Introduction

Toyota Motor (Toyota) is the leading auto manufacturers in the world. The company also conducts
business in the finance and other industries. The company sells its vehicles in more than 170
countries and regions worldwide. Toyota's primary markets are Japan, North America, Europe and
Asia. It is headquartered in Toyota City, Japan and employs about 320,808 people.

The company recorded revenues of JPY20,529,570 million ($205,295.7 million) during the financial
year ended March 2009 (FY2009), a decrease of 21.9% compared to FY2008. This was primarily
due to decreased vehicle unit sales, the unfavourable impact of fluctuations in foreign currency
translation rates, and decreased parts sales during FY2009.The operating loss of the company was
JPY461,011 million ($4,610.1 million) during FY2009, as compared to operating profit of
JPY2,270,375 million ($22,703.8 million) in FY2008. The net loss was JPY436,937 million ($4,369.4
million) in FY2009, as compared to net profit of JPY1,717,879 million ($17,178.8 million) in FY2008.
(Datamonitor, Toyota Motor Corporation, 5th Feb, 2010)

The above information is collected to answer the task 1 which is asking to carry out a research on
the Toyota’s corporate strategy prior to 2009, discuss the current position of Toyota, macro
environment analysis and the effect of Toyota’s organisational culture on the current situation.

Before going in to detail of the Toyota’s corporate strategy, a brief of corporate strategy is defined
below:

“Corporate strategy concerned with the overall scope of an organisation and how value will be
added to the different parts (business units) of the organisation. This could include issues of
geographical coverage, diversity of products/services or business units, and how resources are to be
allocated between the different parts of the organisation.”

J. Gerry, S. Kevan, W. Richard, Exploring corporate strategy: Text and cases, 8 th edition.

Corporate strategy defines the set of business, locate the markets or industries in which the
organisation competes and the how the resources will be distributed among these businesses. The
corporate strategy formulates on the basis of the facts derived from the analysis of external
environment and internal resources.

Corporate strategy involves four kinds of initiatives:

 Making the necessary moves to establish positions in different businesses and achieve an
appropriate amount and kind of diversification. A key part of corporate strategy is making
decisions on how many, what types, and which specific lines of business the company should be
in. This may involve deciding to increase or decrease the amount and breadth of diversification.
 Initiating actions to boost the combined performance of the businesses the company has
diversified into: This may involve vigorously pursuing rapid-growth strategies in the most
promising Line of business (LOB), keeping the other core businesses healthy, initiating
turnaround efforts in weak-performing LOB's with promise, and dropping LOB's that are no
longer attractive or don't fit into the corporation's overall plans. It also may involve supplying
financial, managerial, and other resources, or acquiring and/or merging other companies with an
existing LOB.
 Pursuing ways to capture valuable cross-business strategic fits and turn them into competitive
advantages, especially transferring and sharing related technology, procurement leverage,
operating facilities, distribution channels, and/or customers.
 Establishing investment priorities and moving more corporate resources into the most attractive
LOB's.

(Rex C. Mitchell, Ph.D. Strategy Formulation, 2005)

The Toyota Mission, Objective and Strategies

With a company like Toyota Motor Corporation which involves in many diverse projects and
interests, there are numerous objectives and goals at different level, being pursued at any one
particular time. Following are the outline of some of the most prominent and defined Toyota Motor
Corporation’s objectives, strategies and policies with the discussion on whether these different
tasks, objectives and policies correlate and support each other and keeping consistency throughout.

Mission

On the top of all, the most prominent and the definitive mission of the Toyota is to  "develop and
provide innovative, safe and outstanding high quality products and services that meet a wide variety
of customers' demands to enrich the lives of people around the world"

(Toyota Motor Corporation, 2006).

Toyota outlined number of principles and policies in order to meet the corporation objectives, in
more beneficial manner and enhanced efficiency, set on the basis of this mission. Toyota published
its “Toyota ways” in 2001 as a means of clarifying "the values and beliefs that all employees should
embrace in order to carry out the Guiding Principles at Toyota."

(Toyota Motor Corporation, 2006). 

Before the publication of the Toyota ways, its corporate philosophy, objectives and business
methodology simply passed on as an implicit knowledge. However, with the increase number of
employee and corporation’s internal growth Toyota realized the necessity to bring out its ways of
working in written available to all employee.

Yoshio ishikaza, former president of Toyota US and now the senior advisor to the board of Toyota
Corporation, tells about the vision and the mission of Toyota.

