TP015486 - ISOM 2011

Introduction:
Toyota is the largest manufacturer of cars in the world, with scores of factories in dozens of countries. Its standing in the automotive world as the most successful and most profitable carmaker is unquestioned. In sharp contrast, Australia has one of the smallest car industries in the world and while it is one of the oldest, it has never spread its manufacturing wings across the oceans. And yet Australia has played an important role in the development of the world¶s largest carmaker over a 50 year period, a length of association no other country outside Japan can match. It was Australia where today¶s world car industry leader first tasted success beyond its Japanese domestic market. It was through Toyota Australia that the Japanese company learned many lessons which have underpinned its global success, and it was Toyota Australia that achieved many breakthroughs within the group: first successful LandCruiser exports, first successful production outside Japan, first finance arm to fund dealers¶ inventory and first exporter of the Camry apart from the parent company itself. It is a proud record which has earned Australia a special place in Toyota¶s history.

Toyota Australia's origins go back to 1958 when Thiess Brothers began importing the first LandCruiser models for work on the Snowy Mountains Hydro-electric scheme and sold the first Toyota LandCruiser in 1959. Assembly of Toyota cars began in the Melbourne factory of Australian Motor Industries (later AMI-Toyota) in 1963 and within a decade the Corolla and Corona (replaced by Camry in 1987) were well established in the market. The commercial vehicle business became Thiess Toyota in 1971 and achieved commercial leadership in 1979. Meantime AMI Toyota began investing in an engine and stamping plant to consolidate its position as a high local content vehicle manufacturer. In 1988 Toyota's local operations were unified to form Toyota Motor Corporation Australia and work began on restructuring and strengthening the group as a major step towards achieving international competitiveness and building vital export business. Toyota in 1994-95 consolidated vehicle production at its new world-ranking Altona plant in Melbourne. So after 50 years in Australia, Toyota has grown to be one of Australia¶s leading automotive companies. In just five decades, this proud organisation has grown from a patchwork of import, sales, distribution and assembly activities into a major force. In doing so, it has overcome great difficulties, brought forth strong leaders, fostered the talents of many Australians and contributed to the social and economic development of this country. It has been supported by loyal employees, customers, dealers, suppliers and has earned the commitment of governments, and many other organisations and individuals in Australia and throughout the world. (Toyota Motor Corporation Australia, 2005)

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Mansoor Iqbal Nagori UC2F1007BIT

370 2 Mansoor Iqbal Nagori UC2F1007BIT .983 vehicles New TRD Aurion launched in Australia Tenth-generation Corolla launched in Australia New export record . Replacing the Echo Two millionth locally built Toyota produced New corporate headquarters in Port Melbourne opened Toyota Australia's 300. That s the equivalent of one car coming off the production line every 3.TP015486 . the first Australian built Hybrid is released 3rd generation Prius is launched Toyota announces Australian hybrid Camry production from 2010 Toyota Australia achieves all-time sales record . every hour.688 vehicles 2006 New Generation Camry is launched in Australia Presenting partner 2006 Commonwealth Games Shipped 500.5 seconds.000th Camry exported to Saudi Arabia Toyota Australia builds the world's 10 millionth Camry The Yaris is launched in Australia. every minute.000th vehicle exported Toyota overall Australian market leader with industry record sales of 186. 2007) Timeline: 2010 2009 2008 2007 Hybrid Camry.238. (Toyota press UK. everyday.000th export vehicle 2005 2004 2003 vehicles 2001 The hybrid petrol/electric Prius launched in Australia 100.97.ISOM 2011 Toyota global production in 2006 was more than nine million vehicles.

2005) 3 Mansoor Iqbal Nagori UC2F1007BIT .TP015486 .ISOM 2011 2000 Avalon production commences at Altona Toyota Australia appointed as national Daihatsu distributor New National Sales and Marketing headquarters opened in Sydney 1999 1998 1996 1995 1994 1992 1991 1990 1987 1981 1978 1968 1967 1964 1963 1959 1958 Victorian Parts Distribution Centre opened at Altona Altona plant receives ISO 14001 certification (Environmental Management) First Camry export shipments to the Middle East Camry enters production at Altona Corolla is first car built at the new Altona Assembly Plant Camry is the last car built at Port Melbourne One millionth locally-built Toyota produced Toyota becomes Australian overall market leader Lexus LS 400 launched in Australia Camry replaces Corona at Port Melbourne Assembly Plant Altona begins volume production of body panels First engines built at Altona Corolla assembly begins at Port Melbourne Crown assembly starts Corona assembly begins Toyota Tiara assembly starts First Toyota LandCruiser sold in Australia First 13 LandCruisers imported for use on Snowy Mountains Scheme (Toyota Motor Corporation Australia.

