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2012 Competitive Strategy                 ReportPrepared by:Sara Yeap0008VMVM0112                                     1
UMW BackgroundUMW (United Motor Works) Holdings Berhad is founded by Chia Yee Soh in 1917 as anautomobile repair shop (Bi...
UMW Background – Cont’UMW Core Businesses UMW Core Values:      Honour in their continual efforts in building trusted rela...
UMW Toyota Motor Shd. Bnd.UMW Toyota Motor Sdn. Bhd is the assembler, importer and distributor of Toyota and Lexuscars in...
Analysis – Financial & Market Share AnalysisFinancial highlights of UMW Toyota    Group revenue registered an increase of ...
Analysis – SWOT Analysis                Strengths                                  Weaknesses                             ...
Analysis – PESTLE Analysis                               Politic & Legal                                                  ...
Analysis – Porter’s Value Chain                                  Support                                  Activities      ...
Analysis – Porter’s 5 Forces                    Barganing Power of Buyer - High                             Threat of New ...
Analysis – Competitors AnalysisToyota’s market share in Malaysia dropped 1.2% from 13% to 11.8% because ofKorean car emer...
Analysis Findings & SummaryCompetitors Analysis   Toyota is doing fine in existing product but not in Hybrid models which ...
Recommendations                                                     Strategic Option 1                                    ...
Recommendations Cont’ – Gantt Chart for Strategic Option 1Preparation – Planning – Analysis – Production – Testing – Docum...
Implementation & Control                                                                                                  ...
References1.    Biz.thestar.com.my (2012) Auto sales to speed up. [online] Available at: http://biz.thestar.com.my/news/st...
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UWM Toyota Strategic Management

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UWM Toyota Strategic Management

  1. 1. 2012 Competitive Strategy ReportPrepared by:Sara Yeap0008VMVM0112 1
  2. 2. UMW BackgroundUMW (United Motor Works) Holdings Berhad is founded by Chia Yee Soh in 1917 as anautomobile repair shop (Bicycle) Worth RM10 billion today and listed one of the top ten listed companies in Bursa Malaysia They are strongly operating in Singapore, Indonesia, Thailand, Vietnam, Papua NewGuinea, Australia, Taiwan, China, India, Myanmar and Turkmenistan Having more than 10,000 employees with 80% of them are Malaysians Having 5 strategic partners and UMW Corporation Sdn. Bhd. Holds the largest profitearning annually which operates all of their core businesses activities UMW Holdings Berhad UMW UMW UMW Australia UMW Oil & Gas UMW Petropipe Malaysian Corporation Sdn. Ventures (L) Berhad (L) Ltd. Ventures Shd. Bhd. Ltd. Bhd. Vision: To become a truly world-class brand Mission: “A Good Business Is Rooted Deep in the Solid Ground of Customer Satisfaction.”This saying from Chia itself had embedded in their operating culture continuously for years.They are to treat their customers with honesty, loyalty, earnestly and the best.“Beyond Boundaries” is their new rallying call started in year 2008 2
  3. 3. UMW Background – Cont’UMW Core Businesses UMW Core Values: Honour in their continual efforts in building trusted relationships and behaving with the utmost integrity, resulting in quality products and services that stand the test of time Vibrant in their energetic and open-minded approach to new ideas that inspire fresh solutions to their partners and businesses Unshakeable in their commitment to their customers, partners, employees as well as the community at large, to persevere and strive for excellence in all their undertakings Pioneering as they lead the way with bold ideas that shape the futures of their industries 3
