Toyota Company Analysis Essay Example

with people, society and the environment.

From this perspective, centered on the theme "Innovation into the Future," the Toyota Global Vision 2010 proposes the corporate vision for which all of Toyota should strive and the paradigm change that Toyota should undergo.Under Toyota's Guiding Principles, we practice openness and fairness in our corporate activities, strive for cleaner and safer car making, and work to make the earth a better place to live. We would like to thank everyone for their continuing support.

Fujio Cho Chairman Katsuaki Watanabe President Innovation into the Future - A Passion to Create a Better Society Through "Monozukuri - manufacturing of value - added products" and "technological innovation," Toyota is helping to create a more prosperous society. To achieve this, we are taking up the challenge in the themes below.

1)Be a driving force in global regeneration by implementing the most advanced environmental technologies. (2)Create automobiles and a motorized society in which people can live safely, securely and comfortably. (3)Promote the advantages of cars throughout the world and attract more Toyota fans. (4)Be a truly global company that is trusted and respected by all people around the world.

As you can see it has both aspects of a Vision and Mission statement, it presents where Toyota wants to be and also what it wants to achieve.Toyota hopes to achieve its vision through active practice of the following principles: Guiding Principles at Toyota

1. Honor the language and spirit of the law of every nation and undertake open and fair corporate activities to be a good corporate citizen of the world.
2. Respect the culture and customs of every nation and contribute to economic and social development through corporate
   

activities in the communities.

Work with business partners in research and creation to achieve stable, long-term growth and mutual benefits, while keeping ourselves open to new partnerships. Company History and BackgroundToyota motor company was founded by a man to whom creativity was anything but foreign. Kiichiro Toyoda was the beginning of the most successful motor company of its time and was responsible for basing that company on principles that have carried it to today and will continue to carry it into the future as an industry leader in many ways. The beginnings of Toyota Motor Company were as simple as intrigue and ingenuity.

From that point on, Toyoda has wasted no time moving his ideas forward. Shown below is a timeline of Toyota’s history of achievements and growth found on Toyota’s website.

929: Toyoda traveled to Europe and the United States to explore automobiles

1930: Toyoda started researching gasoline-powered engines

1933: Automobile Department is formed in Toyoda’s father’s loom company

1935: Hinode Motors (currently Aichi Toyota) started operations A1 prototype passenger car completed G1 truck completed

1936: Toyota’s logo established

1937: Toyota Motor Co. , Ltd. was established

1938: Koromo Plant (currently Honsha Plant) started operations “Just-in-time” system launched on a full-scale basis

1940: Toyoda Seiko, Ltd. (currently Aichi Steel Works, Ltd. was established Toyoda

Physical and Chemical Research Institute established

1941: Toyoda Machine Works Co. , Ltd. established

1943: Tokai Hikoki Co. , Ltd. (currently Aisin Seiki Co. , Ltd. ) was established

1945: Toyota Shatai Kogyo Co. , Ltd. (currently Toyota Auto Body Co. , Ltd.) was established 1946: Kanto Electric Auto Manufacturing, Ltd. (currently Kanto Auto Works, Ltd. ) was established

1948: Nisshin Tsusho Co. , Ltd. (currently Toyota Tsusho Corporation) was established 1949: Nagoya Rubber Co. , Ltd. (currently DENSO CORPORATION) was established

1950: Financial crisis/Labor dispute/Voluntary retirement occurs at Toyota Toyota Motor Sales Co. , Ltd. was established Minsei Spinning Co. , Ltd. (currently Toyoda Boshoku Corporation) was Established

1951: Creative Idea Suggestion System started.

