Toyota Motor Corporation Financial Performance Paper Example

Introduction

Toyota Motor Corporation is a Japan-based automotive manufacturing company. The company was founded in 1937 and mainly deals with production and design of automobiles. Toyota has a limited diversity as it deals with automotive industry products such as vehicles, automotive parts, and engines. Toyota Motor Corporation boasts global operations in the automotive industry. It, however, continues global expansion through joint ventures and investments. Toyota primarily operates in Japan, Europe, Asia, and North America. Whereas, the automotive industry often shifts based on the situation in the transportation sector and ever-changing market conditions, Toyota Motor Corporation organizational size increase with growth in business. The Corporation's ability to exploit available opportunities and counter challenges in the industry has led to its success.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

Recent Financial Performance

Toyota enjoys good financial health as its total assets increased from the previous fiscal year. The increase is due to a rise in value for investment securities. There has been an increase in liabilities due to the increase of corporate loans and bonds.

Cash flows provide information about Toyota Corporation's cash receipts and payments. The net cash by operating activities improved from 2016 to 2017 but slightly fluctuated toward 2018. Investment net cash declined from 2016 towards 2017, but an increase was shown in the year 2018. The company enjoys a positive cash flows. However, the decrease in cash flows from 2017 is due to limited diversification (Nishihama, 2012).

Current Financial Health

Toyota ensures that its shareholders are paid dividends on their shares. The company has created a strong relationship with its customers through, providing quality products and making technological advancements to its products. In the company's budget, resources are set aside for research and development which helps promote innovations. The company continued credit appraisal fosters monitoring on clients with bad debts and extensions on loan repayments, therefore, decreasing the percentage of credit losses. The company incremental development and improvement of risk management factors improve its financial health.

The cash and cash equivalents and cash generated by the company's operations are used to fund the company's capital expenditure, research, and development. The company also plans to use its funds in the development of new environmental technologies, design, and development of new products, maintenance, and replacement of facilities. The company funds its programs for dealers and customers using cash generated through borrowing and operations. To increase its ability of locally raising funds the company intends to expand its network subsidiaries worldwide.

For the future of the automotive industry, the industry is expected to expand in developing countries whereas, in already developed countries, the statistics could remain the same. However, the sector faces transformation due to the increase in awareness of environmental issues, technological innovations, social challenges, and lifestyle diversification. The performance of the industry revolves around the economic conditions changes, changes in laws, government policies and regulations, increased competition in financial markets and funding's (Epstein, 2018).

The company enjoys a vast market share. In 2017 its sales in different markets rose with Europe leading the pack. The company has enough financial resources to maintain and improve its current market performance and future growth.

Success Factors and Risks

Strategic Priorities

The benefit of the company's shareholders is one of the corporate management policies. Therefore it continues to enhance its corporate value through the improvement of the corporate structure. Toyota Motor Corporation continues to pay dividends on its shares with a consolidated payout ratio in mind. The company intends to use its internal funds for commercialization of new technologies for safety and the next generation environment. The company also plans on repurchasing shares. Therefore, capital efficiency will be achieved and increased capital return to shareholders. The company has also prioritized response to environmental management issues. Thus, through technological enhancements, design and development of next-generation automobile products are made and avoiding putting the burden on the environment.

Capitalization on Financial Factors

Toyota Corporation can capitalize on its non-financial factors such as market shares, through strengthening its customer relations, enhancing innovations of its products, and smart hiring processes (Anderson, 2010). The total percentage that a company control makes up its market share. When a company has a higher market share, it enjoys a competitive advantage. With improved market share the company gets better prices of products from their supplies. Innovation increases a company's market share. Consumers are attracted to new technological advancements in a business.

Creating and strengthening customer relations protects a company's market share. Toyota can improve its relationships with its customers to prevent jumping ship to their competitors. Satisfied customers promote a company's brand thereby increasing the market share.

Significant Internal Risks

The corporation is unable to develop and maintain a brand image. These inability has been fostered by product recalls that have been made previously. For instance, the company recalled more than a hundred thousand of its products due to the potential shutdown of it's their hybrid system. The company's inability for technological innovations that meet the demands of the market also influences the company's success.

