Toyota Company is among the largest automobile manufacturers in the world. In addition to manufacturing automobiles, Toyota also gives financial services via its division Toyota Financial Services. The company also makes robots. Currently, Toyota Motor Corporation makes production of vehicles under five brands, which include the Toyota brand, Lexus, Hino, Scion and Ranz. In addition to these, the company also holds a total of 51.2% stake in Daihatsu, 16.6% stake in Fuji Heavy Industries, a total of 5.9% stake in Isuzu and it is also a stakeholder in Tesla with a stake of 0.27%.
Background on Toyota
Toyota came into existence in 1924 via invention of Toyoda Model G Automatic Loom by Sakichi Toyoda. His son Kiichiro Toyoda founded the Toyota automobile company in 1937. The Toyota Motor Sales Company Limited was later established and in 1974 the Company established the Toyota Foundation. In the year 1981, Toyota Motor Co., Ltd made an announcement on its intention to combine with its trade entity Toyota Motor Sales Co., Ltd. Shoichiro Toyoda presided over the Toyota Motor Sales during the preparation for the merge that ultimately came into fruition in 1982. In 1997, the Company launched The Prius making it the world’s first mass-produced hybrid car. In the year 2002, Toyota entered the Formula One World Championship and the Tianjian Toyota Motor CO., Ltd. began its production in China. In 2010, the global Prius sales topped the two million mark, which was phenomenal and also the Toyota and the Tesla Motors agreed on joint EV development. The vision of the Toyota Company is becoming the most esteemed in the world and its mission is to deliver outstanding automotive products and services to their esteemed customers and also to enrich their community, partners and the environment.
Following the introduction of the Toyota Prius in 1997, the Toyota Company has progressed to become a leader in hybrid electric vehicles in the market, and the first to produce and sell such vehicles commercially. Such technology received a label of “Hybrid Synergy Drive” in Toyota cars and “Lexus Hybrid Drive” in the Lexus versions. The company’s headquarters is situated in Aichi, Japan. In the year 2013, the Toyota consisted of 333,498 employees around the world and, by January 2014, it was ranked as the forth-largest company globally in terms of revenue. In the year 2012, Toyota Company was the biggest automobile manufacturer worldwide on the basis of its production. The company has made several achievements in terms of automobile production being the first automobile company in the world to produce more than ten million vehicles annually. It materialised in the year 2012 as per the OICA and 2013 as per the Company’s data. In November 2013, Japan listed as the largest in relation to market capitalisation and the amount of revenue collected.
Business leaders in the automobile industry prior to the establishment of Toyota Company included companies in the United States, which began manufacturing vehicles as early as the 1890s. There were over 1,800 automobile manufacturers in the United States in the period between 1896 and 1930. Some of the automakers have become extinct. Some of the earliest automakers in the United States are still in existence and include the Ford (1903- present), Lincoln (1920- present), General Motors (1908- present), Chevrolet (1911- present), Buick (1903- present) and the GMC (1912- present). Some of the followers in the automobile industry include Chinese companies. Some of the major automobile manufacturers in China include the Dongfeng (1969- present), First Automobile Works (FAW) (1953-present) and the BYD Auto (2003- present). Although Japan production ranked third in 2012, the Toyota Company remains the leading company in the production of automobiles worldwide.
Currently, Toyota is the most profitable automobile company in the world. It has been facilitated by its global geographic structure, which has subsidiaries and plants all over the world. The organisation also has the potential to influence its products and services. Examples of automobile industries that compete with Toyota are the big three’s and Honda. With the current United States economy in turmoil and yet to make recovery profitability of the Toyota America division is on a declining trend. It is due to the fact that American public has a low buying power decreasing their purchases. Such scenario makes it difficult for Toyota, along with their competitors, to survive in the current business world.
Toyota as an International Business
Toyota Company has become international already. The Toyota has established a strong market base in the United States and worldwide after the stigma tagged on the Japanese after WWII had been forgotten. Presently Toyota Company has received wide acceptance in the general society of the U.S. The Global Toyota has established production plants in the U.S., China, France, Mexico and the Czech Republic. Toyota has also been facilitated by the diversity of its products. There are little changes in the current global environment that Toyota does not provide a solution. It is aided by the diversification of the company, which supplies trucks, cars, luxury vehicles and compact cars that are compatible with the dynamic needs of the global market.
Factors Which Triggered International Expansion
The Toyota Company also uses high class technologies that have been the cornerstone in its progress to international expansion. Toyota has been capable of staying in tune with the ever-changing technical and technological trends in the global markets. This in turn has helped Toyota gain a better place for successful competing with other major international automobile manufacturers from the U.S., China and Germany.
