Toyota Company Analysis

Toyota Company Analysis

Executive Summary

This paper covers the history of Toyota, its international strategy, its marketing approach, logistics approach and its human resource strategy. In many instances, the analysis for these elements has been used to decide the practicality of letting Toyota to set base in our country. Upon some critical analysis, some of the benefits expected after allowing Toyota to operate from our country include creating a source of employment for the country’s citizens, the increase in revenue collection for the government through taxation procedures, the development of infrastructure, promotion of local activities such as agriculture, and creation of self employment through affordable vehicles. However, the risk that has been noted for allowing Toyota to operate from our country is the threat to future automobile investors. After a careful consideration, the government has therefore been advised to allow the entry of Toyota into the country.

Company Description

Toyota Company was founded in 1937 by Sakichi Toyoda as a family business. Its headquarters is in Tokyo Japan but has many affiliates around the world. Some of the main affiliates are in USA, Europe, Asia Pacific, and China. Toyota is the third largest automobile company in the world in terms of profits and it has more than 240,000 employees. Generally, the main products for Toyota are automobiles as they contribute the largest returns in profit. In the global market, the company is quite successful and has been recording high profits as a result of the many vehicles it sells annually. In the first 9 months of 2011, the company had a net income of 382,785 million yen while in 2012 the net income was 162, 525 million yen for the same period[1].

Company’s International Strategy

Like other multinational companies, Toyota uses transnational strategy to reach out to the global market. That is to say, the utilization of the transnational strategy is done in order to compete with the international competitors such as GM and Ford.

In cost reduction and quality improvement, Toyota has been improving tremendously in order to differentiate its products in the international market. As a result, the company has expanded into developed markets such as USA, Europe, Japan as well as emerging markets such as China, India, Russia, and Brazil[2]. In addition, the international strategy reduces cost of transportation as products are taken closer to consumers.

For the purpose of quality enhancement, Toyota has R&D bases overseas in countries such as USA and Belgium among others. Furthermore, there are also many assembly plants in its affiliates in other countries across the world. To succeed in the market, the company applies an international strategy of building vehicles that meet the demands of individual markets. As a customer attraction strategy, Toyota has established knowledge centers where the public can learn more on the company products.

Due to its application of the international strategy, Toyota is a successful company that has been reporting consistent profits over the years.  Its entry into the American market was a well-calculated move since the company sells more cars and trucks in North America than in Japan. Among its global profits, 60% are collected from North America due to the high demand of trucks and SUVs. Due to its entry into the US market, Toyota has become vulnerable to some of the main competitors such a GM. With this in mind, the GM Company was presented with an opportunity to observe and scrutinize the Toyota’s approach to manufacturing especially the Kanban system and its relationship with suppliers. This has seen GM and Ford improve their brands and productivity in recent years and hence closing the leading gap enjoyed by Toyota.

Company’s Marketing Approach

Toyota markets its products in diverse parts of the globe. In relation to this, the marketing strategy used by this company varies in different countries where it sells its vehicles. To convince its market target, the company showcases its high quality vehicles that are sold at affordable prices. Over the years, Toyota has been designing vehicles to satisfy various regions with more attention being on satisfying local demand. By using this approach, there are some cars that are only offered in certain regions based on their popularity or demand. Additionally, the prices of the Toyota vehicles vary in different countries depending on the economic situation of those countries. In this regard, the US market is particularly popular with Sport Utility Vehicles while the same vehicles are not popular in Europe[3]. Unlike the SUVs, the cars in the European market are designed to be used in cities and hence the demand for land cruisers is relatively low in Europe. It is significant to note that the prices for the Toyota products are meant to meet consumer expectations and hence a Toyota Land cruiser costs more in France than in USA.

In order to capture the diverse market, the Toyota’s head offices located in various countries are responsible of carrying out their own promotions to draw more customers and increase the sales. However, the country head offices may decide to introduce discounts as a promotional strategy or advertise their products as a marketing strategy.

Company’s Logistics Approach

Toyota’s main production plants for its vehicles are located in Japan, USA, Europe, Asia Pacific, and China. In the USA, the product planning, vehicle engineering and evaluation is done by the Toyota Motor Engineering & Manufacturing North America, Inc.  These plants are located in Arizona, Michigan, California, and Washington D.C.  On a different application, the Calty Design Research Inc, that is located in California and Michigan, deals with exterior, interior, and color design.

In Japan, the Head Office Technical Center deals with product planning, design, vehicle engineering and evaluation. In the contrary, the Higashi-Fuji Technical Center deals with advanced engineering while advanced designs are done at Tokyo Design Research & Laboratory[4]..

It is worth noting that, Toyota chose USA as a major operation base is due to the huge potential for the consumption of its products. The high population in USA and the development in technology provide a favorable platform for mass production of vehicles. The country is also politically stable and has a high growth in economy. All these factors are necessary for the sustainability of Toyota products in USA and other countries.

