Dell Team Case

Dell Computers Outline Professor CummingsMgt 509Michael Scheck, Raul Loys, John Duey, Keatha Banelli, Matthew Daley

Dell Case Comments from the TeamCompany objectives, pro-forma statements, and financial trends are based upon company data.The revenue growth rate (in the major objectives section) is based upon the industry definition which for our purposes is the United States.Although the numbers we will lay out in the following slides represent all of Dell, our focus is on the United States.

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Dell Computers General Case Information Industry Definition"This industry includes companies that develop, sell, repair and support computers and related products and services. The computers and related products and services are not only sold worldwide but produced in locations across the globe to ensure proper market penetration. The computers produced within this industry can be mass produced or built to order models. Competition can come in the form of substitution to this industry, including from companies that mass produce computers, related products, and services.For convenience, this will herein be referred to as the computer industry.

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Dell General Case Information

Projected Industry Growth Rate: -2.1% (This is a 2010 to 2012 estimate for background purposes only.) The tablet has really taken a toll on the personal computer sales numbers.http://www.gartner.com/newsroom/id/2301715

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Dell Case - AssumptionsRegarding Industry Units Sold US - Industry Unit Sales % Change 200046 millionFor reference201093 million+50.5%201195.4 million +2.5%201290.3 million-5.4%http://www.statisticbrain.com/computer-sales-statistics/http://www.gartner.com/newsroom/id/2301715

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Dell General Case Information

Dell revenues were up 1% in 2012. Revenue was $62.1 billion, up one percent from fiscal year 2011.The solid financial performance of fiscal year 2012 was driven largely by strategic moves to optimize our operations and invest in our end-to-end solutions and services capabilities.http://www.dell.com/Learn/us/en/uscorp1/secure/dell-fiscal-year-2012-in-review?c=us&l=en&s=corp&cs=uscorp1

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Dell Case Some Major Assumptions

As a part of this case strategy, it will be assumed that customer loyalty is a huge element involved in the buying process.The current economy is in question still, as in 2012 Gross domestic product fell at a 0.1 percent annual rate.Dell has made a decision to go privatehttp://rt.com/usa/us-recession-economy-quarter-101/ http://www.nydailynews.com/news/national/dell-bows-stock-market-24-4-billion-buyout-article-1.1255594 *

Dell Case Some Major Assumptions

Computer prices will rise in 2013, due to the heavy use of tablets, and recent return of desktops to work machines.The average price of a computer will be somewhere between $300-$1600http://abcnews.go.com/blogs/business/2012/12/8-things-that-will-cost-more-in-2013/pt Honda. http://noblepcs.com/average-cost-of-pcs-today/ *

Dell Case Major Objectives*

Dell Major ObjectivesRevenue GrowthThe revenue objective for Dell is to grow at 1%, on average, per year for each of the next five years from $62.1 billion dollars to $64.5 billion. We feel that this number is an aggressive number due to the impact of tablets on the marketplace as well as a weakening PC industry overall. *

Dell Major ObjectivesReturn on Sales (ROS)Our ROS objective for Dell is to limit the ROS reduction to 3.0% by 2017, down from the current 2012 level of 5.6%.*

Dell Major Objectives Return on Equity (ROE)Our ROE objective for Dell is to continue at 39.16%.

One important thing to remember is the higher the ratio percentage, the more efficient Dell has been in utilizing its equity base and the better return is to investors.*

Dell Major ObjectivesReturn on Assets (ROA) and Market Share The ROA objective for Dell is to increase return on Assets to 15%. Dell can do this with a more efficient use of its assets.A big aspect of ROA is customer loyalty and Dell has a strong brand name with a loyal customer base. The objective for Dell is to achieve a market share of 15%. As of 2012 Dell had a market share of 10.2%.*

Dell Corporate VisionOur vision is to be the number one provider for computers and computer services in the industry. Our goal is to create customer loyalty through superior customer service, high quality products at an affordable price, and our commitment to a better tomorrow. *

Key Aspects of Toyota (NA) Case Strategy

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Toyota (NA) Type of Strategy to Follow Offensive against a weaker rival (General Motors)Attack competitors weaknessHigh operating costsPoor managementInferior technological positionPoor financial condition Attack competitors strength Introduction of electric car*

