-How is Toyota affected by Globalization?-
Individual Assignment for Managing Resources in the International Business Environment
4.2 The role of national culture in shaping Toyota`s lean mean production system 6
5. Toyota`s expansion of production in the United States and Europe 6
5.1 Entering in the NUMMI joint venture 7
5.2 Relationships that Toyota used to manage suppliers 7
5.3 Evidence and long-term competitive advantage for becoming more of global corporation 8
5.4 Pros and Cons of globalization 8
6. Conclusion 8
7. References 8
Business
04 December 2013
How is Toyota affected by Globalization?
The reaches and access of Toyota is approximately everywhere in the world.
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The company has its plants every continent with the exception of Antarctica and many more are still under the construction process.
However, in order to achieve globalization the unlearning process is considered as the motivational factor for the lean production system of Toyota. This strategy is used by the company is order to achieve economies of scale by ensuring proper division of labor in the organization.
Further, Toyota has also undergone expansion in the United States because of the increase in the demand of cost effective cars. moreover, the company has adopted verival integration stratey for avoiding unnecessary charges and to acheive the benefits associated with the economies of scale. The company has also favoured competitive bidding for achieving lowest posssible costs in the short run. The company has also adopted strategy of joint venture in order to attain globalization and to avoid the unnecessary quotas and other barriers associated with imports.
- Introduction
- Company Overview
Toyota is the world`s largest automobile company and greatest manufacturer.
Toyota was founded by Kiichiro Toyoda in 1937
It began perfecting its famous Just-in-Time or “Lean” production system in 1948.
Financial resultsgraphic
Logo and branding
- The development of Toyota`s revolutionary „lean production system“
The driving force for the development of Toyota`s revolutionary „lean production system“ was the continuing process of unlearning. In other words, it was the capability to spot problems in the car manufacture and fix them successfully, which lead to a permanent improvement in productivity and quality.
During the 1950s to 1980s, Toyota was permanently facing two major challenges: A restricted capacity, due to a small domestic market and low financial support, and strong competition caused by large American or European auto manufactures. These permanent problems were critical in ordert o be aware oft he urgency of acting before it is too late and therefore, they were Toyota`s motor for learning, reconfiguring and improving.
But it was not only unique to japan that strong competition and the lack of capacity and financial support forced Toyota to permanently rebuild its production system, but Toyota could do that under special conditions.
First of all, government intervention prevented the entrance of stong competitors. Japan`s government prohibited direct foreign investment in the automobile industry and imposed high tariffs on the importation of foreign cars. This gave Toyota time to become competitive by developing a highly efficient production system and gaining economies if scale.
Moreover, it was less riskly to implement innovations and easier to regulate them in the production system as well as it was possible to offer a greater variety for lower costs, because Toyota produced in smaller number than its huge rivals.
What make Toyota`s situation also unique was Ohno Taiichi. It was the capability of one man to recognise how Toyota can take margin out of a point in the value chain, either through adapting new efficient methods quickly, improving production process, or coming up with a pioneering system by himself.
Ohno Taiichi had a sense for adapting the right systems at the right time and implementing them very fast, such as the idea of specialization in component manufacturing and specialised assembly workers matched perfectly to Toyota`s problem that its capacity constraints made efficient-scale mass production, common in Amerika, impossible.
Ohno Taiichi had also a talent to reconfigure assets and skills to provide the same value more economically. For instance, he introduced a technique to reduce setup time in ordert o become more economical in producing or he innovated a team concept aimed to make workforce more flexible.
What was even more impressive its hat, instead of following all the standars practies of incumbents, he was able to challege some of them. For instance, he preferred long-term relationships with supplier, instead of a massive vertical integration, that turned out tob e more productive due to learning effects and the share of knowledge. Furthermore, changing the rework area system lead to less defects and more efficiency.
- The Toyota lean production system vs. the mass production system
The comparison of the Toyota`s lean production system with the traditional mass production system largely used in the US is very interesting, since it means comparing two totally different approaches of production systems.
The traditional, US based, mass production system
On the one hand, the mass production system employed by the US car manufacturers of GM and Ford is preliminary based on a limited product line, produced in massive quantities to achieve the maximum degree of economies of scale. The system is based on large assembly lines and the workflow is divided into very specialized and single tasks. Consequently, the assembly job is done by specialized line workers, which are supervised by formen who ensured that the tasks were performed right and workers followed orders.
