International Business- Toyota

Toyota Motor Corporation was founded by Kiichiro Toyoda in 1937. Kiichiro traveled to the United States where he visited a number of automobile production plants and when he returned to Japan, he produced his first prototype vehicle. General Motors and Ford were already operating their assembly plants in Japan, but this did not stop Toyoda to do what he wanted. (Abilla, 2007) Toyoda wanted to develop engines that were highly fuel efficient because of the few natural resources Japan had. In the year 1939 the company established a research center to gather findings on battery

powered vehicles. The following year they opened Toyoda works which was founded for the production of both machine tools and auto parts. (Abilla, 2007) Since American Manufactures such as General Motors were concentrating their efforts on medium sized and larger cars, Toyota’s executives thought it was a better idea to deal with small cars to avoid head on confrontation with the big rivals. In 1950 Toyota invested in modern production facilities which increased their efficiency almost immediately.

In the year 1980 Toyota was the second larger automobile producer after General Motors. (Abilla, 2007) Besides being in the car industry, they also own Division Toyota Financial Services which plays a crucial role in financial sector and also gives loans and financial assistance to people in need of capital. However Toyota Motors limited also made huge losses of about 5 billion dollars due to internal issues. However this has not tarnished the image of Toyota and it was still in huge demand and consumers were and are still crazy about their cars. (Biswas, 2009)

2. TOYOTA SUCCESS Toyota has outdone General Motors and replaced them as the world’s largest automobile maker. There are various factors that have enable Toyota to be the leader. They achieved competitive advantage through their corporate philosophy known as the Toyota Production system which depends on human resource policy that demands employee creativity and loyalty as well as their highly efficient network of suppliers and components manufacturers. The Following are various factors that helped Toyota reach the number one spot. 2. 1 TOYOTAS CORPORATE CULTURE

One of the reasons why Toyota has succeeded in the global marketplace is because of its corporate philosophy (the rules and attitude that governs the use of its resources. ) High productivity helped Toyota Penetrate the world car market and establish a worldwide presence. The company’s approach to both product development and distribution is very consumer friendly and market driven. Toyotas philosophy ensures that the employees are empowered so that they can be creative, seek to continuously improve, and be innovative by encouraging participation among them.

This closeness and empowerment has led to the employees of Toyota being very loyal. It is obvious a work place with high morale and job satisfaction is more likely to produce reliable, high quality products at affordable prices, and that is the environment Toyota has managed to create all over the world in all their plants. According to Shimizu (2009), Toyota has succeeded also because it creates contradictions and paradoxes in various areas and aspects of the organization life.

Employees are always facing challenges and problems’ forcing them to bring in new idea’s which is the reason why Toyota has gotten better and better every single day. Toyota treats their employees not just as a pair of hands but as knowledge workers who collect and store the wisdom of experience to keep the company moving forward. This is why Toyota invests heavily in people and organizational capabilities, and harvests ideas from everyone and everywhere including a floor man. These ideas are then used to constantly adjust and readjust the goals, strategy and organization in small but significant steps.

This culture of contradiction and paradoxes generates innovative ideas that Toyota has used to move ahead of General Motors. General Motors have earned a reputation of being able to produce high quality cars, however they are unable to overcome the advantage that Toyota has in human resource management, supplier networks (will be discussed later) and distribution systems as they have overlooked them. 2. 2 TOYOTA PRODUCTION SYSTEM This is a system developed by Toyota Motor Corporation to provide best quality, lowest cost, and shortest lead time through elimination of waste.

(MAS, 2010) The Toyota production system has involved many concepts which form to improve production efficiently. These concepts are defined below. (Kentent, 2009) (a) Just In Time (JIT) - this is an inventory strategy that is used by Toyota so that it reduces inventory and the costs associated with holding unsold goods. (b) Jidoka- A Japanese world that refers to having an automated production with the intervention of human. This simply means in case there is an error when producing a car, the production stops and a human identifies and resolves the problem.

(c) Kaizen (Continuous Improvement) - This is the process of gradual change for the better. Employees are encouraged to share knowledge and ideas as inputs, and improve process which in turn will make their jobs enjoyable and improve the efficiency of the production line. (d) Andon- This is a visual control where visual signs such as graphics are used to guide workers on how the production process and work environment should flow. (e) Pokayoke- This is a process of identifying the cause of an error or problem and creating a plan to prevent such problem from occurring again.