  4. 4. UMW Toyota Motor Shd. Bnd.UMW Toyota Motor Sdn. Bhd is the assembler, importer and distributor of Toyota and Lexuscars in Malaysia A joint-venture company with 51% in hand while Toyota Motor Corporation (39%) andToyota Tsusho Corporation (10%). It assembles engines and parts from Thailand and Japan together with the body in which ismanufactured in Malaysia itselfHaving four subsidiaries : Subsidiaries Responsibility Assembly Services Shd. Bhd. (ASSB) Local assembler/manufacturer of Toyota passenger and commercial vehicles. Automotive Industries Shd. Bhd. (AISB) Original equipment manufacturer of exhaust systems for national and non-national car companies Toyota Boshoku UMW Sdn. Bhd. (TBU) Manufacturing and assembling high quality and cost-effective - Formerly known as Takanishi SIM Shd. Bhd. car seats, door trims and interior parts for all Toyota cars and Hino commercial vehicles assembled by ASSB using the JIT method. KAYABA (Malaysia) Shd. Bhd. (KYB-UMW) Manufacturer of high quality shock absorbers and steering pumps. ASSB assembled a few Toyota models: Vios, Hilux, Innova, Hiace and Fortuner . The rest areimported. It also invested into PERODUA, local car manufacturer with a 38% share interests (biggestshareholder besides Daihatsu) 4
  5. 5. Analysis – Financial & Market Share AnalysisFinancial highlights of UMW Toyota Group revenue registered an increase of 150% for both Toyota/Lexus and Perodua earnings in 2Q12 in compared with the preceding year’s corresponding quarter. Group profit before PBT (Taxation) increased by 27.6% to RM433.3 millions. (Appendix J ) Net profit attributable to equality holders of the Company increased by 44.9% compared with the same quarter of 2011. Consolidated cash and deposits stands at RM2.3 billion. Total market share in the automotive sector of Malaysia is approximately 50% (UWM Toyota Motor & Perodua) as of 2012 FOREX conversion rate is better than year than preceding year (Appendix F) Despite global economy recession, Malaysia’s GDP is anticipated to grow 4-5% 5
  6. 6. Analysis – SWOT Analysis Strengths Weaknesses Opportunities Threats Toyota holds the largest market  Despite Toyota’s performance in  The global fuel prices are has  Price leadership by local car share among the foreign cars in Malaysian and global markets, the been steadily increasing, giving a manufacturers Malaysia and the third biggest production capacity is limited as the clear opportunity on the potential  Natural catastrophe in Japan and market share after the two local car main production centers are located in increase in demand for Toyota’s Thailand affected Southeast Asia manufacturers-Proton and Perodua. Japan and US unlike many other fuel efficient cars production line The strong brand image of Toyota leading auto manufacturers which got  The environmental awareness  The Malaysian automobile market both locally and globally manufacturing plants in low cost among Malaysians is growing is saturated due to the slow growth Toyota is the industry leader in locations. On top of that, the ASSB is which will tend more people to rate in population and the presence efficient manufacturing and only putting together the parts produce prefer hybrid cars like Toyota of strong competitors such as operations in terms of TQM (Total in those major production centers Prius. Honda, Volkswagen, Fords and Quality Management) and JIT (just- thereby incurring huge shipping costs  The growth in the Malaysian Hyundai. in-Time) manufacturing and is and directly rising prices of Toyota economy is likely to increase the  Market share dropped from 13% to moving ahead with R&D and latest cars demand for Toyota cars 11% with Korean cars; Hyundai & technology especially in the  Toyota has moved away from niche Kia grabbing some of the shares. manufacture of hybrid cars with an segments and making cars on the  The prices of Toyota cars in objective to eliminate waste specific needs of small customer Malaysia are higher than other groups. This has given a competitive countries due to heavy taxation on weakness in terms of limited product foreign cars.. differentiation (e.g. Toyota Vios is  Profit largely affected by FOREX promoted as a car suitable for all fluctuations ages). 6