Another factor in the international expansion of Toyota is its adoption of the just in time (JIT) inventory. JIT manufacturing is a strong system that has received mass approval in the efficient production of goods, keeping costs low at the same time. JIT manufacturing refers to a system, in which products are built only after the order has been received together with the payment. This production philosophy has allowed Toyota to keep a minimal amount of inventories that translates to lower costs. It also increases adaptability of Toyota to changes in demand without fears of expensive inventory disposing. Such philosophy has helped Toyota maintain high profit margins, which in turn have been vital in making the business international. JIT has also facilitated the success of Toyota divisions in the different countries of the world leading to its expansion.
Toyota Production System (TPS) is another philosophy that has been key in the success and expansion of Toyota. TPS organises manufacturing and logistics at Toyota, including its interaction with customers and suppliers of raw materials. TPS enabled Toyota to reduce lead-time and cost, while simultaneously improving quality. It enabled the company to achieve great success and be among the ten largest companies on the globe. This philosophy has been key in the expansion of Toyota in the international forum and its success in the various divisions found worldwide.
The strategy of merging with other automobile manufacturing companies in other nations of the world has been of prime importance in the expansion of Toyota. It has been evidenced, for example, with the production of Toyota Kirloskar in India and the GAC Toyota and the Sichuan FAW Toyota Motor in China. The people in these countries consequently embrace such brands of vehicles in a better way other than in a situation if they were completely foreign.
Internal and External Risk Factors Facing Toyota Company
One of the external risk factors facing Toyota is the earthquakes experienced in some parts of Asia. It is highlighted by the Great East Japan Earthquake that occurred on 11th of March, 2011. Following the earthquake, Toyota made a temporary suspension on the operations of the domestic factories due to massive damage on social infrastructure that included energy supply, transportation systems and communication systems. Some subsidiaries of Toyota close to the disaster zone also sustained some damages. It was a great setback on the Toyota Company.
Tsunami and accidents at the nuclear power plants in Fukushima Prefecture also act as major risk factors. The damages on the Fukushima nuclear power plant led to a shortage of electricity to some Toyota plants that relied on nuclear power. Also, the nuclear power plants in Fukushima Prefecture are not completely under control; therefore, continuing leakage of radiation and further worsening of the nuclear power plants’ state may have negative results. These issues connected to the Great East Japan Earthquake may ultimately impact significant unfavourable effects on Toyota’s operations and demand of their products.
Toyota also risks a highly dynamic and competitive global market of automobiles. Toyota faces intense competition in the markets, in which it operates. Although, till now Toyota has been able to maintain its vigour in the market, there can be no certainty that Toyota would be capable of competing successfully in the future. Toyota also faces the risks of fluctuations in foreign currency exchange rates, particularly the valuation of the Japanese yen, euro and the U.S. dollar. A negative impact due to these fluctuations may unfavourably affect Toyota financially and in terms of its operations. Internal risks facing Toyota include shortage of skilled manpower in some operational countries, particularly in divisions and plants located in developing countries.
Toyota Marketing and Corporate Strategies Analysis
Toyota as a multinational automobile company employs various strategies to penetrate the international market. As such, they have identified their regional markets to focus on. Such market regions are classified according to their geographical locations.
The Japanese investors find this business vital for the growth of Toyota. The business holds a key entry point to the Toyotas quest of being an international leader. As such, the company has established at least eight factories in that continent. By the year 2003, Toyota was producing its brands in this business and had a share of 4.4%. It increased the number of Toyota units to around 1.3 million in the European Union. The company later ventured further to the Russian market. The strategy of increasing the number of units available in Europe and Russia makes Toyota a competitive car manufacturer in that region, opening the avenue for expansion.
Between 1999 and 2000, the Toyota market share increased from 15.3% to 20.6%. The growth resulted in an increase of Toyota car production units. The company also took advantage of the Americans culture that does not accept the domestic vehicles. The increase in the number of the car production units was called to meet the demand of the Americans. It resulted in the Toyota becoming the second leading vehicle manufacturer in 2007, in the U.S. in terms of sales. The focus of Toyota on sales resulted in more sales, making it the American market leader after surpassing the GM in 2008.
In 2010, Toyota started producing hybrid cars Toyota Camry in the Australian market. In this market, Toyota became the first mass producer of hybrid cars. It was a diversification strategy that aimed at producing environmental friendly cars. This strategy caused increased demand for economic fuel source.
Toyota has also identified China and India as the next targets for their expansion. The increase in demand for Toyota units will help company set up new production units in those countries. African market is sufficiently supplied by shipping. The success of Toyota in the international market is attributable to the KAIZEN integrative approach. This approach is cross-functional. It includes production of high quality units, research on the automobile technologies and innovation amongst others.
