Toyota motor corporation

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Introduction:

From its inception, automobile has changed the whole world. It strongly affected on the transport, and has facilitated the development of the global economy. After over 200 years of development, the automobile industry now has many car-manufacturer brands from different countries in the world such as Toyota, Honda, Ford, General Moto, Hyundai and so on. Over time, the competition between these car-manufacturers to increase market share has become tougher through strategies such as producing new cars, new styles and new functions. This paper will examine the activities and strategy of Toyota Motor Corporation, which is consider as one of the most biggest car-manufacturer in the world.

Overview of Toyota Corporation:

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 productions 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 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.

Toyota-Competitors/Rivals:

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, AichiJapan, 2009). This vehicle from Toyota is more environment friendly and fuel efficient. 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 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.

Corporation strategy:

Above all, the mission that Toyota has pursued is to "develop and provide innovative, safe and outstanding high quality products and services that meet a wide variety of customers' demands to enrich the lives of people around the world" (Toyota Motor Corporation, 2009). In order to achieve the future mission, the corporation outlined three specific objectives, which are followings:

  • Improve progressively the value of corporate.
  • Keep introducing and producing products which satisfy wide range of customers.
  • Become a more competitive corporation in every existing market in the world.

Through publishing these objectives, TMC intends to increase sales and profits, maintains the competitive advantages and continue expansion.

Diversification:

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:

  1. Housing:
  2. TMC entered the house-construction business in 1975. After that, this field of business was not intensively invested because this diversification was not relevant to the main products of the TMC, and 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 numerous earthquakes occurred in Japan 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. In October 2009, the TMC publicly announced to integrate the THC in 2010. This movement was decided because of the increasing housing needs in the market. Therefore, the integration will facilitate the decision-making and flexibility, in order to focus on expanding the market shares (JCN network, 2009).

  3. Financial service:

Since being established in 1983, from a small company with only 8 associates, Toyota Financial Services has become an important corporation in TMC, which currently employs approximately 3,000 employees nationwide with total assets over 65 billion dollars.

The TFS brand identity was launched in 1999. It provides financial services mainly for vehicle purchases and has reached approximately 7.8 million customers in 33 countries in the world (TMC annual report, 2009). 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.

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 (Toyota Australia, 2009)

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 North America, 2008).

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 UK, 2009).

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 services:

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 instalments. 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 (Toyota Australia, 2009).

Outsourcing activities:

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. 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 (Fujitsu, 2009).

Relationship with suppliers and sales network:
  1. With suppliers:
  2. 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" (TMC, 2009) 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 (Carey, 2005).

    Although this 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.

  3. Sales network:

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. (Toyota Annual report, 2009)

Distinctive resource:

According to Johnson et al (2008), distinctive resource is indispensible element of organization to create competitive advantage. These unique resources should be hard to imitate or obtain. A powerful brand could be referred as a distinctive resource for organization as it cannot be imitated easily (Johnson et al, 2008). A powerful brand related to a long term development of culture and history of organization. That is, the image of organization should be developed gradually over time. For Toyota, this brand represents a beacon and reliability for customers (Young & Aitken, 2007). Toyota holds the value "be of service to society" and focus on innovation since it founded in 1937. Toyota enjoys its own features and develops it year by year. This positive image is difficult to be imitated or substituted.

Competitive advantages:

Competitive advantage could contribute to organizations performances are superior to their competitors (Johnson et al, 2008). To creating competitive advantage, companies should develop patented products or services in accordance with the changing external environment. Based on BBC Weather centre, the global climate is worsening day by day. The greenhouse effect is an essential phenomenon which related to climate change due to the human activity and excessive gas emission. As for Toyota, environmentally considerate automobiles were innovated by using the new Hybrid technologies in order to sustain environment (Toyota homepage). The Hybrid technology is a combination of an engine and a motor and will become a core technology in the near future. This system compromises the merits of engine and motor to take advantage of their own strengths. To be specifically, the motor will operate at the start up and low speeds, whereas the engine could be act at a certain speeds (Toyota homepage). It is can be said that this is a power-saved and efficient system. Furthermore, Toyota pays more attention on the utilization of various fuels such as gasoline, bio-fuels, electricity, hydrogen, biomass to aim to decrease the emission of gas.

Buying a hybrid car is encouraged currently because the merits such as fuel-saved feature and environmentally protection (BBC, 2008). That is to say, possessing a hybrid car will become popular in the coming future in global. Based on King (2009), Toyota will be the first Hybrid car carmaker in European market. The first hybrid petrol-electric model is named Auris. It is clear that the Hybrid technology will be a core competence of Toyota.

The third distinctive merit of Toyota is that Toyota lock in a certain market. Johnson et al (2008) claimed that market dominance is a better method to sustain competitive advantage. Toyota focused on young generation market when it was launched in UK (Young&Aitken, 2007). Almost 70 percent under 40 customers were attracted by unusual advertising methods such as sponsoring nightclubs activity, advertising in pop clubs, cinemas and concerts in urban area (Young&Aitken, 2007). This marketing strategy is successful help Toyota dominate youth market. In addition, the brand of Toyota means reliability and credibility for older drivers originally (Young&Aitken, 2007). It is can be draw the conclusion that Toyota lock in a certain size market.

This competitive advantage will be sustainable in the future as it is reasonable and feasible. There are 3 reasons proving that this competitive merit will be sustainable. Firstly, the target of Toyota this innovation is ensuring earth, human and vehicles coexist in the harmonious future (Toyota homepage). That is, minimizing the damage of human behaviour and harmful gas generation. This is a vital task that the whole human have responsibility to do. Secondly, Hybrid system is a breakthrough of current technology improvement. In other words, this system will bring the "eco-car" (Toyota homepage) time for human. Finally, the consciousness of environment protection is widespread and acceptable universally. Human will pay more attention on environment sustainability.

Conclusion:

Toyota has gained the significant successful achievement as an international corporation. It is one of the biggest automobile manufacturers currently. Although the external environment is extremely depressed, Toyota still can keep its position in the global market by creating and developing its distinctive advantage. The fact is that, there are several strong competitors in the global scale. Feasible international strategy and regional strategy are implemented by Toyota in order to dominate the global market. Toyota focuses on innovation of safe and high-quality productions in accordance with the demand of customers. That is, Toyota adopts different strategy in various regions based on the local culture and preferences. However, it is rather difficult to become the biggest carmakers in the world if Toyota merely pays attention on strategy implementation. Distinctive advantages are extremely essential to competition. Both the power of Toyota brand and the latest technology innovation productions are the forceful competitive advantages of Toyota. Furthermore, Toyota operates various sorts of investments to aim to competition like housing and financial services. In short, not only the reasonable and feasible strategies in the dissimilar situation and regions according to the demand of customers in global contributed to the success of Toyota, but these vital indispensible competitive merits.

References:

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