Toyota (NA) Key Aspects of Strategy R & D 24% of strategyNew plant processes and assembly line changes for hybrids/electric car production 24% of strategyMarketing 20% of strategyStrengthen distribution network 14% of strategyReopen component plants and improve suppliers network 18% of strategy*

Toyota (NA) Key Aspects of Strategy R & D accelerated spending will emphasize alternative fuel technologies. This will be 24% of total strategic expenditures.90% expense items10% capital expenditures

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Toyota (NA) R&D Alternative Fuel PrioritiesPercentage of R & D allocations:1) Hybrid 55%2) Electric 40%3) Biofuel3%4) Hydrogen 2%Total 100%

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Toyota (NA) R&D Hybrid TechnologiesToyota has been the leader in this area with over 15 years of R&D effort. Products in the market have the highest MPG. These efforts must continue in order to stay ahead of the competition. Fifty percent of the effort will be allocated to the development of new technologies. Fifty percent will be allocated to the reduction of component costs. *

Toyota R&D (NA) Electric Powered AutomobilesStarting with the planned mass market introduction of the Volt, by GM, they have the potential to establish a strong market presence in this area. Although our efforts have also been put into electric technologies, they will be substantially increased. Alliances with third party specialists will be made to bring our electric cars into the marketplace. The goal is to surpass GM in electric car sales by 2013.

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Toyota (NA) Biofuel TechnologiesEven 3% of the R&D strategy is a sizeable amount of money. Ethanol and other biofuels have been used for decades. The cost/benefit ratio of mass market biofuel availability is questionable. There have been some reports that the use of corn, as a source, has had a negative effect on food supplies. This technology is also affected by political influences. Toyota should focus upon designing one engine that can use all types of biofuels. This is also important in the face of government mandates for alternative fuels. *

Toyota (NA) R&D Hydrogen Cell TechnologiesPromising technology developments and mass-market potential are significantly longer than our five-year timeframe. In the distant future, hydrogen cell technologies will most probably allow for breakthrough products, changing the nature of the automotive industry. Toyota should pursue this technology in a very focused way. This technology development must be continued, but should have low priority.*

Toyota (NA) Key Aspects of Strategy Development and installation of processes to manufacture new advanced product offerings, particularly fuel efficient trucks. This will be 24% of total strategic expenditures. 10% expense items90% capital expenditures

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Toyota (NA) Manufacturing Development EffortsToyota has a large presence in the United States with five major assembly plants in Huntsville, Alabama; Georgetown, Kentucky; Princeton, Indiana; San Antonio, Texas; and Buffalo, West Virginia. A new plant slated to be built in Blue Springs, Mississippi has been put on hold owing to the financial crisis that erupted in late 2008. http://en.wikipedia.org/wiki/Toyota*

Toyota (NA) Manufacturing Development EffortsA portion of the Huntsville, Alabama plant will be converted to the mass-production of additional advanced hybrid automobiles, as well as electric cars.Given projected industry demand and current overcapacity, there are no plans to start to build the Blue Springs, Mississippi assembly plant before 2014. *

Toyota (NA) Key Aspects of Strategy Toyota marketing will emphasize affordable prices (from low production costs), and new technologies. This will be 20% of total strategic costs.100% expense items*

Toyota (NA) Marketing Effort DetailsNo automotive rebates or financing discounts will be given on new technology cars.Continued dealer incentives will remain in place.Sponsorship deals will remain at the current level (for example, sponsorship of sports events).*

Toyota (NA) Marketing Effort DetailsA major advertising campaign emphasizing the new technologies that will be available. A major advertising campaign emphasizing the substantial environmental benefits of new Toyota products.A major advertising campaign emphasizing the creation of NA jobs.Dealership new product displays will be created.

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Toyota (NA) Sample Advertising ThemesWe already have electric and hybrid technologies well under way to give you a wide variety of new environmentally friendly products. We plan to rollout superior products over the next five years at reasonable prices, starting next year. Our cars will significantly lower your operating expenses. (Massive advertising will take place prior to and during the introduction of the GMs electric Volt model.)

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Toyota (NA) Sample Advertising ThemesWe are increasing R&D every year from our current $8+ billion annually. We are serious about the future. This will allow us to offer exciting new cars at reasonable prices. Both hybrid and electric technologies have places in the future.

