TOYOTA

HISTORY:
Indus Motor Company (IMC) is a joint venture between the House of Habib, Toyota Motor Corporation Japan (TMC) , and Toyota Tsusho Corporation Japan (TTC) for assembling, progressive manufacturing and marketing of Toyota vehicles in Pakistan since July 01, 1990. Indus Motor Company is engaged in sole distributorship of Toyota and Daihatsu Motor Company Ltd. vehicles in Pakistan through its dealership network. The company was incorporated in Pakistan as a public limited company in December 1989 and started commercial production in May 1993. The shares of company are quoted on the stock exchanges of Pakistan. Toyota Motor Corporation and Toyota Tsusho Corporation have 25 % stake in the company equity. The majority shareholder is the House of Habib. IMC's production facilities are located at Port Bin Qasim Industrial Zone near Karachi in an area measuring over 105 acres. Indus Motor Companys plant is the only manufacturing site in the world where both Toyota and Daihatsu brands are being manufactured. Heavy investment was made to build its production facilities based on state of art technologies. To ensure highest level of productivity world-renowned Toyota Production Systems are implemented. IMC's Product line includes 6 variants of the newly introduced Toyota Corolla, Toyota Hilux Single Cabin 4x2 and 4 versions of Daihatsu Cuore. We also have a wide range of imported vehicles.

VISION
To be the most respected and successful enterprise, delighting customers with a wide range of products and solutions in the automobile industry with the best people and the best technology

MISSION
Mission of Toyota is to provide safe & sound journey. Toyota is developing various new technologies from the perspective of energy saving and diversifying energy sources. Environment has been first and most important issue in priorities of Toyota and working toward creating a prosperous society and clean world

ACT # 1 Action, Commitment and Teamwork to become #1 in Pakistan The Indus Team is committed to ACT so that it achieves the #1 position in the Auto Industry in: Respect & Corporate Image Customer Satisfaction Profitability Quality & Safety Production & Sales Best Employer

5 CORE VALUES 1. World Class Product Quality 2. Achieving the ultimate goal of complete Customer Satisfaction 3. Being seen as the Best Employer 4. Fostering the Spirit of Teamwork 5. Inculcating Ethical & Honest Practices

CORE OBJECTIVES
1. Achieving Market Leadership by Delivering Value to Customers Following our Customer First philosophy in manufacturing and providing high quality vehicles and services that meet the needs of Pakistani customers. Enhancing the quality and reach of our 3S Dealership Network. Employing customer insight and feedback for continuous corporate renewal, including product development, improving service and customer care.

2. Bringing Toyota Quality to Pakistan Maximizing QRD (Quality, Reliability and Durability) by built-in engineering. Transferring technology and promoting indigenization at IMC and Vendors. Raising the bar in all support functions to meet Toyota Global Standards.

3. Optimizing Cost by Kaizen Fostering a Kaizen culture and mindset at IMC, its Dealers and Vendors. Implementing Toyota Production System. Removing waste in all areas and operating in the lowest cost quartile of the industry.

4. Respecting our People Treating employees as the most important sustainable competitive resource. Providing a continuous learning environment that promotes teamwork. Supporting equal employment opportunities, diversity. Building competitive value through mutual trust and mutual responsibility between the Indus Team and the Company.

5. Becoming a Good Corporate Citizen Engaging in philanthropic and social activities that contribute to the enrichment of Pakistani society, especially in areas that are strategic to both societal and business needs e.g. Road Safety, Technical Education, Environment Protection, etc. Following ethical business practices and enhancing corporate value and respect while achieving a stable and long-term growth for the benefit of our shareholders. 3

MANAGEMENT TEAM
Chairman Vice Chairman Chief Executive Officer Chief Financial Officer Company Secretary Mr. Ali S. Habib Mr. K. Hyodo Mr. Pervaiz Ghias Mr. Muhammad Faisal Mr. Mustafa Hassan Lakhani

Chief Informational Officer Mr. Adnan Qazi Director (HR) Director (Manufacturing) Director (Sales & Marketing) Mr. Saleem Azhar Mr. M. Okimoto Mr. Raza Ansari

Legal Advisors: 1. A.K. Brohi & Company 2. Mansoor Ahmed Khan & Co. 3. Mahmud & Co. 4. Sayeed & Sayeed Co.