the company could see over capacity. Its brand is a household name. highly targeted marketing and a commitment to lean manufacturing and quality. Commentators argue that this is because the company has the right mix of products for the markets that it serves. (Marketing Teacher Ltd 2000 ± 2011) Weaknesses: Toyota comparatively has less market shared if compared to General Motors. The company also needs to keep producing cars in order to retain its operational efficiency as car plants represent a huge investment in expensive fixed costs. £5. If on the other hand the car market experiences an upturn.59 million units in the same period. So if the car market experiences a down turn. Example: Total Quality Management. The company uses marketing techniques to identify and satisfy customer needs. The company is still behind rivals General Motors with 8. The company also maximizes profit through efficient manufacturing approaches. Its strong industry position is based upon a number of factors including a diversified product range.8% to 1. In 2003 Toyota even knocked its rival Ford into third spot. targeting and positioning in a number of countries. Customers are not segmented properly which makes them to miss out on some potential new customers. while sales were 7.55 trillion yen.e. to become the World's second largest carmaker with 6. then the company may miss out on potential sales due to under capacity i. This is a typical problem with high volume car manufacturing. against the worldwide motor industry trend. Net profits rose 0.85bn). as well as the high costs of training and retaining labour.ISOM 2011 SWOT Analysis: Strengths: New investment by Toyota in factories in the US and China saw 2005 profits rise.17 trillion yen ($11bn. (Marketing Teacher Ltd 2000 ± 2011) 4 Mansoor Iqbal Nagori UC2F1007BIT . This is an example of much focused segmentation.TP015486 .3% higher at 18. it takes time to accommodate.78 million units.

In 2005 the company had to recall 880. These economic factors are potential threats for Toyota. Both are based upon advance technologies developed by the organization. Competition is increasing almost daily. South Korea and new plants in Eastern Europe. (Marketing Teacher Ltd 2000 ± 2011) 5 Mansoor Iqbal Nagori UC2F1007BIT . and Toyota has it Prius. Toyota also faces tremendous competitive rivalry in the car market. The key economies in the Pacific. steel and fuel. the US and Europe also experience slowdowns. Toyota is also targeting the urban youth. The company is also exposed to any movement in the price of raw materials such as rubber. therefore they are coming out with various new models which target the streetwise youth market and capture the nature of dance and DJ culture. Lexus has RX 400h hybrid.ISOM 2011 Opportunities: Toyota and Lexus now have a reputation for manufacturing environmentally friendly vehicles. (Marketing Teacher Ltd 2000 ± 2011) Threats: Product recalls are always a problem for vehicle manufacturers.TP015486 . with new entrants coming into the market from China. Toyota did not give details of how much the recall would cost. 00 sports utility vehicles and pickup trucks due to faulty front suspension systems. for example Ford has bought into the technology for its new Explorer SUV Hybrid. Such moves can only firm up Toyota's interest and investment in hybrid research and development. Rocketing oil prices have seen sales of the new hybrid vehicles increase. Toyota has also sold on its technology to other motor manufacturers.

rivalry in the Toyota auto industry has become much more intense. (Scribd Inc. (Scribd Inc.. While the evidence suggests that economies of scale in the auto industry are substantial. entry would represent a large capital investment to any new firm and the body of research still indicates that economies of scale represent a substantial barrier to entry. trucks or SUVs.g. it may be at a significant cost disadvantage. In recent years there has been significant market share variation. Chevrolet and GMC in the 1970's and 80's. There are. Firms compete on both price and non-price dimensions. One would expect the production of automobiles to require significant economies of scale. Consequently.ISOM 2011 Toyota Five Forces Analysis: 1. an important barrier to entry. Threat of entry by new competitors: The presence of new firms in an industry may force prices down and put pressure on profits. entry is currently a weak threat to profitability. barriers to entry that tend to protect established firms. however. new car rebates and interest free loans) drives up fixed cost (new product development) and marginal cost (adding product features). Nevertheless. All the companies make cars. Rivalry between existing competitors: With the rise of foreign competitors like Ford. another indication of rivalry and its very strong threat to profits. The new entrant would have to achieve substantial market share to reach minimum efficient scale. The price competition erodes profits by drawing down pricecost margins while non-price competition (e.TP015486 . there are also indications that large size may not be as important as commonly assumed. 2011) 6 Mansoor Iqbal Nagori UC2F1007BIT . 2011) 2. The competitors are compared to one another constantly. One of the other reasons there is such high rivalry is that there is a lack of differentiation opportunities. and if it does not.

