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International Business of Toyota

East West University


Submitted To:

Leo V. Dewri
Senior Lecturer
East West University

Submitted By:


ID No.

Farzana Ahmed


Nasifa Tasneem


Soumitra Chakraborti


Hasan Md. Zahir


Sraboni Rahman


The history of Toyota is rather long but an interesting one. Here I will try to present a short overview
of it, as I will try to touch upon important aspects of it. Aspects which helped Toyota to become, out
of a small Japanese firm, the biggest single producer and the second biggest producer of cars in the
world, after General Motors. The story begins with the birth of Sakichi Toyoda on February 14, 1867,
which was about the time the Japanese modernization and industrialization had began. Toyoda
began his engineering achievements in the field of textile, and particularly with the creation in 1897
of a modern loom, known as the G-type Automatic Loom, at the time the most technologically
advanced. After this success, Toyoda decided to pursue his dream, to create an automobile. Thus,
with the help from his son Kiichiro Toyoda and using the money from the successful loom
technology, Toyoda invested in his research and development of an automobile in 1930. As the work
was progressing, he established the first Automobile Department, within his existing "Toyoda
Automatic Loom Works" company in September 1933. In April 1935 Toyoda completed the first
prototype of an engine named the type A, and soon thereafter the first automobile, the A1. In April
1936 the mass production of the A1 and a light truck G1, based on the A1, begins. The successful
project, leads to the establishment of Toyota Motor Corporation Ltd., on August 28, 1937 by Kiichiro
Toyoda. The letter "d" in the name Toyoda, was replaced by the letter "t" for softer sounding, and
easier pronunciation. After the end of the Second World war TMC starts working hard, and by
October 1947, it managed to do the first post-war export, BM trucks to Okinawa, and SA cars to
Egypt. A bit later, on December 16 1947, Toyota established the Nippondenso Co., Ltd. During 1969
Toyota celebrates its one millionth exported cars, and by 1979 the tenth millionth exported car
(which by the way happened to be a Celica Supra 1st generation). All these incredible successes
were achieved by the so called "Toyotism" or the system of production created by Toyota, and said
to be the best and most efficient one in the world of automobile production. The main aspects of it
are a mixture of strict quality control, close relations with the local communities, selection and
training of the labor force, very clear and liberal relationship between the worker, the mid and high
managerial levels, minimized hierarchy in the company. This mixture created the perfect base for the
evolution of Toyota as a company and its products as well. Its global view quickly achieved
production bases all over the world. Toyota's strict policy of using the most advanced and modern
technology in the production of, as well as utilizing it in their cars, brought the company today, as the
undisputed leader in the important field of technological advance. Here is an example, of how Toyota
operates. At the end of the 1950s, Toyota decided to create a small, mass-production car, which
was to be cheap, but very reliable, to be aimed for the use of the masses: the common workers. So,
in June 1961 was released the Toyota Publica 700 (utilizing a 700cc engine), and Toyota became
the pioneer in this market niche. This move by Toyota turned out to be a correct market strategy, as
in 1965, the market for big cars (e.g., Crown) dropped with 84%, while at the same time the market
for smaller cars (Corona, Publica) rose 43% and 48% respectively. Other Japanese car producers,
such as Honda and Datsun, also saw the promising success in the market for small cars, and on
their part released new models to compete with the Publica 700. As a result, Toyota from a pioneer
in this market, found itself in a stiff competition. To battle it, it was decided not to release a new
model of the Publica, but rather to design and release a completely new model. This model was to
be produced in massive numbers, but at the same time it was to be very reliable, offering more
comfort, and be driven for a long period of time. Thus, began the work for creating the famous

Corolla, which later became the most produced and sold car model worldwide. The concept behind
this car was planned for victory: it had to possess better characteristics than any of its competitor
models, thus shortly before its release, it was decided that its engine volume should be increased
from 1000cc, to 1100cc, and the advertising phrase, "The extra 100cc gives extra comfort!" was
adopted. The Corolla was a turning point in the hitherto history of Toyota. Everything in this car was
created from scratch, its engine type K, as well. When the planning for its monthly production was
set at 20,000 units, many within the Toyota Company did not believe it was going to be achieved,
since the overall monthly production of cars then was 40,000 units. With the building of a new plant
at Takaoka, this number was not only met, but a bit later surpassed drastically. The advertising
campaign of this car was also planned meticulously, and 18 new dealerships were established to the
existing ones, only six months before its launch. So the Corolla was released on November 5, 1966
and a bit later conquered the world! After its success, based on the Corolla was build and released
the Sprinter, or a sporty version of the model. With the help of the new Corolla, in 1968, Toyota hit
the production mark of 1 million cars per year. Part of the success of the Corolla, and the other
Toyota models, is also based on the wide variety of options available to the customers. Toyota was
able to deliver the "custom made" car within 1 month from the date of the order, and later, with the
introduction of the computerized system of order between the dealerships and the factories, the time
of delivery was shortened to only 16 days. The history of the Corolla is only one significant example,
which clearly demonstrates how the company works. It always plans to present the "best" choice in
each model group in the market. Toyota achieves this by using latest technologies available in its
models, and making this process efficient enough, to be able to keep the production cost as low as

Toyota motor corporation mission is to provide high quality goods and services, more innovative and
safe in order to meet the worldwide demand of the Toyota customers. In order to achieve its aims
and objectives TMC is building plants in foreign countries. So, that that quality and reliability is
maintained. Few aim and objectives are:

The management main concern is to gradually increase the business values

To produce the products that completely satisfy the customer needs

To become a more competitive global company

Overall intention of organization through these corporate goals is to increase the image and
profit of organization.

