“TOYOTA`S GLOBALIZATION STRATEGY”

Q1 –Study Toyota`s evolution into a market leader in the Japanese automobile

market over the decades. What were the factors that helped Toyota attain the
leadership status in Japan? What problems did the company face in this market
later on? Analyze and discuss the efforts made to overcome these problems.

Ans-a- Toyota`s evolution into a market leader-

 Toyota flourished during the Second World War by selling trucks and buses
to the army.
 In 1953 it appointed distributers in EI and Saudi Arabia.
 In 1957 Toyota entered US market through its subsidiary TOYOTA MOTOR
SALES .
 1959- Toyota established its first overseas production unit in Brazil and
gradually developed vast networks overseas.
 By early 1970s, Toyotas sales exceeded that of its competitors and by 1974
Toyota Corolla became the largest selling car in the world.
 By 2003 Toyota sold 6.78 million vehicles worldwide as compared to 6,72
millions by Ford.
 Reports suggest that Toyota`s market share increased from 10.4% in 2002
to 11.2% in 2003, and by September 30, 2003 the company was reported to
have a 23% increase in net income which generated $4.4 billion on $69.7
billion and had a market capitalization of $110 billion which was way ahead
its competitors.

b-Factors which helped Toyota attain its leadership:

 They focused more on their dealer network and tried to strengthen it as far
as possible by improving the communication between the company and
dealers.
 Toyota`s main aim was to attract the younger customers and add them to
their customer base.
  Toyota focused on attaining a regional balance to for its global operations
and focused more on the R&D of the company
 Introduction of Just-In-Time inventory had helped to a great extent.
 Toyota took strict stands against the dealers who failed to meet their
targets and advised them to change the name and infrastructure of the
outlet so that they can attract young customers.
 It changed its Chase production strategy wherein there is a presence of
Constant workforce to Contracting and subcontracting so that they can cut
their operating expenses and planned to cut approximately $680 million.
 It build an amusement park and allowed customers to design their own cars
and also allowed test drives at a very minimal cost.
 Toyota invested a lot of its Capital on advertising and Restructuring of
models.

c-Problems faced by the company-

 Excessive Capacity
 Choosy customers
 Huge workforce
 Intense competition within the Local Market.

d-Efforts made to overcome these problems:

 The company invested a lot on advertising its brand and models.

 It did not supply the same models to dealers located within a vicinity , so as
to avoid Price wars amongst them.
 The main focus was to target the younger generation and so it asked its
dealer base who could not meet the demands to change the store name
and interiors.
 The company went for vigorous restructuring of its model so that the
expectations of the younger generation are met with.
Q2- Critically examine the rationale behind Toyota`s decision to spread its
operations across various geographical regions and to focus on young buyers in
its core markets. Elaborate upon the three different programs adopted and
analyze how localization of manufacturing was expected to help the company.

Ans- a-Toyota`s Rationale behind spreading across different geographic

locations:

 The domestic sales of Toyota were declining and it could not go beyond
38% of market share in the markets of Japan.
 Between 70s-90s the sales of Toyota was way behind its competitors.
 Saturation of the local market was also a reason for this move.
 To maintain its position as a leader , Toyota had to explore new market,
keeping in mind that they have to focus on localization as well.

b-The Three different Programs adopted were:

 The New Global Business Plan- This program aimed at advancing their
localization and increasing their imports over a 3 year old period. Toyota
wanted to expand overseas via this plan and thus build new plants and
enhanced its capacity. They focused a lot in North American areas and
build plants in Kentucky, Canada, Indiana, West Virginia. They also spread
across Europe and Asia.
 Global Vision 2005(1996-2005)- In this strategy, they focused on
localization, and aimed at building mutually benefitting long-term
relationships with its local suppliers and labor. They not only focused on
increasing their networks worldwide but also develop the local market by
improvising design with respect to the regions of the country.
 Global vision 2010(2002-2010)- In April 2002 Toyota announced this
program which aimed at increasing their global market share up to 15%
which is presently 10%. The 4 components of this program were-
1-Recycling Based Society, 2- Information Technology, 3- Diverse Society &
4-Development of Motorization.
Q3-Considering the extremely competitive global market scenario and the
nearly saturated demand in its core automobile markets. Do you think Toyota
will be able to achieve its goal of attaining a 15% market share by 2010? Justify
your stand. Also suggest some measures that could help the company achieve
its global targets.

Ans-Reports suggest that it won’t be very difficult for Toyota to increase their
share up to 15% globally. Reports suggests that Toyota has already captured 5%
market in China and 10% in China, and is advancing to go for 15% globally very
fast. Factors like 1-Strong financial condition, 2-efficient production system
globally, 3- Corporate culture, 4-and new product development has helped
Toyota advance rapidly. Toyota is confident that it will meet the targets with the
help of its new products, expanded manufacturing base and production and
quality control strategies. Even if Toyota failed to achieve its targets it will not be
a great problem because of its strong financial condition.

Suggestions for the company to achieve its global target-

1- Toyota should reduce its dependence on the US markets, because many big
players are entering the market and are gaining markets shares as well.
2- It is facing tough competition globally as well as locally and so Toyota has to
keep focusing on R&D and New Product Development.
3- Toyota should focus on local customization , because to function well in the
global market Toyota should strengthen it`s roots in its local market.