Read the Case Study below and Answer the Case-study Discussion Questions

Toyota's Globalization Strategies

Casting a Global Spell

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% in2002 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.

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.

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."

You are the Marketing Manager for Toyota Motor Corporation (Toyota), and would

like to penetrate European markets. Your major challenge is which market to enter. The

directors of the company are convinced that you can enter any country as long as the

population is big. Their argument is the sheer size of the market is enough to give you

reasons to enter.

a) With the aid of practical examples, advice the directors of Toyota Motor

Corporation (Toyota), on the right steps to follow in selecting appropriate

international markets. [20 Marks]

b) Assume that you decide to export your vehicles to Russia to take advantage of a

huge potential market. Discuss the environmental factors that you need to consider

and demonstrate how they are likely to affect your operations. [30 Marks]