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TOYOTA Report

TOYOTA Report


TOYOTA?s STRATEGY REPORT
A Study of Rethinking Strategy after TOYOTA?s Recalls

Kristianstad University International Business and Economics Program

Tutors:Christer Nilsson PernillaCarlsson

Authors: Yang Kairun Liang Hui Zhang Mengjie

Abstract

Before the 1970s, the United States is the most powerful in the realm of auto industry. Detroit auto standard was praised and abode by the global, General and Ford motors is the model of auto industry. And then Toyota?s technology and scale is not comparable. However, Toyota already was shining. Since 2008, Toyota gradually replaced GM and became the world first ranking car manufacturers, and topped world?s top 10 enterprises by the status of the industry leader.

In the process of Toyota?s rapid development, we can?t ignore Toyota?s unique and efficient enterprise development strategy as a industry leader. Toyota have obtained the brilliant achievements, it largely depends on the forethought and strategic plan of product production, marketing and international development business. Therefore, we have to admit that, Toyota operated the outstanding performance in international development and innovation process.

But when the “Toyota model” is popular, the massive recalls gave the auto industry giants to heavy blow. Around Japan, North America, China, Europe and other major markets, the number of recall could bring 22 billion dollars to damage Toyota. From recalls to today, it seems we should summarize experience and lessons to warn posterity.

This essay will base on the brief introduction of Toyota?s relevant background, and analysis the Toyota?s product production mode, supply chain management and international operation strategy. Eventually we will combine with Toyota recalls and resolve the relevant strategic incentive.

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Acknowledgement

First, thanks our tutors Christer Nilsson, for guiding us and technical aspects of our thesis in the intense world of thesis writing. Thanks Pernilla Carlsson, for helping us to improve our linguistic skills. Thanks Anders Hakansson, for the help with business report search.

Finally, thanks to our group members for helping and discussing with each other.

Thank you.

Kristianstad, 2011

Yang kairun

Liang hui

Zhang mengjie

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Table of Content
Abstract ................................................................................................................................. - 1 Acknowledgement ................................................................................................................ - 2 Ⅰ: Introduction .................................................................................................................... - 5 Ⅱ: Background ..................................................................................................................... - 6 2.1 Toyota Development Resume ......................................................................................... - 6 2.2 Toyota?s Detailed Development ...................................................................................... - 8 2.3 Main leader intro ............................................................................................................. - 9 Ⅲ: Problem ......................................................................................................................... - 11 3.1 Purpose .......................................................................................................................... - 11 Ⅳ. Method.......................................................................................................................... - 12 Ⅴ. Research questions ....................................................................................................... - 13 Ⅵ. Theory ........................................................................................................................... - 14 6.1 Kanban management ..................................................................................................... - 14 6.2 Toyota production system ............................................................................................. - 14 6.3 Uppsala model ............................................................................................................... - 16 Ⅶ. Empery .......................................................................................................................... - 17 7.1 TOYOTA?s Production Model ...................................................................................... - 17 7.2 Toyota?s Supply Chain Management ............................................................................ - 18 7.3 The Uppsala International Model .................................................................................. - 19 7.4 Toyota?s market entry model in China .......................................................................... - 20 Ⅷ. Analysis ......................................................................................................................... - 21 8.1 Toyota?s Production system .......................................................................................... - 21 8.1.1 ?Just in time? production ......................................................................................... - 21 8.1.2 “Zero inventory” and “No waste of time” .............................................................. - 22 8.1.3 “Pull process” production ....................................................................................... - 22 8.1.4 Summary: ............................................................................................................... - 23 8.2 Toyota supply chain management ................................................................................. - 24 8.2.1 Supplier selection and Parts purchasing ................................................................. - 24 8.2.2 The network structure between suppliers ............................................................... - 25 -3-

8.2.3 Technical and quality management ........................................................................ - 27 8.2.4 Supplier human resources management ................................................................. - 27 8.2.5 Summary ................................................................................................................ - 28 8.3 Internationalization and Localization Strategy .............................................................. - 29 8.3.1 Toyota international operation characteristics ........................................................ - 29 8.3.2 The globalization of production and sales network ................................................ - 30 8.3.3 New market entry strategy and localization analysis – Chinese Market ................ - 31 8.3.4 Summary ................................................................................................................ - 34 Ⅸ. Synthesis/Discussion .................................................................................................... - 35 9.1 “Sales first” expansion strategy deviate from Toyota?s principle of management........ - 35 9.2 The lean production mode brings quality problems ...................................................... - 35 9.3 The discussion of Toyota supply chain model?s mistake .............................................. - 37 9.4 Rapid international expansion and localization flaw ..................................................... - 38 Ⅹ. Conclusion ..................................................................................................................... - 39 Toyota’s References............................................................................................................ - 41 -

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Ⅰ Introduction :

Toyota Motor Corporation, the abbreviation is Toyota and the founder is Sakiichi. Toyota is one of the world?s top auto industries and Japan?s largest automobile company, it was founded in 1933.

