Introduction

Haleema Tahir (17074789)

Contemporary issues in business and management

6WBS0010 & 6WBS0011

The Millennium Universal Collage Lahore Campus

5th August 2019

1374 words

Critical evaluation of
TOYOTA

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Table of Contents

Introduction ................................................................................................................ 1

Table of Contents ....................................................................................................... 2

Task 1-EPG Model ..................................................................................................... 3

Ethnocentric ............................................................................................................ 3

Polycentric .............................................................................................................. 3

Geocentric ............................................................................................................... 4

Task 2- Toyota’s Background ..................................................................................... 5

Task 3- EPG approach of Toyota ............................................................................... 8

References ............................................................................................................... 10

Appendices .............................................................................................................. 14

Table 1 ___________________________________________________________ 3

Table 2 ___________________________________________________________ 4

Table 3 ___________________________________________________________ 4

Table 4 (Amatucci and Mariotto, 2012) _________________________________ 15

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Task 1-EPG Model
EPRG model was first introduced by Howard Perlmutter in 1969 as EPG to understand
the tortuous nature of the relationship between multinational parent and subsidiary.
One more component Regio-centric was added in 1973 by Wind, Douglas &
Perlmutter (Drachal, 2014).

Ethnocentric
Tired and tested methods are applied to the subsidiary assuming that home country
management will be extended to other countries. In this approach the management
work with a mindset of ‘what work at home, will work here’ (Guergana & Mujtaba,
2009).

Advantages Disadvantages
Appropriate entry into international
High cost (Mossler, 2003)
business (Mossler, 2003)
Efficient coordination and effective Selection procedures prone to errors
communication (UKEssays, 2018) (Orimojunje, n.d.)
Spreading central standards, rules and
Difficulties in mentoring during stay
principles throughout the organization
(Mayrhofer and Brewster, 1996)
(Orimojunje, n.d.)
No requirement for sophisticated
Government restrictions (UKEssays,
international internal labor (Mossler,
2018)
2003)
Growth for expatriates (whitehead, Potential failure rate likely to be higher
2017) (Mossler, 2003)
Table 1

Polycentric
According to Ahlstrom and Bruton (2010) in this approach “people seek to do things
the way local do”. The assumption made in polycentric approach allow managers in
different countries to make the required changes and shouldn’t severely controlled by
headquarters

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 Advantages
Varied and independent (whitehead,
2017)
Local hiring is relatively less expensive
(Thompson, 2019)
Locals knows more about the host
country market (Trivikram, 2017)
Support of host country’s government
(UKEssays, 2018)
High chance of success (UKEssays,
2018)
Table 2
Disadvantages
Less control of headquarter over
subsidiaries (Dowling, Festing and
Engle, 2008)
Host and parent company
communication barriers (Trivikram,
2017)
Lack of opportunity to achieve cross-
cultural experience (Thompson, 2019)
Localization costs of universal product
(Orimojunje, n.d.)
Unproductive usage of experience of
home country (Thompson, 2019)

Geocentric
Geocentric aspect of EPG model focuses on world-orientated approach with global
administration. A modern interpretation would highlight characteristics such as flexible,
opposed to hierarchy, organizational structure, the transfer of accountability to groups
of staff, and the sharing knowledge throughout the organization. (Khalil, 2019)

Advantages
Better quality of product and services
(Orimojunje, n.d.)
Talented and skilled employees
(Trivikram, 2017)
High flexible (whitehead, 2017)
Higher global profit (Orimojunje, n.d.)
Greater commitment to global
objectives (trivikram, 2017)
Table 3
Disadvantages
Increased cost of training,
compensation, and relocation (Business
Jargons, n.d.)
Wide distribution of power (Orimojunje,
n.d.)
Personnel problems (international
executive re-entry)
International headquarter bureaucracy
(whitehead, 2017)
Time spent on consensus decision-
making (Trivikram, 2017)

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Task 2- Toyota’s Background
An automobile company founded in 1937 (81 years ago) by Kiichiro Toyoda in Toyota
City of Japan (Duignan, 2017). Toyota Motor Sales was founded in 1950 and fused
with Toyota Motor Corporation in 1982 (Sosnovskikh, 2016). First plant of Toyota’s
outside Japan was established in Brazil in 1958 (Revolvy, n.d.). Toyota established
manufacturing plant in 28 countries that are jointly owned by the company or run under
a contract and export cars to 170 countries.

Figure 1 (Toyota corporation, 2019)

In 11th automotive world conference Keiji Yamamoto presented the idea for new car
based on electrification, artificial intelligence, and connectivity for an ecologically
sound society. (Market Report, 2019).

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 Toyota’s Slogan Core values

 Kaizen
 Challenge
 Genchi Genbutsu
 Respect for people
 Teamwork (Rother, 2010)

Industrial Approaches

Humphrey and Memedovic (2003) stated that automotive sector is considered as “a

capital-intensive industry with vertical integration and economics of scale”. Level of
maturity had already been achieved in this industry having high structure, has to
pushed by globalization and government regulation (Sturgeon, Biesebroeck, Gereffi,
2008).

The car business is always compelled to make a continuous upgrading communication

method to progressively spry, flexible and protected frameworks. Accordingly, the
intensity of automakers progressively relies upon their capacity to lead, with expertise
and efficiency, the group of particular providers and sellers (Scavarda, Barbosa and
Hamacher, 2005). See appendix 1 for the evolution of the automotive industry.

The specialization of supplier and increased integration allows sustainable innovations

that reduce complexity of design, renew the product and technology used with lower
cost & share responsibility with maintainable performs. (Vaz, Rauen and Lezana,
2017)

In the last 5 year the increasing price of fuel and rising ecological concerns have
moved buyers’ inclinations to more eco-friendly autos for example, hybrid.