Worldwide coverage of Toyota

In Europe continental Toyota Motor Corporation has 8 plants & manufacturing companies. They
have 30 distributors in that region .Around 20 thousands employees are working under this
corporation that includes manufacturing companies as well as distributors.
In Africa continental Toyota Motor Corporation has 2 plants & manufacturing companies. They
have 49 distributors in that region. Around 24 thousands employees are working under this
corporation that includes manufacturing companies as well as distributors.
In Asia & Middle East region Toyota Motor Corporation has 24 plants & manufacturing
companies. They have 32 distributors in that region. Around 150 thousands employees are working
under this corporation that includes manufacturing companies as well as distributors.
In Oceania Toyota Motor Corporation has only 1 plant & manufacturing company. They have 14
distributors in that region. Around 12 thousands employees are working under this corporation that
includes manufacturing companies as well as distributors.
As we know Japan is the head quarter of Toyota Motor Corporation. In this country they have 15
plants & manufacturing companies. They have no distributor in this country. Around 69 thousands
employees are working under this corporation that includes manufacturing companies as well as
distributors. Any country dont have that much TMC employees in their country .It is the highest
amount of employees who are working for Toyota motor corporation in a particular country .
In North America Toyota Motor Corporation have only 11 plants & manufacturing companies.
They have 5 distributors in that region. Around 37 thousands employees are working under this
corporation that includes manufacturing companies as well as distributors. In Latin America Toyota
Motor Corporation have only 4 plants & manufacturing companies. They have 43 distributors in that
region. Around 27 thousands employees are working under this corporation that includes
manufacturing companies as well as distributors.
Toyota conducts its business worldwide with 56 overseas manufacturing companies in 27 countries
and regions. Toyota's vehicles are sold in more than 170 countries and regions.

History of market emerging is given below -

Business Process
The 8 steps of the Toyota Business Process are
1. Clarify the problem.
2. Breakdown the problem.
3. Set a target.
4. Analyze the root cause.
5. Develop countermeasures.
6. See countermeasures through.
7. Evaluate both results and process.
8. Standardize successful processes.

Little more detail on the Steps:

1. Clarify the problem includes alignment to the Ultimate Goal or Purpose and to identify the
Ideal situation, current situation and the gap.
2. Breakdown the problem requires breakdown into manageable pieces using the 4 Ws and
finding the Prioritized Problem, Process, and Point of Cause.
3. Set a Target is to Set Target to the Point of Cause and determine How much and By
4. Analyze Root Cause is to brainstorm multiple Potential Causes by asking WHY and to
determine Root Cause by going to see the process.
5. Develop Countermeasures is to brainstorm countermeasures, narrow using criteria, develop
a detailed action plan, and gain consensus.

Figure: Business components of Toyota

Free trade:
Free trade means the unrestricted purchase and sale of goods and services between countries
without the imposition of constraints such as tariffs, duties and quotas. Free trade is a win-win
proposition because it enables nations to focus on their core competitive advantage(s), thereby
maximizing economic output and fostering income growth for their citizens. Free trade enables
nations to concentrate their efforts on manufacturing products or providing services where they
have a distinct comparative advantage, according to the theory first espoused by economist
David Ricardo two centuries ago. A free trade policy should enable a nation to generate enough
foreign currency to purchase the products or services that it does not produce indigenously. The
process works best when there are few if any barriers to entry for such imports. The imposition
of artificial constraints such as tariffs on imports or the provision of subsidies to exports will
Toyota does the free trade in some countries. Like Australia, Japan, Canada.
Toyota backs Australia free-trade agreement
Toyota voiced its support for the government yesterday as part of an effort to promote bilateral
free-trade agreements with countries outside Asian. The local unit of the Japanese auto-maker
recently dispatched its senior executive Ninnart Chaiteeraphinyo as a representative of the Thai
private sector for negotiations on a free-trade pact with its Australian counterpart. The Australian
and Thai governments recently signed a memorandum of understanding to form a bilateral freetrade agreement. "The reduction in the import tariffs of other countries would mean a greater
opportunity for Toyota to export more vehicles from Thailand," said Ryoichi Sasaki, president of
Toyota Motor Thailand. Toyota is on a mission to increase its exports from Thailand with the
firm recently announcing a plan to relocate its one-ton pickup truck production base from Japan
to the Kingdom. Ninnart said his recent trip to Australia was a successful one as both parties had
agreed to set up a working committee to study the reduction of import duties for automobile
products for the two nations. "Australia could be the first country that we cooperate with in
reducing tariff barriers, after the conclusion of Asian Free Trade Agreement," he said. Australia
is a major export destination for the Thai auto industry, with the major exporters being Toyota,
Isuzu, Mitsubishi, Auto Alliance and General Motors. Toyota alone is shipping 10,000 pickup
trucks per annum to Australia. The Australian market is double the size of Thailand's with annual
vehicle sales totaling 770,000. The Australia market for pickup trucks totals 80,000 units, 85 per
cent of which are already imported from Thailand.
Toyota Canada supports Canada/Japan free trade talks
Toyota has long been committed to building the Canada-Japan relationship. This is demonstrated
by our 48-year Canadian history that includes established world-class manufacturing facilities in
Ontario and British Columbia, sales and dealership operations across Canada, the creation of
over 18,000 jobs, investment of over 8 billion dollars in the Canadian economy, building over 4
million vehicles, and helping grow local communities.

Absolute Advantage:
It means the ability of a country, individual, company or region to produce a good or service at a
lower cost per unit than the cost at which any other entity produces that good or service. Entities
with absolute advantages can produce a product or service using a smaller number of inputs
and/or using a more efficient process than another party producing the same product or service.
The principle of absolute advantage refers to the ability of a party (an individual, or firm, or
country) to produce more number of a good product or service than competitors, using the same
amount of resources. In 1776 Adam Smith first described the principle of absolute advantage in
the context of international trade, using labor as the only input. Since absolute advantage is
determined by a simple comparison of labor productivities, it is possible for a party to have no
absolute advantage in anything; in that case, according to the theory of absolute advantage, no
trade will occur with the other party. It can be contrasted with the concept of comparative which
refers to the ability to produce specific goods at a lower opportunity cost.
Toyota is a huge car manufacturing company that is based in Japan, but Toyota cars have
factories all over the world. The most prominent plants are located in Asia, North America and
Europe. Toyota cars are built at all of these locations. The reason that Toyota has expanded so
extensively across the globe is because it is easier to ship the cars overland than it is across
oceans. To find out exactly where any specific Toyota is made, you will have to ask the dealer,
but not every factory makes every single Toyota model. The following is information regarding
which Toyota models are manufactured in which countries. At first Toyota was Absolute
advantage. Now a day it spread all over the country.

