Strategic Development of Toyota - Essay Example

Running head: Toyota Strategic development of Toyota The Japanese automobile giant Toyota is the world’s leading car manufacturers which controls major share of world’s car market because of their product quality and services offered to the customers. Toyota also owns and operates Lexus and Scion brands. Their road to leadership in the car manufacturing industry was carefully formulated. This paper briefly analyzes the history of Toyota, their business traditions, strategic choices etc. History of Toyota Kiichiro Toyoda, the father of Toyota Company has made the prototype of Toyota vehicle in 1935 from which the history of Toyota car has begun. Toyotas logo was established in 1936. (History of Toyota) The current Toyota Company has started as a division of Toyoda Automatic Loom Works devoted in 1933 to the production of automobiles under the direction of Kiichiro Toyoda. The name, Toyota, has taken instead of Toyoda in order to separate the exact name of the founder from the company name. Moreover Toyota is easy to pronounce than Toyoda and also it takes eight strokes to write in Japanese, is considered to be luckier than Toyoda. (Toyota corporate history) It has started with A1 passenger cars and later shifted to G1 trucks in 1935, because of the initial failures in car manufacturing. Toyota Motor Co. was established as an independent and separate company in 1937. The initial history of the company was not much encouraging. The US cars were dominated in automobile industry till the initial stages of 1970s. The 1973 oil crisis has served as a blessing to Toyota as more and more customers concentrated on the small car industry to save fuel. The Americans were interested in big luxury cars till the oil crisis while Toyota concentrated more on fuel economy cars. They have researched a lot in manufacturing fuel economy small cars while the American car manufacturers like General Motors concentrated more on bigger expensive ones. When the oil crisis has started in 1973, Toyota had already the technology readily available for them to develop economic cars while the Americans forced to develop new technologies to manufacture economic small cars. Thus from 1973 onwards Toyota, slowly started to capture the world market. “By 1955, Toyota was making 8,400 cars per year; by 1965, 600,000 cars per year. Toyota set up a headquarters in Hollywood in 1957; the first Toyota car registered in the United States was a 1958 Toyopet, sold in 1958”. (Toyota history: corporate and automotive) Business traditions of Toyota “In 1959, the company opened its first plant outside Japan - in Brazil.” (Toyota history: corporate and automotive) As per the business traditions followed by Toyota, they are giving more focus to the local conditions of the country in which they are operating. Even though they are manufacturing automobiles, they are making changes in their design and functioning of their cars based on the local requirements and conditions. They know very well that even the same product needs different marketing strategies in different countries. The writing manufacturing equipment leader Parker Pen is the best example for their failed marketing strategy in global markets. They have utilized the same marketing strategies all over the world since they believed that same product needs same marketing strategies all over the world. “In early 1984, the parker company has launched a global marketing campaign in which everything was to have one look, one voice, and with all planning to take place at headquarters. Everything was connected with the selling effort was to be standardized. This was a grand experiment of a widely debated concept.” ((Marketing across cultures, p.194) Toyota on the other hand maintained a philosophy of localizing both production and design of its products (that is, adapting vehicles to the places they will be used, as well as building them there). This builds long-term relationships with local suppliers and local labour. (Toyota history: corporate and automotive) For example, Toyota has realized that the American people were more interested in big luxury cars and hence they thought about a custom made car for the American people to compete with the market leader Benz. Lexus was thus appeared in American market in 1989 which was an immediate hit because of high luxury and reliability. Even today Lexus is one of the strongest competitors for GM and Benz in America. Development and operations of business traditions in Toyota The business philosophy or traditions of Toyota has formulated based on immense market and customer studies. They have identified around 14 prominent business principles for the marketing of Toyota brand all over the world. These philosophies can be summarised as follows; 1. Long-Term Philosophy- Base your management decisions on a long-term philosophy, even at the expense of short-term financial goals. 2. The Right Process Will Produce the Right Results 3. Create a continuous process flow to bring problems to the surface 4. Use “pulls” systems to avoid overproduction 5. Build a culture of stopping to fix problems, to get quality right the first time. 6. Standardized tasks and processes are the foundation for continuous improvement and employee empowerment. 7. Use visual control so no problems are hidden 8. Use only reliable, thoroughly tested technology that serves your people and processes. 