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Toyota (NA) Key Aspects of Strategy Toyota will strengthen its distribution network, providing guidance on selling/servicing new technology automobiles. This will be 14% of total strategic costs.20% expense items80% capital expenditures*

Toyota (NA) Distribution NetworkCost-sharing of dealers new maintenance equipment will be implemented.Significant training will be provided to dealer mechanics to service new technology automobiles.Through incentive payments, we must reduce our dealer network by 5%. *

Toyota (NA) Key Aspects of Strategy Toyota will re-open component plants that were closed during the deepest part of the recession. Toyota will also establish an adequate supplier network. This will be 18% of total strategic costs100% capital expenditures

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Toyota CasePro-forma Financial Statements*

Toyota Pro-Forma Income Statement*

In $ Billions or %200820092010201120122013Revenue263.8211.0225.5245.2260.6277.3100.0%100.0%100.0%100.0%100.0%100.0%COGS214.8179.8187.2201.1212.9232.081.5%85.2%83.0%82.0%81.7%83.7%Expenses 22.732.137.234.128.832.58.6%15.2%16.5%13.9%11.1%11.8%Taxes (35% of Net)9.10.00.13.56.64.43.4%0.0%0.1%1.4%2.5%1.5%Net Inc. After Tax17.2(0.9)1.06.512.38.46.5%(0.4%)0.4%2.7%4.7%3.0%

Toyota Pro-Forma Expense Detail

In $ Billions or % 200820092010201120122013General & Admin.9.89.09.59.59.510.4% of total revenue3.7%4.2%4.2%3.9%3.6%3.8%R&D7.410.410.410.611.314.4% of total revenue2.8%4.9%4.7%4.3%4.3%5.2%New Processes0.15.08.36.02.01.0% of total revenue0.1%2.4%3.7%2.4%0.7%0.4%Marketing4.06.57.05.35.36.1% of total revenue1.5%3.1%3.1%2.2%2.0%2.2%Distrib./Training0.90.61.42.00.00.0% of total revenue0.3%0.3%0.5%0.8%0.0%0.0%Interest Expense0.50.60.60.70.70.6% of total revenue0.2%0.3%0.3%0.3%0.3%0.2%Total Expenses22.732.137.234.128.832.5% of total revenue8.6%15.2%16.5%13.9%11.1%11.8%

Calculation of New Strategic Assets According to the Case Guide FormulaActual 2008 Sales $263.8 billionActual 2008 Total Assets$324.0 billion2013 Forecast Sales$277.3 billionCalculated 2013 Total Assets$340.1 billion2013 Total Assets 2008 Total Asset = New Assets Needed$16.1 billion plus 30% fudge factor to account for increased process capital/R&D = $20.9

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Toyota Strategic Capital and Other Non-Expense Costs*

$ in Billions20092010201120122013TotalCapitalized R&D0.90.9New tech. processes & plant openings 2.03.03.03.04.415.4Distribution1.51.51.64.6Total2.93.04.54.56.020.9Cash-Flow Needs (losses & 3B annual dividend)3.93.03.03.03.015.9Grand Total6.88.07.57.59.036.8

Toyota Sources of Strategic Funds*

Pro-Forma IncomeStockDebtTotal Raised2009N/A$6.8B$6.8B2010$1.0B$5.0B$6.0B2011$6.5B$1.0B$7.5B2012$7.5B$7.5B2013$9.0B$9.0BTotal$24.0B$1.0B$11.8B$36.8B

Toyota Total Strategic Financial Effort*

Capital Expenditures$billionExpenses$billionTotal$billion% of TotalR&D0.98.59.424%Process Improvement8.50.99.424%Plant Opening6.90.06.918%Marketing0.08.08.020%Distribution4.60.95.514%Total20.918.339.2100%

Toyota Actual and Pro-Forma Balance Sheet (In $ Billions)

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YearAssetsLiabilitiesShareholders Equity2008324.0205.5118.5100.0%63.4%36.6%2013344.9217.3127.6100.0%63.0%37.0%

