Operations Management and International Market Strategies of Toyota - Case Study Example

International market strategies of Toyota Introduction Toyota Motor Corporation is a Japanese automobile firm with its headquarters in Toyota Aichi. It is the largest manufacturer of automobiles and produces vehicles under five brands namely; Toyota, Hino, Lexus, Scion and Ranz. Toyota Motor Corporation is a part of the Toyota group, which is one of the largest conglomerates of the world. Toyota serves as an example to other firms across industries for delivering high performance and high efficiency. The company is highly dedicated towards innovating new technologies for reducing cost of production and improving the means of production. It focuses on long-term goals by developing vehicles to serve needs of consumers of the present and the future. Toyota emphasizes on thoroughly testing their technologies to deliver the best performance. The organization believes in the concept of being a forever learning enterprise by relentlessly focusing on developing new means of technology in order to meet consumer needs effectively (Hino, 2006). International market entry Toyota is the largest automobile manufacturers of the world. The success of Toyota is deeply related with highly strategic plans in marketing, market entry, selling and distribution. Japanese companies such as, Toyota, have different strategies of marketing and selling as compared to other companies across the globe. Some of the strategies followed by Toyota for international market entry and growth are discussed as follows (Liker and Meier, 2007): Understanding the customers- What Toyota does best is that it understands tastes and preferences of its client as compared to rest of the automobile firms. The company has its clients spread all over the world. The company is well aware of ways to handle people and customers across nations by understanding their specific needs and environment. One of the principle strategies of market penetration is to know needs of the people well. The masterminds of Toyota do not waste their time on large number of pointless surveys to understand the global markets. Instead, they rely upon their common sense to determine the wants of people from different nations in an automobile and accordingly manufacture them. However, strategic market penetration plans of the company involve analysis of the different environmental conditions and market situation. Delivering quality- One of the most important strategies that Toyota and most Japanese companies follow is the concept of ‘Kaizen’. Kaizen means continuous improvement. The Japanese believe in the idea that nothing is so good that it cannot be improved or develop further. Toyota uses this concept well and Kaizen concept is one of the key elements of its success. Improvement here does not only suggest that of the company’s automobiles. It also refers to a cross-sectional strategy that aims to improve the company’s overall activities on parameters of quality, management, competitiveness, staff development, technology and so on (Monden, 2011). Early entry- A major advantage that Toyota has compared to other international automobile companies is its early entry in most markets of the world. As a result of early entry, the company has been able to develop trust in minds of the consumers. Innovative solutions- One of the main challenges faced by most automobile companies is to develop environment friendly automobiles. With the world focusing upon sustainable development, companies in the automobile sector are faced with immense challenge of developing automobiles that create least impact on the environment. Toyota designs vehicles that create less pollution. The company is able to do so because of its hybrid system, which helps to manufacture clean technology automobiles. It has also been successful in developing automobiles that use alternative sources of technology. This is another reason why the company is able to attract more consumers. Safety and testing- To develop zero-defect automobiles has been one of the main focus of Toyota. In order to achieve this, the company performs a lot of tests under different conditions to study the maximum impacts. The firm redesigns and re-engineers until maximum safety is ensured. Decentralizing production- Toyota experts realize the fact that manufacturing automobiles locally and exporting them is not a profitable system. Therefore, the firm has set up different production and assembling facilities worldwide. When production of a commodity is carried out in the same location where it is sold, it helps to better understand the consumer needs of that place. This strategy as helped Toyota to develop more customized automobiles that helps to meet country or region specific needs. Toyota has also taken measures to develop research and design centers close to their facilities across the world. ‘Think global, act local’ is the motto behind this strategy of Toyota (Magee, 2008). Small to large- Toyota’s strategy is to develop and sell automobiles at a small scale initially and subsequently proceed towards large scale production, only if the public accepts it. This is another reason why Toyota does not invest in large promotion schemes while launching new automobiles in the market. Their launches are done without much of drum rolls and are quite simple. Once the automobiles are liked and accepted by consumers, greater marketing strategies are adopted. Motivation for international expansion Some of the factors that have led Toyota to expand globally are stated as follows (Chairini, 2012): Development of product lines- Over the years, Toyota