Toyota's international strategic management and vehicle portfolio approach

Strategic Management

Firm chosen for the Study: Toyota Motor Corporation.

Describe the firm and its principle business activities

The principal activity of Japanese company, Toyota Motor Corporation is manufacture and sale of automobiles like passenger cars, trucks, buses, forklifts and other industrial vehicles. Apart from this mainline activity, the company has interests in financial services consisting of leasing and rental services, financial services and telecommunications and other activities spanning designing of residential houses, construction of sales and information services. Production and sales of automobiles contributes for 92% of the revenues; financial services 4% and others 4%. (Toyota Motor Corporation: Profile)

In the U.S., Toyota is to secure the third spot in automobile sales within a year or two. It has grown without acquisitions and by upholding a superior quality of its products. (All about Toyota) the immensely coveted luxury brand Lexus series introduced in early 1980s that came out with the first car, LS, on which an Engineering team of 1400 Engineers, 2300 technicians, 60 Designers and 220 supporting workforce were engaged to built various prototypes with a view to beat Mercedes and other luxury vehicles and it emerged successful.

The LS400- the first Lexus which was launched in 1989 was an instant success due to its extreme levels of luxury and reliability, at a lower price tag compared to Mercedes more less reliable and luxurious models. Lexus would be the frontrunner in passenger car comfort and reliability through to the 21st century. Some of the other popular models of passenger car introduced include Corolla in 1966, Celica in 1970, and Camry in 1983. (Toyota History)

2) Describe the firm's international level strategy

Toyota is one of the rare car production houses which offer a complete line-up of vehicles from its stable right from mini-vehicles to luxury sedans, Sports Utility Vehicle or SUVs, large trucks and buses as well. The fundamental marketing strategy at Toyota is to leverage this potential to give in the hands of customers which satisfy the regional requirements across the world. For instance in N. America the company has over the years persistently built up a range of vehicles which have unleashed dynamic growth and in their respective niche markets. In N. America alone the model line-up ranges from sedans like the Corolla and the Camry to the Lexus RX330, luxury SUV. Besides the Gen Y or youth segment of the population have two new models to choose from under the Scion car marque since June 2003 in the U.S. In Europe also, the brand presence and strengthening the sales network is being built. Besides the presence of the Yaris and the Corolla to the market, a new generation car Avensis has been launched in March 2003. (Growth Strategy)

In the home turf, Japan, Toyota has lined up plans for building a more efficient and aggressive domestic sales network through way of reorganizing the present five brand sales channels into four during spring 2004. In keeping with these endeavors, Toyota will be launching their exclusive Lexus brand in the domestic market during Aug. 2005. The unflinching target of the company is to promote the Lexus brand which is doing exceedingly well in the U.S. market, into a truly international one with top class product attributes. In keeping with the process of globalization of Toyota the company has been augmenting localization and autonomy of the operations in every region and enhancing the profitability and excellence of their global business. Toyota will persist in augmenting international production capacity and product development capabilities.

Whereas the operations in the respective regions will function by granting them more autonomy, the company will be building competent production networks which exploit the underlying strengths of every production centre. Apart from that, the company will be maintaining the policy of developing operations which are optimally weighed equally between Japan, N. America, Europe and other countries including Asia to as to avoid the dependence on any specific regional market. Concurrently, the company will beef up their operations in spheres which are yet to develop completely. Through an effective alliance with the FAW Group Corporation of China, Toyota has made the round work for future expansion in China. The company has set itself a target to make a 10% share of the Chinese market by the year 2010. Toyota's foray in Central and Eastern Europe has been implemented through a JV with PSA Peugeot Citro. (Growth Strategy)

4) Provide an example of the firm's business unit operation

As an example of Business Unit operations, in the sphere of advancing localization, Toyota augmented the overseas production considerably through capacity expansion of the present plants and aggressively bringing new plants online. Especially in North America, apart from expanding existing plants like Toyota Motor Manufacturing Kentucky, Inc. from (i) 4,00,000 units per year to 5,00,000units / per year (ii) Toyota Motor Manufacturing Canada Inc. from 1,00,000 units per year to 2,00,000 units per year, new plants like Toyota Motor Manufacturing, West Virginia, Inc. were brought online expanding the annual production capacity from 9,00,000 units in 1994 to 1.2 million units in 1998 and in excess of 1.25 million units per year in 2000. (Toyota Announces Final Report on New Global Business Plan)

5) Explain how this firm creates value and sustains competitive advantage through the application of the strategies you described.

The management philosophy at Toyota comes through the efficient implementation of the Toyota Production System or TPS that goes beyond physical and cultural boundaries. Toyota has maintained and also increased their global competitive advantage through TPS which depends in part on human resources management policy which stimulates not just the creativity of employees and loyalty but, significantly on an extremely efficient network of suppliers and manufacturers of components. (Toyota in the Press)

It is widely recognized that the success at Toyota is attributed to the TPS founded by Taichi Ohno and Shigeo from the later part of 1950s through the 1970s. TPS comprises the features of Jidoka, Just-in-Time Production, and Kaizen, which involves reduction of inventories as well as flaws. The system is used around the world, however it is just one the factors contributing to the success of Toyota. Jidoka involves trapping flaws in an automated machinery and disallowing to pass on to the next machine which essentially adds the capability to find out unacceptable quality during manufacturing process instead of waiting until the termination of the process, when it might be hidden and hence very difficult to locate and time consuming. The name itself is a Japanese joke on the expression 'automation' appending the character for a person into the middle.

Jikoda lowers cost and improves reliability. Just-in-Time or JIT is the ideology of having the components in complete readiness, when they are required, instead of maintaining inventories throughout the assembly plant and warehouses. Majority of the writers are inclined to concentrate on the cost savings from having less capital locked up inventories under the principles of this system, however there is another merit: engineering changes can be taken about more rapidly as heaps of components are not needed to be cleared out and flaws with the individual components can be diagnosed much more rapidly as they are used nearer to the time they are manufactured. (Toyota History: Why is Toyota successful? (Toyota History)

Another factor contributing to the success at Toyota is Lean Production which is another Toyota first. This is a business system for organizing and managing production development, operations, suppliers, and customer relations which needs less human endeavors, less capital and less time to manufacture products with lesser flaws to accurate customer wants as opposed to the earlier system of mass production. Lean production was groundbreaking approach by Toyota after Second World War and till 1990, characteristically needed 50% of the effort, 50% of the production room and capital investment for a required amount of capacity, and a fraction of the development and lead time of mass production systems, whereas manufacturing products in wider variety and lower quantities with the least flaws.

The terminology crafted by John Krafcik, a research assistant at the MIT with the International Motor vehicle Program in the late 1980s. Another pillar of success at Toyota constitutes Obeya which in Japanese implies 'big room'. At Toyota it has come to be recognized as a major management tool, applied particularly in product development to augment efficient and timely communication. Identical in idea to traditional war rooms, an Obeya will be having charts with heavy visual charts and graphs showing program timing, milestones and progress till date and compliance to existing timing or technical difficulties. The Project leaders will be having desks in the Obeya as others will be appropriating the points in the program timing. The objective is to guarantee success of the project and make the plan-to-do-act cycle shorter. (Capsule Summary of Lean Concepts)