International Operations Management and Innovation: Toyota Motors

This report provides a comprehensive analysis of Toyota's international operations management, with a specific focus on its activities within the United Kingdom. It begins by offering a company background, highlighting Toyota's global presence and position within the automotive industry. The report then delves into Toyota's international operations management, exploring market entry modes like Greenfield investments, and key strategies such as lean manufacturing and outsourcing. It discusses the issues and problems faced, including financial, operational, and resource constraints. Furthermore, the report examines the role of innovation at Toyota, exploring approaches to foster a culture of creativity, such as brainstorming, virtual prototyping, and the stage-gate process. The report concludes with recommendations based on the findings and provides valuable insights into Toyota's international operations and innovation strategies.

Running Head: INTERNATIONAL OPERATION MANAGEMENT 1
International Operation Management
and Innovation Management: Toyota
Motors

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Table of Contents
Introduction.................................................................................................................................................3
Company Background.................................................................................................................................3
International Operations Management.........................................................................................................4
Issues and problems.....................................................................................................................................6
Financial Constraints...............................................................................................................................6
Operational Constraints...........................................................................................................................7
Resource Constraints...............................................................................................................................7
Role of innovation at Toyota.......................................................................................................................8
Approaches for developing culture of creativity and innovation.................................................................9
Brainstorming..........................................................................................................................................9
Virtual Prototyping................................................................................................................................10
Stage-gate Process.................................................................................................................................10
Conclusion and Recommendations............................................................................................................10
References.................................................................................................................................................13

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Introduction
International operations management is the process of manufacturing the goods and services in
international markets and locations. It includes an effective management process that has to
consider local production market i.e. capital and labor and global customer needs. It has more
emphasis on the contemporary issues relevant to the operation function that are related in ability
of firm to effectively cooperate with the supply chain partners to stay competitive in global
economy (Brown, Bessant and Lamming, 2013). There are various organization which face
different issues and problem in expanding its operations to other nations. This report includes the
international operations management of Toyota in context of United Kingdom. Toyota is a
Japanese international automotive manufacturer that is on the fifth position in terms of revenue
generation. In this report, there is the discussion about the role of innovation at Toyota in the
cultural setting of United Kingdom. Moreover, it addresses the issues and problems which are
confronted by the organization in international operation management in United Kingdom. At
the end, it consists of some approaches which can be used by the organization to develop a
culture of innovation and creativity.
Company Background
Toyota Motor Corporation is a Japanese multinational automobile manufacturer that is
headquartered in Toyota, Aichi, Japan. Founded in the year 1837, the organization is ranked as
one of the major international automotive manufacturing corporations. It has employed 364,445
employees all over the world and as of year 2016, it was on the fifth rank in terms of revenue
generation. As per the report of 2016, Toyota is the largest automobile manufacturer in the
world. In automobile manufacturing industry, it was the first entity that manufactured over 10
million vehicles every year (Toyota Motors, 2018). The firm is using various advanced
principles to produce the reliable cars and sustainable growth of community via innovation and
excellent quality auto-parts. Toyota is the market leader all over the world in terms of sales of
hybrid electric vehicles and it encourages the adoption of hybrid cars all over the world. In
January 2017, cumulative sales of Toyota and Lexus hybrid car models attained 10 million
milestones.

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Moreover, it can be stated about Toyota that is using different low cost and differentiated
methods in their operations that assist the organization in attaining more competitive advantage
over its competitors. In addition to this, it operates its business with the philosophy of people and
perfection. The management of company states that processes and practices shall be developed in
a way which helps the working of employees and assist them in enhancing their skills and
abilities.
International Operations Management
When an organization plans to expand its business operations in international market, first it
needs to analyze the market and market trends. As one of the most successful organization,
Toyota is operating its business in different international markets such as Japan, Asia, Middle
East, Europe, Africa, North America, Latin America and Oceania. In the year 2008, Toyota has
become the largest automaker across the globe (Alexander, 2013). The major reason behind this
growth is its rapid business expansion and international operations management in global
markets. By an effective international operations management, Toyota is able to surpass world’s
top car firm i.e. General Electric. The company operates its business all over the world including
sales vehicle in Russia and Africa and it is sales leader in Australia. A major factor behind the
growth of Toyota Motors is its production system. This major pillar of Toyota’s competitive
edge was growth over many decades.
In the year 1989, Toyota Motors has expanded its business operations in United Kingdom and it
is successfully operating its business in the country by the use of effective operations strategy.
There are various reasons that company has expanded its business in UK market. One of the
major reasons is the strong tradition of car and other vehicle production in Britain and large local
market for vehicles. In addition to this, United Kingdom offered Toyota industrial transport links
to the customers and 230 European British supply partners. Another reason is the profitable
working processes and talented workforce of UK. Also the English language is the second
language in Japan that has made integration and communication easier.
In United Kingdom, the company has managed its business operations by implementing effective
international operation strategies which are stated below:
Greenfield Investment as Market Entry Mode