Comparative Advantage:
The challenge to the absolute advantage theory was that some countries may be better at
producing both goods and, therefore, have an advantage in many areas. In contrast, another
country may not have any useful absolute advantages. To answer this challenge, David Ricardo,
an English economist, introduced the theory of comparative advantage in 1817. Ricardo reasoned
that even if Country A had the absolute advantage in the production of products, specialization
and trade could still occur between two countries.
Comparative advantage occurs when a country cannot produce a product more efficiently than
the other country; however, it can produce that product better and more efficiently than it does
other goods. The difference between these two theories is subtle. Comparative advantage focuses
on the relative productivity differences, whereas absolute advantage looks at the absolute
Their strategy is based on internal growth to reach critical mass. Toyota has been very
aggressive: re-entering Formula One with a wholly-built car (building worldwide brand
awareness), investing heavily in Europe (where Toyota was not a leader), and consolidation of

leadership in other areas. The organization has developed own-facilities (as in France) or
alliances to share the cost of production. This enables better understanding of local markets,
which in turn makes it possible for Toyota to serve each markets specific tastes and preferences.
Consequently, Toyota is now one of the most globalized car manufacturers in the world. Toyota
mainly produces in Japan. It is the mother country of Toyota. For gaining market share now most
of the countries has the Toyotas manufacturer. Like Japan, Canada, Australia, India etc. They
produce the Toyota car and export to the other country where Toyota missing.

Heckscher-Ohlin Theory (Factor Proportions Theory):

The theories of Smith and Ricardo didnt help countries determine which products would give a
country an advantage. Both theories assumed that free and open markets would lead countries
and producers to determine which goods they could produce more efficiently. In the early 1900s,
two Swedish economists, Eli Heckscher and Bertil Ohlin, focused their attention on how a
country could gain comparative advantage by producing products that utilized factors that were
in abundance in the country. Their theory is based on a countrys production factorsland,
labor, and capital, which provide the funds for investment in plants and equipment. They
determined that the cost of any factor or resource was a function of supply and demand. Factors
that were in great supply relative to demand would be cheaper; factors in great demand relative
to supply would be more expensive. Their theory, also called the factor proportions theory, stated
that countries would produce and export goods that required resources or factors that were in
great supply and, therefore, cheaper production factors. In contrast, countries would import
goods that required resources that were in short supply, but higher demand.
The Toyota Enhancement Endowment Fund Advisory Committee and Mississippi State
University President Dr. Mark Keenum were to announce the first course in the recentlyestablished
TEEFAC was established to administer the $50 million gift Toyota announced at groundbreaking
in 2007. Payable over a 10-year period, the goal of the education gift is to create a perpetual fun
the first course will be a web application development class beginning January 2014.
Students will learn how to develop platform-independent web applications apps that run on
both Apple and Android devices as well as on standard web browsers.The course will be offered
as a dual enrollment program established by the Mississippi Department of Education, with both
high school and MSU academic credit available to students. The course runs from January
through April and involves three classes a week two distance classes, on Tuesday and
Thursday mornings, and a Saturday class taught at the Toyota facility in Blue Springs, Miss., by
MSU professors. Toyota Motor Company of Japan is one of the world's largest automobile
manufacturers. Toyotas corporate philosophy is Realize harmony with people, societies and the
global environment, as well as a sustainable society through manufacturing, and it has
continually delivered safe, quality automobiles throughout the globe. The companys popular
online video library on the corporate website houses a large number of the companys highdefinition TV commercials and videos, including event and campaign information, as well as

descriptions of vehicle functions and technologies. All of Toyotas online video content can be
viewed on PCs and mobile devices.

Product life cycle:

Product life cycle is a business technique that attempts to list the stages in the lifespan of
commercial/consumer products. Product Life cycle is used for determining the lifespan of these
products; such as the normal phases through which a product goes over its lifespan. A by-product
of this PLC information is Product Life cycle Management. This is the management of the
gathered PLC data to use in different aspects of the business. Proposed by Ray Vernon in the
mid- 1960s.
Introduction Stage This stage of the cycle could be the most expensive for a company
launching a new product. The size of the market for the product is small, which means sales are
low, although they will be increasing
Growth Stage The growth stage is typically characterized by a strong growth in sales and
profits, and because the company can start to benefit from economies of scale in production, the
profit margins, as well as the overall amount of profit, will increase
Maturity Stage During the maturity stage, the product is established and the aim for the
manufacturer is now to maintain the market share they have built up. This is probably the most
competitive time for most products and businesses need to invest wisely in any marketing they
Decline Stage Eventually, the market for a product will start to shrink, and this is whats
known as the decline stage. This shrinkage could be due to the market becoming saturated, or
because the consumers are switching to a different type of product.

Fig : Product Life cycle of Toyota

Toyota in Europe considers activities across all stages of the vehicle life cycle, from design and
development, purchasing, manufacturing, marketing and distribution, through to sales, after sales
and end-of-life services. In Europe, as new plants and logistics centers are being opened, the
range of Toyota and Lexus vehicles expands and Toyotas market continues to grow, Toyota
needs to balance the management of new sites and an increasing vehicle fleet, with the
identification and development of sustainable solutions that promote environmental conservation
and resource efficiency. Toyota in Europe adopts proactive environmental measures throughout
the vehicle life cycle, combining legislative obligations with the best technological solutions for
customers demands, manufacturing considerations, and product requirements such as quality.
The key to success starts with the application of innovative technology at the vehicle design and
development stage. Innovation in product design is driven by the pursuit for the ultimate ecocar through the development of alternative energy systems, like the hybrid, and the
improvement of internal combustion engines. In addition, it means focusing on new materials,
which are less harmful or more recyclable, as well as the use of recycled materials for vehicle
components. Innovation at this stage of the vehicle life cycle ensures Toyota can lessen the
burden on the environment throughout the whole life cycle.

Globalization and integration of the world economy has made this theory less valid today.
The theory is ethnocentric.
Production today is dispersed globally.
Products today are introduced in multiple markets simultaneously.