Audit Committee Members Mohamadali R.Habib (Committee Chairman) Farhad Zulificar Mitsuhiro Sonoda

Makoto Ito Ahsan Tariq (Secretary)

Name of Banks involved:

> ASKARI BANK LIMITED > BARCLAYS BANK PLC PAKISTAN > CITI BANK > MCB BANK LIMITED > BANK ALFALAH LIMITED > BANK AL-HABIB LIMITED > HABIB BANK LIMITED > SONERI BANK LIMITED

> HABIB METROPOLITAN BANK LIMITED > NIB BANK LIMITED > HSBC BANK LIMITED > NATIONAL BANK OF PAKISTAN > UNITED BANK LIMITED > THE BANK OF TOKYO UFJ LIMITED

> STANDARD CHARTED BANK OF PAKISTAN LIMITED

BUSINESS PORTFOLIO:
The collection of businesses and products that make up the company Business portfolio of Indus motors includes Corolla Hilux Cuore CBU Unit (completely built up unit) Corolla, Hilux and Cuore are manufacturing in Pakistan, 65% of the car manufactured in Pakistan which includes body and other parts except the engine which is being imported from Japan Known as CKD (completely knocked down) Engine.

Manufacturing Facilities
Just in Time spirit implies two opposing forces of providing fast and flexible response to customers, yet building efficient mechanisms and systems that are efficient and wastefree. The concept is to provide the right product and information, at the right time, in the right amount, in the right manner, while maintaining high standards of efficiency and cost control. We have to practice this contradictory idea in our daily activities.

DEALERSHIP NETWORK

Liquidity Ratios:
Current Ratio Formula of Current Ratio 2010 = Current Assets / Current Liabilities

23,791,253 / 14,224,866 = 1.7 times

Interpretation: In 2010, Current ratio is 1.7:1 times mean company has 1.7 rupee in assets available to cover every 1 rupee in liability easily.

Quick Ratio Formula of Quick Ratio 2010 = Current Assets - Inventories / Current Liabilities

(23,791,253 5,198,367) / 14,224,866 18,592,886 / 14,224,866 = 1.3 times

Interpretation: In 2010, Quick ratio is 1.3:1 times mean company has only 1.3 rupee in liquid form to cover every 1 rupee of liability.

Working Capital Formula of Working Capital = Current Assets - Current Liabilities

2010

23,791,253 - 14,224,866 = 9,566,387

Interpretation: In 2010, Company used more working Capital which amount is 9,566,387 means company has sufficient cushion available of current assets to cover its short term liabilities easily. This year inventory cost is too much high.

Profitability Ratios:
Gross Profit Margin Formula of GP Margin 2010 = Gross profit / Sales * 100

4,710,833 / 60,093,139 * 100 = 7.8%

Interpretation: In 2010, The Gross margin is increase with 8% means for every 1 rupee of sales, company makes 8 paisa in gross profit. This is good for company. Net Profit Margin Formula of NP Margin 2010 = EBIT / Sales * 100

5,246,115 / 60,093,139 * 100 = 8.7%

Interpretation: In 2010, Net Profit margin is 9% means for every 1 rupee of sales, company generates 9 paisa in Net Profit. This net profit margin is good for company. Assets Turnover Ratio Formula of ATO = Sales / Capital Employed (Long term debt + Equity) 2010 60,093,139 / (325,797 + 12,587,615) 60,093,139 / 12,913,412 = 4.6 times Interpretation: In 2010, Asset turnover ratio is 4.6 times means company sales more than 4.6 times by using their total assets which is satisfactory.

Return on Capital Employed (ROCE) Formula of Return on Capital Employed = EBIT / Capital employed * 100

2010

5,246,115 / (325,797 + 12,587,615) * 100 5,246,115 / 12,913,412 * 100 = 40.6%

Interpretation: In 2010, ROCE is 41% means that it uses every 1 rupee of Capital to generate 41 paisa in profit. It means company used their resources in efficient way. This year company generates more profit.

