Cross Industry Analysis of Toyota Corporation's Entry into Chinese Market

This study evaluates Toyota Corporation's competitive position as an MNC in the global market after entering the Chinese market. It analyzes the industry, Toyota's FDI in China, market entry strategy, and benefits, capabilities, and resources possessed by Toyota to succeed.

ASIA PACIFIC BUSINESS (TOYOTA CORPORATION)

TABLE OF CONTENTS
PARTICULARS REMARKS
1. Introduction
2. Industry analysis
2.1 Toyota’s FDI in China
2.2 Where did the investment go
2.3 How and when did Toyota become an
MNC
2.4 Toyota’s strategy
2.5 Market entry of Toyota
2.6 Are there different patterns in the
timing, location, strategy and entry mode
of multinationals from different nations
3.Why did Toyota go global or
Multinationalize
3.1 Benefits, capabilities and resources
Toyota possessed to succeed
4. Conclusion
1. Introduction- Established in the year 1937, Toyota Motor corporation is a Japanese
firm which engages within works of designing, manufacturing, assembling and sale of

several cars, commercial vehicles, minivans and other parts related to cars as well as
accessories majorly within markets of Japan, Europe, North America and Asia. Toyota is
actually an innovative, well organized and customer oriented firm (Toyota-global.com,
2018).
This study will undertake a cross industry analysis for Japanese automobile firm Toyota
Corporation that entered Chinese market. It will evaluate the level to which the Japanese
manufacturer was capable of retaining its competitive position as an MNC in the global
market
2. Industry analysis- Toyota competes within the industry of automobiles. Last five
years of the firm were tumultuous being into industry of automobiles. Rise in prices of
fuel and emerging ecological trends as well as people’s concern regarding environment
has shifted buyer’s preferences away from the fuel-guzzling pickup trucks and vans to
some small and compact cars with fuel efficiency. Few players in the industry have also
embraced the alterations taking place and they have expanded themselves from small car
segment portfolio to making of eco friendly and hybrid motor vehicles. Few automakers
have been unenthusiastic towards such shift and their main emphasis has been to shift
from mere bigger to smaller cars, anticipating the cost of fuel to shrink ultimately,
bringing buyers back towards big car fold. When prices of fuel fall in 2008, it was
because of economic crisis in US, which ripped the global economy entirely. This
immensely had a domino effect all through the emerging and developing world, with
several western countries following US into recession. Revenue of this industry fell about
by the recovery were expected to lend the entire average growth of industry for about
2.2% every year for 5 years till the year 2013. For next five years, emerging economies
would continue growth as well as demand for motor vehicles within western world would
recover. Revenue of the industry is forecasted to grow at a rate of 2.5% to total an
estimated $2.6 trillion over next five years till 2018 (U.S., 2018).
2.1 Toyota’s FDI in china-Foreign direct investment of Japan inflows to china are rising
as well as diversifying from manufacturing to other sectors, fascinated by availability not
merely of cheap yet skilled labor. At same time, novel wave of FDI linked with

relocation is even stirring opposition in Japan. Additional to sectorial diversification, a
proper geographical shift within FDI patterns into China is occurring. Japan’s main focus
is upon proximate coastal clusters like Dalian within Liaoning province, is being actually
supplanted by the pull of Shanghai as well as the Pearl River Delta. The influx of three
automakers, Honda, Nissan and Toyota, with their Japanese-affiliate part producers, is
even building new FDI clusters (Walsh, 2001).
2.2 Where did the investment go -
Several discrepancies occur amid Chinese plus Japanese statistics. It is thus, hard to
identify FDI of Japanese that is routed via subsidiaries within Hong Kong or several other
nations. As per Japanese data, FDI from Japan to China in the year 1999-2000 dropped
severely below $1 billion, beforehand recouping to some $2 billion in the year 2001.
As per estimates of China, FDI of Japan and its totals were some $3.8 billion on an
average in the year 1996 to 98 (Walsh, 2001).
2.3 How and when did Toyota become an MNC?
Because of the fast development of global integration the industry of automobile has
become world’s most significant financial sectors by revenue. Toyota is a representative
of all MNCs within the globe. Established in the year 1937, till day Toyota carries both
global as well as domestic marketing with 52 international firms in some 27 nations.
Toyota sells and markets 7 million vehicles in 170 nations and even more each year,
globally. Its employees throughout the globe are 320.808. In the year 2008 the firm
officially became globe’s largest automobile supplier. Fast expansion is major cause of
the firm to be capable of overtaking General Motors. Toyota functioned its business all
through the globe, which involves selling of cars and other vehicles in Africa as well as
Russia plus sales leader within Australia.
2.4 Toyota’s strategy- Strategies of Toyota aims to attain success within chosen markets
to grow its business:

