Automobile industry in Japan (Toyota) - Essay Example

Introduction Internal integration can be described as globalization. There are several different definitions and meaning for globalization of which one simple meaning would be unification of the world into a single society which functions together. Globalization involves internationalism, which in a number of cases can be misleading as global generally means ‘one world’ whereas international can be construed to different languages, people, cultures, borders, economies, and even ecosystems (Bigman, 2002). Globalization is a word which has become one of primary importance in the current business world. This became dominant in the 90s when the cold war ended and the Soviet Union was separated. Globalization is the process of speedy yet steady change and integration of countries and the occurrences that happen with the use of foreign trade and a lot of foreign investments (Feenstra & Hanson, 1996). Globalization can be expressed as newer opportunities and possibilities for action among people across the world. Here the location is not an issue and the social activities are not affected by the location of the individuals or the businesses. There have been a number of different definitions that have been provided for globalization, however none of these can be considered to be precise (Kelly, Rajan, & Goh, 2006). However some of the definitions that have been provided by experts are discussed below. According to Stephen Gill, globalization is a method of reducing the costs in terms of transaction and Trans – border movements of, capital as well as goods and also the factors of production and goods (Mooney & Evans, 2007). However Guy Brainbant has described globalization to be a process which does not only includes the world trade, but also includes a number of other factors like the development of advanced means of communication, financial markets becoming internationalized, higher and growing importance to multinational companies, higher mobility of people, population migration, and mobility of other factors like goods, capital, data and also ideas (Kose, 2003). However he also mentions that globalization is also a mode for mobility of infections, pollution and also diseases (Patapan, 2007). This paper aims at discussing the effects of globalisation on the production chain. The paper is also an investigation of the affects of globalisation on Toyota and will also entail a discussion of the various elements of the company which include the strategy used by the company across the world markets, and several other factors like the governmental interference. However before moving into the details of the paper, it is essential to get an overview of what a production chain is and understand the major elements that contribute to the production chain. The next section will deal with the concept of production chain in detail. Production Chain A production chain in simple terms refers to the steps that are followed in order to develop a product from raw materials into finished goods. These finished goods are what are normally consumed in the markets or in some cases used for other industries as a raw material. Every stage of the production chain has a major part in the overall production and the final product (Wright & Mechling, 2002). The various steps that are present in the production chain are as seen in the diagram below. The figure below provides the production chain for the Toyota which is one of the largest car manufacturers in the world and considering the operations of US alone the company has a market share of almost 18.4% as of May 2008 (Newman, 2008). The first step of the production chain includes the raw materials which include items like the steel, rubber, glass, textiles. These are then out together with a design and the all the components like the electrical components, the seats, and other like engine and transmission (Slack, Chambers, Johnston & Betts, 2006). These are then final assembled and the final product, i.e. the car is ready to go into the distribution cycle, i.e. to the manufacturers, and the independent distributors. The cycle is final once the product is available to the consumer markets (Slack, Chambers, & Johnston, 2008). As seen in th above diagram and the discussion earlier, the company’s process is simple with strong attention to detail and the company ensures that all the steps in the process are value adding so that the end users do not need to pay for unnecessary elements of the product production (Slack, Chambers & Johnston, 2008). Scope The research is based on investigation into the influence of globalisation in Toyota corporate social responsibility and how they deal with labours, environment issues and government. Limitation The main limitation of this research is that it deals with the car manufacturing company rather than with a glass or textile manufacturing company. However it is essential to understand that this industry also forms a major part of the industry and in addition, the result may not be very accurate and current, but it gives some important relevant data. Objectives of the Research The research that has been undertaken here for this paper is based completely on the following objectives. The main area of focus has been specifically the following: a) Highlight the Management system of Toyota automobile company. b) Study the Government legislations and how it impact in Toyota strategy. c) Focus in the Social responsibility. d) Study the Environmental initiative. e) Examine the impact of other industries on Toyota development These factors have been chosen as they form a major part and are extremely important elements of the business and it is essential to note these in order to evaluate the performance of Toyota in the ever growing globalisation and also the current recessionary period as well. Toyota Corporation Toyota Motor Co. Ltd. was started in 1937 in Japan. The company however grabbed attention worldwide in 1980s with the special Japanese quality and efficiency (Liker, 2004). In 1980s, it was seen that the Japanese cars lasted more than the American cars and the required much lesser repairs as well. It was in 1991, that the world recognised Toyota had something much more special than the rest of the Japanese companies as