The vision, he says, “is to become the most successful and respected car company in each market
around the world by offering customers the best purchasing and ownership experience.” He then
sets two missions for every employee to materialize the vision, “to create lifetime customers by
adopting a customer-first strategy, and to become the sales and marketing radar for all of Toyota.”

(The Toyota Way in Sales and Marketing, TTWSM)

Objectives

To carry out the mission of Toyota Motor Corporation, several goals and objectives have been
introduced time to time as the aim of the company in keeping with its beliefs and building on its
prior sales and financial success. The three main corporate goals are the following:

1. To steadily increase corporate values as a top management priority.

2. To continue to introduce and produce products those fully cater the customer needs.
3. To become an even more competitive global company.
(Toyota Motor Corporation, 2006)

Collectively, these objectives have the essence of increasing sales and profit, maintaining superior
quality, innovation and expansion.

Strategy
Toyota has developed and implemented several strategies in order to achieve the objectives
consistent with the overall corporate goals. The main strategies, among many others, which Toyota
developed as follows:
1. A unique management system focused on prompt decision making and speeding up
operations.
2. A range of in-house committees.
3. A system that emphasizes problem solving and preventative measures done by immediately
flagging problems and sharing them with the appropriate individuals/departments.
(Toyota Motor Corporation, 2006)

The unique Toyota management system was contributed by Taichi Onho, who also developed the
Toyota Production System (TPS). Onho summed up his theory behind the management of Toyota as,
“"I feel strongly that the word 'work' refers to the production of perfect goods only. If a machine is
not producing perfect goods, it is not 'working'."

The Production System adhered to the Toyota corporate strategy of cutting waste, listing specific
advice such as: “Cut down on the distance that things move throughout the plant.” Another example
of this advice, representative of Toyota strategic management and its attitude towards its workforce
is: “Utilise the inherent talent of your workers.”

(Robert Heller, Thinking Manager, 2010-04-09

http://www.thinkingmanagers.com/companies/toyota.php)
Toyota introduced its pioneering set of strategies, “Toyota Way”, which stresses continuous
improvement and the role of each worker in the production process, has inspired the "lean
production" system and been studied in business schools the world over.

Policies
Since its foundation, Toyota has continuously strived to contribute to the sustainable development
of society and the Earth by providing high-quality and innovative products and services. The
foundations of these endeavours are the Guiding Principles at Toyota and the CSR Policy:
Contribution towards Sustainable Development.

Guiding Principles at Toyota

The Guiding Principles at Toyota (adopted in 1992 and revised in 1997) reflect the kind of company
that Toyota seeks to be in light of the unique management philosophy, values, and methods that it
has embraced since its foundation. Toyota hopes to contribute to society through its corporate
activities based on understanding and sharing of the Guiding Principles at Toyota.
1. Honour the language and spirit of the law of every nation and undertake open and fair
corporate activities to be a good corporate citizen of the world.
2. Respect the culture and customs of every nation and contribute to economic and social
development through corporate activities in the communities.
3. Dedicate ourselves to providing clean and safe products and to enhancing the quality of life
everywhere through all our activities.
4. Create and develop advanced technologies and provide outstanding products and services
that fulfil the needs of customers worldwide.
5. Foster a corporate culture that enhances individual creativity and teamwork value, while
honouring mutual trust and respect between labour and management.
6. Pursue growth in harmony with the global community through innovative management.
7. Work with business partners in research and creation to achieve stable, long-term growth
and mutual benefits, while keeping ourselves open to new partnerships.

(Toyota Motor Corporation, Annual report 2008)

Toyota recognized that all the activities, policies and philosophies by which all transactions take
place in order to meet the corporate objectives must be followed on the basis of the above Guiding
principles

CSR Policy: Contribution towards Sustainable Development

CSR Policy: Contribution towards Sustainable Development (adopted in 2005 and revised in 2008)
explains how Toyota adapts the Guiding Principles with regards to social responsibilities to
stakeholders. TOYOTA MOTOR CORPORATION and their subsidiaries, take initiative to contribute to
harmonious and sustainable development of society and the earth through all business activities
that carry out in each country and region, based on Guiding Principles. Toyota complies with local,
national and international laws and regulations as well as the spirit thereof and conducts business
operations with honesty and integrity. In order to contribute to sustainable development, Toyota
believe that management interacting with its stakeholders is of considerable importance, and Toyota
will endeavour to build and maintain sound relationships with stakeholders through open and fair
communication. Toyota expects business partners to support this initiative and act in accordance
with it.
(Toyota Motor Corporation, Annual report 2008)

Toyota Corporate Governance

Toyota’s top management priority is to steadily increase corporate value over the long term.
Further, its fundamental management philosophy is to remain a trusted corporate citizen in
international society through open and fair business activities that honour the language and spirit of
the law of every nation. In order to put that philosophy into practice Toyota builds favourable
relationships with all of its stakeholders, including shareholders, customers, business partners, local
communities, and employees.

