Impact of Globalisation on Toyota - Essay Example

?International Business: Globalisation Table of Contents Background 3 Theoretical Framework 4 Analysis 7 Impact of Globalisation on Toyota 7 SWOT 7 Strengths 7 Weaknesses 8 Opportunities 9 Threats 10 Globalisation Effect on Strategies Of Toyota And The Impact Of It 10 Recommendations 12 Conclusion 14 References 15 Bibliography 18 Background Toyota Motor Corporation deals with manufacturing of cars and vehicles. Toyota Motor Corporation is based in Japan and is considered to be one of the largest automobile manufacturing companies in the world (Iqbal & Et. Al., 2010). Sakichi Toyoda resisted joining his family business and pursued his dream into handloom machinery making in the year 1897. Sakichi Toyoda developed loom that stopped functioning automatically as a result of minor thread malfunctioning. This very idea of developing machines or equipments to stop functioning with an intention to recognise defects in the very moments and can be fixed instantly proved to be very effective and tended to become the base of the company. This very concept contributed in the success of the company (Toyoland. Com., 2011). Toyota Motor Corporation started its journey in the year 1937. The company was founded by Kiichiro Toyoda. It has been operating as an international business organisation since several years. Kiichiro Toyoda analysed the automobile industry of the US during his visit to Ford. The company established its headquarters in Hollywood which is in the US. This was the inaugural global venture of Toyota. The first car which was registered by the company in the US was named Toyopet in the year of 1958 (Toyoland. Com., 2011). The description of globalisation as stated by International Monetary Fund (IMF), reads “the growing economic interdependence of countries worldwide through increasing volume and variety of cross-border transactions in goods and services, freer international capital flows, and more rapid and widespread diffusion of technology” (Martin Frost, 2011). Globalisation has been a contributing factor in increasing number of nations that are contributing in the world economy as a participant. The practice related to world trade is changing and it is considered as one of the affects of globalisation. With the change in time the automobile industry has increasingly emerged to be a leading industry contributing towards the global economy. Globalisation has played a major part in the emergence of automobile industry and Toyota has been a leading name in the industry which has also been impacted due to globalisation. The paper will discuss and explore the characteristics or issues of globalisation along with its impact on Toyota. Theoretical Framework Globalisation does not have any definite or specific definition. According to Vogel (2010), “Globalisation is known as the domination of the world economy by multinational companies”. Free trade policies and practices have enabled these large corporation entities to operate their business globally further influencing world economy. Capitalist nations have been mostly benefitted by globalisation. Trade and multinational companies have been highly benefited as a result of globalisation (Vogel, 2010). Globalisation has influenced the political as well as technical environment of the world. However, globalisation can be termed as practice of trading among the nations through the operations of the internationally operating corporations. The exchange of goods and services were possible as globalisation enabled these companies to operate in various nations facing minimum friction (Martin Frost, 2011). The effect of globalisation was noticeable after the World War II. The monetary and corporative movement was highly noticeable after the World War II which can be marked as increasing pace towards globalisation. The advancement of technology, establishment of new organisations along with introduction of legal policies and establishment of legal systems are highly responsible for globalisation to flourish and develop. The characteristics of globalisation has influenced economic as well as culture of the world. Economically, globalisation can be observed to have paced up the rate of international trade comparatively. Due to globalisation, boost in the capital flow internationally which also takes into account foreign direct investment (FDI), is to be noted. The major impacts of globalisation have been that it enabled the corporations to operate directly or indirectly in the foreign nations leading the company to enhance its sales generated from foreign sales. The globalisation has led to foundation of international agreements with an intention to establish peaceful operations. Globalisation gave birth to a few of the leading organisations related to supervision of global trade such as World Trade Organization (WTO) and Organization Of Petroleum Exporting Countries (OPEC) (Martin Frost, 2011). Development and improvement in financial systems globally is among the major contributions of globalisation. While the globalisation is in progress, it can be observed that the function of leading organisations like World Intellectual Property Organization (WIPO), World Trade Organization (WTO), and International Monetary Fund (IMF) increased. These are the organisations that are concerned with the monitoring and governing the international transactions. The main impact of globalisation can be observed that has enabled increase in economic practices, included off shoring and outsourcing (Martin Frost, 2011). ‘Liberalisation’ was given much preference which further contributed in enhancing and boosting globalisation. As a result of globalisation, many corporate entities were provided with opportunities to operate in emerging markets which added tremendously in the companies’ profits. Liberalisation came into practice for the betterment of the global economy. Economic liberalisation can be referred to lessening regulations of the government which also includes easing restrictions of the economy of the nations which further enable the private companies to participate (Hundet, 2011). Due to globalisation, large companies were allowed to expand irrespective of the regional boundaries. And, small industries were also provided with the opportunity of expanding their investments. The freedom to export and import raw materials along with the capital goods without major legal restrictions was one of the results of liberalisation. Globalisation was the main reason behind liberalisation. The nations were experiencing trading practice which became easier as a result of liberalisation provided by the governments of various nations in taxation policies (Hundet, 2011). Globalisation has always been linked with the technology development. This has emerged because of the freedom