Toyota group was established in 1874. Now, the group members include Toyota automatic looms company, AISIN machine company, Aichi steel crop, Toyota electric fitting company, Toyota engine group, Toyota textile company, Hino automotive company, Toyota bodywork company, estate company, DAIHATSU industrial company, Toyota trade company and Toyota central institute.

Now, Toyota has become a huge industrial group that mainly produces automobiles, the business involves machinery, electronics and finance. Since 2008, Toyota motor company has gradually replaced GM and become the world first ranking car manufacturer. The present president of Toyota is AkioToyoda.

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Ⅱ Background :

2.1 Toyota Development Resume
The newly formed word was trademarked by Risaburō Toyoda and the company was registered in August 1937 as the ?Toyota Motor company?.

In 1947, Toyota?s small-size vehicles were produced under the named “Toyopet SA” but is also included vehicles such as the Toyopet Crown and the Toyopet Corona. In 1957, Toyopet Crown gradually entered the American market. Crown was soon dropped in the American market but continued in other markets, because Ford and General Motors held the American market.

According to Wikipedia "With over 30 million sold, the Corolla is one of the most popular and best selling cars in the world". (http://en.wikipedia.org/wiki/Toyota) Toyota found a ready market for Corolla and it brought the capital to help the development of Toyota.

Toyota had a good financial year during the oil crisis. “Due to the 1973 oil crisis, consumers in the lucrative US market began turning to small cars with better fuel economy.”(http://en.wikipedia.org/wiki/Toyota) Toyota gained great benefit because their cars use less fuel, they were inexpensive and they were comfortable to drive.

By the early sixties, the US had begun to reduce stiff import tariffs on certain vehicles. In spite of this, Toyota began building plants in the US by the early eighties.

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Under the guidance of American automobile technical experts and management experts, Toyota imported euramerican technology. They introduced, digested and absorbed advanced technology and management experience rapidly. According to the characteristics of the Japanese nation, the company created the famous Toyota production management mode, and continued to improve and enhance the quality of products. It greatly improved the production efficiency. Toyota cars entered the North American market in the 1960?s. Until 1972, Toyota motor corporation produced 1000 million vehicles in total.

The 70s was the Toyota car company?s gold time for developing swiftly. In only four years from 1972 to 1976, the Toyota car company has produced 10,000,000 automobiles, yearly they produced more than 2 million. Since the 80s, the Toyota car company?s volume of production and marketing still has been rising rapidly. To the early 90s, it yearly produced close to 5,000,000 automobiles. Toyota defeated the Ford Motor company and the automobile output is the second largest in the world.

The 70s was Toyota?s domestic self-growth period. After in the 80s, Toyota started its international strategy to get into the global market. In US, Britain, Southeast Asia and South Africa, Toyota successively established sole ownership or joint venture. They built automobile research development centers locally, and got together with local enterprise to develop design and production systems to help realize the globalization strategy.

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2.2 Toyota?s Detailed Development

1930 1933 1936 1937 1957 1966

Kiichiro Toyoda began to research and develop a small gasoline engine. Established an automobile manufacture at Toyota automatic looms. Toyota AA cars came out. Toyota motor industry company is set up (capital 1,200 million yen). Toyota cars CROWN exported to the US. COROLLA came out. Toyota started business cooperation with Hino Automotive industry.

1967 1972 1982

Started the business cooperation with DAIHATSU industry. Japan's national auto output amounted to 10 million vehicles. Toyota Motor Company and Toyota Motor Sales merged into the Toyota Motor Corporation.

1999

Went on the market separately in the New York and London stock markets. Japan's national auto output amounted to100 million vehicles.

2009

Toyota hybrid car sales were more than 200 million.

( http://www.toyota-global.com/company/history_of_toyota/)

This table shows the history of Toyota that presented in 2.1. It helps audience get an overview of what happened in these significant years. As the table shows, in 1957 Toyota got into the global market. Toyota hybrid car sales were more than 200 million in 2009. That is a real development that raise abruptly. Fast development is a good thing, but it also brings some specific problems. The problems will be researched in the analysis.

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2.3 Main leader intro
An enterprise development can?t do without the leadership of the leader, Toyota can't be successful without continuity in company culture and the development of successive leaders. Toyota was established in 1933 and is over 70 years old. Toyota has experienced a total of 11 presidents. They made a great contribution to the development of Toyota. But in 2007, Toyota had to do recalls, why did this happened and is it there a relationships with these strategies?

Outstanding Tenure Leader Toyoda Sakiichi 25

Profile

Prominent Contribution

Theory

And

Toyota?s founder, ?Japanese invention?s king?. When the loom sold abroad, he accumulated capital for Toyota automobile manufacturing department.

