Toyota Motors Company (TM) is a Japanese-based, publicly listed multinational company. Its world headquarters is located in Toyota City, Japan, and Akio Toyoda is its current CEO. He has been in the position since 2009. The company manufactures a diverse line-up of vehicles all around the globe. The vehicles range from small cars and sedans, to SUVs and trucks. However, Toyota does not only makes cars. The company has three main business segments. One segment, and perhaps the one that people are most familiar with, is the automobile segment. This segment constitutes of the design, manufacture and sales of automobiles. The other division represents the financial segment of the company.
This segment establishes financial services related to the sales of the company’s products, as well as the leasing of vehicles and equipment. There is a third, non-automotive, business segment. This segment involves the design, manufacture and sale of housings, as well as information and communication business. The company’s philosophy is to seek continuous improvement, or kaizen. Its global vision is their commitment to quality, while providing constant innovation and respect for the planet. Formally, Toyota is in the auto manufacturers industry, under the consumer goods sector.
The automobile segment is its largest division, and the company carries three different brands: Toyota, Scion, and Lexus. The Scion brand is marketed to the younger generation, while the Lexus brand is marketed for people looking for “prestige luxury.” The company operates 75 manufacturing plants across 28 countries globally, and markets vehicles in more than a 170 countries, thanks to the support of a 320,000 strong workforce. There are seven Toyota regional headquarters spread out the globe: three in North America, one in Europe, and another three in Asia.
North America’s regional headquarters are all located in the United States, the one in Europe is located in Belgium, and the ones in Asia are located in Singapore, Thailand and China. I would like to point out that one of the US regional headquarters is located very close to this area; it is located in Erlanger, KY. The plant is called TEMA, and it is responsible for Toyota’s engineering design and development, R&D and manufacturing activities in the US, Mexico, and Canada. Also, the Georgetown, KY manufacturing plant is Toyota’s largest plant outside Japan, and it builds the Avalon, Camry (both normal and hybrid), and the Venza sedan crossover. Toyota depends heavily on sales from North America and Japan.
According to the company’s annual report for the fiscal year of 2012, Japan accounted for 39.2%, and North America accounted for 25% of total sales. Asia (except Japan) accounted for 16.8%, and Europe accounted for 10.3% of global sales. Latin America, Oceania, and Africa accounted for 8.7% of total sales. According to Yahoo Finance, the company’s total revenue for the 2012 fiscal year was of 226 billion dollars, an increase of 26% compared to the same period last fiscal year. The company also sold 9.75 million cars globally in that same year, setting a worldwide record. Toyota has been the leader of car sales for the past three years, except in 2011, when an earthquake and a tsunami hit Japan badly.
During that time, Toyota suffered, and ended the year in third place, behind Volkswagen and General Motors. However, in 2012, the company bounced back taking the top of the ranking again. Toyota sales in the United States surged 27 percent. In Japan, sales rose 35 percent, helped by government incentives for fuel-efficient cars. In Europe, sales went up 2%. Those increases were enough to offset a decline in sales in China, where Japanese businesses have been hurt by consumer boycotts due to a territorial dispute between the two countries. Toyota’s most profitable products are the Toyota Camry, Corolla, and Prius.
Their single most popular product worldwide is the Toyota Corolla, with 30 million units sold all over the globe. The company also produces many hybrid cars, and a curious fact is that Toyota alone sells more hybrids than all other manufacturers combined. Based on my research, the company’s top competitors are General Motors, Ford, and Honda. It also competes with Nissan, Volkswagen, Opel, Renault, Peugeot, Kia, and Hyundai. One of the major events in the history of Toyota was the first overseas vehicle plant, built in Brazil in 1962.
Another significant event was Toyota’s first US car assembly plant in California in 1984, which was the result of a joint venture with General Motors. In 1989, Toyota starts the luxury Lexus brand in North America. In 1992, Toyota introduces the first European car plant in Britain. Issues and concerns about global warming enabled Toyota to come up with environment friendly products, such as the Prius, which in 1997 was the first mass-produced hybrid car offered. In 2006, Toyota’s global sales of 8.8 million vehicles exceed General Motors’ by 128,000 units, making it the world’s biggest automaker.
Some of us may not be familiar with it, but Toyota is very active in the Corporate Social Responsibility (CSR) world, and here are some quick facts. About 99% of scrap metal from manufacturing plants is recycled. In addition, Toyota vehicles are 85% recyclable. Its manufacturing plants have received environmental awards for reducing the amount of materials sent to landfills. This shows that the company cares about the environment, and the people who live in it. So far, we have talked about what Toyota does and the numbers they have accomplished.
Now, allow me to explain how they achieve them. Toyota’s production system serves as a benchmark to many companies not only in the industry, but in other sectors as well. The Toyota Production System (TPS) was established based on two concepts: The first is called “jidoka”, which can be loosely translated as “automation with a human touch”. This means that when a problem occurs, the equipment stops immediately, preventing defective products from being produced.
The second is the concept of “Just-in-Time”. Toyota was the pioneer of the JIT system, which essentially means making only “what is needed”, “when it is needed”, and “in the amount needed”. This is a different approach compared to the Material Requirements Planning (MRP) system of most companies. MRP forecasts demand and orders in large quantities, with the objective to reduce per unit cost. JIT, on the other hand, aims to eliminate waste by ordering in small batches; in other words, it is an operation with low inventory.
In terms of where the raw materials come from, for cars assembled in the US for instance, come from suppliers located in Kentucky, Ohio, Indiana, Michigan, Texas, and California, where the manufacturing plants are located. Raw materials for cars manufactured in Japan come from the central city of Nagoya, and neighboring countries such as Thailand. Raw materials for cars manufactured in Europe come from European countries, and Latin American produced cars receive parts from local firms as well.
What we can infer from this pattern is that most suppliers will be located nearby Toyota manufacturing facilities, so that shipping costs remain low. Part of Toyota’s philosophy is to create and maintain long-term relationships with its suppliers, and they do so with the objective to reduce costs. In conclusion, Toyota is a very powerful company in the automaker industry. The company is known for making safe, reliable cars. It is also active in the corporate social responsibility world, meaning that they care about the environment and all the stakeholders involved.
They serve many different markets from all around the world, and they offer a diverse line up of high quality products to satisfy consumer demands. Their production system is world-class; it is being mimicked by other companies, and studied by many scholars. The Toyota Production System enables them to make the safest automobiles at the lowest cost, and to develop new products faster than anybody else. Toyota’s spirit of continuous improvement may be one of the main reasons for its global success as the best quality carmaker in the world.