New trade Theory:

New trade theory became popular in the 1960s and 1970s, when it replaced traditional
international trade theories that focused on unlimited free trade and comparative advantage as a
way of explaining international patterns of trade. In 2008, Paul Krugman won the Nobel Prize
for his work on new trade theory.
Traditional theories of international trade iterated that every country had a comparative
advantage over others in the form of a good or service that could be produced at a lower cost
than by any other country. Old theories of international trade suggested that such comparative
advantages came from inherent factors, such as natural resources or climate. Because
specialization is another factor that can lead to a comparative advantage, it then becomes in
every countrys best interest to specialize in certain goods and trade for others.
The new trade theory definition recognized that countries producing similar goods and services
continue to engage in trade with one another, despite the fact that they have nothing to gain by
standard theories of international trade. New trade theory sought to explain why such
transactions occur between countries with similar economic landscapes. Ultimately, new trade
theory concluded that comparative advantage does not just stem from natural differences in
resources or climate; rather, the economies of scale and network effects that occur in key
industries are also substantial determinants of international trade patterns.
Economies of scale are the cost advantages that Toyota Motor obtains due to size. The greater
the volume, the greater the advantage "Economies Of Scale Toyota Motor has a significant
impact, so an analyst should put more weight into it Economies of Scale Toyota Motor will have
a long-term positive impact on this entity, which adds to its value. Economies of Scale Toyota
Motor are an easily defendable qualitative factor, so competing institutions will have a difficult

time overcoming it. It increase variety of goods to the customer and decrease average cost of
goods. Also require to attain economy of scale that significant portion of the world demand.
Financial as an important part of Japans economy, Toyota had access to emergency loans
from state lenders during 2009 totaling approx. 3 billion dollars. Toyota also has their own
financial wing which provides loans for people buying Toyota cars.
Learning Toyota have world and regional training centers in Japan USA and UK, and all
employees need to be trained and certified before they can work for Toyota, with recertification
required every 3 years ensures all workers are trained to a certain standard and will work in
similar ways
Scope Toyota produce a side variety of cars which can use the same components and provide
financial services themselves, as well as having a stake in Mitsubishi aircraft corporation and
their own branch tasked with producing robots
Technical highly specialized machinery can be used by Toyota to produce exponentially larger
number of products, meaning that the high setup cost can be spread to reduce cost per unit.
Managerial Toyota has many managerial levels which range from direct control of a small
group of workers to running a whole factory, and uses the Toyota way to create a system of
continual development of techniques to reduce costs and increase efficiency.

Porters National Competitive Advantage Theory

In the continuing evolution of international trade theories, Michael Porter of Harvard Business
School developed a new model to explain national competitive advantage in 1990. Porters
theory stated that a nations competitiveness in an industry depends on the capacity of the
industry to innovate and upgrade. His theory focused on explaining why some nations are more
competitive in certain industries. To explain his theory, Porter identified four determinants that
he linked together. The four determinants are (1) local market resources and capabilities, (2)
local market demand conditions, (3) local suppliers and complementary industries, and (4) local
firm characteristics.

Firm Strategy,
Structure and



Related and

1. Local market resources and capabilities (factor conditions). Porter recognized the value of
the factor proportions theory, which considers a nations resources as key factors in determining
what products a country will import or export. Porter added to these basic factors a new list of
advanced factors, which he defined as skilled labor, investments in education, technology, and
infrastructure. He perceived these advanced factors as providing a country with a sustainable
competitive advantage.
Toyota has been very aggressive: re-entering Formula One with a wholly-built car (building
worldwide brand awareness), investing heavily in Europe (where Toyota was not a leader), and
consolidation of leadership in other areas. The organization has developed own-facilities (as in
France) or alliances to share the cost of production. This enables better understanding of local
markets, which in turn makes it possible for Toyota to serve each markets specific tastes and

preferences. Consequently, Toyota is now one of the most globalized car manufacturers in the
2. Local market demand conditions. Porter believed that a sophisticated home market is
critical to ensuring ongoing innovation, thereby creating a sustainable competitive advantage.
Companies whose domestic markets are sophisticated, trendsetting, and demanding forces
continuous innovation and the development of new products and technologies. Many sources
credit the demanding US consumer with forcing US software companies to continuously
innovate, thus creating a sustainable competitive advantage in software products and services.
3. Local suppliers and complementary industries. To remain competitive, large global firms
benefit from having strong, efficient supporting and related industries to provide the inputs
required by the industry. Certain industries cluster geographically, which provides efficiencies
and productivity. Toyota assembly to parts production, the Automobile Segment engages in a
wide variety of car-related businesses. Leveraging synergies among its business divisions in
development and production, the Automobile Segment accounts for 53.2% of consolidated net
sales and represents the largest business segment of Toyota Industries. Vehicle With its strengths
as an industry leader in quality, cost and delivery, the Vehicle Business produces compact to
midsize automobiles.
4. Local firm characteristics. Local firm characteristics include firm strategy, industry
structure, and industry rivalry. Local strategy affects a firms competitiveness. A healthy level of
rivalry between local firms will spur innovation and competitiveness.
In addition to the four determinants of the diamond, Porter also noted that government and
chance play a part in the national competitiveness of industries. Governments can, by their
actions and policies, increase the competitiveness of firms and occasionally entire industries.
Toyotas success comes from its planning and execution systems. Their management system
keeps Toyota competitive year after year. Toyota has been a quality leader for more than two
decades, as well as Honda. Toyota slipped when competitors matched its quality or even
surpassed it. In the position of a leader based on quality, Toyota faced some issues that made it
slip. These issues are: the fact that the company was sure about the success it has being a quality

leader made the company stop from the continuous improvement of quality process and the fact
that they thought that it will take long enough for other companies to match their quality
standards. Porters theory, along with the other modern, firm-based theories, offers an interesting
interpretation of international trade trends. Nevertheless, they remain relatively new and
minimally tested theories.

Balance of Payments:
The balance of trade of a nation is the difference between values of its exports and imports.
When exports are greater than imports, the nation is said to have a balance of trade surplus. On
the other hand, if imports are greater than exports, the nation is said to have a balance of trade
deficit. Exports and imports that figure in the balance of trade concept arise in the context of
trade with other countries. Exports are the value of goods and services produced in the United
States and sold to other countriesin other words, exports are expenditures on American goods
and services by the residents of foreign countries. A countrys balance of payment accounts is an
important policy issue for most host governments. There are three potential balance of payments
consequences of FDI. First, when an MNE establishes a foreign subsidiary, the capital account of
the host country benefits from the initial capital inflow. However, this is a one-time only effect.
Second, if the FDI is a substitute for imports of gods or services, it can improve the current
account of the host countrys balance of payment. Much of the FDI by Japanese automobile
companies in the US and UK, can be seen as substitute for imports from Japan. A third potential
benefit to the host countrys balance of payment arises when the MNE uses a foreign subsidiary
to export gods and services to other countries. The evidence based on empirical research on the
balance of payments effect of FDI, indicates that there is a difference between developed and
developing countries, especially with respect to investment in the manufacturing industries.
During (1961, 1969) while assessing the impact of the US FDI in Britain, he estimated a positive
effect of around 15percent of the total capital invested. Nevertheless, his research only dealt with
the direct effect of FDI, which results in noticeable flows in the balance of payments. The
indirect effects, on the other hand arising from the changes in the income of residents, or changes

in consumption patterns were not considered.

