Toyota Business Model

Introduction

The success story of Toyota Motor Corporation (TMC) is becoming a world famous school example for every business owner that wants to grow its company to a global level, take it through difficult times and make it number one in the world. Toyota which was founded as a public company in 1937 entered in 1957 the US market for the first time. At that time it seemed almost impossible for Toyota to compete with the world leading car manufacturer General Motors and the number one importer Volkswagen.

However, by 1970 Toyota managed to become the fourth largest car manufacturer in the world and by 1975 it jumped over Volkswagen to become the largest car importer in the U.S.. In the late 80’s Toyota started to develop new models and decided to enter the luxury market by the foundation of Lexus in ’89. Because of its success a further branching of the portfolio was maintained during the 90s by developing larger and more luxurious models (e.g. pick-ups, sport models, suv’s).

Toyota also began production of today’s world-bestselling hybride car, the prius, in 1997. While many car manufacturers were struggling due to difficult times in the early years of 2000, Toyota managed to continue its growth and became the world’s biggest car manufacturer in 2007. An overview of the results of the three biggest car manufacturers is given for 2010. How did a Japanese car manufacturer managed to overthrow GM, Ford and Volkswagen and become the world’s biggest car manufacturer in a time of crisis? Top 3 Automakers Global, OICA, 2010 Group Units % Share Toyota 8,557,351 11.0 GM 8,476,192 10.9 Volkswagen 7,341,065 9.4

A succesfull strategy It is definitely Toyota’s unique strategy, often referred to as the toyota way, that made Toyota the greatest. There are 14 principles based on 4 guidelines that form the base of the Toyota way. The philosophy penetrates all the company levels, ranging from top management to R&D, production and customer services. The Toyota way

The first guideline of the Toyota was is Long-term thinking as a basis for management decisions . More than once, strategic decisions - made on the long term - gave Toyota the possibility to take advantage out of crisis periods. Already a while before the first oil crisis popped up, Toyota focused on fuel efficient car design. Many of the competitors did not see any value in fuel efficient cars. It was only from the oil crises in the early 70’s that customers discovered the advantage of fuel efficient cars developed by Toyota. The result of long term thinking helped Toyota to gain ground on the US market.

Even today, Toyota benefits from their early design and development of the Hybrid car. Strategic joint ventures with Panasonic, Fuji and Tesla Inc. are no coincidence, they fit in the long term strategy to gain know how about battery technologies. The second guideline is known as the right process will produce the right results and forms one of the basic principles for Toyotas Production System (TPS). Process flows are designed to bring problems to the surface. By standardizing tasks and using visual control problems are discovered in an early early stage which guarantees high quality from the very first time.

To avoid overproduction a “pull’ system is used instead of the classical “push” system. The second principle greatly reduced lead time and costs, while improving quality. As a result Toyota transformed from a low-quality Asian car manufacturer to a high quality car brand. [margins of 8% instead of 6%] The third principle is develop your people. Toyota always believed in adding value to the organization by developing your people and partners. All employees should be informed and follow the company philosophy. Grow leaders who thoroughly understand the work, live the philosophy and teach it to others. This should even be extended to outside the company. Respect your extended network of partners and suppliers by challenging them and helping them improve.

The last guideline claims that continuously solving root problems drives organizational learning. This emphasizes through understanding, implementing consensus-based solutions an continual reflection and improvement. Managers are expected to personally evaluate operations in order to have a better first-hand understanding of situations and problems. The main goal of these principles is to develop a self-learning organization. Result

Low cost higher margins Quality Brand image Continuous improvement up to date, perfect position for the future Nose for growth opportunities green energy market

  • Product differentiation (lexus for luxury, scion for youth)