(f) Muda- This refers to the deadly wastes which are over production, movement and waiting of operator or machine, conveyance, processing time, inventory and correction. The Toyota production system has benefited Toyota by having reduced set up times, small-lot production (producing variety of things in small quantities), employee involvement and empowerment, identification of errors and correcting immediately, equipment Maintenances, pull production, and involvement of the suppliers. This enabled Toyota to have fewer production hours per car than Ford, Chrysler and General Motors all combined together.

2. 3 SUPPLIER RELATIONSHIP Toyota has created a trend where emphasis has been put on relationship with the suppliers rather than price so that continuous learning and improvement can be achieved. American heavy weights, General Motors have failed at attempts to do the same. Having strong relationship with suppliers has good, hard and solid business results as is proved by Toyota. The advantage Toyota had with emphasis of this relationship was having faster production times, designing of new cars in 12-18 months instead of 2-3 year like General Motors and also reduced manufacturing costs.

Outsourcing manufacturing operations to suppliers has enabled Toyota to increase profit, time to market, and customer satisfaction while decreasing costs and keeping up with demands of consumers. Toyota source almost 70% -80% of their manufacturing costs from outside suppliers and some of the cost cutting ideas that made Toyota Camry successful came from these suppliers. American Companies such as General Motors went their own way by believing having immediate benefits of low wage costs were much higher than investing in supplier relationships.

Toyota succeeded by combining these elements to form this improved and efficient supplier relationship. (a) Conducting joint improvement activities to be efficient and effecting in all process (b) Sharing of information intensively, but selectively. (c) Developing suppliers technical capabilities through learning from Toyota (d) Supervising suppliers (e) Turing the perception of supplier rivalry into an opportunity to work together with each other (f) Understanding how the suppliers work.

Toyota allows training the suppliers engineers when they are developing a new technology by giving them extensive training which allows the suppliers to merge with manufacturers (Toyota) processes and eventually develop their own ideas. The opposite also happens where Toyota employees also learn from the supplier’s way of working and apply that in Toyota. This two way strategy benefits both the suppliers and Toyota itself. (Carey, 2005) 2. 4 STRATEGIC ALLIANCE Strategic alliances are the corporate equivalent of friends with benefits.

Partners in a strategic alliance combine forces to achieve strategic goals of their own without getting married (being partners) exclusively. Toyota has been involved in various strategic alliances with Subaru, Caterpillar, and GM. Strategic alliance has many benefits to it as it did with Toyota. The strategic alliances between Toyota and Fuji have enabled both automobile companies to offer affordable cars and sustain their competitive advantage in the auto industry. Consumers are more concerned now about the carbon emissions of conventional gasoline powered cars which has forced government to put regulations on pollution.

Toyota responded by introducing a gas electric Prius hybrid in the year 1997 which was a huge success. The collaboration between the two companies involved the research and development of the first Subaru (Fuji) hybrid. Fuji decided then to use Toyotas Technology in manufacturing its first gas electric car. This agreement of strategic alliance has benefited both as Subaru is using Toyotas Prius technology while Toyotas benefits from the skill of Subaru’s human capital. Alliance enabled Toyota to lower costs, increase production and have increased market scope.

(Hill, 2009) 2. 5 SUPERIOR TECHNOLOGY AND QUALITY The advantage with Toyota is that all their production facilities are set up in such a way that all production facilities around the world are able to easily add new models or modify production of existing models within a short period of time, and this increase flexibility and ensure quality is not compromised. Toyota use robots widely in mass production but also allows a choice between robots and human labor depending on profitability, which ensure flexibility to handle everything from low volume to mass production.

Toyotas quality control is very strict and ensures that correct materials and parts are used and fitted with precision and accuracy. Even with the assurance of the accuracy, team members in Toyota carry out various inspections during the production process. In case any problem occurs during production of any vehicle, any team member is authorized to pull a rope (Andon cord) to halt the production and restart only when the problem is solved. General Motors takes 34 hours for producing a vehicle while Toyota takes only 27 hours. This shows why Toyota has overtaken General Motors and also the technical superiority of Toyota.

