The Toyota Success Story

The story of Japanese car manufacturing company Toyota is one of the enduring successes in the history of manufacturing industry. From a small, obscure entity in 1947, it has now risen to the second spot in terms of global sales. Over the past 30 years, Toyota Motor Corp. has not only been the envy of the automotive industry

“but also been held in high esteem as a symbol of manufacturing and leadership excellence in the business world. In fact, the Toyota brand has been touted as the pinnacle of automotive excellence by rating agencies (e.

g., Consumer Reports) and industry consultants alike, and this status has been reflected in a continuous stream of high marks in consumer confidence. (Piotrowski & Guyette, 2010, p.89)

It was Mr. Toyoda Sakichi, who provided the original impetus to the young company. This entrepreneur and inventor par excellence translated some of the creative ideas he employed in the textile industry to the fledgling automobile industry. Under the mentorship of Toyoda Sakichi, his son Toyoda Kiichiro applied the proven methods of efficiency from the textile looms to automobile manufacturing.

In mid-twentieth century, Ford and General Motors had a significant market share of the Japanese car industry, and competing with them was near impossible. Yet, based on the visionary aspiration of the deceased Toyoda Sakichi, his son took upon the challenge of competing with the bigger firms. Apart from the founder’s vision, some practical necessities in the form of Japanese military missions also facilitated the growth of Toyota Motor Corporation in its early days.

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And then when the legendary Ohno Taiichi joined the company after the Second World War, his incisive engineering inputs helped transform the company into a reputable global player. (Price, 1997, p.14)

Toyota Origins

In 2001, Toyota issued a document titled Toyota Way 2001, which highlights some of the core principles and values espoused by the management and the workforce. Some of these principles also serve as strategically important in distinguishing Toyota from other companies. For example, principles such as Respect for People, Continuous Improvement, etc are inculcated into the workforce right during times of prosperity and distress.

The automotive market in the world is said to be highly competitive and volatile. Moreover, demand in this market is affected by a number of factors such as social, political and general economic conditions; launch of new vehicles and technologies; and expenses incurred by customers to buy and operate vehicles. These factors can make consumer demand to vary substantially from one year to another across market geographies and for different types of automobiles. Yet, in spite of such uncertainties and still competition, a recent annual report of Toyota shows

“increasing unit sales from 2006 to 2008, based on the total unit sales of its products all over the world. But, based on the unit sales per geographic segment, there was a decline in the Toyota unit sales in Japan, from 2,364,000 units in 2006 down to 2,188,000 units in 2008. Despite the decline in the unit sales of Toyota’s products in Japan, Toyota’s market share (including Daihatsu and Hino) including min-vehicles, and Toyota and Lexus’ market share excluding mini vehicles, remained at a high level close to prior fiscal year reflecting the sales efforts of domestic dealers” (Cortez & Penacerrada, 2010, p.113).

One of the key driving forces behind the continued success of Toyota is its embrace of Lean Manufacturing and Just-In-Time Production techniques. Then there is the overarching set of philosophies and values brought under the term the Toyota Way. The Toyota Way can be further broken down into 4 components. First is a long-term approach to management decision making; second is a systematic approach to problem-solving; third is value addition to the company; and fourth is to focus on solving persistent problems facing the company. These principles and procedures add up to form the formidable Toyota Production System.

By applying Michael E. Porter’s Five Forces Analysis, we can arrive at a better understanding of Toyota’s current business environment. The five external forces acting upon a business are 1.Bargaining Power of Suppliers; 2.Bargaining Power of Customers; 3.Threat of New Entrants; 4.Threat of Substitute Products; all of which contribute to the 5.Competitive Rivalry within an Industry. In the current global economic and political context, Toyota is fairly well placed in tackling these extraneous factors that have the potential to alter business prospects. Especially under the regime of neo-liberalism, companies such as Toyota can avail of cost-effective supply of raw materials. The flip side though, might be the bargaining power of customers; but this can be overcome by Toyota’s brand power and leadership position within the industry. The threat of substitute products is a negligible threat and so is the threat of new entrants, as establishing brand equity in the automobile industry is not an easy task.

Toyota has been tasting success consistently for over five decades now. This is not only true in its native Japan, but also across the world. When one looks for the reasons why it is so successful, the answers are again to be found in the tenets comprising The Toyota Way. The key ingredients that make the Toyota Way can be summarized as Challenge, Improvement, Learning, Respect and Teamwork. These factors have stood the test of time and are bound to take the company forward in the future too. (Liker, 2004, p.23)

The company now has strategic plans to surpass General Motors and assume leadership position in the global automobile industry. To achieve this goal, the company has set itself to garner a 15 percent global market share by 2010. Not only is Toyota focused on maintaining its leadership position within the automobile industry but also keep ahead as a global business corporation. As of 2009, Toyota ranked among the top-5 companies in the Fortune 500 list, and this is no mean achievement given its humble origins in Japan. The company would strive to maintain this distinction in the years ahead while also serving its patronage with high-quality products that are state-of-the-art and also efficient in design and energy consumption. (Piotrowski & Guyette, 2010, p.89)