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+91- 9503094040
Global Business Environment
Q.4 Case study
In January 2004, leading global automobile company and Japan's number one
automaker, Toyota Motor Corporation (Toyota), replaced Ford Motors (Ford), as the
world's second largest automobile manufacturer; Ford had been in that spot for over
seven decades. In 2003, Toyota sold 6.78 million vehicles worldwide while Ford's
worldwide sales amounted to 6.72 million vehicles (General Motors, the world's
largest car manufacturer sold 8.60 million vehicles).
According to reports, while Toyota's market share in the US increased from 10.4%
in 2002 to 11.2% in 2003, Ford's declined from 21.5% to 20.8% during the same
period. Reaching the No.2 slot was a major achievement for Toyota, which had
begun as a spinning and weaving company in 1918. Ford was reportedly plagued by
high labor costs, quality-control problems, lack of new designs and innovations, and
a weak economy during the early 21st century, which made it vulnerable to
competition. Toyota, aided by its new product offerings and strong financial muscle
had successfully used this scenario to surpass Ford and affect a dramatic increase
in its sales figures. In November 2003, Toyota announced its financial results for
the half-year ended September 30, 2003. Business Strategy | Case Study in
Management, Operations, Strategies, Business Strategy, Case Studies The
company reported a 23% increase in net income (as compared to the corresponding
period of the previous year) to $4.4 billion on revenues of $69.7 billion. This took
Toyota way ahead of World's top three automobile makers (at that time) by sales,
General Motors (GM), Ford Motors (Ford) and Daimler Chrysler. Its market
capitalization of $110 billion (on November 05, 2003) was more than the combined
market capitalization of these three players. (See Table I).

2. Given the fact that in 2003, these top three companies were struggling to maintain
their sales and profitability targets, Toyota's performance was termed remarkable
by industry observers (See Exhibit I for the company's financials). Toyota had
emerged as a formidable player in almost all the major automobile markets in the
world. Interestingly, one of its strongest markets was the US, the world's largest
automobile market and the home turf of Ford and GM. Toyota had emerged as a
strong foreign player in Europe as well, with a 4.4% market share. In China, which
the company had identified as a strategic market for growth in the early 21st
century, it had a 1.5% market share.
The other major markets in which the company was fast strengthening its presence
were South America, Southwest Asia, Southeast Asia and Africa.3 Back home in
Japan, it enjoyed a market share of over 43%. Analysts attributed Toyota's growing
sales across the world to its aggressive globalization efforts that began in the mid-
1990s.
The company constantly strived to ensure that each of its market segments - Japan,
North America, and Europe and other markets - generated one third of the annual
sales (See Exhibits II and III for revenues and revenue growth data in its core
markets). This goal was at the heart of Toyota's three globalization programs - New
Global Business Plan (1995-1998), Global Vision 2005 (1996-2005) and Global
Vision 2010 (2002-2010). In the light of Toyota's intensifying globalization efforts,
Toyota's competitors themselves stated that Toyota could not be taken lightly. GM's
Chairman, John F. Smith Jr., said, "I would not say they will not make it. Toyota is
an excellent company. They are very focused on what they do and they do it well,
and that is what makes them great."4 Business Strategy | Case Study in
Management, Operations, Strategies, Business Strategy, Case Studies Background
Note Toyota's history dates back to 1897, when Japan's Sakichi Toyoda (Sakichi)
diversified from his traditional family business of carpentry into handloom
machinery. He founded Toyoda Automatic Loom Works (TALW) in 1926 for
manufacturing automatic looms. Sakichi invented a loom that stopped
automatically when any of the threads snapped. This concept (designing equipment
to stop so that defects could be fixed immediately) formed the basis of the Toyota
Production System (TPS) and later became a major factor in the company's success.
In 1933, Sakichi established an automobile department within TALW and the first
passenger car prototype was developed in 1935. Sakichi's son, Kiichiro Toyod
(Kiichiro), convinced him to enter the automobile business, and this led to the
establishment of Toyota in 1937. During a visit to Ford to study the US automotive
industry, Kiichiro saw that an average US worker's production was nine times that

3. of an average Japanese worker. He realized that to compete globally, the Japanese
automobile industry's productivity had to be increased...
The Second Phase of Globalization
Cho decided to focus more on localization - he believed that by doing so, Toyota
would be able to provide its customers with the products they needed, where they
needed them. This was expected to help build mutually benefiting, long-term
relationships with local suppliers and fulfill Toyota's commitments to local labor
and communities. Cho defined globalization as 'global localization.' Therefore,
besides focusing on increasing the number of manufacturing centers and expanding
the sales networks worldwide, Toyota also focused on localizing design, development
and purchasing in every region and country...
The 2010 Global Vision
In April 2002, Toyota announced another corporate strategy to boost its
globalization efforts. This initiative, termed the '2010 Global Vision' was aimed at
achieving a 15% market share (from the prevailing 10%) of the global automobile
market by early 2010, exceeding the 14.2% market share held by the leader GM.
The theme of the new vision was 'Innovation into the Future,' which focused on four
key components: Recycling Based Society; Age of Information Technology;
Development of Motorization on a Global Sale; and Diverse Society (See Table III)...
Business Strategy | Case Study in Management, Operations, Strategies,
Business Strategy, Case Studies
The Globalization Pay-Off
By mid-2003, Toyota was present in almost all the major segments of the
automobile market that included small cars, luxury sedans, full-sized pickup trucks,
SUVs, small trucks and crossover vehicles. According to reports, while global
vehicle production increased by 3.3 times since the early 1960s, Toyota's production
had increased by 38 times. As a result of its localization initiatives, Toyota had 45
manufacturing plants in 26 countries and regions by this time, and sold vehicles in
160 countries (See Exhibit IV and V for Toyota's worldwide manufacturing
operations and production details)...

4. Which Way to Drive from Here?
By the end of 2003, Toyota seemed to be well on its way to achieving its
globalization goals - worldwide sales of 6.57 million units in fiscal 2004; sales of 2.12
million units in North America by 2004; a 5% market share (800,000 units sales) in
Europe by 2004; a 15% market share in the global market and a 10% market share
in China by 2010.
Analysts felt that the following factors were helping the company in its quest to
become a truly global automobile major: strong financial condition, globally efficient
production system, unique corporate culture, and the ability to develop a product
range that met the unique needs and desires of customers in different regions.
Question:
(4 × 5 = 20)
1. What marketing strategies does Toyota use?
2. What are the problems faced by Toyota?
3. Why Toyota is so successful in the market?
4. What was the end result of Toyota's crisis management situation?
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