Globalization And The Toyota Company

The world today has been seeing the strong globalization. The process is reflected not only in trade but also in manufacturing, services, finance, investment as well as socio-culture and environment in various forms and levels. Economic globalization promotes close relationships, interdependence and rapid interactions among national economies. Through the process of liberalization, the globalization creates advantages motivating the development of productive forces and economic interactions between nations. Accordingly, comparative advantages of the participatory nations are strengthened and optimized. Besides, needs for development by enterprises is a growing and indispensable trend in the integrated global economy. Their scales of development are not limited in a geographical country or region, but in the whole world. In such a world of increasingly economic globalization, enterprise managers should be able to manage both internal and external influencing factors. Owing to that the managers will have better prediction, management of resources, and business direction towards set targets. In the course of global organizational environment, there are totally 12 sessions. Out of those, in following part, I will summarize 7 sessions. Particularly, among those selected sessions, I found session 12 an interesting one, even though it is the most challenging topic for me. This session helps the managers draw up both positive and negative perspectives of their businesses. This process strictly requires good understanding of their business situation, so that they can actively cope with and overcome difficulties that they already included in the drawing negative perspective…

Session 1: Organizational forms and purposes:

In this session, we learn about some types of establishment, such as private organizations, state-owned organizations and 3rd regional organizations, etc.

Understanding of these types is an important factor for a start-up business. Selection of type has great impact on the existence and development of an enterprise.

Basically, distinguish features resulted in by different types of business are:

Prestige due to consumption habits,

Ability in capital mobilization,

Investment risks,

Complexity of procedures and business establishment costs,

Corporate governance institutions.

In addition, we may know how to analyze business by looking at its strengths, weaknesses, opportunities and threats (SWOT method) or through Mendelow matrix that tabulates values and priorities of involving factors influencing the business. Analysis results will strongly support the managers in identifying and prioritizing factors, and then developing proper strategies accordingly. Furthermore, we also obtain better understanding of role of business types and their influencing factors. Understanding of the relationship between the organization and its environment is fundamental to development strategy. While making strategic decisions on organizational direction and scope of business, all the factors relating to goals and members’ expectations should be taken into consideration. From the different goals, they put questions that: to whom they offer services and how to offer, or how to deal with the business with consideration of the shareholder’s profits? Once answering those questions, they will determine business goals and directions as well as type of business they will adopt.

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References of this topic are various. Internet is such a great source where I can find lots of references. From this session, I would like to obtain an overall understanding of business types, scales, scopes, socio contributions and to whom the business offers services. One of the key points obtained from this session is to employ Medelow matrix to analyze resources and every activity of the enterprise.

In such a long time, “the concept of corporate governance” remains a debating topic, and it is such a challenge to me. After this course, I will be more confident because I absorbed the knowledge and will learn more from my work…

Session3: Managerial Environment

Through this session we can determine the importance and nature of external environment. Classification of environment toward business orientation needs taking into consideration of different aspects and their complexity, variety and stability of markets and competing environment. The managers can identify the importance of environmental conditions and manage them. At that moment, the managers need to know how to analyze the environment by employing PEST framework. PEST framework is a support tool for effective analysis of business environment. (Andrew Harrison, Feb 16, 2011)

Political environment has effects on the business operation of an enterprise. Stable political environment will help the enterprise having better business operation and long-term strategic directions. On the contrary, it may hinder the business operation in both short and long run.

Business operations are also affected by the national economy. In such a developing economy, the enterprise has more business opportunities due to increasing income of consumers and their willingness to pay. However, the enterprise should have to consider the environmental impacts on the host country from its development. The impacts which can be overuse of energies and natural resources will lead to environmental pollution and resource exhaustion. Other factors affecting the business environment which are social situations i.e. population proportion and averaged age of a country should be considered while running business.

Besides, the application of advanced technologies in the business operations helps increasing yield of production and reducing labor forces. The boom of application of technologies has been changing the sales methods by applying electronic technologies, such as online sale. Online sale also changes the buying tradition of the customers that the products are delivered directly to home.

Analysis of the environmental factors aims at identifying opportunities and threats through which the enterprise can reduce and actively manage risks, and at the same time optimize their strengths in doing business. In addition, we can determine business strategy to cope with and manage changes of the environment. Owing to that we become more proactive and are well prepared to deal with the crisis. This process may be associated with the strategic vision of enterprise in the future scenarios.

Session4: Economy and the role of government

In this session we learn about the economy and the role of government.

The government governs the country with respect to set economic goals. In reality, those goals are essential part of the macro-economy and listed as follows:

a modest rate of inflation,

a reasonable rate of economic growth,

low rates of unemployment,

a balance of payments in equilibrium or surplus.

