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ASSIGNMENT

ON
STRATEGIC MANAGEMENT
&
APPLICATION
(Submitted on September, 14th 2009)

SUBMITTED TO
RESPECTED PROF. SHAM SHARMA SIR,
FACULTY IPM

SUBMITTED BY
SATISH TIWARI
SHAILENDRA KR. JHA
SHADAB AHMAD
SACHIN TOMAR
SHAKSHI SHARMA
Toyota Motor Corporation (TMC) or Toyota is the Japanese multinational
organization and the world largest automobile manufacturers, selling 7.5 million
models annually on all five continents. At present, it employs 70,000 people. Like
many enterprises that have made their mark in history, Toyota has been shaped
by a unique set of values and principles that have their roots in the company's
formative years in Japan.

The supply chain processes and strategies of Toyota are the fundamentals in its
daily operations. By adhering Just-In-Time (JIT) manufacturing and Toyota
Production System (TPS), Toyota emerges to be one of the world's largest
automaker.

The case details the globalization strategies adopted by one of the world's leading
automobile majors, the Japan-based Toyota Motor Corporation (Toyota). It
examines the company's evolution from being Japan's number one automaker to a
formidable competitor in the global automobile market by 2003. It examines the
rationale behind Toyota's decision to concentrate on global expansion and studies
the company's various globalization programs, focusing on the localization efforts.
The case also analyzes the problems faced by the company within Japan and
discusses the steps taken to overcome them. Finally, it examines the results of
Toyota's globalization strategies and discusses its future prospects in the light of
intensifying competition and demand saturation in its core markets, Japan and the
US.

Flashback of Toyota

Japan’s Sakichi Toyota (Sakichi) diversified from traditional family business of


carpentry into handloom machinery in 1897. Toyota Automatic Loom Works
(TALW) founded in 1926 for manufacturing automatic looms. Sakichi invented a
loom that stopped automatically when any of the threads snapped. This concept
(designing equipment to stop so that defects could be fixed immediately) formed
the basis of the Toyota production system (TPS) and later became a major factor
in the company’s success.

In 1933, Sakichi established an automobile department within TALW and the first
passenger car prototype was developed in 1935.
Toyota established in 1937.

Kiichiro Toyoda studied the US automotive industry during visit to Ford. In Japan
he customize the Ford production system where each process in the assembly line
produced only the number of parts needed at the next step on the product line.
This system was named Just-in-Time (JIT)

Toyota flourished during the second world war by selling truck and buses to the
army. The company launched its first small car (SA model) in 1947. During this
period Toyota went into downsizing and restructuring the company into separate
manufacturing and sales division. In 1950 Toyota Motor sales company Ltd was
formed.

By 1952 Toyota made a turnaround. In 1957 Toyota entered in the US market.

Toyota philosophy

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.

The Toyota Way has four components:

1. Long-term thinking as a basis for management decisions.


2. A process for problem-solving.
3. Adding value to the organization by developing its people.
4. Recognizing that continuously solving root problems drives organizational
learning

Analysis of marketing of Toyota

Toyota manufactures cars, which has a wide coverage from economic minibus to
luxurious cars, SUV. The brand on sell includes Crown, Reiz, Vios, Corolla, Coaster
and Prius. And Prius is the brand or car that Toyota has made a significant success
in American market. It is a hybrid vehicle.

Toyota has made its way to America. In 1957, Toyota exported to America at the
first time and established the selling company. In 1984, a joint venture was
established with General motor. Co. And in 1997, Prius was first in production and
had a launch in America. It was such a great success that Toyota conquered
American market.

It is well known fact that American love cars so much. And due to oil crisis,
Americans changed the need structure for cars, converting their needs to oil
saving cars. While American car manufactures lacked producing such cars, then
Toyota caught that opportunity and tried to occupy this niche market.
Questions


Study Toyota’s evolution into a market leader in the Japanese automobile market
over the decades. What were the factors that helped Toyota attain (and sustain)
the leadership status in Japan? What problems did the company face in this
market later on? Analyze and discuss the efforts made to overcome this problem.

