Case Study of Toyota: International Entry Strategies

Toyota is being known world-wide and being accepted as the world most popular car manufacturer. Wherever we go, not even a single soul did not know what a Toyota is. This is what we called as Toyotaism. But, to accomplish this was not that easy compared to how it sounds. Toyota had to face several issues and problems also had taken multiple actions to solve them. Hiroshi Okuda had identified 3 issues relating to the management of Toyota. Those management issues are; (1) Lag in product Planning, (2) Declining market share in Japan, and (3) was behind in overseas expansion. Due to these main issues, Toyota had taken several steps for the manufacturer to survive in its own name in own country and also to the world outside.

Toyota's International Market Entry Strategies

For Toyota to make known of its brand name, a number of development strategies had been taken by Toyota.

The first stage of Toyota’s development strategy is Cross-Nation Space Strategy. It is where Toyota implemented a strategy of marketing its product in Japan and in other nations around the world. It is a strategy of blanketing the nations with all Toyota’s product. Manufacturing of product for Toyota started in 1938 where its first plant was built which is the Honsha Plant. It is after 20 years of incorporating that Toyota could construct their second plant which was in the year 1959. Upon incorporating, there were three major strategies being taken to ensure their success. First and foremost was to have high quality auto suppliers. Second, was for Toyota to built affiliates like providing housing and entertainment facilities for its own employees and families. This was because Toyota is making its employees and families as their crucial factors of Toyota’s success. And thirdly was webbing Toyota dealers in which they developed on their channel of distribution.

It was up until 1960s that Toyota adopted nation-specific strategies to provide their automobiles throughout the nations outside. Due to that, Toyota Motor Sales (TMS) had set up export department for the main reason to pioneer the overseas market. First exporting activities being done by Toyota was after receiving an order from Brazil for 100 units of Model FXL large trucks. As Brazil was a developing country at the moment, it was a golden opportunity for Toyota to introduce its brand name overseas and highly potential to penetrate the automobiles market in Brazil. But, because Brazil eventually had a poor infrastructure, Toyota grabbed this opportunity and tend to market its Four-wheeled-Drive (4WD) Land Cruiser as this vehicle is able to withstand the poor road conditions of Brazil. Starting from this point, Toyota had Ipiranga, Brazil, and had the first-mover advantage to meet the demand locally. This enabled Toyota the chance to export its product to other Latin America nations like Colombia, Costa Rica, Venezuela, and Puerto Rico. For the South-East Asia, the first export was to Thailand which is in 1950s to 1960s. The action of Toyota Motor Sales to gain market in Thailand has enabled Toyota to receive for the second time the advantage as the first-mover in the Thailand’s local automobiles industry. And as for the Middle-East, it was in 1947 that the first exporting activity being done by Toyota which was to the King of Egypt. During this period also Toyota had already started exporting its products to gain market on the automobiles industry in China. Toyota hesitated in exporting its products to the Europe at first because Europe is known as the world’s most sophisticated market. So, Toyota had no intention to do any transaction with the Europe during that particular period. But, a European representative had come all the way to Tokyo asking Toyota to exports its automobiles. As a result, Toyota had export its model, Crown and Land Cruisers to Denmark and Ethiopia.

After the expansion of products to the Latin America, Toyota had expanded its automobiles to the North America Continent especially the United States of America. This is where the second stage of Toyota’s Development Strategies took place. In this stage, Toyota implemented the Cross-Continent Space Strategy by establishing 5 assembly factories. However, due to the weather condition in the USA, it brought some difficulties to Toyota in promoting its vehicles. Thus, Toyota started to export the new Corona and Corolla to Canada. Another core factor that influenced Toyota to expand its cars to United States is due to the existence of large port cities in the West Coast Region that were crucial for Toyota in distributing its products to the USA. Toyota Crown was the first model that arrived in United States, specifically Los Angeles. After a while, Toyota’s cars being condemned as it vibrates badly and easily overheated while driving all the way on United State’s highway. To replace the failure of Toyota Crown, Toyota had produced another improved car, Tiara, to the consumers of the USA. But, the Tiara also had not fulfilled the demand of the consumers and Toyota having serious problems in selling its cars. From this, Toyota had learned its lesson motor vehicles that are not competitive in performance, price, and brand names had no chances at all of being accepted by the markets. Until then, Toyota had been striving eminently to develop its new international product of the new Corona.

