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Manufacturing, U.S.A., Inc. SUBMITTED BY ROWELL PENAFLOR JOLITO C. RAMOS JR. ANNALYN P. ROMERO FRANZ CHRISTIAN C. SOBERANO SUBMITTED TO PROFESSOR ROBIN OWENS DATE SUBMITTED MAY 21, 2011 KEY ISSUES / PROBLEM STATEMENT Toyota Motor Manufacturing USA, Inc., (TMM) is confronted with its rising problem with seat supply and one of the main culprits is the seat defects. Reflected in the decreasing run ratio; as a result there is a growing number of cars sitting off-line with defective seats or no seats at all requiring overtime to make up for the loss production. Another issue worth mentioning is the way TMM handles the defective seats as they deviate towards the Toyota Production System (TPS) norms. SUPPORTING ARGUMENT The seat supply problem is the major issue because it constricts the company to supply the cars on time to the sales company. The seat problem resulted with a ten point drop on the run ratio from around 95% down to a meager of 85%. This shortfall is equivalent to 45 cars per shift which will give a potential loss of $73,593,000 / year. This shortcoming requires high overtime for the personnel to cope up with the demand in the market. It notches a 50% premium for overtime, resulting to an additional cost of $7,311,542 per annum. The increasing number of cars sitting off the line with defective seats or with no seats at all, end result to a loss in production because of waiting and rework. There are 18 vehicles found at the parking area having defects in seats which have an equivalent potential loss in sales with $ 679,320 per annum, based on the 17% pretax profit. ALTERNATIVE STRATEGIES The following alternatives were identified by the group with their corresponding analysis: 1. Send TMM - QC in KFS and assign inspector at the receiving dock. Advantage: Ensure quality compliance prior delivery based on TMM standards, minimizes possible loss and eliminates overtime due to offline inventory. Disadvantage: Additional labor cost incurred. (See Appendices for Exhibit 4: Cost Benefit Analysis). 2. Re-train employees in proper handling and communicating of problems on the line. Advantage: Immediately address problems at the source 1. (See Appendices for Exhibit 2: Problems Arising from Current Process of Handling Seat - Set Mismatch), aligned with the TPS principles, empower employees to remedy problems therefore preventing inventory of problematic cars sitting at overflow, prevents feedback delay through timely information

Toyota Motor Company Limited

Term of Reference

This report will be focusing on Toyota Motor Company Limited, the world third largest automobile in unit sale and net sale, revealing the following questions:

· What are the significant events which have occurred in the automobile industry in the recent years?

· How does the event effect the organisation?

· What strategies are adopted by Toyota to contribute to the effectiveness of the company?

To answer the above questions, the evaluation and critically analyse the business as well as the strategies of Toyota will be examined. Uncovering the stated case study, this report will focus on; the automobile market, Toyota's background and its business, strategies of Toyota in both management and cross-cultural strategies, the recent financial performance of the organisation in domestic and overseas automobile markets, reasons and challenges encouraging Toyota to invest overseas.

Company's background

Toyota Motor Co. Ltd. (TMC) was first established in 1937 as a separated company from Toyoda Automobile Loomworks, the leading manufacturing of weaving machinery.1 The Toyota Automobile Loomworks was then headed by Sakichi Toyoda, the king of investors. TMC was then founded by Kiichiro Toyoda, Sakichi's son. It has since blossomed into the leader it is today.

The giant automaker faced its one and only strike in 1950. This event, however, supplied Toyota an important philosophy, giving it the labour and management system which helped Toyota to gain mutual growth and success in both domestic and overseas markets. Today, this philosophy is very important to the structure of Toyota.

Toyota's production system improved in the late 1950s, establishing the 'Toyota Production System.' This system became the major factor in the reduction of inventories and defect in the plants of Toyota and its suppliers. It also underpinned all of Toyota's operations across the world. It launched its first small cars in 1947. The operation outside Japan started in 1959 in Brazil and continued with growing network of foreign plants.

Toyota celebrated its 60th anniversary in August 1997. It believes that its local production can provide customers with the productions they need, giving it the stable and long-term growth. It also has a global network of design and research and development facilities, consisting Japan, North America, and Europe markets.

It is now the world's third largest manufacturer of automobiles in unit sales, but the first in its home. It plays an important role in the world's automobile market even it stays behind General Motor and Ford, respectively. It earns and gains profits in international and domestic markets. Nevertheless, it expands businesses to overseas and seeks profits there than its home's market. In this context will focus on its strategies, structure, domestic and overseas markets, the reasons persuading Toyota to join overseas market, and its plans for the future.

Toyota's business in brief

Since it was founded in 1937, TMC has contributed to the development of the automobile industry and society by providing people with quality vehicles. TMC manufactures automobiles in 25 countries and regions all over the world. Today, its vehicles are sold in more 160 nations worldwide under the brand names of Toyota, Lexus, Daihatsu, and Hino, manufacturing small cars to luxury sedans, full-sized pickup trucks, and crossover vehicles.

The recent significant success of Toyota is in the fiscal year ended March 31, 2002 in which TMC and its overseas subsidiaries sold 5.54 million passengers cars, trucks, and busses around the world. This helps position TMC as the world's number three in the term of automobiles sold, staying behind General Motor and Ford, respectively.

However, Toyota's overseas business signifies significant sign. According to its annual report 2002, Toyota gained profits from overseas markets than its domestic market, especially in North America where both profits and productions increase significantly. This is because Toyota's business philosophy is to achieve stable, long-term growth through the development of business activities that contribute to the society by focusing the importance of close relationships between individuals, society, the global environment, and the world economy. It believes that this instance will help it to share the benefits of its growth with everyone involving with Toyota, including its customers, shareholders, employees, and trading associates. Given

the major changes that are anticipated in the operating environment for the automobile sector, Toyota intends to further accelerate the pace of its revolution aimed at reinforcing the foundations of the Company's business. 2

The world's automobile industry atmosphere

Today, there are varying brands of vehicles available for drivers to choose. Some countries which are unable to produce automobiles in the past now produce cars. This is because many countries can now afford the technologies which are needed for manufacturing vehicles. These technologies were expensive in the past, but have lower price in these days. This factor persuades many countries to go into car producing industry.

The world's automobile market is now very competitive. Drivers can easily compare price and quality. They have varieties of cars to choose, starting from up-scale, classy, sporty and practical, affordable, and conservative cars. The automakers try to differentiate their vehicles from those of the competitors and also target different groups of drivers. Drivers with low income that cannot afford such extra need of life can now afford them. Consequently, to survive in the automobile market, many automakers have to join the world's automobile market, not only domestic one. They have to plan and adopt the successful strategies.

However. Renault. There are various numbers of automakers from many parts of the world. Saab. Jaguar. Land Rover. Mercury. Lincoln. the key automakers are obvious. Volvo. Mercedes-Benz. Subaru. For example. Jeep. Infiniti. Ford. Honda. Plymouth.Listing the world top automakers. This is because Toyota operates business in foreign countries. Suzuki. Volkswagen. The main competitors of Toyota are General Motor and Ford who tie in the ranking of number one and two in the term of net sale and unit sale. Nissan. Hyundai. full-sized pickup trucks. Lexus. Audi. It has small cars to luxury sedans. Toyota gains a large share in global automobile's market. Toyota. Kia. Daewoo Dodge. Cadillac. Mitsubishi. Corolla vehicles are for middle class people while Camry sedans suit high-class drivers. Toyota plays an important role in both the world's automobile market and in its own home. Mazda. BMW. Buick. Isuzu. There are about 39 automakers in which comprising of Acura. Toyotaand world automobile industry The world automobile's market is very competitive in these days. Oldsmobile. making its brand recognisable.3 However. Toyota is one of those cars that are tied as the well-known vehicles worldwide. This is because Toyotahas various types of cars available for all classes of drivers. Porsche. Fiat. and crossover vehicles. Saturn. this ranking is in the world automobile's market. Pontiac. but not in some regional automobile markets where Toyota stands at a . Chevrolet. GMC Truck. Chrysler.

Toyota vehicles are more popular in Asian countries as they are in the same region with Japan. Toyota expects that these strategies will not . where the automobile markets are very competitive. for instance. Figure 1. is still behind that of General Motor and Ford. Toyota's positioning With many competitors.2 shows the perceptual map of automakers. The strategies that Toyotais now practicing and planning to adopt will be discussed more in depth. For instance.higher ranking. indicating the positioning of Toyota with its competitors. Figure 1.1 compares the sales of Toyotain Asia and other cars from 2001 to 2002. Toyota also produces luxury vehicles to complete the automobiles of Volvo. Mercedes-Benz. Conversely. Toyota's ranking in the term of unit and net sales in other region such as North America and Europe. Toyota's positioning in the automobile's market is different from some of its competitors as they have different target segmentation. Consequently. and Porsche. This is because Toyota does not have to spend much money for transportation cost as the distances between Asian nations are shorter for cars from Japan to be sent to other Asian nations. making the Toyota's cars more affordable than that of American and European cars. Toyota wants to expand its sales in these regions. Audi. Ford and General Motor are still its important competitors because they produce cars to serve same target group.