government allowed in import or export of advanced technology. The large corporate houses enter the new markets with either opening new subsidiaries or merging with existing firms in that particular market or through acquisitions. For instance, one company decides to merge or amalgamate with another company to establish themselves in the market. The company do this by merging operations with another company, for example joint venture, where two companies use their technologies and talents for one single venture. As a result of globalisation, numbers of mergers and acquisitions have increased. Globalisation has increased the demand of industry to go international. Industries are adopting this practice of merger and acquisition to reshape in accordance with the global level. It has been observed that the cross border mergers and acquisitions and the change in strategic alliances are the distinct characteristics of globalisation with respect to the present scenario (OECD, 2011). The enhancement of communication system can be observed under supervision of globalisation. Globalisation has tended to decrease or reduce the kilometre distances with the utilisation of imported technologies which has further contributed in better communication system among the industries belonging to the different nations and citizens. Analysis Impact of Globalisation on Toyota To be more precise with the impact of the globalisation, two frameworks, SWOT and PESTEL, are taken into account for the purpose of analysis of the company, Toyota. SWOT Companies conduct SWOT analysis to determine the strengths, weaknesses, opportunities and threats of the organisation. This is done by the management of the organisation as part of their strategic planning before preparation of corporate strategies (Bernroider, 2002). SWOT analysis also helps the organisation to identify their weaknesses and the required measures to be taken. The opportunity hence identified with the help of SWOT analysis is utilised and used by the company to enhance their profitability. This helps the organisation to accomplish its objectives. The SWOT analysis of Toyota is as followed: Strengths Toyota is globally recognised and operates its business in more than 170 nations. This can be considered as the major strength of the company as this provides the company with various markets of these nations. Globalisation has played a major role as a driving force for the growth of Toyota in various nations. The company is counted among those corporations that enjoy major shares in international markets. The company is financially sound. Finance is considered as the backbone of the company to operate its business. The stable financial condition helps the company to develop advanced technologies and make innovation in new offerings. Toyota has been successful in gaining strong brand image where the quality of the products, it provides to the customers, plays the major role. One of the major qualities, the company incorporates in the products it produces, is environmental friendly attributes. The company, Toyota is considered to be one of the major supporters of greenery (Toyota, 2011). The company operates internationally; the cars and the vehicles are manufactured in wide ranges which help the company to obtain maximum numbers of customers by meeting the needs of the different segments of customers. And moreover, the company allows the facility of customising the products according to the needs of the customers. The company pays adequate attention in manufacturing approaches through various measures. For instance, the company has incorporated Total Quality Management (TQM) and Just-in-Time (JIT) manufacturing approaches that have proved to be the strengths of the company providing it with the title of first mover regarding car research and development (Toyota, 2011). Weaknesses Toyota is a Japan based company which operates globally. But as it operates in other countries, then it can be considered as a foreign company which can prove to be a major drawback for the company to establish itself in those foreign markets. The company has been manufacturing the similar kinds of cars and vehicles with little modification which has stand out to be a major weakness. As a result of globalisation, many companies have emerged providing with the low cost vehicles. This can stand in the way of the company as the products provided by the company are expensive in nature. The technology it adopts can be duplicated or copied by another company which is again one of the major weaknesses of the company. For instance, the JIT technology it uses for the manufacturing its goods are also used by Nissan to manufacture their goods. Both the companies deal in the same industry i.e. car manufacturing industry. This has been possible because of globalisation which has enabled the multinational companies to import and export technology as well as gather information related to the companies easily (Housley & Brandwood, 2011). Opportunities The industry in which Toyota operates its business is highly affected by globalisation. Innovation has been significantly triggered by globalisation. The liberalisation of export and import of technology has increased the demand of advanced technology globally. Globalisation has introduced new markets with the new demands to be served by the companies in order to gain customers. Nations such as China, India and Russia can be taken into consideration as new markets for employing penetration pricing strategy to capture major market shares. These are the nations where population is observed to be huge and due to globalisation, the economic statuses of the population have increased making them able to purchase the luxury items. Exploring these markets can be very effective for Toyota, contributing in enhancing its profit (Housley & Brandwood, 2011). Threats Globalisation has not only introduced new markets but also invited many other competitors from various other nations. Car manufacturing industry, in the span of time, has seen various players (companies) to evolve and dissolve. With the facility of availability of technology, the existence of disruptive technology has emerged as one of the major threats for the company, Toyota. The cars produced by the company are bit expensive but the company adopting disruptive technology can produce cars at minimum expenses. However, the qualities of the products are not according to the Toyota’s standards but still can prove to be appealing to those customers who desire for less expensive vehicles. Recession or depression in economic conditions can further cause reduction in demand for expensive cars which is again the result of globalisation (Lynch, 1999). Globalisation Effect on Strategies Of Toyota And The Impact Of It Toyota is a Japanese company but its mark can be seen in