has developed a variety of automobiles. The vehicles of Toyota include sedans, sports cars, hatchbacks, minivans, cab wagons, sports utility vehicles, vans, trucks and buses. Apart from them, Toyota has its range of newly launched Lexus cars. Toyota also offers spare parts and vehicle accessories. A company with such a broad range of products coupled with efficient management is sure to go global and capture markets worldwide. Toyota vehicles play an important role in markets of Europe, US, Australia and in Asia. Some of the production bases of the firm are located at China, US, Japan, Korea, Brazil, India and Mexico (Marksberry, 2012). Overseas production- Toyota’s overseas production accounts for a major share of vehicle manufacturing. The prime reason for this is over saturation of the Japanese markets, leading to lack of availability of land and other resources, so as to develop production facilities. As a result, in order to meet the demand of vehicles worldwide, the company has its facilities set up across different nations. This had further led the company to expand globally (Toyota, 2014). Favourable labour climate- The locations of Toyota’s production facilities are regions with adequate labour. Hence, production can be carried out without much difficulty. For this reason, Toyota has successfully been able to meet global demands and facilitate growth of sales of its vehicles across different regions of the world. Real estate investment- Toyota has invested in real estate development in many nations, where the company’s production bases are located. This facilitates availability of land to set up factories and institutions. Being an automobile firm, land and property is an extremely important resource criterion for setting up factories and other facilities. This strategic move has helped the firm to expand further. Expanding markets- Toyota has taken advantage of the emerging economies of Russia, India, China and Brazil. The low cost of production and low wage rate have helped the firm to develop cheaper cars that are suitable for the Asian market. Shrinking Japanese economy- The industrial base at Japan of most firms seems to have reached a saturation point due to lack of growth potential. For this reason, most firms in Japan are focusing on developing an international market so that their revenues are maintained. They take advantage of the global economy to grow and prosper. This is another reason why Toyota has developed a worldwide business. Japan faces the problem of ageing population, which has led Toyota and other manufacturing firms to develop on a global scale in order to survive and meet their labour requirements. Expansion strategies of Toyota The expansion strategies of Toyota can be studied region wise as discussed below (Faculty of Economics and Business Administration, 2010): The European Market- Many of the Japanese investors have turned to Europe as it is one of the markets considered to be important not only for manufacturing, but also for becoming a global player. The company has 17 production facilities and 14 research institutes located in Europe. They have been able to create over 200,000 job opportunities in this region (Faculty of Economics and Business Administration, 2010). Europe has a strong industrial base that attracts many industrialists. It is also a market with significant competition. European market has helped Toyota to increase its sales. US market- United States accounts for the largest sales volume of Toyota’s vehicles. Toyota has been generating more profits in the US as compared to General Motors, which is one of the chief players in the automobile industry of US. Toyota has been in a race against General Motors, in terms of profits and sales. The company has been able to perform remarkably well in comparison with General Motors. The main reason for this is that Toyota is able to produce more fuel efficient cars, which experience higher demand in the US. Toyota has been able to maintain a very flexible organization in the US, which helps to meet the changing needs of consumers. Also, Toyota has been able to cater to the US markets by developing a number of assembling units. Canada, Mexico and the United States are members of the North American free trade agreement. This has highly facilitated the export of parts and components without any duty. It has become important for Toyota to develop in North America as it accounts for almost two-thirds of profits of the Japanese automobile industry (Clarke, 2006). China and India- The emerging economies of China and India play a chief role in developing low cost cars. The labour and cost of manufacturing in these regions are significantly low as compared to the US and European market. In Asia, a large portion of the firm’s revenues comes from China. The elasticity existing in these markets play a significant role for Toyota to increase sales. This region is also significant for developing compact cars and other vehicles. Toyota also contributes towards welfare of such emerging nations by developing employment and better infrastructural facilities. The company also emphasizes on training in these regions. Even though Toyota’s main production location is Japan, it is spreading its facilities to every corner in the world. This creates the need for an efficient supply chain, especially in terms of machine parts and inventories. Toyota has sufficiently taken care of these aspects by developing the concept of just-in-time inventory in the production system. Another major reason behind Toyota’s success in Japan is close proximity of the firm with its suppliers that are located nearby. This helps