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Toyota Motor Corporation (TMC) or Toyota is the Japanese multinational
organization and the world largest automobile manufacturers, selling 7.5 million
models annually on all five continents. At present, it employs 70,000 people. Like
many enterprises that have made their mark in history, Toyota has been shaped by a
unique set of values and principles that have their roots in the company's formative
years in Japan.

The supply chain processes and strategies of Toyota are the fundamentals in its dai ly
operations. By adhering Just-In-Time (JIT) manufacturing and Toyota Production
System (TPS), Toyota emerges to be one of the world's largest automaker.

The case details the globalization strategies adopted by one of the world's leading
automobile majors, the Japan-based Toyota Motor Corporation (Toyota). It examines
the company's evolution from being Japan's number one automaker to a formidable
competitor in the global automobile market by 2003. It examines the rationale
behind Toyota's decision to concentrate on global expansion and studies the
company's various globalization programs, focusing on the localization efforts. The
case also analyzes the problems faced by the company within Japan and discusses
the steps taken to overcome them. Finally, it ex amines the results of Toyota's
globalization strategies and discusses its future prospects in the light of intensifying
competition and demand saturation in its core markets, Japan and the US.

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Japan͛s Sakichi Toyota (Sakichi) diversified from traditional family business of carpentry into
handloom machinery in 1897. Toyota Automatic Loom Works (TALW) founded in 1926 for
manufacturing automatic looms. Sakichi invented a loom that stopped automatically when any of
the threads snapped. This concept (designing equipment to stop so that defects could be fixed
immediately) formed the basis of the Toyota production system (TPS) and later became a major
factor in the company͛s success.

In 1933, Sakichi established an automobile department within TALW and the first passenger car
prototype was developed in 1935.

Toyota established in 1937.

Kiichiro Toyoda studied the US automotive industry during visit to Ford. In Japan he customize the
Ford production system where each process in the assembly line produced only the number of
parts needed at the next step on the product line. This system was named Just -in-Time (JIT)

Toyota flourished during the second world war by selling truck and buses to the army. The company
launched its first small car (SA model) in 1947. During this period Toyota went into downsizing and
restructuring the company into separate manufacturing and sales division. In 1950 Toyota Motor
sales company Ltd was formed.

By 1952 Toyota made a turnaround. In 1957 Toyota entered in the US market.

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Toyota's management philosophy has evolved from the company's origins and has been reflected in
the terms "Lean Manufacturing" and Just In Time Production, which it was instrumental in

The Toyota Way has four components:

1. Long-term thinking as a basis for management decisions.

2. A process for problem-solving.
3. Adding value to the organization by developing its people.
4. Recognizing that continuously solving root problems drives organization al learning

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Toyota manufactures cars, which has a wide coverage from economic minibus to luxurious cars,
SUV. The brand on sell includes Crown, Reiz, Vios, Corolla, Coaster and Prius. And Prius is the brand
or car that Toyota has made a significant success in American market. It is a hybrid vehicle.

Toyota has made its way to America. In 1957, Toyota exported to America at the first time and
established the selling company. In 1984, a joint venture was established with General motor. Co.
And in 1997, Prius was first in production and had a launch in America. It was such a great success
that Toyota conquered American market.

It is well known fact that American love cars so much. And due to oil crisis, Americans chan ged the
need structure for cars, converting their needs to oil saving cars. While American car manufactures
lacked producing such cars, then Toyota caught that opportunity and tried to occupy this niche


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In 1995 Hiroshi Okuda became the president of Toyota. To improve company͛s sales in domestic
market Toyota adopted following strategy:-

 Okuda chose to focus on the dealer network. Under this strategy Toyota took initiative to
improve communication with its dealer.
 It offered more incentives to increase sales and encouraged them to attract more prospects
for test drives.
 It identified the younger generation as the means to increase market share in Japan. Under
this strategy it took aggressive measure to attract youngster to its product.

It also realized that the dealer outlets could play an important role in attracting younger customers.
It recognized some functional discrepancies among its dealer outletsͶDealer outlets were located
too close to each other in some places and even displayed the same model. Toyota adopted
following strategy.

 Toyota stopped supplying similar models to such dealer outlets to avoid unnecessary price
 It decided to take a strict stance with who failed to meet the targets and withdraw the
monetary incentive scheme for them.
 It also asked some of its dealer to restructure and rename their outlets in such a way as to
attract  *  "
 The company also invested around $200 million on advertising in fiscal 1995.

AS a result of Okuda͛s strategy Toyota͛s performance began picking up. As the financial base
strengthened. Okuda decided to focus on improving the global sales performance, and took Toy ota
on the path of aggressive globalization.

The company͛s overseas production increased from 1.22 million units per year in 1995 to 1.54
million unit per year in 1998.

While Toyota was drastically increasing its market share in the US, it was finding difficult to perform
well in Europe and Japan.

Its market share was still below 40% in Japan despite aggressive marketing efforts.

The above scenario was due to a host of reasons like

 Excessive capacity
 Choosy customers
 Surplus workforce
 Intensified competition within Japan.

In 1998, Japan sales accounted for mere 38% of the company͛s total sales compared to 52% in
1990. Also Toyota͛s Japan sales contributed to a very small share of its profits.

 By the late 1990s young buyers accounted for 30% of the customer base as compared to
over 45% in the late 1980s. In 1998, models from rival companies such as Honda and BMW
were more popular than the ones offered by Toyota. According to reports, Japanese
youngsters felt that Toyota cars x+,-  +

 ." Toyota realized that by losing its young
customers to other companies, it ran the risk of losing its future market as well.

Alarmed by this scenario, Toyota embarked on an aggressive restructuring exercise and started a
new company, Virtual Venture Co. to design and sell cars that appealed to the young generation.
VVC experimented with many unconventional sales strategies to improve the Toyota models to
people, It built a $83 million amusement park in Apri l 1998, Where it displayed Toyota͛s visions for
future models and also allowed people to design their own cars.

Beginning in 1999, the company rolled out many new cars specifically designed for the young
Japanese buyers. These cars such as Vitz compact, FunCargo compact, and MR-S sports car, had the
distinctive looks and attitude sought by these buyers. More significantly, a majority of these were
entry-level. To keep the prices down, Toyota shared platforms with other models.