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Greenfield investment is a type of entry mode where a parent organization develops its business
operations in foreign country by establishing a wholly owned subsidiary. Under this entry
strategy, firms construct new production facilities in the merging market and they also build new
offices, distribution centers and other premises (Vasin, Gamidullaeva, and Rostovskaya, 2017). It
is one of the most important entry modes that are used by the Toyota while expanding its
business in United Kingdom. Under this international expansion, the company has established a
new subsidiary in UK named as Toyota Manufacturing UK (TMUK). For effective international
operation management, Toyota has constructed its new manufacturing facilities and distribution
centers in United Kingdom. By the use of this approach, the company is able to establish a better
position to utilize the firm specific advantages. TMUK has organized a technical support team to
assist its suppliers to enhance the quality of products under long-term relationship with the
suppliers (Hill and Hill, 2012). After a successful establishment in UK, it opened other
supporting premises in United Kingdom to train the manufacturing supervisors and staff from all
over the Europe region.
Lean Manufacturing
Lean manufacturing is one of the major strategies of Toyota that is the major reason behind its
effective international operations management. This system is found very efficient and it assists
the organization in improving the quality of its products and services. It helps in attaining
competitive advantage in international automotive market (Upadhye, Deshmuk and Garg, 2016).
Lean manufacturing system is the system of work that is very efficient and democratic as well.
Toyota has used the concept of lean manufacturing system due to shortage of resources for
production. In addition to this, implementation of lean manufacturing system in manufacturing
processes of Toyota can be seen as their reaction to intense competition in automotive sector
(Balakrishnan, 2015).
In United Kingdom, the company has established its subsidiary with the name of Toyota
Manufacturing UK. In the country, lean manufacturing has combined the just-in-time production
system with the Kanban technique of pull production. Moreover, it is making focus on respecting
of employees and encouraging team work at workplace. As mentioned above, the major reason
behind UK’s expansion is its working practices and excellent workforce. At Toyota, it is one of
the best international operation strategies which are associated with different aspects like

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inventory control and management, labor management, supply chain management and industrial
relations (Slack, Chambers, and Johnston, 2010). By this, Toyota is able to reduce the human
effort by 50% and to improve its financial performance. In this way, lean manufacturing strategy
at Toyota has an effective potential for controlling transportation cost of materials. It is one of
the major innovative practices that are implemented by Toyota in its operations in UK.
Outsourcing
Apart from above practices, Toyota has adopted another innovative practice i.e. outsourcing.
There are various organizations which have moved from in-house manufacturing to outsourcing
and they are internationalizing their business operations due to technological changes in today’s
world (Walker, et al, 2014). The organizations are taking the advantage by outsourcing their
functions to others. Toyota is also one of them that adopted outsourcing due to lack of resources
and talented workforce. In United Kingdom, the company has outsourced the knowledge and
workforce from other companies. It assisted the organization in gaining more competitive
advantage over its competitors. Additionally, it outsources the vehicle electronic system from the
supplier in UK. At Toyota UK, 70% of its components are outsources that have a positive impact
on the growth of Toyota in United Kingdom (Sarkis, 2017).
Thus, the company has managed its international operation management process by the use of
above processes and strategies. By this, the organization is able to establish its operations in UK
successfully.
Issues and problems
However, the company is able to manage its international operations in UK effectively but still
the company is facing some issues under its international operations. These issues and problems
are stated below:
Financial Constraints
However, Toyota has a stable financial position in UK but still it has faced various financial
constraints under its international operations management. In the country, when company was
introducing innovation then there was a big disruption by many natural disasters. This disaster
has contributed to underperformance of company and its financial results have also negatively

