Analysis for Toyota

Topics: Toyota Production System, The Toyota Way, Toyota Pages: 6 (1665 words) Published: August 12, 2012

1. Introduction2
2. Ownership advantages3
2.1 Toyota Production System (TPS) and Just-In-Time (JIT) management3
2.2 Resource – based view: core competencies of Toyota4
3. Internalization advantages6
4. Location advantages7
4. Conclusion8

1. Introduction
As the leading auto manufacturing company, Toyota is not only the symbol of Japan, but also the one of the best business models for MNCs expansion overseas. Since the company was established in 1937, it has experienced many changes and challenges. However, depending on the distinguished competitive advantages in quality of cars and perfect management, ultimately, Toyota achieved huge success worldwide. In 2010, for example, Toyota sold 8.42 million vehicles in the global market that exceeded GM total sales (Theguardian Inc, 2011). The aims of this paper is to analyze how Toyota keeps its sustainable competitive advantages by applying different strategies and try to find out what potential threats behind its brilliant success. The analysis is based on the Dunning’s Eclectic (OLI) paradigm, which including three specific perspectives of ownership, internalization and locational advantages. 2. Ownership advantages

2.1 Toyota Production System (TPS) and Just-In-Time (JIT) management According to Akio Toyoda - the president of Toyota corporation, the company’s success is mainly attributed to two factors: Toyota Production System (TPS) and Customer Focus (Toyota annual report, 2011). Clearly, production process is an essential part not only in Toyota, but also in all-manufacturing companies that could directly affect the firm’s profitability. Hence, to highly improve the effectiveness of production system is the main project for all automakers. TPS is a typical lean manufacturing model, which could effectively avoid waste during the production process. Moreover, due to the key feature of TPS is producing in large economic scale with highly standardized and high effectiveness, thus, any products under this system could keep low production cost (Lander & Liker, 2007). In other words, when such finished products enter into the market, they usually could gain more competing advantages by lower price. In addition, by applying the JIT tools, such as kanban-card pull system, JIT inventory management and small batch production could offer flexibility for the organization to more quickly response the changes of market in order to further reduce the cost in value chain management (Spear, 2002).

2.2 Resource – based view: core competencies of Toyota
Before to deeply analyze the Toyota’s ownership advantages, it is necessary to identify its core competence based on the VRIO model: value, rarity, inimitability and organization. Table 1 – VRIO model matrix

Resource – based view|
Ability| Value| Rarity| Inimitability| Organization|
Marketing activity| √| ×| ×| √|
Production process| √| ×| ×| √|
Research & Development| √| √| √| √|
Value chain management| √| √| √| ×|
Corporate Culture| ×| ×| √| ×|
Product differentiation| √| ×| ×| √|
It has been widely argued that the Toyota’s core competence is TPS. However, due to the fact that TPS has become a standard model for many car manufacturers today, in other words, it is no longer a rare source among the fierce competing market. As a result, based on the above VRIO analysis (see Table 1), it is clear that the core competence of Toyota is their R&D ability. As an automaker that highly requires technological and innovative inputs to match customer’s needs, the company has to pay more attention on R&D. This is not only a vital area of improving the quality, safety and environmental compatibility for existing products, but also the essential sector of providing opportunities and guarantees for Toyota’s future development. For instance, Toyota spent over 730 billion to establish new R&D labs and develop its existing R&D centers in...

References: Lander, E. E., & Liker, J. K. (2007). The Toyota Production System and art: making highly customized and creative products the Toyota way. International Journal Of Production Research, 45(16), 3681-3698. doi:10.1080/00207540701223519
Minhyung, K
Spear S. J. (2002). Just-in-Time in practice at Toyota: Rules-in-Use for building self-diagnostic, adaptive work-systems. Assistant Professor of Harvard Business School, Working paper: 02-043
Theguardian Inc
Toyota annual report (2011). Reward with smile by exceeding your expectations. Retrieved on 20th, June 2012 from:
(sourced from: Toyota annual report, 2011)
Figure III – Hourly compensation costs of manufacturing employees in China
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