Apart from these new launches, the company also launched upgraded versions of its existing
models such as Windom (Lexus ES 300), Verossa and Brevis. To attract the young buyers, Toyota
took the risk of even de-emphasizing the Toyota brand. For instance the new car bB, which became
very popular with young buyers, had no visible signs of the ͚Toyota͛ name, except for a Toyota
symbol on the steering wheel.
As part of making the company͛s dealer outlets more appealing to young buyers, the company
renamed one of its five dealership chains $
/ and targeted it exclusively at entry-level buyers.
Toyota also undertook aggressive marketing efforts such as focused advertising of its new models
besides offering high cash rebates to buyers of its flagging models.

Toyota focused on streamlining and reducing its workforce and decided to hire contract employees
against its policy of lifetime employment. It planned to cut about $678 million in costs, employment
mainly by designing cars with fewer and simpler parts and by sharing platforms and part s among its

 The factors that helped Toyota attain and sustain the leadership status in Japan are: -

 Focus on dealer network.

 Initiative to improve communication with its dealers.
 It took aggressive measures to attract youngsters to its products.
 It stopped supplying similar models to such dealers whose outlets were located too close to
each other to avoid unnecessary price competition.
 It decided to take strict stance with those dealers who failed to meet target.
 The company invested heavily on advertising in fiscal in 1995. (around 200 million)
 It embarked on an aggressive restructuring exercise.
 It built a $83 million amusement park in April 1998, where it displayed Toyota͛s visions for
future models and also allowed people to design their own cars.
 As part of making the company͛s dealer outlets more appealing to young buyers, the
company renamed one of its five dealership chains Netz, and targeted it exclusively at entry -
level buyers.
 It focused on streamlining and reducing its workforce an d decided to hire contract
employees against its policy of lifetime employment.
 It planned to cut about $678 million in costs.

½ Problems the company faced in this market later on: -

The problem was drastically increasing its market share in the US, it was finding it difficult to
perform well in Japan. Its market share was still below 40% in Japan despite aggressive marketing
efforts. This happened because of number of reasons like: -

ë Excessive capacity
ë Choosy customers,
ë Surplus workforce
ë Intensified competition

It is already mentioned regarding problem faced by Toyota and the strategy it adopted to come out
of the problem.
Over all the strategy it adopted to became leader in automobile market in Japan became the best
practices in automobile sectors.

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For though buyers 40 to 69 years old have averaged more than twice as many new-car buys since
1995, 25- to 34-year olds alone should pack $1.2 trillion in buying power by the end of this year.
And they'll spend $70 billion of it on vehicles and other autom otive purchases. Given that today's
18-year-old will buy about 13 vehicles during his or her lifetime from 8.4 in 1970.

The under-35 automotive market didn't exist a half century ago.

Without doubt, entry -level buyers just out of high school and college are more image-conscious and
brand oriented than older buyers. And automakers must snag these buyers when they don͛t; it
hurts their chances of getting them back later. But it's not easy. Generally, people no longer act
their age.

"Over the past few years, the Jetta has been targeted at younger people, kids getting out of college.
It's made a huge impression." It doesn't hurt that it's a quality product with a popular design, he
adds. Meanwhile, in East Providence, R.I., Ford dealer Bob Tasca III sees you ng women going for the
Jetta because it's "like a mini luxury car".
On the other hand, Tasca Ford is mainly selling supposed youth magnet Ford Focus to customers
over 45. Yet Tasca is excited about what the Focus is doing nationally: attracting younger buyers
into the brand through edgy commercials and special editions, such as the Focus Street, whose
marketing connects with the audience via techno-music. "You'll see a migration pattern," says
Focus brand manager Bob Fesmire of the long-term prospects for Focus and the Ford brand. Some
Focus owners will buy another; others those marrying and starting families will buy a different Ford,
such as the Windstar, he says.

At Toyota, loyal but aging buyers have some observers concerned. Though the maker has ridden
the wave of young Baby-Boomers in recent decades, its styling may not be hip enough for today's
first-time buyers and new college grads. The Echo, though priced low, didn't resonate with younger
buyers, but ended up drawing folks over 40. Under -35 buyers are "more educated than when I was
their age," says one Toyota general sales manager. "They're not afraid
of the imports like their parents might have been. They want to make sure they're going to get
something that will last them, give them good fuel economy, and make them feel safe." Price
seems less important for young Toyota buyers, he adds.
Young buyers who have money often make contact via the Internet, say dealers John Weinberger
and Scott Vanderbeek. "They're looking for a specific luxury car that m ay not be in their
hometown", says Weinberger of Continental Motors (including Acura, Audi, Bentley, Ferrari, and
Rolls-Royce), near Chicago. Buyers in their 20s are after the 3 -series and get hooked, say Roseville
salesperson Candy

Beck, through BMW's college grad program with terms up to 60 months for financing or leasing a
new or certified used Bimmer.
One survey indicated that 78 percent of college students look at price first. Then comes reliability
(75 percent). Also, 48 percent of students plan to buy a new car, but 52 percent intend to buy used
which may be good news for makers with robust used-car certification programs. The 34 percent
intending to buy new in the next year plan to spend less than $20,000.

Of course, dealers use some automaker incentives with young buyers. "We advertise the first-time
buyer programs," says Earnhardt Auto Centers corporate general sales manager Steve Arey, who
also does many secondary finance deals. Some college-grad incentives, such as Toyota's and Ford's,
involve $400 rebates. And, says Arey, "We deal heavily in program cars. A lot of the Hyundai͛s are
really popular. They like that warranty." in any event, financing "is going to be the key. If they have
the program for them, they'll buy [new] cars. If not, they'll buy used."

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1) Early 70s prod & sales was behind from Ford and GM.
2) Domestic sale gone to decline.
3) The need to explore new markets and maintain a leading position is extremely urgent.
Without proper localization, this can hardly become reality. Due to the growing market and
increasing competition, localization is the right move forward.

