Pakistan and Gulf economists by Khurram Baig), the market for smaller sized engine cars is expected to grow at about 5% per annum.
3. He also believes that the lower projected growth will likely limit Indus’s target market over the next three years.
BARGAINING POWER OF SUPPLIER
Suppliers can affect an industry through their availability to raise prices or reduce the quality of purchased goods and services.
The Industry specific deletion policy will cause an increase in number of vendors end will result in the existence of strong vendor industry but until the vendor industry does not exist in appropriate size, the existing vendor will exhibit their powers to bargain their cost of services.
Moreover, for Indus Motors, the vendors work at an established rate, that only vary in prices whenever inflation take place.
They give incentive to their vendor supplier to reduce their bargaining power. The incentive may be in the form of training in Japan and also can be monetary terms.
According to Jay Barney "'The study of sustained competitive advantage depends in a critical way, on the resources endowments controlled by a firm.
It is very important for the organization to develop a strategic fit between capability and their resources in changing environment, Resources are only one of several influences on company policy and in cer1.ain circumstances may have first class resources, which are fully exploited and controlled but be operating in highly depressed and unprofitable market.
It is very important for the organizations to identify their resources, what resources they have for achieving their goal, it is called resource audit. The following factor involve, the resources that Indus Motors is employing:
¶ Human Resource
We discus these resources one by one.
MARKETING AS A RESOURCE
Product which company offers is also resource of company. Larger the product mix, greater will be return on sale of product. Indus Motors company has analyzed needs and wants if its customer and has made available a broad product range to suit their need. All the cars in its product range are a beautiful brand of style, economy and technology. Now they are going to increase its product range by introducing "Dehatsll Coree" in year 2000 that also possess all the qualities, which its all the cars have.
After commencement of business in Pakistan, its share was 60% and it enjoyed higher return because of its larger market share. Now the Toyota has entered in the maturity stage of product life cycle and its market share has shrunk from 60% to 41%, but in spite of all this, Toyota is still enjoying brand loyalty and higher returns. This is obvious from the tact that company has earned Its. 271.70 million pre-tax profit for the year 1998, and it announces to pay 15% dividend to the share holders of the Company.
CHANNEL OF DISTRIBUTION
Indus Motors has a manufacturer-sponsored retailer franchise system. They license dealers to sell the cars. The dealers are independent business people who agree to meet various condition:, of sales and service.
In this context, they have established a network of 27 dealers all over the country.
The groundbreaking concept o(synchronized dealer ship network-of Toyota and Indus has revolutionized automobi1e marketing in Pakistan. The motivation behind this concert is to provide the best help to customer, according to its corporate phi1osophy customer satisfaction.
This innovated concert revolves around the "Toyota 3S Dealership", which Encompasses three critical areas; sales, services and spare parts all under one roof.
All the 27 dealerships have been sent up with latest facilities, repair, equipment and machinery, manned by highly skilled and trained individuals, in order to provide the customers, a higher to unknown level of service. The dealership have ready access to genuine Toyota spare parts and ensuring their customer that their Toyota always remains a Toyota.
Modern marketing demand more than just developing a good product, pricing attractively, making it available to target consumer.
So, Toyota's total marketing communication program also consist of advertising, personal selling, ales promotion and public relation tools.
Since company has develop the market of its product to such extent that they have not to advertise to the extent the competitors do. They are extending their market through electronic media, newspaper banners and boarding.
Indus Motors company has appointed very trained experienced sales people in a large number so they can observe the needs of customer and make quick adjustment.
AFTER SALE SERVICE
After sale service is very important aspect of the Toyota Motors. Toyota Motors continued the dealership and fun within the company. The establishment of a "customer relation tell" and the ongoing programmer for training to their dealership, staff have resulted in improved service to their customer the uninterrupted availability of spare parts at reasonable prices throughout the country contributed in Toyota vehicles commanding a higher resale value which in turn attracts rate value which in turn attracts repeat sales and customer loyalty thus achieving their objective of an increase market share for Toyota.