almost every nation of the world. The company has been well-acquainted with mergers and acquisitions. In the year 1966, the company acquired ‘Hino’ a truck manufacturer. Since then, Hino has been the part of the Toyota and is generating high demand in Europe. This acquisition has proved to be highly beneficial for the company as it is considered to be the leader of sales regarding the medium and heavy duty diesel trucks (Toyoland.Com., 2011). The strategy of operating globally has been part of the strategies of Toyota since long. After the visit to Ford, Kiichiro Toyoda decided to establish manufacturing units in the US which was in the year 1957. Toyota penetrated the market of the US with the help of subsidiaries. In the year 1959, the company is said to establish its very first manufacturing unit overseas which was in Brazil (Scribd, 2011). Toyota has adopted corporate strategies such as environment related technologies to develop its cars and vehicles so as to appeal to the customers as well as contributing in the sustainability of the environment. The company has also adopted joint venture strategies of entry. In this context, it has been observed that two or more corporations come together to form a different separate legally recognised entity. New United Motor Manufacturing, Inc (NUMMI) was the joint venture between Toyota and General Motors. This provides the companies involved in joint venture with the opportunities of getting benefitted or gain information from the partners’ knowledge. This helps in reducing political risk. And, one of the major benefits of joint venture is it provides the companies with the opportunity of sharing risks and costs with the partner company (Scribd, 2011). Toyota has gone beyond the traditional labelling approach. For instance, the quality of the products is opted to be the introduction of the Toyota’s manufactured products. The company does not label its products with ‘made in US’ or ‘made in Japan’, instead it labels it as ‘made by Toyota’ making quality to be its judging factor. And, in addition to this, the products of the company cannot be discriminated with respect to its manufacturing nations (Toyota, 2011). Toyota has been highly influenced as well as benefited by the globalisation. It has been observed that in the year of 2003, the company has been able to sell 6.78 million of its manufactured vehicles globally. Though the USA is its major foreign market share, the company has been able to succeed in increasing its market share in other parts of the world as well. In the year 2002, the company was marked to have 10.4% of market share which increased to 11.2% in the year 2003, reducing the market share of Ford, the US’s local company (Scribd, 2011). In the year 2002, the company had decided on another strategy related to corporation to enhance the globalisation efforts. This was determined to become the vision of the company termed as ‘2010 Global Vision’. The concept behind the new vision of the company was ‘Innovation into the Future’. This was developed to appeal the customers seeking for the innovative products as well as an attempt to cope up with globalisation (ICMR, 2011). Recommendations For many of the company’s dealings in the industry of manufacturing cars and vehicles, their operations have an adverse affect on the environment. Toyota should use its Research and Development (R&D) to develop such cars which are fuel efficient and have less impact on the environment. This could appeal to many ethical customers who are concerned about environment. The company has developed quite a few models of cars which are hybrid but it is not enough. To cope up with globalisation and the competitors, the company needs to concentrate more on manufacturing hybrid cars as well as electrical cars. There is always a threat of hike in fuel prices and therefore, if the company manufactures such cars which consumes comparatively lesser fuels can prove to be effective for it. Moreover, this would have lesser impact on the environment adding to the brand name of the company. Thus, R&D department of the company needs to be attentive in developing such technologies which enable the company to manufacture such cars. The company manufactures most of its vehicles from the US based factories or factories in Japan. This can prove to be one of the disadvantages for the company. Globalisation has enabled the practices of outsourcing and off shoring which help many companies to reduce their extra incurred expenses. The company can utilise various other nations too for the purpose of manufacturing its goods which would further help it to deduct the extra incurred expenses while operating in these nations. For instance, the company already operates in the market of China, it can potentially utilise the nation for the manufacturing purpose as the labour cost is observed to be low in this nation, reducing the cost of the manufacturing. Emerging markets of rising nations are always a tempting option for Toyota. As the corporation is globally renowned, it does not need to put much effort in marketing. Though, the centre of concern for the organisation needs to be developing such cars or vehicles which would suit the requirements of these nations’ people. Conclusion Toyota is considered to be amongst the largest car and vehicle manufacturing companies. The company operates its business in a global market and industry where intense competitions are observed. As a result of globalisation, the industry the company deals in is facing many emerging potential competitors from various nations. The advancement of technology has created huge demand in the markets. The advancement of technology has allowed better productions which are gaining demand in the market. Toyota has incorporated advanced technologies in the process of its manufacturing goods. Although, the efforts applied by the company need to be enhanced to cope up with increasing pace of globalisation and upgrading of technologies. The company needs to be actively involved in advancing the technologies it incorporates in manufacturing its goods. As the company is globally renowned, the expectations of the customers would grow with the expansion as well as increasing impacts of globalisation. Toyota is recognised as an environmental friendly company. This has contributed in its image globally, adding to its brand image gaining company goodwill. With the help of various entry strategies accommodated by the company, it has been able to operate well in multiple nations. Being a Japan originated company, the company has been able to generate maximum of its profit from various European nations and the US as well. Globalisation has allowed the company to wear the crown of being one of the largest car and vehicle manufacturers. 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