1953: Towa Real Estate Co. , Ltd. was established Corporate slogan “Good Thinking, Good Products” was established

1954: Main Technical Building (Technical Center) completed

1956: Toyopet dealerships started operations Head Office test course completed

1957: Toyota Motor Sales, U. S. A. , Inc. was established

1958: Toyota do Brasil S.A. started operations

1959: Motomachi Plant started operations

1960: Main building completed-Toyota Central Research & Development Laboratories, Inc. was established

1961: Publica dealerships (currently Toyota Corolla dealerships) started operations “Total Quality Control” adopted throughout company Haruhi Plant (currently Haruhi Center) was completed

1962: Labor Management Joint Declaration was signed Toyota Motor Thailand Co. , Ltd. was established 1 millionth Toyota vehicle produced domestically

1965: The Deming Prize awarded Kamigo Plant started operations

1966: Takaoka Plant started operations Entered into business tie-up with Hino Motors, Ltd. Higashifuji Proving Ground completed

1967: Toyota Auto dealerships (currently Netz Toyota dealerships) started operations Entered into business tie-up with Daihatsu Motor Co. , Ltd. 1968: Miyoshi Plant started operations

1969: Cumulative exports reached 1 million units Annual domestic sales reached 1 million units.

1970: First Japan

Quality Control Medal awarded Tsunami plant started operations

1972: 10 millionth Toyota vehicle produced domestically

1973: Myochi Plant started operationsCalty Design Research, Inc. was established

1974: Toyota Kuragaike Commemorative Hall completed The Toyota Foundation was established Nisshin Training Center completed

1975: Shimoyama Plant Started operations Prefabricated housing business started Cumulative exports reached 5 million units

1977: Toyota Technical Center U. S.A. , Inc. established Toyota Kaikan Exhibition Hall completed

1978: Kinuura Plant started operations 1979: Tahara Plant stated operations Cumulative exports reached 10 million units

1980: Toyota Vista dealerships started operations

1981: Toyota Technological Institute inaugurated

1982: Toyota Motor Co. , Ltd. and Toyota Motor Sales Col, Ltd. merged into Toyota Motor Corporation

1984: Toyota-GM joint venture in the U. S. , New United Motor Manufacturing, Inc. (NUMMI), started production Shibetsu Proving Ground completed

1985: Tobishima Center Completed Cumulative exports reached 20 million units

1986: Teiho Plant started operations 50 millionth Toyota vehicle produced domestically

1987: Kasugai Housing Works started operations Toyota Memorial Hospital completed TMME Technical Center established

1988: Toyota Motor Manufacturing, Kentucky, Inc. tarted production Annual domestic sales reached 2 million units

1989: Hirose Plant started operations Tochigi Housing Works started operations Toyota Automobile Museum completed Lexus dealerships established in the U. S. Tokyo Design Center established

1990: Amlux opened Toyota Motor Europe Marketing & Engineering S. A. (TMME) was established 1991: Yamanashi Housing Works started operations

1992: Guiding Principles at Toyota announced Toyota Earth Charter established Toyota Motor Manufacturing (U. K. ), Ltd. (TMUK Ltd.) started production DUO dealerships for VW and Audi cars openedToyota Motor Hokkaido, Inc. started operations Toyota Motor Kyushu, Inc. started operations

1994: Industrial Technology Memorial Museum opened Annual overseas output exceeded 1 million units 1996: Genesis Research Institute, Inc.

1998: “Toyota Auto” sales channel changed name

to “Netz Toyota” Toyota Motor manufacturing Indiana, Inc. (TMMI, Inc. ) and Toyota Motor Manufacturing, West Virginia, Inc. (TMMWV) started operations Tianjin Toyota Motor Engine Co. , Ltd. (TTME) started operations Toyota Motor Tohoku, Inc. started operations

1999: MEGA WEB openedListed on the New York and London Stock Exchanges Toyota Kirloskar Motor, Ltd. started operations 100 millionth Toyota vehicle produced domestically Annual overseas sales exceeded 3 million units

2000: Toyota Financial Services Corporation was established to oversee Toyota’s finance companies worldwide Sichuan Toyota Motor Co. , Ltd. (SCTM) started production in China 2001: Toyota Motor Manufacturing France S. A. S. (TMMF) started production

2002: Toyota enters Formula One (F1) competition Toyota Peugeot Citroen Automobile Czech established Toyota Motor Manufacturing Poland Sp.