and with little cost. Ford Motor and Daimler-Chrysler) whose most profitable models are energy inefficient pick-up trucks and sports utility vehicles. each representing a small proportion of total sales.g. switch to other auto dealers. they will have little bargaining power with manufacturers and therefore pose a weak threat to Toyotas industry profit.ISOM 2011 3.TP015486 . Although new cars generally are slightly price elastic. the demand for a particular model is highly sensitive to price because of the availability of close substitutes for a given model.g. But when you have many individual customers. is likely to affect some firms more than others depending upon the vehicle composition. Bargaining Power of Buyers: Buyer power refers to the ability of individual customers to negotiate prices that extract profit from the seller.. and tires) could have a significant impact on the demand for automobiles. While Toyota has their hybrid series of cars which are efficiently using green energy (electricity). bus and rapid transit). but little power over manufacturers. 2011) 4. an important complementary product. Price pressure from substitute or complementary products: While five-forces do not directly consider demand. Furthermore. batteries.. On balance. The rising price of gas. it does consider two factors that influences demand substitutes and complements. Customers can easily. (Scribd Inc. 2011) 7 Mansoor Iqbal Nagori UC2F1007BIT . (Scribd Inc. gasoline. A change in the price of a complementary product (e. customers now have access to market information (prices and costs) from the Internet that enhances their negotiating power. Recent rising fuel prices are likely to have a more impact on the firms (GM. Individual consumers have some influence over price within a given dealership. suggesting few real substitutes (e. the overall impact on Toyota profitability from substitutes and complements is weak to moderate.

moderate or strong depends on how much bargaining power they can exert. The auto manufacturers have large supplier networks that appear to exert little bargaining power. 2011) 8 Mansoor Iqbal Nagori UC2F1007BIT . the only supplier of labour. Whether the strength of suppliers is weak. Nevertheless. one has to characterize supplier power.ISOM 2011 5. (Scribd Inc. Bargaining Power of Suppliers Auto manufacturers require labour. the United Auto Workers (UAW). raw materials and services. at least in this segment of the Australian market. as a strong threat to profits. Because of this historical dominance by the UAW and the uncertain results of their current negotiations with Toyota. The cost of these inputs can have a significant effect on profitability.TP015486 . 2011) The following table summarizes the results of a five-forces analysis of Toyota: (Scribd Inc. has historically exerted a great deal of leverage over the benefits and wages provided by Toyota. parts.

representing 55% of total Australian vehicle exports for the year. With a dedicated supplier development team in place since 1989. share valuable knowledge and prevent free riders in its supply chain. Nobeoka 2000) 9 Mansoor Iqbal Nagori UC2F1007BIT . It has been proactive in working partnerships with its suppliers to improve capabilities and increase local part sourcing. as the supplier integration system has been taught to their suppliers the excellence in performance was then outsourced to second and over time lower tier firms. Toyota has long been recognized as one of the most efficient manufacturers in the world. It was found that in the Toyota system. Toyota believes it has much to gain from developing strong ties amongst its suppliers and creating and sharing new knowledge to increase the efficiency of the entire TPS. over time.TP015486 . In addition. H and K. In addition. benchmarking their Toyota Production System process. Toyota and its first tier suppliers also have benefits on the introduction of lean manufacturing into their operation. The aim is to have members identify themselves as part of an interdependent economic network. (Toyota Production System 2011) The key to Toyota¶s success would appear to be their highly effective supplier integration process that over the past 50 years has enabled the excellence of their internal hoshin kanri strategic management. In this type of network where manufacturers and suppliers are highly involved in the interactions and learning is known to as ³knowledge sharing network. the suppliers were developing a ³dynamic learning capability´ that improved their competitive capabilities. Toyota is a leader in the industry in terms of supplier capability development initiatives and a major contributor to building skills. cross functional process based management and Toyota Production System to be shared directly with their direct suppliers. J. The primary method to do this has been the kyoryoku kai or Supplier Association. (Cong Xue. In terms of supply chain. shipping to 33 countries worldwide and ensuring high quality standards in their products. Toyota has successfully implemented lean manufacturing. 2009) Toyota has a system to increase its online supplier¶s involvement.ISOM 2011 Toyota-Australia¶s supply system: Toyota Australia exports a total of 50. This has made Toyota Australia¶s largest vehicle exporter.´ The effects of knowledge sharing network on the coordination of supply chain and product customization forms the basis of Toyota Production System (TPS). (Dyer.000 automobile.

AANX provides IP based Extranets for the automotive industry in Australia. suppliers. This industry driven initiative is called the Australian Automotive Network exchange (AANX). The four major car manufacturers in Australia are involved in the project. manufacturers. Nurhazman Abdul Aziz. importers and dealers. processing. Hoh Whay Loh. Tee Young Chew. to share information. inventory and other business processes. The main component of the project consists of: ‡ A network that is based on available Internet technology ‡ Operated by agreed and standardized service levels. an internet-based infrastructure that allows users to send date to each other in a reliable and secure manner.TP015486 . Cong Xue. the automotive industry developed a fast and reliable communication network for all the key stakeholders involved. AANX Operates as a virtual point network (VPN).2005). . It is a platform for conducting domestic and international business-to-business (B2B) e-commerce activities. JIT in short deals intimately with all areas of supply chain to reduce inefficiencies in transportation. 10 Mansoor Iqbal Nagori UC2F1007BIT . In order to facilitate JIT. ‡ Demonstrating proactive management of trading partner connections ‡ Practice the best standard of security and privacy for transactions and interoperability between service providers (Joseph Baez.ISOM 2011 Key IT Solution: Making the best use of Information Exchanged: The automotive industry is geared towards Just-in-time (JIT) manufacturing.