4 This is an important reason why Toyota seeks market overseas as it need money for investing . the market of Toyota in Japan is not as good as overseas market.2 % models such as Corolla. and Crown continued to be the strong sales.only help to change its ranking.32 million units in the previous fiscal year to 2. but also its sales in both domestic and overseas. Toyota's share of the market was 38. vehicle sales in Japan's automobile sector were down on the previous year.22 million units in fiscal 2002. According to the annual report of 2002. In spite of edging down less than one percentage point. turned down 4. Factoring in the minivehicle market. stay above the 40 % mark for the fourth consecutive year. However. the Toyota brand's market share.2 %. Estima. impacted by the prolonged economic slump in the domestic market.6 %. including Daihatsu and Hino vehicles. Vitz. from 2. to 42. On the other hand. it lost some of its shares to foreign competitors who enter Japanese automobile market. Toyota's performance in domestic and overseas in the recent years Japan: Toyota generate most of its profits domestically. not include minivehicles. Nevertheless. Toyota successfully protected its market share of more than 40 % by proactively bringing new and fully remodelled vehicles to the market. Domestic vehicle sales. and including the Daihatsu and Hino brands. during fiscal 2002.

While the Prius hybrid sedan and the RAV4 the small SUV brought their respective classes. Also. including Toyota and Lexus vehicles. to reach a record high of 1. ranking as the fourth automaker that concerning about environment in which Honda is the first in this field. market in July 2000. North America: Recently the automobile market in North America is optimistic. This was attributable to the effects of a brisk market. Toyota models were highly ranked by the U. Environmental Protection Agency in a broad range of size categories. rose 2. which was launched in the U.S.S. with respect to fuel economy. Toyota plans to continue bolstering its manufacturing base in North America with a view to achieving production capacity of 1.7 % compared to the previous fiscal year's 1. the Prius hybrid car.45 million . Toyota's strengthen vehicle sales in North America. It sold 18. Toyota's relentless technological innovations aimed at improving fuel efficiency in all of its models are steadily growing. the ECHO compact sedan and the Avalon large sedan also received high evaluations. In fiscal its home in order to complete its competitors in Japan.78 million units.000 vehicles in fiscal 2002. together with Toyota's introduction of new models and the full remodelling of popular vehicles.73 million units. is gaining increasing recognition in North America. In 2001.

Toyota has also decided to begin building the RX300 at its production base in Canada. Toyota plans to construct a factory in Baja California.000 units in the previous year to 730. it is currently constructing a plant in Alabama to supply V8 engines for the Tundra. Indiana.5 According to the annual report.000 vehicles locally in fiscal 2002. from 2003. (TMMI).vehicles during 2003. Toyota's business in North America is more optimistic than other regions. It produced new vehicles to serve this market and also plan to expand its business in this area. which is currently being made by New United Motor Manufacturing. compared to 180. (NUMMI). Toyota Motor Manufacturing Canada Inc. Toyota Motor Manufacturing. The Company's market share expanded to 3. Mexico. trying to compete with Ford in its own home. to manufacture truck beds from 2004 for the Tacoma. As part of these efforts.000 in the previous year. Europe: During the year of 2002. Toyota also continued to extend its local production it built 260.000 engines. Inc. which surpassed 210. Production in Alabama will get under way in 2003 and plans call for an annual output of 120. Inc. . which is built at its Indiana plant. (TMMC). Toyota's vehicle sales in Europe continued to fare well. having sales rising from 690.000 units. Furthermore.000 units.8 % on a calendar-year basis due to robust sales of the Yaris.

000 vehicles. in order to increase the efficiency of its European operations and augment the speed of business management decisions. Over a scheduled 18-month period. it founded Toyota Motor Europe (TME) in April 2002 as a holding company in Europe. progress was made in Toyota's joint venture with PSA Peugeot Citroën (PSA). (TMUK). Toyota also plans to bring together diesel engines there from 2003.At Toyota's plant in the United Kingdom. The DPNR system is capable of simultaneously and continuously extracting particulate matter (PM) and nitrogen oxide (NOx) emissions from diesel exhaust fumes.000 unit sales and win a five % market share by 2005 accelerating its pace of localization in the European region.o.6 Toyota's goal is to achieve 800. It also incorporated Diesel Clean Advanced Technology (D-CAT) which is cantered on its Diesel Particulate NOx Reduction system (DPNR). In March 2002. Toyota Peugeot Citroën Automobile Czech s. it manufactured 200.r. including the United Kingdom and Germany. where the Corolla and Avensis are built. Toyota will monitor the performance of the vehicles in seven countries. and plant construction under way.000 gasoline engines in the year under review. (TPCA) was established in Kolin. which started in March 2002. In addition. With TMUK slated to become its European engine production centre. Toyota Motor Manufacturing (UK) Ltd. in the Czech Republic.7 . joining production of small cars will start from 2005 to target annual output of 300. Mindful of this target. in 60 Avensis models as part of its environmental activities in Europe.

000 vehicles in the Asian market in fiscal 2002. Asia: Toyota gains fans in Asian countries as Toyota's vehicles are more affordable than that of other European cars. Thailand. Thailand and Malaysia recorded sales increases of more than 10 % while Taiwan and the Philippines contracted 17 % and 8 %. and Vietnam. the Philippines.Toyota tries to expend its business in Europe since the automobile market in this region is quite competitive. hoping to gain share in Europe. 8 . Toyota can display the largest share of sales in Indonesia. (SCTM) launched sales of the Coaster mid-size bus as the first vehicle produced locally in China to bear the Toyota badge in April 2001. The sales of ToyotaThe ASEAN automotive market expanded one % in calendar 2001.. However. Brunei. Singapore. Toyota's steadfast position in the area resulted in sales of 210. It also extended its share of the markets in Thailand. its share in this market is lower than those of other European automakers. and Taiwan. Sichuan Toyota Motor Co. it invests a lot of money in this market. From the plan and strategies that it has been adopting so far. Ltd. respectively. The ASEAN market recovered to 88 % of its 1996 peak as a whole.

Moreover. It also does not have to face the distance problem. the Australian market remained steady and Toyota preserved its position as the leader of Australia's commercial vehicle market for the 23rd successive year. recording unit sales in the Oceania market of 180.000 vehicles sold in calendar 2001.It is easy for Toyota to expand its business in this region as the culture is similar to the culture of Japanese. Toyota which takes more than 20 % share in the South African market maintained its position as the country's top-selling brand for the 22nd consecutive . In particular. sales of the Camry and the Corolla were favourable. Toyota sold most vehicles in New Zealand for the 14th consecutive year. Moreover. South Africa's automobile market grew 8 %. Oceania: In calendar 2001.000 vehicles in the year under review. outperforming initial expectations.9 Middle East: Sales in the Gulf countries remained brisk. having 370. the trade integration between Asian nations also makes the business of Toyota move smoothly.10 Africa: Representing Africa's largest market.

finding new markets. Reasons for Toyotato engage international business activities Toyota is now operating business in more than 160 countries and going to expand more businesses in other countries. It has operations and expands its business in foreign countries than in its own home. the business of Toyota goes beyond well in overseas market. low transportation cost. The reasons and challenges that influence Toyota to engage business overseas will be discussed more in depth in the following topics. expanding risks. Toyota also invests in this area because of this reason and it intends to expand its business in this region. The most important factor is low labour cost.11 Africa becomes the new area for investing business of many companies because Africa has many interesting factors that can attract foreign investors. and acquiring resources. moving from Asia to Africa.year. Toyota decided to operate overseas because of several seasons. What reasons encourage it to engage in international business activities? There are several main reasons that push Toyota to take on international business activities. low labour costs. expanding sales. Expand sales: . According to the annual report 2002. competing competitors.

This is not because the technologies and human resources in the US are better than in Japan. (TTC) the research and development (R&D) in California in 1977. For instance. Acquire resources: Companies look for foreign capital. Toyota wants to expand sales and make its name recognised. It is because the US government offers investing incentives to Japanese automakers to encourage them to operate business in the US to create jobs for local people. and information that they can use at home (Daniel & Radenbaugh. technology. and crossover vehicles. after the success of Toyota Prius the hybrid vehicles which developed by TTC. These various choices make people in foreign countries interested in buying Toyota's vehicles. full-sized pickup trucks. It . It has small cars to luxury sedans.First of all. It produces vehicles matching people of every class. it brought the hybrid technology information back to Japan. When the number of people who are interested in buying Toyota's automobiles increase. For example. TTC is a dynamic company that conducts the design-engineering and development of Toyota products. Toyotaopened Toyota Technical Center Inc. it raises its sales by joining international activities. Corolla vehicles are for middle class people while Camry sedans suit high-class drivers.12 In this case Toyota gets both capital and information as a fringe benefit to bring back home. 2001). particularly those developed for North America market.