However, this type of production comes along with a set of drawbacks. First, the long production runs created massive inventories that had tob e stored in large warehouses. For example Ford would stamp 50,000 right hand door panels in a single production run. The individual parts had tob e storage before being processed and actually used in a upcoming assembly proccess. This is a major drawback since warehousing and storage of inventory is costly and considered as inefficient in terms of supply chain management. Second, the mass production process produced a large number of defects and consecutive errors if the initial machine settings were wrong. Unfortunately, the nature of the mass traditional mass production system did not allow any interruptions and dynamic changes. This was also accompanied by the fact that workers became lax and frowsy about quality control since they only had to care about their own monotone and boring job. Snce they had no responsibility for quality control, they had no incentive to minimize defects. Next tot hat, the extreme division of labour resulted in the inefficient employment of many specialists on the line worker as well as supervisiory side. Lastely, the mass production system was unable to adapt to costumer perferences for produvt diversity since giving up the process would also mea nto give up a certain degree of economies of scale.
The Toyota „lean production system“
On the other hand, the „Toyata lean producttion system“ may be seen as a completely different approach towards mass production. Instead of relying on highly specialized and standardized tasks by individuals, the „Toyota way“ was based on empowered employees, diversification of jobs and ultimately a clearly defined team approach at the assembly line. Instead of supervisors, the Toyota assembly teams had that ensured coordination but was also required to step in at the assembly line if necessary. Furthermore, the teams were also given basic „contextual“ tasks such as housecleaning, tool repair and quality inspections as well as the chance to suggest production improvements in so called „quality circles“. All this resulted in a larger, diverse, enriched and also way more efficient job design and finally higher productivity oft he workforce.
The outcome oft he team based approached were reduced set up times and improved quality since team members gained experience in identifying problems and tracing them back to theid root cause. Thanks to empowerment, workers had a better view of the big picture oft he production process. In addition, the underlying Kanban system.
In conclusion, the Toyota way is far more efficient dynamic and productive from a modern supply chain perspective. Reduced inventory, efficient job design as well as reduced defects and set up times and better quality control are major advantages of the lean production system. The cost savings could be passed to the final consumer by offering a quality car for and affordable price.
4.2 The role of national culture in shaping Toyota`s lean mean production system
A large part of Toyota`s success lays in their approach of forming quality, beneficial and empowering relationships, which lead to efficiencies, increases in productivity and innovation, while keeping quality. Initially, when they implemented their approach inthe foreign-based sites, their succes were not immediatly replicated (high defect levels – 100 times greater than what was supplied by Japanese suppliers). Here I want point out that the success was brought on not only by the national culture but also by the strong culture that Toyota developed in its company. The principals that were embodied in the lean production system include stopping to fix problems, employee empowerment, developing people and partners, establishing long-term and quality realationships rather than focusing on cheapest options, and the just-in-time sstem to avoid buffer inventories and unnecessary waste.
It focused heavily on lean production and values of educating and empowering your partners. The system allowed for differences to remain in each partner`s working culture but the common goals were shared and ultimately led to success.
A strategy that is properly developed and communicated with all the stakeholders has a better chance of succeeding. Toyota utilized this approach in the strong relationship development.
- Toyota`s expansion of production in the United States and Europe
The main reason for Toyota`s susbsequent expansion into the US was the serge in US demand for small, fuel efficient, cars. Followed by the 1973 oil cries, worldwide exports of Toyota increased from approximately 157,000 units in 1967 to over 1.8 million units in 1984. Another reason for Toyota`s expansion was the voluntary import quotas with the US in 1981, which caused exports to remain plateaued. Moreover, Toyota was encouraged by the success of NUMMI that proved tot he Japanese corporation it could „make it in Amerika“. By building quality cars with relatively low level of defects and doing it fast (using Amerikan workers and American suppliers), Toyota wanted expand even more.
In Europe, as with the US, Toyota was faced with import barriers it wanted to „get around“. Also, with the formation of European Union and the single market, Toyota felt in needed a manufacturing presence in the region .
Ultimately, Toyota had expanded its operations to 26 countries with 52 plants. It had plants in USA, U.K, Mexico, France, China and different other coutries. Rapidly identifying where the „mother load“ of demand lays, Toyota felt it needed to expand over seas in ordert o use its core competences and grow even bigger.
5.1 Entering in the NUMMI joint venture
The correctly predicted decreasing demand at home and the oil crises in the 70s contributed to a successful expansion in the US. However, their succes in the United States resulted in not only in benefits but also came with certain limits an new problems, such as the „voluntary“ import quotes. Basically, the joint vernture was a way to get around the quotas and import barriers. Additionally, Toyota gained an opportunity to see if they could apply their succesful modelt o the American environment, worker and suppliers and deliver quality results. It further exposed them to dealing with the American Unions and gave them an insight to do better market research and understand the American approach as well as the customers.
5.2 Relationships that Toyota used to manage suppliers
US model was heavily based on vetival integration in ordert o avoid opportunistic overcharges and maximize benefits of economies of scale. They also practiced competitive bidding in ordert o achieve lowest short-run costs. The American approach was very much about keeping control in the house, for example GM did up to 68% of production in house.