Toyota (NA) CaseOverall Strategic Direction

Strategy Group Maps*

Toyota Case Strategic Group Map Automobile Industry (Now)*

NISSANCOGS/RevenueThe lower the percentage the higher the efficiency

75% 80% 85% 90% 95%CorporateAverageFuelEconomy(mpg)Also a proxy for innovation323130292827262524GMFORDTOYOTACHRHONDA v w Legacy SegmentHigh Innovation SegmentHigh EfficiencySegmentTransition SegmentEmpty

Toyota Case Strategic Group Map Automobile Industry (In 5 Years)*


75% 80% 85% 90% 95%CorporateAverageFuelEconomy(mpg)Also a proxy for innovation

323130292827262524GMFORDTOYOTACHRHONDA v w Legacy SegmentHigh Innovation SegmentHigh EfficiencySegmentTransition SegmentEmpty

Toyota (NA) CaseIndustry Analysis*

Toyota (NA) Industry Analysis ConclusionsThe industry is in poor condition. Significant cost pressures affect the industry. The economic crisis is having a severe affect on demand. However, eventual technological developments, in four to twenty years, make the long-term outlook for the industry extremely good for competitors who are prepared.*

Toyota (NA) Industry Definition (Repeated from Beginning)This industry includes companies that mass-produce (500,000 units per year) cars, pick-up trucks, vans, mini-vans, SUVs, or durable on-road four wheel vehicles. These vehicles must have an engine of some sort. Recreational vehicles, non-pickup trucks, and buses are excluded. Manufacturing or assembly can take place anywhere in the world, for sale in North America (Canada, Mexico, and the USA).

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*Toyota (NA) Summary of the Five Most Important Industry Characteristics

Market Growth Rate : -4%

Number of Competitors in Industry:Estimated 20Concentration Level Top 4 have 70% market share (moderately concentrated)

*Toyota (NA) Summary of Important Industry Characteristics

Fuel efficiency is the major technology/ innovation trend in the industry. (Note: Past trends have included safety and quality.) Fuel efficiency would also include automobile production with advanced materials. New technologies are major and spread rapidly because all of the major companies have been investing in developing these technologies. Major breakthrough innovations occur every ten years.

*Toyota (NA) Summary Of Important Industry Characteristics

Special Industry Problems: Problems include fluctuating gas prices, long design-to-production cycles, government regulations/ standards pressures, and owners keeping their automobiles longer.Stability of Demand: It is cyclical and seasonal

*Toyota (NA) Industry CharacteristicsMarket Size : 19.6 Million Units Market Growth Rate : -4% Stage in Industry Life Cycle : MatureNumber of Companies in Industry: 20 Companies Top 4 have 70% market shareTop 7 have 86% market share

*Toyota (NA) Industry CharacteristicsCustomers: Automobile dealers: 30,000 (approximate 8% drop in dealers since 2005)Rental companies: 100Fleet buyers: 500Ease of Entry: Difficult distribution limits, excess demand, and commitment of current companies make entry into North America difficult.

*Toyota (NA) Industry CharacteristicsEase of Exit: DifficultTechnology/Innovation trends: Fuel efficiency including hybrid or alternative energy powered automobiles. Stronger and lighter automobiles with advanced materials. New technological features are major, rapid, but consistency unknown.Current breakthroughs based upon 15 year R & D efforts (Toyota as an example)Cross-company licensing

*Toyota (NA) Industry CharacteristicsProduct Characteristics: Differentiated, based upon size (compact versus large), car versus truck versus SUV, and standard versus luxury. Some differentiation occurs across manufacturers, based upon quality, performance, and new technologies. Advertising to establish differentiation is heavy.

*Toyota (NA) Industry CharacteristicsScale Economies: All manufacturers in the industry have achieved economies of scale. Estimated minimum efficient plant size cost is $1.0 billion. (This is based upon estimated assembly and manufacturing plant sizes.)Estimated Capacity Utilization: 65%Estimated Industry Profitability: 1.0% ROS; 1.7% ROA (Ford, GM, & Chrysler are bringing industry averages down.)

*Toyota (NA) Industry CharacteristicsStability of Demand: Cyclical, SeasonalSpecial Industry Problems: Fluctuating gas prices, long design-to-production cycles, government regulations/standards pressures, and owners keeping automobiles longer.