  7. 7. Analysis – PESTLE Analysis Politic & Legal SocialThe Malaysian domestic automobile With the government grants and People tend to purchase different car Toyota produced variety of carsindustry is strongly protected by the other incentives, local cars are models and brands as a symbol of the ranging from luxury to medium-endgovernment. The revised National becoming more affordable creating social status ranging from the luxury and to economical models such asAutomotive Policy (NAP) gives tough competition for Toyota in the cars to the medium, economy and low Toyota Vios which catered to differentserious consideration in further Malaysian market. end cars. walks of life among the Malaysiansdeveloping the domestic automanufacturers such as Proton and TechnologyPerodua. Meantime, there’s no tax With the mainstream awareness of the Toyota has been the leader forimposed on some hybrid models negative environmental impacts from environmental friendly vehicleextended till 31st December 2013 as a automobiles and the increased technologies for a long time andsupport to moving towards green importance given to the precious energy Toyota was the first to commercially resources, leading car manufacturers are produce vehicles with such coming up with new technologies to technologies with its launch of the Economy manufacture fuel efficient cars. Also, Prius in 1997 and has been movingIn order to develop the domestic Heavy taxes on imported cars lead to Malaysia has recently announced its ahead with this technology ever since.automobile manufacturing industry, a significant increase in prices of plans on boosting the automotive sectorimported cars have been heavily Toyota cars to the end-customer. through production of electronic cars.taxed.Since 2011 the Malaysia government With this, it is likely to boost the salehas given 100 exemptions on of Toyota hybrid models such ascustoms duties and exercise duties Prius and Prius C. Environmentfor both hybrid and electronic cars. Environmental protection has become a The increased environmental hot topic recently and Malaysian awareness coupled with the taxDespite the recent global economic The good economic growth will customers are becoming more aware of incentives and the government’s targetcrisis, the Malaysian economy has have favourable impact on people’s the environmental concerns. on cutting down carbon emission, it isbeen steadily growing with an purchasing power thereby increasing obvious that Toyota has a bright futureexpected growth rate of 4% in 2012. demand for durables such as hybrid on its hybrid models. cars. 7
  8. 8. Analysis – Porter’s Value Chain Support Activities Primary Activities 8
  9. 9. Analysis – Porter’s 5 Forces Barganing Power of Buyer - High Threat of New Entrance - Low •Can easily switch to other brands if theyre cheaper •New entrants cant enter the market easily as it and better specifications such as Hondas new requires huge capital investment and the industry Hydrid models which are more lucrative than have already reached economics of scale Toyota Prius •Brand loyalty amoung the buyers. They wont easily •Local domestic manufacturer: Proton & Perodua switched to new brand as purchasing a vehicle which holds a hefty 58% of market share in 2011. incurred high cost •Other substitues such as walking and busHow to reduce How to reduce itsbargaining power of Rivalry within the industry - High selling price andbuyer to moderately maintain its quality •There are two major players in Malaysianlow to compare with automotive industry, two national cars which is simultaneously?national cars’ price? more affordable •Other top 8 auto companies presence in Malaysia such as Honda, Nissan, Hyundai, Volkswagen, etc asHow to overcome foreign brands. Currently Volkswagen and Honda What to do to staygovernment’s are moving aggressively with their strategy to own ahead of its strongprotection duty higher market share in Malaysia especially with rivalry? Hybrid modelstaxation over its GLC? Bargaining Power of Supplier - Moderately Threat of Substitute - Moderately High Low •There are a lot of substitutes in this industry. When •Various types of suppliers in vehicles industry such the price or specifications of the vechicle is lack of as cooling, electrical, braking, fuel supply systems favour, the substitutes will emerge distributed across the globe. •Besides a vehicles, buyer can opt for other •They own many interchangeable supplier and substitues such as bicycle, bus, train or even produced many components in the short time. walking to reach their destination with petrol price Supplier dont own the power to determine the hiking. However, it depends greatly on the price. consumers geographical location 9