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u New Global business plan (1955-1998)

u Global vision 2005 (1996 ʹ2005)
u Global vision 2010 (2002 ʹ 2010)

$ 5 % +    + 899:88;7 In June 1995, Toyota announced the 'New Global
Business Plan,' aimed at advancing localization (of production) and increasing imports ( through
collaboration with foreign automobile companies) over a three year period. A major objective
of this plan was to increase Toyota's offshore production capacity to 2 million units by 1998.
This was the major proactive plan which is aimed for almost 43 years future. Keeping on the
mind of location advantage Toyota mainly focused on overseas production. And on this concern
Toyota established new plants and expanded the capacity of plants.

Especially in $ 
1  ,+, in addition to expanding existing p lants such as

 Toyota Motor Manufacturing Kentucky, Inc. (TMMK) (from 400,000 units/year to

500,000 units/year) and
 Toyota Motor Manufacturing Canada Inc. (TMMC) (from 100,000 units/year to
200,000 units/year), new plants such as
 Toyota Motor Manufacturing, Indiana, Inc. (TMMI) and
 Toyota Motor Manufacturing, West Virginia, Inc. (TMMWV) were brought online,
increasing annual production capacity from 900,000 units in 1994 to 1.2 million units
in 1998 (total production capacity is e xpected to increase to 1.25 million units/year in

In   , Toyota Motor Manufacturing France S.A.S. (TMMF) was established in France in
November 1998. It is scheduled to go into operation in 2001, with an annual production target
of 150,000 units of the Yaris, a strategic vehicle for the European market. In Asia as well,
where economic stagnation has been continuing, TMC established a supply structure in
anticipation of market recovery, starting up second plants in Thailand, Indonesia, the
Philippines, and Taiwan.

Next, in the area of increasing imports, TMC strengthened the sales structure of the DUO
stores, which sell VW/Audi cars expanded imports of completely built-up cars, and began
selling the Avalon, a passenger car made at TMMK, in May 1995 and the Toyota Cavalier,
made by GM in January 1996. TMC also expanded its efforts to increase imports, including
foreign aftermarket parts, by establishing TACTI Corporation to procure and sell new brands
of aftermarket parts and by increasing the number of its directly owned "jms" car sho ps to 28
by March 1999.

Furthermore, TMC implemented various steps to promote the "Toyota Global Optimum
Purchasing System"and has made steady progress, e.g., facilitating access for prospective
overseas suppliers by publishing the contents of its Supplier's Guide on the Internet (in
November 1997), and constructing a Suppliers Center (in April 1998) which can be used for
exhibiting new parts, etc

Although the New Global Business Plan has come to a close, TMC plans to continue expanding
its business operations aggressively on a global scale in the future.

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Since the New Global Business Plan was announced in 1995, TMC's overseas production has
been expanding on schedule, increasing from 1.22 million units per year in 1994 to 1.54
million units per year in 1998.

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TMC's North American production capacity increased to 1.2 million units per year in 1998. In
addition to expanding the existing plants, two new plants (TMMI and TMMWV) were brought
online on schedule.

In the year 2000, TMC's total North American production capacity will increase to 1.25 million
units per year with production starting of a new SUV model at TMMI. TMC also plans to
exceed the originally announced localization plan by producing additional V6 engines
(summer 1999) and starting production of automatic transmissions for the Camry (spring
2001), both at TMMWV.

North American production results increased from about 740,000 units i n 1994 to about 1.01
million units in 1998.

 In 1998 production at TMMK was about 480,000 units (1994 results were about
290,000 units). Expansion of production capacity to 500,000 units per year has been
achieved as outlined in the plan.
 The line-off ceremony for the Tundra was held in December 1998 at TMMI. Mass-
production started in February 1999 and plans call for production of 100,000
units/year. Production of a new Tundra-based SUV is planned to begin in the fall of
2000. Total production capacity wi ll reach 150,000 units.
 Assembly of Corolla engines began in November 1998 at TMMWV, with a planned
initial production level of 300,000 units per year. Production of about 200,000 V6
engines per year will begin in summer 1999. As a result, annual producti on capacity
will reach 500,000 units in summer 1999. Coupled with the above increases, Bodine
Aluminum, Inc. plans to expand its production of cast aluminum parts for V6 engines
from the current level of 180,000 units per year to 380,000 units per year fro m early
2000. Beginning in the spring of 2001, moreover, TMMWV will start producing
automatic transmissions for the Camry (at an annual production rate of 360,000 units).
 In 1998 actual production at TMMC in Canada was about 170,000 units (1994 result
was about 90,000 units). Expansion of production capacity to 200,000 units per year
was achieved in 1997. Production of the new Solara model began in June 1998.
 Total exports of vehicles from the U.S. amounted to 36,000 units. (The cumulative
total for 1995 through 1998 was about 240,000 units.)


European production capacity expanded to 220,000 units by the end of 1998. Toyota Motor
Manufacturing (UK) Ltd. (TMUK)'s second assembly plant started building Corolla lift-back
models in September 1998. Total European production capacity will reach 350 - 400,000 units
in 2001, when the French plant goes into production.

In 1998 vehicle production result at TMUK was about 170,000 units (1994 result was about
90,000 units).

 In 1998 engine production at TMUK was about 110,000 units (1994 actual production
was about 80,000 units). TMUK's engine production capacity will increase from the
current level of 150,000 units/year to 200,000 units/year by the end of 1999, and to
between 350,000 and 400,000 units/year in 2001. A casting process will also be added
to the engine production process (with the start of production planned for 2000).
 The new production company, Toyota Motor Manufacturing France S.A.S., established
in Valenciennes, France, in October 1998 is proceeding with plant construction with
the goal of starting production by early 2001 (at the rate of 150,000 units per year).
 In order to support Toyota's European manufacturing operations, Toyota Motor
Europe Manufacturing (TMEM) was formed in Brussels, Belgium, in October 1998.
 In July 1998, TMC established a design center in the Cote d'Azur, France (with the start
of operations planned for early 2000).
 Exports of TMUK-produced cars to countries outside the EU, which began in 1996,
reached about 7,000 units in 1998. (The cumulative total for 1996 through 1998 was
about 18,000 units.) Exports of engines to Turkey reached about 8,000 units in 1998.
(The cumulative total for 1996 through 1998 was 45,000 units.)