In 1995 Hiroshi Okuda became the president of Toyota. To improve company’s


sales in domestic market Toyota adopted following strategy:-

 Okuda chose to focus on the dealer network. Under this strategy Toyota
took initiative to improve communication with its dealer.
 It offered more incentives to increase sales and encouraged them to attract
more prospects for test drives.
 It identified the younger generation as the means to increase market share
in Japan. Under this strategy it took aggressive measure to attract
youngster to its product.

It also realized that the dealer outlets could play an important role in attracting
younger customers. It recognized some functional discrepancies among its dealer
outlets—Dealer outlets were located too close to each other in some places and
even displayed the same model. Toyota adopted following strategy.

 Toyota stopped supplying similar models to such dealer outlets to avoid


unnecessary price competition.
 It decided to take a strict stance with who failed to meet the targets and
withdraw the monetary incentive scheme for them.
 It also asked some of its dealer to restructure and rename their outlets in
such a way as to attract younger buyer.
 The company also invested around $200 million on advertising in fiscal
1995.

AS a result of Okuda’s strategy Toyota’s performance began picking up. As the


financial base strengthened. Okuda decided to focus on improving the global sales
performance, and took Toyota on the path of aggressive globalization.

The company’s overseas production increased from 1.22 million units per year in
1995 to 1.54 million unit per year in 1998.

While Toyota was drastically increasing its market share in the US, it was finding
difficult to perform well in Europe and Japan.
Its market share was still below 40% in Japan despite aggressive marketing
efforts.

The above scenario was due to a host of reasons like

 Excessive capacity
 Choosy customers
 Surplus workforce
 Intensified competition within Japan.

In 1998, Japan sales accounted for mere 38% of the company’s total sales
compared to 52% in 1990. Also Toyota’s Japan sales contributed to a very small
share of its profits.

 By the late 1990s young buyers accounted for 30% of the customer base as
compared to over 45% in the late 1980s. In 1998, models from rival
companies such as Honda and BMW were more popular than the ones
offered by Toyota. According to reports, Japanese youngsters felt that
Toyota cars ‘lacked attitude’. Toyota realized that by losing its young
customers to other companies, it ran the risk of losing its future market as
well.

Alarmed by this scenario, Toyota embarked on an aggressive restructuring


exercise and started a new company, Virtual Venture Co. to design and sell cars
that appealed to the young generation. VVC experimented with many
unconventional sales strategies to improve the Toyota models to people, It built a
$83 million amusement park in April 1998, Where it displayed Toyota’s visions for
future models and also allowed people to design their own cars.

Beginning in 1999, the company rolled out many new cars specifically designed for
the young Japanese buyers. These cars such as Vitz compact, FunCargo compact,
and MR-S sports car, had the distinctive looks and attitude sought by these
buyers. More significantly, a majority of these were entry-level. To keep the prices
down, Toyota shared platforms with other models.

Apart from these new launches, the company also launched upgraded versions of
its existing models such as Windom (Lexus ES 300), Verossa and Brevis. To
attract the young buyers, Toyota took the risk of even de-emphasizing the Toyota
brand. For instance the new car bB, which became very popular with young
buyers, had no visible signs of the ‘Toyota’ name, except for a Toyota symbol on
the steering wheel.
As part of making the company’s dealer outlets more appealing to young buyers,
the company renamed one of its five dealership chains Netz, and targeted it
exclusively at entry-level buyers. Toyota also undertook aggressive marketing
efforts such as focused advertising of its new models besides offering high cash
rebates to buyers of its flagging models.

Toyota focused on streamlining and reducing its workforce and decided to hire
contract employees against its policy of lifetime employment. It planned to cut
about $678 million in costs, employment mainly by designing cars with fewer and
simpler parts and by sharing platforms and parts among its models.

 The factors that helped Toyota attain and sustain the leadership status in
Japan are:-

 Focus on dealer network.