2005: Toyota has started production of the “Toyota Aygo” along with “Peugeot 107” and “Citroen C1” through a joint venture with PSA Peugeot Citroen in the Czech Republic 000 “TOYOTA MOTOR MANUFACTURING RUSSIA” (TMMR) was established The Lexus brand was launched in Japan Toyota and Fuji Heavy Industries to Agree on Business Collaboration

2006: Rush is announcedAs shown above, Toyota has made many accomplishments in the relatively short time it’s been in business. The word growth has been given a new meaning by the leaps and bounds that are shown throughout Toyota’s history. There is one point at which, within four years, Toyota completely doubled its cumulative exports.

Toyota’s activities are all purposeful yet diverse. Their history shows activities ranging from new concept introductions to creating a foundation. Not only has it been successful domestically, but it’s also proven to be very successful internationally.They’ve not only opened many plants, but they’ve diversified their business into different incorporated companies that feed

their growth and production.

Along with expanding internationally, they’ve formed various greatly useful strategic alliances that have allowed them to be sustainable and to continue to grow. As if company production and sales growth wasn’t enough, Toyota Motor Company has also changed the world of quality control and improvement. They can also be credited with creating one of the most efficient production systems, the “Just-in-Time” system.All these vehicle, production, growth, and quality developments combined have made Toyota Motor Company what they are now, an industry leader, and have set them up for success far into the future.

Industry description The Automotive Industry The Automotive industry has grown into one of the largest industries in the world; mass producing automobiles and other gasoline-powered vehicles, such as buses, trucks, and motorcycles. The industry has provided the world with immense leaps in transportation technology and has permanently changed the way everyone lives their daily lives.It provides millions of jobs globally, billions of dollars in revenues, and allows almost all businesses to distribute their products and services in an efficient manner. The automobile industry is the foundation of most of the modern world’s economies, allowing business to distribute and customers to purchase products and services efficiently. By making transportation available and cheap to people the automobile industry has literally transformed the world in terms of trade and ease of transportation.

In addition, it has shaped many fundamental business practices that other industries rely on today, such as mass production, mass marketing, and globalization (Encarta). Size The Automobile industry is a multibillion industry that produces about 58 million new vehicles a year making it the largest manufacturing industry in the world. It is

so large that it directly affects even the largest of economies, including the United States, in terms of employment. The Automobile industry has created and greatly enhanced many other industries such as steel, petroleum, and travel industries (Encarta). Porters Five ForcesThreat of New Entrants The threat of new entrants is very low in the automobile industry. One reason for this is that the industry is very established and it has had immense strategic success in economies of scale.

Economies of scale calls for manufacturers to mass-produce automobiles, so that they are less expensive and more affordable for the buyer. In order to even be able to compete in the automobile industry, a manufacturer would need to be able to achieve economies of scale. An additional barrier to entry is the need to acquire large amounts of capital to even be able to start up a company.Startup capital is needed not only to be able to manufacture the automobiles, but also to be able to keep up with all of the research and development growth in the industry. Because the automobile industry is so innovative, it is essential for any new entrants to be able to compete and keep up, if not stay ahead of, its competitors.

The difficulty of access to distribution channels is also a high barrier to entry. In order to even be profitable, a company must find a source through which to sell their automobiles, such as a dealership.The only other alternative to finding a distribution channel is to create their own, which is expensive and difficult. Being a new entrant into this industry is difficult in distribution because all of the existing channels

are saturated with product from other companies. Also, it would be difficult to find a distributor that is willing to take a chance on an unknown name. The limited space and the preconceptions of dealerships make for a difficult entry into this industry.

As shown above, there are many ways that a new entrant into the automobile industry can fail; therefore they oftentimes choose not to enter at all.This is a huge asset to all of the existing companies in this industry, including Toyota Motor Corporation. Power of Suppliers The power of suppliers is also very low in the automobile industry. This is because there are so many suppliers in the automobile industry that they have little to no power over the companies that use them. Also, there are so many parts used in the production of an automobile that it takes many suppliers to provide all the necessary materials for production. There are so many suppliers to this industry that manufactures can easily switch to another supplier if it is necessary.

The one exception is a just-in-time system. This would require that suppliers have more pricing power, given the unpredictable demand. The large number of suppliers and the ability to switch on a whim contribute to low supplier power in this industry. Power of Buyers Power of buyers in the auto industry is moderately high. The buyers, being the consumers in this industry, purchase almost all of the industry’s output.

