Toyota's Globalization Strategies

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Case Details:

Case Code : BSTR094
Case Length : 20 Pages
Period : 1995 - 2003
Organization : Toyota Motor Corporation
Pub Date : 2004
Teaching Note :Not Available
Countries : Japan
Industry : Auto and Ancillaries

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"If people started living at the South Pole, we would want to open a dealership there."¹

- Fujio Cho, President of Toyota Motor Company, in March 2002.

"Toyota is a car company that challenges itself in a way that makes the world shudder. Toyota announces it is shooting for 15% of the global market and 50% cost cuts, and everyone goes 'Ooof!' It is like getting hit in the solar plexus."

- Maryann Keller, a US-based consultant (auto industry), in April 2003.²

Casting a Global Spell

In January 2004, leading global automobile company and Japan's number one automaker, Toyota Motor Corporation (Toyota), replaced Ford Motors (Ford), as the world's second largest automobile manufacturer; Ford had been in that spot for over seven decades. In 2003, Toyota sold 6.78 million vehicles worldwide while Ford's worldwide sales amounted to 6.72 million vehicles (General Motors, the world's largest car manufacturer sold 8.60 million vehicles).

According to reports, while Toyota's market share in the US increased from 10.4% in 2002 to 11.2% in 2003, Ford's declined from 21.5% to 20.8% during the same period. Reaching the No.2 slot was a major achievement for Toyota, which had begun as a spinning and weaving company in 1918. Ford was reportedly plagued by high labor costs, quality-control problems, lack of new designs and innovations, and a weak economy during the early 21st century, which made it vulnerable to competition. Toyota, aided by its new product offerings and strong financial muscle had successfully used this scenario to surpass Ford and affect a dramatic increase in its sales figures. In November 2003, Toyota announced its financial results for the half-year ended September 30, 2003.

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The company reported a 23% increase in net income (as compared to the corresponding period of the previous year) to $4.4 billion on revenues of $69.7 billion. This took Toyota way ahead of World's top three automobile makers (at that time) by sales, General Motors (GM), Ford Motors (Ford) and Daimler Chrysler. Its market capitalization of $110 billion (on November 05, 2003) was more than the combined market capitalization of these three players. (See Table I).

Given the fact that in 2003, these top three companies were struggling to maintain their sales and profitability targets, Toyota's performance was termed remarkable by industry observers (See Exhibit I for the company's financials). Toyota had emerged as a formidable player in almost all the major automobile markets in the world. Interestingly, one of its strongest markets was the US, the world's largest automobile market and the home turf of Ford and GM. Toyota had emerged as a strong foreign player in Europe as well, with a 4.4% market share. In China, which the company had identified as a strategic market for growth in the early 21st century, it had a 1.5% market share.

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1] Green and Global Are the Road to Success, www.toyota.co.jp, March 18, 2002.

2] The "Oof Company," www.forbes.com, April 14, 2003.