to deliver parts as and when needed (Toyota, 2012). Reasons to Toyotas success internationally Majority of the credit for Toyota’s success goes to efficient production system laid down by Tiachi Ohno and Shigeo Shingo. The system includes concepts of Jidoka, Just-in-time production and Kaizen. These concepts focus on reducing cost as well as defects in the final product. The kaizen concept was elaborated earlier in the above discussions. The other two concepts are discussed in detail as follows (Magee, 2008): Jidoka- Jidoka refers to the idea that defect must not travel from one machine to the other. If there is any defect, then it should be immediately tracked; before the inventory moves on to the next production stage. This prevents the defect to be detected at the final stage, where it may be difficult to make rectifications. Sometimes when corrections are not made in time, defects remain hidden in the final product and do not get tracked. Hence, it is important to establish a system to track quality of units produced, after each stage of production (Magee, 2008). Just-in-time- Toyota believes in just-in-time production system whereby parts required in the production system are delivered as and when required; instead of maintaining inventories across the company’s production lines. This system leads to two important benefits. Firstly, capital does not remain tied up in the form of inventory. Secondly, re-engineering cost is significantly more in cases where huge stock is maintained. In case of just-in-time inventory system, stock arrives in smaller proportions and defects are corrected involving much lesser costs. Some of the other reasons behind Toyota’s success are (Magee, 2008): Long-term planning- Toyota develops its automobiles keeping in mind needs of the future. For instance, the hybrid car, Prius, was developed by Toyota much before the need for alternative fuel based car had emerged. At present, Toyota’s cars that are based on hybrid technology are much in demand because of their fuel efficiency as well as low impact on the environment. Very few automobile manufacturers realized the need of sustainable cars as early as Toyota did. Market speed- Toyotas efficiency in marketing and strategy making has helped the firm to move its vehicles in the market much faster than any of its competitors. The sales figures of Toyota across nations are proof to this. Toyota is able to efficiently detect needs of consumers and much better than most of the other players in the automobile sector. This has been one of the most important reasons for the company to be able to move its products faster. In order to assess the consumer needs, the company invests in market research and forecasting future needs of the automobile industry. Obsession with improvement- When most of the companies see that their production systems are going profitably, they do not take much measures to improve further. This, however, is not the case with Toyota. If Toyota can finish a job in ten minutes, it will be on the search to find out how the work can be done faster in less than ten minutes. Continuous improvement across its line of production is the main focus of the company. They never stop renovating and improving. Humility- Toyota sees all its employees at the same level, be it a top level executive or a lower level employee. The employees give much more importance to group performance, rather than individual performance. The company also does not believe in too much of promotion and creating hype about their products. They let their products speak for themselves by delivering high performance and high product quality (Harvard Business Review, 2008). Conclusion From the above discussion, it has become quite clear that Toyota is a highly successful firm owing to its ability to identify growth opportunities and tap it effectively. Toyota offers a wider range of fuel efficient and hybrid cars as compared to other firms of the same industry. This has played an important part in the company’s growth. The company develops the right products at the right time to meet consumer needs, thereby driving the organization forwards towards success. Toyota maintains a diverse portfolio in respect to its vehicles by offering both luxury class and simple class vehicles. Moreover, the company gives high importance to developing and imparting training to employees. The corporate culture of the firm has set standards for other firms. Efficient cost cutting strategies and innovation practices has been chief principles of the firm. Toyota, therefore, is clearly a highly successful enterprise from all viewpoints. Reference list Chairini, A., 2012. Lean Organization. New York: Springer. Clarke, C., 2006. Automotive Production Systems and Standardization. New York: Springer. Faculty of Economics and Business Administration, 2010. Toyota’s business strategies in international markets. [pdf] University of Brasov. Available at: [Accessed 26 March 2014]. Harvard Business Review, 2008. The contradictions that drive Toyota to success. [online] Available at: [Accessed 26 March 2014]. Hino, S., 2006. Inside the mind of Toyota. New York: Productivity Press. Liker, J. K. and Meier, D., 2007. The Toyota Way Fieldbook. New Delhi: Tata McGraw-Hill. Magee, D., 2008. How Toyota became #1. New York: Penguin Group Inc. Marksberry, P., 2012. The Mordern Theory of the Toyota Production System. Florida: CRC Press. Monden, Y., 2011. Toyota Production System. Florida: CRC Press. Toyota, 2012. Annual report 2012. [online] Available at: [Accessed 26 March 2014]. Toyota, 2014. Corporate Philosophy. [online] Available at: [Accessed 26 March 2014]. Read More