The manufacturers depend on this to stay in business. Given this, a significant portion of the industry’s revenue depends on these buyers.This can affect a company, such as Toyota, when the buyers are not purchasing from them.

Because of the buyer power in the auto industry, if a company cannot keep the buyers happy they risk losing them to the competition. This is caused by the fact that buyers have low switching cost if they are not being satisfied. It can be as simple as the buyer selling their car and purchasing another one from a competitor.

Also included in the buyer’s options is the choice to make the original purchase from a competitor, which can be caused by price, quality, or a number of other actors that play into buyer satisfaction. Buyer power is strong, but not at its fullest because buyers have no other option but to purchase a vehicle from a manufacturer’s distribution channel. They cannot create or supply their own automobile. The buyers do not have the ability to integrate backwards into the industry, so if a consumer wants a car, the place of purchase is controlled by the manufacturer. Threat of Substitute Products There are not many substitute products for automobiles; therefore the threat of substitute products in the auto industry is low.Substitutes are defined as other alternatives provided by a different industry.

Some substitutes are walking, riding a bike, or taking public transportation. One component of substitute availability products is the geographic location of the consumer. Cities in which it is easy to use alternatives to automobiles, such as New York or Chicago, may not require a consumer to use a personal vehicle. For example, in those types of cities a lot of people take cabs or ride city transportation, such as the city bus or the subway (Automotive Digest).

However, because most people feel the need to own

their own vehicle nowadays, there is not a high threat of substitute products no matter where a consumer is located. Rivalry Among Competitors Rivalry among the competitors in the auto industry is very strong. The power of buyers in this industry plays a part in the rivalry competition between competitors. The major competitors are so closely balanced that rivalry and competition is increased. The ultimate goal of any large corporation is to gain market share. This also applies to Toyota and every other company in the auto industry.

In order to gain market share, it is necessary to take it from the competition. Given this, every player in the industry is trying to gain market share at once, which makes for strong rivalries. One of the other reasons for such high rivalry between Toyota and its competitors is that there is little differentiation opportunity in automobiles. Toyota, along with all of its competitors, makes cars, trucks, or SUVs. Because of this, there is really no opportunity for any company to market itself in a completely different way. The only differences between these vehicles are design and features, which is largely competitive as well.

The differences between the companies, in addition to vehicle differences, include price and quality, which are equally as competitive. Therefore, competitors are constantly compared to one another. A great example of this is manufacturer advertisements. Differentiation is often the angle that they take when promoting new products or ideas (Automotive Digest).

The number of competitors, the low differentiation opportunities, and the high degree of comparison all contribute to high rivalry and competition in the auto industry. Growth Potential The automotive industry has plenty of room

for growth.There are two key influences that are opening up growth opportunities throughout the industry. The first is the emergence of several vast and lucrative emerging markets and the second is the ever growing demand for more and more energy efficient vehicles in markets where the market is already saturated.

The automotive industry is waking up to the fact that their ability to penetrate the emerging markets early will determine the available growth potential of each company. Today, the four largest emerging markets are China, South America, India, and Russia.Each of these markets possesses an amazing amount of future demand for automobiles. Until just recently, these country’s economies have been too impoverished to afford vehicles for the vast majority of their populace and they have lacked the infrastructure to accommodate large amounts of traffic.

With globalization and the ever shrinking trade boundaries between countries, these emerging markets are becoming increasingly capable of producing immense demand for automobiles. Each manufacturer must adapt to each region and conduct effective research to find out just what each region wants in their automobiles.In addition, they need to have sufficient production facilities in strategic locations to meet the ever growing demand and distribution demands. The energy shortage is a growing concern for many future automobile owners due to the ever growing world utilization of fossil fuels. The company that develops a useful and efficient method of addressing the prevailing energy crisis will find abundant growth opportunities. This will be especially true in the countries advanced enough to make the transition from fossil fuels to an alternate source of energy.

Below is a graphical representation of Toyotas projected total sales by 2010 and their

estimated sales in each region by 2010, taken from their October 6, 2006 information meeting. Major Competitors and Market Share The following graph shows the major competitors in the automotive industry and their portion of the market share, based on production. Based on Sales, market share can be roughly determined. The best determinants of the market make up are the major companies; GM, Toyota, Ford, Daimler Chrysler, Honda, and Nissan. GM's market share was 24. percent in November and its sales were 293,558 vehicles in the United States.