Entry Market Strategies of Toyota
Toyota exports its units to the countries all over the world. Such strategy ensures that Toyota has presence all over the world, penetrating the markets. This way Toyota has established numerous dealer agents in different countries. The dealers include sales representatives and importing distributors. The Toyota sales representatives do business in different developing countries, for example, where the company has production units. They provide a variety of services to facilitate export of the Toyota units. The approach is imperative because it facilitates the export of the cars entering different countries of the world. Direct exporting strategies of Toyota helps the company choose and control its representatives in the foreign countries. The approach also allows the Toyota to collect the feedback from the car users in the international markets. It is also a potential method of increasing the sales volume.
The Japanese Company also exports the units through intermediaries in the domestic places. The types of indirect export strategies practiced by Toyota include export trading companies, confirming houses, purchasing agents and export management companies. Export trading companies help the importers of Toyota units locate the car manufacturers. They also present the units and respond to specific enquiries. Export management companies export the car units for the manufacturer or suppliers. Confirming houses in the Toyota manufacturing countries work with international buyers as intermediates. They make deliveries and negotiate purchases as required by the clients. They also make payments to the car manufacturer or supplier. Purchasing agents are similar to the confirming houses but do not make any payments to the suppliers.
The indirect export process allows fast access to the car business. It also allows the Toyota production factories to use more resources on production rather than selling. The approach is also instrumental in reducing the financial responsibilities of the car suppliers or the manufacture because it requires the client to cover all expenses in the supply chain. It is a way of outsourcing the export business and the supplier or the manufacturer without direct handling of the export business. Toyota also uses the cooperative approach to enter the market. This approach is reached through agreements on shared research on automobile technology and formal joint ventures. It is involved in the creation of new technologies for use in the automobile industry.
Standardisation in Toyota
All tasks and processes depend on standardised systems in Toyota. Such standards form the basis for the employees’ improvement and empowerment. Toyota production systems have worksheets containing information about all processes and tasks within the system. The production standard at Toyota is written by people who have the highest competency levels and who have proven themselves in their work. Standard operating charts make the processes efficient, as well as effective. New workers in the production system, for example, undergo training before they can be allowed to work independently. The workers are also required to use the standard operating worksheets in their work
Centralisation versus Decentralisation Strategy
Centralisation involves focusing of the power on a centralised position in the business. Toyota can use the centralisation of important decision making activities. Such activities include financial decisions regarding the establishment of new plants, diversification and investment. Centralising business decision making process ensures that all areas of business interest command due attention. It also allows the top level management an opportunity to consider diversification and emerging markets. Toyota can also consider centralisation of investment decisions. It is possible due to the fact that such decision is important in shaping the future of the Toyota activities. Investment decisions about the next technologies, for example, require centralisation because technology is dynamic and requires due attention before its use. Decentralisation of the major business of Toyota has demonstrated success through increased sale and profits. The activities that work best in decentralisation include sales, manufacturing and technological application. Sales functions of Toyota are decentralised to different countries in the world. This activity leads to free access by the customers due to the reliable sales channels created. Manufacturing of the car units is distributed across the world where the manufacture has identified market segments. As a result, the shipping cost is avoided.
Marketing Decisions for an Effective Marketing Mix
International Marketing Mix Decisions Based On 4Ps/7Ps
The marketing strategy of Toyota utilises the marketing mix to make important decisions. The 4Ps strategy looks at price, product, promotion and place. In the international market, Toyota considers the economic status of a business segment before setting up the price of the units. For the rich business segments, the company provides a vehicle that matches their class. In low income countries, Toyota provides affordable cars (product) to the customer. With Toyota, there is a car for every economic class. This strategy has been instrumental in driving Toyota to becoming the biggest car seller in the world purchasing products of high quality. The company employs sophisticated technology to come up with high quality units that attract numerous potential customers. Toyota conducts in intensive product promotion. The company uses advertisements, direct sales, public relation among other tools to meet its sales targets. Toyota identifies target market segments and their geographical location before setting up showrooms in those places. The approach brings the Toyota products closer to the potential customers.
The other marketing strategy used by Toyota is the 7Ps strategy. This approach incorporates the 4Ps with some other features to come up with the best marketing strategy. The other features include packaging, positioning and people. Packaging is the fifth aspect of the 7Ps strategy. The Toyota cars consist of attractive shapes and colours. The aspect makes the units appealing to the buyers and potential users. The incorporation of the Toyota logos in the cars and the car parts, for example, makes them stand out from those of the competitors. Positioning is the sixth aspect of the marketing mix. Toyota has positioned itself in the minds and hearts of car buyers and users alike. The cheap, economical and high quality features of the Toyota products make it align with the needs of most car users in all economic classes. People take up the final P in 7Ps marketing mix. The people's need tunes the production of the Toyota vehicles. The need for cheap and environmental friendly vehicles helped Toyota establish a hybrid car plan in Australia, for example.
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