Internationalization of Toyota Motor Co.

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  • Topic: Toyota, Toyota Production System, Toyota Motor Europe
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Group Assignment:
INTERNATIONALIZATION OF TOYOTA MOTOR CO.

Name of the students:
VIJAY CHATURVEDI, SUUNIL DABRAL, PRIYAJEET VILKU, PROMILA KAUSHIK, SUMIT MAJKHOLA, RAJ SINGH THOL

Group Number: 8

Name of the Course:
GLOBAL BUSINESS ENVIRONMENT

Assignment/Case number: 01

Faculty in charge: PROF. BIBEK RAY CHAUDHURI

INTERNATIONALIZATION OF TOYOTA MOTOR CO.

I) JAPANESE BUSINESS AND ECONOMY:

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II) TOYOTA GOES INTERNATIONAL: REASONS, JOURNEY AND BENEFITS

In 1998, Toyota, the number three carmaker in the world, sold 1,711 thousand vehicles in Japan through 309 dealers, and 2,930 thousand overseas through 170 distributors deploying about 5,400 outlets in 73 countries. So, Toyota’s sales network was already fairly globalized, the markets in the East European countries surely being fallow lands yet. As for its overseas production, Toyota had 40 companies among which 27 firms in 24 countries assembled 1,468 thousand vehicles, whereas Toyota produced in Japan 3,166 thousand of which 1,463 thousand were exported. Then, Toyota seems being on the way to globalize its production network at the end of 20th century. However, Toyota’s globalization of production came lately.

If in general the internationalization proceeds pass through four phases: export strategy, strategic alliances and shareholding investments, foreign direct investments, and globalization, the internationalization trajectory of Toyota rather shows in its basic trend the classical process, analyzed by studies on multinational firms during the 1970s and the 1980s. The successful export strategy of the firm had encountered protectionist policies, set by the importing countries for some reasons — growing trade deficits, devastating local firms, etc. — so that it decided to produce there to avoid protectionist barriers — quota, prohibitive import taxes, etc. The fact that its overseas production essentially began to replace exports from 1985 apparently shows that its internationalization strategy changed form export centered strategy to localization of production during the first half of the 1980s.

1. General Tendency
Toyota Motor Sales (TMS) began exporting in 1952, just after being separated from Toyota Motor Corporation (TMC) because of the financial crisis of this latter, by receiving sporadic orders from some peripheral countries such as Brazil. The real take-off of its exports was marked during the second half of the 1960s. From then to 1985, its exports had a tendency to expand, being accelerated in the period between two oil crises and interrupted by short sluggish terms as those in 1973, 1978-1979, and 1981-1984. Despite these sluggish terms, Toyota’s production continued to expand with twin engines until 1985, the growing domestic market and the increase in its exports especially toward the North America.

This tendency was reversed from then, because of the increase in overseas production, especially that of its transplants in the USA, though its production in Japan continued to grow until 1990 thanks for an economic boom fuelled by a “financial bubble” during 1987-1990. Toyota’s overseas production rapidly increased from 136.3 thousand units in 1985 to 1,467.6 thousand in 1998.

Of course, this inversion of export trend does not mean the decrease of overseas sales. In fact, the latter continued to grow from 2,107 thousand vehicles in 1989 to 2,930 thousand in 1998. Even the fall of the sales by half in the Southeast Asia in 1998 with respect to the previous year because of the economic crisis of the ASEAN countries was compensated for by the increase in sales in the North America and Europe and had no substantial effect on its overseas sales. This fact shows the importance of the North American markets for Toyota. It is then obvious that the North American markets have an overwhelming weight in Toyota’s globalization strategy. So, it...
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