If there are defects, production needs to stop.

Kiichiro Toyoda

17

The father of Toyota, In 1937, he founded the Toyota motor industry.

The idea of Just-in-time is the core of Toyota production mode. Four management thoughts: reasonable money, equipment first, no borrowing and eliminate the waste.

Taizo Ishida

11

Toyota?s father of the ?Revival?. From Japan's economic recovery period to the high growth period, Taizo stopped

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Toyota?s bankruptcy and turned business into profit ShotaroKa miya 15 Sales master. He created a first-class Toyota car sales organization in 40 years. TaiichiOhn o 14 The father of the Toyota production mode, he summarized the predecessors' experiences of development. This became the Toyota production way today. Toyoda Yinger 15 Realized the Toyota mass production. He was called Japan's "Henry Ford". Exploited the overseas markets, creating a luxury car brand Katsuaki Watanabe 4 ?Cost killer?, controlling costs became an important position in Toyota. akiotoyoda 2009-now He was appointed in the financial crisis, continuous recalls. (Auto Data, NRI research) Led and implemented ?CCC21 plan?, put forward ?value innovation? plan. Manufacturing philosophy: so-called manufacturing is the foundation to create civilization. It is the motivity of the develop technology; It is art, can make a person touched, and bring exciting reactions. Put forward business philosophy: "customers first, production second and sales third". Advocated "in situ thing" philosophy and ?ask five why? introspection philosophy, has become an important part of Toyota enterprise culture.

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Ⅲ: Problem
Toyota was keeping the number one in global automobile sales for the first quarter in 2007. We are interested in how Toyota became the company of the most output in the car industry, and we will consider and analyze the successful strategy and business models of Toyota step by step.

TPS (Toyota Production System) is a new production model created by Toyota Motor company after the Taylor production mode (scientific management) and Ford production mode (large assembly line mode). How does it work? What constitutes the TPS? Why could it be highly efficient?

Toyota's supply chain management is different from General and Ford?s. So we want to know how Toyota choses and manages suppliers. What?s the relationship between the suppliers and Toyota? How does Toyota make sure the quality and technology of their suppliers?

Toyota's international strategy has an impact on Toyota's sales volume. So we will sum up the characteristics of international business and distribution of production and sales net. We will use the Chinese market as an example to analyze how Toyota entered the market and started producing cars locally?

3.1 Purpose

We need to look at Toyota's strategic thinking after recalls. We decide to analyze Toyota?s recalls and find the reason why there have been recalls, which strategies are at fault in the recalls?
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Ⅳ. Method
Causes of Toyota's recall problem

Primary cause was the technical problems. The arm of the accelerator pedal and the slip surface of the friction pole are used for a long time, so when using the warm wind under the low temperature, the slip surface will come out dew which enlarges the friction, and at last block the accelerator pedal and influence car acceleration and deceleration. In the extreme case, the accelerator pedal may be locked, making the car cannot slow down immediately, which as a result influences driving safety.

Another important cause was the unsuitable measures. Firstly, Toyota group didn't react correctly toward the crisis because of bad management and road accident, which caused the situation promptly worsen when the crisis came out. Secondly, the measures were taken quite late after the crisis happens. The leaders always take measures reluctantly so that they miss the good chance to solve the problem. They are not frank to customers when their cars are found with safety defects. The way Toyota chooses to face the problem is shifting the blame to others' shoulder, which deteriorates the situation and ruins its good reputation.

The root cause was management problems. Toyota outsources its components and even core technology to the suppliers and local producers in other countries. Toyota takes this mode in regards of reducing the costs and focuses more on the core business, however, the product quality is sacrificed and so is company image and credibility.

The irresponsibility of product chain suppliers which deviated from the principle of high quality production as well as the neglect of Toyota administration resulted in the vast number of problematic cars.

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Ⅴ. Research questions

1. TPS
1. ?Just in time? production 2. No stock, no waste of time 3. ?Flow back a distance?

2. Toyota?s supplier management 1. Suppliers select and purchase spare parts 2. The network among suppliers 3. Technology and quantity management 4. Supplier?s human resources management

3. Internationalization strategy
1. Operational characteristics of Toyota?s international strategy 2. New market entry strategy and localization analysis

4. The re-thinking after Toyota?s recalls
1. Sum up the above strategies 2. Find out what strategies affected recalls

Hypothesis:
Ho: Toyota?s business model affected the recalls. H1: Toyota?s business model didn?t affect the recalls.

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Ⅵ. Theory

6.1 Kanban management
Toyota wants to control the stocks, raw materials and the wastes of time. That is the reason why Toyota chose kanban management.