Toyota (NA) Five Competitive Forces SummaryRivalry: Very StrongPotential Entry (foreign manufacturers with no sales in North America): WeakSubstitutes (used cars, motorcycles): WeakBuyers (dealers, rental car companies, and fleet purchasers): WeakSuppliers: Strong Unions: Very Strong Equipment and parts manufacturers: Weak *

Toyota (NA) Five Competitive ForcesRivalry: Very StrongCompetitors are dissatisfied with market share.Product demand is growing slowly.The industry has high fixed costs.Volume is important.*

Toyota (NA) Five Competitive ForcesPotential Entry: Weak (foreign government-backed entry exists. An example would be Chinas Cherry brand cars.)Incumbents have high dedication to the industry.Brand preferences and customer loyalty are high.Economies of scale are high.*

Toyota (NA)Five Competitive ForcesSubstitutes: Weak (used cars, motorcycles)An extremely low percentage of rental car companies or fleet buyers acquire substitutes. Thus, our focus will be on the dealer networks. Substitutes rank low on quality and performance. Dealers do purchase used cars, but generally only as trade-ins. There are concerns about their condition. *

Toyota (NA)Five Competitive ForcesSubstitutes (continued)Substitutes are not coming from high profit industries. Used car sellers do not make enough profit to allow downward price negotiations.There is a low price structure for substitutes (which is outweighed by the first item above). Both used cars and some motorcycles are less expensive.*

Toyota (NA) Five Competitive ForcesBuyers: Weak (dealers, rental car companies, and fleet purchasers)Buyers are not concentrated and do not purchase in large volumes, relative to automobile manufacturers.There are high switching costs (dealer switching from one manufacturer to another).Products represent a significant portion of buyers costs and is important to the quality of buyers products/services.*

Toyota (NA) Five Competitive ForcesSuppliers (Unions): StrongSuppliers services are important inputs to your business.Suppliers are dominated by a few concentrated unions (with multi-year contracts).Few substitutes exist for suppliers services. (Robotics is a growing exception.) *

Toyota (NA) Industry Driving ForcesRegulatory Influences/Government Policy Changes: Unfavorable Fuel efficiency standards will reduce industry profits over the next five years. (Long-term it will be beneficial.)Changing Industry Growth Rate (Projected three-year recession): Unfavorable Reduced industry profits and sales. This is particularly important, given the capital intensive nature of the industry and attempts to develop new technologies*

Toyota (NA) Industry Driving ForcesIncreases in Efficiency (Although slowed by union power, which is strong): Favorable This increases industry profitability. Taken separately, this would be a favorable force. However, the current decrease in demand limits pricing and causes underproduction (increasing costs). Thus, driving force #2 is much stronger than this driving force.

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Toyota (NA) Case Industry Segment Analysis*

Toyota (NA) Industry Segment Analysis ConclusionsThere are essentially three major segments in this industry. The most attractive segment is the high innovation segment, followed by the high efficiency segment. The least attractive segment is the legacy segment made up of very large companies that have high operating costs due to historical patterns. Potential new entrants would most likely enter the legacy segment, particularly if they were foreign state-supported. However, quality and distribution issues may affect foreign entry even into the legacy segment.*

Toyota Case Strategic Group Map Automobile Industry (Now)*

NISSANCOGS/RevenueThe lower the percentage the higher the efficiency 75% 80% 85% 90% 95%CorporateAverageFuelEconomy(mpg)Also a proxy for innovation323130292827262524GMFORDTOYOTACHRHONDA v w Legacy SegmentHigh Innovation SegmentHigh EfficiencySegmentTransition SegmentEmpty

Toyota Case Strategic Group Map Automobile Industry (In 5 Years)*


75% 80% 85% 90% 95%CorporateAverageFuelEconomy(mpg)Also a proxy for innovation

323130292827262524GMFORDTOYOTACHRHONDA v w Legacy SegmentHigh Innovation SegmentHigh EfficiencySegmentTransition SegmentEmpty

Dell High Innovation SegmentMinimum Success FactorsAn ability to sell products at competitive to low prices due to minimal stock based on the ease of website ordering.A strong support team with the ability to handle any and all customer issues.Becoming more cutting edge with their products and services.