(Toyota Motor Corporation, Annual report, 2008)

Emphasis on the customer

“The users comes first, the dealer second and the manufacturer third.”
Even before the World War II, a corporate customer came to the sales division and pressed kamiya,
who was then in charge of the division, for Toyota’s position on selling cars. Kamiya didn’t hesitate:
“the first person we think of is the customer. The last person we think of is the manufacturer.” It was
desperate and evasive answer. But the customer is said to have gone away satisfied. The substance
of this declaration later became a Toyota slogan: “the user comes first, the dealer second, and the
manufacturer third.”
(H. Satoshi, Inside the mind of Toyota: management principles for enduring growth. Productive Press,
2006)
Customers are the first priority at Toyota corporation as their philosophy “customer first” reflects.
Toyota develops and provide safe, innovative and high quality products and services that cater a
huge variety of customers’ demands.
Macro environmental analysis
The environment is what gives organisation their means of survival. The macro-environment
influences on organisation. This consist of broad environmental factors that impact to a greater or
lesser extent on almost all organisations. The PESTEL framework can be used to identify how future
trends in the political, economic, social, technological, environmental and legal environments might
impinge on organisations. The PESTEL analysis provides a broad data from which to identify key
drivers of change. The PESTEL framework categorises environmental influences into six main types:
1. Political
2. Economic
3. Social
4. Technological
5. Environmental
6. Legal

(Exploring corporate strategy, 8th edition)

PESTEL analysis for Toyota

1. Political force

Important factors Potential impact on business

 Unstable condition of the middle-east and
the political instability including the Iraq war,
Iranian tension and Israel /Palestine hostility.
 Customer may give preference to purchase
plug-in hybrid car to keep themselves
independent on foreign oil and one that
serves to bolster US independence while
reducing the bargaining power in adversarial
governments.

 Upwards of 8 million cars have been recalled  The US government bring Toyota into trial
in the U.S. and worldwide, amid reports of over the issue which may effect on Toyota’s
Toyota's vehicles accelerating rapidly. brand image.

 The U.S. owns 61% of Detroit-based GM, the  The US government’s stakes in GM and
biggest U.S. car company, after bailing out Chrysler may influence the investigation and
the automaker with $49.9 billion in aid. discriminate against its direct competitor.
Auburn Hills, Michigan-based Chrysler
received $14.3 billion, giving the U.S. a 10%
stake. (John Hughes and Theo Francis -
February 23, 2010, Bloomberg)
 2. Economic forces
Important factors
 Steep increase in crude oil price.
 Global demand has exceeded global oil
production. China and India growing at 8-
10% annually have put a huge demand on oil
in the global market keeping prices steady.
 The issue of Excess Capacity
 The issue of excess capacity, as described
above, has ignited the need for lower prices
in order to liquidate product that is
overstocked.
 Fluctuations in the exchange rate between
the Japanese yen and the U.S. dollar.
3. Socio-cultural force
Important factors
 The development of ethnic markets can be
relevant. In a number of countries, the
ethnic mix of consumers is changing due to
immigration and other factors.
 The result of an increased number of
women working over the past decades.
Potential impact on business
 The price of gasoline, driven by supply
concerns and increasing demand will serve
to increase the attractiveness of vehicle
options like plug in hybrids that are less
dependent on gasoline.
 Governmental tax increases and tax credits
on gasoline will increase the desirability of
plug in hybrids
 Toyota may face more loss in terms of
excess capacity which it is holding while
there is already the issue of recall and the
decline in overall sale revenue for the
corporation.
 Due to this there will be a great price
competition start among the manufacturer
which will become another challenge for
Toyota. However, for the auto manufacturers,
pressure to continually lower prices to
generate sales is resulting in significantly
lower profit margins.
 As a result, exchange rate fluctuations are
likely to affect the market price of the
American Depositary Shares (ADS) on the
New York Stock Exchange (NYSE). Toyota
will declare any cash dividends on shares in
Japanese yen. Exchange rate fluctuations
will also affect the U.S. dollar amounts
received on conversion of cash dividends.
Potential impact on business
 This will be reflected in changing demands
for various goods, not only from the specific
ethnic group but from other consumers
whose tastes have been affected by them.
Furthermore, as ethnic groups immigrate to
other countries, their own tastes can affect
those of consumers in the host nation.
 This has been elevated household incomes,
allowing for more frequent purchases of new
vehicles.
 4. Technological force