Kanban is the most important management tool to realize JIT production. Kanban is used to control the production field as scheduling tools. The operation process of Kanban is once the production plan is determined, it will issue production instructions to each production workshop. Production workshops order the necessary equipment specified in the production plan from the procurement department. These production instructions are transmitted by a card. Specifically, it is a card. The card has different shapes in different enterprises. The card information usually includes: part number, name of product, manufacturing numbers, container form, container capacity, kanban numbers, deliver place and parts appearance, etc.

The functions of kanban are: 1. Produce and transmit work instructions. 2. Prevent excess production and excessive transport. 3. “Visual management” tool. 4. Improvement tool.

6.2 Toyota production system
“The Toyota Production System (TPS) is an integrated socio-technical system, developed by Toyota, that comprises its management philosophy and practices. The TPS organizes manufacturing and logistics for the automobile manufacturer, including

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interaction with suppliers and customers.”

Figure 6.1: http://hasanyorukoglu.com/blog/?p=143

“The main objectives of the TPS are to design out overburden and inconsistency, and to eliminate waste. The most significant effects on process value delivery are achieved by designing a process capable of delivering the required results smoothly. It is also crucial to ensure that the process is as flexible as necessary without stress. Finally the tactical improvements of waste reduction or the elimination of inconsistency are very valuable. There are seven kinds of inconsistency that are addressed in the TPS: 1. over-production 2. motion (of operator or machine) 3. waiting (of operator or machine) 4. conveyance 5. processing itself 6. inventory (raw material) 7. correction (rework and scrap)”
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“The elimination of waste has come to dominate the thinking of many when they look at the effects of the TPS because it is the most familiar of the three to implement. In the TPS many initiatives are triggered by inconsistency or overburden reduction which drives out waste without specific focus on its reduction.” (http://en.wikipedia.org/wiki/Toyota_Production_System)

6.3 Uppsala model

Uppsala model help us to understand how the company get into the global market and what they need to do in the different periods. We are interesting in the development of Toyota and will researching the paths of Toyota?s internationalization strategy in the analysis.

“The Uppsala mode is a theory that explains how firms gradually intensify their activities in foreign markets.”

“The key features of both models are the following: firms first gain experience from the domestic market before they move to foreign markets; firms start their foreign operations from culturally and/or geographically close countries and move gradually to culturally and geographically more distant countries; firms start their foreign operations by using traditional exports and gradually move to using more intensive and demanding operation modes (sales subsidiaries etc.) both at the company and target country level.” (http://en.wikipedia.org/wiki/Uppsala_model)

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Ⅶ. Empery
7.1 TOYOTA?s Production Model

Figure 7.1 Toyota production model (http://en.wikipedia.org/wiki/Toyota_Production_System)

Toyota?s production model has three characteristics: 1. ?Just in time? (JIT) 2. ?No stock? and ?No waste of time? 3. "Pull process". The model shows why the Toyota model can achieve the demands and how Toyota?s production works. The reason why we selected the table is it?s a new production model after the Taylor model and the Ford model and we want to find the relation between TPS and the recalls.

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7.2 Toyota?s Supply Chain Management

Figure 7.2 Data (http://www.toyotasupplier.com/sup_diversity/sup_diversity.asp)

The supply chain is the main strategy of Toyota reducing costs. It?s a part of TPS and show the brief connection between Toyota and the suppliers. About recalls, we decided to find the mistakes when Toyota managed the suppliers and what supplier?s problems make the quality issues.

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7.3 The Uppsala International Model

Figure 7.3 Data (http://www.toyota-global.com/investors/presentation/2011/)

Frankly, this is not the true Uppsala model, because we pay attention to the Chinese market and discuss how Toyota get into the Chinese market and what are the problems in policy, market and competitor. It is Toyota?s international expansion strategy. So we collect the factors when Toyota expanded into the market and research how the international strategy is affecting the recalls.

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7.4 Toyota?s market entry model in China

Figure7.4 (http://www.informaworld.com/smpp/content~db=all~content=a913268228)

The table shows the strategic plan, strategy in action and existing problems when Toyota expands to the world. We want to analyze the defects of Toyota?s expansion plan. Through those defects, we decided to find the relation between the international strategy and the recalls.

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Ⅷ. Analysis

8.1 Toyota?s Production system

8.1.1 ?Just in time? production

The original meaning of Just in Time is that Toyota only produces the number of needed cars with the required time. The core of the production model is trying to have no inventory, or keep inventory at a minimum. JIT includes the development of ?Kanban? (the series of specific methods), and gradually forms a unique production management system.

Toyota company mainly uses the following three ways to achieve its ?Just in time? production management:

(1) Thorough rationalization: Toyota is notoriously famous as “stingy”. It believes in “if the towel is dry, keep on squeezing”. This just embodies the spirit of Toyota thorough rationalization. Toyota tried to eliminate two wastes: one kind is the waste on the production site, another kind is the excess waste of production.

