Research and Analysis Project Toyota Indus Motors

Presented by: Murtaza Ghazi

Introduction
Company started in 1933, when they ventured into automobile production Recovered from bankruptcy in 1949, benefitting from Korean war. Became a top level vehicle manufacturers with a change in the top level management and an order of 5000 vehicles by America Credited for revolutionizing the production process

Introducer and pioneer of Just In Time manufacturing

Introduction
Creative Idea suggestion system Total Quality Control Incorporated in Pakistan as a PLC in December 1989 IMCs plant in Port Bin Qasim is the only manufacturing site in the world Have six variants of Corolla, Toyota Hilux and four versions of Cuore Pakistan automobile industry has slowed down due to global recession

Research Objectives and Aims

Competitor Analysis by comparing performance of IMC with Honda Performing SWOT analysis

Performing PESTEL Analysis

Analysis of Financial statements for the years 2011, 2012, 2013

Information gathered from Annual Reports, Toyota IMCs official website, Hondas website, Pakistan Automobile Association (PAMA)

Limitations and Ethical issues while collecting Information

Analysis performed only on the basis of past information Does not depict the future of IMC Not for shareholders or institutional investors to predict the future of IMC Research only focuses on IMC All ethical standards have been adhered to, whole analysis is free from plagiarism with proper references

Limitations and Ethical issues while collecting Information

Ratio analysis performed to compare financial performance of IMC with its competitor Honda Trend Analysis conducted to evaluate trend in terms of Sales revenue and growth Graphical representation used to present ratio analysis of IMC and Honda for the years 2011, 2021 and 2013 SWOT analysis conducted to identify internal threat faced by Toyota PESTEL analysis conducted to identify external threats faced by IMC Porters 5 forces conducted to identify five competitive forces shaping the industry

SWOT analysis (Strengths)

Able to maintain consistent durability, quality and reliability standards in its cars Prices are nominal and reasonable compared with its competitor Has a strong management Brand name Toyota is itself a strong image, as they have a history of producing the best cars in the world Good after sales services

Weaknesses
High staff turnover recently Have a weak supply chain Highly leveraged High interest payments leading to declined profits High cost per unit, higher sales price leading to declined sales volume

Opportunities
To produce medium sized cars for the middle class Keeping up to date with the latest technology Entering new markets in pakistan will help increase sales volume Expand their business throughout the country, hence leading to higher sales and profits

Threats
Highly volatile economy due to political instability causing a lot of uncertainty Unstable political environment that hinders with IMCs operations and success Frequently changing business regulations due to frequently changing governments Availability of substitute products and high gasoline prices, people can switch to cheaper mode of transport and vehicles

PESTEL analysis Political

Unstable, uncertain, and unpredictable political environment Frequently changing governments Inconsistent policies by new governments Frequent changes in customs, duty tariffs, monetary and fiscal policy has a negative impact on IMCs operations

Economical, Social, Technological

Rising inflation, current is 7.39% Strong brand image as they respect culture, values, customs of every community Able to maintain quality standards, reliability and luxury comfort Adhered in implementing latest technological changes in production Maintain low maintenance costs Introduced the airbag system in its vehicles, and anti corrosion coating

Environmental & Legal

Rough environment, rough roads, rough weather Extreme climate in different regions of Pakistan Laws and regulations frequently change with the change of governments Toyota has to adhere and comply with these changes in order to survive and maintain there standards and strong brand name throughout the country

Financial Ratio Analysis

Sales declined in the current fiscal year by 17% due to decline in sales volume Highest sales volume in 2012 increasing by 22% with a figure of Rs. 76.962 million Honda managed to boost their sales by 96.15% in 2013 with a sales figure of Rs. 30,762 million Gross profit margin increased throughout the years from 6.63 %, to 8.53 % to 9.18% in 2011, 2012, 2013 Net profit margin also increased throughout the years from 4.45% in 2011, to 5.59% in 2012 to 5.26% in 2013, outperforming Hondas performance

Financial Ratio Analysis

Return on Equity was 19% in 2013 due to decline in cost of sales Highest was 25.3% in 2012 Outperformed hondas ratios Current ratio increased throughout the years from 2.19 in 2011, to 2.32 in 2012 to2.99 in 2013 This was due to maintaining high cash reserves and reducing their current liabilities, outperforming hondas ratios again Quick ratio also improved from 1.72 in 2011 to 1.59 in 2012 to 1.93 in 2013

Financial Ratio Analysis

Improved A/R collection period throughout years as their collections were in 8.78 days in 2011, to 6.68 days in 2012 and 8.13 days in 2013 Their A/P payment period was 41.9 days In 2011 improving to 34.9 days in 2012, slightly declining to45.9 days in 2013 Their interest cover improved throughout the years due to increase in net profits, from 160.7 times in 2011 to 280.2 times in 2012 to 15433.6 times in 2013. IMC paid huge amounts of dividends in 2011 of Rs. 1.174 million, Rs. 1.409 million in 2012 and Rs. 2.645 million in 2013. this was due to earning high net profits, and IMC felt they were capable of making their shareholders happy EPS increased from Rs. 34.9 to Rs. 54.74 in 2011 and 2012 but declined to Rs. 42.72 in 2013 but outperforming Hondas EPS

Conclusion and Recommendation

IMC performed well as compared to Honda, after conducting SWOT, PESTEL and Ratio Analysis Maintained a strong brand name in Pakistan Maintained the second largest market share in Pakistan after Pak Suzuki They need to cut down their expenses in order to boost their sales Major reason in decline in sales was decline in sales volume Toyota needs to reduce its leverage as it may lead to bankruptcy Should rely on other sources of finance, like IPOs of new shares Need to cut down their expenses in order to increase profits IMC should offer campaigns of free check ups and free maintenance to attract more customers, IMC should start recovering lump sum amounts from their trade receivables