Stricter regulations on pollution and tougher carbon emission rules are putting a lot of pressure on automakers to upgrade their powertrain technology which is used to improve the efficiency and performance of the engines. General Motors introduced the hybrid powertrains, cylinder deactivation, six speed transmissions and direct injection gasoline engines but its costly bet on fuel cells has yet to pay off. Toyota also is developing its own plug in hybrid, though they are at a lesser risk as they have Prius to fall back on which shows how Toyota makes sure of having a plan B or contingency plan. (Greimel, 2008) 2.

6 RE-ENGINEERING Re-engineering has player a huge role in the success of Toyota. It is possible for every company to have a failed product in the market even if they are the world’s best organization. For example if Toyota introduces a new Toyota model in the market but fails to impress in the market. Toyota will have another strategy whereby they will re-engineer the model i. e. alter the failed Toyota model using the same production facility which ensures the company does not accumulate huge losses and also saves a lot of money by using the same production facility to create a new successful model in the market.

However this is not the same case with General Motors who scrap the entire manufacturing facility as well as employees working in that facility are pushed out. This is another reason why Toyota has an upper hand when reasoning about cost cutting, cheap vehicles, reducing waste and having successful models. 2. 7 STRATEGIES AND CULTURE The following are some of the very important strategies that helped Toyota reach the number one spot. (a) Long Term planning Toyota never responds to trends and fads. They tend to look to the future and develop cars that will have a lasting effect rather than a trend.

For Example the introduction of Toyota Prius in 2000 is yet famous for being a pollution free car. (b) Studious speediness Toyota takes a long time before it reaches a conclusion of a decision which has frustrated suppliers, but this is because they extensively research their options and make sure there are in agreement with the stakeholders. Once Toyota decides to build a car, they can move the product to the market faster than all its competitors including GM. (c) An open mind Toyota is able to understand the trends and tastes of consumers and sometimes predicting American tastes better than American companies.

This is due to studying theories of management Guru W. Edwards Deming. (d) Obsession with waste Toyota often looks to reduce waste whether it is regarding time, excess material or scrap of trash. Companies such as General motors, would move on to something else if the previous thing is going well and is profitable while Toyota, if they can fix a door in 8 minutes, they will look to reduce it to 4 and then 2 minutes. (e) Humility Toyotas company culture emphasizes and encourages teamwork over individual stars.

The people in the top hierarchies are friendly, down to earth and don’t see themselves bigger than the company, employees or customers. 3. CHALLENGES FOR TOYOTA IN THE ECONOMIC AND FINANCIAL CRISIS. Toyota will have to readjust its strategy to be able to stay ahead in the automobile industry. The following are some of the challenges they will face: (a) Producing vehicles demanded by the consumers at affordable prices yet being able to make profits as desired (b) Keep improving on producing more fuel efficient cars so as to have demand for those cars as economic and financial

crisis will force consumers to have less disposable income. For them to purchase the car, fuel cost will play a huge role in their decision. (c) Ensure creativity and innovation is constantly improving while also keeping the costs low. (d) Keeping the number one position and having a competitive advantage on competitors investing more internationally as overseas market are being dominated by General Motors. (e) Collaborating with supplier to work on how to reduce cost associated with various things such as parts of vehicles so as to have low cost of production. 4. CONCLUSION

Toyota has indeed become one of the most successful, admired and imitated companies in the world. Throughout its history, Toyota has had to overcome various problems but with its commitment to improve they have moved way forward than even companies that were born before Toyota. Hard work, research, innovation, new ideas, relationship network, technology and humility has all played a huge role in Toyotas success. Continuous improvement, production prowess and technical innovation in everything Toyota did has enabled them overcome General Motors as the number one automaker in the world.

The number one position is not guaranteed to Toyota, which means they will have to be on their heels watching every step their competitors make so that they readjust their strategy to sustain the competitive advantage. 5. 0 REFERENCES Hines. P, Rich. N (1998). Outsourcing competitive advantage: the use of supplier associations. International Journal of Physical Distribution & Logistics Management, 28(7), 524-546. Retrieved on August 20, 2010 from http://www. emeraldinsight. com/journals. htm? issn=0960-0035&volume=28&issue=7&articleid=846688&show=pdf Abilla. P (2007).

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