Toyota sold 196,695 vehicles in November. Ford's market share of the domestic market is 15. 1 percent in November, with Ford selling 181,111 vehicles. DaimlerChrysler sold 186,635 vehicles. Honda Motor Co. sold 106,446 vehicles. Nissan Motor Co. sales were 76,015 (Forbes). According to current predictions, Toyota is expected to become the world's largest automaker, overtaking General Motors, by producing and selling 9.8 million vehicles in 2008 along with increasing sales (Wikipedia).

Company Description MarketingToyota Motor Corporation’s success is, in essence, due to its marketing skills and planning. It has been able to market its vehicles successfully not only domestically, but in foreign countries as well. They have grown their company so much that they now market their vehicles in more than 170 countries. They have manufacturing companies in 27 countries and regions (Automotive Digest).

This takes skill and the drive to continue company growth. They have been major in many markets, ranging in demographic from Australia to the United Kingdom. Below is a chart showing Toyota’s top ten markets for the past three years, as shown on Forbes. Toyota also has so much room for growth in their production capacity

that the demand that Toyota’s marketing is creating can easily be met if they continue their patterns in growth. Toyota is very strategic in its growth; it has proven that slow and steady wins the race.Although Toyota has been very successful, they have only grown based on the demand that already existed and could support the growth.

Toyota recognized that growth is only useful if it allows the company to continue sustainability. Not only has Toyota set a vision, but they’ve taken small, well planned steps to achieve their vision. That has brought the market to a tight race for the “Big 3”. Recent trends show that Toyota is fighting to keep its number two spot in the market, over Ford (Forbes). General Motors still holds the number one spot, but has taken a defensive strategy to protect against Toyota taking the lead in market share.

Below is a projection report from Forbes that shows historical and projected market share and sales for Toyota. Research and Development Toyota Motor Corporation’s research and development sector consists of the following technological activities that are designed to advance Toyota’s technological standing and invent the future for its customers: Energy/Environment, Safety and Human Engineering, Mechanical engineering, System Engineering/Electronics, and Materials. The Energy/Environment activities aim is “Researching new technology that contributes to energy conservation and protection of the environment.

It is Toyota’s weapon against the inevitable energy and environmental predicament coming in the next fifty years. Through the design of more energy efficient and low emission vehicles Toyota plans on meeting the future demand for new socially responsible products. The search for better combustion methods, catalysts for cleaner burning emissions, fuel cell technology

, and solar cell technology are just a few of the projects that Toyota’s Energy/Environment department is pursuing.

Safety is one of the most crucial concerns for customers of any automobile and safety is also on the minds of Toyota Research and development team.The Safety/Human engineering team’s primary job is “Pursuing advanced safety technology to support a society in which both people and automobiles can coexist. ” They seek to first develop preventative technology, in order to avert accidents in the first place, then technology that protects drivers, passengers and pedestrians from harm in the event of an accident. The future of safety includes devices that can detect unsafe conditions and avoid accident automatically as well as further investigation into how the human body is susceptible to injury in the event of an accident and what can be done to minimize damage.

The Mechanical Engineering Department primary activity is “Researching machining technologies that combine human feelings and senses”. “In the field of mechanical engineering, we contribute to the development of vehicle technology that improves the performance, efficiency and active safety of automobiles through the research on the control, kinetic and vibration analysis and tribology.

” In other words, they develop technology that helps bridge the divide between man and machine.It includes such pursuits as limiting noise from the engine and from wind resistance and using psychological tools to help create a more enjoyable ride. The System Engineering/Electronics Department “conducts research on information and communication, as well as electronics, to ensure advanced vehicles that better meet the needs of society. ” Some of the technology being pursued include power control devices for electric vehicles, communication devices, gas sensors, sensors

for advanced vehicle control, and sensing systems based on optical, image, and radio-wave technologies.

