Strategy Context: Toyota Motors Corporation and Honda Motor Co Ltd

Assignment 1: Strategy Context
Industry: Automotive
Company 1: Toyota Motors Corporation
Company 2: Honda Motor Co Ltd
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Executive Summary
Toyota and Honda are the two Japanese giants in the global automotive industry. Toyota specializes in innovating products and production methods using its corporate philosophies. However, Honda focuses on diversified innovation and expand product portfolio to mitigate risks. The external environment indicates that the two companies experience sustainability challenges. Toyota is accused of Greenwashing practices. However, Honda is more influenced by supply chain constraints. The internal analysis indicates that Toyota is more agile, innovative, and cost-effective than Honda. However, Toyota is questioned for using obsolete products to mitigate production costs during the pandemic. However, the company dominates Honda through R&D investments and creating Woven City to test new technologies designed for modern vehicles. Both brands must overcome operational weaknesses in the long run to prevent competitive tendencies posed by American and German automotive manufacturers.
Organization Overview
Strategic management is a significant topic for organizations operating in a diverse and competitive business environment. Strategic management allows organizations to improve efficiency levels, offer unique value propositions (USPs), and build sustainable relationships with stakeholders (Hill et al., 2019). This paper will compare and examine the internal and external environments of two automotive giants, namely Toyota Motors Corporation (Toyota) and Honda Motor Co Ltd (Honda), to determine core influences on strategies.
Toyota is a Japanese automotive company founded by Sakichi Toyoda in 1986. Toyota integrates the ‘Customer First’ philosophy in business decisions to establish a brand reputation. The company formed various partnerships and strategic collaborations over the decades to create a sustainable Global Value Chain (GVC). Toyota’s strong GVC network provides a unique value to customers in products and services. The company’s vision is to ‘Create Mobility for All’ while navigating its operational roadmap during each fiscal period (Toyota Motors, 2023). Toyota designs manufactures, and sells motor vehicles and spare parts. The company operates in a divisional structure: automotive, financial, and services. The automotive division designs, manufactures, assembles, and sells cars, minivans, trucks, and other spare parts. Toyota is the first automotive brand to introduce intelligent transport systems in vehicles (Forbes, 2023).
Honda is a primary competitor of Toyota in the global automotive sector. Honda has more than 204k employees worldwide, deployed to achieve the company’s vision. Like Toyota, Honda manufactures vehicles, trucks, spare parts, and automotive accessories. However, Honda has a broader product portfolio compared to Toyota since the company manufactures motorcycles and home equipment to achieve product diversity. Honda secures a 16.2% revenue contribution, making the second-largest market share in the global automotive sector (IBIS World, 2022). The company has more than 197k consolidated associates that contribute to continued innovation. Honda generated global revenue of JPY86 billion until Q1 FY2023. The product segments are segregated into motorcycles, automobiles, and power equipment (Honda, 2023). Toyota and Honda are the two dominating automotive entities worldwide that compete continuously to sustain market positions and brand reputations among customers.
External Analysis
Like all industry players, the external business environment focuses on opportunities and threats. External factors are beyond the company’s control and influence long-term strategies by introducing opportunities and threats. Opportunities arise once a company can leverage a situation and generate more profit. However, threats would compromise core competencies and make the market position vulnerable for brands in the long run (Hill et al., 2019). The environmental factors have been strict since the COVID-19 outbreak worldwide. As a result, automotive brands like Toyota and Honda experience challenges in revising emission policies immediately. For instance, Toyota announced its prospect of achieving zero emissions by FY2050. The company aims for zero emissions by transforming its product portfolio to hybrid electric vehicles (HEVs; Cox, 2023). HEVs would consume no fossil fuel and pollute less than traditional cars manufactured by Toyota.
Nonetheless, Toyota is a pioneer of fuel cells and is targeted to manufacture 315,000 HEVs in FY2022, providing a competitive edge to manage emerging trends in the external business environment. However, the current operational practices and traditional corporate philosophies failed to achieve the prospect since Toyota is accused of Greenwashing in various countries (Cox 2023). Honda kept the situation under control by achieving supply chain sustainability. The company deployed a circular supply chain cycle to maintain transparent sustainability and avoid Greenwashing exercises in the global marketplace (Honda, 2023a). However, the situation remained hostile for Toyota in the worldwide market.
Secondly, the current supply chain challenges have made competition cutthroat for Toyota and Honda since the pandemic. France-Presse (2023) found that Japanese manufacturers like Toyota and Honda lost respective market shares significantly in the North American, Oceanic, and European regions due to recent emission scandals and mismanaged inventory functions. Japanese automotive brands needed help maintaining momentum with GVC partners to acquire adequate and sustainable raw materials to fulfill market demands. As a result, German and American manufacturers like GM, Tesla Motors (Tesla), and Daimler are gradually capturing the market share with contemporary practices and focused strategies to dominate the global marketplace in the long run (France-Presse, 2023). Hence, the external environment is becoming aggressive for Toyota and Honda globally due to shifts in market paradigms.