Business Model Canvas for Toyota

Business Model Canvas for Toyota
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Abstract
This report focuses on the application of the Business Model Canvas in the organizational settings. A graphical presentation of the building blocks as described by Alexander Osterwalder and Yves Pigneur in the model will be assessed while referring to the Toyota Ltd. Business Model Canvas is an essential tool for management who’s its application is spreading at a vast rate in the modern business environment. Most scholars have asserts that BMC helps in developing the most appropriate strategies that integrate all the organizational aspects. These are proven to be beneficial in creating a competitive advantage in the market. The model incorporates various aspects such as corporate value proposition, customers, infrastructure and financial resources for a prudent decision-making process. Practical application of the models offers a justification of each strategy developed in the organization. Toyota is one of the companies making use of the BMC to maintain their significant market share in the automotive industry.
__Key Words: Business Model Canvas, Strategy, Competitive advantage

Introduction
Business Model Canvas (BMC) is an essential tool used in strategic management in developing and documenting business models. It provides a graphical presentation of various events and variables for value proposition, customers, infrastructure and financial resources of an organization.

The MBC was invented by Alexander Osterwalder and his colleague Yves Pigneur who is a specialist in management information system. The model involves nine key events which they refer to them as the building blocks of any organizations where new or existing one. According to Deming, Miller & Dess (2014), the overall organizational performance can be improved using the Business Canvas Model. All the core aspects of determining the value creation are represented at a glance and with visual aspect and hence, making the strategizing process much more comfortable and efficient. The model also facilitates the decision-making process when establishing a new company. The management has the opportunity to have a look at each category and improve the organizational strategies to create a competitive advantage. For the clear understanding of these blocks in the model and its application in the corporate environment, we are going to analyze the business canvas model for Toyota Ltd in the automotive industry.