Important factors Potential impact on business

 Technological breakthroughs related to  Development of leading-edge components
components and systems. and systems ahead of competitors.

The worldwide automotive industry is highly volatile.

“Each of the markets in which Toyota competes has been subject to considerable volatility in
demand. Demand for vehicles depends to a large extent on general, social, political and economic
conditions in a given market and the introduction of new vehicles and technologies. As Toyota’s
revenues are derived from sales in markets worldwide, economic conditions in such markets are
particularly important to Toyota. Demand may also be affected by factors directly impacting vehicle
price or the cost of purchasing and operating vehicles such as sales and financing incentives, prices
of raw materials and parts and components, cost of fuel and governmental regulations (including
tariffs, import regulation and other taxes). Volatility in demand may lead to lower vehicle unit sales
and increased inventory, which may result in further downward price pressure and adversely affect
Toyota’s financial condition and results of operations.”
(Toyota Motor Corporation, Annual Report 2008)

The current situation of Toyota

“Prosecutors in California are suing Toyota, claiming the Japanese carmaker sold hundreds of
thousands of vehicles that it knew had defects.”
(M. Rajesh, California sues Toyota for faults, BBC New, Los Angeles)

"We understand that the current situation is creating concerns and we deeply regret it," said Tadashi
Arashima, the chief executive of Toyota Motor Europe.
(http://news.bbc.co.uk/1/hi/business/8487984.stm)

The impact of Toyota’s culture on the current situation

Prior to 2009 Toyota has done a great job of expanding internationally. It had built up a reputation
for high quality and reliability. With its Prius model it had effectively captured a large part of the
green market. The Lexus brand had a strong image in the luxury sector.
In 2006, Toyota was voted the most respected car company in USA. It had a 17.4% share of the US
car market and was heading towards becoming the single largest car company in the US. By focusing
on developing US factories and supporting local communities it had managed to win the hearts and
minds of normally protectionist American car buyer.
The fundamental reason for Toyota’s success lies in the corporate philosophy, Toyota’s production
system and it’s sets of rules that governs the use of resources. Toyota has successfully competes in
the market and established its world-wide presence.
Despite having such a power full production system, The Toyota Way, which many companies
fosters to develops their business and production plan, Toyota is facing the major disaster of its life
time.
Some analysts criticise that the Toyota Production System (TPS) and lean does not work.
The lean and TPS does work in Toyota since many years which make it the world’s best car seller
company. Toyota has an operating model for their business and everyone in the company knows
about it. As long as they stick with their plan Toyota managed a very strong quality system.
The problem in the Toyota arises when it did not align with its way. Quality and culture are the
fundamental growth factor for Toyota and ignoring them specially when not keeping Toyota’s
culture in focus, the things began to go wrong.

Time magazine suggests the culture had everything to do with it. The company simply got too big.

"Rapid expansion puts enormous pressure on any company's ability to transmit know-how and
technology, especially over long distances and across national cultures. When Toyota opened its
Georgetown, Ky., plant in 1988, hundreds of work-team specialists and other experts were
transplanted from Japan for several years to make sure the new plant fully absorbed the Toyota
way. That kind of hand-holding may still be possible, but it isn't as easy ... When weak signals started
coming out in 2002, Toyota's top management wasn't listening. By then, the heroic stage of Japan
Inc. was over; parts of its business culture had become sclerotic. Compared with the nimbleness
seen in Silicon Valley, Japan's manufacturers and their systems began to be seen as inflexible, too
removed from a changing global economy to adapt. Analysts describe a Toyota management team
that had fallen in love with itself and become too insular to properly handle something like the
current crisis. 'The reaction to [the situation] is a very Japanese thing,' says Kenneth Grossberg, a
marketing professor at Waseda University's business school in Tokyo. Jeffrey Kingston, director of
Asian studies at Temple University Japan, says Toyota's managers don't understand how sensitive
the American public is to auto-safety issues. "Their focus on the customer has been nonexistent," he
says. "Toyota is famous for having an arrogant culture. They're so used to dealing with successes
that when they have a problem, they're not sure how to respond.
(http://www.time.com/time/business/article/0,8599,1963595-2,00.html)

