Toyota's Global Expansion

Topics: International trade, Generally Accepted Accounting Principles, Currency Pages: 2 (529 words) Published: December 6, 2011
Case 1: Toyota’s Global Expansion

Toyota is expanding aggressively to overtake General Motor’s first position in volume. Its goal won’t be achieved if Toyota only focusing its manufacturing plant only in Japan, because as the volume increase the demand stay still in Japan, and if Toyota exporting their product it will make their cost higher and resulting uncompetitive price. So Toyota built their manufacturing overseas by considering country’s law, agreement, demand, taxes, currency and cost of their product in each country to maintain their commitment of low cost, high quality, and just-in-time inventory. The risks were faced by Toyota in expanding its overseas manufacturing: 1. Government policies that are incompatible with the company 2. The risk of adverse changes in exchange rates

3. Lack of control over technology which can eliminate a competitive advantage 4. The pressure of global competition
5. The difference in productivity cost and each country's resources 6. The difference of distribution and manufacturing costs 7. Losses and high cost due to the differences in inflation, taxes and government regulations in each country From our opinion, Toyota should consider the country’s demand, law, free trade agreement, raw material and labor cost for the next manufacturing place. Mexico would be a better choice as the labor cost is cheap and Mexico, Canada and US free trade agreement is established. As an important strategic decision, internationalization became one of the most common responses, especially when facilitated by advances in technology such as internet and global distribution systems. However, expanding overseas entails many factors not faced by purely domestic firms. There are unfavorable macro-economic conditions, fluctuations in relative values of currencies, political instability, cultural and religious differences and different tax and accounting structure, among other factors that stated before. If the...
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