(2) “Three timely”: the so-called “three timely” is to provide any part that the procedure needs in time, the workshop will receive the parts for the procedure in time, the suppliers will provide the amount of parts that the procedure needs in time.

(3) Kanban management: The Kanban system is to control the size and speed of

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material flow to achieve cost reduction and supply guarantee according to the plan made by headquarters.

8.1.2 “Zero inventory” and “No waste of time”

Toyota through Just-in-time production and Kanban management, finally achieved “zero inventory” and “zero time”. The realization of “zero inventory” and “zero time” is to avoid the unnecessary waste in the production process from the source, and save production costs.

Here, we need to specify. When Toyota says waste it refers to “the cost of production”, it?s deeper and wider than the waste concept we often talk about. It has two meanings: first, all activities not creating value for customers, is a waste. Those activities that do not increase value should be eliminated. Second, even if the activities are meant to create value, resources consumed above the absolute minimum, are wasted. There are eight kinds of specific waste causes: overproduction, field waiting time, unnecessary transportation, excessive treatment or incorrect handling, inventory surplus, unnecessary mobile handling, flaws and no use of staff creativity. One waste will produce another new waste, a vicious cycle lead to higher costs.

8.1.3 “Pull process” production

Toyota production mode is famous for the pull process. In this way, it?s revolutionary.

First, from the macro production plan, "pull process" production management is like a topsy-turvy pyramid. The spire point is dedicated to clients, customers and consumers, according to the actual needs of the company daily, monthly and annual production

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plan directly. This reflects the company considers customers first, and how the company effectively avoids the product inventory cost.

Secondly, from the specific production operation level, according to the specific vehicle production plan,workers only inform the final assembly line about getting time and quantity of needed parts. The final assembly line will take the parts from primary process. In the necessary time, the final assembly line gets the necessary quantities for the equipment of cars. Since then, every process starts to begin to produce the parts that take by the previous process and work step-by -step.

Therefore, it was not necessary to issue production plans to all processes simultaneously. In the car production process, if necessary, you only need to change schedule to the final assembly line when it changed the production plan.

8.1.4 Summary

The above analysis shows, the Toyota production mode is mainly focused on eliminating waste and lowering the cost. Toyota through Just-in-time production, zero inventory management and pull process schedule, it maximizes and comprehensive control unnecessary waste. (Figure 7.1)

If TPS is compared to large production mode, all input is much reduced. The factory labor and tooling investment is halved. The lower cost can develop new products in the half of time. Meanwhile, on-site required stock is less than a half. The minimum amount of waste can produce more varied products. Toyota uses many ways to reduce costs.

Toyota created a unique production mode which won the unprecedented competitive advantage on its production and business operation in the future. Just-in-time
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production reduced unit costs comprehensively. The process was monitored and the company improved product quality. The combination of two ways got the high efficiency, the absolute advantage of product prices and brand effect. This series of advantages made Toyota win the price competition and continuously increase market share. Finally Toyota became the industry leader!

8.2 Toyota supply chain management

Compared with GM, the Ford auto production enterprise, Toyota?s supply chain management system is different. Toyota lean production requires a lean supply chain system and it realizes the precision of product?s quantity and delivery time. This not only makes the Toyota supply chain efficiency better than US companies?, and greatly reduces the supply chain it also makes it more inexpensive. In the global financial crisis, Toyota?s supply chain cost was about 8% lower than American car companies?. Meanwhile, precise numbers and times control also help Toyota to realize zero inventory. In fact, “zero inventory” is one of the core philosophies in TPS.

8.2.1 Supplier selection and Parts purchasing

In supplier selection, Toyota has the following ideas:

(1) Select high technology and quality suppliers (2) Choosing short delivery cycle (3) Components manufacturers near by the enterprise (4) Make long-term close cooperation with few suppliers

Toyota parts purchasing follow the following three principles:

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(1) Execute open fair competition and take global sourcing strategy (2) Establish a long-term steady and interdependence cooperation relationship (3) Actively promote their products in overseas market and set up the production in the locality. It is preferred that you choose local parts suppliers

In addition, in order to improve the supply on time and avoid quality defects, Toyota adopts the following requirements:

(1) Supply manufacturer production system must be flexible to cope with change in orders. (2) Supply manufacturers cannot have mechanical failure. (3) Inferior quality will stop supplier production (4) Transportation route should consider a good backup line.

8.2.2 The network structure between suppliers

As 7.2 shows, Toyota and supplier network relationship seems to set Toyota as the center and other manufacturers around Toyota. However, the network work in its own way that is the close cooperation between suppliers.

1.

“Kyohoka” is a supplier chain alliance of Toyota and was established spontaneously by approximately 220 powerful house manufacturers and suppliers.