well (Liker, 2004). Over the years Toyota has been placed on the second position in the markets, right after General Motors (Liker, 2004). The table below provides a clear view of the market share of the various companies in the U.S. markets for as of May 2008. It is clear that as of May 2008, Toyota has gained as much as 18.4% of the total US markets (See Appendix 1 - U.S. Market Share by Manufacturers (Newman, 2008). The company has spread its operations across the world and currently operates in over 170 countries. Toyota has built a brand name and image for itself and has proved itself in the past. The company has by – far the most profitable business than any other car manufacturer (Liker, 2004). Discussion a) Management system of Toyota automobile company: Due to global competition in car industry, Toyota has established the most power management system which allows the company to be the world’s leading automobile. There are number of literatures that deal exclusively with Japanese management firms in general and with Toyota’s management in particular. Giriprakash, (2009) states seven management subsystems which are applied in Toyota Corporation such as production management, R & D management, sales management, financial management. b) Toyota’s Management Strategy Around The World Toyota has developed very realistic and achievable strategic objectives. The company realises the impact of the recession and the time required to recoup from the impact. Toyota has hence developed very realistic objectives as follows: Toyota aims at achieving a flat growth in the year 2010 (Ahmed, 2009). Toyota has always achieved a continuous rise in the sales, however in the current year the company has seen a major drop in sales (as discussed). ‘The company hopes that this move will raise operation levels past the break-even point of 70%, and put the company’s books in the black for fiscal year 2010’ (Calogera, 2009). Take advantage of the eco friendly vehicles that they produce and expand the sales based on these vehicles. Also try to regain the markets to the maximum possible by introducing special edition cars to meet the needs of the customers across the various locations. The company aims at improving its operations by concentrating more on the changing demand of customers and to move towards more resource rich and emerging countries (Sandras, 1989). In the long run, the company aims at providing products based on the customer’s view point and provide the customers with high quality, attractive products at most affordable prices (Toyota – Environment 2009). The company’s reports also highlight that they plan, ‘Early commercialization of next-generation environmental, energy and safety technologies’ (Toyota, 2009). Toyota also aims at developing production and sales environment to respond easily to the business environment changes in a more effective and efficient manner (See Appendix: Future Plans, strategic objectives). c) Government legislations: Japanese government is playing very significant role to support car industry to be competitive globally. Ahmad (2009) analysis the role of Japanese government in the development of conventional car and the importance of government schemes in terms of technical flexibility. Toyota has been impacted to a great extent and this is evident from the performance in terms of its sales. The company’s financial statements highlight the impact that has been faced in 2009 and the changes compared to 2008. It has been noted that the company has had a major drop of -1,103,000 vehicles which have been reduced over the year. It can be noted that the company’s operations in North America has been faced with high levels of decline in production and the total drop in the retail sales has been -746,000 vehicles (Ahmad, 2009). Other countries like Japan and Europe have also been impacted however, relatively they are much lesser than the drop seen in Northern America (See Appendix: Consolidated Vehicle Sales & See Appendix: Table of consolidated vehicle sales). d) Social responsibility Toyota has implemented a simple and straight forward strategy across all locations worldwide. The company has had to reduce the production due to low sales hence instead of losing its employees the company has now incorporated new on – the – job training for its employees. Also, Toyota has implemented this to ensure that the ideal time of the employees is reduced to the maximum possible (Toyota - Environment, 2009). The company has moved towards a strategic decision of participating in social causes to a greater extent. The company’s website also mentions, ‘our environmental commitment is a way of life, extending across all of our operations and through the full life cycle of our products. Through our strategy of sustainable mobility, we are developing and managing vehicles and technologies through their "life-cycle assessment" footprint so that we deliver the right vehicle, at the right time’ (Toyota - Environment, 2009). Toyota has also taken several intiatives during this period to cut down the production levels and it has been noted that the company has cut its production capacity by 1 million vehicles, which equals a reduction of 10 percent of its production. Toyota has also taken up the task of the cost cutting by shutting down the New United Motor Manufacturing Inc., and by reducing or halting a few of the production lines at the plants in Japan and England (Toyota - Environment, 2009). This strategy allows the company to save on the costs incurred and to reduce its losses to a great extent (Dunning, 2002). With the cuts, the company’s production capacity has been reduced to 9 million and the company as well as the experts in the markets like Reuters, expect the company to be able to cope back up in 2010 (Toyota - Environment, 2009). e) Environmental Initiative Toyota Corporation has initiated a competitive advantage in order to contribute in environmental responsibilities by lowering emissions. For instance, hybrid cars which have electronic motor and this switch off the petrol engine at low speed which help in drop of 40% of flue usage and reduce of CO2. The company follows the fundamental of ‘Knowledge is Power’ and it has now been investing in knowledge (Dunning, 2002). Also, Toyota has taken on numerous projects and