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Production capacity in Asia and Oceania expanded to 640,000 units in 1998. Against the
background of stagnating economies and a shrinking automobile market in Asia, 1998
production result in Asia and Oceania was about 280,000 units (1994 actual production was
about 410,000 units). To maintain local operations and employment levels, TMC has been
taking such measures as the expansion of exports from local operations, support of training,
and active support of management of parts makers and dealers.

 In 1998 vehicle production in Taiwan was about 73,000 units (1994 actual production
was about 65,000 units).
 In 1998 vehicle production in the Philippines was about 11,000 units (1994 actual
production was about 30,000 units). Production of constant -velocity joints was about
57,000 units. In addition, transmission exports to Japan began in March 1998.
 In 1998 vehicle production in Thailand was about 35,000 units (1994 actual production
was about 110,000 units). Prod uction of engine blocks was about 100,000 units (1994
actual production was about 53,000 units). In April 1998, the export to South Africa
began of Hilux production parts made in Thailand. In July 1998, the export of Corolla
bumpers to Brazil began. In August 1998, the export of Hilux made in Thailand to
Australia began.
 In 1998 vehicle production result in Indonesia was about 17,000 units (1994 actual
production was about 80,000 units). In February 1998, production began at P.T.
Toyota-Astra Motor's (TAM) second plant (Karawang Plant). 1998 engine production at
TAM was about 36,000 units (1994 actual production was about 70,000 units).
 In China, Toyota continues to build our parts production network. In June 1998, the
line-off ceremony for a constant velocity joint production joint venture was held. In
July 1998, the line-off ceremony for a engine production joint venture was held. In
January 1999, the line-off ceremony for a forged parts manufacturer was held. As for
vehicle production, in November 1998, a manufacturer of compact buses was set up.
TMC is also undertaking negotiations with the Chinese government on a small car
project. In addition TMC ha s been providing support for increasing production capacity
to 150,000 units/year targeting sales of 100,000 units per year for the Tianjin Charade.
Finally, in February 1998 ToyotaTechnicalCenter (China), Ltd. was established to
provide production and dev elopment support, with operations scheduled to begin in
April 1999.
 In 1998 vehicle production result in Malaysia was about 6,000 units (1994 actual
production was about 17,000 units). 1998 production result of power steering units at
T & K AutopartsSdn. Bhd. was about 27,000 units. 1998 actual production of lower ball
joints was about 12,000 units.
 In 1998 vehicle production result in Vietnam was about 2,000 units.
 In 1998 vehicle production result in Australia was about 100,000 units (1994 actual
production was about 78,000 units). 1998 exports of Australian -made Camrys totaled
about 30,000 units. (The cumulative total for 1996 through 1998 was about 70,000
 In 1998 vehicle production result in New Zealandwas about 4,000 units (1994 actual
production was about 15,000 units).

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TMC is also moving forward with projects in the following regions, which were not included in
the original plan:

 In August 1998, Corolla production began in Indaiatuba, Sao Paulo, Brazil, with a
production capacity of 15,000 units per year.
 In India, TMC is preparing to start production of family type diesel passenger vehicles
exclusively designed for the Indian market by the end of 1999. The plant building was
completed in February 1999

As a result of the foregoing activities, the percentage of worldwide sales (excluding Japan)
accounted for by overseas-produced vehicles reached 52% in 1998 (percentage in 1994 was


 For major parts, such as engines and stamped parts, as well as facilities and materials,
TMC is making steady progress in localization, with local procurement being the rule.
 In July 1996, TMC published the "Supplier's Guide" to foster understanding by new
suppliers of TMC's procurement activities and sales approach pr ocedures, as well as to
help current suppliers understand better TMC's procurement policy and procedures. In
November 1997, TMC published the contents of its Supplier's Guide on the Internet to
facilitate access for prospective suppliers.

The "Global Optimum Purchasing System" is already in operation in North America and Europe,
and preparations are underway to establish the same system in Asia and Oceania. The following
three main pillars of this system are being enhanced:

½ New Supplier & New Technology Cultivation Program To cultivate new suppliers,
TMC has been holding new parts exhibits, JAMA/CLEPA business talks (in
November 1997), JAMA/MEMA business talks (in November 1998), theme
exhibits such as "New manufacturing methods exhibition" and "World No. 1
activities exhibition," etc. TMC is aggressively promoting new parts exhibits for
global suppliers.
½ Current Supplier Improvement Support Program As part of this program, an
expected value system is being implemented in 11 countries world wide. A system
has been established in each region to spell out the expected values and to
recognize those suppliers who meet them. In February 1999, a procurement
policy explanation meeting was held in Japan with global suppliers in attendance.
½ International Price Comparison System This system went into full operation in
August 1995, and is being promoted as a system for updating/adding price data
and for applying such data to new products.

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 Sales result of VW/Audi cars through DUO dealers were about 29,000 units. (The
cumulative total for 1995 through 1998 was about 119,000 units.) At the end of 1998,
the nationwide sales network consisted of 144 sales outlets.
 Sales results of the Toyota Cavalier were about 7,000 units. (The cumulative total for
1996 through 1998 was about 28,000 units.)
 Sales results of the Avalon made at TMMK were 4,000 units. (The cumulative total for
1995 through 1998, including the Scept er, was about 59,000 units.)

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 In April 1998, to further facilitate sales by suppliers, TMC opened a SuppliersCenter (in
ToyotaCity, AichiPrefecture) that can be used for exhibiting new parts, etc.
 For the importation of originally equipped parts, TMC is promoting:

1) New Supplier & New Technology Discovery Program,

2) Current Supplier Improvement Support Program, and

3) International Price Comparison System, etc., of the "Global Optimum Purchasing

System" which is based on fair and objective evaluation, utilizing the same approach TMC
is using to promote local purchasing.

 In April 1996, TMC established TACTI Corporati on to procure and sell new brands of
aftermarket parts. In November 1996, TMC began the operation of its directly owned
"jms" car shops, and increased their number to 28 shops by the end of March 1999.
The locations include: Sapporo (3), Kushiro, Hakodate, Hachinohe, Morioka, Sendai,
Mito, Kooriyama, Utsunomiya (2), Chiba, Tokyo, Kanagawa (2), Aichi (2), Gifu, Kobe (2),
Okayama, Takamatsu, Hiroshima (2), Fukuoka, Oita, and Kumamoto.
 Cooperation with TACTI has significantly bolstered the lineup of imported products
handled by TMC parts distributors. As part of a plan to increase the sales of TACTI
products, efforts to increase sales are continuing.