 Initiative to improve communication with its dealers.
 It took aggressive measures to attract youngsters to its products.
 It stopped supplying similar models to such dealers whose outlets were
located too close to each other to avoid unnecessary price competition.
 It decided to take strict stance with those dealers who failed to meet target.
 The company invested heavily on advertising in fiscal in 1995. (around 200
million)
 It embarked on an aggressive restructuring exercise.
 It built a $83 million amusement park in April 1998, where it displayed
Toyota’s visions for future models and also allowed people to design their
own cars.
 As part of making the company’s dealer outlets more appealing to young
buyers, the company renamed one of its five dealership chains Netz, and
targeted it exclusively at entry-level buyers.
 It focused on streamlining and reducing its workforce and decided to hire
contract employees against its policy of lifetime employment.
 It planned to cut about $678 million in costs.

⇒ Problems the company faced in this market later on:-

The problem was drastically increasing its market share in the US, it was finding it
difficult to perform well in Japan. Its market share was still below 40% in Japan
despite aggressive marketing efforts. This happened because of number of
reasons like:-

 Excessive capacity
 Choosy customers,
 Surplus workforce
 Intensified competition

It is already mentioned regarding problem faced by Toyota and the strategy it


adopted to come out of the problem.
Over all the strategy it adopted to became leader in automobile market in Japan
became the best practices in automobile sectors.

Q2.) Critically examine the rationale behind Toyota’s decision to spread its
operations across various geographical regions and to focus on young buyers in its
core markets. Elaborate upon the three different program adopted and analyze
how localization of manufacturing was expected to help the company?

For though buyers 40 to 69 years old have averaged more than twice as many
new-car buys since 1995, 25- to 34-year olds alone should pack $1.2 trillion in
buying power by the end of this year. And they'll spend $70 billion of it on vehicles
and other automotive purchases. Given that today's 18-year-old will buy about 13
vehicles during his or her lifetime from 8.4 in 1970.

The under-35 automotive market didn't exist a half century ago.


Without doubt, entry-level buyers just out of high school and college are more
image-conscious and brand oriented than older buyers. And automakers must
snag these buyers when they don’t; it hurts their chances of getting them back
later. But it's not easy. Generally, people no longer act their age.

"Over the past few years, the Jetta has been targeted at younger people, kids
getting out of college. It's made a huge impression." It doesn't hurt that it's a
quality product with a popular design, he adds. Meanwhile, in East Providence,
R.I., Ford dealer Bob Tasca III sees young women going for the Jetta because it's
"like a mini luxury car".
On the other hand, Tasca Ford is mainly selling supposed youth magnet Ford
Focus to customers over 45. Yet Tasca is excited about what the Focus is doing
nationally: attracting younger buyers into the brand through edgy commercials
and special editions, such as the Focus Street, whose marketing connects with the
audience via techno-music. "You'll see a migration pattern," says Focus brand
manager Bob Fesmire of the long-term prospects for Focus and the Ford brand.
Some Focus owners will buy another; others those marrying and starting families
will buy a different Ford, such as the Windstar, he says.

At Toyota, loyal but aging buyers have some observers concerned. Though the
maker has ridden the wave of young Baby-Boomers in recent decades, its styling
may not be hip enough for today's first-time buyers and new college grads. The
Echo, though priced low, didn't resonate with younger buyers, but ended up
drawing folks over 40. Under-35 buyers are "more educated than when I was their
age," says one Toyota general sales manager. "They're not afraid
of the imports like their parents might have been. They want to make sure they're
going to get something that will last them, give them good fuel economy, and
make them feel safe." Price seems less important for young Toyota buyers, he
adds.
Young buyers who have money often make contact via the Internet, say dealers
John Weinberger and Scott Vanderbeek. "They're looking for a specific luxury car
that may not be in their hometown", says Weinberger of Continental Motors
(including Acura, Audi, Bentley, Ferrari, and Rolls-Royce), near Chicago. Buyers in
their 20s are after the 3-series and get hooked, say Roseville salesperson Candy

Beck, through BMW's college grad program with terms up to 60 months for
financing or leasing a new or certified used Bimmer.
One survey indicated that 78 percent of college students look at price first. Then
comes reliability (75 percent). Also, 48 percent of students plan to buy a new car,
but 52 percent intend to buy used which may be good news for makers with
robust used-car certification programs. The 34 percent intending to buy new in the
next year plan to spend less than $20,000.

