Toyota's Globalization Strategies
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Case Code: BSTR094 Case Length: 20 Pages Period: 1995 - 2003 Pub Date: 2004 Teaching Note: Not Available |
Price: Rs.500 Organization: Toyota Motor Corporation Industry: Automobile & Automotive Countries : Japan Themes: International Business |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Early Globalization Efforts
In June 1995, Toyota announced the 'New Global Business Plan,' aimed at advancing localization (of production) and increasing imports (through collaboration with foreign automobile companies) over a three year period. A major objective of this plan was to increase Toyota's offshore production capacity to 2 million units by 1998. As part of the localization efforts, Toyota focused on increasing overseas production significantly by establishing new plants and expanding the capacity of the existing plants (See Table II for major initiatives taken under the New Global Business Plan). Apart from this short-term global business plan, Toyota also came up with a long-term global business vision in June 1996, named the 'Global Vision 2005.' The major components of "Global Vision 2005"were, asserting a competitive edge in technology and accelerating globalization, while sustaining market leadership in Japan, by reclaiming its above 40% market share. As part of its globalization efforts, the company focused more on increasing the production of automobiles in the areas where they were sold...
Domestic Problems & Solutions
According to industry observers, the above scenario was due to a host of reasons such as excessive capacity, choosy customers, surplus workforce and intensified competition within Japan. In 1998, Japan sales accounted for a mere 38% of the company's total sales, as compared to 52% in 1990. Also, Toyota's Japan sales contributed to a very small share of its total profits. US sales contributed to the majority share (80%) of the profits, followed by Europe. By the late 1990s; young buyers accounted for 30% of the customer base as compared to over 45% in the late 1980s. In 1998, models from rival companies such as Honda and BMW were more popular than the ones offered by Toyota. According to reports, Japanese youngsters felt that Toyota cars 'lacked attitude.' Toyota realized that by losing its young customers to other companies, it ran the risk of losing its future market as well. Analysts claimed that despite its efforts to cater to the young, the company had failed to give them zippy compact minivans and sports utility vehicles...
The Second Phase of Globalization
Cho decided to focus more on localization - he believed that by doing so, Toyota would be able to provide its customers with the products they needed, where they needed them. This was expected to help build mutually benefiting, long-term relationships with local suppliers and fulfill Toyota's commitments to local labor and communities. Cho defined globalization as 'global localization.' Therefore, besides focusing on increasing the number of manufacturing centers and expanding the sales networks worldwide, Toyota also focused on localizing design, development and purchasing in every region and country...
The 2010 Global Vision
In April 2002, Toyota announced another corporate strategy to boost its globalization efforts. This initiative, termed the '2010 Global Vision' was aimed at achieving a 15% market share (from the prevailing 10%) of the global automobile market by early 2010, exceeding the 14.2% market share held by the leader GM. The theme of the new vision was 'Innovation into the Future,' which focused on four key components: Recycling Based Society; Age of Information Technology; Development of Motorization on a Global Sale; and Diverse Society (See Table III)...
The Globalization Pay-Off
By mid-2003, Toyota was present in almost all the major segments of the automobile market that included small cars, luxury sedans, full-sized pickup trucks, SUVs, small trucks and crossover vehicles. According to reports, while global vehicle production increased by 3.3 times since the early 1960s, Toyota's production had increased by 38 times. As a result of its localization initiatives, Toyota had 45 manufacturing plants in 26 countries and regions by this time, and sold vehicles in 160 countries (See Exhibit IV and V for Toyota's worldwide manufacturing operations and production details)...
Which Way to Drive From Here?
By the end of 2003, Toyota seemed to be well on its way to achieving its globalization goals - worldwide sales of 6.57 million units in fiscal 2004; sales of 2.12 million units in North America by 2004; a 5% market share (800,000 units sales) in Europe by 2004; a 15% market share in the global market and a 10% market share in China by 2010. Analysts felt that the following factors were helping the company in its quest to become a truly global automobile major: strong financial condition, globally efficient production system, unique corporate culture, and the ability to develop a product range that met the unique needs and desires of customers in different regions...
Exhibits
Exhibit I: Toyota - Financial Highlights
Exhibit II: Toyota - Revenues by Core Markets (Fiscal 2003)
Exhibit III: Toyota - Revenue Growth in Core Markets
Exhibit IV: Toyota - Worldwide Operations (Manufacturing)
Exhibit V: Toyota - Production Figures (By Region)*
Exhibit VI: Toyota - Overseas Sales (By Region)*
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