Company Background of Toyota Motor Corporation

1.Company Background

Toyota Motor Corporation was founded in Japan on August 28, 1937. The headquarters of Toyota Motor Corporation are located in Aichi, Japan. The headquarters for Toyota’s U.S. operations is located in Torrance, CA. Japanese multinational automaker Toyota employed 300,734 people worldwide, and was the third-largest automobile manufacturer in 2011 by production behind General Motors and Volkswagen Group.

Toyota is the eleventh-largest company in the world by revenue. In July 2012, the company reported it had manufactured its 200-millionth vehicle. The company was founded by Kiichiro Toyoda from his father’s company Toyota Industries to create automobiles. Toyota Motor Corporation group companies are Toyota including the Scion brand, Lexus, Daihatsu, and Hino Motors.TMC is part of the Toyota Group, one of the largest conglomerates in the world.

Toyota has factories in most parts of the world, manufacturing or assembling vehicles for local markets. Toyota has manufacturing or assembly plants in Japan, Australia, India, Sri Lanka, Canada, Indonesia, Poland, South Africa, Turkey, Colombia, the United Kingdom, the United States, France, Brazil, Portugal, and more recently, Argentina, Czech Republic, Mexico, Malaysia, Thailand, Pakistan, Egypt, China, Vietnam, Venezuela, the Philippines, and Russia.

Stock value of Toyota

2. Country analysis

Toyota Motor Sales, USA Inc. was eastablished on October 31, 1957. The first Toyota retail dealership was opened in Hollywood, CA and it was called Toyota Motor Sales, USA, Inc. Mission statement is “Moving People in a Better Way. Toyota’s mission statement is really a global vision about how to move people around the planet in a better way. Toyota has become one of the best automobile companies and one of the most popular car brands in the U.S. automobile industry largely because it is able to live up to its own lofty mission statement:

“Toyota will lead the way to the future of mobility, enriching lives around the world with the safest and most responsible ways of moving people”. Toyota’s management philosophy has evolved from the company’s origins and has been reflected in the terms “Lean Manufacturing” and Just In Time Production, which it was instrumental in developing. Toyota’s managerial values and business methods are known collectively as the Toyota Way.

In April 2001, Toyota adopted the “Toyota Way 2001”, an expression of values and conduct guidelines that all Toyota employees should embrace. Under the two headings of Respect for People and Continuous Improvement, Toyota summarizes its values and conduct guidelines with the following five principles:

✓ Challenge✓ Kaizen (improvement)✓ Genchi genbutsu (go and see)✓ Respect✓ TeamworkAccording to external observers, the Toyota Way has four components:

➢ Long-term thinking as a basis for management decisions ➢ A process for problem-solving➢ Adding value to the organization by developing its people ➢ Recognizing that continuously solving root problems drives organizational learning Toyota’s marketing efforts in North America have focused on emphasizing the positive experiences of ownership and vehicle quality. The ownership experience has been targeted in slogans such as “You asked for it! You got it!” (1975–1979), “Oh, what a feeling!” (1979 – September 1985, in the US), “Who could ask for anything more?” (September 1985 – 1989), “I love what you do for me, Toyota!” (1989–1997), “Everyday” (1997–2001), “Get the feeling!” (2001–2004), “Moving Forward” (2004–2012), and “Let’s Go Places” (2012-present).

Toyota’s success was a result of a significant cost advantage over its American competitors. Toyota’s cost advantage was the result of its innovative Toyota Production System (TPS). Detroit carmakers were unwilling to adapt new manufacturing techniques and therefore lost tremendous market share.

Toyota introduces the smaller Corolla in 1968. Toyota hopes that by introducing a smaller car they will differentiate themselves from Detroit cars, which at the time are big heavy cars loaded with horsepower and options. By entering the American market with small cars, they prevent head-on competition with formidable American car companies. Toyota has a first mover advantage in small cars, able eventually to achieve terrific economies of scale in this category.

Toyota’s pricing is geared towards lower to middle class customers, not the customers who are buying cars loaded with expensive options. In the 1950s, American car companies have huge economies of scale. In 1952, the average American car costs $1500 to build, while the average Japanese car costs $2,950 to build. To overcome these barriers to entry, Toyota hires manufacturing and quality control consultants from the United States. First among these is W. Edwards Deming, a man shunned by American car manufacturers. Deming’s theory puts quality at the center of the entire manufacturing process.

Toyota follows Deming’s advice and ruthlessly implements his quality control techniques. Toyota improves on Deming’s methods, culminating in the creation of the Toyota Production System. By 1964, the Toyota Production System has resulted in economies of scale. Now Japanese car companies produce cars more cheaply, with the average Japanese car costing $1,400 to build and the average American car costing $1,900 to build.

American car companies are now suffering from a first mover disadvantage. American cars companies are stuck with outdated equipment and outdated production methods. To take advantage of new production methods, American car companies would have had to scrap old plants and replace them with the kind of state-of-the-art plants the Japanese were developing.

American car companies exposed in the low end. Detroit attempted to build small cars but missed the point. Ford introduced the Maverick in 1969 and the Pinto in 1970. GM introduced the Vega in 1970. American small cars were cheap but not reliable like Japanese cars. American car companies now seen as getting sloppy about quality.Toyota gave dealers 18%-20% of gross profits to induce them to sell Toyota cars. American car companies only gave 12%-13% of gross profits.

3.Social Responsibility ethics

Toyota promotes its brand and high quality image through exposure and coverage of its activities in motor shows,sports sponsorship, motor sports and cultural endeavors. It races cars on 3 continents and sponsors soccer, baseball and football teams. At Toyota, their commitment to the environment goes beyond their products.

They also support nonprofit organizations that promote environmental stewardship, education and research. Environmental Programs also reflect their commitment to representing and engaging diverse populations and communities.In 2008, they launched TogetherGreen, a $20 million, five-year alliance with Audubon to fund conservation projects, train environmental leaders, and offer volunteer opportunities to significantly benefit the environment.

4. Conclusion

Toyota used the cost advantage of the Toyota Production System to invade U.S. market. The TPS system used less of everything: less human effort in the factory, less manufacturing space, less investment tools, and half the engineering hours to develop new products compared to American and European manufacturers. System of innovative workforce practices included lifetime employment and pay scale based on skills to increase motivation.

Lean production involved building small batches of cars with a system centered on quality and problem solving. TPS used multi-skilled workers unlike the narrow tasks assigned to workers under mass production. To invade the U.S., Toyota had to engage in fierce competition both in Japan and in the U.S. In the United States, Toyota had to compete both against American car companies and West German car companies like Volkswagen. References