500. Europe. were buoyant. costs £6. Affordability: Finally. Corolla in Thailand. and Middle East have raisen. making its cars more affordable. Figure 1.16 .13 In contrast.500 while Ford Escort costs around £10.3 represents Toyota's global sales which are higher than domestic. The annual sales in calendar 2001 in the US market.15 Toyota also practices reducing price and raise quality of its campaign. Central and South America. Minimise risk: Moreover.18 million units. reaching the second highest level ever. Its automobiles are more affordable than that of European and American cars in many countries. Toyota decides to try to take advantage of the business cycle. This is also how Toyota employs workers in industrialised countries where employees have high salary. especially in Asia. for example. vehicle sales of Toyota in North America. Oceania. it is more competitive for Toyota to sell vehicles abroad. at 17. Toyota's vehicle sales in Japan have been declining gradually because foreign vehicles such as American and European cars share the automobile market in Japan.14 To minimize unstability of sales and profits in the domestic market. for instance. Asia.then launched FCHV-BUS2 the fuel cell hybrid bus having zero emission and low noise for Japanese people.

International Operations Control Toyota's Major Factors Toyota is an automobile company whose operations extend beyond its domestic operations shores is faced with lots of hurdles and environmental factors. Toyota operates R&D in the US where people have higher education and it then controls operations in countries where it can find low labour cost. Low labour cost: The first reason is low labour cost. Toyota is now expanding its business abroad and controlling operation overseas rather than in its home. the extent to which it is able to combat these factors will determine how successful its operations will strive globally. What challenges influence Toyota to control operation internationally rather than domestically? It controls operation overseas for several major challenges. . Toyota operates R&D in industrialised countries as workers with higher educations are needed for controlling R&D. For example. Alternatively. It is expensive to employ workers in Japan as it is a developed and industrialised country where people have high salaries and quality of life. Most countries that Toyotacontrols operation are in Asiasuch as China and the Philippines where people have low wages and education.

EX-Work is a transport system that purchasers can collect the products from factories of sellers. it will not only save transportation cost. This is why Toyota has overseas affiliates and subsidiaries. Transportation cost: In addition. 1982). and insurance. If it invests in importing countries. It is generally adopted by companies having subsidiaries and factories in importing countries. Exporters have to pay for all of the costs occurring from the shipment.4 compares the function of Toyota's affiliates and numbers of workers in industrialised and developing countries. making the products more expensive as importers will charge extra price (Hyman. In contrast. they can use Ex-Work transport system instead of CIF. When companies export products overseas. if companies control operation in the importing countries. freight. Trade integration problem: Furthermore. they usually use CIF transport system which includes cost. but also does not have to be concerned much about fluctuations of exchange rates (Ball. cheap transportation costs are another important challenge. 1983). but impose tariffs against countries outside the bloc (Daniel & .Figure 1. Such integrations remove tariff within the bloc. countries are now forming association and trade integration such as NAFTA (North America Free Trade Association) and EU (European Union).

2001). especially in European nations.000 kiloliters of gasoline annually. Seek customers' demands: Controlling operations in importing countries helps seek the needs of investing in business. In 1969. it can easily expand business and sell its automobiles to neighbouring countries. Prius vehicles are not . Toyota started to operate in Germany. Therefore. people are now concerned about pollution problems. Toyota produces Prius. Toyota decided to operate in Europe to minimize tariff problems.000 to 70.000-ton decrease in otherwise created carbon dioxide. Customers in each nation have different needs and people in the same region also have similar demands. For instance. which is mostly produced by cars. Before 2000.Radebaugh. If Toyota operates in one country.000 to 30. the world's first mass-produced and mass-marketed hybrid passenger car. For example. but the tariff made it difficult for Toyota to enter. However.17 It also holds 100 % of ownership. This persuades Toyota to control operation in foreign countries.18 Prius has steadily gained fans in North America and Europe where people have similar tastes.000 Prius vehicles can save about 20. Research shows that carbon dioxide. a 50. Thus. the Europeans kept the Japanese from mounting any serious market competition by restricting the number of cars that could be imported to Europe. Americans who are soft on environment want vehicles that do not harm the environment. the automobile market in Germanyis very competitive. 100. decreases ozone.

Toyota has 56 manufacturing companies in 27 countries/locations and components. Find operation space: Lastly. Japan has limited space and is not suitable for some businesses of Toyota. Global sales of its Toyota and Lexus brands combined with those of Daihatsu and Hino.700 people worldwide (on a consolidated 15. and industrial vehicles. besides is 12 plants in Japan. Toyota controls two businesses in Australia.19 Political factors Toyota Motor Corporation is the world's third largest automaker.available in some countries outside North America and Europe. totalled millions units in year 2000. so it has to operate in other countries. Australian Afforestation Pty Limited. prefabricated housing and leisure boats. Diversified operations include telecommunications. For example. Toyota Motor Corporation Australia Limited controls production and sales of automobiles. Every country on whose soil Toyota operates will definitely face . however.1 yen trillion in the fiscal year to March 2002. operates afforestation activities handling raw materials for paper making which is needed for the automobile production. parts. As of March 2002. offering a full range of models mini vehicles to large trucks. Toyota employs 246. Some of Toyota's activities need bigger places to operate.

For example. The Legal factor The legal system operating in a country in which Toyota dwells is closely related to the factors that affect its political system. the chief executor officer will try as much as possible to obtain within or influence as much as possible the policy of its interest either through working closely with the policy maker or engaging in lobby activities. rules and regulations governing its corporate or business existence in that country. operational restriction that impede the company's ability to take certain actions and agitation that dispute sales. being it a democratic. aristocrat or another form will greatly challenge its survival. implemented and altered depending on the reaction from political parties. courts. Toyota has been able to strive better on a democracy that engages freedom and other rules that safeguard individual and cooperate right. Although political risk can occur in politics as such governmental take over of property either with or without compensation. National laws affect business .immense political challenges in view of the differences in policies. The system of government existing in a country in which Toyota operates. survival and growth of Toyota's existence in that region. government agency. political policies are established. the degree of independence of judicial from the political process poses a major factor the legal existence. legislators.

the payment of dividends to foreign investors and customs duties on imports. such as the investment of capital. and patents and trade probations. taxation. legal. disruptive force part of 1990s is not likely to be eradicated in the next century. employments practices. relationship between the power of domestic and international currency. balance of payments. Investment is likely to pick up in those nations where Toyota operates that make the most successful and deeply rooted regulatory. many lessons have been learnt about the need to avoid excessive financial exposure by borrowers and lenders. Laws also exist that govern cross-border activities. Progresses have been made to strengthen and provision of economic polices. large part of institutionalized capital is likely to play havoc with markets and currencies from time to time. finance and corporate reforms . national income. and availability of resources and so on pose great challenges to Toyota. can also determine how a firm operates in transferring shipments across borders. Global financial volatility. However. Emerging economies will be particularly vulnerable. The Economic factor The economic environment and its hydra-headed indices such as inflation rate. International laws such as treaties governing the cross-border transfer of hazardous waste.especially in the areas of health and safety standards.

the challenge Toyota has taken up with its global vision 2010. support for civic activities and political contributions of their company to enable the customer judge a company's behaviour and its business principles. Toyota has put greater emphasis on transparency regarding information on the product and services. the environmental practices. society and environment. Toyota going global combined with changing demographics_ aging societies in advanced economies and growing numbers of young people in emerging ones will require companies as never before to pursue multicultural human resource policies and facilitate the international mobility of their best talent. Toyota has been aiming to enrich society through car making . treatment. This hydrous task is summarily a battle with society and culture. Technological factors . To improve consumer and social confidence.with the intention of winning the trust and respect of the international community to maintain stable long term growth while striving for harmony with people.Social-Cultural factors According to the management of Toyota "since its establishment. workers.

and threat of substitute products or services. . Porter's approach to industry analysis Michel Porter. A low force in contrast. the more limited companies are in their ability to raise prices and earn greater profits. to change the strength of one or more of the forces to the company's advantage. those are as follows: threat of new entrants. an authority on competitive strategy. through its choice of strategy. "determines the ultimate profit potential in the industry. these forces act as constraints as a company's activities. In carefully scanning its industry.In addition to physical and societal factors faced by Toyota. bargaining power of suppliers. it may be possible for a company. rivalry among existing firms. "The collective strength of these forces". however. In the long run. the corporation must assess the importance to its success of each of the 5 forces. bargaining power of buyers. A high force can be regarded as a threat because it is likely to reduce profits. The strong each of these forces. where profit potential is measured in terms of long run return on investment capital". the company is also faced with competitive and technological factors which affect the smooth running operations of the company. where profit potential in the industry. The level of this intensity is determined by basic competitive forces. In the short run. can be viewed as an opportunity because it may allow the company to earn profits. he contends. contends that a corporation is most concerned with intensify of competition within its industry.

