Assignment

Subject: Global Business Environment

Q.4 Case study In January 2004, leading global automobile company and Japan's number one automaker, Toyota Motor Corporation (Toyota), replaced Ford Motors (Ford), as the world's second largest automobile manufacturer; Ford had been in that spot for over seven decades. In 2003, Toyota sold 6.78 million vehicles worldwide while Ford's worldwide sales amounted to 6.72 million vehicles (General Motors, the world's largest car manufacturer sold 8.60 million vehicles). According to reports, while Toyota's market share in the US increased from 10.4% in 2002 to 11.2% in 2003, Ford's declined from 21.5% to 20.8% during the same period. Reaching the No.2 slot was a major achievement for Toyota, which had begun as a spinning and weaving company in 1918. Ford was reportedly plagued by high labor costs, quality-control problems, lack of new designs and innovations, and a weak economy during the early 21st century, which made it vulnerable to competition. Toyota, aided by its new product offerings and strong financial muscle had successfully used this scenario to surpass Ford and affect a dramatic increase in its sales figures. In November 2003, Toyota announced its financial results for the half-year ended September 30, 2003. Business Strategy | Case Study in Management, Operations, Strategies, Business Strategy, Case Studies The company reported a 23% increase in net income (as compared to the corresponding period of the previous year) to $4.4 billion on revenues of $69.7 billion. This took Toyota way ahead of World's top three automobile makers (at that time) by sales, General Motors (GM), Ford Motors (Ford) and Daimler Chrysler. Its market capitalization of $110 billion (on November 05, 2003) was more than the combined market capitalization of these three players. (See Table I). Given the fact that in 2003, these top three companies were struggling to maintain their sales and profitability targets, Toyota's performance was termed remarkable by industry observers (See Exhibit I for the company's financials). Toyota had emerged as a formidable player in almost all the major automobile markets in the world. Interestingly, one of its strongest markets was the US, the world's largest automobile market and the home

turf of Ford and GM. Toyota had emerged as a strong foreign player in Europe as well, with a 4.4% market share. In China, which the company had identified as a strategic market for growth in the early 21st century, it had a 1.5% market share. The other major markets in which the company was fast strengthening its presence were South America, Southwest Asia, Southeast Asia and Africa.3 Back home in Japan, it enjoyed a market share of over 43%. Analysts attributed Toyota's growing sales across the world to its aggressive globalization efforts that began in the mid-1990s. The company constantly strived to ensure that each of its market segments - Japan, North America, and Europe and other markets - generated onethird of the annual sales (See Exhibits II and III for revenues and revenue growth data in its core markets). This goal was at the heart of Toyota's three globalization programs - New Global Business Plan (1995-1998), Global Vision 2005 (1996-2005) and Global Vision 2010 (2002-2010). In the light of Toyota's intensifying globalization efforts, Toyota's competitors themselves stated that Toyota could not be taken lightly. GM's Chairman, John F. Smith Jr., said, "I would not say they will not make it. Toyota is an excellent company. They are very focused on what they do and they do it well, and that is what makes them great."4 Business Strategy | Case Study in Management, Operations, Strategies, Business Strategy, Case Studies Background Note Toyota's history dates back to 1897, when Japan's Sakichi Toyoda (Sakichi) diversified from his traditional family business of carpentry into handloom machinery. He founded Toyoda Automatic Loom Works (TALW) in 1926 for manufacturing automatic looms. Sakichi invented a loom that stopped automatically when any of the threads snapped. This concept (designing equipment to stop so that defects could be fixed immediately) formed the basis of the Toyota Production System (TPS) and later became a major factor in the company's success. In 1933, Sakichi established an automobile department within TALW and the first passenger car prototype was developed in 1935. Sakichi's son, Kiichiro Toyod (Kiichiro), convinced him to enter the automobile business, and this led to the establishment of Toyota in 1937. During a visit to Ford to study the US automotive industry, Kiichiro saw that an average US worker's production was nine times that of an average Japanese worker. He realized that to compete globally, the Japanese automobile industry's productivity had to be increased...

The Second Phase of Globalization Cho decided to focus more on localization - he believed that by doing so, Toyota would be able to provide its customers with the products they needed, where they needed them. This was expected to help build mutually benefiting, long-term relationships with local suppliers and fulfill Toyota's commitments to local labor and communities. Cho defined globalization as 'global localization.' Therefore, besides focusing on increasing the number of manufacturing centers and expanding the sales networks worldwide, Toyota also focused on localizing design, development and purchasing in every region and country... The 2010 Global Vision In April 2002, Toyota announced another corporate strategy to boost its globalization efforts. This initiative, termed the '2010 Global Vision' was aimed at achieving a 15% market share (from the prevailing 10%) of the global automobile market by early 2010, exceeding the 14.2% market share held by the leader GM. The theme of the new vision was 'Innovation into the Future,' which focused on four key components: Recycling Based Society; Age of Information Technology; Development of Motorization on a Global Sale; and Diverse Society (See Table III)... Business Strategy | Case Study in Management, Operations, Strategies, Business Strategy, Case Studies The Globalization Pay-Off By mid-2003, Toyota was present in almost all the major segments of the automobile market that included small cars, luxury sedans, full-sized pickup trucks, SUVs, small trucks and crossover vehicles. According to reports, while global vehicle production increased by 3.3 times since the early 1960s, Toyota's production had increased by 38 times. As a result of its localization initiatives, Toyota had 45 manufacturing plants in 26 countries and regions by this time, and sold vehicles in 160 countries (See Exhibit IV and V for Toyota's worldwide manufacturing operations and production details)... Which Way to Drive From Here? By the end of 2003, Toyota seemed to be well on its way to achieving its globalization goals - worldwide sales of 6.57 million units in fiscal 2004;

sales of 2.12 million units in North America by 2004; a 5% market share (800,000 units sales) in Europe by 2004; a 15% market share in the global market and a 10% market share in China by 2010. Analysts felt that the following factors were helping the company in its quest to become a truly global automobile major: strong financial condition, globally efficient production system, unique corporate culture, and the ability to develop a product range that met the unique needs and desires of customers in different regions. Question: (4 5 = 20) 1. What marketing strategies does Toyota use? 2. What are the problems faced by Toyota? 3. Why Toyota is so successful in the market? 4. What was the end result of Toyota's crisis management situation?