Intro:

To begin with, the automobile industry is very complex and requires high capital or intensive
capital investment. The aim of the companies in the industry just like any other business is to
increase profits and reduce the cost of operation.
Therefore, you have to know that decision making in Japan is very slow because the process
is based on consensus. Culturally and historically, Japan is a country quite closed on itself
and very proud of its success: it is not very open to other cultures and other ways of doing
things.
Sales in Europe did not represent an important part of Toyota's business: In 2000, sales in
Europe represented less than 10% of Toyota's annual sales volumes. It was only when sales
started to grow and become more important/significant for the group that the problem
became a priority.
Let’s start answering the first question with

Why do you think Toyota had waited so long to move much of its manufacturing for
European sales to Europe?
On the financial side: it is because of the depreciation of the euro, which has gradually
deteriorated over 2 years, that Toyota has been slow to relocate its production. Indeed, at
the beginning, with a strong Euro, it was better to produce in Japan (the cost of cars
produced in Japan was lower in Euro). The sales of cars in Euro with strong Euro brought
more yen to the mother company (due to the exchange rate).
But with the weakening of the Euro, the cost of cars for Europe increased in Euro. At the
same time, the sales in Euro converted into Yen represented less Yen.
So the situation gradually deteriorated during the period when the Euro was devalued and
Toyota's sales in Europe increased. It was only then that it was important for Toyota to
produce in Europe and not in Asia.
To avoid the problem of loss on the variation of the exchange rate, it is necessary to have
factories and purchases of components in the same currency as your sales.
I think that Toyota thought that the weakening of the Euro was temporary and that it was
going to go back up and therefore earn much more again. That's why they decided to wait

2 Question 2
British pound joining the european monetary system is not going to solve our problem or
only partly;
If we take a look at the documents provided we can see that only one of our TMEM is
financed in pounds, 2 others manufacturing facilities are using another currency, first one in
portugal being in Euro is fine but the other one is in Lira in Turkey which is a high risk
currency too.
Therefore it’s going to save a financial hassle in currencies exchange and in exchange rate
fees in general. But our main company being based in Japan and using most of the money in
Yen plus sending almost 80% of cars manufactured in Japan and getting paid in Euros is the
biggest problem we must focus on.

Question 3:
The best short-term solution for Toyota is to absorb the cost of the exchange rate of the yen
against the euro to try to maintain market share growth in Europe instead of increasing the
price of cars, which would slow down demand.
By doing so, we can hope that the euro will appreciate in the future against the yen and
return to normal.
In the medium to long term, the best for the company is to move more of its manufacturing
operations to Portugal or France as they have already begun.
Producing in France and Portugal allows the company to eliminate the problem of the
exchange rate, and thus to have better control over the cost and price of their cars sold in
Euros. Also, producing in the EU makes it possible to benefit from free trade between
European countries. Then the shipping cost will be reduced compared to shipping from
Japan to Europe, and there will be no customs duties.
For the UK, the best is to orientate the production for the UK market only.
Now we will move to the conclusion.

Conclusion:

To conclude, the depreciation of Euro in comparison to Yen was the reason why
Toyota had waited so long to move much of its manufacturing for European
sales to Europe?
In addition, Toyota should absorb the cost of the exchange rate of the Yen in
order to maintain the growth of the market share.
Thank you for your listening concerning this presentation about the toyota case
do not hesitate if you guys have any question