Today, Toyota is not only viewed as one of the top-quality firms in the world, but it is the world’s most profit- able auto manufacturer. However, when Toyota began in 1937 as a spin-off from Toyoda Automatic Loom Works, its products were not perceived as high quality. The firm built its quality image with years of hard work. One key element in that success has been the firm’s ability to adapt and change as its environment has changed. In the 1990s the firm was, and still is, the dominant firm in the highly fragmented Japanese automobile market. Toyota had international operations but most of its international sales came from the export of cars produced in Japanese plants. Profits were long heavily dependent upon the Japanese market and the captive set of distributorships the firm con- trolled. However, in the 1990s as the economic bubble in Japan burst, Toyota had to look internationally to increase sales. Initially, the firm dealt with its declining Japanese sales through greater international sales served by exporting cars from its plants in Japan. The response by the political establishment, particularly in the United States, was fiercely negative. Toyota was criticized for providing no jobs to the U.S. economy, while profiting significantly from their open access to U.S. markets and U.S. distribution—something that U.S. auto firms did not enjoy in Japan. Prior to the 1990s, the firm had manufacturing facilities around the world; however, these efforts were not extensive. As a response to the political pressures in the United States that arose at the time, Toyota began to set up manufacturing operations in the United States and other countries. Both Toyota and the U.S. government agreed to the voluntary guideline that 75 percent of Toyotas sold in the United States would also be produced there. Similar goals exist for other major regions of the world. Today, Toyota has a goal to hold 15 percent of the world’s auto market and 15 percent of the U.S. auto market. In 2005, the firm had approximately 12 percent of the U.S. market. The firm has established six manufacturing facilities in the United States to meet current demand, with future plans to build two more manufacturing facilities to meet the expected sales growth and the goal of locally producing 75 per- cent of autos sold in the United States. As a result of increasing its inter-national focus Toyota, for the first time, will produce more cars outside of Japan than inside. Thus, Toyota has quickly become a truly global company. The difficulty for the firm has been maintaining the quality of the firm’s products as it expands. The methods used to ensure this include: Reducing the number of people on the board of directors from 60, a common number for Japanese organizations, to less than half. The expected effect is that the board (and the firm) will become more responsive to environmental change and make decisions more quickly. Adding five new non-Japanese top executives to ensure that the firm adopts and maintains a global outlook. Creating the Toyota Institute to train managers around the world and to ensure that the global managers are using consistent methods. Flying group so workers from Japan to facilities around the world to ensure that the best methods are used in each of Toyota’s geographically scattered manufacturing plants. Using joint ventures actively to ease market entry in new locations. Creating a Global Production Center to ensure state-of-the-art production methods are used around the world. One result of these efforts is that Toyota has become the most profitable firm in the world, beating out U.S. giant General Electric, which held the top spot for several years. The firm has been able to gain this position with a clear vision of its goal (to become a successful worldwide auto company), how it was to achieve this (focus on the customer needs, quality manufacturing, and a commitment to innovation, even at the lower end of the market-place), and adapting the company as the environment changed. The more Toyota has internationalized, the greater its success. Today, it is one of the most internationalized auto firms in the world. Studying the success and methods of such firms offer other businesses the chance to replicate this success..
The opening case was about the success of Toyota. Research the major recent strategic actions of General Motors (5-10 major strategic actions over the last three or four years). Comparing these actions to Toyota’s, why do you think Toyota’s performance is ascending while General Motors is in decline?