These goals can be achieved through market forces. In fact, in the past the government tried to achieve all these goals simultaneously and by doing so it has encountered other problems. Today, the government focuses on management of macro-economy instead putting its efforts on a certain issue. The most important task is to keep everything under control. Example is to ensure low-enough inflation rate as compared with those of other countries. If the inflation rate is too high, it can even weaken the common currency system.

How can the government manage the economy?

Government must consider the tools available to achieve the set goals. Two common tools are fiscal policy and monetary policy.

Fiscal policy in which use of taxes and spending is announced in the budget is part of the Government’s efforts to affect demand in the economy. By using this tool, an economy can be adjusted through changing the amount of tax and expenditure. The fiscal policy is used to increase or decrease demand. The fiscal policy is basically a method to smooth the economic cycle for achievement of the goals. The government mainly uses interest rates to influence demand in the economy for restraining inflation. Increase in interest rates would increase savings and reduce consumption and investment spending. Although it is a short-term solution, it is worth achieving benefits from restraining inflation. Similarly, interest rates affect exchange rates and those involved in the trade are often affected significantly when interest rates change. Interest rates are also used to change the money supply by affecting the ability to create credit by the banking sector.

Monetary policy uses the money supply and interest rates to affect demand. The interest rate affects short-term demand and is mainly used to achieve realistic goals of the Government-that is low inflation rate.

The use of tax incentives designed specifically to improve labor productivity are referred to as the “supply side”, which is a long-term strategy designed to reduce unemployment. The government also sets out the framework of laws and regulations to govern the operation of enterprises.

Accordingly, the Government acts as an important actor in the economy. Management of the economy to achieve the goals is a complex operation. In short, the government uses interest rates as a tool for short-term demand management and other taxes and spending on long-term supply side to achieve macroeconomic goals.

Session 7: Economy has emerged on three continents.

In the 7th session, we consider the emerging economies including Brazil, Russia, India and China (BRIC). How do these emerging economies affect the world economy in the future and whether or not the emerging economies will usurp the U.S. position as number-one world economy?

The fact is that emerging economies have been contributing largely to the development of world economy. BRIC are among the first countries getting out of the crisis. In the future, those economies can be considered as core pillars of a newly-ordered world gradually appearing and they will dominate the global economy. Even though they have distinguished economic infrastructures, each of them has particular and significant advantages. Brazil has the strength of iron and agricultural raw materials; Russia is a large country with huge reserves of crude oil and gas, India is an exchanging point and can provide information, computing services, while China has a giant consumption market and considered as a “world factory” with huge cheap labor forces.

BRIC economies are booming with continuous high growth rate and gradually proving their important positions in the world trade. During this financial and economical crisis, BRIC is expected to have an important role in stabilizing the world economy and its role as an organization to influence the world political and economic situation following G8 and G20. Most analysts have reckoned that the prospects of the BRIC cooperation are very positive and bring opportunities to the communities of developing countries.

BRIC countries have distinguished characteristics of economic development. They will complement with each other in different fields such as finance, energy, services, technology, agriculture, environmental protection and food safety as well as in the multilateral trade negotiations of the World Trade Organization (WTO). BRIC countries are emerging and market-oriented economies and they are playing an increasingly important role in changing the structure of the current global economy.

Most economists agree that, if nothing happens than expected, in 50 years the BRIC countries will be the economic entity having great power to the global economy. In 40 years, the economic size of the BRIC countries will surpass the G7 countries in GDP. The Indian economy scale will overtake Japan in 2032, while China will overtake the U.S. in 2041. In 2050, six major economies in the world will be ranked as China, America, India, Japan, Brazil and Russia. Chief economist of Goldman Sachs Investment Bank Gim predicted these four economies will form the “dominant force” the world economy in 2050. (Goldman Sachs, Feb 16, 2011)

That is just the analysis and prediction of scientists on the future BRIC group. However, the open and developing economy together with a stable political environment are overwhelming advantages for the BRIC countries in the coming decades.

Session 10: Delivering Customer Value

In 10th session, we will study the goals and position of the enterprise in the market of providing products and services to customers.

Customer value is the total benefits received by the customer who owns the product or service. It includes the benefits offered from products and services offers, additional services, brand image and also personal relationships. Comparison of customer value and cost of customer will form the concept for value for customers.