In recognition of their achieving a higher standard of "after sale service" in Pakistan Toyota Motor corporation of Japan has presented the company its "Good performance award" which places Pakistan in the highest category.
Developing a product involves the benefits that product will offer. In there benefits and attributes the product quality level sports products position in the target market product quality stands for the ability of a product to the perform its functions.
Indus Motors has set up one of the most modern automobile manufacturing plant in its region.
Quality of product has not been compromised with and very heavy investment has been made to build its production facilities based on state of the art technologies.
The whole body shall of the car is dropped into tank containing 75 tons of point which is deposited electrochemically onto the body.
The welding line utilizes a fully automatic process control cycle for consistent quality and energy saving.
A set of interdependent organizations involved in the process of making a product or service available for use are consumption by the consumer or business users"
Distribution Is a key element of marketing mix, as if the product is not being distributed properly, all in vein.
Toyota Motors has a well-established distribution network for the quick and Toyota Motors is Japanese Company. It has authorized several Companies of the world to sell its products in their own countries. All the parts of the Toyota products are supplied- through road airway and watering.
In Pakistan these Parts are brought through watering from Japan. Then these parts are assembled in Karachi the assembling of Parts the finish products are delivered to the dealers, which are spread in 16 cities of Pakistan through National Logistic cell (N.L.C)
Indus Motors has a we11 established modern Computerized system for assembling of Toyota products. It assembled a car within two hours and fifteen minutes.
Simply defined, pricing is the amount of money charged for a product of service. Price is the only element in marketing mix that produces revenues.
All other elements represent costs. There are many factors that affect the pricing policies of company.
Since the objectives of Toyota is "Customer First Always" or they position their car for budget minded customer, they always when setting price, take care of the customer.
Costs set the floor of the price that the company can charge for its product.
The major component of their component of their cost is CKD kit, which is about 75% of its
SETTING OF PRICE
As we know that the objective of Toyota Motors is to satisfy the customers. Toyota always set the prices of its products according to the customer, s purchasing power. They charge low price for their products that is why Toyota is know as economical car. Costs provide the base in setting the price that a company can charge for its products. Toyota is one of those companies who want to become the low cost manufactures in their industries maintaining the best quality of the products.
Competitors also effect the pricing decisions. While setting the prices of Toyota products, Toyota keep in mind the competitors prices, offer etc. Prices in Pakistan Toyota motors also consider the current policies of the government like custom duty, octari and freight etc.
Total cost. There are many factors, which influence their cost of product major of them is inflation. In Pakistan, inflation rate is growing rapidly, so due to this, cost of product is affected.
Competitor, s Costs, prices, Offers
Another factor affecting the company, s cost, prices and other features, incentives they are offering to their customers. Toyota also keeps in view the most important factor while setting the prices.
AREA OF PRODUCTION
A favorable location indicates the strength of an organization, the essence of favorability is that whether the plant is located at a place which is near to the supplier (or not).
The Indus plant is located at very favorable place; the port is near to it. The general Tyre Company is near to it from which it gets the tires for its cars and save transportation cost. Though some of vendors are also located in Lahore. But most of its vendors are located in Karachi.
The kind of technology employed by an organization gives an important edge in terms of quality. Technology is of two types: labor intensive and capital intensive (state-of-the-art technology, for example). In case of Indus Motors, the company has installed capital-intensive technology. They are using conveyer belts to transfer a car during assembling from are station to another station. They have heat exchanger, spray booth, drying tower, etc.
For measuring and checking of locally manufactured parts in order to maintain quality standard and to assist vendors in product development, a state-of-the-art Quadrant Measuring Machine was installed in 1997.
In 1996, the company acquired new computer technology for the implementation of software and its applications, which provides a centralized database support integration between Manufacturing and Financial systems, and is assisting the company in providing meaningful data in time for management decision making.
