International Business: Toyota

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Company Overview

Company Name
Toyota Motor Corporation

Head Office
Toyota, Aichi, Japan

1933 by Kiichiro Toyoda

Fujio Cho

Katsuaki Watanabe

USD$173 Billion (2005)

Total Number of Employees
285,977 (March 2006)

Toyota Financial Services, Daihatsu Motor Co., Ltd., Hino Motors, Ltd., DENSO, Toyota Industries

Automobile manufacturing, Financial services, Biotechnology

Toyota, Lexus and Scion

Toyota Moving Forward (It’s time to Move Forward)

Global position
8th largest organization
2nd largest in automobile industry

Toyota Motor Corporation, a Japanese MNC, or widely known as Toyota markets vehicles to over 170 countries. Toyota’s automotive business, including sales finance, accounts for more than 90% of the company’s total sales. In March 2006, Accountancy Age reported that Toyota (fiscal years ended 31 March) had already sold almost 8 million vehicles worldwide. Diagram below shows Toyota annual global production from 2002 to 2006. Annual sales had been climbing steadily with the latest global sales hitting at 7,974,000 units (Toyota, 2006).

Diagram 1: Toyota’s Annual Vehicle Production. Fiscal years ended March 31.
Source: Toyota Financial Highlights

Toyota Motor Corporation operates under the basic principle of ‘kaizen’. The Japanese word ‘Kaizen’ means continuous improvement. In step with kaizen, Toyota Production System (TPS) was established to monitor the continuous improvement Toyota has in mind for their corporate expansion. The essence of Toyota’s production control system is simply focused on to provide the best quality, lowest cost and shortest lead time through the elimination of all non-manufacturing wastes. This is instilled in all aspects of Toyota’s production (Toyota Vision and Philosophy, 2006).

Back in the 1950s, Toyota’s industrial production was substantially below its pre-war peak at only 10,000 trucks. Times were bad for Toyota as the company faced major strikes and was at the edge of bankruptcy. The outbreak of the Korean War saw Toyota’s increased production leaned heavily on the supply of its truck to the American armed forces.

During Toyota’s bleak times, the company underwent modernization such as implementing a new labour policy of long-term employment, limited-volume production and adopting the the American’s Training Within Industry (TWI) etc. (Fujimoto, 1998). Toyota top officials had been frequenting to US to learn from Ford Motors, a way of exchanging technology. Eiji Toyoda saw the Americans’ prosperity and was determined to bring that wealth back to Toyota. Then in 1947, world trade barriers were reduced under the General Agreement on Tariffs and Trade (GATT) signed (Jones, 2005). This reflected an opening to turn Toyota’s dusty dream into steeled cars.

It took Toyota ten years before arriving at its first prototype, the passenger car Crown. 1957 saw Toyota establishing its first Toyota Motor Sales Inc in America. With that, the first batch of the Japanese model Crown, entered the US market. It was a good time for Toyota to export its products to the US then. World Trade barriers were already reduced under GATT. The Crown cost $500 more than the popular Volkswagen Beetle and it did not suit American driving needs. Needless to say, the Crown was a huge failure. Nonetheless, Eiji Toyoda was optimistic because as he simply put it, “But we had to get a foot in the door.” (Asiaweek, 1996). Undeterred by the passive sales, Toyota continued to struggle for more opportunities to improve and to expand overseas.

The Kennedy Administration invested major efforts to secure radical reductions in tariff rates. However, by the end of 1960s, the US inspired drive for trade liberalization showed a loss of momentum when US balance of payments deficits began to cause concern with the scale of foreign imports. The following decade saw a wide spread of non-tariff...
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