Gearing Ratio:
Debt to Capital Employed Ratio Formula of Debt to Capital Employed Ratio 2010 = Long term debt / Capital employed * 100

325,797 / (325,797 + 12,587,615) * 100 325,797 / 12,913,412 * 100 = 2.5%

Interpretation: In 2010, the ratio of Debt to Capital Employed is 2.5% means company has more control on long term debt and able to pay back their previous interest and loans easily. Lower ratio is better for company. Debt to Equity Formula of Debt to Equity 2010 = Long Term Debt / Total Equity * 100

325,797 / 12,587,615 * 100 = 2.6%

Interpretation: In 2010, Debt to Equity is 3% means company has liable to pay its long term debt and this ratio is good for company. Mostly acceptable ratio is 60:40. Inventory Turnover Period Formula of Inventory Turnover days 2010 = Inventory / Cost of Goods Sold * 360

5,198,367 / 55,382,306 *360 = 34 days

Interpretation: In 2010, the period of Inventory turnover is decreased in this year that is 34 days means Company improve and work in efficient way. Their time period of inventory turnover is reduced and the whole process from starts to end the time period of turnover within 7 weeks. Account Receivable Period (Debtor Days) Formula of Account Receivable Turnover Days = Account Receivable / Net sales * 360 2010 1,613,247 / 60,093,139 * 360 = 10 days

Interpretation: In 2010, Debtor days are 10 days company receives their payments quickly after sales of their goods. This period is good for company. Lower days are favorable. Account Payable Period Formula of Account Payable turnover days = Account Payable / Cost of Goods Sold * 360 2010 5,905,062 / 55,382,306 *360 = 38 days

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Interpretation: In 2010, the ratio of accounts payable turnover is 38 days means company accounts payable after one month and this is good for Company

Shareholder Ratios:
Earnings per Share Formula of EPS = Profit after tax / Number of Ordinary Shares 2010 3,443,403 / 78,600 = Rs. 44

Interpretation: In 2010, EPS ratio is 44 Rupees profit earns on each ordinary share, its mean company performance very well. Shareholders more satisfied and invested more Price Earnings Ratio Formula of Price Earnings Ratio = Market price per Share / Earnings per Share 2010 262.4 / 44 = 6 times

Interpretation: In 2010, the price earnings ratio is same 6 times better company performs better and shareholders satisfied about the performance of a company. Dividend Yield Formula of Dividend Yield = Dividend per Share / Market Price per Share * 100

2010

15 / 262.4 * 100 = 5.7%

Interpretation: In 2010, shareholders profit in shape of dividend is 5.7% on the investment.

SWOT ANALYSIS
STRENGTHS 1. Toyota has become the generic name in the Pakistan market. Whenever the company launches the new car in the market it has always the great support of the already market orientation so the car introduced by it easily covers the introduction stage. People have a lot of trust for their name & this is why Toyota is the leader in automobile industry.

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2. Industry leader in manufacturing and production. Maximizes profit through efficient lean manufacturing approaches (e.g. Total Quality Management) and JIT (Just in Time) manufacturing, first mover in car research and development.

3. Toyota has a great strength for its 2.OD Car, Toyota is the hot selling diesel engine car in Pakistan & is the only company offering the diesel engine in this category of cars.

4. The important edge over the company editors are the ample availability of the spare parts in the markets. The price of spare parts is comparatively low and availability all over the country has proved to be beneficial for the company.

5. Toyota is a financially strong company. This can be seen by analysis of the financial reports of the previous years.

6. Toyota vehicles have got a much stronger resale value than other car in Pakistan. This is why people prefer to buy a Toyota.

7. Toyota vehicles are made according to the Pakistani environment. No doubt the other cars are available but Toyota has an edge because it has learnt various conditions of the Pakistan environment and people.

8. Toyota is the only company having the most sophisticated network of dealerships where customers are treated by professional dealers. There are seventeen dealers in Pakistan where sales, service and spare parts are offered, leading to convenience for the customer.

WEAKNESSES 1. There is some weakness in the case of ergonomic interior of Toyota corolla as well. The power steering is not speed sensitive and the air conditioning system in severe heat is in-effective. Interior dimensions are also less compare to other Cars.

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2. The company is besieged with internal operating problems which are not very serious. Because of dependency on Toyotas principles delivery of cars is done after 4 to 6 months. This is because CKD (completely knocked down) kits are order 4 months before and once they arrive from Japan, assembly and delivery takes some more time.