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Dell High Innovation SegmentMinimum Success Factors (continued)A heavy commitment to focused our new Research & Development plans.Customer loyalty is a must as we introduce our Buy Back Program.Heavy commitment to marketing as we have realized we need to market more to stay competitive in the industry.

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Toyota (NA) Primary Competitor General MotorsStrengths:Size: It affects the economy and the political world, as well as GMs ability to survive.Market leadership: It is only slightly behind Toyota in North American market share.Reputation: It has made significant investments quality improvement systems.Physical Presence: The company is well known and has a worldwide presence. Design Capabilities: It has strong new car styling capabilities.*

Toyota (NA)Primary Competitor General MotorsWeaknesses:GM has inefficient operations and a high unit cost.It faces significant financial pressures due to several recent annual multi-billion dollar losses.GM divisions have overlapping offerings (Buick and Chevrolet, for example).There have been negative effects of GMACs recent performance (49% owned by GM). For example, GMAC was involved in derivatives trading which lost large amounts of money.GM must bear a large amount of Delphi Corporations post-GM divestiture liabilities.

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Toyota (NA)Primary Competitor General MotorsWeaknesses (continued):GM has overcapacity in the North American dealer network.GM has significant union legacy costs.There is probably an inability to negotiate further significant union concessions. Severe cash flow problems are causing the sell-off of significant assets. GM is overemphasizing truck and SUV lines.GM has a very weak management team.

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Toyota (NA)Primary Competitor - FordStrengths:Ford has skills in manufacturing and selling trucks and SUVs.They have a good reputation and attract the Buy American segment of the industry.They have significantly improved quality over the last decade.They have adequate short-term cash flows with a current ratio of approximately 2.0.

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Toyota (NA) Primary Competitor - FordWeaknesses:They have structural cost problems which have led to significant losses and an overall long-term weak financial position.Labor union constraints are similar to those of GMNA.They are weak in product innovations.The product line is too narrow.*

Toyota (NA)Primary Competitor - HondaStrengths: Superior skills in engine design.Good financial position.Brand recognition.Superior dealer network.Good Management.*

Toyota (NA)Primary Competitor - HondaWeaknesses:Relatively small established distribution network (constrains already smaller market share.)Limited commitment to breakthrough innovations.

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Toyota Case Company Analysis*

Toyota Company Analysis ConclusionsToyota is in the dominant position in the industry and has outstanding management.It has a head start in bringing new technologies to the market place.It has superior financial strength and very high market capitalization .It is positioned to take market share from the second largest, but weakest, competitor (GM).*

Toyota Financial Trend Analysis ConclusionsToyota has a superior position on almost all financial indicators. Although Toyota has roughly 1 the worldwide revenue of GM, it has 22 times the market capitalization.Ford and GM are in similar, poor conditions. *

Instructors Notes on Common Financial Statement ErrorsSome labels are missing or not in proper format. For example: $10000000 thousands should be in billions.The slide backgrounds are not consistent.The color code for a company changes from slide to slide.Numerical amounts for each data point are missing from the slides.Numbers that do not make sense are plotted.ROE for companies which have negative equity in a year should not be plotted for that year.Missing numbers are plotted as zero instead of left blank.

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Financial Trends Instructors NoteYou should plot three companies on each slide. Hopefully data will be available for the company which you have chosen as your major competitor. If not, select another company which has data available.When the data for one of the companies differs dramatically from the other two, add an additional chart without that company. The following charts for Net Profits (after taxes) are an example of this. *

Toyota Case*

Toyota Case (Without GM Data)*

Toyota Case*

Toyota Case (Without Toyota Data)*

Toyota Case You Should Determine Why this Slide is Incorrect*

Toyota Motor Corporation Only Other Five-Year Historical Data*

(in Billions, except stock price)20042005200620072008Total Current Assets $84.86$88.17$91.25$99.82$121.27Total Assets$211.37$227.29$244.22$275.92$325.68Total Current Liabilities$72.87$76.84$85.24$99.67$119.81Total Liabilities$128.65$138.09$149.44$170.34$200.00Total Stockholders Equity$78.43$84.48$89.76$100.26$119.10Revenue per EmployeeNot availableYear-end Stock Price (Adjusted for Splits)$74.50$74.38$108.90$128.16$100.89