Of course, dealers use some automaker incentives with young buyers. "We
advertise the first-time buyer programs," says Earnhardt Auto Centers corporate
general sales manager Steve Arey, who also does many secondary finance deals.
Some college-grad incentives, such as Toyota's and Ford's, involve $400 rebates.
And, says Arey, "We deal heavily in program cars. A lot of the Hyundai’s are really
popular. They like that warranty." in any event, financing "is going to be the key.
If they have the program for them, they'll buy [new] cars. If not, they'll buy
used."

Rationale behind Toyota’s decision to spread its operation across various


geographical region:

1) Early 70s prod & sales was behind from Ford and GM.
2) Domestic sale gone to decline.
3) The need to explore new markets and maintain a leading position is
extremely urgent. Without proper localization, this can hardly become
reality. Due to the growing market and increasing competition, localization is
the right move forward.

Three different programs adopted

 New Global business plan (1955-1998)


 Global vision 2005 (1996 –2005)
 Global vision 2010 (2002 – 2010)

New Global business plan (1955-1998): In June 1995, Toyota announced


the 'New Global Business Plan,' aimed at advancing localization (of production)
and increasing imports (through collaboration with foreign automobile
companies) over a three year period. A major objective of this plan was to
increase Toyota's offshore production capacity to 2 million units by 1998. This
was the major proactive plan which is aimed for almost 43 years future.
Keeping on the mind of location advantage Toyota mainly focused on overseas
production. And on this concern Toyota established new plants and expanded
the capacity of plants.
Especially in North America, in addition to expanding existing plants such as

• Toyota Motor Manufacturing Kentucky, Inc. (TMMK) (from 400,000


units/year to 500,000 units/year) and
• Toyota Motor Manufacturing Canada Inc. (TMMC) (from 100,000
units/year to 200,000 units/year), new plants such as
• Toyota Motor Manufacturing, Indiana, Inc. (TMMI) and
• Toyota Motor Manufacturing, West Virginia, Inc. (TMMWV) were
brought online, increasing annual production capacity from 900,000
units in 1994 to 1.2 million units in 1998 (total production capacity is
expected to increase to 1.25 million units/year in 2000).

In Europe, Toyota Motor Manufacturing France S.A.S. (TMMF) was


established in France in November 1998. It is scheduled to go into operation
in 2001, with an annual production target of 150,000 units of the Yaris, a
strategic vehicle for the European market. In Asia as well, where economic
stagnation has been continuing, TMC established a supply structure in
anticipation of market recovery, starting up second plants in Thailand,
Indonesia, the Philippines, and Taiwan.

Next, in the area of increasing imports, TMC strengthened the sales structure
of the DUO stores, which sell VW/Audi cars, expanded imports of completely
built-up cars, and began selling the Avalon, a passenger car made at TMMK,
in May 1995 and the Toyota Cavalier, made by GM, in January 1996. TMC also
expanded its efforts to increase imports, including foreign aftermarket parts,
by establishing TACTI Corporation to procure and sell new brands of
aftermarket parts and by increasing the number of its directly owned "jms"
car shops to 28 by March 1999.

Furthermore, TMC implemented various steps to promote the "Toyota Global


Optimum Purchasing System" and has made steady progress, e.g., facilitating
access for prospective overseas suppliers by publishing the contents of its
Supplier's Guide on the Internet (in November 1997), and constructing a
Suppliers Center (in April 1998) which can be used for exhibiting new parts,
etc.

Although the New Global Business Plan has come to a close, TMC plans to
continue expanding its business operations aggressively on a global scale in
the future.

Specific details of the major areas are as follows:-

I. Advancing Localization
Since the New Global Business Plan was announced in 1995, TMC's overseas
production has been expanding on schedule, increasing from 1.22 million
units per year in 1994 to 1.54 million units per year in 1998.

1. North America

TMC's North American production capacity increased to 1.2 million units per
year in 1998. In addition to expanding the existing plants, two new plants
(TMMI and TMMWV) were brought online on schedule.

In the year 2000, TMC's total North American production capacity will increase
to 1.25 million units per year with production starting of a new SUV model at
TMMI. TMC also plans to exceed the originally announced localization plan by
producing additional V6 engines (summer 1999) and starting production of
automatic transmissions for the Camry (spring 2001), both at TMMWV.

North American production results increased from about 740,000 units in


1994 to about 1.01 million units in 1998.