3. The company feels that one weakness is the changing policies of the Government and also changing their policies according to the Pakistani Trends from time to time.

4. Limited Research and Development done as compare to competitors

5. Continuous stress on employees due to kaizen (Continuous improvement).

OPPORTUNITIES 1. Export is a major opportunity for Toyota Indus Motors. Vehicles were exported to Bangladesh just once in order to prove the plant capacity and efficiency of the company. This should be started again.

2. The contract with the Government Departments e.g. Motorway Police, Shaheen Force and the dignitaries where corolla has an opportunity to deal with the business markets along with dealing in consumer markets. It can offer discounts to Government departments and large organizations on Purchase of its vehicles in more quantities. 3. Toyota can do better by focusing on segments much more than presently being done.

4. Toyota should also try to lower its price of Corolla in the segment where Honda City has penetrated.

5. Success of the manufacturing of Daihatsu Coure is a major opportunity for Toyota to excel further careful planning and the right time to launch the new car can prove to be a success.

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THREATS 1. Even though Toyota enjoys the position of being the No.1 automobile company, still it faces some threat from competitors especially Honda. Honda has adopted aggressive strategies for capturing the market.

2. Even though Toyota keeps a careful eye on the changing trends, still the changing customer needs and trends can prove to be a threat. 3. A major threat is the changing political and economic scenarios of Pakistan. Changing government policies affect the companys performance. Devaluation of rupee adverse shifts in foreign exchange rates, trade policies of governments is a threat. Moreover the company is threatened by the ongoing rate of 30% cash L/C margin.

4. Import of re-conditioned cars is also considered as a threat for the company.

PEST ANALYSIS:
PEST analysis is the analysis which we tend to perform in order to analyze the external as well as the internal environment in which organization is currently working. PEST analysis revolves around the four things.

Political Factor:
The Pakistan Governments inconsistent policies, frequent change in duty tariff and smuggling are main reasons of unstable market conduction. Like other motor companies. Toyota is also affected by the current changing policies of the government. Some year ago, the automobile industry had to cope with more than 77000 yellow cabs that were imported during the yellow cabs scheme and was later turned lose to the market after a change of government and the policy scrapped.

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Just a 2 or 3 years back the general sales tax (GST) has been increased by 16% promoting more prices. So there is going to be a Rs. 80,000 to Rs. 100,000 increase in vehicles. The company is likewise linked closely to the policies of governments, the earnings of banks. Little wonder then that so many emerging countries are keen to develop an auto sector or that there is such a political pressure to protect it in the country like Pakistan where political sector is not as much sustained as in the developed countries. Toyota Company is currently dominated by little more than a handful of firms, each wielding colossal financial, emotional and political power. The company approach to dealing with political institutions has not always been brilliant. But one decision is favorable for Toyota by the Government side. The contract with the Government Departments e.g. Motorway Police, Shaheen Force and the dignitaries where corolla has an opportunity to deal with the business markets along with dealing in consumer markets. It can offer discounts to Government departments and large organizations on Purchase of its vehicles in more quantities.

Economic Factor:
Economic factor much of the developed world, and increasingly for the developing world, Toyota Company is a pillar company in automobile industry and have strengthen share in the Pakistan as well, a flag of economic progress. Without Toyota Company in automobile industry, it is impossible to develop an efficient steel business, a plastic industry or a glass sector other central foundations of economic progress. The Toyota Company has been a core company, a unique economic phenomenon, which has dominated the twentieth century. Government economic policies at the federal level clearly influence the ability of the industries to survive and progress. Inflation is a major economic factor which has affected the Pakistans Automobile industry including Toyota. The current inflation rate is 21%-23% annually prices in the auto market were deregulated in 2000 and grew almost 20 percent to 30 percent per annum to allow Toyota to bring their prices to profitable levels. For the capital markets and the finance sector, it has lost a lot of its significance due to high interest rates, as a result of ever declining profits and stagnant sales but we are achieving our goals in a disturb economic environment of Pakistan. The proliferation (increase greatly) of products means that it has become hopelessly wasteful of economic resources.