Although competition remains tough, the quality is no longer a dominant competitive advantage. The product innovation and quality are no longer a basis for competitive advantage. Some companies turned to internal improvements by trying to work through better structure and process changes. Downsizing, restructuring, re-establishment emerged as a common management tool to create enterprise “streamlined.” However, whether or not the experience of these tools has made their promises is still uncertain. The operational processes are certainly changed, but the expected impacts on performance are yet achieved.

The quality and organizational structure improvement keeps on going and there are continuous and strong pressures on improvement coming from outside markets a process of seeking for competitive advantages begins. A question of what the comparative advantage is becomes important to the enterprises. Instead of focusing on the improvement of activities and internal structure, a change and improvement in management is unavoidable for the enterprises that are interested in outside markets and their customer benefits. Delivering customer value is a consistent and proper strategic direction.

First of all, the application of customer value delivered orientation requires the enterprises to have careful and concise study of the market and their customers. Decisions on the methods of competing in customer value delivery becomes more effective if the enterprises consider the questions:

What do the customer exactly need?

Out of all the values appreciated by the customers, which value should the enterprises target to for their advantages?

How do the customers think of the ability of the enterprises in delivering the values?

How do the appreciated values change in the future?

Secondly, the managers should have to translate their customer studies into action in order to offer better services. For example, the internal processes that provide values need to be adjusted to coincide with the values that customers appreciate.

If businesses become more competitive in providing better customer values, they will need a set of corresponding “tools for delivering customer value”. Using these tools, organizations in the future will become more qualified in integration of internal quality management and outward strategies which is consistent with the customer view of the values.

Session11: Managing Market Performance

In this session, we will learn about the market activities and the businesses, business regulations in a certain market and how to manage market businesses and exist in a market.

In a particular market if companies are about to succeed, they must study seriously and understand well that market and their products in that market. In order to do that the enterprises must understand both the current and potential markets and evaluate the attractiveness of the market. They also must define the strengths and weaknesses of existing businesses and the potential. That does not mean to set standards for the best market. The market attractiveness can be understood in different ways depending on on specific situations of that market. A market is considered more attractive if it possesses such factors: (large, growing, high profit, competition and competitive intensity is low, low immigration barriers, the market is less sensitive to occurrences due to loss of control).

Similarly, the evaluation of the company’s strengths and potentials in providing services, meeting the market needs should be conducted at the same time with the evaluation of the customer needs, advantages and strengths of competitors through following criteria: The company holds a big market share, grows faster in the market, has unique and valuable and high quality products and services, higher profits, effective production and marketing, protected technology properties.

In the context of the analysis of two factors including market attractiveness and the company strength, we must consider the relative importance of each factor to achieve a comprehensive assessment that helps us choose a target market.

Session12: Making Sense of Uncertainty.

Participating in the current rapid globalization environment, the enterprises and managers need to study the nature of the environment to be ready coping with rising problems in their businesses. In a constant and simple environment, while dealing with possible future situations, the managers often refer to the past and use the methods of prediction and assumption of unchanged situation in the future.. But this approach is no longer appropriate and it is even dangerous if it is applied in nowadays rapidly changing environment. The managers are more active in their businesses if they must make a detailed plan predict an operational process to deal with both advantages and disadvantages. Design of the good or bad scenario for business case, management and the leaders will avoid the thing happening unexpectedly they might encounter. At least two scenarios will be conducted:

Script that will achieve positive business and other cases, specific activities, if their business is in good point

Is a bad scenario worst for business and corporate actions as well as managers to avoid losses to the company.

Advantage of both scenarios shows that the specific actions that managers need to do beside the support tools to control the actions for promotion of business activities. However, in the case of a complex and dynamic environment, more sophisticated techniques are needed. In a dynamic environment, understanding the past situation does not always help the manager see what is going to happen. A commonly used technique is the creation of scenarios, allowing users to explore the broader possibilities and thus to terms with uncertainty.

Task 2 (60% of module mark)

Toyota Haier

Airbus British Airways

Sony-Erickson Marks and Spencer

Ikea HSBC

SAB Miller TUI

Cadburys Tata Steel

You are required to select one of the above companies in class and write a report (3000 words) in which you address the following issues:

Type of organisation and its scope

The organization’s purpose and an analysis of its key stakeholders with an underpinning rationale for the power/interest of each stakeholder group

The key external environmental issues (both general and competitive) impacting the organization in 2010 and beyond

The organization’s market position and its segmentation in 2010

The key opportunities and threats/challenges facing the organization in 2010 with a rationale for their selection

The role and purpose of scenarios as a management tool illustrating your answer with an example of a scenario for your organization based upon the key challenges generated in task 2.

Answer:

I will write a report for the Toyota.

