Mission and Vision of Toyota in the Automobile Industry - Research Paper Example

running head: Capstone Project Capstone Project Submitted No. [Pick the Introduction Toyota is a key market player inglobal automobile industry. It is recognized by its energy efficient, low-cost and highly differentiated product line. In the recent years, Toyota has performed many recalls due to quality issues while showing increasing sales and net profits. Toyota’s mission and vision were altered in 2011 to comply with its 21st century regime and also it’s founding guiding principles. The purpose of this research paper is to determine if Toyota’s current performance and goals reflect its compliance to organization’s mission and vision; and also if it has appropriate strategies in place that can help it in achieving its goals while utilizing its strengths and exploiting its opportunities. Toyota’s Mission & Vision Toyota’s mission states, “Toyota will lead the way to the future of mobility, enriching lives around the world with the safest and most responsible ways of moving people. Through our commitment to quality, constant innovation and respect for the planet, we aim to exceed expectations and be rewarded with a smile. We will meet challenging goals by engaging the talent and passion of people, who believe there is always a better way (Toyota, 2012, p.12).” Careful analysis reveals that Toyota has been concerned with providing a product line that is affordable to its customer and also serves community by playing its role in environmental protection and social stability. Comparison of its mission and vision to its financial performance indicated that Toyota has managed to retain its profitability ratio as compared to last financial year 2011. Although due to strong position of Yen, its product became expensive for American and European markets, which is later on reflected in decrease in its gross sales which is ¥ 17,820,520 for 2011 and ¥17,511,916 for financial year 2011 and 2012 respectively. However, other losses attributed to recalls made further decreases in profits. Toyota’s vision entails making better cars and enriching communities’ lives through sustainable growths and adherence to its original values. Its guiding principles indicated that respect for culture and customers, fair business activities, corporate citizenship, innovative management, individual creativity and team work and working with business partners in research and manufacture to achieve stable, long-term growth and mutual benefits (Toyota Global, 2011a). However, losses incurred through recalls indicate that Toyota digressed from its values and mission of making better cars and benefitting consumers. Therefore, profitability ratio was maintained if not declined and stakeholders along with other investors were kept satisfied but original mission was neglected. Strategic Goals of Toyota Toyota’s strategic goals involves adherence to becoming a market leader in Chinese automobile industry by manufacturing environment friendly and cost effective cars. The given strategic plan is called Yundong. Since Japanese cars have a limited share in this market as compared to American brands therefore there lies a huge potential of hybrid cars that are relatively lower in cost as compared to other brands (Zhao, 2012). Toyota’s new strategy released in 2011 entails its concrete plan to manufacture cars that are improved in style, meet the customers’ needs globally, introduce enthusiasm in customers, expand product line of hybrid cars and focus more on future green vehicles along with energy efficiency in existing gasoline models. This new supply strategy is more focused on providing technologically advanced and high value-added products along with optimizing investments in European and North American markets. This new strategy also entails participating in new business ventures through smart communities’ participation; achieve solid profitability of Yen 1 trillion along with business sustainability and satisfying customers in emerging markets (Toyota Global, 2011b). Comparative analysis of this new vision directs compliance with Toyota’s original vision and mission along with its guiding principles. Respect for individuals and communities can be seen through formation of cars that address consumers’ requirements and also through active community formation by using technological interventions where home, office and transportation are linked through IT infrastructure. Furthermore, adherence to environmental protection and corporate citizenship is well-reflected in the formation of hybrid cars and gasoline reduction is existing engines. Strategic Goals & Financial Statement in 2012 Critical analysis of financial statements indicated that Toyota has decreased its research and development expenditure as compared to last financial year 2011 from 6.8% to 4.2% of net revenues (Toyota, 2012, p.32). In order to provide customers with environment friendly and desirable vehicles, Toyota performed recalling of over 200 thousand models in hybrid cars and Lexus. Despite the encouraging effect of overall cost reduction per unit i.e. Yen 102 748 millions, which reflected in prices as well, it sustained an operating loss of 112,652 million as compared to last fiscal year. Therefore, despite substantial