Figure 1.1: Financial Performance of Toshiba Corporation (Toshiba Corp ADR, 2016)
Gross margin of Toshiba Corporation also reflected a minor change during last five years. For instance, it was 21.13% in 2012, while in 2016; it rose up to only 25.04%.
Shares also showed a slight improvement from the period of 2012 to 2016. For instance, in 2012, the shares of Toshiba Corporation were 1004, while it increased only up to 1258 that is really not a great achievement from international business point of view.
As per the analysis of Toshiba Corporation in terms of its financial performance over last five years, it is observed that there was a lack of strategic priority (Sadudin, 2014). The firm failed to set strategic priorities due to which it missed the opportunities to generate additional revenues and growth.
Lack of Strategic Goals:
For improving the business growth, it is important to have some strategic goals and objectives (Koontz, 2010). As per the evaluation of Toshiba Corporation, it is observed that the management did not finalize strategic goals as per the SMART pattern. It has objectives but not specific and achievable. Hence, due to this, they failed to grab the global business opportunities and improve their financial performance over the last five years (Toshiba's revenue worldwide by segment fiscal years 2012 to 2016, 2016). Due to this, the company experienced loss of $126 billion yen ($1.05 billion US dollar) in the fiscal year ended in March 2016. Despite of this loss, Toshiba Corporation stated that it would get profit soon.
Business Segment Performance:
As per the business segment performance, performance of Toshiba Corporation is not up to the mark in its diversified business segment such as mobile segment, Music, Devices and so on. Segment wise performance evaluation of the company is as follows:
Personal Computer Segment:
Along with mobile segment, the company has experienced a major loss in the PC business as well. In addition, in personal computer segment also, computers of Apple, HCL, Lenovo, IBM etc. are performing well due to which, Toshiba experienced a major loss. Another division of Toshiba experienced a loss that is television division. It is so, as other brands like LG, Samsung etc are performing better than Toshiba in the television division. Below is the performance of Toshiba Corporation in each business segment during last five years (Khan and Nasser, 2016).
The financial service segment of the company is not performing well. As per the turbulent market conditions of Japan, where the economy is fluctuating and interest rate is also changing, Toshiba Corporation may face challenges to maintain the performance (Yan, Chiang and Chien, 2014). Growth from financial services is also a key factor in the success or failure of any business. In the case of Toshiba Corporation, the firm again failed to record a major growth track. For example, in 2012, it was 8.2., while in 2016, it rose up to 9.8 only (Toshiba's revenue worldwide by segment fiscal years 2012 to 2016 (in billion U.S. dollars), 2016). The CEO of the company should think about this poor performance and take corrective actions to handle this issue as soon as possible. In this regards, the company CEO should conduct market analysis by using models like PESTLE analysis and on the basis of results; corrective strategies or actions should be taken (Hagiu, 2014).
Home Entertainment & Sound:
Home entertainment & sounds another business segment of Toshiba Corporation. In this segment also, the company failed to improve its revenues during last five years. For example, in 2012, it was 12.06, but it dropped up to 10.26 in 2016. It shows that the company lost its business in last five years (Toshiba's revenue worldwide by segment fiscal years 2012 to 2016 (in billion U.S. dollars), 2016). The CEO of the company should think about this poor performance of this business segment and add some innovative features to its music systems and applications.
In pictures business segment also, Toshiba Corporation failed to improve much during last five years. For example, in 2012, the revenues from this business segment were 6.18 that rose up to 8.3 in 2016. This growth is not a massive one as per the global business environment.
Figure 1.2: Toshiba Pictures (Toshiba IR Day, 2016)
Therefore, the executives of Toshiba Corporation should add some unique features to the pictures area like improving the quality of pictures, entering into new partnership with media, film producers, new entertainment options etc. it can help the company to boost the revenues and sales of this business segment in coming years, as customers want something different in the pictures segment (Goi, 2009). Different themes or genre should be tried by the company executive of picture segment to increase the revenues.
The main strength for Toshiba is the ability to design and develop innovative quality products and innovations in the company has become the mainstream culture. They call themselves the company of first. Toshiba is also successful in handling different markets including computer, electronic video games, and televisions (Lamb et al. 2012). The company is also strong in its strong brand image, leadership in make share, loyal customers, worldwide reputation, high technology, synchronized supply chain for its products; high quality products, strong research and development plan, motivated workforce, and pioneer of innovation and creativity in electronic manufacturing industry (Lamb et al. 2012).
The company’s products are made using expensive hardware, sometimes products produced and released into the market turn out to be faulty thus damaging Toshiba’s reputation.