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Social Factor:
It is the part of the development in automotive industry in the Pakistan where now days the political instability is going with adverse economic conditions but Toyota is still fulfilling the societal needs of this country. Toyota takes pride in being the most trusted name all over Pakistan. Its vehicles are regarded as a status symbol. Toyota respects the culture and customs of every nation and community and contributes to the economic and social development through corporate activities in the communities. The Toyota Company actually affects the society as a whole. It employs millions of people directly, tens of millions indirectly which do not have buying power but still to buy their brand. Its products have transformed society, bringing undreamed-of levels of mobility, changing the ways people live and work. Toyota company has the role to play in helping develop the mobility of such countries and it can be achieved at an acceptable social cost of the country is prepared to learn the necessary lessons from those who have traveled this route before it, and to make the necessary investments.

Technological Factor
The Toyota Company works on a scale so awesome and has an influence so vast that it is often difficult to see. The level and diversity of technologies that it must deploy are increasing, which imposes both new investment burdens and new uncertainties and risks. Roughly a million of new cars are built around the world each week, they are easily the most complex products of their kind to be mass-produced in such volumes. The industry uses manufacturing technology that is the cutting edge of science. But still, the potential for developing coordination skills, intellectual capabilities and emotional sensitivities through electronic technologies remain far from fully exploited. There are numerous additional near term technological opportunities to adapt the company to changing energy availability. Technology is of particular importance because it has been and continues to be the main source of increases in productivity. Its excellent quality, low maintenance cost and high resale value has won it the support and loyalty of its customers. Product diversification and a wide range of colors has allowed customers to exercise greater options. The total companys

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product range comprises of 8 variants of Corolla and 5 variants of Hilux. As a result of the Safety First commitment; for the first time in Pakistan SRS Secondary Restrain System Airbags have been introduced in the GLI Automatic and GLI manual models, side impact bars which protect vehicles for side collisions have however been routinely fitted in all Corolla variants since inception.

BOSTON CONSULTING GROUP MATRIX:

The BCG matrix measures market attractiveness by market growth rate and it assesses the firms ability to compete by its relative market share. The BCG matrix assumes the causal relationship between market share and profitability. BCG matrix consists of four factors which are:

STARS: Toyota Corolla of IMC falls into the category of Stars. It generates large amount of cash because of its strong relative market share, but also consume large amounts of cash because of its high growth rate.

CASH COWS: If IMC, Toyota Corolla could maintain its large market share, it will become a Cash Cow when the market growth rate would decline. The portfolio of a diversified company always should have stars that will become the next cash cows and ensure future cash generation. Typically needs this cash to support its rapid and significant growth. It generates large amounts of cash for the organization. QUESTION MARK: According to Boston matrix, a question mark is such a business unit about which you are not about the success or failure. The unit can be very successful in the market or it can be simply being ruined of. In case of IMC the question mark is actually the Cuore. It is due to the large competition of in this category of cars.its substitutes cars are Suzuki Alto, Mehran, Santro and some imported vehicles like Vitz are already present in the market.

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DOGS: This category of BCG matrix includes the product that has no market share as well as consuming the large amount of cash instead of generating the cash. The company has no product which lies in dog segment.

Risk:
Risk is describe as any situation where there is uncertainty about the what outcome will occur or uncertainty about the future outcome.e.g there is test cricketer having average score of 50runs in the test career therefore the reasonable expected value of his total runs in the match is about 80 runs so that there is a risk if he will score above 80 runs or might score as few as 10 runs.

Identification of Risk:
Toyota's vehicle recall puts reputation at risk. Toyota is having risk of Power steering is not speed sensitive, air condition system and brakes are not comfortable as compare to Honda cars

The delivery of Toyota cars are lying within 4 to 6 months.

Continuous stress on employees due to kaizen (Continuous improvement). Saturation and increased competition, intense marketing campaigns increasing competitive pressure. The Coure brand of Toyota is lying in the Question mark which is the major risk for the company.

Shifts in the exchange rates affecting profits and cost of raw materials.

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 Predictions of a downturn in the economy

Rising Oil Prices(Fuel prices)

Measurement of risk:
Toyota is having risk of Power steering is not speed sensitive, air condition system and brakes : In this measurement of risk there is a problem that the power steering of Toyota cars are not according to the demand of the customers because it is not speed sensitive and cause serious damages. But the people buy the Toyota due to its goodwill and better resale price so Toyota has to improve their technology and spend money in research and development to overcome these risks. The air condition of Toyota is also sophisticated due to the heat up of air conditioner which cant do such cooling which is required by the customers. The quality of brakes is not meeting the requirement of customers due to that most the people is diverting from Toyota to Honda brands. Because the Honda brakes are very speed sensitive and settle down car on the spot.