Projections

Projected Consolidated Financial Opportunities

Regarding future opportunities in the automobile industry, the economy is expected to grow globally. However, some uncertainties may affect this optimism. Trade frictions impact is felt due to the United States protection policies, geopolitical risks, the future trend of monetary policy. The consolidated net sales forecasts are twenty million U.S dollars ($20 million).

Business Opportunities

Investment Opportunities for Toyota

The automotive industry provides similar opportunities for competing companies to exploit. Competition in the automotive industry is based on some factors, amongst them is technological advancements. Toyota Motor Corporation together with other competitors such as Tesla and General Motors improve technology on their products to make them attractive. Therefore, it is imperative that Toyota acts take advantage of technology to make improvements to their products to increase performance. Other opportunities in the industry include; diversification, expansion, and growth (Nozawa et al., 2010).

Diversification

Toyota Corporation's business is significantly in the automotive industry due to its limited diversification. Therefore, whenever, there is a decrease in the market performance in the automotive sector the implications are felt in the company's business. A drop in market performance reduces business for the company. Toyota can diversify its operations to other different sectors and industries to minimize the risks. For instance, the company can invest in the design and development of robotics and heavy machinery which enhances its business distribution to other sectors in the market.

Technological innovation

Toyota has resources that can enable it to explore new technological ways to improve its products. The increase of investments in research and development to enhance the company's innovations. Competitors in the automotive industry invest in new opportunities. Therefore, an increase in funding to research and development improves the Corporation competitive advantage.

Sustainability

All industries are affected by sustainability issues with the recent popularity and environmental awareness. In the automotive sector, sustainability issues affect fuels and ecological impacts of the company's operations. Through innovations, Toyota Company can design new engines to boost the fuel economy of the company's products. Environmental concerns raised due to its activities can be addressed by increasing efficiency in its processes (Marucheck et al., 2011). With the exploitation of these available opportunities, the company's brand image can be improving, foster customer loyalty and enhancement of good customer perception.

Cost and Benefit of New Investment

Toyota Corporation can spend up to ten billion US dollars ($ 10 billion) on research and development. With an increase in investment in research and development, technological advancement is enhanced. With the increase in funding for research and development, the company's capital spending increases. Technological innovation will make the company's operations and products efficient, attractive and profitable (Gokhale, Brooks, & Tremblay, 2014).

Due to the current money oriented economy, finance form the lifeline of companies and organizations. Financial statements from organizations provide data that is used for financial performance analysis. Through financial analysis, useful information is provided that clearly show the financial position of a company regarding equity, assets, and liabilities. Therefore, the examination of financial statements gives the financial position of organizations. The financial analysis focuses on the financial statements and the relationships that exist between them.

Toyota company need to maintain the highest level of cash and bank balanced in its operations. The corporation can work towards increasing its sales to make more profit, therefore gaining financial health. The company should enhance its current assets so that a company's financial position is improved.

References

Anderson, E. (2010). Toyota's competitive advantage: path dependency, dynamic capabilities, and sources of inimitability-a contrastive study with Nissan. In Enhancing Competencies for Competitive Advantage (pp. 87-120). Emerald Group Publishing Limited.

Epstein, M. J. (2018). Making sustainability work: Best practices in managing and measuring corporate social, environmental and economic impacts. 45(2), 72-88

Gokhale, J., Brooks, R. M., & Tremblay, V. J. (2014). The effect on stockholder wealth of product recalls and government action: The case of Toyota's accelerator pedal recall. The Quarterly Review of Economics and Finance, 54(4), 521-528.

Marucheck, A., Greis, N., Mena, C., & Cai, L. (2011). Product safety and security in the global supply chain: Issues, challenges, and research opportunities. Journal of Operations Management, 29(7-8), 707-720.

Nozawa, S., Maekawa, T., Yagi, E., Terao, Y., & Kohno, H. (2010, June). Development of new power control unit for a compact-class vehicle. In Power Semiconductor Devices & IC's (ISPSD), 2010 22nd International Symposium on (pp. 43-45).

Nishihama, T. (2012). U.S. Patent Application No. 29/388,456.