2. Toyota?s spontaneous organization of purchasing equipment and enterprise, is called “Rongfeng Will”. From the production line of machinery and equipment into building houses and making deliveries, this is the scope of work in Rongfeng Will. Its members totally have 80 companies and are engaged in purchasing for Toyota. Mutual cooperation between members of the association make Toyota get
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the actual development in the world. With continuous development of globalization, the two associations and Toyota grow up together. The cooperation between Toyota and suppliers has achieved great success. Toyota and the supplier network structure shows powerful integrity.

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8.2.3 Technical and quality management

This large and powerful supplier system enables Toyota upstream parts suppliers formed some scale economic benefit with Toyota. However, whether this huge supplier system can produce and deliver is crucial according to Toyota lean production meaning.

Therefore, Toyota sent its quality supervision and staff to large numbers of upstream and downstream components suppliers, assembly traders, wholesalers and subcontractors. Through workshops, seminars and training Toyota promote overall quality management consciousness and raise the level of efforts to help suppliers improve production quality.

Toyota not only sees the suppliers as a general business relationship, but they bring them into their own production system. And Toyota is also committed to suppliers raising productivity and quality management system. Toyota through requiring suppliers to provide regular cost reduction methods and helping suppliers to implement technology improvements for achieving the cost reduction objectives is doing better than other automakers by putting pressure on suppliers.

8.2.4 Supplier human resources management

In supplier management of human resources, By sending consultants to impart knowledge of how to achieve low costs to suppliers, Toyota gradually strengthened its bilateral relation with suppliers.

(1) Established the Operation Management Consulting Development(OMCD)
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Back in 1960s, Toyota began to send expert consultants to assist its Japanese suppliers. Therefore, the company has set up an operations management consulting department (OMCD), in order to get storage and transmit the valuable knowledge of the Toyota group. OMCD consists of six experienced senior managers and about 50 consultants. In 50 consultants, there are 15 to 20 who are permanent members of OMCD, the rest of all is up-and-coming young talents in the OMCD. They go through 3 to 5 years job rotation and consolidate their knowledge of the Toyota production system. Toyota sent these in-house experts to supplier companies, and helped them solve the difficult problems encountered when they implemented TPS in the process.

(2) Form autonomous learning team

Toyota established an independent learning team, and sent experts and senior managers to assist supplier in studying and solving problems in production management. On the one hand, the human resource helps suppliers to solve talent problem. On the other hand, supplier can provide assurance in respect to quality for Toyota, even in some parts of the production they provide Toyota with technical advice. And through the participation in the study, the relationship between Toyota and suppliers is strengthening the cooperation, and increasing the available resources in sharing network. This sharing network also penetrates in Toyota?s supply chain management. Toyota used this powerful sharing network to build international price comparison system, then to establish the world?s best purchasing system.

8.2.5 Summary

From the above analysis visible, Toyota?s supply chain management is completely opposite of General motor and Ford motor?s. Toyota is not squeezing the profit space of the suppliers, and they are looking for cost cuts opportunity with all partners are

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collaborating in the whole production process. It also let vendors keep part of the remaining profits in a certain period, build long-term trust and cooperation and maintain the stability of the suppliers system. In this way, the suppliers and Toyota?s goals are kept consistent, all enterprises have a chance to get benefits from the cooperation in the supply chain.

8.3 Internationalization and Localization Strategy

In the internationalization process, the enterprise will usually face the challenges from the new national government, new competitors and new customers. In 1957, Toyota had the “try to sale the car to America” idea, they took to the internationalization way, although the way was too difficult, but by now, Toyota has become a global sales first company.

8.3.1 Toyota international operation characteristics

(1) In the overseas production, the sales proportion is higher. Shortly after the end of the Second World War, Toyota entered the U.S. market, but Toyota?s product quality and reputation was inferior. Therefore, Toyota took the following several measures:

a. Focus, choose and enter the market in the right moment and in the right way b. Choose effective sales channel and capable wholesalers c. Direct contact with the user, establish independent sales agencies d. Used the competitors? sales network for sales, after getting into the USA market, they used middlemen or producers trademark to sell Toyota.

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Through a series of measures implemented, since 1957 Toyota began to export first cars to American and expand in the overseas market. In 1977, the export amount hasd surpassed the domestic volume. Meanwhile, as the overseas production scale continuously expanded, the overseas production quantity began to exceed the export quantity in 1995.

8.3.2 The globalization of production and sales network

Overseas business was made mainly through the sales network of importers and car dealers when it was launched early. Form 1957, Toyota exported first car to American and they started to seek partners for selling cars in United States. Meanwhile, establish long-term, stable and close contact with overseas agent is one of the success factors when Toyota expanded to the overseas market.

With the expanding of the overseas business, establishing overseas factories became Toyota?s main means to break through trade barriers. However, local production finally developed and evolved into the scope of the Toyota parts production and supply system. By the end of 2007, Hino and Toyota company together had 53 production bases and 8 representative offices in 26 countries and more than 25million employees.