Strategy that is generally based upon Toyota as well as which is used by majority of firms
in Japan is named as KAIZEN strategy. It refers to constant enhancement as well as the
affect that the tactic has upon level of the quality of its product.
Product strategy of Toyota is on the basis of high quality, growth of novel and innovative
technologies, focusing upon future research, hard work and creativity (Ahsan and
Musteen, 2011).
Toyota being a world leader in the field of research and development, aims to attain
advanced automotive technology within the firm.
Related to the issues of environment like pollution and carbon emission as well as global
warming problems, the firm explores concurrently some varied solutions in order to
design some vehicles that are less polluting. This firm is committed towards developing
some hybrid schemes as very essential factor within making of clean technology cars,
joining dissimilar sources of the power.
The technology of fabrication of the engines is considered one amongst most valued
property of the firm. This firm’s performance ranges to engines as well as unconventional
design reflecting greater standards that are set by the expert engineers.
It could also be mentioned that firm’s major strategy is about having a full control of
quality depleting the “zero defects”, constant development of its goods (Barraza, 2011).
2.5 Market entry of Toyota -
Toyota is a well-established firm in the market. Initially the firm just imported vehicles.
From the year 2003 they began the manufacturing of automobiles in China. Today the
firm has nine brands. FAW Toyota’s customers are generally the value customers. But
the firm emphasizes more on those buyers that are QRD buyer, which refers to durability,
quality as well as reliability. China is a country of first time car purchasers. Here, the
firm’s strategy of brand distinctiveness is generally a difficult task. The firm builds its
proper brand identity through use of proper media (Buckley, 2002).

Toyota entered Chinese markets with exporting task which was considered fastest as well
as the one with lowest risk, with an aim to launch its cars in the market and later the firm
established its proper brand recognition. Furthermore, with some restraints like higher
costs of transaction, restrictions on import, and also volatility in the rates of exchange, the
firm regulated its entry tactics with FDI, entirely owned subsidiaries. Toyota yet faced
limitations like difference in cultures and some risks that were political (Cateora, 2016).
Toyota had an acquired economy of scale as well as and advantage of labor cost when the
expanded. The firm expanded its network of sales throughout the globe in their
production as well as enhanced its abilities of production in all its centers of production.
2.6 Are there different patterns in the timing, location, strategy and entry mode of
multinationals from different nations-
Yes of course there exist several different timing, strategy and entry mode of Toyota for
different markets. The firm adopts several different entry modes like wholly owned
subsidiary, FDI and even licensing for several different nations. Firm’s marketing
strategy differs as per the needs of its market in diverse geographic locations. Basic
market strategy of the firm is a differentiated one, as it aims towards making and selling
different goods and services from those of its rivals (Czinkota, Donath and Ronkainen,
2004). Competitors such as Ford also try to gain the market share through use of similar
international strategy, whilst Toyota actually adopts particular marketing strategy for
every market it serves. Though the firm makes products that can be sold globally yet it
emphasizes on making goods and services that are personalized for specific market of
segment (Dutta, 2011).
3. Why did Toyota go global or Multinationalize-
A major advantage for the firm to go global was brand recognition, which at the global
level of business matters a lot for any firm and especially for a firm well known and a
vital player in global market. The firm through globalization was able to spread its risks
and lower the chances of failure or loss. If economy in one nation was slow or say the

demand seemed to fall in a specific country, the firm’s chances were yet thrived into
other market.
Another vital cause for Toyota to go global was to compete with bigger firms and attain
economies of scale. Market for the goods and services through becoming global can be
expanded more and firm was able to serve more people. Also size of the market increased
through multinationalization, which led the firm to attain extra profit through serving
several different markets internationally.
3.1 Benefits, capabilities and resources Toyota possessed to succeed-
a) Management of global production chains/ SCM-
Toyota’s experimented a mix of technology as well as new function strategy with
an aim to help themselves in leaning of the global supply chain operations and
recovering rapidly from disruption. Toyota’s had seven vital forms of non-value-
adding waste in the business as well as manufacturing business (Horn, 2015).
They are management of overproduction; lower the waiting time, avoiding
needless transport and carriage, stopping the process of extra-processing and also
avoiding incorrect processing and control on excess inventory, stopping the
needless movement, lowering defects as well as ensuring optimum use of staffs
within the firm.
b) Toyota research and development:
As per Toyota, its present activities of research and development chiefly focus
upon the below mentioned elements:
 The firm aims to enhance the hybrid technologies in future.
 Toyota aims to expand its gasoline engine’s fuel economy plus enhance its
technology in connection along with more stringent standards of emission.
 The firm tends to promote developments in functions as well as fuel economy
regarding clean diesel engines.

