Decision Making; the case study of

Toyota Motor Company Essay

Introduction
With competition in the business world today, the quality of decision made by managers
to a large extent determines the success their business attains. The major difference
between effective and unreliable managers is on the quality and timelessness of their
decision. Making a decision whether it’s a minor or major decision is a process that
should be understood by management. There are different methods/approach of
making decision; each situation and organization use a different method to get a
solution to its needs.

Toyota is an international leading automotive company which has growth through thick
and thin to assume the world largest automotive producer. It assumed this position in
2008 after it over took General motors. This tremendous growth is attributed to strategic
decisions that the company management has made. In specific the company uses
scientific method of decision making (Provis, 2010).

This paper analysis international market entry decisions made by the company and the
process Toyota management used to come with the choice of country to invest in.

Brief history of Toyota

Toyota was founded in the year 1937, by Kiichiro Toyoda. As per reports released in
December 2009, the company had total 71,116 employees distributed in all its
branches. Despite the world financial crisis, the company was able to record an
increase in sales and made a profit of US$4.2 billion. The company has an effective
supply chain management and embraces technology in all its processes. For example it
has started making electric motor vehicles and bio-diesel motor vehicles (Toyota Motor
Company Official website, 2010).

The problem of analysis

International trade has been facilitated by globalization and companies are targeting
markets away from their country of incorporation. However the decision to venture into
one country and not in another determines the success of such a company in the new
market.

The following is the process that Toyota Company uses to come up with the choice of
country to invest in;
Problem analysis

The initial stage in making an international investment decision is to analyze the

investment problem at hand. In this case, the company would like to diversify in other
countries. It should evaluate how the current market is operating and come up with an
effective foreign market entry strategy. The following are the things that Toyota
Company considers before they choose a country A and not country B,

 What is the market intended to meet?

 Does the company have capacity to supply quality goods to the country?
 What is the brand name that the company is having at the moment? Will the
brand name favor the company in the foreign country?
 Why does the company aim at diversifying its processes?

The initial stage is more on understanding the company’s strengths and weaknesses for
better decision making (Ştefan, 2009).

Collecting data

In this stage the company management devices a team that is supposed to take data
regarding the countries and products that it should invest in. This is to ensure that it
comes up with alternative countries which have potential. The team may use data
available in the company’s business intelligence systems or can borrow data from other
sources like external data companies. The internet is crucial for this as it offers an
overview of the market situation of the countries under consideration.

The teams come up with a number of countries that should be considered and an in
depth analysis of the country follows. They may visit these countries and collect relevant
data. The major thing that they focus in is to look at the special attribute that certain
countries have that may be of benefit to the company. It may range from growing
economy, high population growth rate with increased living conditions to the strong of
Toyota’s brand name in the country.

Choosing the best alternative

After data has been collected, the next stage is to choose the best alternative for the
venture. This takes a brain storming of the countries and weighing options. The kinds of
leadership models and market entry strategies that will be required in the country are
interpolated to ensure that the project will not be a failure. Cost benefit analysis, sales
forecasts, operation costs forecasts are done on various countries (Higgs, Smith, &
Mechling, 2010).

Targets country analysis

After the company has realized that it has some potential and can manage an
international market, the next step is to make a choice on the country to venture into.
This takes the form of an external audit of the market. The choice is made from a list of
probable countries then zeroing in one country. The following are the factors that it
looks into;

 What is the current market share of the company’s products in the country of
choice
 Does the company have a strong brand name in the country of choice? At this
level, it is important to analyze the changes in sales with the country, the
products that the country seems to buy from Toyota
 Considering the legal situation in the country; this is where the managers
consider taxation policies, foreign companies legal standing on area like property
acquisition
 The resources available in the country; these resources may be in terms of labor
availability, material availability, transport and communication networks.
 The economic growth rate of the country is considered.
 Competition that prevails in the country of venture is an important thing that the
company considers. In most cases, it sends a spy, who undertakes an analysis
of the market situation and the position that the company assumes in that
country. The products that the people tend to use from the company are also
captured. For example in most African Nations, Toyota Pickup and Lories are
more common that they are in United States markets. Understanding such
parameters assists the company choose its market segment more easily.

This is taking a P.E.S.T.L.E. analysis of the country. This stage is crucial since it ensure
that all data that might affect the company in the foreign market are undertaken. Those
factors that offer opportunities are known and threats recognized for mitigation purposes
(Anon, 2008).

Conclusion
Toyota is a world leading motor vehicle manufacturing company. It assumed this place
in 2008 after it surpassed General Motor in terms of sales and production. The major
driving force that has leaded it to the good performance is the quality of management
decision. International markets accounts for a great potion of the company sales.

To venture in these markets, the company analyses its internal strengths and
weaknesses and takes a deep analysis of the opportunities and threats offered by the
foreign country it intends to invest in. This is a scientific decision making mechanism.