In today’s modern society, owning a car to transport is no longer a distant issue with consumers worldwide. Therefore business has a lot invested in the manufacturing sector and business vehicles such as GM, Ford, Nissan, Toyota … the new launch of car companies that will create a competitive environment is very strong in business car. And expanding business market to other countries in the trend of global integration is becoming a serious urgency to this enterprise. Enterprises need to learn a lot about the conditions, standards and procedures of the different business environment affects how for production work and their business, of course if you want, they will be, they will have to adapt and to see changes to conform and survive in the environment they want to participate. Also businesses can take advantage of available resources such as cheap labour force, and natural resources abundance in the developing countries to produce their product and then sell in local market and exported to other countries.

Toyota is one such company that I also had a long interest in newspapers, articles on the website and on other media. In this article I will analyze and learn about the business environment impacts how for this business.

Toyota is an automotive group transnational headquarters in Japan. Toyota was founded by Kiichiro Toyota on 28/08/1937 from a section separate from Toyota Industries. After a long development time, Toyota has now emerged to become the largest car manufacturing group in the world in terms of sales (Kendra Marr, Jan 22nd 2009).

According to the annual report fiscal year 2009 (from 01/04/2008 to 31/03/2009), Toyota provides jobs for 320,808 workers, with 529 subsidiaries, with total capital of the company up to 397.05 billion yen.

Major activities of the company are to design, assemble and sell cars, race cars, trucks,

transportation vehicles and related spare parts. Toyota is known for the famous brands such as the Prius (hybrid vehicles with clean fuel), Lexus and Scion (luxury), Tundra (truck) … Toyota owns a large amount of shares in the company Car Daihatsu and Hino, Fuji Heavy Industries, Isuzu Motors, Yamaha Motors, and Mitsubishi Aircraft Corporation. In addition to manufacturing automobiles, Toyota provides financial services (Toyota Financial Services), involved robots, biotechnology…

Toyota’s market share worldwide spread. Of these 26% in Japan, 29% in North

U.S., 14% in Europe … Toyota to build factories in all parts of the world, manufacturing or assembling vehicles in serving the needs of that market.

Major changes in the global business environment, has changed rapidly in the business environment for Toyota. The growth of global markets and expanding into resource-rich countries or emerging markets has led to a decline in the U.S. market. Due to environmental problems and threats of global warming, interest in a low carbon society has led to rising petrol prices and rapid growth in demand for fuel-efficient vehicles. Finally, rising raw material prices caused the increase of raw materials used in the automotive industry, especially steel. Moreover, the challenge is now recession that has led Toyota to develop effective strategies to overcome financial losses. According to Business Week magazine in Toyota’s profit fell 10% last year in the United States because the economic downturn. For this recession, Toyota has launched two short-term strategies (for example, for production systems optimized to meet the demand in the U.S.) and long-term strategies (for example, to increase hybrid production). That is the strategic goal of the Toyota business in the state of the global economy today.

Mendelow I will use the matrix to analyze the role of environmental factors affecting the operations of Toyota:

Figure 1:

Through consideration Mendelow matrix we can see the role of the factors that affect decisions relating to Toyota’s strategy as follows:

With business partners, suppliers and local communities Toyota put them in the table that have less impact to Toyota because most of these factors contributing only a small part and depending on decisions of Toyota and Toyota can replace these elements with new elements even more valuable and more relevant. These factors are not vital element of the business. Actors like competitors and shareholders are located in the “Keep inform” the Toyota because of all the activities of Toyota and its competitors are analyzed when any new product or any act are reviewed information that is harmful or beneficial, must be treated thoroughly before using for business purposes, especially when competitors launch new products to market. The elements of the customer and the government (including provisions for legal, tax,..) of the host country where Toyota market are placed in the “Keep satisfied.” Consumers are objects that Toyota wants to target and their assessment is objective and is crucial to the existence or destruction of the Toyota. Toyota’s products when launched without the support and acceptance from customers will be very difficult for Toyota business in the local market and can even lead to bankruptcy of enterprises. And finally the factors that play an important role for Toyota as owners, managers, employees, and banks. Owners have the important decision to make leadership and development company in the right direction and purpose. Bank could help Toyota help on the financing to complete the project and product development objectives and expand into new markets. And finally the officers and employees of the company they are the factors that make our products and contribute to the value of the product, they will promote and increase the value of brand products as well as Toyota…

Toyota is still considered the pinnacle of creativity, production quality and the power industry in Japan – especially after the company passed General Motors (USA) to become the largest carmaker in the world. But now they are facing catastrophic – why?

Most problems related to Toyota’s business environment is currently facing that are:

The recovery (recall), nearly 8.5 million cars Toyota worldwide with technical deficiencies endangering the safety for the users have caused a serious crisis.