9. Grow leaders who thoroughly understand the work, live the philosophy, and teach it to others. 10. Develop exceptional people and teams who follow your company’s philosophy. 11. Respect your extended network of partners and suppliers by challenging them and helping them improve. 12. Go and see for yourself to thoroughly understand the situation 13. Make decisions slowly by consensus, thoroughly considering all options; implement decisions rapidly 14. Become a learning organization through relentless reflection and continuous improvement (The 14 Principles of the Toyota Way: An Executive Summary of the Culture Behind TPS) Toyota never attempted for short term goals. Most of their management decisions were aimed at long term goals even though they suffered initial setbacks. They had a strong belief in their abilities to innovate and the authenticity of their strategies. They never stayed away from problems; in fact they addressed even the smallest problems with larger considerations. Whenever they realized that the market is going to be dull they have reduced the production or in other words they moved along with the market conditions like a tidal wave. Crest and trough are always followed with the movement of a tide. Same way whenever the market went down, Toyota reduced their production and whenever they felt a higher demand they increased their production. Their quality policy was related to market leadership and they never sacrificed quality at the expense of quantity. Each vehicle produced by Toyota has gone through a vigorous quality check in order to ensure the quality. They used scientific methods of business management especially in the labour relations department. They treated all the employees as their family members and hence each employee of Toyota Corporation all over the world treated the company as their own. They never tried to hide any problems. Toyota, even now working as a student who wants to learn more and more and hence their products always undergo changes as per the requirement of the current generation. ‘Even before the launch of Toyotas first mass-produced passenger car, Kiichiro Toyoda recognized the importance of marketing in building a successful business and appointed Shotaro Kamiya (Former manager of the Tokyo office of General Motors-Japan) as the sales in charge of Toyota corporation. It is the dealers and distributors that strengthen the relationship between the customer and the manufacturer.  They make customers aware of all that Toyota has to offer and they bring customers needs and desires to factory floors and to boardrooms’. (Toyota traditions) “Toyota participates in community activities, sponsoring educational and cultural programs as well as research” (Toyota history: corporate and automotive) Toyota never underestimated their commitment to the society apart from that of a car manufacturer. They believed that each organization has a big commitment towards the society in which they are operating. They never tried to focus entirely on making automobiles while keeping a blind eye towards other social issues. They believed that, just like spending for advertisements, some portion of their revenue must be spend in the community activities as well in order to strengthen the bond between the company and the community in which they are operating. The importance of protection of environment has well understood by Toyota more than anybody else. They have realized the dangers of excessive Carbon Dioxide (CO2) liberation through the smokes liberated by car engines, to the atmosphere. They always tried to reduce the CO2 levels in the smokes liberated by Toyota vehicles. They always aimed at growing in harmony with the environment. They always maintained a close relationship with the society and cooperated with agencies which are working for the prevention of green house gas emission. Strategic choices and issues Toyota may faces in the future Strategic choice is a logical element of strategy formulation process. “Choice is at the centre of strategy formulation. If there are no choices, to be made, there can be little value in thinking about strategy at all.” (Strategic choice) Toyota always believed in this principle. The current global financial crisis has opened the eyes of many business tycoons only at the latest moment. But Toyota has a strong future vision based on their past experiences. “Four key themes based on trends seen as developing from 2020 to around 2030 are: Toward a recycle-oriented society Toward the age of IT and ubiquitous networks Toward a mature society (the decline of nationalism and war and the rise of respectful exchange of ideas) Toward motorization on a global scale (societies with little private transport gaining more) These are linked to the pursuit of a new global image for Toyota with four key components: kind to the earth, comfort of life, excitement for the world, and respect for all people. The encompassing motto of "innovation into the future" is "working with passion and dedication to create a prosperous society." (Toyota history: corporate and automotive) Our earth is accumulating more and more wastes which may create severe problems in future. Both land and sea are filled with the human made disposals. Now the scientists even think of disposing the harmful nuclear wastes even out of space. Toyota has identified and taken this problem