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Toyota and Honda

Thailand’s automotive industry is one of the major industries that drive Thailand to become global player in this sector. Currently Thailand’s automotive sector is ranked 12th worldwide and aiming to be rank number 10 within the next 5 years. Therefore, the common interest focuses the competition of car makers in Thailand. The objective of the paper is to analyze Toyota and Honda in the passenger car segment as well as to recommend strategies to Toyota Thailand to remain ahead of the competition.

The passenger car segment is the second largest segment (33. 4%) in the Thai market after the pick-up segment which is the largest segment (65. 1%) in the overall automobiles. Toyota Thailand covers 41. 2% total of the automobile market in Thailand. Toyota Camry and Honda Accord are used as the examples for the comparison. The approach is to use SWOT as the analytical model and use database from internet, companies as well as field data by visiting the car dealers. In term of specification wise, both models are almost indifferent.

In term of after sales, the services provided to the passengers are also the similar except Honda Accord has the 24-hours road side assistance service. It is the advantage

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of Toyota Camry to have lower car prices and higher resell prices compared to Honda Accord. Toyota Thailand also has the advantage over Honda Thailand on net-income as seen on common-sized income statement. Toyota had 3. 76% net-income as percentage of sales over Honda of 1. 13% in year 2009. Both companies have their own production systems. Toyota is synonym with Lean manufacturing while Honda developed its own Honda Production System (HPS).

Recent recalls of Toyota Camry in the U. S. tarnished the image of the company and slipped its rating in its market popularity. Trade agreements in ASEAN region help Toyota Thailand to garner the opportunities by increasing the customer base because of non tariff benefits. The weakening Thai Baht trend will make the cars export. Steel price, CNG, LPG, Tax implication and interest rate are the threats to the company because, these factors play important role in pricing, demand and competitiveness of the car against the competitors.

Above all, the new segment ECO will impact the buyer behavior of the passenger car. Though, Toyota Thailand earns comparatively higher net-income than Honda Thailand due to economy of scale, yet its gross margin is lesser compared to Honda Thailand. Therefore, reduction of the cost could be one of the strategies to keep sustainable competitiveness. Moreover, enhancing the launch of ECO car, capturing consumer base in the ASEAN region and also taking advantage of the exchange rate would be the recommended strategies to Toyota.

Thailand’s automotive industry has been established since the early 1960s1 and it has always been one of Thailand’s most promoted industries. Currently Thailand is ranking number 12th globally in term of production volume2. In January-October 2010, Thailand’s production volume was 1,349,949 units while the world’s production volume was 47,199,372 units. In 2010, Thailand’s total production volume was 1,645,304 units with 895,855 units for export. In 2011, the forecast volume is 1,800,000 units with 800,000 units for domestic and 1,000,000 units for export.

Thailand’s automotive industry is divided into 4 main segments; passenger car, pick up, truck and bus. According to the data in 20103, the largest segment by production volume is the pick-up (65. 1%) while the second largest is passenger car (33. 4%). As Table1 shows that Toyota is the leader in the market which account for 41. 2% of Thailand’s total industry volume in 2011. One of the main reasons is because Toyota is the only brand that has car models covered in all segments. Isuzu has only the pickup truck segment; never the less it’s still currently ranked as the second largest (20. 2%).

Honda also only has the passenger car segment, but it can still maintain third place. The passenger car is the second biggest segment, and there is fierce competition in this market. The current sub-segments which are big size, mid size and small size vehicles already have many key players such as Toyota, Honda, Nissan, Ford, Mazda, Mercedes Benz and BMW. However, the alternative small brands such as Chinese cars also want to step in this market. In addition, new Eco car which has just been recently introduced to be the new passenger car segment will also create more severe competition.

Our focus is to choose this segment in Thailand by comparing Toyota and Honda as the main and also bring up Toyota Camry in comparison with Honda Accord for mid-size passenger car in competitive SWOT analysis. As shown in table2, Toyota Camry ranks number one in this segment, while Honda Accord ranks number two and Nissan Teana ranks number three. However, the reason that we do not compare Toyota to Nissan is because Nissan has been launched many new models in many segments starting from 2006 after Nissan Japan became majority shareholder in Thailand in 20041, while Honda has steadily launched cars in the passenger car segment.

Moreover, the aggressive growth of Nissan does not come from the passenger car segment but also a lot of contribution from the pickup truck segment. In addition, the growth 55% of Nissan, as illustrated in figure1 below, came from very low base volume. Comparing Toyota against Honda which mainly emphasizes on the passenger car market would be a better comparison in our study. Additionally, compound annual growth rate of both Toyota and Honda is equal (8%). Toyota Motor Thailand (TMT) was established in 1962 with the capital of 7.

5 million Baht. Currently, there are 119 dealers and more than 300 showrooms in Thailand. The production capacity exceeds 550,000 vehicles a year and plan to increase capacity of 180,000 units more within 2016. Toyota is the largest manufacturer in Thailand and also a leader in the world market4. The center of Toyota research and development in Asia Pacific is also in Thailand which is controlled by TMAP (Toyota Motor Asia Pacific). All of their vehicles are designed to meet the European Safety Standards and Euro III Emission Standards.

They ensure that customers receive magnificent service and top quality product the same as Toyota in other countries. The vision is to be the most admired and respected company in Thailand. Toyota also contributes to the Thai society through social activities such as education for kids, environmental concern, and road safety program. Toyota (Thailand) foundation which was found in 1992 is also one of the most recognized non-profit organizations in Thailand. Honda Automobile Thailand Corporation (HATC) was established in 1983. Currently, there are 105 dealers and 97 showrooms in Thailand.

The current capacity is 220,000 units a year and plans to increase capacity of 33,000 units more within 2016. Honda has two automobile plants in Thailand and their Ayutthaya plant is the most technologically advance and fully integrated assembly line in Southeast Asia5. HATC is the largest manufacturing facility in Asia (except Japan). The center of Honda research and development is also in Thailand, under “Asian Honda”5. Honda gives back to the Thai society by enhancing Thai’s quality of life in term of education, environment, and safety mostly through “Honda Thailand Foundation” which was found in 2003.

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