5) Mitsubishi. therefore. 4) Vauxhall. Toyota has established its own car manufacturing plant in different countries in Europe and successfully operating its business activities. In terms of car manufacturing company index. The threat of entry depends on the presence of entry barriers and the reaction that can be expected from existing competitors. 2) BMW.Threat of new entrants: New entrants to an industry typically bring to its new capacity. . car market leaders.A. especially from other Asia. They are. 3) Jaguar. threats to an established corporation.S. Toyota as global car manufacturing company started its production of vehicle outside Japan in 1959. a desire to gain market share and substantial resources. Europe & U. Global entrants may pose a threat to Toyota's market share. the following companies are as follows: 1) Ford.

the loyalty of the customer may not be gained or retained unless cost incentives and quality assurance are customary. More established online car manufacturing company.6) Suzuki. However Toyota's online venture is in mature stage besides this they are always aware of what the potential threats to its business are. Toyota as a multinational enterprise has already launched its product to the online market and is currently mature stage of online product cycle. therefore switching costs is not such as threat if brand loyalty is a prevalent sales feature. BMW & Jaguar already has secured market position in the British market environment. therefore their threat is made all the greater as they now have knowledge of the British market system and are building their customer and loyalty base. Therefore Toyota may be viewed as a threat to . Customers are prone to repeat orders. especially if there is elasticity of demand. who have already identified and possibly combated the risks to their market share may gain a competitive edge here. In a price sensitive and competitive industry achieving profits where prices are nailed down. the backbone of business profit. like rival Ford. On the other hand Toyota is trying to adopt the market share in Europe. Ford. low cost production is particularly difficult. The purpose of online sales facilities is to boost more sales and gain profit.

this will ultimately challenge Toyota's cost leadership pricing strategy. Bargaining power of buyers: Buyers affect an industry through their ability to force down prices.other car manufacturing company such as Toyota. The more indirect the substitute and the more cleverly packaged the imitation. BMW. Threat of substitute products or services: Substitute products are those products that appear to be different but can satisfy the same need as another product. If Toyota's car prices are competitive as a result of the quality of the vehicle or service being acceptable inferior and the production cost are low. bargain for higher quality or more services and play competitors against each other. the less likely that the price and performance will be comparable and switching costs for customers will be made easier. Substitute products on the market could pose a threat to Toyota's if customers are price sensitive. Ford. The threat of cheap imitations may an irresistible challenge for the customers. Mitsubishi etc all private goods at affordable prices and target the lower end of the quality conscious customers. if brand loyalty is not an issue and so may be able to benefit from the cheaper prices if willing to compromise quality. Vauxhall. The customer is ultimately king when they are car .

Toyotaalso looks to improve their own efficiencies in choosing their suppliers.companies' consumers. lowering their already competitive prices. Brand loyalty is an important issue as most end users will stay with the same product and most likely will switch to online and stay loyal. Toyota's look to their internal means and market share to determine whether they have power over the supplier and exert to gain their competitive edge. Toyota's consumers are looking for quality goods and a good serve. However the convenience factors of online purchasing makes it easy for consumers to target specific brand products from other online car manufacturing companies. Bargaining power of end users is not necessarily exerted on line regarding price sensitively of goods. The sensitively surrounds the pricing strategy used by Toyota's as cost leadership and differentiation. This strategy is entitled. simpler. Bargaining power of suppliers: Suppliers can affect an industry through their ability to raise prices or reduce the quality of purchased goods and services. there by reducing the amount of overall spend per car manufacturing company's as this is now split among the choices available. They can exert more power over Toyota's online than offline as the technology involved offers them the freedom of choice not just of product but also of vehicle companies as it is convenient to switch. Suppliers are forced into comprise. . together faster.

Buyers may perceive these alternatives as substitutes. . An example would be plastic bottles. So not all competition lies the same industry. so that the internal competing demands for finances are prioritised. it is important to look beyond one's immediate competitors. even through they are part of a different industry. Toyota as a car manufacturing company aware of their low cost strategy and look to competitive pricing to begin with the supplier. and jaguar increased all level of competitive activity to such an extent that any price reduction or new product introduction is now quickly followed by similar moves from other car manufacturing companies. corporations are mutually dependent. The same is true of prices in the U. exchange rate fluctuations and labour laws. Rivalry among existing firms: In most industries. For example: car manufacturing industries dominated by Toyota. computer industry. A competitive move by one firm can be expected to have a noticeable effect on its competitors and thus may cause relation or counter efforts. Honda. Porter contends.A programme to improve the quality levels of service from the supplier the force is to then pass this on to the customer. interest rate increases. Ford. cans and glass for packaging soft drinks. as there are other determinants of profitability. As the industry is subject to inflation. Specifically there might be competition from substitute products or services.S. BMW.

78 million units and Europe and other regions 1. If these forces are powerful they are in a position to bargain profits away through reduced margin. although some competitors will see this an opportunity to strengthen their position in the market by ensuring. by forcing either costs increases or price decreases. customer loyalty may be built out of trust and familiarity possibly based on quality. it is important to appreciate that companies purchase from suppliers and sell to buyers. North America 1. Toyota's consolidated world sales are 5. Now-a-days in every corner of the world the drivers have significant diverse needs. By fiscal 2002.22 million units.54 million units of which the Japanese accounted 2.There may also be a potential threat of new entrants. as far as they can. Toyota Motor Corporation has contributed to the development of the automobile industry and society by providing people with automobiles. Some are looking for an environmentally friendly . Toyota is now world's third largest manufacturer of automobiles in unit sales and net sales and has established a well-balanced sales structure that is strategically positioned between the world's three major markets.54 millions units. Strategies Adopted By Toyota Since it was established in 1937. Toyota's central philosophy is to grow in harmony with society producing automobiles that enjoyed and cherished the world over. Finally.

Therefore Toyota's success is lies within its strategies. iii) Enhancing cost competitiveness to provide higher quality products and services at a more affordable price iv) Expanding Toyota's value chain with a specific focus on building financial operations. ii) Promoting further globalisation within Toyota. Then there are people who look beyond the vehicle itself to value added services. according to the company Annual Report 2001 these include: i) Focusing investment on the development of new technologies for the environment.vehicle while others emphasis on safety and performance. Analysis of The Four Key Strategies =================================== Focusing investment on technological development: ================================================= . safety and information and communications.

During fiscal 2002. FCHV-5 (2003). which is widely utilized for the public transport sector. This new era is all about the speed of commercialisation new technologies that enhance not so much the vehicles themselves. The advantages of these newly developed models are: more than one source of fuel can be used and they are not causing Global Warming. driverless operation of three buses together in a single-file "platoon" has been underway since October 2001 at a theme park on Awaji Island in Hyogo Prefecture. Pirus (1997). cars and society. the company made progress towards the practical application of its Intelligent Multimode Transit System (IMTS). For example. running single.From the late 1990s. but their interaction with society and individual lives. Nevertheless Toyota is tackling the construction of advanced transport system through its Intelligent Transport System (ITS) technologies to improve the performance of its vehicles.23 . Besides in recent years the company has launched Fuel Cell Hybrid Vehicle. Japan. the global auto industry entered an era of tough competition in technological development. Estima Hybrid (2001). As a global company Toyota is at the forefront of these technological innovations. Based on its recent R&D activities. the company is now working to build cars that accelerate a beneficial relation between people. Using this system the vehicles are driven automatically.file on special roads.

for the right place.represents one-third of total net sales. Toyota motor company is entirely successful to face the competition created by its competitors. The company has a well regional balanced marketing network comparing to its competitors. affordable vehicles with more attractive features. Toyota is now going ahead to work on the development of automobiles that met the diverse needs of different regions while at the same time determined to benefit local communities. and Europe & Other regions.Japan. To provide its customers "the right cars. Overcoming two seemingly contradictory challenges. This absolute commitment is the driving force behind Toyota's accelerating globalisation. which appears ready to heat up. even further in the 21st century. at the . Therefore through insistent localization of its operations. Each of its three core regions. North America.Promoting further globalisation: One of the key strategies of Toyota is to deliver to its customer in every corner of the world high quality. Enhancing cost competitiveness: At present there is fierce competition in automobile industry. raising quality and lowering cost.

and the process reinforces its corporate value chain. offering them a full range of services that reach beyond the automobile. initiated in July 2000 aims to achieve large-scale cost reduction for about 170 components that account for 90 % of Toyota's total component purchasing costs (Annual report 2001). and purchasing. This three years cost reduction programme. Toyota is currently expanding its value chain by providing its IT business. The company wants to be a life long partner to its customers. in purchasing. Toyota is adopting various cost reduction strategies ingrained in various steps of manufacturing process such as development. Followings are the major initiatives form the crux of its actions: . Nevertheless. By using this concept. For example. which is being currently implemented by Toyota. One of these cost-reducing drives is CCC21 (Construction of Cost Competitiveness for the 21st century). Toyota is currently adopting an initiative called "Four-in-one" Concurrent Frontloading Concept.right time". In this way Toyota tries with its best to bring a greater comfort and convenience to the customers' lives. To do so the company is connecting with customers more than ever before. company is working to achieve its enduring mission of purchasing. (Annual report 2001) Expanding the value chain: Toyota's goal is to become a Total Mobility Services Provider. production.