 Toyota aims to enhance efforts towards developing new electric cars and other
vehicle also some fuel cell vehicles, plus other substitute fuel vehicles
(Mayrhofer, 2012).
c) Firm’s distribution network-
Toyota in China is a wholly owned subsidiary of Toyota motor in Japan. The firm
has its headquarter located in China and also a manufacturing concern within the
nation. Toyota also has a different marketing and sales office specially made for
China and its markets. Because of facts, like, Toyota carries its major operations
in China, like marketing, corporate services, sales, product planning and
manufacturing as well as purchasing (Xinfa Lin and Eso, 1998). Furthermore,
Toyota’s vehicles are sold in Chinese market either through import or are
manufactured within the Nation. Thus, firm’s channel of distribution proves to be
efficient and effective one for its sellers as well as buyers. Additionally, some
other advantages for the firm is that its system of distribution channel could
actually cut cost for Toyota and also can have extra convenience for its buyers in
the nation.
d) Toyota HRM- Toyota is generally known for several initiatives of its world-class
goods and services and quality, which involve popular system of production of
the firm which later became famous as Just-in-time or JIT. Toyota maintains very
high profile in maintenance of its staffs or human resources. HR policies and
practices of Toyota could actually serve as a model, particularly in field of
production as well as in area of production oriented firms (Robles, El-Ansary and
Root, 1988).
The firm periodically undertakes systematic firm-wide as well as divisional
training plus tasks aims towards proper training with total emphasis upon on-the-
job training to make sure that people are able to completely utilize all their skills
and capabilities. Toyota actually has a strict process of recruitment as well as
multi-layered techniques of recruitment. It calls for appropriately standardized
behavior. For example, when the firm holds an interview, judgers would take

capability, tools and techniques as well as characteristics into considerations. And
in assessment center, interpersonal interaction within the staffs plays a major role
in decisions made by the judges, who actually aims to find the capability and
potential of the staffs (Root, 1998).
Toyota is majorly interested in hiring staffs with very strong ethics for their work.
It aims to select people familiar with hard work and who carry proper motivation
needed to learn as well as perform well. The firm is developing its emphasis upon
training through opening several regional training centers called Global
Production Centers (Hofstede, 1994).
e) Relation with suppliers- the firm believes in building and maintaining a mutual
and beneficial long run relation based on mutual trust with all its suppliers. With
an aim to foster this, the firm pursues close and very vast ranging communication
to share its business information and knowledge with an aim to enhance its
business relations. Toyota’s policy for procurement in China is on the basis of
some basic principles like open-door policy and fair competition. It also involves
the elements of, trust resulting in mutual welfares as well as facets of working
with best as well as maximum competitive associates/partners (Lin and Kwan,
2011).
f) Organizational structure- this firm has a proper divisional organization
structure. Its structure experienced vital alterations in the year 2013.
It was recognized as a major response towards safety problems and matching
goods recalls which initiated in the year 2009 .
 International hierarchy- the firm maintains a global hierarchy in spite of its
reorganization in the year 2013. In the present organizational structure the firm
has enhanced the power of decision making of its regional heads as well as heads
of business units.

 Geographic division- firm’s novel structure carries eight regional divisions Japan,
Europe, China, East Asia and Oceania, Caribbean, North America, Africa and
Asia and middle east
 Product-oriented division- Toyota carries four of such divisions namely: 1)
Lexus international
2) Toyota number 1 for operations within North America, Japan and Europe
3) Toyota No. 2 for operations in all other regions
4) Unit center accountable for engine, transmission as well as other operations
(Panicker, 2018).
f) Role of Government in stimulation of FDI-
Being in automobile sector in a nation like China was never and easy task for Toyota. In
china some 20 years ago, a baseline of FDI inflows was as low as $19 billion, later this
increased to $30 million in FDI within 10 years. Though in the year 2009, there entered
an international economic crisis and disturbed the entire business, the FDI yet enhanced.
China is considered to be a major player and a leader in the development and growth, as
compared to all other developing nations. From the year 1978, FDI within China
experienced a rapid growth. Additionally the nations’ government allowed the highest
percentage of FDI (Gracetoyota.in, 2018). China’s government proved to be more
supportive towards foreign investors and permitted several major external players into
their market. Though the regulations and rules lay down by the government were difficult
ones and were hard to be abided by, yet the government tried its best to allow maximum
they could within their nation (Bloomberg.com, 2018).
4. Conclusion-
Toyota has tried its best to build and maintain a proper strategy for its global market, yet
has at times failed and has still left some space for further development. The firm must
try to improve its tactic regarding its pricing and costing strategy. The firm follows a

differentiated strategy for all its market yet needs to enhance its goods and services to
attain better market share in nations like China. For example, Ireland as well as Germany
is located in the similar region yet Toyota’s goods are less costly in Germany. This makes
the firm less competitive.
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