Toyota motor corporation strategy
I. Introduction of Toyota:
Overview of Toyota Company
Toyota Motor Corporation is one of the leading automobile manufacturers in the world. It is founded in August 28, 1937 in Japan. Akio Toyoda is the current president of Toyota motor company. As of March 31, 2009, the capital of Toyota is estimated as 397.05 billion yen. The major business undertaken by Toyota is Motor Vehicle Production and Sales. It has been estimated that around 320,808 employees working at present in Toyota and its affiliated companies all over the world as of March 31, 2009 (Toyota, 2009).
Even though Toyota was able to maintain a steady growth rate both in sales and production of vehicles till 2008, because of global economic crisis both the sales and production of vehicles of Toyota has been come down in 2009. The company has produced 5,100,000 vehicles in Japan itself in 2007 and 5,160,000 in 2008. But the production has come down to 4,255,000 in 2009. On the other hand the company has recorded 23,948.0 million yen sales in 2007 and 26,289.2 million yen in 2008. But the sales have dipped to 20,529.5 million yen in 2009. 8,524,000 Toyota vehicles have been sold in the world in 2007 and 8,913,000 in 2008. But the number of vehicles sold has slipped to 7,567,000 in 2009 (Toyota, 2009).
International, regional, industrial environment of Toyota
Toyota Company is currently operating in five continents and in 27 countries with 53 manufacturing units apart from its main manufacturing units in Japan. It has operations in more than 170 countries all over the world at present. It always acquires a place in the top 10 Fortune Global 500 enterprises list. It has a good reputation as the most socially and environmentally responsible automaker in the world (Global Toyota, 2007)
“Toyota Financial Services (TFS) provides vehicle financing in 33 countries worldwide. Some of the most diverse and fastest-growing among our global network of offices are those in the Asia Oceania Region. Over the last 5 years, their average annual asset growth has been a staggering 30 percent” (Toyota Financial Services Global Presence, 2009).
Toyota is operating in one of the highly contested automotive sector. Apart from international automobile manufacturers like, BMW, GM, etc, Toyota is facing challenges from domestic automobile manufacturers such as Nissan, Mitsubishi, etc. Toyota believes in localising the vehicles in order to cater the specific needs of the regions in which it operates. For example, Indian business conditions and American business conditions are entirely different for Toyota and they have specific custom made vehicles for different regions. Toyota has implemented a “Just in Time” (JIT) production system which is highly debated in the global corporate sector. (Just in Time, or JIT – Toyota’s Manufacturing Technique, 2005)
International and global strategy
A company with multinational branches and head quarters can be referred as a global firm. (What is a global firm? n. d) It is not necessary that a company producing goods locally and sells it internationally, necessarily a global firm. A global firm always produces goods locally and internationally and sells it in different market across the world. Moreover, a global firm always look for making custom made goods for international market. For example, it is not possible for vehicle manufacturers to make a standard vehicle suitable for the international market. Even the same product needs customization for different market because of the difference in international markets with respect to culture, politics, legal aspects, environment conditions, economic conditions etc.
Toyota is operating in more than 170 countries at present with 53 manufacturing units all over the world as mentioned earlier, which is clearly an indication that Toyota is a global firm. Moreover, Toyota is addressing the needs of the diverse customers around the world and they were able to make vehicles suitable for regional preferences. For example, for Indian conditions, Toyota has introduced two vehicles; Qualis and Innova which can accommodate more people in the same car whereas such vehicles may not suit for the American conditions. Americans like luxury cars more than the Indians and Toyota concentrated in making luxury cars for American market. Thus, Toyota was able to realize the tastes of local people and they succeeded in producing vehicles suitable for each country which made them a true global company in all senses.
II. The external environment:
Toyota is one of the leading automobile manufacturers in the world. Competitors are struggling to compete with Toyota because of the superior quality, excellent supply chain, and very good after sales support, Toyota offers to the consumers. In fact competitors are forming regional blocs to compete with Toyota. General Motors, Volkswagen, Ford, Honda, Fiat, Renault, Nissan, BMW, Hyundai etc are some of the major competitors for Toyota in automobile industry all over the world. “DaimlerChrysler and BMW accepted GM’s invitation to cooperate in joint development of hybrid technology, in part to gang up on Toyota” (Target, Toyota: Competitors Try To Trip Up the Carmaker on Its Way to No. 1, n. d.). In other words, the competitors are making all efforts to prevent Toyota from sustaining its superior performances. They have realized that nobody can compete with Toyota independently at present because of the superior technological advances and features incorporated to Toyota vehicles and that also at cheaper rates compared to the competitors.