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 TMC established an internal "contact point" in July 1995 to deal with inquiries related
to handling foreign cars, and informed interested parties through visits and
announcements. So far, there have been contacts from several foreign makers.

% + 0   988? @97 Cho decided to focus more on localization - he believed that by
doing so, Toyota would be able to provide its customers with the products they needed, where they
needed them. This was expected to help build mutually benefiting, long -term relationships with
local suppliers and fulfill Toyota's commitments to local labor and communities. Cho defined
globalization as 'global localization.' Therefore, besides focusing on increasing the number of
manufacturing centers and expanding the sales networks worldwide, Toyota also focused on
localizing design, development and purchasing in every region and country.
It͛s implemented Kaizen and many philosophies. A new concept of just in time (JIT) also innovated.
Also they adopted few western management practices in add ition to the traditional Japanese ones.
All practices gave ample of improvement as its Kentucky plant won four ͚Gold plant quality award͛
from JD power and Association.

% + 0     @ 7 In April 2002, Toyota announced another corporate strategy to
boost its globalization efforts.
This initiative, termed the '2010 Global Vision' was aimed at achieving a 15% market share (from
the prevailing 10%) of the global automobile market by early 2010, exceeding the 14. 2% market
share held by the leader GM.
The theme of the new vision was 'Innovation into the Future,' which focused on four key
components: Recycling Based Society; Age of Information Technology; Development of
Motorization on a Global Sale; and Diverse So ciety.

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Toyota hopes that the 21st century will be truly prosperous for society, and aims to grow as a
company together with its stakeholders, including customers, shareholders, business partners, and
employees, through making things and making automobiles, while seeking harmony wi th people,
society, the global environment and the world economy.

In order to put these management principles into practice, the "Guiding Principles at Toyota Motor
Corporation" were established as the fundamental management policy. These principles were
adopted in 1992 to codify the business spirit handed down since the company's foundation, and
revised in 1997 to add the stipulation of legal compliance. Each of the seven items is a cornerstone
of Toyota's business activities.

With 2010 as the turning point, in April 2002 Toyota adopted the Global Vision 2010 which
proposes the corporate image for which Toyota should strive . Centered on the basic theme of
"Innovation into the Future Ͷ A Passion to Create a Better Society," and with a view toward what
society is expected to be like in the medium to long term, the Vision sets the course for the multi -
faceted roles to be played by Toyota about society, people and the Earth.

The fundamental thinking for Global Vision 2010 has three elements:

1) To step beyond "harmonious growth" and demonstrate our responsibilities as a world leader;.

2) To benefit society through monozukuri (manufacture of value-added products) and

"technological innovation"; and

3) To share prosperity with our employees.

In order for each employee to realize the image that Toyota is striving to achieve in the future,
without complacency, it is important to undertake a paradigm change from the following three

(1) Technology development / Product development;

(2) Management; and
(3)Profit structures.

In June 2003, Toyota introduced a new management system that features, among other
enhancements, a streamlined board of directors and the new position of non -board managing
officer, aimed at speeding up operations by making the decision-making structure less vertical. At
the same time, the system hopes to strengthen corporate auditing efforts by increasing the number
of outside corporate auditors. With global competition growing evermore severe, Toyota is striving
to achieve the objectives outlined in Global Vision 2010 by boosting its competitiveness.

But it is very tough to achieve the goal of attain its 15% market share. The reasons behind it are as

Under previous presidents, Toyota Motor Corp. had set a goa l of reaching 15 per cent global market
share in global vehicle sales sometime after 2010. Until last year's financial crisis, which sent sales
crashing, it had been steadily expanding production toward that goal.

The executive, who spoke on condition of anonymity because he spoke to select reporters, said the
automaker will still use numbers in their business plans, but "the vision" had changed under
President Akio Toyoda.

Toyoda, who took office in June, wasn't comfortable with racing toward numbers, and instead
wanted to return to the old -fashioned "Toyota Way" of understanding customer needs and
developing products to fill them, the executive said.
"Our president doesn't like numbers or documents," he said.

But the executive made clear Toyota remains bullish on sales, especially in emerging markets,
which now make up half of the global auto market.

A recovery in the U.S. auto market must come with bigger sales in China, South America, the Middle
East and other emerging markets to work as the "two engines" of growth for a recovery, he said.

Toyota is hoping to sell more than 2 million vehicles in emerging markets this year, which will make
up about a third of its overall vehicle sales, the executive said.

Earlier this week, Toyota raised its vehicle sales forecast for the fiscal year through March 2010, to
6.6 million vehicles from its initial forecast for 6.5 million vehicles.
The appointment of Toyoda, the grandson of Toyota's founder, has been viewed as a morale boost
for workers, dealers and suppliers as the maker of the Prius hybrid and Lexus luxury car fights for a

Toyota racked up its worst loss in its seven-decade history for the fiscal year ended March, and is
expecting to stay in the red for the fiscal year through March 20 10.

Speaking on the New United Motor Manufacturing Inc., or NUMMI, plant in Fremont, California, a
joint venture with U.S. automaker General Motors Corp., the executive said Toyota will make a
decision by the end of August. Details on what to do must be worked out, he said without
So this situation shows that it is the tough time for Toyota and tough to attain the15% market


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If we see the financial report of Toyota then we find in 2009 financial year Toyota beared the loss
of 437 billion yen. It only happens when any company could not sell up to that volume in which that
company take out its costs of production and other cost which is related to production and final

$ 55 1   -+

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By above report of Toyota͛s consolidated financial summary, We can analyze that the condition of
Toyota in market will not be good because as they h ave projected for 2010, they will have to bear
the loss next year also, according to the FY2010 forecast report.
So it͛s tough to attain the 15% market share till 2010.

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Toyota͛s approach to automobile production, with its inherent quality controls, revolutionized the
industry. Its ͞just-in-time͟ supply-chain concept has become a model for manufacturers around the
world, and not just for automakers.

The Toyota Production System (TPS) calls for the end product to be ͞pull ed͟ through the system.
This means the right parts reach the assembly line at the right place, just as they are needed, and
with no excess.

