Japanese Automobile Manufacturers as Multinationals - Essay Example

Japanese Automobile Manufacturers as Multinationals al Affiliation Japanese Automobile Manufacturers as Multinationals Introduction The paper explores the entry strategies of Japanese automobile manufacturers, their marketing strategies, ownership advantages, capabilities, management and organization structures, R&D in a case study of Toyota and other companies as well. I’ll try to find out how Japanese automobile manufacturers to retained their competitive position as multinationals in international market, to determine the role of Japanese government in the Japanese automobile firms’ development as multinationals. This paper describes as well the problems that Japanese manufacturers came across and the measures and tools used to overcome them. Using Toyota Automobile Company as a case study, this paper review management issues and strategies of the company. The brief description of the company, analysis of the external and internal environment and competitors will help to assess and to understand the management decisions that led the company to the global leadership in the industry. Brief Description of the Company Toyota Motor Company is the leader of Japanese automobile manufacturers as multinationals with revenues of JPY 25,691,911 million in 2014 according to the Financial Summary FY2014 (Toyota Motor Corporation, 2015). Toyota Motor was founded in 1937 as a branch of weaving equipment manufacturer Toyoda Automatic Loom Works. The headquarters of the company are based in Japanese Toyota city. The company employs about 320 000 of specialists. The outlet of the company includes 170 countries all over the world. The main company’s activities involve designing, producing, adjusting and sale of passenger and commercial vehicles as well as accessories and hardware. One of the main company’s activities is supporting the dealers and customers for Toyota vehicles purchasing or leasing. The company includes three segments of business: IT and telecommunication, automotive and financial services (Toyota Global Site, 2015). Japanese Producers’ Strategies in International Markets Strategies created by Japanese experts were used by Toyota and other Japanese automobile manufacturers to achieve the imposing in the markets and the business development. Japanese strategy called KAIZEN is widely famous for using by Toyota and other major producers. According to Funaru this strategy includes continuous improvement and its impact on the product quality’s level (Funaru M. 2010). This strategy is considered to be integrative and cross-functional in meaning it involves all staff in the gradual improvement, management and business activities for increasing company’s productivity, quality of the products and competitiveness of the business. Speaking of Toyota’s product strategy, it’s built on the following: new innovative technologies development, highest quality, discovering of new sources for creativity and focusing on research. R&D in Toyota In the area of advanced automobile technologies Toyota is a famous world leader of research and development due to the activity of Toyota Research Centre. The current and future challenges of the automobile industry need the responses and the opportunities for the future. For example, trying to solve the problem of pollutant emissions a variety of solutions for producing less harmful vehicles are proposed to protect the environment. Hybrid systems are committed by Toyota as a main trend in eco technology cars. These systems combine various power sources including electric and internal combustion engine. Hybrid systems combine two energy sources in one system and it contributes both the reduction in fuel consumption and emissions into the atmosphere. Safety is another priority for Toyota, so the company produces advanced brakes, traction and suspension control systems, and steering assistants. For developing of such innovations advanced computer tests and simulations are used. The innovations and improvement in car safety made the Toyota vehicles one of the most innocuous in the industry. The Problems that Japanese Automobile Manufacturers “Toyota” has come across and how it has fixed the problems Toyota Company is one of the largest automobile manufacturing companies in the world. The designs of the products are quite impressive thereby commanding lots reliance by several customers around the globe. However, it is of crucial significance to note that there are a number of problems that face the Japanese Automobiles in general. Some of these problems may include the issue of globalization and its associated implications, stiff competition, striking a balance between marketing and branding as well as dealing with pressure to attain efficiency and maintain sustainability in the markets and production. These have presented major challenges to a number of automobile industries thereby compromising their competitive advantages over the other world producers. Relevant to the above, it is of crucial significance to understand that the issue of product differentiation is also one of the problems that has presented major challenges to the automobile industries in Japan. This has affected both the Nissan Manufacturing Company as well as Toyota Company considerably. However, it is important to note that amidst the negative pressure posed by the issue of product differentiation, Toyota has managed to realize competitive advantages over the other competitors following their abilities to identify and fix the problems associated. Following the problem of product differentiation that has been facing the Japanese automobile companies, it is significant to note that Toyota Company realized early that the competition for the sophisticated consumers is fierce globally. Therefore, they had to act in speed in order to solve the problems associated. In this regard, Toyota Company managed to increase their shares as well as