In America, General Motors is the main rivals for Toyota whereas in Europe it is BMW. In Asia the major challenges are coming from Hyundai whereas in the home country, Japan the major competitor for Toyota is Honda. Toyota is facing challenges not only from the American and European car manufacturers. In fact they are facing challenges from their Asian counterparts, Korean car manufacturers like Hyundai and Kia. These Korean companies are offering vehicles with nearly similar qualities as that of the Toyota vehicles at cheaper rate than the Toyota vehicles. They have advertised their vehicles in comparison with the Toyota vehicles; a direct attack on Toyota. In other words, Toyota is targeted from all the corners; Asia, America, Europe etc. “While the domestics and Germans battle to hold their ground, Korean automakers Hyundai and Kia are attacking Toyota “from a second front” (Target, Toyota: Competitors Try To Trip Up the Carmaker on Its Way to No. 1, n. d.)
“Toyota company makes a hybrid-powered (gas and electric) sedan — the Prius — that is being snapped up in US and European markets” (Toyota Motor Corporation: Toyota, Aichi Japan, 2009). This vehicle from Toyota is more environment friendly and fuel efficient and it is also in accordance with the Obama’s proposal to rejuvenate the auto industries in America. GM and other European car manufacturers are already afraid of the new entry from Toyota. They are already on the verge of destruction because of the current global financial crisis. The new user friendly and environment friendly hi tech car from Toyota is a great challenge for the competitors.
Toyota is not running blindly against the electric car technologies. They have lot of concerns about the success of electric cars. “Mitsubishi Motors started leasing its all-electric vehicle, the i-MiEV, in June. Next year, Nissan Motor is set to release its electric car, the Leaf. But Toyota does not plan to introduce an all-electric car until 2012” (The New York times, 2009). If the experiments of Mitsubishi and Nissan found success, they can lead the car market in future at least for some time. But Toyota is anticipating certain problems in electric cars and unlike others they are not going all out for the electric cars.
In short, Toyota was able to read the automotive market well so far, which helped them to keep the number one spot amidst stiff competitions from all over the regions in the world.
2. The market structure:
III. The internal environment of the company:
1. Corporate strategy:
- Cooperative arrangement:
- Relationship with suppliers:
- Relationship with sales networks:
Relationship with suppliers: Toyota believes that one of the most important factors which makes a “long-term and stable procurement of the best products with the lowest price in the most speedy and timely manner” is a close relationship with suppliers wherever Toyota operates. This relationship, which is called keiretsu in Japanese concept, bases on mutual respect and trust, communal growth and development between the company and suppliers.
In order to build a deep relationship with supplier, Toyota ran a program, namely guest engineer program, in which Toyota allows suppliers’ engineer working in plant for two or three years. This plan helps suppliers increase their technological advantage, thus will fully meet the corporation’s technological standard demand in manufacturer’s processes. Toyota also often sends engineers, and occasionally senior executives, to the suppliers’ company to study their operation and culture. Through the information which was shared intensively, but selectively, and the understanding, supervising the operations of suppliers in this program, Toyota developed the capabilities of suppliers, which coupled with increasing value for the corporation.
Although keiretsu is a time and money consuming process, and sometimes is a risk investment if supplier cannot meet the requirement after finishing the program, it allows suppliers control more in terms of cost, quality and delivering to the market than ever before. Because of that, Toyota believes that it is worth for spending resources in building a deep relationship with supplier.
Toyota has made contract directly with about 300 dealers within Japan and approximately 7,500 overseas dealers. This sales network is considered as the first point for Toyota apply their “Customers first” policy. The corporation and dealers work together with mutual trust to enhance the customers’ satisfaction and convey Toyota values, which are emphasized in the superiority of Toyota product and service. In order to pursue customer’s satisfaction, Toyota and dealers engage in activities based on constant and close communication, including various forms of support from Toyota, customer’s feedback and comment of dealers.
The Kaizen Development & Support Division was established in January 2006 to cooperate with dealers in improving the operation and enhancing customer’s satisfaction by supporting activities at dealers at Japan and overseas. The division’s main activities are:
- Expanding Toyota Product System improvement activities to sales and distribution.
- Differentiating Toyota dealers from competitors through improvements.
- Enhancing customer satisfaction from the customer’s perspective by implementing on-site improvements.
- Fostering human resources with the ability to make improvements and reforms using their own skill.
After being established, the division immediately held many activities in Japan and overseas countries to foster the development of industry-leading dealers.
Besides concentrating on developing mainly motor, TMC also invested in a number of other industries. Most of the diversified business’s capital is the corporation’s own fund or joint venture with other companies who know clearly the market. The 2 following are the most intensively invested industries in Toyota’s diversification:
Toyota Motor Corporation entered the house-construction business in 1975. After that, this field of business was not intensively invested because the automobile market still was the biggest target of Toyota. The corporation just supplied some lineup of production, including condominiums, built using its unit building system, steel framework construction method or residential steel framing technique. However, when many earthquakes occurred in Japan in 2003 and others house-construction brand faced to difficulty to meet the requirements of customer, Toyota decided to take part in the market by establishing Toyota Housing Corporation. The corporation was completely invested by own fund of Toyota Corporation with 100 million yen at the establishment, and aimed the goal that Toyota Housing Corporation will become the number 1 seller detached house in Japan.
