Harvard Business School
9-197-031
rP os t
May 30, 1997
Toyota Motor Corporation: Target Costing System
op yo If Toyota does one thing better than other automakers, it is cost management. After earning a reputation for quality and fuel efficiency in the “economy models,” we moved successfully into upscale models, like the Lexus line. But we still pride ourselves in the cost competitiveness of our products in every price stratum. The history of Toyota is a story of unceasing efforts to reduce costs.
Toyota Motor Corporation 1992 Annual Report
tC
Toyota Motor Corporation started as a subsidiary of the Toyota Automatic Loom Works, Ltd.
It was founded in 1937 as the Toyota Motor Company, Ltd. It changed its name
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Altogether, Toyota vehicles were either manufactured or assembled in more than 20 nations. These local manufacturing facilities provided jobs for nationals and business for local supplier firms. The relative importance of the international supplier business to Toyota was increasing. In 1992, for example, Toyota purchased locally approximately 70% of its parts requirements (or $5 billion) for its North American operations. The other 30% was imported from
Japan, but this percentage was expected to decrease over time. By 1994, Toyota expected to purchase
$6.3 billion of parts from local suppliers worldwide and import $2.9 billion for domestic use.
Supplier Relationships
op yo Product design was also international in scope. Calty Research, Inc., a Toyota subsidiary formed in California in October 1973, was responsible for the body styling and interiors of new models scheduled for production in North America. The design styling for European markets was coordinated from the firm 's design and technical centers located in Brussels.
Third-party suppliers were responsible for approximately 70% of Toyota’s parts and materials. In particular, the cost and quality of third-party supplied parts was considered critical to the firm’s success. In recent years, Toyota’s expansion into international production had required increased interaction with non-Japanese suppliers to raise their efficiency and quality to the same
Toyota was thought to be the best quality car in the 1970s and 1980s but, due to Japanese competition, American car manufactures soon began to close the rankings gap. At the top of their game in 2010, Toyota had to stop manufacturing and order a large recall of automobiles. While leadership was probably considered great at the height of Toyota’s success, changes were obviously needed during the recall period and management needed to be as adaptable to those changing conditions. The only thing regarded as permanent in a market economy is change
Toyota is a leading company, and for over 70 years. It has been expanding business all over the world and
In 1994 Toyota was the world’s third largest seller of vehicles (at 4,580,000 units), following GM (at 8,420,000 units) and Ford (at 6,800,000 units) respectively. TMC’s Total Market Share and Total Retail Sales in 1994 are as follow:
the world, and that has lead to U.S. based plants shifting work over to foreign competitors, such
Toyota is making only "what is needed, when it is needed, and in the amount needed. Toyota is using impute from workers and their culture encourages employees to learn from their mistakes and successes and failures of each other.
main strategy for the North American market is to aim for higher sales, while raising the proportion of locally produced automobiles. Toyota Motor Corp have reached a stage where investments made over the last several years to expand production capacity are beginning to show returns and improved profitability can be expected. Toyota’s goal is to bolster local production through additional investment, and contribute to the regional economy by expanding its operations. At present, our production capacity in North America is approximately 1.25 million units (including our joint venture with GM). However, Toyota Motor Corp plan to boost this to 1.45 million units during 2003.
In 2009 Toyota Motors (TM) posted a net loss of $4.6 billion ("Market watch," 2014). From 2009 to 2011 Toyota encountered a number of factors contributing to their economic downturn. It began with recalling millions of vehicles, for quality related problems, followed by natural disasters hitting northeastern Japan. These disasters wiped out Toyota’s production capabilities (Tabuchi & Vlasic, 2014). While these events were occurring, the cloud of the 2008 global financial crisis was still being felt. This crisis weakened demand in the automotive industry. This weakened demand increased the competitive landscape for all automotive manufactures. This drove down automotive prices and effectively contribution margins (i.e. sold less
It is also important to note how Toyota had gained such a stronghold in the operations and sales in North America, since they had been more practical about setting up manufacturing plants in North America. This was not the case with regard to Europe since all the manufacturing was done in Japan, which obviously had sky rocketed the costs for the vehicles that were being sold in Europe. The biggest positive that can be taken is how they decided to manufacture a car that was targeted to sell in Europe the Toyota Yaris but sadly the manufacturing was being done in Japan and this was the underlining
Manufacturing today includes all facets of research, development, production, sales, distribution, logistics, customer service, marketing, and support. It extends from the making of physical products to the delivery of services (Deloitte, 2013). Manufacturing companies now compete on a global scale and utilize specific locations around the world to their advantage. For instance, basic, simple to make products will be produced in an area with cheap, low education labor. While products that use high tech machinery that require a skilled labor force would need to be produced
Toyota Motor Corporation, commonly known simply as Toyota, is a multinational corporation headquartered in Japan. At its peak, Toyota employed approximately 320,000 people worldwide. It is
many companies who are contracted with factories outside of the United States, some of which
The operating environment that the company has to operate in has also become more intense. The level of competition has increased while the global economy experienced a significant downturn. It is likely that Toyota will lose some market share in the developed markets. However, the company can work to offset these in the developing nations. This also supports a more regional strategy in the developing world. Most of the company's product mix that is marketed to developed markets is simply too expensive for consumers in the developing world. Therefore it is necessary for Toyota to continue to customizing their operations to meet the consumers' needs in these quickly growing markets.
Toyota is able to offer competitive advantage through its valuable resources that makes it able to attract and retain best suppliers and also its rare and unique staff. Also, Toyota’s competitors cannot manage and develop their HR at the same cost that Toyota does.
By the Mid 90’s Toyota was again faced with issues in the market with the increased competition and Toyota being criticized for creating copies of other popular cars on the market. GM had created a smaller fuel efficient car brand Saturn that was directly competing with Toyota’s products. Honda had created a new market for themselves with the creation of two