In particular. making its sales increase. Toyota's financial review As Toyota starts to operate business overseas. Ã× Intelligent Transport System (ITS) implemented at commercialising the next generation of highway travel. that company's goal is to support customers throughout the life of their vehicles and offer one-stop financial services.Ã× The Gazoo. Ã× Network to support the above four initiatives. Ã× The TS3 automotive e-commerce site. thereby creating synergies that will yield great convenience and benefits. . which will cover the way for the company's entry into the business of processing and setting consumer purchases. Toyota always seeks to offer a wide range of services and link them together. its name becomes recognised. Ã× Information terminals designed to add value to automobiles through increasingly sophisticated car navigation systems. It is evident from launch of the TS3 CARD. a new Toyota credit card.

· The Current Ratio This is Toyota's ability to pay its current liabilities out of its current assets.The ratio is slightly increased than the 2. as the rule of thumb dictates that a ratio of 2 or greater is good .Financial Audit =============== Liquidity Ratios ---------------- These groups of ratios will measure the solvency of Toyota's.9: 1. Toyota's current ratio is 2. * The Acid Test (Quick Ratio) This is a more rigorous test to measure Toyotas ability to pay its current liabilities out of its current assets less its inventory.7: 1 in 2001. which is quite healthy. The reason for subtracting the inventory is that it is difficult to . It reflects its ability to generate the cash necessary to pay its bills and other short term financial obligations.

although it is a drop from last year's 2: 2: 1 ratio. Activity Ratios --------------- These ratios indicate how efficient Toyota is at using its resources to generate revenue. which is a positive indicator of the company's ability to meet its liabilities. Dept Ratios (Gearing ratios) These ratios are a measure of how much debt Toyotais carrying and who is financing the debt. and the more attractive it is to investors and lenders. it may not even exist. So this test establishes the asset that can be turned into cash quickly. : 1. Debt to Equity Ratio . The acid test for Toyota is 1. A ratio of 1: 1 or higher is regarded as acceptable and Toyota's ratio is nearly 2.convert it into cash as it may be obsolete.9: 1. The faster and more efficient Toyota can generate cash. Debt is good to finance growth or to plug short-term holes in cash flows but too much debt can be a financial drain on Toyotas financial resources. the stronger it is financially. and in some fraudulent cases.

The debt to asset ratio for Toyota is 0.5 may be seen as a sign of trouble. the change is not that great to cause concern.The debt to equity ratio measures the extent to which Toyota is financed by outside creditors versus shareholders and owners. A high ratio. is considered a high risk.1.9. which considerable which means this is an improvement from last year when the ratio was 1. A 24% gearing ratio is considered acceptable on scale where anything above 0. . Debt to Assert Ratio This is a measure of how much Toyota's assets are financed by outside creditors versus the percentage that is covered by the owners. anything above 1. There is no improvement from last year's ratio.0. Profitability Ratios -------------------- These ratios indicate the effectiveness of management in controlling expenses and earning a reasonable return for shareholders and owners.4. Toyotas debt to equity ratio is 1. Profit Ratio.0.

In this way . Finances and the way they are managed can be a key determinant of strategic success. maintain.Its corporate mission is to develop its manufacturing operations to produce the automobiles demand by a diversity of regions and by changing times."From a shareholders point of view.. A profit ratio of 2% is considered satisfactory in the manufacturing industry where money is made by turning over high volumes of production quickly. J. corporate strategy and Financial Analysis. from a standpoint that is both global and local. Williams (1993). what matters most is the cash generating capability of the business since this determines the ability to pay dividends in short .The profit ratio is a measure of how much profit Toyota generates for each yen of revenue after all costs of normal operations are accounted for. Toyotawill enhance the lives of people around the world while continuing to grow in conjunction with society. Toyota's profit ratio rose to 2% in 2002 compared to 1. This indicates Toyota's ability to generate profits after costs of operating its production. Financial Strategy ------------------ Toyota's financial strategy is concerned with increasing shareholders funds ..5% in 2001. Pitman..Ellis and D.

At present they are providing automobile sales related financial services to more than 3. Figure 1.5 shows Tokyo Stock Exchange. trading on the Tokyo stock exchange accounted for about 94. when they purchase one of their vehicles. Toyota established Toyota Financial Services Corporation (TFS) to take overall control of their financial subsidiaries at home and abroad and comprehensively enhance their financial service operations. The high levels of investment also serve to maintain investor confidence and meet dividend expectations of increased returns.72% of the aggregate trading volume on all five stock exchanges on which Toyota's shares are listed in Japan. However in the year to March 31. Investment into the company has shown to have a positive affect on the company's share per price value. Shareholders fund increased by 97 million to 4.5 million people in around 22 countries. The mission of Toyota's financial services operations.5 at 30 March 2002.848 million an increase . The mission of Toyota's financial services is to fulfil the diverse financing needs of customers with respect to car loans and insurance.term and to reinvest for the future (which in turn should enable a future flow of dividend payments)" Toyota's strategy appears to reflect with this way of thinking. which has increased from 399. In July 2000.2002.

The decision to propose an increase in the final dividend reflects the Director's confidence in the group future growth prospects. who are able to use its resources effectively and efficiently. Employ workers with Japanese literacy: The first solution is hiring local workers having Japanese literacy to work for Toyota's affiliates operating in foreign countries.3 times .The total proposed dividend for the year is 14.84 which represents an increase of 3. Toyota has adopted a cost efficiency drive with the purposes of supporting the financing of its growth strategy.7 . key position of cost leadership and quality differentiation is achieved which then leads to increased profits and a larger market share. Nevertheless. This . Toyota has some efficient solutions to cope with cultural barriers.of basic earnings per share increased by 31. Japanese are Buddhists and they also pride in their own nation and language. Dealing with cultural barriers Controlling business in a different environment. Toyotacannot avoid cultural barriers of language and religion. These are the obstacles for Toyota when managing business in countries having different cultures.6% on last year dividend cover of 1. Through the correct usage of its core competences.

but will also make local people think that Toyota creates jobs for them. making people have positive views toward Toyota. This is because Thais love and always pay royalty to the royal family.helps business move smoothly. a multinational firm must fit into the national identity where it operates (Robinson. Toyota Indonesia hires employees who have Japanese literacy. Toyota strives to improve the communities where it does business by supporting organizations that focus on education. 1973). and health cares. For example.20 This will not only eliminate the culture problem.21 Reward the communities: Lastly. Toyota Thailand sends its representatives to join the celebrating parade and pay courtesy to His Majesty the King of Thailand on his birthday. This helps make people think that Toyota is not only taking things from them. However. it still keeps high-income positions for Japanese employees who will control local employees in order to protect its intangible assets. but also giving things back. Toyota fits itself into the national identity where it operates in by respecting and following the culture and tradition of each nation it functions in. Applicants with Japanese degrees and a familiarity of Japanese culture will have an advantag. . services. In Indonesia. for instance. social. Fit into new environment: In addition.

This is because Toyota has efficient strategies and ways for coping with cultural barriers.. Yoshimitsu Ogihara. It also grants scholarships to a graduate from one of the area's high schools in Indiana. the health organisation. "These gifts are the ways Toyota can give back to the community that has given us so much. It is not surprised to learn if Toyota cars are known as the automobiles of the future. the president of Toyota Industrial Equipment Manufacturing Inc. USA said. the cultural barriers cannot obstruct its business. USA." These are the good ways to cope with cultural barriers of language and religion. This innovative concept and strategy will help Toyota to produce the vehicles that make people proud of. placing as the world's third automaker in the term of net sale and unit sale. Indiana. Conclusion ========== As you can see. Toyota plays an important role in the world's automobile market.Toyota USA donates more than 1. As long as Toyota is concerned about the community it operates in. It also looks ahead in the future aiming to be the best automobile in automaker industry. .22 Mr.9 million dollars to Relief Effort.