FINANCIAL RESOURCE ANALYSIS
A typical financial resource analysis of a company involves a study of its financials statements for four or five years.
This kind of financial analysis includes earning per share, debt to asset ratio (leverage ratio), return on investment, and so on, plus a ratio study comparing the firm with its immediate competitor.
Toyota Indus, in fact, is in better position with respect to profitability relative to its competitor as evident by %age net profit margin, 3.31% and 1.88% comparison respectively.
Indus has utilized inventory and its assets more efficiently than Honda Atlas. Indus has asset turnover 1.88 times, while Honda Atlas has 1.2times. Honds Atlas has utilized more borrowed funds about 62% of total assets as compared with Indus that has utilized 43% borrowed funds.
A historical analysis looks at the deployment of the resources of a business in comparison with previous year. By doing this, any significant change in the overall levels of resources can be identified. For this regard, we make a historical table to analyze bow much changes take place in their different resources, such as market share, current assets, fixed assets, and also deletion targets.
STRENGTH & WAKENESSES
· The government tax policies are threat to Indus motors. Indus motors have to pay 6.25% capital value added tax (cvt). Apart from this, they have to pay 35% important duty on CKD kits (the main component of Toyota cars), that is imported from Japan. That has increased its costs.
· The earning of Indus motors are presently subject to 30% taxation while that of Honda motors, is subject to 5% taxation which is threat to Indus motors.
· The law and order situation in the country especially in Karachi is threat to Indus motors. Which has caused diminishing of companies production and demand in the country in demand of locally manufactured cars.
· The political instability is also a threat to Indus Motors as well as overall automobiles industry. Due to political instability policies about tax and import duties are inconsistent.
· The 1992’s taxi scheme has acted and is still acting as a threat to Indus Motors. During 1990 Government imported sixty thousands" yellow cabs" from korea, which resulted in decrease in demand of Toyota vehicles. Still three thousand yellow cabs are awaiting for sale in the market.
· The authorities in Indus Motors consider Suzuki (a substitute of Toyota car) as a threat to Toyota cars.
· Suzuki 800cc and 1000cc cars are substitute for Toyota car. The reason is that people are becoming more price conscious and want economical car which give low fuel consumption that is why Suzuki demand in gradually increasing.
· The increasing inflation is acting as a threat to Indus Motors. Presently inflation rate is 9% (according to official sources) and 13% (according to non official sources) which has decreased the purchasing power of people and also decreased the demand of Toyota vehicles.
· Exchange rate fluctuation is also a threat to Indus Motors. Devaluation of Pak rupee has acted like a threat to the company.
· Indus Motors imports CKD kits from Japan, when devaluation in the country takes place, it increases the CKD cost.
· When Pakistan made its first atomic explosion on May 28, 1998, the after math of this was, G 7 imposed sanctions on Pakistan. Due to this the monetary base of Pakistan decreased. It adversely affected the whole industry of Pakistan and in turn demand for Toyota Motors.
· The severe competitions in the upper segment market is also a threat to Indus Motors. The analysts have projected that the market for larger sized engine cars will grow at a rate of 5% which is less than 9% for small sized engine market; this slow growth puts dampening effect on Indus performance, giving some competitive disadvantage.
· Political stability in Afghanistan will increase demand for commercial vehicles in the Central Asian States. So this is an opportunity for them to export the commercial vehicles as well as passenger cars to Central Asian Republics, for the Central Asian republics, Karachi being their nearest port the opening of trade routes in these countries, will lead to an inevitable growth in the transport sector.
· The completion of the Lahore/ Islamabad motorway, expansion of the road net work and reduction in the rail links will cause expansion in the automobiles market in the future.
· According to Manager Imports Mr. Asad ali Shah from Indus Motors. There is an opportunity to expand market of Toyota Hilux in Nipal and Bhotan, if India give way through its trade root to Pakistan by an agreement.