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affected from the quality issues of products, market share loss and cost pressure intensified by
the unstable market conditions in the country (Market Realist, 2018). According to a credit rating
agency, this issue has weakened the earnings of Toyota as there was fluctuation in the currency
market due to financial crisis. It has led the sales of Toyota in the phase of stagnation. In addition
to this, there is an increase in the environmental awareness among people. Due to this, there is a
delay in ability of Toyota to deliver eco-friendly vehicles that may restrict its future financial
growth.
Operational Constraints
Apart from financial issues, Toyota faces some operational constraints that have affected the
brand image of organization in United Kingdom. It has faced some operational issues due to its
production and lean manufacturing system. Toyota has used Toyota Production System and it
was worked well. Due to this, the company felt that they did not need to think about being
attentive with the product quality and manufacturing process. It has caused various quality issues
in its products and forced Toyota to recall its product. In United Kingdom, the location of its
engine plant along with the manufacturing plant at Burnaston has decreased the long term
capacity of Toyota to expand its site. Eventually it has restricted the opportunities for both the
plant to expand in future. However, to deal with the issues of wastage and scarcity of resources,
Toyota has implemented lean manufacturing but this was very expensive for the company. The
quality management techniques of the company are not enough to manage the quality of vehicles
at Toyota (Matsuo, 2015). These issues have restricted the organization in implementing
innovation in its practices.
Resource Constraints
In addition to above, Toyota faces some issues related to resources and knowledge. While
adopting the innovation, the company faces the issue of resource scarcity. It was the major
reason that company has expanded its business in United Kingdom. To gain more resources and
effective workforce, the organization has outsourced from the country. It has increased the cost
of organization. These costs include training and development costs, material costs, cost of
resources etc. In addition to this, it is facing the issues related to human resources. One of the
major constraints is that failure in human resource management has led the company to the
problems that manifested them in production defects (Heizer, 2016). The company was unable to

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manage the risks and other issues. Before the incident of product recall, the employees of Toyota
have informed the top management about the quality of components but they avoided. It has
demotivated the employees and degraded the quality of vehicles. These resources related issues
restrict the organization from implementing innovation in international operations (Westland,
2016).
Role of innovation at Toyota
To deal with and overcome the above constraints, innovation can play a significant role at
Toyota Company in the cultural setting of United Kingdom. The company implements the
innovation in two forms i.e. hard innovation and soft innovation (Azis, and Osada, 2010). Toyota
production system is the hard innovation which enables the firm to keep enhancing the way it
produces its vehicles. Moreover, the soft innovation is related to the corporate culture. One of the
major elements of Total Production System is the kaizen philosophy that developed the company
in the constant and incremental improvement. At Toyota UK, all the employees have participated
in the process of innovation and improvement. At Toyota, the actual innovation is its production
and manufacturing system which made the organization successful in United Kingdom and other
nations. The reason behind this system is the continuous and strong devotion to the highest
quality. If there is any issue is the production process, the manufacturing process automatically
stops not to manufacture products with defects (Basulto, 2018). Innovation in production and
manufacturing process can assist to overcome the operational constraints.
In addition to this, company can engage in the social innovation to deal with resource and
environmental related issues. To implement this, Toyota has introduced the vehicle that complies
with sustainable capacities which addresses the above given issues in UK’s natural and cultural
setting. The company has utilized various development processes and solutions to innovate its
engine concept. This innovation allows Toyota to stay ahead of its competitors by developing
innovative-driven business development with the assistance of sustainability. Among its
innovations, the company has made a large investment in the research and development of
cleaner-burning vehicles which include gas engines with electric motor (De Massis, et al, 2018).
It assists the organization to overcome the financial constraints also.