Using the traditional TMC first principle of µlet¶s go see it¶ and then converge on the Five Why¶s. while training the staff to be more careful with installation. This would require little resource and be a quick win. or the KFS staff with assembly. relating to material flaws and missing parts. As KFS is the responsible party the situation needs to be addressed at their site. Doug should visit KFS and inspect the manufacturing and QC process. what would you do to address the seat problem? Where would you focus your attention and solution efforts? Why? The two major causes of seat defects originate with KFS. may also be an option. By focusing on uncovering issues at the source of the seats. address the immediate issue of the backlog by reconciling orders with KFS to ensure the backlog is cleared. Redesigning the seat or replacing easily broken parts could reduce breakage and installation issues. The seat bolster issue is a distant third. 1992. .Seat Problem 1. While all of these options may potentially address part of the issue. 2. What options exist? What would you recommend? Why? Simplifying the seats could reduce the problem since product proliferation appears to added complexity to KFS manufacturing process.Toyota Motor Manufacturing Usa . As Doug Friesen. The focus on QC at KFS could potentially eliminate 113 of the 138 problems reported between 14-30 April. Replacing the supplier would be a high-risk option that would only be explored if the issues at KFS were so irreversible that TMM had no other choice. it is likely there will be fewer problems at the TMM plant. improving the QC process and then working backwards from there into the assembly and manufacture at KFS will ultimately have the greatest single impact on production efficiency. In the short term. though it¶s unlikely that the designers will take this feedback as welcome given similar issues are not faced at the Japanese plant.

Upon his return to Japan. the young man established an automobile division within his father's loom factory and in May 1935 produced his first prototype vehicle. brakes only on the rear wheels. In 1939.).Incorporated: 1937 as Toyota Motor Co. But the Japanese tradition of dedication and perseverance proved to be Toyota's most powerful tool in the difficult task of reconstruction. The next year Toyoda Machine Works. The company was producing almost five million units annually in the late 1990s and controlled 9. 3714 Motor Vehicle Parts & Accessories Toyota Motor Corporation was Japan's largest car company and the world's third largest by the year 2000. This was followed in 1940 by the establishment of the Toyoda Science Research Center (the nucleus of the Toyota Central Research and Development Laboratories. the company had every incentive to develop engines and vehicles that were highly fuel efficient. but its fate will be largely determined by how strongly American automakers feel they should concentrate on small cars. In 1933 a Japanese man named Kiichiro Toyoda traveled to the United States. General Motors and Ford already were operating assembly plants in Japan. Ltd. and its maximum speed was 54 miles per hour. Toyota's executives thought that by focusing on small cars the company could avoid a head-on market confrontation. SIC: 3448 Prefabricated Metal Buildings.. 'also faces many difficulties. Although its profits declined substantially during the global economic downturn of the early 1990s.000 employees but no working facilities. Just as the Japanese motor industry as a whole was beginning to recover. was founded for the production of both machine tools and auto parts. the company established a research center to begin work on battery-powered vehicles. Since Japan had very few natural resources. preeminence in the worldwide automotive industry did not deter Toyoda. its growth and success reflective of Japan's astonishing resurgence following World War II.) and the Toyoda Works (later Aichi Steel Works. . The company had 3.' It was January 1947 when Toyota engineers completed their first prototype for a small car: its chassis was of the backbone type (never used before in Japan). and the economic situation in Japan was chaotic. After two years of difficulties the company seemed headed for success. and a single headlight. there was mounting concern that American and European auto manufacturers would overwhelm the Japanese market with their economic and technical superiority. where he visited a number of automobile production plants. wooden seats. the company started piecing together usable parts from wrecked or worn-out trucks in order to build 'recycled' vehicles. the procurement of basic materials for automobile manufacturing became more and more difficult. Since American manufacturers were concentrating their efforts on medium-sized and larger cars. 3711 Motor Vehicles & Car Bodies. NAIC: 42111 Automobile and Other Motor Vehicle Wholesalers. Japan's automakers knew that they could no longer count on government protection in the form of high import duties or other barriers as they had before the war. When the war ended in August 1945 most of Japan's industrial facilities had been wrecked. As Japan became embroiled in World War II. Pushing toward the limits of resource conservation as the course of the war began to cripple Japan's economy. The company represented one of the true success stories in the history of manufacturing. 'The British motorcar industry.' he said. 3713 Truck & Bus Bodies. Toyota responded by cutting costs and moving production to overseas markets. Kiichiro Toyoda likened the postwar situation in Japan to that in England.8 percent of the global market for automobiles.S. Ltd. Inc. 3694 Engine Electrical Equipment. Ltd. but U. At one point Toyoda was manufacturing trucks with no radiator grills. and the Toyoda (or Toyota as it became known after the war) production plants had suffered extensively. its front suspension relied primarily on coil springs.

died less than two years later. Toyota was compelled to reduce both production and overhead. when the Toyota Labor Union went on strike. In the meantime. Japanese auto manufacturers found themselves unable to raise the funds needed to support their recovery efforts. in April 1950. production of passenger cars also rose quickly. however. visited the United States. Kiichiro. however. In some months. leading eventually to the formation of Toyota Motor Sales Company Ltd. Two years later. President Kiichiro Toyoda and all of his executive staff resigned. Production dropped to 992 vehicles in March 1949. in which every employee was encouraged to make suggestions for improvements of any kind. Toyota moved quickly and aggressively in the 1950s. On their return to Japan. for the new governmental policy had discontinued all financing from city banks and the Reconstruction Finance Corporation. Seeking new ideas for Toyota's anticipated growth. Crucial restructuring efforts included a proposal to incorporate Toyota's sales division as a separate company. Toyota was unable to meet its regular payroll. as the domestic demand for taxis rapidly increased. Along with improvements in its production facilities. One especially useful idea they brought home from their visit to Ford resulted in Toyota's suggestion system. Toyota's founder and a pioneer of the Japanese automotive industry. to 619 in April. these dealers had no choice but to pay Toyota in long-term promissory notes as inventories kept accumulating.This was not to be accomplished as easily as expected. and because the Toyota dealers were unable to sell cars in sufficient quantities. in 1949. In large part because of wartime regulations and controls. Not surprisingly. Toyota also worked to develop a more comprehensive line of vehicles to contribute toward the growing motorization of Japanese society. discussions between labor and management finally focused on whether to admit failure. making capital investments in new equipment for all of the company's production facilities. Toyota had come to place strong emphasis on the production end of the business. they toured Ford Motor Company's factories and observed the latest automobile production technology. Moreover. Toyota introduced the first four-wheeldrive Land Cruiser. The Japanese economy at that time was suffering from a severe depression. the company produced vehicles worth a total of ¥350 million while income from sales reached only ¥250 million. Delayed payments were followed by actual salary reductions and then by plans for large-scale layoffs--until April 1949. Negotiations between labor and management dragged on with the union leaders bitterly opposed to any layoffs. inflation was rampant. Toyota suffered its first and only serious conflict between labor and management. Finally. until the company finally found itself on the verge of bankruptcy. the company began to benefit from the increased efficiency almost immediately. During 1951. so that in the early postwar years not enough attention had been paid to the proper balance between production and sales. or to agree on the dismissal of some employees and embark upon a rebuilding program.000 employees. At the management level. for example. declare bankruptcy. from 50 units per month to 250 units per month by 1953. . Not long after the strike was settled in 1950. and people in the cities were forced to trade their clothing and home furnishings for rice or potatoes to survive. when it merged with Toyota Motor Company. Toyota soon was facing a severe liquidity crisis. That year the Japanese government took measures to control runaway inflation in ways that severely reduced consumer purchasing power and worsened the already severely depressed domestic automotive market. and all the while Toyota kept falling further into debt. the two men inaugurated an even more vital policy that remained in force at Toyota through the 1990s: the continuing commitment to invest in only the most modern production facilities as the key to advances in productivity and quality. and to 304 in May. In the absence of credit sources to bridge the imbalance. Eiji Toyoda (now chairman of Toyota Motor Corporation) and Shoichi Saito (later chairman of Toyota Motor Company). As a result. Nearly four years had passed since the end of the war. primarily by asking for voluntary resignations. for example. but Japan's economy was still in poor shape: goods and materials of all kinds were in short supply. and dissolve the company. Toyota Motor Sales Company handled all domestic and worldwide marketing of Toyota's automotive products until July 1982. In the end management and labor agreed to reduce the total workforce from 8. Under these conditions the company's financial situation deteriorated rapidly. two of the company's new executives. Workers staged demonstrations to press their demands.000 to 6.