The delivery of Toyota cars are lying within 4 to 6 months: The delivery of Toyota cars are lying within 4 to 6 months. due to the CKD(complete knock down) kits is imported from Japan due to their just in time approach and customer satisfaction can be affected and the main risk is the changing in the exchange rate of currency which decreases profits so company have to follow the hedging technique to avoid this risk and now a days energy crises is a major issue so company also have to keep in mind this factor.

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 Continuous stress on employees due to kaizen: Toyota is focusing on Kaizen approach which means continuous improvement with the passage of time. So that they arrange different training and workshops to enhance the skills of employees. This is good sign for the employees but generally it creates stress on the employees to behave periodically in an environment creating by Toyota to achieve its Just in time approach. So that it can disturb the efficiency and effectiveness of the employees to do work in such environment morally.

The Coure brand of Toyota is lying in the Question mark: The unit can be very successful in the market or it can be simply being ruined of. In case of IMC the question mark is actually the Cuore. It is due to the large competition of in this category of cars.its substitutes cars are Suzuki Alto, Mehran, Santro and some imported vehicles like Vitz are already present in the market. So its a risk for the Toyota because it might be lay in the dog product which can disturb the product line of Toyota.

Toyota's vehicle recall puts reputation at risk: Toyota announced on Jan. 21 that it was recalling around 2.3 million vehicles because of accelerator pedals that are at risk of becoming stuck, a recall separate from one initiated last November for around 4.2 million Toyota and Lexus models to reduce the risk of the pedals being trapped by floor mats. Predictions of a downturn economy: Recession, will affect car purchases (especially new cars)in Pakistan and really going on. As household budgets tighten - this could lead a decline in new car sales and possible rationalization of dealerships. Rising Oil prices(fuel prices): The costs of maintaining cars is going difficult now a days because in the increase of oil prices, Increase in families who have chosen not to own a car, or decided to use their car less due to low buying power of the people. Saturation and increase in competition: Toyota has the risk about the saturation of market if the market get saturated so Toyota has to develop different marketing 20

techniques and schemes to increase the profits of the company and necessary to retain the profits of the company for the survival.

Prioritization of Risks or Ranking of risks:

The Prioritization of risks are as follows:

Sr. No 01 02

Risks Coure brand of Toyota Rising Fuel Prices

Status High

Rank 1

High 03 04 Downturn of Economy The delivery of Toyota cars Medium 05 Toyota is having risk of Power steering is not speed sensitive, air Medium condition system and brakes : High

2 3

4 5

06

Continuous stress on employees due to kaizen (Continuous improvement).

Low

07

Saturation competition

and

increase

in Low

08 Toyota's vehicle recall puts reputation at risk:

Low

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Recommendations:
In The above steps of finding risks, measurement and prioritization of risks we conclude that Toyota should work on the research and development area which is the need of today and to overcome the issues of power steering is not speed sensitive etc. So changes in the Government policies and exchange rates is somehow not predictable so company have to develop backup plans to overcome these situations. As the conditions of the Pakistan is going on Toyota try to develop his own Energy plant to produce his own electricity to meet its objectives.Kaizan approach is the positive factor of the company but the company has to give incentives to deserved employees who are getting new techniques and capable of doing such things learned in the trainings because its a motivator for the other employees which increase their devotion to do work and thats how stress of employees will decreases gradually.

Conclusion:
In this assignment we discuss about the history of Toyota company, his Business portfolio that is which type of brands Toyota is offering in the Pakistan so we do some analysis of the company like PEST, SWOT and BCG MATRIX and ratio analysis of financial reports 2010 and at the last we cover major portion of the Assignment which was our prior task that was to identify, Measure and prioritize the risk and how to overcome such risks as discussed above in the project.

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FINAL ASSIGNMENT OF RISK MANAGEMENT

PRESENTED TO: MISS MARYAM

Group Members Irfan Ali Sadan Tahir Moazz Mustafa Azain Waqas 8336 8331 8220 8246 8242

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