Toyota Motor Corporation (NYSE:TM) is the largest automobile manufacturer in the world, based on units sold in 2013, and the largest in the U.S. since 2008. Based on 2013 annual sales, Toyota has a 12% market share of the global automotive market compared to 11% each of General Motors and Volkswagen. 

Japan and North America are the two largest markets of Toyota. The company also drives significant sales from Latin America, the Middle East, and Africa. However, Toyota as of now is under-represented in the all-important and growing Chinese market.

Regional changes in the automotive industry
The automobile industry had drastic regional changes over the past five years, with the Asia Pacific market emerging as a core region. The demand from the region increased from 20 million vehicles in 2009 to 36 million vehicles in 2013, driven mainly by the market demand from China. 

The strong demand coming from the Asia-Pacific region was offset by the decline in Europe and the lower growth from North America. Moreover, Latin America remained a small but significant market.

Political hot waters
Toyota has a leading market share of 44% in Japan (2.4 million vehicles out of a total of 5.4 million). However, excluding Japan, the company only has a 5% market share of the overall emerging Asian market. 

This is mainly because of the political tensions between Japan and China, which have severely dented Toyota's sales in China. However, the company has been able to compensate its low Chinese sales with strong sales in North America, Africa, and the Middle East markets. The company's global sales are expected to grow by 4%-5% in 2014. 

Improving margins
In a bid to improve its margins, the company is taking measures to improve its manufacturing facilities and investing in research and development to develop technologies for future products. During fiscal 2014, the company spent $8.3 billion on its 62 manufacturing facilities and $7.9 billion on R&D. 

The company is also shifting more and more of its production out of Japan to keep its supply line short and quality high. According to Toyota's most recent filings, 75% of the company's non-Japan sales came from vehicles produced outside Japan.

Managing currency risk
The depreciating Yen also boosted Toyota's profitability; however, as the currency movement can cut both ways, the company's move to expand its operations in different regions is also to reduce the exchange rate risk.

Toyota's stock has underperformed S&P over the past five years. The company's stock dipped at the various occasions because of the economic downturn, recalls, and recently because of Crimean issue, however, similar to its peers, the stock has been rebounding.

Source: YCharts.

Toyota has an earnings yield of 9.7% compared to the S&P's 5.4%, and it also trades at a relatively low valuation compared to its peers..

Toyota has a price-to-earnings ratio of 10.4, compared to the industry average of 12.3, and 18.3 of S&P 500. In comparison, Honda Motor, General Motors, and Ford have price-to-earnings ratios of 13.7, 20.6, and 10.4, respectively.

Toyota is also returning cash to shareholders and boosting its return on equity after it made record profits for the financial year ended March 2014. The company in March announced to buy back up to $3.5 billion worth of shares, the biggest buyback by Toyota in more than a decade and first since 2008. 

The buyback program is to be funded from cash pile of 1.8 trillion yen the company has accumulated as of the end of December 2013.

Foolish takeaway
In its pursuit to overcome numerous difficulties following the 2008 financial crisis, Toyota has built a high-profile operating structure. The company has favorably positioned itself in the ongoing economic trend to benefit from recovery in advanced markets of the U.S. and Europe, and the growth in emerging markets.

Toyota has improved its profitability while focusing on the longer-term objectives of efficient operations and innovation. Moreover, the company has become more proactive on shareholder returns, evidenced by dividend hikes and share buybacks.