This approach represented a radical departure from conventional manufacturing systems, which
require large inventories in order to ͞push͟ as much product as possible through production lines,
regardless of actual demand. The idea of TPS, the contrary, is to produce only the products
required in the precise quantities desired at a given point in time

! , 3 6  
By basing production on demand rather than simply on capacity, Toyota manages to keep
inventories, both of parts and of finished goods, to a strict minimum. But this is only one of the
more obvious advantages of Toyota͛s unconventional approach . By focusing on smaller production
lots and producing only what customers require when they require it, Toyota has developed a
flexibility and responsiveness that continues to set the standard for the industry.
With its Attention to continuous improvemen t (j ), Toyota has attained die-changeover and
machine-set times that are a fraction of its competitors'.Thus its capacity for reacting quickly to
new market trends makes TPS an ideal system in today͛s rapidly changing global business
Just as important is ensuring quality control, and the delivery of reliable and dependable products
to customers. If a problem arises at any stage of production, Toyota͛s automatic error detection
system, called ͞Jidoka͟, flags the defect and enables line employees to take the necessary steps to
resolve it on the spot ʹ even if that means bringing production to a halt.
By calling attention to the equipment when an error first occurs, the Toyota system makes it easier
to identify the source of the problem and prevents defects from progressing to subsequent stages
of production. Only a system as agile and quality -oriented as TPS could make such measures
economically possible.
This approach not only helps eliminate waste, which makes TPS more respectful of the
environment, it also means that customers can rest assured that Toyota products will conform to
the highest standards of quality, reliability and durability.

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The value chain is a systematic approach to examining the development of competitive advantage.
It was created by M. E. Porter in his book, Competitive Advantage (1980). The chain consists of a
series of activities that create and build value. They culminate in the total value delivered by an
organization. The 'margin' depicted in the diagram is the same as added value. The organization is
split into 'primary activities' and 'support activities.'


  & * 
Here goods are received from a company's suppliers. They are stored until the y are needed on the
production/assembly line. Goods are moved around the organization. Toyota motors purchase their
raw material from all around the world. In order to maximize their availability of raw material
Toyota motors maintain good relationship wit h their suppliers. Toyota use JIT (Just In Time)
approach for handling of raw material.

This is where goods are manufactured or assembled. Individual operations could include organizing
the parts to make new cars & the final tune for a new car's engine. Toyota motors are known for
their reliability which comes from efficient operations.

  & * 
The goods are now finished, and they need to be sent along the supply chain to wholesalers,
retailers or the final consumer. Toyota motors manage their own Show rooms in different
countries. Toyota motors make their product easily assessable.

*+ + 7
In true customer orientated fashion, at this stage the Toyota motors prepares the offering to meet
the needs of targeted customers. This area focuses strongly upon marketing communications and
the promotions mix.

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This includes all areas of service such as final checking, after-sales service, complaints handling,
training and so on. Toyota value their customers.

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This function is responsible for all purchasing of goods, services and materials. The aim is to secure
the lowest possible price for purchases of the highest possible quality. Toyota motors will be
responsible for outsourcing (components or operations that would normally be done in -house are
done by other organizations), and e-Purchasing (using IT and web-based technologies to achieve
procurement aims).

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Technology is an important source of competitive advantage. Companies need to innovate to
reduce costs and to protect and sustain competitive advantage. Toyota motors implemented
production technology, Internet marketing activities, lean manufacturing, Customer Relationship
Management (CRM), and many other technological developments.

'+  , ++*  

Employees are an expensive and vital resource. Toyota motors manage recruitment and s election,
training and development, and rewards and remuneration. Toyota motors consider their
employees as HUMAN CAPITAL. The mission and objectives of the Toyota motor is the driving force
behind the HRM strategy.
Toyota motors uses following techniques to retain their employes:
 Recruitment
 Selection
 Training and development
 Compensation
 Maintenance

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This activity includes and is driven by corporate or strategic planning. Toyota motors implemented
Management Information System (MIS), and other mechanisms for planning and control in
different departments.

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ë Austria ë Hungary
ë Belgium ë Iceland
ë Bosnia Herzegovina ë Israel
ë Bulgaria ë Italy
ë Canary Islands ë Kazakhstan
ë Croatia ë Latvia
ë Cyprus ë Lithuania
ë Czech Republic ë Luxembourg
ë Denmark ë Macedonia
ë Eire ë Malta
ë Estonia ë Moldova
ë Finland ë Monaco
ë France ë Netherlands
ë Germany ë Norway
ë Gibraltar ë Poland
ë Great Britain ë Portugal
ë Greece ë Romania
ë Sweden ë Russia
ë Switzerland ë Serbia and Montenegro
ë Turkey ë Slovakia
ë Ukraine ë Slovenia
ë Toyota Japan ë Spain
ë Toyota US

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The independent body J.D. Power and Associates measures car owner satisfaction levels in 16
countries around the world.

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The Toyota Prius has gained a second J.D. Power and Associates award after emerging as the
highest scoring individual model in the 2008 UK Customer Satisfaction Index Study, retaining the
position it held in 2007.

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The independent body J.D. Power and Associates measures car owner satisfaction levels in 16
countries around the world.

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The all-new Toyota Corolla has been awarded a maximum five-star safety rating for adult occupant
protection in the highly regarded Euro NCAP tests.

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Euro NCAP confirmed that the new Toyota Auris has been awarded a maximum five -star rating for
adult occupant protection in its safety crash test evaluation.

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For the third year in succession, the 1.5-litre petrol engine of the Hybrid Synergy Drive® has won
best 1.4-1.8-litre engine in the awards and has also been named ͚Best Fuel Economy͛ for its
application in the Toyota Prius.

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The new Toyota Yaris has been awarded a 5-star safety rating and 35 points for adult protection in
the latest round of Euro NCAP safety tests.

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Toyota has achieved the premier position in overall customer satisfaction for the fourth
consecutive time, according to the J.D. Power and Associates 2005 Germany Customer Satisfaction
Index (CSI) Study.

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The Toyota Hybrid Synergy Drive system of Toyota Prius has been awarded two category wins in the
International Engine of the Year Awards 2005.

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The newly introduced Toyota AYGO has been awarded a four -star rating for adult occupant safety
by the Euro NCAP testing programme.