maximize their price realizations within the competitive world markets in a number of ways. The Toyota Company managed to offer differentiated products that succeeded in winning the customers’ needs and wants. The company managed to maintain genuine innovations that foster creation of new vehicle segments with improved design, comfort, efficiency, functionality and performance. This strategy has helped the Toyota Company to remain competitive over other automobile manufacturers in Japan and also internationally. It is of crucial significance to note that the Japanese automobile manufacturers have also been facing major challenges relevant to the issue of supply chain restructuring. For many decades, the people or the customers have majorly been relying on the suppliers for modules and systems to avail the products to the consumers. This has been very challenging since most suppliers have been working on their own, thereby maintaining individualistic approaches towards effecting the operations. However, the Toyota Company has worked tirelessly to fix this problem. Due to the issue above, it is of crucial significance to note that he Toyota automobile company embarked on the supplier consolidation strategies in order to offset the challenges posed by supply chain restructuring. In order to realize maximum customer loyalty from within and abroad, the Toyota Company decided to consolidate suppliers with intellectual and financial wherewithal. This was necessary in ensuring that the missions of the company are fulfilled as well as meeting the demands and needs of the customers globally in the most appropriate manner and time. The consolidation of the suppliers has also been seen by the company as a sure bet to tip the balance of power amongst the suppliers. One of the examples of supplier consolidation as practiced by Toyota Company is evident in the brakes market. The company has established a number of credible and large distribution points across the world relevant to the brake market demands. These developments have made the Toyota Company to succeed amidst the competitive automotive world markets. Besides, it is of crucial significance to note that the issue of marketing and distribution has also been one of the major problems facing the Japanese automotive companies in the recent past. The problem of marketing and distribution of the products have been compounded by the stiff competition emanating from the other major world automotive manufacturers, as well as the increasing and dynamic demands, tastes and preferences of customers. Therefore, in order to fully excel in the competitive market fronts, one must be able to gain the customer trust, loyalty as well as command and maintain a large customer base. Toyota, being one of the automotive manufacturing companies in Japan has also been affected with the issue. However, it is important to note that Toyota has moved with speed to fix this problem thereby making it remain competitive over the other companies. In order to win the loyalty and trust of the customers, Toyota Company embarked on producing efficient cars with high performance, reliability, and comfort as well as improved design. This has enabled the company to have easy time in marketing and distributing its products globally since many people like them. In their designs, the Toyota Company has massively vested in minding the user experience through safety designs. The company has also worked on the issue of availing more moving spare parts to improve the user experiences. Furthermore, it is also significant to note that the issue of rusting and brake pedal problems has also affected a number of automobile industries in Japan. This has posed major challenges in their competitive abilities in the global markets. However, it is important to note that Toyota has also moved with speed to fix this problem. In order to curb the problem of rusting, the Toyota embarked on recalling 466, 000 vehicles in order to fix the problem. Autonews.com reports that the Detroit Toyota Motor Corp recalled 466,000 vehicles globally in order to fix the problem of rusting corrosion and brake pedals. These comprised of about 460500 vehicles in North America (Autonews.com). This is a sure step of maintaining customer loyalty and trust, as well as attracting more customers to the company’s products. As such, the Toyota Company continues to enjoy competitive advantage over their competitors alongside realizing more success. The Japanese Entry strategies The European markets turned the attention of Japanese automotive companies as a market with constant growth. Japanese companies try to invest in ideas, visions, desires and new technologies instead of European manufacturers who invested in additional plants and production capacities. Instead of American car manufacturers, Japanese are characterised in complying with regulations but not avoiding or modifying them. The main factor of the Toyota’s strategy is building more of design and research centres instead of building production facilities. These allow the company to build specific items and products. This experience is unique for a global car production and it was very successful. The Toyota’s strategy as international may be expressed in four words: Think global, act local. And that is the slogan for the global markets the Toyota is guided by. Centralized decisions-making As Masanori mentioned, the nature of corporate decision-making is also a basic part of Japanese strategies. Before the decision to enter Indian market in 1983 was made by Osamu Suzuki, it seemed to be premature and irrational for some experts. Collaborating with Maruti Udyog Ltd whose founder was Sanjay Gandhi, the mutual holding soon filled approximately half of a market. Suzuki’s unique management style was a reason of company’s success (Masanori, K. 2012). Crisis Management of Toyota To keep competitive in long term and prove that Toyota can retain their competitive position the company has