As a result." had become and would remain a necessity for people at all levels of society. In December 1970 the U. quickly became Japan's most popular family car and led the market for autos of its compact size. contributing to the impressive growth in auto sales to the Japanese public. then added the Toyo-Ace (Japan's first cab-over truck) and a large-sized diesel truck. The rate of inflation increased and demand for automobiles fell drastically. in the face of the overall pessimism that gripped the industry and the nation. In subsequent years Japan's gross national product expanded rapidly. where 'consumers' (those in the later production stages) took 'products' (parts) from the stock shelves. In 1955. but in Japan even stricter laws were promulgated during the same time with . but automobiles remained one of Japan's least competitive industries in the international arena. Congress passed the Muskie Act.S. Toyota did away with facilities designed exclusively for the production of specific models and shifted instead to general-purpose facilities that could be operated according to changes in market demand for the company's various models. foreseeing the coming age of large-scale international trade and capital liberalization in Japan. Now Toyota was ready to compete with its overseas competitors--both in price and quality. which set limits on automobile engine emissions. It soon became apparent that to be competitive at home and abroad. By the early 1950s. while at the same time attempting to achieve the highest possible level of quality in production. Yet. Japan became a member of the General Agreement on Tariffs and Trade (GATT). When. Toyota Motor Sales was capitalized at ¥1 billion. Toyota was awarded the coveted Deming Prize for its quality-control achievements. Toyota also began to offer a more complete line of products. This was a joint effort conducted with Toyota's many independent parts suppliers and one that proved so successful that ten years later.000-cubic-centimeter Corona. which went on sale in 1966. Toyota's chairman Eiji Toyoda proposed a highly aggressive corporate strategy. introduced in 1955. The 1973 oil crisis and its aftermath were valuable lessons for Toyota. Toyota. if less conventional. the Japanese market was crowded with vehicles from the United States and Europe. In the wake of this move. Toyota would not only have to make additional investments in manufacturing facilities and equipment. automakers. The Kanban system became the basis for Toyota's entire production system. decided to focus on lowering its production costs and developing even more sophisticated cars. In 1971 the government removed controls on capital investment. Throughout these years Toyota also was working hard on another important. Toyota introduced the 'Kanban' (or 'synchronized delivery') system during 1954. In the United States the enforcement of this law was eventually postponed. Toyota made a major contribution to Japan's growing motorization in the years following 1965. That was also the year that the Japanese government liberalized imports of foreign passenger cars. but also undertake a major new research and development effort. ten years after its defeat in World War II. This was the reasoning behind Toyota's decision in 1958 to build a full-scale research center for the development of new automobiles (which also was to become Japan's first factory devoted entirely to passenger-car production). several Japanese automakers formed joint ventures or affiliations with U. Through this and similar efforts. Toyota continued to make major investments in new plants and equipment to prepare for what it believed would be a higher market demand. the 1973 Middle East War erupted and the world's economy was shaken by the first international oil crisis. Toyota decided to move forward by expanding the company's operations. just as Toyota had anticipated. His conviction was that the automobile. far from being a "luxury. Japan. Toyota quickly expanded its passenger-car line to include the 1. For example. wholly dependent upon imports for its oil supply. was especially affected.S. The idea was derived from the supermarket system. 40 percent of that amount (¥400 million) was immediately invested to establish an automobile driving school in an effort to help citizens acquire driver's licenses. approach to adapting itself to the rapid motorization of Japan. and the 'storekeepers' (those in the earlier production stages) replenished the stock to the degree that it was depleted. in 1965. a trend that was to lead to a mass domestic market for automobiles. Beginning with the Crown model. The crisis demonstrated the necessity for a flexible production system that could easily be adapted to changes in consumer preferences.In production control. The Toyota Corolla. for example. Two years later. brought about by a remarkable increase in national income.

exceptionally well-run car company was nearly unassailable. Despite these favorable developments. Although Toyota made efforts over the years to improve the international cooperation between automakers. effected substantial cuts in the company's executive staff. Inc. and carving new markets in Latin America. Toyota moved forward on its own to develop a new generation of cleaner and more fuelefficient engines. By means of intense advertising and controlled public relations under Toyoda's direction. At the same time. the company stood atop the Japanese automobile industry and ranked number three worldwide. Toyoda carefully committed his company to greater international cooperation in both technological and managerial areas. president of Toyota during the middle and late 1980s. They argued that it would actually prohibit the use of all internal combustion engines currently used. Toyota's position as a powerful. With the highest operating margin of any carmaker in the world. (NUMMI). (Meanwhile. all of which pointed toward further growth and underscored the car company's vitality. it provided General Motors with insight into Japanese production methods and management styles.000 vehicles a year.) In 1980 Japan's aggregate automobile production was actually better than that of the United States. Notwithstanding these developments. where the burgeoning demand for cars promised much growth. and in the United States it sold. for the first time. possessed a solid understanding of American culture. Shoichiro Toyoda eliminated two layers of middle management. created approximately 3. particularly in Southeast Asia. for example. Toyota's profits declined for four consecutive . When the Muskie Act was first proposed. able to meet the law's requirements. as well as learn about American labor practices. while a rising yen made Japanese products relatively more expensive in overseas markets. rotary engines. Toyota was solidifying its global operations. however. and they requested that the enforcement of the law be postponed until new technology. The plant. for example. In the same year. Toyota entered into a joint manufacturing venture with American giant General Motors called New United Motor Manufacturing. Toyota commanded an overwhelming 43 percent of the Japanese car market. Toyota announced that it would build an $800. more than one million cars and trucks. rarefied combustion. Toyota ranked second only to General Motors in total number of cars produced. automakers all over the world were opposed to it. could be developed. and Jaguar. In 1984. which by the mid-1990s was outselling market veterans BMW. which was expected to begin assembling 200. Toyota had little control over external forces. Toyota also spearheaded the Japanese automobile industry's foray into the luxury car market. At the same time. By the beginning of the 1990s. and reorganized Toyota's product development. leading the way with its Lexus LS400 luxury sedan.000 production facility near Lexington. This state-of-the-art facility allowed Toyota to begin production in the United States cautiously at a time of increasing protectionism. Aside from these two mainstay markets. and as the 1990s progressed. By the end of the 1980s. Shoichiro Toyoda.000 cars per year by 1988. a position it had held since 1978 and strengthened in the ensuing years. Toyota's management continued to strive for improvements. gas turbine and battery-powered cars--Toyota settled on the catalytic converter as the most flexible and most promising and succeeded in producing automobiles that conformed to the world's toughest emissions-control standards. The plant was slated to build up to 50. moreover. imported cars were given a three-year grace period to conform to Japan's strict emissions-control standards.000 jobs. After studying all the feasible alternatives--including catalytic systems. a nation that he perceived to be extremely bitter about losing trade battles with Japanese industry. After a decade of prodigious growth. Toyoda reportedly believed that Toyota's future success depended in part on the way it handled public relations with the United States. a global economic downturn brought the prolific growth of Japan's largest car manufacturer to a halt. in such ways as procuring parts and materials from overseas manufacturers. Kentucky. when the company was posting enviable financial results and its manufacturing processes provided a model for other companies to follow. In 1990. In the fall of 1985. Toyota was a formidable competitor. Toyota tried to elevate the principle of free competition in the minds of the American people. The recession stifled economic growth throughout the world. postponement of enforcement deadlines. Japan's successes in the world auto market nonetheless resulted in the Japanese automobile industry becoming a target of criticism.

Under Totsuro Toyoda's stewardship.000 vehicles a year for the Prius to turn a profit. Okuda also assumed an aggressive approach to Toyota's role in the domestic market. one of them a wholly owned subsidiary. however. In June he unveiled Toyota's New Global Business Plan. Midway through Toyota's net income slide. limited travel expenditures. enabling Toyota to increase its overall automobile production and devote greater resources to research and development.S. Okuda wasted no time putting his vision into practice. and in December it announced plans to build a second European plant in Valenciennes. Toyota's first vehicle production plant in China. Toyota recorded ¥125. Pakistan. manufacturing plants. By widening the scope of operations in Toyota's overseas locations. a little more than a quarter of the total posted in 1990. the stimulation of local economies was an effective public relations tool. The company also implemented a number of environmental initiatives during this period. enhancing the value of the Toyota brand name in foreign markets. Turkey. In 1997 the company opened new plants in Canada and India. In July 1999 it inaugurated an initiative that aimed to eliminate all landfill waste by 2003. He believed the first two goals would be achieved through the construction of new manufacturing plants in foreign markets. Design changes in the company's vehicles coupled with reductions in manufacturing and distribution costs saved Toyota ¥150 billion in 1993. As Toyota's profit decline continued. the company opened a new operation in Brazil.. and the United Kingdom by 2002. Toyoda also continued the trend toward moving production to less expensive overseas markets by ordering the construction or expansion of six assembly plants in Great Britain. One of the most radical innovations to arise from Okuda's revolution was the Prius. and eliminated white-collar overtime. with a total output of 240. One of the most promising automobile markets to open up in the late 1990s was in China. and to increase its share of the domestic market to 40 percent. falling to the lowest level in more than a decade. the new plant was scheduled to begin manufacturing coaster-class buses by 2001. A joint venture with the Sichuan Station Wagon Factory and Toyota Tsusho Corp. The company took a more significant step in November 1998. In late 1996 he made drastic cuts to Toyota's vehicle prices in Japan. Furthermore. In August 1998 Toyota extended its hold over the domestic market with the purchase of a majority stake in Daihatsu. to increase Toyota's international market share to 10 percent. a move that incensed the competition. When Hiroshi Okuda was promoted to company president in 1995 his chief ambition was to revitalize Toyota's standing in the global marketplace. The purpose of localization was to reduce the time and expense involved with shipping components across great distances. the company gained new leadership when Totsuro Toyoda succeeded his brother in September 1992. in the hope of becoming a major participant in North America's highly competitive large truck market. . the mounting losses persuaded Toyoda to intensify his cost-cutting measures. with most of the vehicles destined for the Australian and New Zealand markets..000 vehicles. Although initial estimates showed that production would have to surpass 200. Okuda envisioned a more streamlined. when it established the Sichuan Toyota Motor Co. the fourth consecutive year of negative net income growth. and another ¥100 billion in savings was expected to be realized in 1994. which placed renewed focus on innovation and international expansion. along with an increased emphasis on the "localization" of parts production.000 units. Okuda's targets were clearly defined: to raise production to six million vehicles a year. Ltd. The year 1997 also saw increased production in Toyota's Thailand operations. both at home and abroad. Thailand. which would begin exporting the parts to Toyota's manufacturing centers in France..years between 1991 and 1994. and in 1999 it began construction of a transmission production plant in the Walbrzych Special Economic Zone in Poland. the United States. and Japan. In 1995 Toyota announced its intention to set up a manufacturing operation in Indiana. By March 1998 Toyota already had stakes in four Chinese parts manufacturing plants. Turkey. Toyota's first hybrid car. the Prius combined a highly efficient gas engine with a self-regenerating electric motor. which actually went beyond the current EPA standards.3 billion. and in 2000 it introduced stricter environmental regulations in its U. when the company earned ¥441. cost-effective manufacturing process. In 1998 the company also raised its export levels from the Thailand plants to 20. That same year.8 billion in consolidated net income. to begin production of a new line of cars specifically designed for the European consumer. That same year. a cost-cutting program was enacted that reduced expense account budgets 50 percent. reducing carbon dioxide emissions by half. France. Launched in October 1997.