Overconfidence in the company which misleads them to not paying attention to competitors
Electronics industry is projected to grow by more than $200 billion by 2017Increased demand in technology products across the globe
New market opportunities from emerged and developing countries
Global purchasing power continues to increase
Continuous growth in the sectors that Toshiba operate
Currency exchange risk due to fluctuations
Cheaper technology that competitors use giving them a competitive edge regarding pricing
Threats due to acquisition, alliances and joint ventures due to unpredictability
Unpredictable demand and supply conditions globally
Restructuring of Toshiba Business:
The restructuring of Toshiba business has also not performed effectively. Due to this, the company experienced a loss of its sales from the mobile segment. The company also appointed a new executive for the mobile division to boost its sales of Smartphone, but it was also effortless. For example, in October 2015, the company observed only 43 million sales of its Smartphone, while Apple experienced over 61 million sales of its smart phone in similar time period. It also shows that Toshiba Corporation is losing its spark in the smart phone.
Issues related to Operational Performances:
The Company is slow in forecasting in demand due to which, it has lost revenues and sales in the business segments in which it was once the market leader. So, the CEO of the company should adopt demand forecasting properly to estimate demands of the products and services in the market.
As per the market conditions, there are risks and uncertainties related to the demand and supply due to external market factors. Hence, to avoid these kinds of issues, the company should ensure that the materials are timely procured to avoid any delay in the supply of the products to the final users.
The value chain activities or practices like research & development plays a great role in the success or failure of business. In the case of Toshiba Corporation, the company really performed poor, as it did not invest much into this segment to grasp the knowledge of market trends (Ho, 2014). As a result of this, it lost the market growth opportunities due to which it had to shed its television and PC business segments. To improve the performance in these segments, the company executive should ask the production & operation department to conduct intensive research into market conditions and trends. It can help to revive the growth and sales of different business segments.
To address the issues identified above, it is essential for the executives of Toshiba Corporations to identify some unique and competitive strategies to retain its position and create competitive advantages for the available and new players. Thus, the firm souls implement some model or framework. For Toshiba Corporation, the application of Porter’s Five Forces is right to shed light upon its current situation and suggest several strategies to the CEO to boost the sales in coming years and enhances its competitiveness in the industry. Application of Porter’s Five Forces for Toshiba Corporation is as follows:
Increasing rivalry in different business segments due to the need of innovation and aggressive sales and distribution strategies adopted by the rival firms has also posed threat to the business of Toshiba Corporation. Hence, to handle these challenges posed by the rival firms, the company should aggressively adopt sales and distribution strategies by using social media (twitter, face book, Google +, you tube etc), digital media, brand partners, celebrity, famous public-figures etc to boost the sales (Lee & Kotler, 2015). If these sales and distribution strategies are executed in a right direction, it can help Toshiba to refresh the business segments that are currently performing poor (Thompson & Martin, 2010).
Threat of Substitute Products:
In the electronic and entertainment industry, threat of substitute products is medium. So, Toshiba Corporation should be cautious about this factor and take precautionary steps to avoid the impact of this force over its business. They should adopt a unique marketing mix approach to develop personal relationship with the consumer and increase their dependencies on the company products, so that they would not choose substitute product. Here, brand strengthen is highly imperative for the firm (Zhang, Wang, Wang, Korpås and Khodayar, 2016).
Figure 3: Porter's Five forces model
Threat of new entrants:
Threat of new entrants is medium in the electronic industry. The entry barriers are average. So, Toshiba Corporation should also take care about this aspect while formulating strategies for business growth like expansion, strategic alliance or joint venture. For example, Chinese electronic firms are really doing well. Hence, to handle the competition, Toshiba should partner with small Chinese firms to take synergy effect in its business and operations (Khan and Nasser, 2016).
Bargaining Power of Buyers:
Bargaining power of buyers is higher in the electronic industry. It is so, as the switching cost is low due to multiple options. Hence, the company should be really careful to avoid brand switch by the customers (Hagiu, 2014). To avoid this situation, Toshiba Corporation should adopt aggressive marketing, add innovative features to the existing products, launch new products and services etc in a customized manner to attract and retain the customers for long term.
Bargaining Power of Suppliers:
Bargaining power of suppliers in the electronic industry is medium. Toshiba Corporation should maintain healthy relation with the suppliers to avoid any loss of the supplier, as they also play a great role in the long term success of any business (Zhang, Wang, Wang, Korpås and Khodayar, 2016).
It can be inferred that there are various fundamental issues related to the strategic management of the organization. To handle these issues, the company should conduct regular market research; respond to the changing consumer demand and expectations. The product and service strategies should be also aggressively done to address the competition posed by the rival firms. Furthermore, the executives of different business segments should set some strategic priorities to improve the performance of each segment. To attain these goals, well thought action plans should be developed. By doing so, the organization could improve its sales, revenues and growth in coming years.
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