Toyota in different political systems

Originally Toyota started its journey in Japan in 1937 during which the other countries of the world
were going through The Great Depression. But Japan on the other hand with their strong political
system started manufacturing Toyota engines originally coming from Toyota Industries. Toyota
industries were a part of Japans financial plan to get out of The Great Depression taken by the
Political system can be separated into two dimensions.
They are:

Degree of Democracy vs. Totalitarianism

Degree of Collectivism vs. Individualism

In Asia:
One of the largest Democratic nations of the world, It didnt take much time for Toyota to take over
after starting exporting in 1957. Because its a democratic country the policies are less rigid. In the
recent times India came in 6th position in car manufacturing. In India their plan became to provide the
huge population with affordable cars. They made joint ventures with Kirloskar Group and even
produced local hybrids such as Toyota Cambry. That sheds a light on how doing business on this
sector can be profitable as the government encourages Toyota despite having local manufactured
cars of their own countries (e.g. Tata).

Thailand is a country that has been plagued with plenty of political tension in their history. Basically
ruled by constitutional monarchy system Thailand had a mix of democracy as well as Dictatorship.
Despite all the troubles Toyota was doing rather well in Thailand since beginning the journey there
back in 1954. Almost every 20th car that Toyota sells is bought in Thailand, which makes it an
important sales destination for the Japanese auto giant. Its importance also lies in the fact that Thaimade vehicles comprise a big portion of exports to countries like Australia. Roughly 20% of the cars
sold in Australia are made in Thailand. But the volatile political situation is not helping them now.
The Thai economy has suffered a severe blow from the anti-government protests and with their auto
industry facing a severe slump in demand is troubling them even more. The latest to drive out of
Thailand will be Toyota's Corolla sedans, which were earlier being made in Japan. Till now they
have kept faith but they might

Before World War II, in 1937, Toyota built plants in Tianjin and Shanghai and conducted local
assembly in China. The political state specially the emergence of communists and then long war
with Japan almost halted their business with Toyota. From the early 1970s, after Chinas return to
the United Nations was formally decided, Toyota transferred technology, worked to develop the auto
parts industry and actively trained personnel in order to contribute to the development of the Chinese
automobile industry. And now because of the political stability and change in the system from rigid
communism to a less rigid one China is developing in such a great way with Toyota.

Saudi Arabia:
Saudi Arabia is a country that has a system of absolute monarchy governing along with Islamic lines.
Toyota started exporting since 1955. Royalties and affluent businessmen have huge demand for
these vehicles. Apart from oil embargo they held twice against some of the influential nations back in
the 1970s for political differences Toyota had a pretty much good business altogether.

Iran is an Islamic republic country. However Iran originally associated with Toyota back in 1973
when it was still ruled by the Shah. After the Islamic revolution the business halted for few years
resuming fully in 1994. It has been said that they are stopping their export for an indefinite period for
nuclear concerns in recent times.

United Kingdom:
Toyota signed their agreement with United Kingdom in 1965. Both monarchy and democracy are the
main government of this country. Britains monarchs had no problem with the inclusion of Toyota in
their country. Toyota Prius gained a lot of popularity after starting their journey. After Falkland war
and political turmoil in the 80s Toyota gained immense popularity in the 90s, mostly because of the
correct policy by the government of that time. Britain even started manufacturing the cars, mostly
affordable family cars.

Germany is one of the key manufacturers of Toyota in Europe. They had a lot of political turmoil after
the country was separated into two parts. That is why Toyotas venture started in the 1970s in West
Germany as it was not a socialist part of the country and was open to many policies. Germans love
their stylish cars and have their own famous cars like Volkswagen and that made them invest a lot of
time behind this company.

Italians also love stylish cars. Their government also a republican one made a good policy of
bringing Toyota to the country. Their success was quite good although locally manufactured cars
were comparatively more popular. Their distribution signed with Toyota Italiana signed in 1970 was
terminated in 1993. It possibly happened because of poor policy.

Russia had the same socialist government like former East Germany before becoming democratic in
the 90s just like the reunified Germany. Despite that, their main head of state Vladimir Putins
differences with other countries on lot of political issues is distancing Russia from the countries that
dont support his ideas and imposing sanctions. These factors are prompting political tension and
making many companies go away. Toyota stopped manufacturing in a lot of places of Russia. But
kept trust on selling Toyota cars like Lexus and Camry.
North America:

In 1957 Toyota opened its first United States office in a former automobile dealership. Then the
government didnt only continue doing business with this company but they also decided to allow
Toyota to manufacture family cars. USA is already pretty good at automotive manufacturing and with
the help of the government Toyota is doing pretty well.

Latin America:
Latin America has one of the oldest in Toyotas history of expansion into overseas markets, second
only to Southeast Asia.
Starting with its entry in Brazil in 1958, its 1st full-scale launch of overseas production operation after
World War II, Toyota has actively pursued localized production in Peru, Venezuela, and other
countries. These countries were mostly under dictators but despite lot of troubles they were
successful because these countries strong parts are its manufacturing capabilities. Strong
industrialization is their key to success.

South Africa:
South Africa had affiliation with Toyota back in 1959. But their apartheid era made a bitter relation
with most other countries as they imposed sanctions on the country. That led to a void for Toyota
business in the country. After apartheid was lifted in the 90s the Toyotas business flourished again.
In the meantime recently a lot of workers started a strike stating poor treatment of the worker as the
main reason which reflects poorly on the current government policy.

Australia is one of the main places for Toyota. This is a democratic country with open policies.
Toyota started their journey back in 1951 in Australia. It then started their venture in for
manufacturing. But the economic handling of the situation by the current government made a huge
loss for every automotive company in Australia. That is why this government will only export Toyota
cars instead of manufacturing.