  10. 10. Analysis – Competitors AnalysisToyota’s market share in Malaysia dropped 1.2% from 13% to 11.8% because ofKorean car emerging fast (stylist & cheaper) Hybrid models are most expenses now compared with Honda (as for now).Technology higher but losing out interms of price. Took too long to produce hybrid cars, Toyota has 2 while Honda as 4 (onelaunching soon). 10
  11. 11. Analysis Findings & SummaryCompetitors Analysis Toyota is doing fine in existing product but not in Hybrid models which are perceived lack of designs and variety to compare with its competitors, Honda.PESTLE Analysis Free duty tax on Hybrid models are only extended till end of year 2013. After that, it will be a lot more expense to own a Hybrid car whereby current price ranges are starting from RM90,000 – RM140,000Financial Analysis Toyota is doing great in year 2012 but the looking back to year 2011, its sales dropped tremendously from the impact of natural catastrophe.Value Chain Analysis Toyota inbounds logistic and operation relied in Japan and Thailand whereby sales and production from assembly plant in 2011 is badly affected by earthquake and floods (Appendix C). Only few models are assembled locally and majority models are imported from ThailandSWOT Analysis FOREX currency fluctuates every year and no guaranteed sales target achieved every year (Appendix B) Latest market dominance revealed by theedgeMalaysia that Toyota had reduced from 13.1% to 11.8% with more new models emerging from Hyundai & Kia (theEdgemalaysia.com, 2012)Porter’s 5 Forces Threats from substitutions would increased if Malaysian’s government withdraw from the “no duty tax” on hybrid models and increased current taxation on foreign cars FocusGrowth Target How to better and be COST LEADER?Toyota wants 15% market shareLexus wants to boost 35% saleswith new model Differentiation Cost Leadership 11
  12. 12. Recommendations Strategic Option 1 Collaborate and trained Perodua intensively to produce a Perodua first Hybrid Model Strategic  A win-win situation for both: Option 1 Perodua increased technology & skills UMW Toyota profits increased if sales well Local car, cheaper (No shipping cost & Tax)Strategic Option 2Backward Integration strategy on its supply and Strategic Option 2value chain. – BackwardPropose to Perodua to manufacture its engines Integration& accessories locally.Implement strategic option 1 to buildtrust, confidence, skillful enough and to test themarketWhy? To avoid natural catastrophes such asfloods & earthquake in Toyota’s production land. Also reduce price as cost (shipping & tax)reduced tremendously. 12
  13. 13. Recommendations Cont’ – Gantt Chart for Strategic Option 1Preparation – Planning – Analysis – Production – Testing – Documenting = 488 days 13
  14. 14. Implementation & Control 1. Integration of UMW Toyota and1. Managing/sharing customer information Strategy Perodua team with other2. Implement Toyota manufacturing management, marketing (corporate systems (TQM & JIT) into Perodua communications, brand existing system marketing, direct marketing) and IT staff3. Managing content quality 2. Utilize cross-functional teams and4. Unified reporting between both teams steering groups to exchange brilliant to align marketing effectiveness System Structure ideas Priority: 3 Priority: 1 Shared Improving and gradually change of1. Insourcing VS Outsourcing Values management style/culture among the2. Staff Development and training top managements and employees to3. Achieving senior management buy- share the same values especially in/involvement in this corporation Perodua adapting and adhering to4. Staff recruitment and retention Staff Toyota’s Hybrid Technology Skills Priority: 5 Priority: 2 Style Seek for specific set of skills into position Relates to role of highly innovative and fit (design exports, financial commitment as to influence dynamic analyst, project manager, automotive thinking and infiltrate into the team with 1. Gaining appropriate budgets and engineers, etc) to create an effective same voice demonstration to deliver value to share skill set amongst themselves Priority: 7 across the organization. Annual planning Priority: 6 approach 2. Deliberate techniques for aligning strategy with organizational and market strategy Priority: 4 14
