A Case Study Documenting Toyota’s Success and Challenges.
Toyota Motor Corporation is Japan’s number one carmaker. Toyota has international presence in over 170 countries worldwide. It manufactures cars, pickups, minivans, and SUVs include models such as Camry, Corolla, 4Runner, Land Cruiser, Sienna, the luxury Lexus line, and full-sized pickup trucks. It has huge financial strength, a sales turnover of 131,511 million for 1997 and sales growth of 29.3%. It is the second largest car manufacturer in the world, after General Motors.
Some of the key reasons for its success include:
- Successful brand - Toyota has developed a trusted brand based on quality, good performance and for being environmentally friendly.
- Innovation - Toyota is at the forefront of car manufacturing innovation. It was the first car manufacturer to embrace lean manufacturing (known as Toyota Production System) which is a faster, more efficient process which leads to less waste compared to the traditional batch and queue method of manufacturing. It also applied JIT (Just in Time manufacturing) and smart automation.
- Product Development - Key to the success in the car market is new models which stimulate demand and loyalty to the Toyota brand. Toyota has reputation for producing cars which are greener, more fuel efficient, and of good performance. Toyota has sought to meet government requirements (for reducing the impact on the environment), economic changes (as prices of fuel - oil continues to rise) through the development of hybrid fuels. Toyota was the first car manufacturer to market hybrid (gas and electric) fuel, with the launch of Prius model, ahead of competitors.
- It successfully entered markets and penetrated them with both manufacturing and sales subsidiaries. Toyota gained first mover advantages by presence in globally strategic markets (Asia, Europe, US) first, whereas its nearest rivals (Ford, GM) gained footholds in only 2 of (US and Europe). Toyota is well positioned to take advantage of the growth in South East Asian markets of China and India.
- Toyota has moved to a global manufacturing model. Car manufacturing sites are expensive, requiring high fixed cost investment. Toyota has moved its manufacturing sites to where factor costs are lower (without comprising on quality) and now manufactures different parts of the car and carries out assembly in different locations around the world. It has been particularly successful at gaining cost efficiencies (locating and obtaining suppliers, components in low cost locations) and compared to the manufacture and assembly of cars in one location.
Challenges and outlook for the company:
- Car manufacturers are facing growing political and consumer group pressure to produce cars that are more fuel-efficient and reduce emissions.
- Saturation, over supply in the developed world, has led manufacturers to look to China, India and emerging markets where population, income and demand is growing. However, these countries have national brands which are growing in popularity.
- Oil prices - affecting the price of fuel. Fluctuating economic and political conditions those markets.
- Consumers usage of cars is decreasing. Faced with increased running costs, consumers are reported to be using their vehicles less to save on household costs. Businesses are utilizing technology more than ever before, with less face to face meetings. Governments across Europe are encouraging car-share and alternative forms of transport. These factors are affecting the demand for new cars.
- Changing demographics. The size of families has been decreasing. This has reduced the demand for larger cars, and an upswing in demand for fuel efficient smaller cars.
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