to conquer many challenges. The delay in decisions may be deadly for the company. As Heineman emphasized, in 2007 appeared the problem of deadly crashes because of uncontrolled speeding but to solve the problem and to recall millions of vehicles it took Toyota four years (Heineman, B. 2014). This was one of the most dangerous safety problems appeared for Toyota. This example is an occasion for company to review whether processes are in place and to find out who is responsible for consequences. The Japanese Automobile Industry’s New Paradigm Kereitsu is the unique model of business relationships meaning the group of Japanese companies that dominated in the Japanese economy during the last decades of 20th century. This group included automobile companies as well, for example, Mitsubishi Motors. Analyzing the current changes in the Japanese automobile industry shows that the relationships among kereitsu members were the Japan’s tool for the world-class competitiveness in the automobile industry. But nowadays it is loosening because of the troubles with domestic economy and global external environment. The brief geographical analysis shows that the traditional clusters of companies’ operations were beginning to decentralize trying to escape the labor shortages as well as infrastructure constraints. This means that globally the Japanese moved labor-intensive production of components to Southeast Asia and China as well to shift the comparative labor advantage. The Japanese manufacturers continued to adapt to the political pressures from European and North American governments and producers with increased production for the local markets. For the North American and European markets the Japan’s export of vehicles had a diminishing role. The main reasons for such measures were the yen rising, the shortages of land in Japan as well as labor. Despite this influenced badly on volume efficiency in Japan, these measures were inevitable. The worldwide redistribution of production helps the Japanese companies to get closer to the customers and markets offering lower costs and also allows hedge a long term currency risks. Speaking of the general paradigm for Japanese manufacturers, Rapp emphasized that Japanese automobile producers consider the protecting of existing client relationships to be more important than profit and they often offer new products to protect the existing customers and market share (Rapp, W. 1995). Ando mentioned the successful collaboration between Honda and Rover to help Honda become international. This partnership took part at the US Honda plant as American market was very important for the company but it was too small in comparison to competitors, so the co-operative agreement was profitable for Honda (Ando, K. 2005). The winning Strategies of Toyota: Applying the Dunning’s OLI Model and Foreign Direct Investment (FDI) Theory Toyota Company has massively employed the application of Dunning’s OLI Model in their strategic business organizations and operations. This has been very integral in occasioning the success of the company both domestically and globally. The strategy of investment employed by Toyota Company has been significant in offsetting the problems and challenges posed by the dynamic and competitive world markets alongside surviving the pressure posed by the competitors working on the same products. It is of critical significance to note that Dunning’s OLI paradigm blends three different theories of foreign investment. These include the O+L+I. These three pieces always focus on different questions of explaining why, how and where organizations invest. The O factor represents the firm specific advantages. The L represents the country specific advantaged whereas the I factor represents the internationalization advantages. The Toyota automotive company has massively applied the Dunning’s OLI Model in their strategic marketing, investment as well as organizational operations. This has occasioned their success. Toyota Company has been able to maintain higher specific advantages on the foreign markets. For instance, its products have been valued at higher prices compared to their competitors. However, due to the trust and loyalty from the foreign customers, the products have realized higher consumption rates. This has seen the Toyota Company to have some advantages relevant to the costs of operating in foreign markets. As such, the Toyota Company has been earning higher revenues relevant to the same costs employed in those foreign markets. This has leveraged the competitive advantages of the Toyota Company over other competitors therefore leading to realization of sustainable profits. This confirms the I Factor in the Dunning’s OLI paradigm relevant to Toyota strategies of investment. Relevant to the country specific advantages, the Toyota Company has observed the L-Factor in Dunning’s OLI Model through gaining the domestic economic, social and political advantages. Being a multinational enterprise, the Toyota Company boasts of domestic growth, high income markets as well as a politically stable economy. This has enabled the company to thrive the competitive market fronts. Relevant to gaining support on the basis of internationalization of advantages as detailed in Dunning’s OLI Model, Toyota Company has managed to go abroad by exporting its products to foreign markets in a wise manner. In the foreign markets the Toyota Company always licenses foreigners to distribute their products. This has made the company to remain competitive I the global market fronts and command more customer base thereby earning more profits. The other secret winning strategy of Toyota automobile industry is the application of Foreign Direct Investment mechanisms. The Toyota Automotive Company has been very much successful in the transfer of its production overseas. Toyota managed to form a joint venture with the General Motors thereby coming up with New United Motor Manufacturing Inc (NUMMI). This has