Resources and Capabilities
The purpose of this essay is to apply the resource based view to critically analyse how Toyota use their resources and capabilities to establish core competences, sustain competitive advantage and achieve their corporate strategy. Toyota Industries Corporation was established on November 18th 1926. Their business industries include; Manufacture and sales of textile machinery, automobiles, materials handling equipment and logistics (www.Toyotaindustries.com). For the purpose of this essay however, the automobile industry is the key focus with specific attention given to the vehicle market segment (see figure 1 below). Fig 1.
Toyota Motor Company was established on August 28th 1937. Within the vehicle industry, Toyota has become the world’s largest automotive manufacturer, overtaking General Motors in 2008 and produces sports and luxury vehicles, SUV’s, trucks, minivans and buses. Additionally Toyota’s subsidiaries manufacture Daihatsu mini-vehicles, with Hino motors producing trucks and buses. Vehicle parts are also produced by Toyota for its own use and to sell around the world, with Asia generating near 40% of vehicle and vehicle parts sales (www.Hoovers.com). Toyota Motor Corporation’s top competitors are; Ford Motor Company, General Motor Company and Honda Motors Co., Ltd (www.uk.finance.yahoo.com). The resource based view identifies that a firm is a set of resources and capabilities that determines strategy and performance (Grant 2005) (See fig.2 below). This view is a development from Porter’s (1980) structural perspective of strategy where emphasis is on the competitive environment rather than the resources and capabilities firms have, develop and evolve to compete (Miller et al 1996). Broadly speaking, a resource can be defined as: “An economic or productive factor required to accomplish an activity, or as means to undertake an enterprise and achieve a desired outcome” (businessdictionary.com). Resources can be categorised into types, each essential for creating competences. These include; physical, technological, financial, human and intellectual capital. Johnson et al (2008) defines resources as the tangible and intangible assets of an organisation, such as buildings, people and reputation (Johnson et al, 2008). Toyota is a vast organisation that competes in many markets (fig.1). Over the years it has built up its market resources in order to compete in an array of market segments. By using resources in an effective way, Toyota has created competences in ‘lean’ manufacturing, efficient supply chain management and inventory management. This has enabled flexible, reliable production on a global scale, whilst being able to react quickly to fast changing customer needs. These elements are at the heart of their strategy in the vehicle market segment (Chen 2004; Lee 2007; Vaghefi 2000). We will now take a look at Toyota’s resources in respect to the categories above. First are the financial resources. Net income was (Yen in millions) ¥209,456 (see appendix page 1) with a loss of ¥86,370 in the automotive sector (see appendix page 2). In the past Toyota has seen bigger profits and in turn have invested a lot of money in physical, technological and human resources, with many assets all over the globe. Using flexible production methods and standardised production, Toyota have invested heavily in physical and technological resources around the world in order to produce cheap and reliable cars in a number of markets. The graph below demonstrates the extent to which Toyota invests in assets (per employee) in comparison to their main competitors. Fig2.
Adapted from (Raghefi et al 2000)
Toyota has physical assets all over the world with facilities in Japan, North America, Europe, Asia, central and south America, Oceania and Africa (property, plants and equipment) and are valued at (US dollars in millions) $326,196 (see...
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