Toyota Motor Company Limited

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Toyota Motor Company Limited

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This report will be focusing on Toyota Motor Company Limited, the world third largest automobile in unit sale and net sale, revealing the following questions:

* What are the significant events which have occurred in the automobile industry in the recent years?

* How does the event effect the organisation?

* What strategies are adopted by Toyota to contribute to the effectiveness of the company?

To answer the above questions, the evaluation and critically analyse the business as well as the strategies of Toyota will be examined. Uncovering the stated case study, this report will focus on; the automobile market, Toyota's background and its business, strategies of Toyota in both management and cross-cultural strategies, the recent financial performance of the organisation in domestic and overseas automobile markets, reasons and challenges encouraging Toyota to invest overseas.

Company's background

Toyota Motor Co. Ltd. (TMC) was first established in 1937 as a separated company from Toyoda Automobile Loomworks, the leading manufacturing of weaving machinery.1 The Toyota Automobile Loomworks was then headed by Sakichi Toyoda, the king of investors. TMC was then founded by Kiichiro Toyoda, Sakichi's son. It has since blossomed into the leader it is today.

The giant automaker faced its one and only strike in 1950. This event, however, supplied Toyota an important philosophy, giving it the labour and management system which helped Toyota to gain mutual growth and success in both domestic and overseas markets. Today, this philosophy is very important to the structure of Toyota.

Toyota's production system improved in the late 1950s, establishing the 'Toyota Production System.' This system became the major factor in the reduction of inventories and defect in the plants of Toyota and its suppliers. It also underpinned all of Toyota's operations across the world. It launched its first small cars in 1947. The operation outside Japan started in 1959 in Brazil and continued with growing network of foreign plants.

Toyota celebrated its 60th anniversary in August 1997. It believes that its local production can provide customers with the productions they need, giving it the stable and long-term growth. It also has a global network of design and research and development facilities, consisting Japan, North America, and Europe markets.

It is now the world's third largest manufacturer of automobiles in unit sales, but the first in its home. It plays an important role in the world's automobile market even it stays behind General Motor and Ford, respectively. It earns and gains profits in international and domestic markets. Nevertheless, it expands businesses to overseas and seeks profits there than its home's market. In this context will focus on its strategies, structure, domestic and overseas markets, the reasons persuading Toyota to join overseas market, and its plans for the future.

Toyota's business in brief

Since it was founded in 1937, TMC has contributed to the development of the automobile industry and society by providing people with quality vehicles. TMC manufactures automobiles in 25 countries and regions all over the world. Today, its vehicles are sold in more 160 nations worldwide under the brand names of Toyota, Lexus, Daihatsu, and Hino, manufacturing small cars to luxury sedans, full-sized pickup trucks, and crossover vehicles.

The recent significant success of Toyota is in the fiscal year ended March 31, 2002 in which TMC and its overseas subsidiaries sold 5.54 million passengers cars, trucks, and busses around the world. This helps position TMC as the world's number three in the term of automobiles sold, staying behind General Motor and Ford, respectively.

However, Toyota's overseas business signifies significant sign. According to its annual report 2002, Toyota gained profits from overseas markets than its domestic market, especially in North America where both profits and productions increase significantly. This is because Toyota's business philosophy is to achieve stable, long-term growth through the development of business activities that contribute to the society by focusing the importance of close relationships between individuals, society, the global environment, and the world economy. It believes that this instance will help it to share the benefits of its growth with everyone involving with Toyota, including its customers, shareholders, employees, and trading associates. Given the major changes that are anticipated in the operating environment for the automobile sector, Toyota intends to further accelerate the pace of its revolution aimed at reinforcing the foundations of the Company's business. 2

The world's automobile industry atmosphere

Today, there are varying brands of vehicles available for drivers to choose. Some countries which are unable to produce automobiles in the past now produce cars. This is because many countries can now afford the technologies which are needed for manufacturing vehicles. These technologies were expensive in the past, but have lower price in these days. This factor persuades many countries to go into car producing industry.

The world's automobile market is now very competitive. Drivers can easily compare price and quality. They have varieties of cars to choose, starting from up-scale, classy, sporty and practical, affordable, and conservative cars. The automakers try to differentiate their vehicles from those of the competitors and also target different groups of drivers. Drivers with low income that cannot afford such extra need of life can now afford them. Consequently, to survive in the automobile market, many automakers have to join the world's automobile market, not only domestic one. They have to plan and adopt the successful strategies.

Listing the world top automakers, Toyota plays an important role in both the world's automobile market and in its own home.

Toyota and world automobile industry

The world automobile's market is very competitive in these days. There are various numbers of automakers from many parts of the world. There are about 39 automakers in which comprising of Acura, Audi, BMW, Buick, Cadillac, Chevrolet, Chrysler, Daewoo Dodge, Fiat, Ford, GMC Truck, Honda, Hyundai, Infiniti, Isuzu, Jaguar, Jeep, Kia, Land Rover, Lexus, Lincoln, Mazda, Mercedes-Benz, Mercury, Mitsubishi, Nissan, Oldsmobile, Plymouth, Pontiac, Porsche, Renault, Saab, Saturn, Subaru, Suzuki, Toyota, Volkswagen, Volvo.3 However, the key automakers are obvious. Toyota is one of those cars that are tied as the well-known vehicles worldwide. This is because Toyota operates business in foreign countries, making its brand recognisable. Toyota gains a large share in global automobile's market. This is because Toyota has various types of cars available for all classes of drivers. It has small cars to luxury sedans, full-sized pickup trucks, and crossover vehicles. For example, Corolla vehicles are for middle class people while Camry sedans suit high-class drivers.