A.. The company also experienced strong sales in the United States and Japan during this time.A. and European markets in late 2000. U. Daihatsu Motor March 1998 demand was already surpassing supply. was expected to reverse this trend. (U. New United Motor Manufacturing..S. Principal Competitors Ford Motor Company.. Prius finally hit the U. (51%).S. and the future of the eco-car on the domestic market looked promising.000 vehicles a year.S.A. amid increased fuel prices and mounting concerns over global warming. Toyota Motor Thailand Company Limited.answers. Ltd. Honda Motor Co. Inc.. the new operation in France. Hino Motors. Although a weakened euro caused Toyota to suffer losses in Europe toward the end of the 1990s. Toyota Motor Credit Corporation (U. Principal Subsidiaries Toyota Motor Sales. Inc. Ltd. General Motors Corporation. 50%).. Ltd. scheduled to begin production in 2001 at a rate of .). and in 2000 Toyota's total worldwide production exceeded five million vehicles for the first time ever.S. Read more: http://www.

This case introduced three main concepts: 1. along with the wagon model of the Camry as well. mainly in human infrastructure. Root cause analysis (the five whys) 3. It started out as an adoption of the Ford conveyer system adapted to serve the small volume production of the Japanese market in the 1930's. which were driven by the output of preceding lines. Problems with the rear seat started decreasing the whole plants throughput which resulted in delays and more costs for the plant. Top and operations managers were flown out to the Tsutsumi plant in Japan. and unpredictable problems will always show up on the shop floor.. then hundreds of supervisors and team leaders were sent out of Tsutsumi to train the work force at the TMM plant. showing the real benefits of the TPS. to replace the bulk of Japanese imports of the very successful Camry. TPS operated to fix two problems: actual production always deviates from planned production. which TMC was forced to open under political pressure from the US in 1985. Production started remarkably well in 1988.. The method they employed for developing was persuasion. It contrasts conventional push systems. Just in Time/Toyota Production System 2.Toyota Motos Manufacturing Case Overview Toyota Motor Manufacturing. TMC had to invest heavily in TMM to ensure its success (especially implementing the Toyota Production System for the first out of Japan). This is mainly done through the kanban system (conveying information in and between processes on instruction cards). . The link between production control and quality control Toyota Production System The Toyota Production System (TPS) is basically a pull system. driven by the needs of the following lines. USA (TMM) is a subsidiary of the Japanese Toyota Motor Corporation (TMC). and went on without major incident until the Camry model change in 1991. then went through a major improvement to become the world-known TPS in the 1950's when the Just in Time concept was introduced inspired from the.

The vehicle itself is a unique convertible. the company could see over capapacity. Such moves can only firm up Toyota's interest and investment in hybrid R&D. Both are based upon advance technologies developed by the organization. Net profits rose 0. while the rest were sold in Japan. y Lexus and Toyota now have a reputation for manufacturing environmentally friendly vehicles. So if the car market experiences a down turn. If on the other hand the car market experiences an upturn.g. from the small Yaris to large trucks. Europe and Australia. The World market for cars is in a condition of over supply and so car manufacturers need to make sure that it is their models that consumers want. Rocketing oil prices have seen sales of the new hybrid vehicles increase. for example Ford has bought into the technology for its new Explorer SUV Hybrid. Total Quality Management). highly targeted marketing and a commitment to lean manufacturing and quality. targeting and positioning in a number of countries. y In 2003 Toyota knocked its rivals Ford into third spot. This is an example of very focused segmentation. Movements in exchange rates could see the already narrow margins in the car market being reduced. to become the World's second largest carmaker with 6. The company is still behind rivals General Motors with 8. Toyota has also sold on its technology to other motor manufacturers. Threats. In 2005 the company had to recall 880. The company also maximizes profit through efficient manufacturing approaches (e. The company has launched its new Aygo.8% to 1.17 trillion yen ($11bn. £5. y Product recalls are always a problem for vehicle manufacturers.e. The majority of affected vehicles were sold in the US. Therefore it is exposed to fluctuating economic and political conditions those markets. . The company uses marketing techniques to identify and satisfy customer needs. Lexus has RX 400h hybrid. y The company needs to keep producing cars in order to retain its operational efficiency. it takes time to accommodate.00 sports utility vehicles and pick up trucks due to faulty front suspension systems. Perhaps that is why the company is beginning to shift its attentions to the emerging Chinese market.59 million units in the same period. against the worldwide motor industry trend. y Toyota is to target the 'urban youth' market. Its brand is a household name. Toyota markets most of its products in the US and in Japan. Its strong industry position is based upon a number of factors including a diversified product range.85bn). Commentators argue that this is because the company has the right mix of products for the markets that it serves.SWOT Analysis Toyota Strengths. then the company may miss out on potential sales due to under capacity i. which is targeted at the streetwise youth market and captures (or attempts to) the nature of dance and DJ culture in a very competitive segment.3% higher at 18. as well as the high costs of training and retaining labour. The company makes a large range of vehicles for both private customers and commercial organizations. with models extending at their rear! The narrow segment is notorious for it narrow margins and difficulties for branding. Toyota did not g ive details of how much the recall would cost. This is a typical problem with high volume car manufacturing. Car plants represent a huge investment in expensive fixed costs.55 trillion yen. Weaknesses y Being big has its own problems. while sales were 7. y New investment by Toyota in factories in the US and China saw 2005 profits rise. Opportunities. and Toyota has it Prius.78 million units.

And this led to the third problem. The first was the actual defects with the hooks and the damaged caused by cross threading by employees when installing the seats. USA. TPS is based on reducing costs through the elimination of waste. Competition is increasing almost daily. Jidoka is the stopping of production when a problem is noticed and fixing it then and there. Toyota Motor Manufacturing. Toyota faces tremendous competitive rivalry in the car market. which was the departure from the Toyota Production System (TPS) when dealing with the seat problem. Inc background. These economic factors are potential threats for Toyota. * Toyota Motor Manufacturing (TMM). The main topic of the case was the problems caused by defective or damaged seats.y As with any car manufacturer. TMM USA's seat problem was threefold. they continued with the car's production and worried about the seat afterwards. and relationship between TMM USA and its seat supplier Kentucky Framed Seats (KFS). USA. In reading the case I noticed three subtopics. The key economies in the Pacific. JIT means that new parts are produced only when needed. South Korea and new plants in Eastern Europe. the US and Europe also experience slow downs. a build up of cars with seat problems in the off-line operation area. This problem led to the second problem. with new entrants coming into the market from China. Rather than fix the problem with the seat when it happened. The plant was modeled after the Tsutsumi plant and was to replace the majority of the Camrys that were being imported from Japan. As part of its setup the Tsutsumi production line was copied and employees were trained in the TPS process. They were the use of TPS in TMM USA. . TPS relied on two themes Just-In-Time (JIT) and jidoka. the problems caused by the increase in the Camry seat options and the taking on of all the wagon productions for TMM. The company is also exposed to any movement in the price of raw materials such as rubber. In 1988 TMM Japan began production on a new plant located in the US. TMM USA implemented these methodologies throughout its operation departments. Inc Case Analysis * Main and sub ideas of the case. steel and fuel.