The brighter side of the world’s most respected Automaker
“If people started living at the South Pole, we would want to open a dealership there. “
-Fujio Cho, President, Toyota Motors March 2002.
In January 2004, leading global automobile company and Japan’s no.1 automaker Toyota Motor Corporation, replaced Ford Motors as the world’s second largest automobile manufacturer. Started off as spinning and weaving company in 1918, so what exactly resulted in this historic turnaround?
Toyota’s history dates back to 1897, when Sakichi Toyoda started Toyoda Automatic Loom Works (TALW) in 1926 for manufacturing automatic looms. This concept of designing equipments to stop so that defects can be fixed immediately formed the major basis of Toyota Production system (TPS) and later became a major factor in the company’s success. In 1933 the automobile division was launched and the first passenger car was rolled out. Sakichi’s son Kiichiro Toyoda during a visit to Ford motors USA to study the US automotive Industry saw that an average US worker’s production was more than the Japanese. He realized that to compete globally the Japanese productivity had to improve.
Advent: After returning to Japan he introduced several innovative methodologies in Japanese Industry. JIT: Just in time production was adopted in assembly line system, where each unit produced only as much was required by the next in line unit thereby reducing the cost of inventories and excessive workforce. During the next few years many innovative methods were applied, but due to World War II and Japan’s direct involvement hampered the growth prospects of the company. However after the World War, the banks helped in reviving Toyota. Throughout the next decade Toyota carried out extensive expansion and sales. It setup distributors in the Middle East (Saudi Arabia), in the North America in the El Salvador and finally forayed into the US market through its subsidiary. It also setup its first overseas production in Brazil and over the next few years developed a vast network of overseas plants and R&D units.
Globalization Policy: Toyota motors policy of globalization, was internally interpreted as global localization. The company believed that by setting up plants in the company’s major market would help them cater to the customers better. Moreover they setup R&D facilities in loyal and potential markets where they hired local engineering talent. This helped them understand the requirement of the particular market better and also come out with the desired product. By early 1970’s Toyota was the no.3 automaker in the world. Its model Corolla launched in 1965, by 1974 had become the largest selling car in the world.
Losing Ground At Home: Meanwhile as Toyota was gaining ground in overseas market its sales in domestic market was on the decline courtesy Honda, Nissan etc. The company then turned to its dealer network which was already the best in the country that time. The company took initiatives to have a better communication with its dealers. It offered more incentives to increase sales and encourage them to attract more prospects for test drive. It also observed that some dealers were based close to each other and even displayed the same models. It took steps to provide them with different models for sale to reduce unnecessary price competition. Also it decided to take a strict stance if the desired targets were not met. The company also started investing heavily in advertising. These steps helped it stop its decline in the local market.
Gaining in the US and Europe: While Toyota was losing some ground on home turf it was making huge strides in offshore markets. The oil crisis in the late 70’s and early 80’s led people to move towards fuel efficient cars. Japanese automakers were always working on automobiles with increased performance and fuel efficiency. It was quickly able to capitalize on the crisis and achieve path breaking success in the US. Moreover the company had rolled out car models in almost all segments; ranging from small segment, to luxury sedans, SUV’s to mini trucks! Thus marking its presence in almost all segments of the auto market.
Breathing a fresh lease of air: In the late eighties and early 90’s a market survey showed that the average age of Toyota customer base was in the age group of 45+. Analyst felt that despite its attempt to appease the young population it wasn’t able to brand itself. This resulted in massive brand building attempts, the company embarked on a massive restructuring campaign and started a new company Virtual Venture Co (VVC), to design and sell cars that appealed to the youth. VVC adopted many unconventional sales strategies to improve the Toyota brandname among the youngsters. For a small amount they offered free test drive on the latest Toyota models. It built an $83mn amusement park, where it displayed Toyota’s vision for future models and also allowed people to design their own cars. To breathe a fresh look in the dealerships, Toyota launched on-site pizza parlors and playgrounds at the dealers place to attract the young customers and present a fresh and appeasing look to the company. The company also rolled out various models like Vitz compact, FunCargo etc. which were basically in the entry level segment. It even offered cash rebates to the buyers of these models.
Innovation: Toyota has always been involved in providing better technology and fuel efficient cars. In 2003 Toyota unveiled the new hybrid gasoline sedan Prius. It was the world’s first vehicle that could park itself. It had an electronically operated steering wheel that guided the car when reversing into parking lanes.
Business Practices: Toyota look global policy resulted in establishment of a number of offshore manufacturing plants, R&D centers and sales offices. However each unit sticks to the fundamental company’s business practices. All the units practice the principles of KAIZEN (continuous improvement), PDCA (Plan, Do, Check, Action), Pokayoke (mistake Proofing), JIT and Construction of Cost Competitiveness (CCC)
Markets: For long Japan, North America and Europe had been the major markets for Toyota. The company always focused its approach to launch new and technologically advanced products in these markets. Moreover cater to the aesthetics demanded by the customers. The company launched a small car Yaris which improved the company’s brand image in the European market. The company is now looking towards the emerging markets like India and China for its expansion.
Future and Global Vision 2010: Despite the speculation that the global auto markets have saturated, Toyota still aims to become the largest automaker in the world and achieve a 15% market share. It’s optimistic that there are emerging markets like India, China, Brazil where economic activity is growing leading to rising income, moreover people moving towards owning their own cars. The carmaker wants to tap these markets.
Thus Toyota has been the most valued brand for quite some time, may be for times to come! 🙂