R & D expenditure, strategic goal of having a satisfied customer and increased revenue of Yen 1 trillion could not be achieved. Further analysis indicated that Toyota has invested into other non-automotive businesses that added to its operating income equal to ¥6.8 billion which is 19.8 percent as compared to last year’s 7.9%. These non-automotive businesses include Intelligent Transport Systems (ITS), information technology and telecommunications, e-TOYOTA, housing, marine, and biotechnology and afforestation businesses (Toyota, 2012, p.26). Most of these ventures are live examples of its vision 2011 which included development of smart communities through IT developments. Commercializations of the Driving Safety Support System (DSSS), an onboard navigation system for public highways are further examples of its commitment to development of smart communities. Toyota’s Strengths and Opportunities Toyota has been known for its cost effectiveness and high-quality consumer products since its very inception. Due to massive production and presence in various countries, Toyota has been able to utilize economies of scale and also act as a corporate citizen that develops communities wherever it is present. Toyota is one of the market leaders who have presented hybrid cars that are energy efficient and environment friendly. Furthermore, its extensive research and developments plans also strengthen quality of its existing product line and mitigate faults in new models. Toyota has been focusing on reducing gasoline consumption and making green cars that address concerns of environmentally conscious customers. Since it has performed substantial research in this area, it has an edge over other market players. Toyota has mechanisms like Just-in Time Production and Jidoka (production with human touch) in place that make it produce cheap products while responding to quality requirements (Toyota Global, 2011c). Other than innovation, its multiple plants presence makes it less prone to delays and losses caused by global disasters. Furthermore, it also helps patriotic customers to perform buying due to internal branding in European and North American markets (Hirsch, 2013). Its branding of being a long-term and cost-effective commodity makes it consumers’ preference. Hence, it provides quality, durability and value for money. Other than strengths, Toyota has several opportunities that it can utilize for the purpose of further development. Toyota’s Prius can provide it an edge over other hybrid car manufacturers due to cost effectiveness (Mukai & Hagiwara, 2011). As the fuel price increases, consumers are likely to divert to it. Furthermore, Japan is an un-ventured market with dominance of North American cars. By venturing into markets like India and Japan, Toyota can attain a status of automobile leader (Toyota, 2012, p.18; Gulati & Choudhury, 2011). Its highly extensive operations make it capable of responding to increase in consumers’ demand. Other opportunities include joint ventures with French manufacturers, diversion of North-American consumers to Prius and reduction in taxes by Chinese government (Toyota Europe, 2008; APCO, 2010). Appropriate Strategy for Toyota In the light of current market scenario and critical analysis of Toyota’s strengths, low cost vehicles and product differentiations can provide Toyota with desired edge over other car manufacturers. It can be seen that Toyota has highly extensive production capacity and supply chain operations. It has an established brand name of being an affordable vehicle that offers durability and value for consumer’s money. Although Yen has strengthen leading to increase in overall price, Toyota is required to keep on following its earlier strategy of lower cost perhaps through lower margins. Economies of scale can help it yield desired profit margins through bulk selling and ample production to meet the demand. Toyota has ventured into emerging markets like India and Japan. Although Chinese consumers have other established brands like GM and Ford however Toyota’s cost effectiveness and environmental consideration can help it attract consumers in emerging markets as well. Further analysis indicated that Toyota has varied customers’ requirements. Although it presents reasonable vehicles with energy efficient technology, it is required to provide more alternatives for bigger families and business ventures. Toyota has already introduced product differentiation though hybrid and green cars. Further alliance with French manufacturers can help it perform research that will address requirements of European consumers. Slow digression from gasoline engines to hybrid technology can assist it in having the necessary edge. It has already performed substantial investment on research and development in this technology which can act as its strength (Miltenburg, 2005). Its commitment to smart communities has introduced a concept of a vehicle that provides interconnectivity between travelling, work and home. Using IT interventions, Toyota can introduce further product differentiation in automobile industry. Toyota’s fast paced research and technology makes it difficult for other manufacturers to emulate it and thus provide consumer with value of their money. Varying from utility vehicles like Scion and