Toyotas business strategy in international

Toyotas success both on Japanese and international market was possible due to its continuous
improvement of products. They believe that there is nothing that is not possible to improve and this
thing can be defined by one world Kaizen: means continuous improvement.
Toyota has factories all over the world, where produces and assembles vehicles for local markets.
The company has manufacturing or assembly plants in Japan, USA, Australia, Canada, Indonesia,
Poland, South Africa, Turkey, United Kingdom, France, and Brazil, most recently those in Pakistan,
India, Argentina, Czech Republic, Mexico, Malaysia, Thailand, China and Venezuela. The first
Toyota vehicle built outside Japan was a Land Cruiser FJ<251 built in So Paulo, Brazil, in May of

Toyotas international market:

A. Toyotas European Market:
Japanese investors have turned to Europe, a market which they consider vital not only for their
products, but also ambitions to become leading global player. Toyota Motor, the second global car
manufacturer, was the one who initiated this trend. The auto manufactures has eight factories in the
old continent, in UK, France,
Poland, Turkey and the Czech Republic, with a total of 55,000 employees, including a distribution
network and a research and a development center in Zavetem, Belgium. Any location it would have
operations, the company brings annual profits of million Euros from contracts made. It brings an
important chain in research and development related to design and safety standards. In Europe in
2003, the Japanese company under three brands owned Toyota, Daihatsu and Hino, recorded a
4.4% market share. In 2004 there were 17 production units of Japanese automotive facilities in the
European Union; they produce 1.3 million vehicles and 14 research and development centers. It is
estimated that these investments have created 200,000 new jobs. The European market is too
important to be ignored, said the Japaneses, it is still a strong market that rivals many companies for
and it has a unique industrial base. Japanese companies have started a series of investments in
Russia, where domestic market is growing. In June 2005, Toyota began building a plant near St.
Petersburg that will produce, starting with the 2007 Camry models. While the UK benefits from about
half of total Japanese investment, Japanese companies begin to move eastward manufacturing
facilities to take advantage of lower wage costs and to be closer by the more flexible markets of new
EUs members, that some of them will adopt the euro in a few years. They want to consolidate their
positions on the stable, secure and growing markets, but competitive, too. The European market is
one of them. On the European market Toyota Motor Corporation recorded increases in sales from

year to year. Its success owes to adapt its supply to the needs and requirements of the Europeans,
based on total quality strategy, innovation and continuous competitive spirit.
B. Toyotas US Market:
Business activities in U.S. of Japanese automotive and components companies are highly profitable.
If in 1980 the Asian brands cars were imported 100%, in 1993, the number of factories located on
American soil was 11. Descent into force of the Japanese producers in the U.S. is seen as a second
Pearl Harbor. Japanese brand market share increased from 15.3% in 1999 to 20.6% in 2004 and the
trend is upward, considering that in 2006 their number of plants is 23. As in Europe, the Japanese
have invested heavily in U.S. production sites. GM, Ford and DaimlerChrysler companies have been
overcome by the Japanese, especially because of their high adaptability, but also of the lack of a
culture of domestic product among American citizens. In 2007, Toyota surpassed Ford in U.S.
sales, standing on second place, after GM. At the end of 2007 Toyota manages to become a world
leader in car sales surpassing giant General Motors. Japanese manufacturer has managed to
manufacture and sell 9,51 million units compared with 9,26 million units sold by GM. GM leader of
the auto sector for 8 decades, had to settle, this time, with the second position after Toyota. The
reason that Toyota becomes the world leader was undeniable the interest that US show to the
fuel<efficient vehicles which bear the unmistakable signature of Japanese. In 2008, Toyota sold
more vehicles than GM, 4.72 million vehicles for the Japanese group compared with 4.67 million
vehicles of GM, the leader of the American auto industry over the past 76 years. For 2009 Toyota
proposed to sell 10.4 million vehicles, a figure that would set a new record in the automotive
industry, the former dating from 1978 when GM sold 9.55 million vehicles in the whole world.
However, global economic crisis has hit everyone, including Toyota. The race between GM and
Toyota is not only about the number of vehicles sold. In terms of profitability, GM is significantly
behind those of Toyota, which also invests heavily in research and development of new models. On
costs and profits of the auto industry, for each vehicle produced in North America in 2006, GM
posted a profit of $ 2,123 less than Toyota did. Japanese car manufacturer is the most profitable car
manufacturer in the world, its profit per vehicle increasing from U.S. $ 1.175 in 2005 to $ 1,977 in
Although the European market is steady for Toyota Company, the market where they sell most
Toyota cars remains the North American.
B. Toyotas Australian Market:
On the Australian market, in early 2010, the Toyota Company has started production of the Toyota
Camry Hybrid car. This is a model powered by electricity and gas and it will be produced around
10.000 units annually at the Altona plant in southeastern Australia. Toyota became the first
manufacturer which makes mass production of cars powered by a hybrid system, starting with the
Prius more than ten years ago. Toyota is counting on increasing demand for such vehicles with
hybrid propulsion in terms of increasing fuel prices and the sharp rise in world temperatures. D.
Other markets of Toyota Corporation.
Culture: The challenge of management between cultures has existed since the presence of ancient
civilization (Hickson and Pugh, 1995). From the governance of populations, the commanding of
armies and the management of religions; the problem of management across cultures has been
present for thousands of years. Business and corporations in recent decades have been exposed to
the globalization of various cultures and philosophies. Many organizations have welcomed this and
attempted to buy and sell products outside of their domestic market, whilst others have been more
reluctant to face the challenge. Understanding the cultural norms and behaviors of new
environments, whilst showing signs of sensitivity, can be the difference between the success and
failure of a business operating abroad (Hannagan, 2005a). Improvements in the technology of

communication and transportation, and the decreasing costs of production, result in more and more
businesses taking advantage of the growing accessibility of global markets (Adler, 1983). The
increase in overseas operations for businesses has seen new strategies implemented internally as
there needs to be an improvement of communication between the employees and management of
different cultures. Hofstede et al (2005a) argues that if we want to understand the management
styles of different cultures, we first have to understand their society; for example, how families
function and what effects does the government and political system have on citizens. It is
understandable why some businesses may be reluctant to diverse into new cultures, as there is a
considerable amount to comprehend about the market; but this is a risk that some large-scale
businesses have to take in order to compete in the global market. The growing importance of cultural
differences, internally and externally to multinational organizations, is calling for new styles of
management to be introduced which follows the norms and behaviors of the society.