Despite a global company Toyota is still a very much Japanese company, still sticking to its same
culture which lead the company in the current position. Toyota’s top leadership dose not included
US executives. Toyota developed Toyota Production System and it was working so well that they did
not think about it with respect to changing environment and strategy. They believe that they have all
the solution for the future problem.
Task 2: Draft a new Vision and Mission statement for Toyota.

Toyota has experiencing a challenging era since it comes into creation. Toyota has recalled millions
of vehicles due to the problem with its braking and acceleration. The current situation of the Toyota
could cost billions of dollars to the corporation. In the US the company has been forced to recall
6million vehicles.
Laws and government regulations are also changing continuously and rapidly. Almost all the
regulations are concerning to the environment.
It was decided in the Copenhagen Climate Change Summit, 2009 that “The current climate is one of
the greatest challenges of this age. There is the need to emphasise the strong political will to
urgently combat this climate change.”
In the current situation Toyota needs a sense of urgency in revising a strategic plan through which it
enables itself to tackle with the changing global competition, economy and environment within the
automotive industry.

New Vision Statement for Toyota

To make the world a global family through quality products, leaving the brand as a symbol of quality
in consumers’ mind and lead the automotive industry through innovation and alternative fuelled
vehicles.

New Mission Statement for Toyota

To meet the customers’ expectations through quality, delivery, cost and after sales services and will
regain the lost market share through aggressive strategic marketing in a smarter way and innovating
the vehicles for the changing global market.

Task 3

Proposed top 5 objectives for Toyota based on the vision and mission are as follows:
1. To provide the safer transportation and the quality product to the customers Right First
Time.
2. To involve the customers’ interaction for continuous improvement.
3. To contribute in employment globally and play a leading role in manufacturing low carbon
vehicles.
4. To penetrate in the global automotive industry and take the company’s growth at a higher
rate.
5. To ensure reasonable ROI and to maintain liquidity by managing the assets and human
capital efficiently.

Reasons for the chosen objectives

The auto industry is going through the tremendous change because of the many reasons. The
middle-east war is responsible to the rise in the fuel prices and global warming and changing
environmental regulations.
 Toyota is one of the major car manufacturing industry which needs plans its corporate strategy
carefully and thus the path to accomplish its goals. This is the time when Toyota must reengineer its
strategy and take these environmental and other conditions as opportunities.

opportunities, and take advantage of changing consumer buying habits. GM needs to change
consumer perception of the company, from a dull, poor quality, vehicles to innovative, quality, and
environmentally friendly company. To do this GM must portray an image that states that GM
values what the consumer wants and what the environment needs. Listen to what consumers are
saying directly and indirectly about GM’s current products, and create innovative, green, vehicles
that turn consumers into customers. At the same time provide GM stakeholders pride and financial
incentives to remain with GM.

Task 3.3: How will success against the objectives defined in 3.1 be measured.

The method of this study, measures for evaluation of the proposed objectives, is based on the
suggestions determined by the Robert S. Kaplan and David P. Norton in 1992. This is known as the
Balanced Scorecard and can be used for strategy and policy implementation and performance
measurement. It is composed of four categories.
1. Customer perspective.
2. Internal business perspective.
3. Financial perspective.
4. Innovation and learning perspective.

Customer Perspective
How customer see the business. Evaluation from the customers’ perspective helps in improving the quality, cost and position in market.
The considered measures of evaluation are the number of new customers, customer satisfaction and retention, acquisition and market share.

Internal business Perspective Innovation and Learning Perspective

stion.
the It
measure of meet
strives to the ability of continuedand
the shareholders growth and innovation.
customers’ It shows
expectations the ability
by excellent of managed
business resources
internal of the business and ability of change and
processes.
asures of evaluation are cost, quality, lead time and response time. Measures for this perspective are information system availability and the employe
.
 Financial Perspective
investments and defines its measures for evaluation. It gives an indication whether firm’s strategy, implementation and execution contributing in th
The general measures for this evaluation are (ROI) Return on Investments, profits and (EVA) Economical Value Added.