Business Model Canvas for Toyota Ltd.
Key Partners
Toyota Ltd. Outsource most of its vehicles components from the following partners:
Toyota Boshoku
Trim Masters
Denso
Citroen
Araco Key Activities
Good relationship with suppliers
Just-in-time inventory management
Research and development
Innovation Value Proposition
High-quality products
Timely delivery
Offer motor vehicles with guaranteed long useful life and with less depreciation
Affordable pricing
Offer cars for best performance and ability to withstand heavy loads
The low rate of errors and faults. Customer Relationships
Client partner firm
Customer care and support
Create a distant Customer Segments
The target customers are the general public including old and young generation, small and large families. Online and off-site shoppers and other with financial capacity.
The segmentation is based on demographic, geographic, and psychological factors.
People who need heavy duty vehicle.
Key Resources
Total Quality Management system
Toyota Product System
Dealers in deferent countries across the world
Development staff
Workshops
Long-term management Channels
Dealers
Web site
Mechanical
Contest Cost Structure
Expenditures within the budget
Spending only when necessary
Timely payments to suppliers
Significant investment in human capital
Process maintenance
Distribution Revenue Streams
Customer service
Car sales
Eliminated wastes
Cost saving
Lease income
Licensing
Description of the business model canvas for Toyota Ltd.
Key partners: It is essential to create a network with various partners for both existing and upcoming organizations. This helps in the mobilization of resources and synergy competitive advantage (Havaldar & Medioni, 2015). Toyota Company acknowledged the benefits of engaging some players in the industry as key partners. Toyota outsources most of its vehicle components of about 70% from various vendors in the industry. Some of these include; Toyota Boshoku, Trim Masters, Denso, Citroen and several others that Toyota engages as joint ventures for valuable relationship
Key activities: Clear understanding of the core activities of the company is essential in ensuring value addition to the customers. Business operation is not all about production but is on how it seeks to meet the meet the market needs with a problem-solving approach. The management of Toyota Company upholds adding value to the customer for an improved relationship for canvassing of potential customers. Some of the firm’s key activities include; creating a good relationship with the suppliers, just in time system, innovation, and research and development.
Key resources: Organizational resources are meant to enable the business to continue with the operations. These can be categorized as physical resources, human resources, financial resources or even intellectual resources. Toyota Company has its key resource that ensures quality-service delivery to their customers. The company guarantees proper utilization of resources in creating a competitive advantage. These include; Total Quality Management system, Toyota Products System, Dealers, Development staff, Workshops and showrooms, dedicated long-term management.
Value proposition: It refers to the various right to exist and serve the clients’ needs. Deming, Miller & Dess (2014) describes value proposition concept as the way that an organization distinguishes itself from its competitors. The automotive industry has a perfect competitive structure, and hence, product differentiation is necessary for creating a competitive advantage. Toyota uses the following strategies for value proposition: high-quality products and services, timely delivery, fair pricing, and robust control system to minimize errors.
Customer relationships: All businesses exist due to the presence of customers Toyota ensures a stronger client base, and it categorized its customers into various target group. The firm provides attraction and retention of the customers through incentive process. This is because of the broader the client’s base, the broader the market share and the higher the competitive advantage. Toyota Company enhances client partner firm model with their major primary clients. The model involves allocating particular resources and attention to specific clients within the organization. Also, the company upholds quality customer and support to enhance client relationship.
Channels: Most of the multi-national organizations may require broad distribution channels to ensure accessibility of their products to the target market (Havaldar & Medioni, 2015). Business Model Canvas describe channels as the aspects associated with communication, sales, and distribution. It is not only customer’s contact but how the firm manages communication within and outside the organization. Customer channels at Toyota are addressed at five levels which are; product awareness, sale, delivery, evaluation and then after sale service. The tools used to facilitate this at all phases include dealers, company website, contests, and mechanical channels.
Customer segments: Market segmentation helps in product modifications to meet customers’ needs. As the organization offers services to various groups with different backgrounds, it is sensible to classify them into customer segments. This will help to ensure clients’ satisfaction and hence, create a competitive advantage over the rivals in the same industry (Havaldar & Medioni, 2015). Customer segments at Toyota include the general public in old and young generation, small and large families. The segmentation is based on demographic, geographic, and psychological factors.
Cost structure: The primary aim of every business is to maximize profit, and this can be attained through minimizing cost while maximizing revenue. Getting insight into the cost structure helps in determining the turnover level for the firm to generate profit (Indrawan, Nasution, & Rossanty, 2016). The concept of cost structure is also applicable in the pricing of the products and services. The cost structure for Toyota is a flexible one to allow adjustments in the cases where more investments than the revenue generated. The company has also adopted a culture of spending within the set budget and spending when necessary. The highest costs at Toyota Ltd. Are on human resource, process maintenance, and distribution.
Revenue Stream: This is a critical aspect in the BMC since it is the only one generates money for the organizations, all other are costs to the firm. The survival of the business depends on its ability generate revenue. In addition to the cost structure, this aspect provides a clear insight of the organizational revenue model. It explains the number of customers or level of sales that the firm has made to break even or generate the desired profit. Revenue stream and cost structure are used collaboratively to undertake cost-volume-profit (CVP) analysis. In addition to sale of vehicles, Toyota also generate revenue from lease income, licensing, advertising, car repairs services, cost saving, eliminated wastes, sponsoring and many other options,
How the company makes money
Toyota is operating in a perfectly competitive market structure, but it holds a significant market share. The firm produced 10milion vehicles in the financial year 2017 where 2.8 million were sold in North America. Following the historical production trend, the company is most likely to dominate the automotive industry in the next few years since its revenue from the sales of the cars is growth at a steady rate. The corporation has also become more profitable and attractive to most investors due to its high earnings per share. For instance, the company had a gross profit margin of 17.6%. Even though this was a fall from 20.4 in the financial year 2016, the company this rate was higher compared to the industry average which was at 11%. The consolidated company’s revenue for the year 2017 amounted to $27,597,193 million indicating a significant market share (Toyota Corporation 2017 Annual Reports). Even though the firm has high operating cost revealed by its cost structure, it is capable of generating numerous operating profit of $1,994,372 million.
The Business Model applied by Toyota Ltd. is one of the contributing factors to its excellent performance. The company is keen on ensuring high-quality products which gives them a competitive advantage. Toyota Corporation upholds value proposition, and it segments its market efficiently to ensure that each market needs are addressed depending on the category of the market (Hyunchul, 2013). The appropriate business model facilitates proper utilization of resources and promotes value proposition. A healthy customer relationship is also maintained at Toyota to increase customer loyalty. These factors have put Toyota on top rank followed by General Motors. Other firms in the automotive industry should considers improving their value proposition to sustain their survival in the industry. A significant market share hasve been dominated by few firms, and this may result into duopoly effect and hence exploiting the consumers through pricing.
Conclusion
From the above analysis, it is crystal clear that business model adopted by the firm is vital to the overall organizational performance. A graphical presentation of the critical aspects creates an insight at various angles to the managers in formulating a strategic plan. The management at all levels needs to be involved for excellent contribution to the business model canvas. This allows innovation and collaboration of ideas to improve value to the customers and boost the organizational performance. The organization should also pay much attention to the value proposition, customers, infrastructure, and resources while developing competitive strategies. However, it should be noted that BMC is just a tool of management and hence, managers should take responsibility to ensure the formulated policies are executed successfully for positive results. Firms

References
Deming, D. Miller, A., & Dess, G. (2014). Strategic management. New York: McGraw-Hill.
Havaldar, P., & Medioni, G. (2015). Multimedia systems. Boston: Course Technology Publishers.
Hyunchul K. (2013). A Business Model View on Toyota Crisis. Productivity Review, 27(3), 387-399. http://dx.doi.org/10.15843/kpapr.27.3.201309.387
Indrawan, M., Nasution, M., & Rossanty, Y. (2016). A Business Model Canvas: Traditional Restaurant “Melayu” in North Sumatra, Indonesia. Business Management and Strategy, 7(2), 102. http://dx.doi.org/10.5296/bms.v7i2.10193
Toyota Corporation 2017 Annual Reports. Form 10k Download. Retrieved January 27, 2018, from http://www.toyota-global.com/pages/contents/investors/ir_library/annual/pdf/2017/annual_report_2017_fie.pdf