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The safety assessment organisation Euro-NCAP has recently introduced an even tougher testing
regime ʹ and Toyota͛s Avensis 2003 rose to the challenge and passed with flying colours.

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The Toyota Prius has been voted 2005 Car of the Year by the 58 members of the European Car of
the Year Jury.

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For the third consecutive year Toyota has been ranked highest overall in the Germ an J.D. Power
and Associates Customer Satisfaction Index Study SM

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The Prius has been awarded Euro NCAP͛s five -star rating for occupant safety and a record 43 points
for child protection.

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The new Toyota Corolla Verso is the safest car in its class according to Euro NCAP, having been
awarded a 5 star maximum ranking

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Toyota comes highest in an incredible 5 out of 7 award segments in the J.D. Power and Associates
2002 Germany Customer Satisfaction Index Study SM


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The development of the automobile came from many different people from different countries.

The development stated in 1769 in France, with the invention of a three -wheeler that was powered
by steam (Gale, 2003).

Then in 1800's the first internal combustion engine was created in Belgian and the first gasoline
powered vehicle was constructed in 1885 in Germany (Gale, 2003).

Henry Ford built the first car in 1896 (Gale, 2003). He then revolutionized the industry with the
invention of the assembly line.


 Laws and government regulations have affected this industry since the 1960's. Almost all of
the regulations come from consumers increasing concerns for the environment and the
concern for safer automobiles. The first safety act passed by Congress was in 1966 and was
called the National Traffic and Motor Vehicle Safety Act (Gale, 2004). This act forced
manufacturers to improve the safety for the passengers, the driver visibility, and the braking
of the car. It also stated that manufacturers had to inform the public when it had a recall on
the cars.

 The motivation for the passing of this safety act was Ralph Nadar's 1965 novel Unsafe at
Any Speed: The Designed-in Dangers of the American Automobile. (Gale, 2004) Sa fety
concerns were not the only concerns during this period. There was also growing concern for
the environment even before the oil crisis. According to the article "Motor Vehicles and
Passenger Car Bodies", Congress passed acts in 1965 and in the 1970's. The Vehicle Air
Pollution and Control Act was passed in 1965. This was the first act to set standards for
automobile pollution. Then in the 1970's, Congress passed the Clean Air Act that demanded
a 90% decrease in automobile emission within the next six years (Gale, 2004). 

 In the 1970's the oil crisis caused another act to be passed. The Energy Policy and
Conservation Act of 1975 stated that all automobiles must meet a certain mileage per
gallon. The act demanded that all automobiles had to meet a standar d of 20mpg by the
1980 model and then 27.5 mpg for the 1985 model. Then in 1992, the Intermodal Surface
Transportation Act required the installation of front airbags. (Motor Vehicles and Passenger
Car Bodies, 2004)

  *+1 ,

 For many years now, the baby boomers generation has been the main target market for just
about every product. As their generation is getting ready to retire and spend less money,
the automakers are looking at the younger generations. Right now, the focus i s starting to
turn towards the baby boomers children (Generation X) who are in their mid 20's and 30's
and Generation Y(Winter, 2002). GenYer's are now hitting the age where they are able to
buy cars. According to Drew Winter, "Analysts say that five years from now Gen X and Gen Y
combined will account for at least 40% of vehicle sales." 

 Americans today are choosing to purchase larger vehicles over passenger size vehicles.
Today's generations are still buying the trucks, minivan and especially the SUV's, even with
the ridiculous gas prices. It is not only the younger generations either; the boomers who are
all reaching the retirement age are more interested in the bigger vehicles (Fetto, 2001).
There activities after retirement are way more active then their parents. They are not just
sitting around and playing golf or going on vacations. They are still working in some ways
and being more active in their grandchildren's lives. Since the boomers are still active, they
want to drive the same vehicles that their children drive in order to make life that much
easier. Studies show that trucks, minivans and SUV's report increased sales nearly every
year (Fetto, 2001). 

 The manufactures target the sales of their cars to certain people and their geographic
location. Convertibles are not marketed toward people who live in parts of the world that
are cold all year round. A good example of targeting markets is in Paris. A new is trying to be
passed that SUVs are not allowed inside the city. They are taking up t o much room and the
vehicles use a lot of fuel. If this law is passed then SUV's will not be marketed toward people
who live in Paris. Another example is that minivans are mainly marketed toward "soccer
moms". They are marketed toward the moms because they are perceived, as needed a lot
of room to haul kids around and the easy access the minivans provide. 

,   ,
 The automobile industry has a huge impact on the U.S. economy. The University of Michigan
and the Center for Automotive Research s tated that this industry is the major user of
computer chips, textiles, aluminum, copper, steel, iron, lead, plastics, vinyl, and rubber.
(Gale, 2004) The study also showed that for every autoworker there are seven other jobs
created in other industries (Gale, 2004). These industries include anything from the
aluminums to lead to vinyl. In 2001, the total sales of automobiles were 3.7% of the nation's
gross domestic product. This percentage works out to be $ 375 billion dollars in sales. 

c ,1  *

 The internet has affected just about every industry in the world and has also had a huge
impact on the automobile industry. A study was conducted by J.D. Power and Associates in
2002 and involved more 27,000 new vehicle buyers. The study showed that 60% of the
buyers referred to the internet before making their purchases and out of that 60%, 88%
went to the auto websites before going and taking a test drive. Business -to-business
marketplaces have given the industry many opportunities because of the internet , such as
more efficiency and lower cost. Ford, GM, and Daimler Chrysler announced in 2000 their
plans to create a global online exchange for suppliers and the original equipment
manufacturers. The exchange was originally called NewCo, and then it was chan ged to
Convisint. According to Motor Vehicles and Passenger Car bodies, "In August 2002 General
Motors announced it was about to begin sending requests for quotes to suppliers through
Covisint using a tool called Quote Manager." 

 Concerns for the economy and global warming have caused the automobile industry to
develop alternate fuel vehicles. In the beginning, automakers did not want to look into the
development because of the high cost and the many risks involved. Because of new
legislation, they had no choice but to come up with the technology to make the fuel -
efficient cars. The automakers decided that electric cars would be the best way to meet the
legislation demands. "Early models were unpopular because of slow cruising speeds and lack
of performance, but by the end of the century, electric car production began to be
practical."(Motor Vehicles) At the end of the 1990's manufacturers was coming up with the
technology to produce internal combustion engine with an electric motor. Toyota and
Honda were both selling the hybrid vehi cles at retail value in 2001. 