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Figure 8.1 Data http://www.toyota.com.cn/corporate/about/appendices01.html

Meanwhile, from 1990s, Toyota strengthened the international cooperation and began to pay attention to allocate parts in the host countries and the neighbour regions. Now, Toyota has formed auto parts supply system in North America, Europe, Oceania and other regions, the Asian supply system also increasingly make sure its strategic adjustment in the Indian market.

8.3.3 New market entry strategy and localization analysis – the Chinese Market

(1) The path of Toyota entering a market

In a specific market, Toyota took four development stages is: enter time, increase the profit period, localization and stable development. And Toyota through different strategies was coping with the challenge from government, market and competitors. Specific strategies are shown below 8.2:

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(2) The path of Toyota enter China market and current situation

In September 1964, when Toyota for the first time exported CROWN to China they went through a long period of market entry. Then the rapid rise of the Chinese market caused the Toyota headquarters? attention. But because it started later, Toyota is still in the localization stage in China. In every stage during the development process, Toyota adopted different development strategies in different periods of Chinese market. Specific content are shown below 8.3:

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8.3.4 Summary

From the above analysis, we concluded Toyota internationalization strategies as the following:

1. In its entry period, first Toyota would export the differentiation product to form brand awareness in the target market. 2. In the increase profit period, Toyota set up the comprehensive sales network and a preliminary centralized system of production and spare parts supply chain. 3. In the localization period, Toyota implements technology and product centralize system, and form localization supply system. 4. After the localization period, Toyota establishes a social image and enhanced brand influence.

Toyota?s internationalization strategy is similar to its supplies strategy. Toyota basically is using the same way as with Toyota lean manufacturing and employee training modes. There is also close contact with enterprises, shared interests and long-term cooperation. However, how to get local staff recognition and adapt to large overseas market, how to strengthen the quality of the supervision and administration, are significant challenge to Toyota.

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Ⅸ. Synthesis/Discussion

9.1 “Sales first” expansion strategy deviate from Toyota?s principle of management
In the past ten years before the recalls, Toyota average sales grew by 4.5 million vehicles each year. From 1997 to 2007, Toyota pursued “world first” and “15% vehicles market share in the world” ideas when Toyota was in the fastest expansion stage. Meanwhile, Toyota has embarked on a “CCC21 (21 century cost competitiveness construction)” strategic plan. “Rapid expansion” and “reduce costs”, these two strategies replaced the dominant strategy “original manufacture”. Toyota production was eroded and gradually abandoned.

9.2 The lean production mode brings quality problems
The basic thought of lean production mode is “just-in-time (JIT)”, only when needed, and produce the products by the needed quantity. Among them, the “zero inventory”, “emphasizing the time cost” and “extinguish all kinds of waste” are the keys to the lean production. Toyota pursued excellent quality of the lowest cost. This time, because of the defects of accelerator pedal and brake system, Toyota was forced to recall the cars. There was a connection with “too much cost reduction”.

First, Toyota?s new car test often proceed indoor, but European car?s test go through the commissioning of 300-800 million kilometers across the arctic, desert and high
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humidity rainforests. This is obviously better than simple indoor test. Despite its strict quality inspection and control of the production, the design flaws were not exposed in the simple test process and caused massive recalls. By investigating its root caused and comparing Toyota and European companies, Toyota have not extreme environment tests, because they wanted to save time and cost.

Second, Toyota?s recalls is different from other auto car recalls, Toyota?s recalls involves multifarious brands (Camry, Card Laura, Highlander and RAV4) and amount to 800million vehicles. Why does the same the same problem appear in different cars? The answer is Toyota?s “universal product platforms”. In recent years, Toyota produced a varied style of vehicles in the same product platform, this saves new car launch and upfront input of models alteration. Therefore Toyota used the same components in different cars. This is why the accelerator pedals impact on almost all mainstream products. “Universal product platform” is a part of lean production.

To sum up, with the trend of global resources shortage, the lean production still is a practical production mode. After Toyota recalls, we have to think about the existing defects and lack of Toyota production mode. Meanwhile, the “larger-scale production” of European-American type emphasize the production concept “high investment”, “repetition test” and “reasonable rejection ratios”, we should learn more about its attractions. Maybe, “improved lean production” will look for the perfect union between the cost and quality.

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9.3 The discussion of Toyota supply chain model?s mistake
In the Toyota recalls, the quality problem of Toyota car?s accelerator pedal and brake system parts appeared in the quality problems, we have to start thinking about the Toyota supplier strategy.

First, Toyota shared interests with suppliers in the long-term cooperation. If Toyota wants to ensure the quality of parts, Toyota must increase the quality supervision and control. It?s not like GM and Ford, they used the market competition to admit the suppliers that with the lowest prices and selected highest quality.