seriously and hence they are now concentrating more towards making environment friendly products. Most of the products made by human being needs to be recycled in future. Our earth cannot withstand for longer periods amidst of harmful man made wastages and Toyota has realised this fact much before others realised it. New technologies like It and computers are going to be the prominent ones in future and hence Toyota has already started to IT enabled features to their cars. Cars working on Global Positioning System (GPS) are the latest in this series made by Toyota. My advice regarding preparation to Toyota “Toyota, the world’s largest automaker, said Friday that it expected to suffer a loss this year, thanks to rapidly declining sales around the world, especially in the United States. The company is expecting its first full-year operating loss since 1937 — 350 billion yen ($3.9 billion) — more than double its previous forecast.” (FACKLER & MAYNARD) The current global business scenario is not running well because of the economic crisis. India and China like countries has escaped from the crisis without much damages compared to other developed countries like US and UK. Moreover India and China believed to become the super most powers in near future itself. Hence my advice to Toyota is to concentrate more on these markets of India and China. India and China covers a major share of world populations (China has got the highest population while India has the second best in the world), the market potential also will be more in these markets compared to others. Toyota has already launched their manufacturing units in India and China. In my opinion they have to open more manufacturing units in these countries not only because of demand, but also the immense cheap labour markets these countries have. Even American companies are now focussing on these countries to exploit the cheap labour market through outsourcing and offshoring. “Next year could be even worse. In the year through March 2010, analysts project the company’s operating loss will swell. If the supercharged yen does not weaken, warns CLSA Securities analyst Christopher Richter, for example, Toyota’s operating loss could swell to $11 billion next year.” (Rowley) Toyota has immense resources to overcome the dull periods. They have already managed such dull situations in the past and hence they can successfully overcome the present crisis in my opinion. I think Toyota must concentrate on making strategies for the next 20 or 30 years rather than panicking about the current situations. The technology and the living styles of human being are always changing and hence today’s car will be out of fashion within 50 to 10 years. Most of the people are now more passionate towards the high-tech equipments and hence Toyota must think of a high tech revolution in the car manufacturing industry in near future itself. Conclusions Toyota is supposed to be the leader of manufacturers all over the world. They have attained this position through carefully prepared strategies and business innovative processes. Toyota was succeeded in identifying the customer culture in different parts of the world and hence they made custom made cars for each part of the world. Moreover they have implemented unique marketing strategies for each part of the world based on the cultural, linguistic, and economical differences. Toyota always tried to establish a strong relationship with the society in which they were operating. They have tried to improve their participation in social activities more than any other companies. Toyota has realized the importance of recycling of products and has already started to make products which are easy to recycle. They focused more on producing environment friendly products by eliminating the risk of excessive carbon dioxide like toxic gas emission through the smoke ejected by their vehicles. Toyota Doesn’t wants to be more panicking about the current economic recess, even though their current year sales are not encouraging. They have to concentrate more on the markets of India and China like countries for their future operations because of the immense growth prospects in these countries. References 1. History of Toyota, 2009, Retrieved on May 9, 2009 from http://www.toyota.co.jp/en/history/index.html 2. Toyota corporate history, Retrieved on May 9, 2009 from http://www.toyoland.com/history.html 3. Toyota history: corporate and automotive, Retrieved on May 9, 2009 from http://www.toyoland.com/history.html 4. Strategic choice, Retrieved on May 9, 2009 from http://www.scribd.com/doc/8204771/Strategic-Choice 5. Toyota traditions, Retrieved on May 9, 2009 from http://www.toyota.co.jp/en/vision/traditions/nov_dec_02.html 6. The 14 Principles of the Toyota Way: An Executive Summary of the Culture Behind TPS Retrieved on May 9, 2009 from http://www.si.umich.edu/ICOS/Liker04.pdf 7. MARTIN FACKLER &MICHELINE MAYNARD, 2009, In the Red, Toyota Sees Loss Tripling, Retrieved on May 9, 2009 from http://www.nytimes.com/2009/02/07/business/worldbusiness/07toyota.html?hp 8. Rowley Ian, 2009, Its Official—Toyota Scion to Become New Chief, Retrieved on May 9, 2009 from http://www.businessweek.com/autos/autobeat/archives/2009/01/its_officialtoy.html 9. Marketing across cultures, Retrieved on May 9, 2009 from http://www.sam.sdu.dk/undervis/90434.E04/Spoergsmaal_til_Case_Tekst_Parker_Pen.pdf Read More