From November 2009 Toyota has a withdrawal of 3.8 million cars to repair parts of the accelerator, to overcome unwanted vehicle acceleration. During the period Jan to May 2010, Toyota had recalled 2.3 million vehicles on the same reason, and stopped production at five factories in the U.S.. On 2nd September 2010, Toyota additionally recalled 440,000 hybrid vehicles (both cars have gasoline-electric), including the popular Prius model, to fix a problem in parts wins. According to Reuters news agency on 23rd February 2011, Toyota is also considering withdrawal Corolla – the second best selling car after the Camry due to problems in parts of the wheel. (TBKTSG, Feb 26, 2011)

The competitors with the Toyota U.S took advantage of Toyota’s crisis by pushing up a promotion campaign “Giving up Toyota to buy their vehicles.”. Before Hyundai, two U.S. carmakers General Motors (GM) and Ford have also adopted similar measures to attract customers. GM and Ford pledged to donate $ 1,000 for consumers to switch Toyota’ car to their products. Customers who wish change from Toyota to GM car could get a loan to buy the car for 5 years without paying any interest…(vneconomy.vn, 20 Feb, 2011)

Otherwise, Toyota is also facing environmental problems for example earth’s warming, gas prices, increasing demand for less fuel consumption. and finally the rise of raw material will cause an increase in the price of the product in the future.

Toyota’s goal is to maintain its position as the world’s No. 1 in sales and continue to upgrade and further improvements in product quality and will regain its image.

In 2010 it has been seen that the combined fuel vehicles of Toyota Prius sales break record for a single model in Japan. Prius sales increased program support by the Japanese Government for consumers to buy environmentally friendly vehicles.

Toyota predicted that car sales reached 8.61 million vehicles in the global market in 2011

However, according to analysts, because of the recall crisis that Toyota faced in the past year, which is accompanied by a wave of claim and the record fines, there will be chasing this car in the process to regain the confidence of customers.

“Being number one in term of sales is not important for us,” Toyota spokesman Paul Nolasco told AFP. “Our objective is to become number one with the customer, in terms of service and customer satisfaction.” (Tokyo-AFP, Jan 24, 2011)

According to AFP, Toyota is still the world’s largest car maker. Its sale increases 8% in 2010, reaching 8.418 million units. Meanwhile, any U.S. rivals General Motors (GM) sold 8.39 million vehicles.

Particularly in Japan, Toyota’s group sales – including both car Daihatsu Motor and Hino Motors downs 10% in the past year. However, the group’s sales in foreign markets increased 7%. Toyota sold 7.528 million vehicles last year, increasing 8% from last year.

According to data provided by Goodcarbadcar.net in 2010 new car sales at Toyota’s U.S. market have fallen behind both GM and Ford Motor to GM: more than 2.2 million vehicles, Ford Motor: more than 1.9 million vehicles, and Toyota: more than 1.76 million units, and the rest belong to other companies such as Hyundai, Kia, …about 900,000 units. (Good car guy, Jan 5, 2011)

Figure 2:

Through the above analysis and data can be found despite declining sales in the U.S. and Japan, but Toyota’s sales is still increasing in other markets, especially emerging markets like China Asian Nations.

Opportunities:

Situation in world oil prices is raising, customers tend to use the car

consumer oriented products that save fuel or use clean energy sources.

Toyota is pursuing projects to build natural gas vehicles and hydrogen by applying

and technical achievements of the modern world and the results of R & D. While customers are

looking for alternative sources of oil, this is a lucrative project for the company.

Currently, in many countries where have high demand for vehicles but the supply is still limited. Toyota may expand its market to these countries. Toyota can produce the cars that meet requirements of geographical conditions and target the young generation. These are opportunities Toyota to raise its market share.

Threats:

As discussed above, there are many other vehicle manufacturers around the world who have joined market. This is a big challenge for Toyota that requires Toyota has to improve the quality and price in order to compete with the existing and potential competitors. Besides, changes in the exchange rate between the dollar and yen also cause a profit decline. The increase in price of raw material is also a threat to the production. After the prolonged economic crisis, the governments are expected to proclaim

tight fiscal policy that lead to the decrease in sales and sales of vehicle manufacturers. Government also encouraged their people to use less polluted means like a train, bus, high speed train instead of using polluted transport means like s cars, motorcycles. In addition, changing demographical structure, families now prefer to use the

large models, the change in the use of family car as the car uses less than in making

children to school, the home delivery services, also reduces the demand for cars fell

significant.

To analyse environmental factors I would use PEST model includes