• In 1998 production at TMMK was about 480,000 units (1994 results


were about 290,000 units). Expansion of production capacity to 500,000
units per year has been achieved as outlined in the plan.
• The line-off ceremony for the Tundra was held in December 1998 at
TMMI. Mass-production started in February 1999 and plans call for
production of 100,000 units/year. Production of a new Tundra-based
SUV is planned to begin in the fall of 2000. Total production capacity will
reach 150,000 units.
• Assembly of Corolla engines began in November 1998 at TMMWV,
with a planned initial production level of 300,000 units per year.
Production of about 200,000 V6 engines per year will begin in summer
1999. As a result, annual production capacity will reach 500,000 units in
summer 1999. Coupled with the above increases, Bodine Aluminum,
Inc. plans to expand its production of cast aluminum parts for V6
engines from the current level of 180,000 units per year to 380,000
units per year from early 2000. Beginning in the spring of 2001,
moreover, TMMWV will start producing automatic transmissions for the
Camry (at an annual production rate of 360,000 units).
• In 1998 actual production at TMMC in Canada was about 170,000
units (1994 result was about 90,000 units). Expansion of production
capacity to 200,000 units per year was achieved in 1997. Production of
the new Solara model began in June 1998.
• Total exports of vehicles from the U.S. amounted to 36,000 units.
(The cumulative total for 1995 through 1998 was about 240,000 units.)

2. Europe
European production capacity expanded to 220,000 units by the end of 1998.
Toyota Motor Manufacturing (UK) Ltd. (TMUK)'s second assembly plant
started building Corolla lift-back models in September 1998. Total European

production capacity will reach 350 - 400,000 units in 2001, when the French
plant goes into production.

In 1998 vehicle production result at TMUK was about 170,000 units (1994
result was about 90,000 units).

• In 1998 engine production at TMUK was about 110,000 units (1994


actual production was about 80,000 units). TMUK's engine production
capacity will increase from the current level of 150,000 units/year to
200,000 units/year by the end of 1999, and to between 350,000 and
400,000 units/year in 2001. A casting process will also be added to the
engine production process (with the start of production planned for
2000).
• The new production company, Toyota Motor Manufacturing France
S.A.S., established in Valenciennes, France, in October 1998 is
proceeding with plant construction with the goal of starting production
by early 2001 (at the rate of 150,000 units per year).
• In order to support Toyota's European manufacturing operations,
Toyota Motor Europe Manufacturing (TMEM) was formed in Brussels,
Belgium, in October 1998.
• In July 1998, TMC established a design center in the Cote d'Azur,
France (with the start of operations planned for early 2000).
• Exports of TMUK-produced cars to countries outside the EU, which
began in 1996, reached about 7,000 units in 1998. (The cumulative
total for 1996 through 1998 was about 18,000 units.) Exports of
engines to Turkey reached about 8,000 units in 1998. (The cumulative
total for 1996 through 1998 was 45,000 units.)

3. Asia and Oceania

Production capacity in Asia and Oceania expanded to 640,000 units in 1998.


Against the background of stagnating economies and a shrinking automobile
market in Asia, 1998 production result in Asia and Oceania was about 280,000
units (1994 actual production was about 410,000 units). To maintain local
operations and employment levels, TMC has been taking such measures as
the expansion of exports from local operations, support of training, and active
support of management of parts makers and dealers.

• In 1998 vehicle production in Taiwan was about 73,000 units (1994


actual production was about 65,000 units).
• In 1998 vehicle production in the Philippines was about 11,000 units
(1994 actual production was about 30,000 units). Production of
constant-velocity joints was about 57,000 units. In addition,
transmission exports to Japan began in March 1998.
• In 1998 vehicle production in Thailand was about 35,000 units (1994
actual production was about 110,000 units). Production of engine blocks