The Japanese approach did not promote the heavy competition between suppliers – they believed more in creating beneficial and long-relationships. They integrated suppliers into production and design in ordert o promote innovation, reduce costs, and synchronize further the whole supply chain. Tight and long-term relationships allowed Toyota to specialize on their core competencies. This approach allowed them to utilize the kanban system and led tot he creation of synergies, which resulted in reduction of inventory holding costs and realizing still quality benefits. This approach also allowed fort he spread of costs – their investments were divided between Toyota and their suppliers, which was especially helpfull since they had small to capital to work with. Additionally, it was a quicker way to trace the origins of defects. The „first tier“ and „second tier“ led to more deeply integrated relationships between suppliers and Toyota. The interwinning oft he culture was also exhibited by toyota`s initiatives to encourage suppliers to innovate and find cost efficient ways; they also encouraged with incentives of sharing the savings.
Toyota created a production system that allowed to produce greater varieties of cars, in fewer numbers, with fewer people, fewer effects, and with reduced cost as opposed to the mass production, batch and queue methodology of U.S automobile markers. In essence, it appeared that Toyota was „doing more with less“ than its American counterparts in the automobile industry.
The drawbacks mainly include the risk of giving up some bargaining power Toyota would make long-term commitments with their suppliers. Additionally, you risk over-sharing your competitive advantages or know-how. The deeply interwined relationship leads to heavy co-dependency, thus ifo ne supplier is not properly integrated or messes up, it could affect the whole system.
5.3Evidence and long-term competitive advantage for becoming more of global corporation
As mentioned earlier, Toyota has definitely penetrated the global area and is working to maximize its influence.
With global operations in 26 countries net profits of $152 billion, over taking GM and becoming the largest automobile company in the world, it seems that Toyota is truly an international gaint. Furthermore, when looking at its management, it appears that Americans are also starting go gain influence and make their way into Toyat`s top ranks, making it more international corporation.
Finally, Toyota Supplier Support Centre (which helps Toyota`s suppliers cut the costs of different products dramatically) the construction oft he CCC21 (with its goal of slashing compoent cost parts by 30% on all new models) and the adoption of the GBL system (replacing Toyota`s Flexible Body Line assembly philosophy) are all examples of Toyota`s longterm competitive advantage.
5.4 Pros and Cons of globalization
There are several advantages and disadvantages associated with the globalization of Toyota. The biggest advantage is that the company is providing better opportunities for the consumers of the developing countries that emphasize on the foreign investment and international trade for expanding people’s chioces. With the provision of greater product chioce people of developing countries can purchase more and this bring better technology and increased funds from abroad. As a result the standard of living of people rise due to availabilty of advanced technology and more choices (Akubue). Furthermore, Toyota is using the concpet of continuous improvement for the success of its products, which is streghtening its ties with other companies and countries.
But, the company’s globalization also have disadvantages. Considering the fact that the income gap is widening. The company is locating its plant and is investing at the places where they can approach the lowest paid workforce. Moroever, Toyota is introducing latest technology, which is reducing the demand of unskilled workers and raising the demand of skilled workers. The declining demand of unskilled workers however pave the way to the broadening of the income gap in the country (Akinson).
The prons and cons of globalization of Toyota matters because they help to analyze the performance of the company and the areas of improvement. They provide useful information to analyze the capabilities of the company relative to the cometitive envirnement. The company can analyze its strenghts and weaknesses and can modify them if required in order to remain competitive. The scrutiny of prons and cons of Toyota’s globalization is essential in this analysis because they give an idea and insight into the strategic planning process of the company. Further, they also help to integrate and synthesize different types of known information.
- Conclusion
Toyota is undoubtley a leading automobile company. In the beginning the company has faced several problems but later on the company has successfully developed strategies such as development of the Lean production system in order to compete and improve the competing processes to lead the market. Toyota has not adopted the mass production process, which is embraced by Ford and General Mortors because it has not functioned properly. The core values of lean production system of Toyota are empowerment of employees, fixation of problems, establishment of long term emplyee relationships, and partnership with people. Moreover, in order to go global the company has adopted expansion strategy and increased its business in America and Europe. Their expansion strategy however has been proved successful due to rise in demand of the cars that are fuel effective and small. Further, after exapnsion the company ahs faced several import barriers and in order to avoid such hurdles the compnay has done joint partnership with other companies. There are several prons and cons of Toyota’s globaliztion. The cons include improvement of the living standards of people and continuous betterment of the product to satisfy needs and demands of customers. Contrary to it, the cons include the income gap, which is arising because of the latest techonology introduced that is disadvantageous for unskilled workers. In nut shell, Toyota has strenghthened its position globally and is still working to cover those areas that are still not served that will further increase the goodwill of the company.
- Works cited
Akubue, A. “Appropriate technology for socioeconomic development in third world countries”. The Journal of Technology Studies. 24.1(2000): 33-43. Print
Atkinson, Anthony B . "Reducing income inequality in Europe." IZA Journal of European Labor Studies 2013. 2.12 (2013): 2-11. Print.