(FOX News Network.TP015486 . Cong Xue. (Joseph Baez. Every trading partners share a similar physical infrastructure of the AANX. Tee Young Chew. 2005). 2011).ISOM 2011 By connecting to AANX. Even a secured internet is a bad neighbourhood now. after which. There are two extremes: absolute security and absolute access. The closest we can get to an absolutely secure machine is one unplugged from the network. and it isn't long before some hacker will tell the computer to do things like self-destruct. locked in a safe and thrown at the bottom of the ocean but that cannot be the case for AANX as multiple numbers of transactions keep happening all day long so it has to stay connected with millions of other networks. the benefits reach beyond tangible gains such as cost savings. Like for example in Japan. all electronic conversations traverse a secure and private connection between two trading partners. 11 Mansoor Iqbal Nagori UC2F1007BIT . Risks: As for every computing network. AANX holds the risk of getting hacked for various reasons.. virtual private network where service providers compete for customers and at the same time conform to standard service quality requirements such as security. Sony Corp's handling of a massive Internet security breach is becoming a public relations nightmare reminiscent for Toyota Motor's as there is high security breach threat on Toyota Japans network. Nurhazman Abdul Aziz. Hoh Whay Loh. power supply. it can give an overall bad reputation. Some of the benefits include: ‡ Pervasive supply chain communications ‡ Rapid application deployment across the supply chain ‡ Lower cost of EDI ‡ Faster Business Cycles ‡ Simpler integration into trading partners' and customers' online e-business systems and strategies Network Structure: AANX is a multi-provider. Within the framework.

The use of Public Key Infrastructure (PKI) certificated within the AANX network enables all participants to achieve a high level of confidence when making transactions on the network. 2005). Hoh Whay Loh. Secured Data Transmission . Nurhazman Abdul Aziz. Key trust provides the AANX network with four major security functions: 1. (Joseph Baez. Key trust is the certificate authority and vendor for providing IPSec security services.KeyTrust Professional Managed Services . 2005). Cong Xue. Tee Young Chew. Cong Xue. Nurhazman Abdul Aziz.TP015486 . 3. (Joseph Baez. Tee Young Chew. PKI Digital Certificates . Equant and Connect Internet Solutions provide communication services for the network.ISOM 2011 Security: As shown in the diagram. It is implemented through encryptions for permanent and dialup connections.AANX Community Directory .Defines and verify network service levels and certification criteria.Central policy repository used by security gateways when sessions between trading partners are established. Hoh Whay Loh. 4.. 2.IPSec protocol is used to provide secure communication over public and private data networks. 12 Mansoor Iqbal Nagori UC2F1007BIT ..

Although natural hazards are unpredictable. Cong Xue.TP015486 . Nurhazman Abdul Aziz. Commerce Plus is the central trading solution for AANX. Recovery: A backup system ready for use at any time of the year would be the best recovery I can suggest for the AANX network. With the introduction of AANX. disrupting the supply of key parts. (Joseph Baez. Hoh Whay Loh. (The Victoria Times Colonist. Moreover. 2005). It can significantly streamline the supply chain by allowing companies to collaborate and trade via the Internet. Like for example Toyota Motor Corp Japan said it could take until the end of the year before production has fully recovered to levels before the massive earthquake and tsunami on March 11 devastated Japan. this can cause a lot of problem for AANX network. 2011) 13 Mansoor Iqbal Nagori UC2F1007BIT . key stakeholders are able to link the company's critical business systems that will in turn increase efficiencies and cost savings across all business divisions.ISOM 2011 The network is the company: Australia's car manufacturers have started to implement major improvements to their production management systems in order to deliver real-time communications across the entire supply chain.. managers will have real-time visibility into different aspects of the organization. Tee Young Chew.

14 Mansoor Iqbal Nagori UC2F1007BIT . The analysis of the supply chain has improved significantly over the period of time. The technology keeps changing year by year which is why supply chain will always need improvement to technologies current formation. within the operation of IT. computer mediated processes have undoubtedly changed the traditional supply chain management through the Toyota Australia to carry out their supply chain operations in the automotive industry. results in weakness even after having benefits.ISOM 2011 Conclusion: With the arrival of the technology and development of Information Technology. But still the use of IT on supply chain.TP015486 .

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