Company’s Human Resource Management Approach

Toyota treats its employees as the most valuable asset in the company. This is because, the company believes the growth of personnel should be guided by communication of ethics and ideology. One of the basic principles of Toyota’s employment system is the mutual trust between employees and management. This mutual trust was adopted from the Labor Management Joint Declaration of 1962[5]. In order to safeguard the fundamental principle in labor management, Toyota adheres to the basic principles of human resource management.

In addition, Toyota offers stable employment that avoids unnecessary layoffs and terminations as a way of promoting the mutual trust between the management and the employees. Equally true, is that the management system at Toyota aims to maximize employees’ abilities, creativity, and skills. This is achieved through effective human resource management that is regarded as a significant asset to the company. Additionally, termination of human resources not only hinders maximization of employees’ abilities but also damages relationship of trust.

As a matter of fact, Toyota considers communication to be an effective approach for maintaining a healthy work force. To enhance this, the company provides numerous chances for discussions between management and labor. Moreover, the company also conducts regular surveys to monitor employee morale and job satisfaction. In a study conducted in 2004, 83% of the 19,000 Toyota employees who were interviewed responded to be happy with the working conditions in the company[6]. One aspect that contributed to this was that the company considers the relationship with the employees’ families to be a critical aspect and has therefore established a family oriented website referred to as Toyota Fami-net to promote communication between the company and the employees’ families.

It is equally important to note that, Toyota invests heavily in human resource development by conducting training for employees to enhance their skills in problem solving techniques. In the same token, the company also conducts training for improving the managerial skills for managers and offers global training for employees in its overseas affiliates. In another exchange program, the company allows inter-company transfers where employees from overseas affiliates are allowed at its headquarters in Japan for two years.

To further emphasize the value of its human resource, Toyota revised the contracts of employees in 2004 by extending the duration for temporary employees from one year to three years[7]. Since then, the company has continued to develop the working conditions for its employees in order to have secure human resources to spearhead its objectives.

Summary

One of the benefits of allowing Toyota to operate in our country will be the increased access to affordable vehicles in the local market. This will be supported by the company’s strategy to promote the local brands where the prices for their products will be influenced by the economic situation in our country. When people are able to access high quality vehicles at low prices, the country will benefit through economic growth that might be experienced through transportation. Good vehicles will support agricultural activities such as transporting of farm products to the market using Toyota trucks or pickups.

Another benefit is that, the entry of the Toyota market is also likely to be a source of business for many people. In addition, the investors willing to start transport business will have a better opportunity to venture into business and hence boost the local economy.

Lastly, the establishment of the Toyota Company in our country will be a source of employment for the local population. This will contribute towards lowering the rate of unemployment which will be a positive economic indicator. Due to the increased rate of employment, the government is expected to benefit directly by taxing the permanent employees. This will eventually lead to increased revenue collection for the government. Increased revenue collection may also lead to better services from the government such as infrastructure development and provision of basic services that include health facilities.

Although every investment has its own disadvantages, the only risk of allowing Toyota in our country will be the threat to the small industries.  Again, the country’s future likelihood of starting a local company for vehicle manufacture will be minimized due to the dominance of the Toyota Company in the automobile industry. Similarly, the presence of the Toyota Company in our country may also scare away other automobile companies who wish to establish their businesses here.

Conclusion

In final consideration, the entry of Toyota in our country will create employment to the people as they will be working in the local plants. Besides that, the government is also likely to collect more revenue from the taxation procedures for the new company and tax collection from the permanent employees. Furthermore, the country’s economy may experience positive growth due to the development of infrastructure. In the same way, the local business will be promoted due to the ease in transport and the availability of affordable vehicles that can be a source of self-employment. However, the presence of the company may scare other automobile companies planning to invest in the country in future. In regard to this, the country is therefore recommended to allow the entry of the Toyota into the local market since there are more benefits than risks. Nevertheless, the government should however ensure that Toyota meets all the regulations required for new investors.

 

 

Notes

1. Borowski Arkadi. Report on the Toyota Company. (New York: GRIN Verlag, 2012), 27.
2. Hino, S. Inside the Mind of Toyota: Management Principles for Enduring Growth. (London: Productivity Press, 2006), 76.
3. Doole Isobel and Lowe Robin. Strategic Marketing: Decisions in Global Marketing. (Michigan: Cengage Learning, 2005), 38.
4. Ferrel Odies and Hartline Michael. Marketing Strategy. (New York: Cengage Learning, 2010), 108.
5. Hill, C. International Business: Competing In the Global Marketplace. (New York: McGraw-Hill International, 2009), 47.
6. Peng Mike. Global Strategy. (California: Cengage Learning, 2008), 29.
7. Womack James, Jones Daniel, and Roos Daniel. The Machine That Changed the World. (New York: Macmillan, 2010), 145.

 

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