· According to sources from Indus Motor, if engineering board of Pakistan makes the industry specific deletion policy this will provide an opportunity for the development of vendor industry. At present, there are 180 vendors in the vendors industry, if they remain and increase in vendor industry, this will enforce localization of cars.
· Indus motor has not yet achieved appropriate economies of scale as compared to its competitors. Indus Motor and Honda Atlas motors are producing the same no of vehicles (5000) vehicles per year) but Indus Motor incur huge cost. For Indus CKD kits account for 75% of their total Manufacturing cost, where as for Honda CKD kit account for 65% CKD kits cost for Indus is on the average about 25% higher than its competitor Honda Atlas. It is obvious that Indus is producing 5000 vehicles at higher cost as compared to its competitors.
· Indus Motor Company has total capacity of 20000 units. But at present they are producing 5000 units, this shows that they are not fully utilizing their capacity. It means that they are not amortizing their fixed cost in best way, while major competitor Honda Atlas, having capacity of 10000, but at present producing 5000 units.
· Their dealership network is weak. Company does not own this dealership network. Indus Motor has a manufacturer sponsored retailer franchise systems. They license dealers to sell their cars. So dealers often charge high price from customer and also not act upon the instructions of Indus Motors Company.
· According to Toyota Indus Motors Company sources, all major decisions are made in Japan by the holding company, they send instruction about their decisions in Pakistan and this process delays the policy making at corporate level by the top management.
· One of its strength is its location at Port Qasim Karachi. Most of its vendors are located in Karachi. Indus Motors Company get tyres from General Motor, which is also located at Port Qasim. So Indus Motors Company saves a lot of transportation cost.
· Indus Motor has installed latest technology in its plant, which is almost computerized. It is also a strength for Indus Motor.
· Indus Motor has set up a paint system, which is considered no 3 in Asia. As installed in 1997 the state of art Quadrant Measuring Machine to maintain its consistence quality checks and to insure Toyota’s quality standard.
· The major strength of Indus Motor is that it is recognized as market leader in the Industry. Before introduction of Honda Atlas Motor, its market share was 60%. But now though it is reduced to 55% but still it is recognized as market leader because of its quality, household product and brand loyalty.
· The other major strength of Indus Motor is its installed capacity, which is 2000 units per annum and it is expandable to 40000 units per year.
· Indus Motor Company has a wide product range, which Includes 20 vehicles. Which satisfy each and every segment of market. And now they are introducing Dihatso Coree for price conscious people.
· Indus, Labour force is also its strength, which is efficient and well trained. It is obvious from the fact that employee turnover rate is only 3% and absenteeism rate is only 5%.
· Easy availability of genuine spare parts and its Toyota’s resale value act as its strength.
· Creative Suggestion System is also a strength (discussed in an earlier part).
VEHICLES FOR THE NEW MILLENNIUM
What we are about to see is top secret, or at least was at one time or another. There is always a lot of speculation surrounding any new Toyota vehicle, so we have to keep things close to the vest until they're ready. The vehicles below, however, are near enough to launch to allow you a sneak peek.
The new Highlander will give us SUV versatility and unparalleled comfort, all in one unmistakable form.
What do we get when you take the "fiction" out of sci-fi? We get a group of unbelievable vehicles poised to take on the future...now. These highlighted vehicles demonstrate Toyota's commitment to a better tomorrow. With these vehicles, Toyota has staked a claim as an industry leader in the development of vehicles that do less harm to the environment. There's the RA V4-EV: Don't let its electric motor fool us…. this baby moves. Next up, the e. com: An electrifying new idea - just the right amount of car for getting there. And, finally, there is the CNG Camry: The vehicle for the Fleet Manager who really cares about air quality . . . and his or her people. (CNG Camry and RA V4-EV are fleet vehicles only;
e.com concept car is not available.)