All are meant to give passengers and the vehicle itself information on demand to make driving a more enjoyable and safe experience. And last but not least, the materials department seeks to further improve basic materials in order to improve the overall quality of Toyotas Vehicles, Some of which include including metallic composites, organic-inorganic molecular composites, and high-performance cell materials (TYT labs). Production and Operations Toyota Motor Corporation is renowned for developing simple yet effective Production practices, which have driven the company to new frontiers of quality and efficiency.The development of the Toyota’s Production System (TPS) and Total Quality Control (TQS) revolutionized the manufacturing process.

Toyota’s Production System (TPS) has two main components: "Jidoka" and the “Just in Time” Production Method. The "Jidoka" concept is the idea of shutting down equipment immediately when a defect occurs, thus eliminating the production of further defected products. As a Result, Quality is built into the Manufacturing Process. Toyota uses both sophisticated machinery and highly trained employees to detect defects.The focus of the “Just in Time” production method, also referred to as lean manufacturing, is for each process to produce only what is needed by the next process in a continuous flow, thus eliminating overstock and reducing overhead.

In other words, Making only "what is needed, when it is needed, and in the amount needed! ” Inventory is not only considered bad in Japan it very much seen as evil. The JIT system is designed to clean up the inventory mess and streamline the distribution channels to avoid waste. The use of "Jidoka" insures the quality of the

production process and output.The JIT system ensures the timeliness and efficiency of the production process.

When the Total Quality Control program was implemented every worker was to "regard the next processes (on the production line) as their customers and provide them with the required amount and quality of goods and services on a timely basis. " It relies heavily on the idea of kaizen or continuous improvement. Kaizen states that no matter how refined a process is it can always be improved upon (Toyota Website). It is a mindset that Toyota employees must possess to be successful in the company.

Kaizen is a simple notion to understand but very hard to perform. Toyota is renowned for implementing kaizen and making it an effective tool in the production of their products. Human Resources Business Week’s most recent figure of the number of employees at Toyota is 285,977. This number is rapidly growing as their plants and production grows. More than 38,000 people are directly employed by Toyota in the U. S. and more than 386,000 through their dealer and supplier networks. The one year employee growth at Toyota Motor Corporation was 7. 6%.Toyota has made it their goal to focus on diversity in their hiring practices and was named by “Black Enterprise” as one of the best companies to work for in diversity.

It was also ranked fourth by Business Week in the most innovative companies to work for. In-depth information concerning Toyota’s hiring practices could not be found. There was also very limited information on Toyota’s employee turnover and benefits structure. Although there are no solid numbers to be found, it could be inferred that, given Toyota’s growth

and success in building more plants, employees are happy to work for Toyota.

The growth of the company makes for happy employees because of the ability to promote and transfer. It also makes profit sharing and stock options more enticing to employees. A position with Toyota Motor Corporation is coveted in the business world today. Finance One of the most crucial areas of any company is the finance and accounting departments.

They determine what return the company gets on their investments, manage debt structure, and see that the company has enough free cash flow to pay the bills. If they fall short in any of these areas the company is likely to become insolvent.The finance department of Toyota is headed up by Mr. Takeshi Suzuki, 58, who is the Chief Financial officer, Chief Accounting Officer, Chief Business Development Officer and the Senior Managing Director. The following is a consolidated financial analysis of Toyota as of the most recent data (Yahoo Finance): Cash Flow Toyota operates with a very strong free operating cash flow of 23. 73 billion dollars. This is important for the future growth of Toyota because it allows them to pursue future investments and fund R&D projects without having to borrow funds and pay interest to a debtors or investors. DebtThe capital Structure of a company indicates just how a company balances equity and debt to finance their operations.

The debt to equity ratio of Toyota is 1. 029, meaning Toyota finances a little more with debt than equity. A 1. 029 D/E ratio is unusual for an automotive manufacturer, which usually has a 2. 0 D/E ratio. A low debt to equity ratio generally means

that a company has been less aggressive in financing its growth with debt, decreasing their leverage and investor risk. Management Effectiveness The following chart indicates the overall financial health of Toyota and the effectiveness of Toyotas management.There is a progressive rise in Return on Revenues, Return on Assets, and Return on Equity. Consequently, Toyota has made good use of its revenues and of shareholders invested capital.