Toyota SWOT Analysis*

Toyota Potential StrengthsHigh innovation with substantial R&D focusExcellent financial positionExtremely cost-efficient on a per car basis (labor cost, supplier cost, and process-based benefits) High quality products and systemsNo legacy labor union commitmentsGood brand recognition for stylish carsStrong management teamWorldwide manufacturing and distribution networkStrong supplier relationships

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Toyota Potential WeaknessesRelatively small presence outside of Japan and the USAPerceived in the USA as a Japanese company rather than a multi-national or global company*

Toyota Potential OpportunitiesToyota could make a major thrust to serve emerging markets (e. g., China and India) using North American production and assembly facilities.Toyota could focus upon the market for smaller more fuel efficient cars in North America by using new technologies.Toyota could take advantage of the severe economic times to attack weaker companies (e. g, GM and/or Ford) in the North American market.

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Toyota Potential OpportunitiesToyota could invest heavily to significantly speed the apparent long-term development of an environmentally clean (hydrogen cell) car.Toyota could compete worldwide (including North America) by focusing on current technology cars.Toyota could use its efficient quality-oriented systems to enter new markets, such as airplane engine manufacturing.

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Toyota Potential ThreatsA deeper than anticipated worldwide economic slowdownLow gasoline pricesIncreased unionization of North American operationsConsumers keeping cars for a longer period of time

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Toyota Potential ThreatsStrong government support of legacy manufacturers (Chrysler, Ford, GM)Increased competition from other large companies, such as Honda or Mercedes-BenzGM introducing a breakthrough electric car with major infrastructure problems (charging batteries) solved

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*Toyota Generic Strategy

Differentiation based upon: a desirable product line, a strong brand image, andimportant innovations (hybrid technology)

*Toyota Value Chain AnalysisManufacturing/Service-Related ActivitiesHigh quality and competitively-priced cars (production operations)Customer brand image, for example owning a Lexus is a status symbol (marketing and sales activities)High MPG and environmentally-friendly products (Product R&D)

*Toyota Value Chain AnalysisForward Channel ActivitiesHigh quality distributor and dealer networksHigh quality parts, service/repair service

Toyota Distinctive CompetenceHigh innovation with substantial R&D focus Although other large competitors have invested similar amounts in R&D, Toyota is more focused. Toyota is able to bring breakthrough innovations to the marketplace more quickly, but at the same time maintain an unwavering commitment to long-range efforts.

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Toyota VIRO AnalysisSustainable Competitive AdvantageValuable Yes (there is a demand for these products)Inimitable Yes (within the 5-year timeframe)Rare Yes (unless GMs electric car proves to be a success)Organizationally capable of utilizing the distinctive competence Yes*

Toyota Key StakeholdersThe top six institutional investors (banks and insurance companies) own 31% of the shares outstandingThe top institution owns 10.2%http://www.toyota.co.jp/en/ir/stock/outline.html

The founding Toyoda family*

Toyota Sustainability Issues

Toyota should continue its very highly-ranked sustainability efforts. New products will not only reduce harmful emissions when customers operate their cars, but the cars will be manufactured in an environmentally responsible way.

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There are a wide variety of sustainability sources and rankings. Since there is no generally accepted method of assessing sustainability, the wide variety of sources is often confusing.Despite this, Toyota generally is ranked near the top on most worldwide ranking lists. Environmental concerns normally rank higher than ethical and social justice concerns.

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Company comparison prepared by :SAM Research Inc.Analyst: Aino Piekkola. http://blogs.bnet.com/ethics/?p=247Automobile Manufacturers. Sustainability Leader. Member of DJSI World. Toyota Motor. Please review the follow three page PDF file. http://www.sustainability-index.com/djsi_pdf/djsi_world/CompanyBiographies/Bios04/Select Toyota near the bottom of the list.

A clear picture of Toyotas efforts, researched by an independent organization, is very useful. It should be studied and discussed.

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Toyota Ethical IssuesSome Stakeholders which should be consideredLabor unionsUnion membersNon-union workersRetireesSuppliersCommunitiesAutomobile ownersStockholdersBond holdersSalaried employeesGovernmentsDealershipsRepair shops

How should they be ranked?*

End of Case*

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Dell Team Case