As for the development on the automobiles market in Thailand, Toyota had made a joint-venture with one of the car manufacturer of Thailand to become Toyota Motor Thailand. This was later enabled Toyota to establish its own assembly plant in Thailand where it provided multiple job opportunities to the locals indirectly.

The expansion of Toyota’s products continued to the West Region, then to the Central Region and lastly to the East Region of United States especially to New York City. This expansion process was successfully carried out with one of the factor of the establishing of the second wholly-owned subsidiary of Toyota which located in Brazil. The expansion leads to a success when Toyota Do Brazil (TDB) merged with Toyota of Argentina to export Toyota’s automobiles to Latin America and Central America. As Toyota was backed with high political influence due to its several contributions to the local politician during the election years, this guaranteed the successfulness of Toyota to world generally.

Approaching 1970s, two major developments occurred to the Toyota manufacturer. First is the oil crisis. As the price of oil increased tremendously during the period, Toyota’s cars are highly demanded as Toyota promoted a reasonable price on its cars. Another development occurred was the appreciation of Japanese currency. For this reason, Toyota had swift its manufacturing of high grade of small cars to sporty cars. The examples are Celica and multi-use pick-up trucks.

Next strategy implemented was the establishment of the product plants. The main factor that leads Toyota to put this strategy into action was due to the oil crisis that eventually increase the number of units sold of Toyota’s products. In January 1982, Toyota Motor Company (TMC) and Toyota Motor Sales (TMS) combined to form Toyota Motor Corporation. This restructuring and merger initiative was to grasp the capabilities of Toyota to the fullest. Toyota had been in a joint venture with General Motors (GM) with the reason that a voluntary restriction on Japanese exports to USA was initiated in 1981. This was after an action to joint-venture with Ford Motors failed. As a result, facilities of its own by Toyota being able to set up in the United States of America. The advantages towards this plan were to reduce risks and to accumulate experience in the local production. In this strategy also, Toyota decides to build production plants in developing countries and targeting places in Urban City like the Shenyang and Tianjin in China. In 1998, Toyota acquired Tianjin Motor Group to become Tianjin Toyota Motor Engine where they were in charged in supplying Daihatsu and later exported to Japan.

Up until 1995, Toyota implemented its third stage of development strategy which stressed on the globalization strategy. New global business plan being initiated with the efforts to further localize (overseas) and increase imports of automobiles produced overseas (in Japan). One of the strategy made was the New Sienna which was made by the manufacturer of Toyota in Kentucky, USA. Other globalization plan that were made was the published of supplier’s guide with the intention to aim at providing the first timer suppliers a greater understanding on Toyota’s purchasing activities and giving outlines on how to sell supplies to the Toyota. In 1997, Toyota made another plan which providing internet services where it makes overseas supplier request for auto parts easier. As up to March 1998, Toyota had already had 34 overseas subsidiaries and affiliates throughout the world, 150 distributors in 5 continents and 25 countries. This indicates that Toyota is successfully entered the foreign market.

One key factor that leads Toyota to be able to expand effectively is due to its active played the role of a good corporate citizen. Toyota is actively donating to social and cultural activities, exchange students programs and traffic safety campaign. This global business strategy has being a major plan for Toyota to keep consumers driving its products from generation to generation.

In short, all of the above strategies created by Toyota can be explained as; first, Toyota started to target the international market by focusing on the national level, then the global level. Ways of making its products known throughout the world are through exporting at first, joint ventures and later towards the establishing of Toyota’s own subsidiaries to manufacture its products in the host country. After creating a potential hopes on the 5 continents’ market, Toyota began to be part of the local communities’ choice of automobiles in their own country.

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