Vehicle prices fluctuate with cost of equipment & material cost, manufacturing cost
and price of product has been raised due to raise in prices of steel and plastic on the
supply end (Nkomo, 2012). Below is some key success factor of automotive industry

 Determining expenditure flexibility

Cost related to employee’s expenditure will make manufacturing in
develop countries more competitive

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  Established export market
Helps refute any decline in the host country market
 Efficient work practices usage
Manufacturing disputes can be minimized through workforce who is
motivated that helps in building good industrial relation
 Effective cost control
Cost can be controlled by having close relationship with suppliers and
good distributing channels.
 Utilization of optimum capacity
Extremely high plant consumption and light duty engine vehicle
assembling plant will be required (Nkomo, 2012)

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Task 3- EPG approach of Toyota
Japanese in-groups are situational (not highly collectivistic) with strict rules, laws at
work and long-term orientated society with mainly male domination (Hofstede Insights,
2019). These are fundamental components that are adopted by Toyota management
style which make Toyota different, exclusive and successful on the international
market (Winfield & Kerrin, 1994).

Toyota was ethnocentric at its core following Japanese-centric strongly as ‘Toyota

way’ philosophy (Minor, n.d.), when a new plant is installed in a host country, Hoseus
& Liker (2008) states that ‘Toyota implements its culture with all its aspects and
principles’. Kaizen instructors are sent to teach local staff, skills & new technologies
for lean production and quality standards (Sosnovskikh, 2016). Leadership model of
Toyota is based in collaboration, consensus and teamwork. According to Ozawa
(2010) Toyota ‘lacked a real feeling’ about what was happening and “failed to sense”
what consequences would be for its foreign market. In 1998 when company’s
international production started, Toyota distributed the philosophy to its subsidiaries
all over the world with almost no stipends for it to be social adjustment in host nations
(Fackler, 2007). Toyota is developing more rapidly than its capacity to transplant its
culture to foreign market. Hierarchical employee relation was being practiced in
Toyota’s UK branch which was a product of Japanese culture. (Morgan et al 2003).

Polycentrism is a methodology with conscious administration decision to differentiate

it from original ethnocentric practice to geocentricism, to meet the drive toward
globalization (Ghoshal & Bartlett, 1998). The hiring of low-level labor is done nationally
with very little interference from the headquarter.

A nationally diverse top management team of qualified international executives will

provide various range of knowledge and high chance of working in collaboration, which
is an essential for making effective decisions in this complex worldwide business
environment (Zehnder, 1991, p. 48). The nationality of regional headquarter leader
makes a company more geocentric than it is, Hanson, Ibarra & Peyer (2010) states
that ‘international business is still not a global market for CEO’s’ because only 15% of
the top CEO’s are been foreign.
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The Regio-centric approach can be described as ‘hiring managers from different
countries within the geographic regions’ (Anon, 2017). This approach combines both
ethnocentric and polycentric approach by obtaining the efficiency benefits of a
standardization and allowing subsidiaries to react to their specific environment at the
same time (Brewster, Harris and Sparrow, 2004).

Market strategies for Toyota were established within the region to meet market
demand, so US and UK started training center similar to one is Japan for key
innovations (Spear & Bowen,1999). One of the Toyota’s UK branch is supervised by
an Italian (third-country national), who has a good knowledge of the European market
and had experience of Japanese corporate culture and language that is a perfect
example of Toyota been using Regio-centric approach (Carly, 2011).

According to my observation Toyota’s current staffing approach is Ethnocentric Regio-

centric, as Toyota teaches its people an effective mean for working through obstacles
toward the target condition, but they fail to do so because of the culture barriers in
different countries and government regulation of the host country. They should give
rights to the subsidiaries where profitable, and to reduce the complexity of the system
which they are using currently. This will reduce their cost and will provide a competitive
advantage to Toyota.

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 Appendices
Appendix 1

The internationalization of the automobile industry

Internationalization Approximate Production characteristic and Product Internationalization

step Period context characteristic motive

CBU export, SKD Completely assembled vehicles

1890-1910
assembly shop were exported
Overcome market
 Semi-disassembled were Standardized
imperfections
exported
CKD assembly shop 1900-1920
 Low skill levels for local staff
 No local supply industry

 Specialization of labor force Basic standards

CKD assembly shop Meet demands of
 Supplier development with imported
with increasing local 1920-1950 host country
supply of parts  100% localized assembling parts for
of parts replacement government

 Interdependent
Autonomous
manufacturing model
manufacturing from Standardized Lowering the cost of
designed
headquarters 1950-1980 adjustment for non-innovative
 International life cycle
standardized local operation models
projects  Export of models
manufactured
Manufacturing from  Emerging market gain more
headquarters’ importance Adaption of Increase the sales
1980-1990
projects localized by  Modified model for local local market of localized vehicles
HQ market sells more

Inability to make
Increasing local Auxiliaries activity for new international
subsidiary 1990-2000 structure by subsidiaries and Adaption to adjustments
participation complete models regions with centrally
similar
characteristics Subsidiary
Units of excellence Some unit’s advance
1990-2000 competence
(UOE) development
development

Follow Global
Word merchandise Global command gained by characteristics rationalization and
2000 -present
command some UOE of local seeking
expertise competitiveness

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 Receive
Productivity of the
product
Centers of COE earned by some decentralized
2000-present adaptations
excellence (COE) subsidiaries initiative and impact
from local
of subsidiary
expertise

Table 4 (Amatucci and Mariotto, 2012)

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