• was about 100,000 units (1994 actual production was about 53,000
units). In April 1998, the export to South Africa began of Hilux
production parts made in Thailand. In July 1998, the export of Corolla
bumpers to Brazil began. In August 1998, the export of Hilux made in
Thailand to Australia began.
• In 1998 vehicle production result in Indonesia was about 17,000
units (1994 actual production was about 80,000 units). In February
1998, production began at P.T. Toyota-Astra Motor's (TAM) second plant
(Karawang Plant). 1998 engine production at TAM was about 36,000
units (1994 actual production was about 70,000 units).
• In China, Toyota continues to build our parts production network. In
June 1998, the line-off ceremony for a constant velocity joint production
joint venture was held. In July 1998, the line-off ceremony for a engine
production joint venture was held. In January 1999, the line-off
ceremony for a forged parts manufacturer was held. As for vehicle
production, in November 1998, a manufacturer of compact buses was
set up. TMC is also undertaking negotiations with the Chinese
government on a small car project. In addition TMC has been providing
support for increasing production capacity to 150,000 units/year
targeting sales of 100,000 units per year for the Tianjin Charade.
Finally, in February 1998 Toyota Technical Center (China), Ltd. was
established to provide production and development support, with
operations scheduled to begin in April 1999.
• In 1998 vehicle production result in Malaysia was about 6,000 units
(1994 actual production was about 17,000 units). 1998 production
result of power steering units at T & K Autoparts Sdn. Bhd. was about
27,000 units. 1998 actual production of lower ball joints was about
12,000 units.
• In 1998 vehicle production result in Vietnam was about 2,000 units.
• In 1998 vehicle production result in Australia was about 100,000
units (1994 actual production was about 78,000 units). 1998 exports of
Australian-made Camrys totaled about 30,000 units. (The cumulative
total for 1996 through 1998 was about 70,000 units.)
• In 1998 vehicle production result in New Zealand was about 4,000
units (1994 actual production was about 15,000 units).

4. Other regions

TMC is also moving forward with projects in the following regions, which were
not included in the original plan:
• In August 1998, Corolla production began in Indaiatuba, Sao Paulo,
Brazil, with a production capacity of 15,000 units per year.
• In India, TMC is preparing to start production of family type diesel
passenger vehicles exclusively designed for the Indian market by the
end of 1999. The plant building was completed in February 1999

As a result of the foregoing activities, the percentage of worldwide sales


(excluding Japan) accounted for by overseas-produced vehicles reached 52%
in 1998 (percentage in 1994 was 48%).

5. Parts related

• For major parts, such as engines and stamped parts, as well as


facilities and materials, TMC is making steady progress in localization,
with local procurement being the rule.
• In July 1996, TMC published the "Supplier's Guide" to foster
understanding by new suppliers of TMC's procurement activities and
sales approach procedures, as well as to help current suppliers
understand better TMC's procurement policy and procedures. In
November 1997, TMC published the contents of its Supplier's Guide on
the Internet to facilitate access for prospective suppliers.
• The "Global Optimum Purchasing System" is already in operation in
North America and Europe, and preparations are underway to establish
the same system in Asia and Oceania. The following three main pillars
of this system are being enhanced:

⇒ New Supplier & New Technology Cultivation Program To cultivate


new suppliers, TMC has been holding new parts exhibits, JAMA/CLEPA business
talks (in November 1997), JAMA/MEMA business talks (in November 1998),
theme exhibits such as "New manufacturing methods exhibition" and "World No.
1 activities exhibition," etc. TMC is aggressively promoting new parts exhibits for
global suppliers.
⇒ Current Supplier Improvement Support Program As part of this
program, an expected value system is being implemented in 11 countries
worldwide. A system has been established in each region to spell out the
expected values and to recognize those suppliers who meet them. In February
1999, a procurement policy explanation meeting was held in Japan with global
suppliers in attendance.
⇒ International Price Comparison System This system went into full
operation in August 1995, and is being promoted as a system for
updating/adding price data and for applying such data to new products.
II. Increasing Imports

1. Increase of TMC cars produced overseas, and foreign makers' cars

• Sales result of VW/Audi cars through DUO dealers were about 29,000
units. (The cumulative total for 1995 through 1998 was about 119,000
units.) At the end of 1998, the nationwide sales network consisted of
144 sales outlets.

• Sales results of the Toyota Cavalier were about 7,000 units. (The
cumulative total for 1996 through 1998 was about 28,000 units.)
• Sales results of the Avalon made at TMMK were 4,000 units. (The
cumulative total for 1995 through 1998, including the Scepter, was
about 59,000 units.)