The main competitors of Toyota are General Motor and Ford who tie in the ranking of number one and two in the term of net sale and unit sale. However, this ranking is in the world automobile's market, but not in some regional automobile markets where Toyota stands at a higher ranking. For instance, Toyota vehicles are more popular in Asian countries as they are in the same region with Japan, making the Toyota's cars more affordable than that of American and European cars. This is because Toyota does not have to spend much money for transportation cost as the distances between Asian nations are shorter for cars from Japan to be sent to other Asian nations.

Figure 1.1 compares the sales of Toyota in Asia and other cars from 2001 to 2002.

Toyota's positioning

With many competitors, Toyota's positioning in the automobile's market is different from some of its competitors as they have different target segmentation. Conversely, Ford and General Motor are still its important competitors because they produce cars to serve same target group. Toyota also produces luxury vehicles to complete the automobiles of Volvo, Mercedes-Benz, Audi, and Porsche, for instance. Figure 1.2 shows the perceptual map of automakers, indicating the positioning of Toyota with its competitors.

Toyota's ranking in the term of unit and net sales in other region such as North America and Europe, where the automobile markets are very competitive, is still behind that of General Motor and Ford. Consequently, Toyota wants to expand its sales in these regions. The strategies that Toyota is now practicing and planning to adopt will be discussed more in depth. Toyota expects that these strategies will not only help to change its ranking, but also its sales in both domestic and overseas.

Toyota's performance in domestic and overseas in the recent years

Japan:

Toyota generate most of its profits domestically. Nevertheless, it lost some of its shares to foreign competitors who enter Japanese automobile market. According to the annual report of 2002, the market of Toyota in Japan is not as good as overseas market. Domestic vehicle sales, including Daihatsu and Hino vehicles, turned down 4.6 %, from 2.32 million units in the previous fiscal year to 2.22 million units in fiscal 2002. In spite of edging down less than one percentage point, to 42.2 %, the Toyota brand's market share, not include minivehicles, stay above the 40 % mark for the fourth consecutive year. Factoring in the minivehicle market, and including the Daihatsu and Hino brands, Toyota's share of the market was 38.2 % models such as Corolla, Vitz, Estima, and Crown continued to be the strong sales.

However, during fiscal 2002, impacted by the prolonged economic slump in the domestic market, vehicle sales in Japan's automobile sector were down on the previous year. On the other hand, Toyota successfully protected its market share of more than 40 % by proactively bringing new and fully remodelled vehicles to the market.4 This is an important reason why Toyota seeks market overseas as it need money for investing in its home in order to complete its competitors in Japan.

North America:

Recently the automobile market in North America is optimistic. In fiscal 2002, Toyota's strengthen vehicle sales in North America, including Toyota and Lexus vehicles, rose 2.7 % compared to the previous fiscal year's 1.73 million units, to reach a record high of 1.78 million units. This was attributable to the effects of a brisk market, together with Toyota's introduction of new models and the full remodelling of popular vehicles.

Toyota's relentless technological innovations aimed at improving fuel efficiency in all of its models are steadily growing. In 2001, with respect to fuel economy, Toyota models were highly ranked by the U.S. Environmental Protection Agency in a broad range of size categories, ranking as the fourth automaker that concerning about environment in which Honda is the first in this field. While the Prius hybrid sedan and the RAV4 the small SUV brought their respective classes, the ECHO compact sedan and the Avalon large sedan also received high evaluations. Also, the Prius hybrid car, which was launched in the U.S. market in July 2000, is gaining increasing recognition in North America. It sold 18,000 vehicles in fiscal 2002.

Toyota plans to continue bolstering its manufacturing base in North America with a view to achieving production capacity of 1.45 million vehicles during 2003. As part of these efforts, it is currently constructing a plant in Alabama to supply V8 engines for the Tundra, which is built at its Indiana plant, Toyota Motor Manufacturing, Indiana, Inc. (TMMI). Production in Alabama will get under way in 2003 and plans call for an annual output of 120,000 engines. Toyota has also decided to begin building the RX300 at its production base in Canada, Toyota Motor Manufacturing Canada Inc. (TMMC), from 2003. Furthermore, Toyota plans to construct a factory in Baja California, Mexico, to manufacture truck beds from 2004 for the Tacoma, which is currently being made by New United Motor Manufacturing, Inc. (NUMMI).5

According to the annual report, Toyota's business in North America is more optimistic than other regions. It produced new vehicles to serve this market and also plan to expand its business in this area, trying to compete with Ford in its own home.
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Europe:

During the year of 2002, Toyota's vehicle sales in Europe continued to fare well, having sales rising from 690,000 units in the previous year to 730,000 units. The Company's market share expanded to 3.8 % on a calendar-year basis due to robust sales of the Yaris, which surpassed 210,000 units. Toyota also continued to extend its local production - it built 260,000 vehicles locally in fiscal 2002, compared to 180,000 in the previous year.

At Toyota's plant in the United Kingdom, Toyota Motor Manufacturing (UK) Ltd. (TMUK), where the Corolla and Avensis are built, it ...

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