Land Cruiser to Personal Luxury cars such as Camry, Corolla, and Pick Up trucks like Tundra, Toyota has product for every demographic segment (Miltenburg, 2005). Stretching this differentiation to other segments such as gender-based division and young population with low income can help it utilize more economies of scale leading to lower cost and more sales simultaneously. Strategic Alliances by Toyota There have been a few instances where Toyota acquired some of its own suppliers and complimenting businesses that would help them diversify in the automotive industry. These acquisitions are suitable for a growing and quality conscious company like Toyota, where every acquisition means control of supplier by the manufacturer itself. These acquisitions help Toyota enhance their products which eventually results in to increased sales and brand value. Any such future acquisitions should also enhance Toyota’s image in the automotive industry or acquiring companies that are concerned with materials, spare part, electronics and rubber works etc. The strategy involving acquiring more companies should only focus on counterparts and suppliers that can enhance the quality of the products produced by Toyota and eventually benefiting the brand name in the market. The company has merged in past with Tohoku and other subsidiaries like car manufacturers, Tesla (Roberts, 2011). The merger activity shall be fruitful where a shared strategy of research and development, technology and future objectives have been agreed upon. Although mergers by Toyota can more often is referred to as adopting a problem child, meaning brands and products that can benefit from manufacturing process of Toyota but adding little value to Toyota itself. In a fragile economy and scandals of recalls with increasing competition from other car manufacturers, Toyota has done very well to maintain its sales and loyalty of the customers worldwide. It is an extremely reliable brand with good sales and after sales services. In a scenario where merger or acquisition is necessary, Toyota should only acquire or merge with entities that can complement the existing brand. Appropriate Rewards System for Toyota An appropriate reward program for a company like Toyota should be based on both extrinsic and intrinsic rewards. While extrinsic rewards satisfy the basic necessities and security needs of its valued employees, intrinsic rewards should help in keeping the employees motivated and enhance their esteem to attain maximum objectives along with development of their careers. The company’s financial indicators are healthy hence the reward program should at least include performance bonuses equivalent to four gross salaries, on-spot recognition rewards, long employment rewards, innovation reward, change agent reward and other basic compensation and benefit elements that can not only fulfill the needs of employees but also give them more in comparison to other competing employers. Similarly extrinsic awards, proven as more important for employees should be in form of a conducive culture towards learning, friendly and flexible schedule and leaders that can understand and react humanly to human problems. The problem faced by huge organizations like Toyota, is maintaining same reward practices in all its operations and countries. It is observed that similar practices do prevail in terms of quality assurance and manufacturing although where head office employees get frequent rewards, far flung offices are unaware of the rewards program and managers tend to force and apply unacceptable methods on employees to get the work done (Hino, 2006). Implementing a standard rewards program is necessary where all employees are equally rewarded and treated in a respectable way by their managers and supervisors alike. Once the basic reward management program is in place for all branches with strict adherence of monetary and non-monetary factors, Toyota can introduce more rewards for their diligent employees. Toyota’s Ethical Business Behavior A critical analysis of Toyotas strategic goals reveals that customer is the most preferred element in the way Toyota conducts its business. The company is an exemplary corporate citizen amongst other reputable companies as it creates employee opportunities and low cost vehicles with social investments made in developing sectors of the country. It prefers local employees for upper management positions and develops environment friendly manufacturing processes. The goal of achieving 10 percent hybrid cars in all cars manufactured by 2015 shows the commitment of Toyota towards environment by decreasing carbon emissions, furthermore it plans to increase hybrid car production to 50 percent by year 2020. The company’s CSR programs inculcate a comprehensive strategy; Toyota is committed to contributing to sustainable development with its stakeholders in each country. Its guiding principles are chalked out for each set of stakeholders such as customers, shareholders, employees, partners such as suppliers and vendors. Included in its global vision achieving harmony with people, society and global environment for sustainable growth is an important aspect. Besides business related CSR activities Toyota also makes direct investments in the community, a detailed analysis reveals