Toyota: Where the Future Is Available Now

[Video 3-3: Toyota Video Case (kerin.tv/cr9e/v3-3)]

Synopsis

This case describes Toyota's transition from an automobile company to a mobility company. The shift is discussed in the context of two key business values: The Toyota Way and The Toyota Effect. In addition, the case presents the company's environmental initiative called Toyota's Environmental Challenge 2050 and discusses the introduction and marketing of its first hydrogen fuel cell vehicle, the Mirai.

Background

Kiichiro Toyoda started the company in Japan as a manufacturer of weaving looms. The company's first vehicle was the Toyopet, and a subsequent vehicle, the Toyota Corolla, became one of the best-selling cars in the world. Other Toyota brands include Lexus, Hino, Ranz, and Daihatsu. Today, Toyota is ranked number five on Fortune's list of the world's largest corporations, with sales of $254 billion and 369,000 employees.

The company's corporate philosophy is "seeking harmony between people, society, and the global environment, and sustainable development of society through manufacturing." The philosophy has been supported by two statements of business values:The Toyota Way and the Toyota Effect. The Toyota Way is made up of two pillars, respect for people, and continuous improvement. The two pillars are supported by five business practices: challenge, kaizen, genchi genbutsu, respect, and teamwork. The Toyota Effect refers to Toyota's ability to use its resources to create a positive impact on society, and people, and the planet. Examples of some of these resources include financial support through grants, networking opportunities, and access to Toyota's intellectual capital.

To guide Toyota's environmental and sustainability efforts, Toyota's current president, Akio Toyoda, launched The Toyota Environmental Challenge 2050. The challenge specifies six actions that seek to reduce the negative factors associate with automobiles and to create a net positive impact on society and the planet. The first three actions seek to eliminate emission from building, operating, and disposing of cars. The other three actions focus on water, recycling, and environmental responsibility. One of Toyota's first efforts at sustainability was the Toyota Prius, a hybrid vehicle that combines an internal combustion engine and an electric motor and has become the best-selling vehicle of its kind.

Another example of Toyota's focus on sustainability is its investment the hydrogen fuel cell technology used in its new Mirai. The Mirai mixes oxygen from the surrounding air with hydrogen stored in a tank to create electricity which is used to power an electric motor. The only byproduct of the process is water, which drains out a tailpipe. Because the technology is new to consumers, the Mirai marketing activities focus on educating consumers about topics such as safety, convenience, and range. Product managers use integrated marketing programs that include traditional advertising such as television and also many forms of social and online media.

In the future, Toyota will be expanding the applications of its zero-emission fuel cell technology to heavy-duty trucks, buses, and power stations. Toyota has also invested in ridesharing companies Uber and Grab and many other initiatives that will provide "mobility for all."

Video Case Questions

1.Describe Toyota's transition from an automobile company to a mobility company.

2.How does Toyota's corporate philosophy relate to the concepts of profit responsibility, stakeholder responsibility, and societal responsibility?

3.How does Toyota's Mirai fit with the goals of the Challenge 2050 initiative?

4.What new mobility products and services is Toyota considering for the future? What activities would you recommend for Toyota as it prepares for the future?

Epilogue

Global automobile sales recently reached 97 million vehicles and auto industry experts predict total sales of 114 million vehicles by 2024. The growth in vehicle sales is anticipated due to (a) significant growth in the China, Hong Kong, and Taiwan markets, and (b) the trend toward the "electrification" of the automotive industry. Many consumers may purchase low/no emission vehicles in anticipation of new regulations and possible bans related to fossil-fueled vehicles. France and Britain, for example, have already decided to ban internal combustion engines by 2040. In response, Volvo recently announced that it would begin a transition to manufacturing only hybrid and electric vehicles. In the U.S. automobile sales are at 16.5 million vehicles and are expected to reach 17.6 million by 2020. Currently, hydrogen fuel cell vehicles represent a very small percentage of total vehicle sales, but forecasts indicate growth to approximately 30,000 vehicles per year by 2020.

Toyota's commitment to mobility will be increasingly visible in the future. For example, Toyota will be the official "mobility partner" of the 2021 Olympics. At the Games, Toyota plans to introduce two new vehicles: (1) the Concept-i, which is an egg-shaped electric vehicle that senses a person's emotion and talks with the driver using artificial intelligence, and (2) the e-Pallette, a large self-driving urban people mover. In addition, Toyota is testing a car-share program that allows consumers to use a smartphone app to rent a vehicle by the hour or by the day with no human interaction. The target audiences include one-car families, students who can't afford a car, and businesses without vehicle fleets. Toyota is also developing new vehicle-to-vehicle communication technology which allows vehicles to anonymously communicate location, speed, and acceleration with one another and with traffic lights. These cars could provide guidance and alerts to drivers and vehicles beyond the range of on-board cameras and sensors. Finally, Toyota is working with governments around the globe to develop policies that encourage the purchase of lower emission vehicles, reduce the use of current vehicles, and encourage the scrapping of old high-emission vehicles.