% +

 General Motors, Ford Motor Company, Daimler Chrysler, BMW, Volkswagen, Volvo, Toyota,
Mazda, and Nissan Motor Company come together to create a new trade association
created the Alliance of Automobile Manufacturers (Gale, 2004). The organization was to
replace the American Automobile Manufactures Association that only consisted of American
manufacturers, the goals of the associations "were to work together on public policy
matters of common interest to provide credible industry information and data, and seek
consistent global regulatory standards (Gale, 2004). The manufacturers also started merging
in the late 1990's. American companies started buying foreign manufacturers created some
of the largest foreign takeovers. In 19998 Daimler -Benz A.G. merged with Chrysler
Cooperation to form DaimlerChryler A.G (Gale, 2004). Some other big mergers were Ford
with Volvo, and General Motors and Saab (Gale, 2004). 

 , ,

 Today's society judges people on the type of car you drive. Society does not like to admit to
this but it is very true. Manufactures know this happens and targets their markets by these
thoughts. For example, anyone who drives a mini van is perceived as a soccer mom. This is
because the manufactures target mini vans to mothers. Anyone who drives a nice vehicle is
thought to be wealthy. No one wants to be seen driving an unattractive piece of junk
because of what other people will think of him or her. Consum ers also just feel better when
they are driving a nice or new car, if makes them feel better about themselves. 

 Another aspect of the sociocultural is the environmental concerns for the need of fuel -
efficient vehicles. Many environmentalists are worried about the impact that the gas cars
have on the environment. There is even legislation that requires cars to average a certain
miles per gallon.

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The threat of new entrants is very low in the automobile industry. The industry is very mature and
it has successfully reached economies of scale.

In order to compete in this industry a manufacture must be able to achieve economies of scale. For
this to occur, manufacturers must mass-produce the automobiles so that they are affordable to the

Another barrier to entry is that it takes an incredible amount of capital to manufacture the

It takes an extreme amount of capital not only to be able to manufacture the products but also to
keep up with the research and development that is necessary for the innovation requirements.
Access to distribution channels is another high barrier to entry.

A company must find a dealership to sell th eir automobiles or have their own dealership. Space in
the dealerships lots is very limited making it difficult to have a wider variety of inventory.


The bargaining power of suppliers is very low in the automobile industry .

There are so many parts that are used to produce an automobile, that it takes many suppliers to
accomplish this.

When there are many suppliers in an industry, they do not have much power. There are so many
suppliers to this industry; manufactures can easily switch to another supplier if it is necessary.


The bargaining power of the buyers is moderately high. The buyers being consumers purchase
almost all of the industries output.

The manufacturers depend on them to stay in business. The buyers also are a significant portion of
the industries revenue. If they can not keep their buyers happy then they risk losing them to their

The buyers have low switching cost if they are not happy. All the buyer has to do is sell the car they
own and purchase a new one. The reasons why the power is not completely high is that the buyers
are not large and few in number.

The buyers do not have the ability to integrate backwards into the industry. If they want a car then
they have to purchase it from a dealership.


There are not many substitute products for automobiles. Some of the substitutes are walking,
riding bike or taking a train.

Substitutes products all depend on the geographic location of the consumer. In some cities such as
New York or Chicago, a car is not as necessary. In cities such as those, the subway is the most
effective means of transportation. However, in most places a person must have access to an
automobile in order to get around.


Rivalry among the competitors is very strong is this industry. The major competitors are so closely
balanced that it increases the rivalry. In order to gain market share in the automobile must gain
market share by taking it from their competitors.

One of the other reasons the re is such high rivalry is that there is a lack of differentiation
opportunities. All the companies make cars, trucks or SUV's. The competitors are compared to one
another constantly.

The price, quality, durability, and many other aspects of different ma nufacturers are greatly taken
into consideration when deciding what type of vehicle to purchase.

When the different manufacturers advertise they even compare their products to their
competitors. For example, the commercials will focus on areas where the company outperforms its

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 Services
 Experiences
 Events
 Person
 Organization
 Information and ideas

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advertisement of TOYOTA COROLLA is individually targeted at factors like
comfort,performance,styling,power,leg room and driving pleasure.
 The commercials mainly target at youth and young executives.

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sedan likecamry etc.

 People who are in sporty attitude having unique style statement would settle for Toyota Altis sport
model or Fortuner which would exhilarate their senses.

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But the world's No. 1 auto manufacturer is still as focused as ever on the business of making cars
and has some fascinating sheetmetal in the pipeline to prove it. Just one look at what's coming in
the next five years will cement that fact.

Unusually exciting concepts for Toyota unveiled at the recent Tokyo Auto Salon -- the FT-86 G
Sports Concept and the GRMN Sports Hybrid concept boasting a 400 -horsepower V-6 and electric
motor combination -- garnered headlines around the world, with company CEO Akio Toyoda front
and center promoting them on stage.

Lexus is planning a next-generation version of its aging GS sedan which is expected to hit the
market within two years.

A GS F version is also reportedly in the pipeline. The question is what will power the super GS.
We've recently learned that Toyota is strongly considering d ropping a detuned version of the LFA's
thumping 552-horsepower 4.8-liter V-10 under the hood of a GS F model.

Targeting the likes of BMW's M5 head on, one source close to Lexus tells us that engineers will
reduce the LFA's engine capacity to 4.6-liters and drop power to around 450 horsepower, with the
aim of generating beefier bottom-end torque, making the new GS Japan's most powerful sedan

GS F would employ a version of the IS F's 5.0 -liter V-8, but forces inside Toyota are apparently now
pushing hard for the V-10.

Word is that if the V-10 gets the green light, it may appear in at least one other vehicle to help
spread the cost.

Another highlight of the GS F will be the incorporation of a Toyota -first rear-wheel 'torque split unit'
that channels power between the right and left rear rubber in much the same way as Mitsubishi's
AYC system or Honda's SH-AWD unit does, except that the Lexus system will only engage on the