Contemporary Cultural Issues in International

There are a number of issues that businesses need to consider when internationalizing and
expanding their operations into new cultures. They may need to reconsider their marketing and
human resource management, or even reconsider their product in order to comply with socialcultural norms (Brooks et al, 2004). With these considerations many businesses are changing their
management practice in order to conform to the cultural norms within their place of operations. Ways
in which many contemporary businesses are approaching this is to create inter-cultural managers,
someone who can operate in a variety of different cultures (Hofstede, 2005b). One of the many
benefits to inter-cultural managers is that it an break down the cultural barriers and bring people from
different cultures and sub-cultures together through means of communication. These managerial
development programmers have been implemented into American businesses since the midtwentieth century, but many businesses operating abroad have found it difficult implementing these
programmers. International participants have struggled to take advantage of these development
programmers, as the cultural and communication barriers have taken effect. Hofstede et al gives an
example of businesses operating in Japan; many participants found it difficult receiving personal
feedback on their performance as they feel they insulted the giver of the feedback. This would come
down to the variance in cultural norms; in Japanese business culture, the relationship between the
employee and manager are more personal than Western practice. Another downside to developing
inter-cultural managers is that many managers these days are not willing to spend long periods of
time abroad (Daniels & Radebaugh, 2001). But Daniels et al identify a trend in managers spending
short periods in international markets, which is something businesses encourage as through this
they can become more culturally sensitive through the experience and further training. With regards
to marketing management, Brooks et al believe that many businesses face the issue of whether to
go with the 'Convergence Perspective' (global marketing campaigns) or adapt their marketing
strategy and product to the cultural norms and behaviors (Divergence Approach) of the country in
question. The contemporary approaches to cultural issues in management help identify the new
trend of approaches to management which consider the cultural behaviors of the internal and
external environment to the business.

Determinants of culture:
1. Social structure

2. Religion
3. Language
4. Education
5. Economic philosophy
6. Political philosophy
7. Values and Attitudes
8. Technology and Material Culture

Toyotas business market in international arena is not affected by all the elements of culture.
Only the last three elements are responsible for the changes.
Education: Where there is education there is progress. So the more educated the society is
educated the more upgraded the society is. So Toyota targets those society or those regions
where education is more to expand their business in a big and expanding market. That is the
reason why it is expanding its activities in European market or US or Australian market
rather than African or Asian market. Recently in South Asia they are introducing their
products as countries like India are now giving importance to education and an increased
Economic Philosophy: Where there is a strong economic base firms will try to expand their
products there, and Toyota did exactly the same. It choose the strong economic regions like

US, Europe or Australia to trading, but they have their products for all classes of people like
for executives, for A class people, for VIPs etc. They have their sections for different class
of people.
Political Philosophy: Political stability is required for doing business without any
disturbance. Thats why it is important to target the areas where political stability is more
than others. Toyota did the same in choosing those areas. It ignored political unrested areas
like Africa or countries like Iran , Iraq, Afghanistan where there is constant threat of political
attacks as the situation there is very much violent and very unfriendly for running a business.

Toyota Production System

A production system which is steeped in the philosophy of "the
complete elimination of all waste is imbues all aspects of production
in pursuit of the most efficient methods.
Toyota Motor Corporation's vehicle production system is a way of "making things" that is
sometimes referred to as a "lean manufacturing system" or a "Just-in-Time (JIT) system,"
and has come to be well known and studied worldwide.
This production control system has been established based on many years of continuous
improvements, with the objective of "making the vehicles ordered by customers in the
quickest and most efficient way, in order to deliver the vehicles as quickly as possible."
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") which
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," in which each
process produces only what is needed by the next process in a continuous flow.
Based on the basic philosophies of jidoka and Just-in-Time, the TPS can efficiently and
quickly produce vehicles of sound quality, one at a time, that fully satisfy customer

TPS Concept
Highlighting/visualization of problems
-Quality must be built in during the
manufacturing process!If equipment malfunction or a defective part is
discovered, the affected machine

Productivity improvement
- Making only "what is needed, when it is
needed, and in the amount needed!"

automatically stops, and operators cease

Producing quality products efficiently

production and correct the problem.

through the complete elimination of waste,

For the Just-in-Time system to function, all of

inconsistencies, and unreasonable

the parts that are made and supplied must

requirements on the production line.

meet predetermined quality standards. This is

In order to deliver a vehicle ordered by a

achieved through jidoka.

customer as quickly as possible, the

1. Jidoka means that a machine safely stops

when the normal processing is completed.
It also means that, should a quality /
equipment problem arise, the machine

vehicle is efficiently built within the

shortest possible period of time by
adhering to the following:
1. When a vehicle order is received, a

detects the problem on its own and stops,

production instruction must be issued

preventing defective products from being

to the beginning of the vehicle

produced. As a result, only products

production line as soon as possible.

satisfying quality standards will be passed

on to the following processes on the
production line.
2. Since a machine automatically stops when
processing is completed or when a
problem arises and is communicated via
the "andon" (problem display board),
operators can confidently continue
performing work at another machine, as
well as easily identify the problem's cause
to prevent its recurrence. This means that

2. The assembly line must be stocked

with required number of all needed
parts so that any type of ordered
vehicle can be assembled.
3. The assembly line must replace the
parts used by retrieving the same
number of parts from the partsproducing process (the preceding
4. The preceding process must be

each operator can be in charge of many

stocked with small numbers of all

machines, resulting in higher productivity,

types of parts and produce only the

while continuous improvements lead to

numbers of parts that were retrieved

greater processing capacity.

by an operator from the next process.

Toyota takes measures in environmental

issues surrounding vehicles
Due to the global development of the industry and technology in the 20th century, increased
production of vehicles and the growing population resulted in massive consumption of fossil fuels.
Today we face three challenges regarding environmental and energy issues, which are finding an
alternative energy source as opposed to oil, reducing CO2 emissions, and preventing air pollution.
Although the demand for oil alternatives, such as gas fuels, electricity, and hydrogen may grow,
each alternative energy source has its disadvantages. Oil is currently the main source of automotive
fuel, but further research and development of alternative energy in the future may bring change.
Various power trains, such as those found in Plug in Hybrid vehicles, electric vehicles and fuel cell
vehicles, will be required in order to use diversified types of fuels.
At Toyota, we will continue to develop various vehicles, along with our emphasis of conventional
vehicles and hybrid vehicles as fundamental core technology while pursuing further advancement.
Based on these core technologies, Toyota will develop next-generation vehicles utilizing alternative
fuels such as gas fuel, electricity and hydrogen.