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Moreover, this organization has not only developed better relations with suppliers but also
innovates continuously to enhance relations and makes their work easier. By developing
innovations, the organization can provide similar quality at its all the manufacturing plants of
vehicles. Currently, Toyota is implementing incremental innovation that is related to the
improvements to existing technologies with market drivers (Goffin, and Mitchell, 2016). In this
way, innovation plays a significant role in the life of Toyota. Through effective innovation,
company can deal with the above issues and constraints in international operations in United
Kingdom.
Approaches for developing culture of creativity and innovation
In today’s competitive business environment, most of the organizations are working to develop a
culture of creativity and innovation. As mentioned above, Toyota is confronting some issues in
the process of innovation and international operation management. So, the organization needs to
develop a culture of creativity and innovation by following some specific approaches (Towill,
2010). These approaches will assist the organization to overcome the above issues and stay
competitive among its competitors. The approaches of innovation and creativity are stated
below:
Brainstorming
Brainstorming is one of the major approaches which can assist Toyota in establishing a culture of
innovation and creativity. It is a technique by which efforts are made to get the conclusion for
any specific issue by collecting different ideas contributed by its members. Toyota can adopt this
approach at its workplace to collect the ideas of employees for any issue faced by the company.
For example, Toyota was facing the issue related to product quality that has affected the brand
image of company adversely (Rawlinson, 2017). By the implementation of brainstorming,
Toyota can collect the opinions of its employees and manufacturing staff so that they can provide
higher quality of vehicles. It can assist the organization in reducing the chances of defects in
vehicles. This is the most important approach which can establish a culture of innovation and
creativity at Toyota.

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Virtual Prototyping
This is another approach of creativity and innovation that can be used by Toyota to establish an
innovative culture. Virtual prototyping is an approach that can be used in the product
development process at Toyota. This technique includes different technological innovations like
computer automated design, computer aided engineering and computer aided design and other
software to authenticate a design prior to make it physical. Toyota can take various advantages of
this approach of innovation (Harhoff and Lakhani,). In its manufacturing and production process,
the company can implement updated technologies to make advanced vehicles (Betancourt,
Mooney and Ross, 2018). Toyota Motor Corporation uses various technologies like geometry
optimized data and new technologies to develop the vehicles faster and without any defect. For
managing and controlling the quality of Toyota’s products, Toyota Motor can create a system of
products in which technologies are extensively used. By using this technique, Toyota will be able
to make its operations more advanced and smoother (Rix, Haas and Teixeira, 2016).
Stage-gate Process
Stage-gate process is the process of developing a culture of innovation and creativity. Toyota can
use this approach to establish an innovative culture in its workplace and manufacturing process.
For implementing innovation management process, this is new technique. It takes the feedback
from all the user of functions and decision phases. Toyota can use this technique to overcome the
above issues and it will allow the organization to make right decisions regarding its employees
and resources (Hicks, 2016). When the company manufactures any vehicle then it can manage its
new product development process to enhance the efficiency and effectiveness of business
operations of Toyota. It can assist Toyota in developing a creative and innovative culture in
United Kingdom.
Conclusion and Recommendations
From the above report, it can be concluded that Toyota is successfully operating its business in
international markets. As a leading automotive manufacturer, Toyota has expanded its business
in various nations North America, South America, Middle East, Asia etc. United Kingdom is
also a major country where it has expanded its operations. The above report concludes that
company has implemented various effective strategies and market entry modes for international
operations management in UK. The company is facing some issues like financial issues, resource

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constraints and operational issues. Innovation can assist Toyota to deal with these issues and
constraints. It can be found that highly competitive international automotive industry and
scarcity of resources has led the company to develop innovative and effective production system.
Implementation of lean manufacturing has emphasized on reduction in wastage, minimization of
defects and decrease in lead time. By adopting effective innovation approaches, Toyota can
develop a culture with innovation and creativity. The company will be able to establish an
organizational culture of efficiency and resolve the issues related to manufacturing process.
It is hereby recommended that company should make some changes in its production system so
that it can make it more advanced and simpler. Innovation plays a significant role in the success
of an organization so it should adopt the above innovation approaches. These approaches will
assist the company to create culture of innovation and creativity. In United Kingdom, Toyota
should provide effective training to the employees so that they can understand its production
system and updated technologies. It should focus on managing its international operations all
over the world.

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