initiatives where the employees can contribute towards helping the society and participating in improving the world. One of the best examples for this has been in India, where the employees, apart from being trained have also been participating, towards creating a ‘clean and green city’. Mr Vishwanathan, the Deputy Managing Director of Toyota Kirloskar (India), had also mentioned in his interview with Business Line, that ‘for the remaining time, employees have started engaging themselves in activities such as promoting clean and green areas in Bangalore [India]’ (Giriprakash, 2009). f) The Impact of other Industries on Toyota Development Toyota can be impacted by the other organisations within the various industries to a great extent. A few of the major industries that impact the company include the suppliers of glass, steel, tyres, and all electronic parts for the cars have a direct impact on the development of Toyota. The company’s suppliers have a major impact on the total development of itself. The overall impact can lead Toyota to be faced with higher levels of expenses and the can impact the company with higher costs that need to be met. Conclusion It has also been noticed in by Global Vice Chair Industry, Ernst and Young, Steve Almassy, ‘The world has changed in the last year and so have traditional business models. Some have disappeared outright but others will have to adapt to the new rules of the game. Thriving in this challenging business climate requires flexibility, creativity and imagination’ (Emirates Business, 2009). The increasingly globalising world has a clear impact on the overall performance of the company. It is also essential to note even as a conclusion, that Toyota has a major competitive advantage over the other companies and this is mainly the JIT Strategy. Just – In – Time (JIT) is a recent strategy of inventory management to reduce the carrying costs and the in progress inventory, and also increase the return on investments (Sandras, 1989). This method has been developed to help companies use its investments carefully and appropriately. This strategy adopted by the company has led the company to be strong and not only face the intense competition that is presented with the globalisation but also to be able to face any changes that are present in the market including the current recessionary period. Toyota has a high growth possibility and is one of the only companies that will be able to stabilise back to the neutral position or even exceed their pervious performance as well, ‘The Toyota Way’ (Liker, 2004). In conclusion it is safe to say that Toyota has over the years built a company and brand which has not only been successful, but has also been built strong to be able to face all competition globally and also to be able to face any changes in the environment like recession or inflation. The company on its own strategies has in simple ways covered the success for itself for several years to come. References Ahmed, R. (2009, June 14). Toyota can face Post Recession Demand Well? Retrieved December 21, 2009, from Asianbiz: http://asianbiz.blogspot.com/2009/06/toyota-can-face-post-recession-demand.html Bigman, D. (2002). Globalization and the Developing Countries, 1st Edition . CABI Publishers. Calogera, S. (2009, August 27). Toyota to cut global production capacity by 1 million units. Retrieved December 22, 2009, from egmCarTech: http://www.egmcartech.com/2009/08/27/toyota-to-cut-global-production-capacity-by-1-million-units/ Dunning, J. (2002). Theories and paradigms of international business activities. Cheltenham: Edward Elgar. Emirates Business. (2009, October 22). Companies are re-focusing on core competencies . Retrieved December 20, 2009, from Emirates Business: http://www.business24-7.ae/Articles/2009/10/Pages/21102009/10222009_28e7069ab4f841108c3cc60fe4ec2b41.aspx Feenstra, R. C., & Hanson, G. H. (1996). Globalization, Outsourcing, and Wage Inequality. American Economic Association Papers and Proceedings , 86(2), 240-245. Giriprakash, K. (2009, January 09). Recession forces Toyota go-slow. Retrieved November 30, 2009, from Business Line: http://www.thehindubusinessline.com/2009/01/09/stories/2009010950880300.htm Kelly, D. A., Rajan, R. S., & Goh, G. H. (2006). Managing Globalization: Lessons from China and India. World Scientific Publishing Company. Kose, M. A. (2003). Effects of Financial Globalization on Developing Countries: Some Empirical Evidence. International Monetary Fund. Liker, J. K. (2004). The Toyota Way. New York: McGraw - Hill Edition 2004. Mooney, A., & Evans, B. (2007). Globalization: The key Concepts. New Edition: Routledge. Newman, R. (2008, June 9). How Toyota Could Become the U.S. Sales Champ. Retrieved November 30, 2009, from U.S. News : http://www.usnews.com/money/blogs/flowchart/2008/06/09/how-toyota-could-become-the-us-sales-champ Patapan, H. (2007). Globalization and Equality. Taylor & Francis Publications. Sandras, W. A. (1989). Just-in-time Making it happen: Unleashing the power of continuous improvement. Wiley Publishers. Slack, N., Chambers, S., & Johnston, R. (2008). Operations and Process Management: Principles and Practice for Strategic Impact, 2nd Edition. Prentice Hall Publications. Slack, N., Chambers, S., Johnston, R., & Betts, A. (2006 ). Operations and Process Management: Principles and Practice for Strategic Impact. Prentice Hall. Toyota - Environment. (2009). Sustainable Mobility. Retrieved October 23, 2009, from Toyota: http://www.toyota.com/about/environment/ Toyota. (2009, May 08). FY2009 Financial Results. Retrieved December 21, 2009, from Toyota Motor Corporation: http://www.toyota.com/about/our_business/investor_relations/financial_data/2009/20090509Presentation.pdf Wright, C., & Mechling, G. (2002). The importance of operations management problems in service organizations. Omega, Vol. 30 No. 2 , 77-87. Yip, G. (2003). Total Global Strategy II. Prentice Hall . Appendix Appendix: Future Plans, Strategic Objectives: Appendix: Consolidated Vehicle Sales (Toyota, 2009) Appendix: Table of Consolidated Vehicle Sales (Toyota, 2009) Country 2008 2009 Change Japan 2,188 1,945 -243 North America 2,958 2,212 -746 Europe 1,284 1,062 -222 Asia 956 905 -51 Others (Central and South America, Oceania, Africa, The Middle East, etc) 1,527 1,443 -84 Read More