Characteristics of Oil Alternative Fuels

Electricity, hydrogen, biodiesel and natural gas are good alternatives for fossil fuel, but each source
has their own disadvantages. The left figure shows compares the energy density of each alternative
Even with the latest lithium ion battery technology, only 1/50 of the energy required by gasoline is
used. Although powering a motor with electricity is much more efficient than an internal combustion
engine, liquid fuels such as gasoline are still advantageous because of their high volume in energy
density. The figure below shows the difference in energy density between electricity and gasoline but
does not indicate correlation in cruising range.
The cost of batteries also poses a major challenge. In an effort to attain the 2030 Innovative
Technology Plan issued by Japan's Ministry of Economy, Trade and Industry, we have barely
reached the status to be at a competitive level with gasoline powered vehicles.

Toyota takes measures in environmental issues

surrounding vehicles
For more improvements in efficiency, Toyota proactively manages power train efficiency, reduces
vehicle load, and controls energy management by integration of fuel-saving technologies such as
charge control, idling stop, etc.

For Achieving Sustainable Mobility

Toyota has a long history of continuous improvement when it comes to conventional engines,
including lean-burn gasoline engines, direct injection gasoline engines and common rail directinjection diesel engines, as well as engines modified to use alternative fuels, such as compressed
natural gas (CNG) or electricity (for Electric Vehicle).
Engineers may disagree about which fuel or car propulsion system is best, but they do agree that
hybrid technology is the core for eco-car development. We develop these key technologies in-house
to reduce costs and rapidly commercialize their application.

Toyota Financial Services

From a recent report we come to know that Toyota Financial Services (TFS) recently celebrated its
one-millionth eContract, an accomplishment that demonstrates the success of this pioneering auto
financing process. In January 2013, TFS introduced an industry-leading electronic contract
(eContracting) system for its dealerships. Through this process, dealers are able to transmit contract
package information electronically phasing out tedious paper contracts, increasing accuracy, and
improving efficiency. The benefits of implementing an eContracting program were very clear from
the start. With deal validation occurring immediately, the auto financing experience is simplified and
significantly enhanced for both the customer and the dealer. Customers have no need to return to
the dealership for follow-up items, and funding is handled immediately, improving dealership cash
The TFS eContracting process reduces contract errors and significantly improves funding times,
which, in turn, improves both dealer and customer satisfaction. TFS comprehensive approach
ensures that all auto financing products and required documents are available. Dealers are able to
lead customers, step by step, through the financing process, eliminating most administrative or
contract completion errors, saving time and overall operational costs. The process is seamless and
accelerates the loan review process while maintaining compliance with current legislation and
As a result of these design elements, eContracting was rapidly adopted by more than 1,300
authorized Toyota, Lexus, and Scion dealers across the nation.
It happened much faster than we anticipated, said Mike Wells, TFS Group Vice President of Sales,
Product, and Marketing. Our original goal of 30 percent utilization by the end of the programs first
year quickly increased to a 50 percent goal, as our field embraced the process. And by the end of
that first year, wed reached an astonishing 56 percent eContracting utilization throughout our
As of September 2014, 65 percent of TFS contracts are electronic, with nearly 90 percent of its
dealers actively using the industry-leading process.
Moving forward, we now anticipate completing over one million eContracts each year, added Wells.
eContracting has really taken off, and the feedback from dealers and customers is very positive. We
look forward to continued growth, improved dealership efficiencies, and increased customer
TFS eContracting platform, and its success, is unparalleled in the industry. Its implementation has
enabled TFS to stay abreast of the auto industrys changing landscape, and revolutionizes the auto
financing process.

At present Toyota is the leading company in the auto mobile market. They have capture the lion
share of the global market and this the 75th year is running of their glorious success.

In this graph, the red dot shows the position and the size of the Toyota in Auto industry.
Toyota also has comparatively the highest sales percentage than its competitors. But it varies from
region to region.

The market value as well as the brand value is also high. And its 6.39 times larger than others.

If we go for the overall sales performance of Toyota from past to present then the graphical figure will
be like this

Nothing in life goes the exactly like we plan, we face issues in the way. Also systems
they dont work exactly the way they supposed to. So Toyota has also some drawbacks and
1. Toyota Production System

Difficult, high cost to implement.

To implement this system they need to dismantle previous systems, train employees
how to use it.

Complex to use.

Supply problems.

In lean manufacturing they keep small amount of inventory in hand, so they need a
supplier that they fully trust not to interrupt or delay the supplies and
always stay on schedule.
2. Warehouse Management System


To implement full features of the system it costs between 750,000 and 2,500,000 $.


Complex to use.

Takes months to be fully implemented and ready to use.[v]

Learning Management System

Reduce the possibility for the user to get more explanation if he didnt


No social interaction involved.

Little or no human interaction, more likely increases level cause of depression.


Can terns routine.

In order to solve the disadvantages, we need to keep improving these systems, by
reducing its complexity at the lowest possible cost.

Reduce complexity of using a system, by applying well defined, easier


Reduce implementation cost, by removing unwanted or unneeded features

of the system.

Toyota established a division which relies and competes within the industrial and commercial
industry. Toyota Commercial is an outdoors workman oriented company that produces commercial
and industrial equipment and services that meets the needs for the everyday labor working
generation person. The labor industry is typically defined as people who are in their late twenties to
early thirties, and which tends to be hands-on rich, and time-consuming. Toyota Commercial keeps
everything as simple as possible in the commercial and industrial experience, from heavy equipment
to pure pricing to great industrial & commercial long-term consumer relations.
One of the best factors helping Toyota Commercial is that it is a division of Toyota Motor
Corporation, one of the leading automobile manufacturers in America. This division was created in
attempt to make up for any failure of Toyotas past. The lesson Toyota learned from opening its
doors to the industrial and commercial industry was that people generally categorize the Toyota logo
as an only vehicles organization and that it could not compete in any other industry. With this
Toyotas knowledge in hand, this new addition seemed to be a sure fire way to go. With a variety of
commercial equipment and services for this industry currently in production and servicing, Toyota
Commercial surprised many by building the Hino truck line alone. This number toppled some of the
veteran truck manufacturers of today. These numbers still continue to rise, with Hino showing a high
percent increase in sales within the past four years all together.