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Toyotas Global Production Strategy

Toyota Motor Corporation is one of the largest car makers in the world. Although headquartered in Toyota City, about 15 miles west of Tokyo, it has production or assembly facilities in many parts of the world. The company is known for its effecti!e and efficient approach to production management, its quality products, and its outstanding labor relations. The Toyota production system "T#$% integrates craft with mass production, and it is now emulated by its competitors. The system aims at producing high&quality cars at low costs, accomplished in part by ha!ing parts deli!ered to the production line '(ust in time) to a!oid the high in!entory costs of the traditional assembly operation. *t is sometimes called '(ust&in&case) in!entory system, referring to the practice of storing additional parts (ust in case a part is defecti!e or is needed because of unforeseen circumstances. The effecti!eness of T#$ is aided by close relationships with suppliers and by continuous impro!ement, teamwork, decentrali+ed decision making, and a moti!ated work force. ,ehicles are designed with customers in mind, who can order cars according to their needs. -!en after the car is deli!ered, customers are kept happy by good customer ser!ice. Toyota uses se!eral ways to impro!e production. .orkers are trained in se!eral kinds of skills so that they can operate se!eral machines. -lectrical signs, called andon boards, show daily production figures and problems on the assembly line. They also can indicate whether o!ertime may be necessary. /uality is achie!ed through the +ero defects system. .orkers are trained to trace any error to its source. *f a production problem occurs on the assembly line, workers pull a cord to draw attention to the problem and request assistance, or to stop the altogether. The company de!eloped a unique relationship with its suppliers, who deli!er parts daily "often se!eral times a day%, to the production line. $uppliers are often responsible for a whole system, such as the brakes, seats, or the electrical system. To make the supplier relationship effecti!e, Toyota people ha!e to be !ery familiar with the operation of the supplier, often by ha!ing representati!es at the supplier0s site for assistance. Toyota also pro!ides loans or makes equity in!estment in the operations of its suppliers. The result is long&term cooperati!e relationships. 1ne of Toyota0s successful was the introduction of the lu2ury 3e2us model. #artly in response to 4$ pressure to limit 5apanese car sales in the 4nited $tates, Toyota focused on high&!alue lu2ury cars using 6M. and Mercedes as benchmarks. 3e2us was also aimed at customers of American lu2ury cars such as Cadillac and 3incoln. *n de!eloping the 3e2us, Toyota purchased cars made by Mercedes, 6M., and 5aguar and tested them thoroughly. Then it de!eloped 11 performance goals to impro!e on the results of those tests. *n order to be price&competiti!e, Toyota in!ested in automation to reduce labor costs. 7reat attention was gi!en to high quality standards. The de!elopment time was relati!ely short for the 3e2us. 8owe!er, some critics suggested that it was a lu2ury model based on the Toyota Camry #latform. The initial low price for the lu2ury car was subsequently hiked se!eral times. The success of the 5apanese operation has been e2tended o!erseas. 1ne such e2ample is 9ew 4nited Motor Manufacturing, *nc. "94MM*% in :remont near $an :rancisco. *n 1;<=, Toyota and 7eneral Motors "7M% agreed on a 5 &5 (oint !enture. 4p to that time, this 7M plant was one of the least producti!e. After the (oint !enture, it became one of the best 7M plants. Critical to the success of the (oint !enture was good labor management relations based on trust and respect for each others point of !iew. The new arrangement called for the elimination of multiple (ob categories, e2tensi!e use of teams, the use of quality circles, indoctrination, and training. Many of the employees were send to 5apan for additional training. The plant was also changed through rearrangement of the assembly line, replacement of old equipment, employment of the

(ust in time in!entory system, and enabling workers to stop the assembly line should a problem arises. The relationship with suppliers was also changed from ad!ersarial to cooperati!es. Another Toyota plant was opened in 7eorgetown, >entucky, in 1;<<. 7reat efforts were made in selecting employees, in!ol!ing tests and simulations to assess not only technical skills but also personal and leadership abilities. -mphasis was also placed on teamwork at the plant. The company0s e2pansion in the 4$ market was not restricted to !ehicle production. The Calty ?esign Center in California de!eloped in Celica model and the #re!ia mini!an especially designed for 4$ consumers. ?esign and research were done at the technical center in Torrance, California. Toyota also has many other o!erseas operations. *n -urope too, there were restrictions on 5apanese car imports, especially in :rance and *taly. To o!ercome these restrictions, Toyota built a plant in 6ritain, which is a member of the -uropean 4nion. *n @ be produced annually, 1 , 1, Toyota and the :rench #eugeot Citroen announced plans to 5. 1f the A , cars to as #eugeots or Citroens. #rofitability in!est 1.A billion euros to build a plant for producing a small, entry&le!el car by @ will be sold as Toyotas and @ ,

will be challenge for the (oint !enture because of the slim profit margins for small cars. Cost reduction will be critical for its success. Toyota0s contribution to the planned !enture is the e2perience of producing fi!e million cars annually. #eugeot Citroen has the ad!antage of ha!ing a strong brand image in the region as well as a good understanding of the local market. Moreo!er, The :rench Company has e2pertise in making supermini cars. 6ut sometimes it is not possible to engage in a (oint !enture or to set up a company&owned plant. This is the case in some Asian countries, especially in $outh >orea. Consequently, Toyota acquired minority interests in >orean companies. Questions: 1. .hy has Toyota been successfulB @. .hat are the strategies for gaining entrance into foreign countriesB A. .hat should Toyota do to be successful in Asian countries that restrict importsB