Since being established in 1983, Toyota Financial Services has developed from a small company with eight associates to one that currently employs approximately 3,000 associates nationwide with managed assets in excess of 65 billion dollars.
The Toyota Financial Service brand identity was launched in 1999. It plays a role to market the productions of Toyota Motor Credit Corporation (TMCC) and Toyota Motor Insurance Service (TMIS). TMCC was incorporated in California in 1982, started operating in 1983. The productions which the company provides are retail and wholesale financing, retail leasing, vehicle protection plans and certain other financial services to authorized Toyota, Lexus and Scion dealers, Toyota forklift and Hino dealers as well as Toyota Material Handling, U.S.A. dealers, affiliates, and their customers in the United States (excluding Hawaii).
Opening the Toyota Financial Service was the right move of the corporation in that time in order to increase total profitability from a new potential market. Toyota Financial Service made profit immediately after establishing, and now it contributed a considerable factor in total Toyota’s income, which is 623 million dollars while Toyota loose approximately 5 billion dollar in fiscal year 2009 due to financial crisis.
2. Human resource management:
- The relationship with employees:
- Human resource development:
The labor-management relationship in Toyota was strongly emphasized in 1950, when Kiichiro Toyoda and his executive staff were voluntary to resign with 2,000 other employees after the corporation suffers the sharp reduction of automobile demand. This incident had the strong impact on employees and built an absolute trust on the corporation because it represents the due care and sharing difficulty from the corporation with them. Since then, Toyota has been working to develop mutual understanding between employees and management.
The relationship between Toyota’s employees and manager is considered as one of the most factors contributing on its success. One concept has being intensively applied for building this relationship among Toyota members is Toyota Way, which is supported by two main pillars: “Respect for people” and “Continuous improvement”. All employees at any level in Toyota have been required to use these two values in their daily work.
Toyota concentrates mainly on developing and conveying the Toyota Way between employees based on OJT (on-the-job training) in the human resource management policy. In 2002, the Toyota Institute was established in order to improve implementation of Toyota Way by overseas affiliates. The Institute develops and deploys training programs on the core aspects of the Toyota Group and also provides management training. Besides, a series of lectures, namely “The things I learn from Mr. Ohno and Mr. Suzumura”, are held, which base on the desire “conveying the Toyota Way properly and accurately” of Chairman Fujio Cho. These actions created a strong corporate culture, which has fundamental impact on the performance of the corporation.
In 1988, the organizational restructuring was implemented to make the decision-making less vertical. This process was improved in 2006 when smaller groups were created to enhance teamwork and work-related skills, and reinforce the work ethic in light of the importance of raising the skills of organizations and groups.
In 2006, TMC established R&D Learning Centre and run the Pro-WIN education program, which is mechanism allowing individuals accomplish their goals in production and production engineering. The R&D Learning Centre aim to reinforce the foundation for development of the production and to maintain and enhance Toyota’s high-quality.
3. The value chain:
Toyota Motor Corporation is one of the largest companies in the vehicle industry, and has branches in most of the world’s countries. In order to stay competitive, Toyota strives to provide clean and safe products, to provide fuel-efficient vehicles and to make use of advanced technology.
The inbound logistics of Toyota:
Toyota forms its culture and principles through continued growth. Therefore the most important step is to produce vehicles in accordance with sound environmental standards. The company continually improves the accuracy and the efficiency of the use of its resources. Toyota produces less than 2 kg of waste per vehicle, and is working to reduce it to less than 30 kg in the coming years.
The operation of Toyota:
Toyota focuses on supervision in its industrial processes, and this improves the quality of every stage of manufacture and ensures the continual improvement of the company’s standards. Visual observation is used to assess the process, and each team member is responsible for his or her work. Moreover, any team member is able to stop the process if any part of it is incorrect.
Toyota’s marketing and sales:
Toyota is one of the largest automobile producers in the world. The company ensures reliable customer service, and consistent sales, by managing over 529 branches around the world. And they are looking forward to improving those sales as well.
Toyota’s services continue after the sale by ensuring that all of its vehicles are under warrantee for 3 years or 60,000 km, whichever comes. Any defects in the vehicles during this time are repaired without cost to the owner. Toyota also provides many financial services for the customer, such as vehicle loans that are repaid in monthly installments. Toyota provides additional services, such as being able to repair your car in any of its branches throughout the world. As well as Toyota always contact their costumer on phone or email to ask them about the services and how they find it.
Vehicles manufactured in Toyota’s factories are sent to authorize distributors. And also they have the genuine spare parts so that, they can fix the care in every branch.
In 1977, Toyota made a deal with Fujitsu, a Hong Kong-based company, where Toyota transferred about 77 employees to Fujitsu for training. Since then, Fujitsu has worked with Toyota to develop new technology and to improve the company’s global business performance.
Fujitsu is a giant in the field of technology. The partnership allows Toyota to develop new hardware and software as well as provides the ability to sustain a competitive advantage. As a result, the cooperation of Toyota and Fujitsu will enable Toyota to use the latest techniques in automobile production.