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Strategy Execution
Q.4 Case study
In July 2013, Yasumori Ihara (Ihara), Executive Vice President of Toyota Motor
Corporation was readying plans to bolster Toyota's position in the emerging
markets by expanding operations into Cambodia, Myanmar, and Kenya.
According to Ihara, who was in charge of the company's emerging markets
business, "Compared with North America, Europe, or Japan, where buyers are
mostly replacement buyers, it's mostly first-time buyers in emerging markets.
It's where the future growth is."
The Japan-based Toyota was the world's largest automaker with a presence in
more than 170 countries. In March 2011, Toyota announced its ‘Global Vision' in
which emerging markets were given particular importance as part of its
strategy. The company wanted to get 50% of its global sales from the rapidly
growing emerging markets by 2015. The company considered China, Southeast
Asia, India, and Brazil as its key emerging markets. In 2012, Toyota's
consolidated vehicle sales was 8.7 million units, out of which 3.7 million were
sold in emerging countries.
But in the second half of 2013, Toyota was facing intense competition from its
rivals both in the developed as well as the emerging markets. The company had
invested a huge amount in emerging markets, but key emerging markets were
facing a lot of volatility and sluggish growth. There were concerns that these
markets were no longer attractive enough. In addition to getting Toyota's
emerging markets strategy right, Ihara's main responsibility was to reverse the
disastrous sales decline in China, where consumers were boycotting Japanese-
built cars due to diplomatic tensions over some disputed islands.

2. The global automotive market was highly competitive and competition was likely
to intensify further with continuing globalization. The factors affecting
competition included product quality and features, safety, reliability, fuel
economy, the amount of time required for innovation and development, pricing,
customer service, and financing terms. With growing economies and a low
vehicle penetration rate, emerging markets were considered as the key source of
growth for the global automobile industry.
According to the International Monetary Fund, between 1988 and 2011, while
the developed markets' of global GDP declined from 61% to 49%. Toyota's
presence in the emerging markets dated back to the 1960s when it used to sell
vehicles in markets like Taiwan, Brazil, South Africa, Thailand, the Philippines,
Malaysia, Russia, and China. In the initial years, Toyota was mostly exporting
vehicles from Japan to these countries as it only had production facilities in
Brazil, South Africa, and Thailand.
During the 1970s, Toyota started producing multipurpose vehicles in the
Philippines and Indonesia as families in these two countries tended to be large
and therefore vehicles that could be used both for business and family were
preferred. In 1976, Toyota launched the Tamaraw in the Philippines followed by
the Kijang in Indonesia in 1977. In the 1980s, Toyota started producing vehicles
in Taiwan and Malaysia followed by India in the 1990s. By the 2000s, Toyota
had production facilities in all these emerging markets. In an effort to increase
its presence in the emerging markets, Toyota began strengthening its supply
system in the emerging markets and increasing localization. During the 2000s,
the company set up a local parts distribution network and a supply chain to
provide greater autonomy to affiliates in the emerging markets.
Toyota's presence in South East Asia dated back to the 1950s. By 2012,
Toyota had 14 production companies in Thailand, Indonesia, the Philippines,
Malaysia, and other Southeast Asian countries. Under the Innovative
International Multi-purpose Vehicle (IMV) project launched in 2004, Thailand
and Indonesia became Toyota's global production centers. By 2012, Toyota was
the market leader in Thailand, Indonesia, the Philippines, Taiwan, Brunei, and
Vietnam. The IMV Project was intended to create an efficient production and
distribution structure for pick-up trucks and multipurpose vehicles to meet the
needs of consumers globally. Toyota applied the ‘genchi genbutsu' approach to
observe and analyze the needs of each region and the types of vehicles used in
those regions to develop and introduce IMVs.

3. The IMV project included manufacturing diesel engines in Thailand, gasoline
engines in Indonesia, and manual transmissions in the Philippines and India.
The IMV project adopted a leaner development process based on a common
platform, and developed five vehicles: three pickup trucks, a minivan, and an
SUV, especially developed in 2004 for launch in over 140 countries. Though
Toyota was still the #1 automaker in mid-2013, its position was coming under
threat from a resurgent GM and Ford in the US market.
Competition was catching up in the hybrid car market too. In its home market,
the company was hit hard in late 2012, after government incentives for
consumers to buy fuel-efficient models expired. In 2013, the Yen declined more
than 12% against the dollar. In emerging markets, Toyota had to contend with
intense competition from other Japanese companies such as Nissan, Honda, and
Suzuki, some of which had managed to entrench themselves in key emerging
markets. Companies such as GM and Germanybased Volkwagen were also
pushing ahead with their own emerging strategies.
In 2008 and 2009, analysts were expecting emerging markets to become a safe
haven for investors, considering the recession in the US and Europe post the
global financial crisis. But as of 2013, while developed economies seemed to be
strengthening, the emerging markets had underperformed in the previous couple
of years. Analysts were also concerned about the vulnerability of the emerging
markets which reacted strongly to modest changes in the world economy. In mid-
2013, many emerging markets were struggling with rapid depreciation of their
currencies. Countries such as Brazil, India, South Africa, and Indonesia were
among the worst affected.
Between May and September of 2013, while the Indian Rupee fell by 21%, the
Brazilian Real fell by 17%, followed by the Indonesian Rupiah (15%), the
Thailand Baht (8%), and the Russian Ruble (6%). Central banks in key markets
like Brazil and India were working frantically to prop up their currencies.
As of mid-2013, Toyota pursued the emerging market strategy with Asia as its
‘second mother base'. According to Toyota's Global Vision, the company aimed to
implement its IMV Project strategy in the emerging markets by continuing to
fortify its core models along with new hybrid models. It would also strengthen its
production and supply bases, and enhance its cost competitiveness by 100%
localized procurement.
Question:
(4 × 5 = 20)

4. 1. Analyze the automobile industry in emerging markets and discuss and Debate
whether automakers should focus on these markets.
2. Evaluate the strategies adopted by Toyota to increase its presence in
Emerging markets.
3. Discuss ways in which Toyota could get its emerging markets strategy Right
and bolster its position further in emerging markets.
4. Give your suggestion for better marketing strategy.
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