almost revolutionized the motor vehicle industry in the world. NUMMI later became the Tesla Incorporation in October. In the following events, it is important to note that the Toyota Company also managed to transfer its skills, expertise and essence of lean production systems (Katsuki et al, 2011).. These incorporate efficiency, quality as well as teamwork. This has occasioned the competitive advantage of Toyota over other companies like Nissan. Even though the home market of the company has been experiencing considerable contraction, the transfer of its production overseas has been very critical in ensuring continued and sustainable growth thereby leading to profit maximization. The rate of Toyota’s production can best be illustrated in the figure below derived from the OICA Production statistics (Katsuki et al, 2011).. Figure 1: Toyota’s production by location: Japan and overseas Source: OICA production statistic (http://oica.net/category/production-statistics/) Due to the transfer of its production overseas, Toyota Company has also realized increased annual production of passenger cars. With the increased efficiency, as well as quality of their products, the return of profits has been very magnificent. From the OICA production statistics, the annual production volumes of Toyota cars has been shown to top other major leading producers relevant to the 2000-2009 survey (Katsuki et al, 2011). This is illustrated below. Figure 2: Annual production volumes of passenger cars by Toyota, Ford & GM (2000-2009) Source: OICA production statistic (http://oica.net/category/production-statistics/) Reasons why Toyota is more competitive compared to Nissan Company There are several reasons to justify the trend of the customers developing preference for Toyota automobiles over Nissan automobiles. It is of critical significance to note that people always prefer Toyota automobiles despite their relatively higher prices over Nissan automobiles due to the fact that Toyota automobiles have superior performance. As such, a number of customers always consider it advisable to spend more money on automobiles with proven reliability, efficiency as well as increased performance. In terms of fuel consumption, it is important to note that Toyota automobiles are more efficient in fuel utilization compared to Nissan automobiles. Toyota automobiles have the most impressive design. The simple but sophisticated sleek design as well as their improvement over rusting and corrosion makes them to remain highly competitive on the global markets over other brands like Nissan automobiles. Other than the stated above, it is of crucial significance to note that several people always prefer Toyota automobiles over Nissan and other brands due to the fact that Toyota automobiles lacks unexpected and astronomic costs of service. The issue of servicing the Nissan automobiles is always very hectic. In addition, the rate of deterioration of Nissan automobiles is considerably higher compared to the rate of deterioration of Toyota automobiles. This informs the increasing preference of Toyota automobiles by customers over the Nissan automobiles. It is of crucial significance to note that each Toyota automobile always comes with a range of low capped service price costs for a set of years, and upon attaining certain distances in kilometers. Moreover, it is important to note that Toyota always offers its customers the best services ever. This is opposed to the Nissan automobiles. For instance, when the automobiles develop any problem, servicing is done at any of the many Toyota Service Centers where only the Toyota-trained staffs are the ones authorized to work on the car. This offers quality that amounts to making more people prefer Toyota automobiles over other automobiles like Nissan. The Role of Japanese Government The Government policy made the Japanese internal automotive market one of the most closed for decades and it helped the national companies to attract investments and to increase producing before becoming international. The policies of US government as well as of the majority of European governments were more open and welcome to all automakers, foreign and domestic (American Automotive Policy Council 2015). Using their strategies Japanese automotive companies achieved a significant market share in the foreign markets. The government helps to encourage new technological developments and innovations supporting various Toyota’s research and development (R&D) projects. The government is trying to improve the skills of Japanese workforce to meet the needs of the Japanese automotive industry. For example, the human resource development is invested by the government. This helps to ensure that workforce is professionally prepared to work in Japanese high-tech sector including automotive manufacturers. To meet the specific needs of Toyota and other manufacturers the collaboration between technical schools, universities and industries is made (Corwin, J. & Puckett, R. 2009). International experts consider Japanese governmental strategy to be successful and they believe they the government needs to continue focusing on global markets and their global strategy. As Corwin & Puckett emphasize the key elements of Japanese global strategy are diversifying the locations of production and free trade agreements negotiating (Corwin, J. & Puckett, R. 2009). As an example of diversifying production locations the automotive sector appears. Japanese automobile companies faced trade restrictions on automobiles produced in Japan and exported to USA in 1980s. Because of the mentioned limitations Toyota and Honda started their productions in USA. The production of Japanese automobiles started in China in 2000. With the direct support of Japanese government the production is now split almost equally between domestic and international plants to meet the limitations on automobiles produced outside of Japan. 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