  15. 15. References1. Biz.thestar.com.my (2012) Auto sales to speed up. [online] Available at: http://biz.thestar.com.my/news/story.asp?file=/2012/7/20/business/11696596&sec=business [Accessed: 20 Sep 2012].2. Ecmlibrary Research Library - UMW Holdings Automotive Results View (2012) UMW Holdings Automotive Results View. [online] Available at: http://baby.boom.com.hk/portfolio/research/Malaysia/umwh.pdf [Accessed: 20 Sep 2012].3. Ecmlibrary Research Library - UMW Holdings Berhad (Automotive) (2012) UMW Holdings Berhad (Automotive). [online] Available at: http://www.ecmmoney.com/wp- content/uploads/downloads/2012/08/UMWH_120817_2QFY12.pdf [Accessed: 20 Sep 2012].4. Insideline.com (2011) Toyota To Launch 10 More Hybrid Models By 2015. [online] Available at: http://www.insideline.com/toyota/toyota-to-launch-10-more-hybrid- models-by-2015.html [Accessed: 20 Sep 2012].5. Klse.i3investor.com (2012) UMW - Targeting 15% market share | i3investor.com. [online] Available at: http://klse.i3investor.com/servlets/ptres/6925.jsp [Accessed: 20 Sep 2012].6. Managementstudyguide.com (2008) SWOT Analysis - Definition, Advantages and Limitations. [online] Available at: http://www.managementstudyguide.com/swot- analysis.htm [Accessed: 20 Sep 2012].7. Mypintar.com.my (2003) UMW. [online] Available at: http://www.mypintar.com.my/main/en/pintar-members-a-partners/46-umw [Accessed: 20 Sep 2012].8. OSK Investment Banking (2012) UMW Holdings - Improving 2012 Outlook. [online] Available at: http://www.osk188.com/adminv2/UserFiles/OSK188- Malaysia/Article/UMW%20Holdings_1QFY12_Results%20Review_20120530_OSK.pdf [Accessed: 20 Sep 2012].9. Oup.com (1997) PESTEL analysis of the macro-environment. [online] Available at: http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htm [Accessed: 20 Sep 2012].10. Tan, D. (2011) Budget 2012: Hybrid car incentives extended till 2013!. [online] Available at: http://paultan.org/2011/10/07/budget-2012-hybrid-car-incentives-extended- till-2013/ [Accessed: 20 Sep 2012].11. Theedgemalaysia.com (2009) Single-digit growth for auto sales in 2012. [online] Available at: http://www.theedgemalaysia.com/highlights/198926-single-digit-growth-for- auto-sales-in-2012.html [Accessed: 20 Sep 2012].12. Theedgemalaysia.com (2009) UMW reaching for higher ground. [online] Available at: http://www.theedgemalaysia.com/in-the-financial-daily/217654-umw-reaching-for- higher-ground.html [Accessed: 20 Sep 2012].13. Themalaysianreserve.com (2012) Lexus targets 35% sales growth in 2012 on new model launch. [online] Available at: http://themalaysianreserve.com/main/index.php?option=com_content&view=article&id=1382:lexus-targets-35-sales-growth-in-2012-on-new-model- launch&catid=36:corporate-malaysia&Itemid=120 [Accessed: 20 Sep 2012].14. UMW Corporate Portal (2012) UMW Financial Statement 2012. [online] Available at: http://www.umw.com.my/Download%20Documents/Investors/Financial%20Results/20111124%20Financial%20Results%203Q11.pdf [Accessed: 20 Sep 2012].15. UMW Corporate Portal (2012) UMW 2011 Annual Report. [online] Available at: http://www.umw.com.my/Download%20Documents/Investors/Annual%20Reports/20090602%202008%20Annual%20Report.pdf.16. UMW Corporate Portal (2012) UMW Corporate Social Responsibility Report 2010. [online] Available at: http://www.umw.com.my/Download%20Documents/Social%20Responsibility/20120427%202010%20CSR%20Report.pdf [Accessed: 20 Sep 2012].17. UMW Success Stories (2010) UMW Success Stories. [online] Available at: http://www.yglworld.com/templates/yglworldcom/userfiles/doc/success-story/umw.pdf [Accessed: 20 Sep 2012].18. UMW Toyota Motor Corporate Brochure (2012) UMW Toyota Motor Company Profile. [online] Available at: http://cdn.assets.toyota.com.my/assets/downloads/aboutus/UMWTCorporateBrochure.pdf [Accessed: 20 Sep 2012].19. Umw.com.my (2008) UMW Corporate Portal. [online] Available at: http://www.umw.com.my/Pages/default.aspx [Accessed: 20 Sep 2012]. 15

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