2. Purchasing and parts

• In April 1998, to further facilitate sales by suppliers, TMC opened a


Suppliers Center (in Toyota City, Aichi Prefecture) that can be used for
exhibiting new parts, etc.
• For the importation of originally equipped parts, TMC is promoting:

1) New Supplier & New Technology Discovery Program,

2) Current Supplier Improvement Support Program, and

3) International Price Comparison System, etc., of the "Global Optimum


Purchasing System" which is based on fair and objective evaluation,
utilizing the same approach TMC is using to promote local purchasing.

• In April 1996, TMC established TACTI Corporation to procure and sell


new brands of aftermarket parts. In November 1996, TMC began the
operation of its directly owned "jms" car shops, and increased their
number to 28 shops by the end of March 1999. The locations include:
Sapporo (3), Kushiro, Hakodate, Hachinohe, Morioka, Sendai, Mito,
Kooriyama, Utsunomiya (2), Chiba, Tokyo, Kanagawa (2), Aichi (2),
Gifu, Kobe (2), Okayama, Takamatsu, Hiroshima (2), Fukuoka, Oita,
and Kumamoto.
• Cooperation with TACTI has significantly bolstered the lineup of
imported products handled by TMC parts distributors. As part of a plan
to increase the sales of TACTI products, efforts to increase sales are
continuing.

3. Activities to promote understanding

• TMC established an internal "contact point" in July 1995 to deal with


inquiries related to handling foreign cars, and informed interested
parties through visits and announcements. So far, there have been
contacts from several foreign makers.

Global vision 2005 (1996 –2005): Cho decided to focus more on localization -
he believed that by doing so, Toyota would be able to provide its customers with
the products they needed, where they needed them. This was expected to help
build mutually benefiting, long-term relationships with local suppliers and fulfill
Toyota's commitments to local labor and communities. Cho defined globalization
as 'global localization.' Therefore, besides focusing on increasing the number of
manufacturing centers and expanding the sales networks worldwide, Toyota also
focused on localizing design, development and purchasing in every region and
country.
It’s implemented Kaizen and many philosophies. A new concept of just in time
(JIT) also innovated. Also they adopted few western management practices in
addition to the traditional Japanese ones. All practices gave ample of improvement
as its Kentucky plant won four ‘Gold plant quality award’ from JD power and
Association.

Global vision 2010 (2002 – 2010): In April 2002, Toyota announced another
corporate strategy to boost its globalization efforts.
This initiative, termed the '2010 Global Vision' was aimed at achieving a 15%
market share (from the prevailing 10%) of the global automobile market by early
2010, exceeding the 14.2% market share held by the leader GM.
The theme of the new vision was 'Innovation into the Future,' which focused on
four key components: Recycling Based Society; Age of Information Technology;
Development of Motorization on a Global Sale; and Diverse Society.


Considering the extremely competitive global market scenario and the nearly
saturated demand in its core automobile markets (US and Japan ). Do you think
Toyota will be able to achieve its goal of attaining a 15% market share by 2010 ?
Justify your stand. Also suggest some measures that could help the company
achieve its global targets.
Toyota hopes that the 21st century will be truly prosperous for society, and aims
to grow as a company together with its stakeholders, including customers,
shareholders, business partners, and employees, through making things and
making automobiles, while seeking harmony with people, society, the global
environment and the world economy.

In order to put these management principles into practice, the "Guiding Principles
at Toyota Motor Corporation" were established as the fundamental management
policy. These principles were adopted in 1992 to codify the business spirit handed
down since the company's foundation, and revised in 1997 to add the stipulation
of legal compliance. Each of the seven items is a cornerstone of Toyota's business
activities.

With 2010 as the turning point, in April 2002 Toyota adopted the Global Vision
2010 which proposes the corporate image for which Toyota should strive .
Centered on the basic theme of "Innovation into the Future — A Passion to Create
a Better Society," and with a view toward what society is expected to be like in the
medium to long term, the Vision sets the course for the multi-faceted roles to be
played by Toyota about society, people and the Earth.