that Toyota helps communities in areas of safety, personnel development, society and culture along with energy and the environment (Toyota Global, 2011d). The company expects all its stakeholders to follow well communicated ethical practices while as seen during massive recalls by the company, the company does not shy away from accepting a mistake and taking corrective measures even if it costs them billions. Conclusion Toyota’s work model reflects adherence to its earlier values and guiding principles of its founders. Since its inception, it has shown commitment to respecting consumers’ rights and demands along with being a responsible corporate citizen with liability to preserve communities where it is present. Toyota’s has performed massive recalls in the year 2012 and a public apology has been issued in this regard which reflects humility of organizations’ leaders. Strategic analysis reveals that Toyota is committed to introduce operational excellence in its work model through continuous cost effectiveness and quality ensuring measures. For this purpose, it has established manufacturing plants within its major markets including Europe and North America. Its extensive supply chain mechanism is a state of art mechanism that is continuously learning and evolving. In addition to that, Toyota’s last year financial statements indicate that it has attempted to comply with its mission and vision. With strong Yen and decreasing sales due to quality issues, it has shown decline in net revenues as compared to financial year 2012. Furthermore, it has new strategic goals like venturing into emerging markets and utilizing IT as a tool of introducing product differentiation and also making smart communities. Other strategies like effective global supply chain mechanism, addressing consumers’ requirements through hybrid and green vehicles and development of smart communities indicate that Toyota sets its goals that follow doctrine of corporate citizenship and general ethics. Toyota’s financial statements of 2012 also indicate its adherence to its strategic goals. In addition to that, it has several strengths and opportunities i.e. low production cost, hybrid cars manufacturing, scattered production facilities, joint ventures, strong research and development that can help its in remaining attached to its core values and progressing towards becoming a market leader. Critical analysis indicates that low-cost vehicles and product differentiation can be appropriate strategies for Toyota in the given scenario. It has substantial infrastructure and supply chain mechanism that can provide optimum benefits through exploiting economies of scale. Furthermore, low-cost is a trademark of Toyota and acts as foundation of its branding. On the other hand, Toyota has a product line that responds to needs of different demographic segments. Hence, it can be said that Toyota complies with its mission and vision of being a market leader through appropriate goals and suitable strategies to achieve them while benefiting its customers and suppliers along with communities. References APCO Worldwide. (2010). Market Analysis Report: Chinese Automobile Industry. Retrieved from http://www.export.gov.il/uploadfiles/03_2012/chinasautomotiveindustry.pdf Gulati, N. & Choudhury, S. (2011), Toyota Enters India’s Small-Car Market, Wall Street Journal, Retrieved from http://online.wsj.com/article/SB10001424052702304447804576411240080311646.html Hino, S. (2006). Inside the mind of Toyota: management principles for enduring growth. New York: Productivity Press. Hirsch, J. (2013). Toyota overhauls management, gives more autonomy to North America, Retrieved from http://www.latimes.com/business/autos/la-fi-hy-toyota-management-overhaul-20130306,0,1868401.story Miltenburg, J. (2005). Manufacturing Strategy: How To Formulate And Implement A Winning Plan, Productivity Press. Mukai, A. & Hagiwara, Y. (2011). “Toyota Hybrids Go From Strength to Strength as World No. 1 Cars”, businessweek, Retrieved from http://www.businessweek.com/news/2011-12-06/toyota-hybrids-go-from-strength-to-strength-as-world-no-1-cars.html#p1 Roberts, G. (2011). Japan: Toyota Details Merger Of Three Tohoku Subsidiaries, Retrieved from http://www.just-auto.com/news/toyota-details-merger-of-three-tohoku-subsidiaries_id115500.aspx Toyota Europe. (2008). Toyota in Europe, Retrieved from http://www.toyota.co.uk/bv/1024downloads/ToyotainEurope.pdf Toyota Global (2011a). Guiding Principles at Toyota. Retrieved from http://www.toyota-global.com/company/vision_philosophy/guiding_principles.html Toyota Global. (2011b). Toyota Global Vision, Retrieved from http://www.toyota-global.com/company/message_from_president/president110309.pdf Toyota Global (2011c). Toyota Production System. Retrieved from http://www.toyota-global.com/company/vision_philosophy/toyota_production_system/ Toyota Global. (2011d), CSR Initiatives, Retrieved from http://www.toyota-global.com/sustainability/csr_initiatives/csr_concepts/csr_activities.html Toyota Motor Corporation. (2012). Toyota Annual Report 2012, Retrieved from http://www.toyota-global.com/investors/ir_library/annual/pdf/2012/ar12_e.pdf Zhao, Z. (2012). Toyota’s Ambitious Plan for Being No.1, Retrieved from http://www.chinadaily.com.cn/cndy/2012-03/05/content_14752793.htm Read More