Second, the mistake of Toyota suppliers was exposed in the financial crisis. Because Toyota and parts suppliers are often holding stock ownership each other, it makes them to be “bind type” mode. Toyota limits the suppliers supply parts to other vehicle companies, it take suppliers into the enclosed cycle with Toyota profit and loss. However, under the influence of the financial crisis, Toyota decreased production and parts supplier?s output also decreased. Because the parts suppliers equipment was already completely invested by Toyota, excess capacity lead to an increase in cost pressure. In this situation, suppliers will debase quality for relieving the cost pressure.

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9.4 Rapid international expansion and localization flaw
In the recalls crisis, we seem to find the lack of localization and international expansion.

In 1987, Toyota entered the U.S. market. Under the leadership of Zhangfushi, Toyota still adhered to the Toyota lean production mode. One of the most important things is to stick to train their talents, and bring a new recruit to Japan for training. In addition, experienced engineers have great privileges. If they find problems, they can stop the production line for improvements. The products by Toyota Kentucky factory often occupy the top of the J.D.POWER quality list.

But with rapid expansion in the overseas market, Toyota couldn?t cultivate enough talents completely who understand the knowledge of Toyota?s lean production. The professional managers from GM and Ford gradually took over the business.

Toyota also faced the difficulties of quality control in local production. The Toyota motor sale in the United States is mostly produced by the local manufacture. The bad bad accelerator pedal was provided by American CTS company. The salient feature of globalization is outsourcing and supply chain expansion. This way is increasing the difficulty of quality control and weakening the enterprise control of the product quality.

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Ⅹ. Conclusion

First, we found out “Sales first” expansion strategy deviate from Toyota?s principle of management. As the world?s trend, the customers pay attention to the quality of products. Sales volume gain profits for company, but if the products have quality problems, it will influence the reputation of brand.

Second, the lean production mode brings quality problems. While lean production mode reduce the costs, it also brings the quality problems. When a company wants to reduce the product?s costs, they must need to make a discreet choice.

Third, it is a supplier chain?s mistake. The relationship between Toyota and suppliers is a “bind mode”. They are profiting and losing from each other. So supplier chain must keep the state of competitive.

Fourth, the rapid international expansion and localization flaws also influence the company. When the company expanded to the global market and set up local factories, they must consider its operation problems and completely implement enterprise?s culture into every branch offices. That is very important to the company?s development.

We suggest Toyota to set up the recall apartments, it will improve Toyota faster to find out the problem of cars. The information that collected by recall apartments shows the specific parts problems. Toyota can readjust their supplier?s process and reduce the rejection ratio. Quality is the basic of products, it can make product sells in the world and everyone knows it. It also can make company lose too much. We hope Toyota will pay attention to the quality of cars when they excessive reduce the costs.

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If Toyota wants to avoid recalls, the most important thing is to do more tests. Toyota decreased the cost and strength of tests for saving money. So they must do more tests and guarantee the product?s quality before delivery. Toyota needs to set up the customer feedback teams, so that it can collect first-hand information about the customer needs, customer opinions and after-sales service.

Maybe Toyota?s lean production system is very useful, but it must be advancing with the times and reform step-by-step. Because the defects of system will appear in the different periods.

Toyota can obtain achievements today, the contribution of lean manufacturing mode is vital. Meanwhile, Toyota also emerge ability in the fierce competition and ultimately brought the champion in supply chain management and international development process. After the Toyota recall crisis, we have to start examining all sorts of problems appearing in the strategic process.

In this survey, it seems as self-examination to company that rise abruptly. It should be discussed, what strategy is suitable for positioning itself and international environment. Only in this way, strategy can truly achieve the roles of recognizing advantage, weakness, opportunity and threat.

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Toyota?s References

http://en.wikipedia.org/wiki/Kanban http://en.wikipedia.org/wiki/Toyota

2011/5/13 2011/4/12 2011/5/13 2011/4/27

http://en.wikipedia.org/wiki/Just-in-time_(business)

http://www.toyotasupplier.com/sup_diversity/sup_diversity.asp
http://www.toyota-global.com/investors/presentation/2011/ 2011/4/27

http://www.informaworld.com/smpp/content~db=all~content=a913268228 2011/4/28
http://en.wikipedia.org/wiki/Toyota_Production_System 2011/4/26

http://www.toyoland.com/history.html

2011/4/18 2011/4/25 2011/4/25 2011/5/5 2011/5/5 2011/5/5

http://www.toyoland.com/toyota/plants.html

http://www.sba.pdx.edu/faculty/gordonm/BA339/ch15.ppt http://www.oppapers.com/essays/Toyota-Strategies/657117 http://www.toyotasupplier.com/sup_guide/sup_guide.asp

http://elsmar.com/pdf_files/Toyota%20Kanban%20System.pdf

http://www.businessknowledgesource.com/manufacturing/pull_production_understan ding_kanban_extended_entry_026156.html (kanban) 2011/5/13

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