The fundamental thinking for Global Vision 2010 has three elements:

1) To step beyond "harmonious growth" and demonstrate our responsibilities as a


world leader;.

2) To benefit society through monozukuri (manufacture of value-added products)


and "technological innovation"; and

3) To share prosperity with our employees.

In order for each employee to realize the image that Toyota is striving to achieve
in the future, without complacency, it is important to undertake a paradigm
change from the following three perspectives:

(1) Technology development / Product development;


(2) Management; and
(3)Profit structures.

In June 2003, Toyota introduced a new management system that features, among
other enhancements, a streamlined board of directors and the new position of
non-board managing officer, aimed at speeding up operations by making the
decision-making structure less vertical. At the same time, the system hopes to
strengthen corporate auditing efforts by increasing the number of outside
corporate auditors. With global competition growing evermore severe, Toyota is
striving to achieve the objectives outlined in Global Vision 2010 by boosting its
competitiveness.
But it is very tough to achieve the goal of attain its 15% market share. The
reasons behind it are as follows-

Under previous presidents, Toyota Motor Corp. had set a goal of reaching 15 per
cent global market share in global vehicle sales sometime after 2010. Until last

year's financial crisis, which sent sales crashing, it had been steadily expanding
production toward that goal.

The executive, who spoke on condition of anonymity because he spoke to select


reporters, said the automaker will still use numbers in their business plans, but
"the vision" had changed under President Akio Toyoda.

Toyoda, who took office in June, wasn't comfortable with racing toward numbers,
and instead wanted to return to the old-fashioned "Toyota Way" of understanding
customer needs and developing products to fill them, the executive said.
"Our president doesn't like numbers or documents," he said.

But the executive made clear Toyota remains bullish on sales, especially in
emerging markets, which now make up half of the global auto market.

A recovery in the U.S. auto market must come with bigger sales in China, South
America, the Middle East and other emerging markets to work as the "two
engines" of growth for a recovery, he said.

Toyota is hoping to sell more than 2 million vehicles in emerging markets this
year, which will make up about a third of its overall vehicle sales, the executive
said.

Earlier this week, Toyota raised its vehicle sales forecast for the fiscal year
through March 2010, to 6.6 million vehicles from its initial forecast for 6.5 million
vehicles.
The appointment of Toyoda, the grandson of Toyota's founder, has been viewed as
a morale boost for workers, dealers and suppliers as the maker of the Prius hybrid
and Lexus luxury car fights for a recovery.

Toyota racked up its worst loss in its seven-decade history for the fiscal year
ended March, and is expecting to stay in the red for the fiscal year through March
2010.

Speaking on the New United Motor Manufacturing Inc., or NUMMI, plant in


Fremont, California, a joint venture with U.S. automaker General Motors Corp., the
executive said Toyota will make a decision by the end of August. Details on what
to do must be worked out, he said without elaborating.
So this situation shows that it is the tough time for Toyota and tough to attain
the15% market share.
Another reason is that if we analyze the financial position of Toyota then we find
as follows.

If we see the financial report of Toyota then we find in 2009 financial year Toyota
beared the loss of 437 billion yen. It only happens when any company could not
sell up to that volume in which that company take out its costs of production and
other cost which is related to production and final sales.
Now we should look another position of the company .
By above report of Toyota’s consolidated financial summary, We can analyze that
the condition of Toyota in market will not be good because as they have projected
for 2010, they will have to bear the loss next year also, according to the FY2010
forecast report.
So it’s tough to attain the 15% market share till 2010.

Suggestion

But while on a Share of Market Interest basis several Toyota models are steady or
even up, the problem is the context: with overall market demand at all-time lows,
a steady share means much lower demand, and hence sets the stage for much
lower sales.

For Toyota to regain footing in this market, it will need to boost Share of Market
Interest not just maintain it—as the Toyota results show all too well. And since the
global recession is likely to keep oil and gas prices below 2008 highs for a while,
Toyota will need to boost SMI with cost-effective, targeted marketing and very
successful launches of must-have products. For Toyota, those include the ’09
Venza, ’10 Highlander and ’10 Prius. And while Compete early demand results for
Venza look promising, it is too early to say whether it will drive overall Toyota
Share of Market Interest upwards.