A Case Study on

TOYOTA MOTORS

IN FULFILLMENT OF REQUIREMENTS FOR

STRATEGIC MANAGEMENT AND BUSINESS
POLICY

PREPARED BY:

MAGNAYE, CHRISTINE C.

February 1, 2020
 I. TIME CONTEXT OR TIME FRAME

 In 2011, Toyota Motor, the world’s largest automaker slipped to third place in
production in automobile industry

 2011, Toyota production plummeted due to tsunami in Japan

 2009-2010 Recalled Toyota units due to malfunctioned parts

II. VIEWPOINT
 Akio Toyoda
President, Toyota Motor
Grandson of Toyota Founder

III. STATEMENT OF THE PROBLEM

 Toyota Motor lost its production facilities due to tsunami in Japan

 No available alternative supplier for automobile parts

 Lost 800,000 production units or 10% of annual output

 Recalled 8M Toyota units due to malfunctioned parts

IV. STATEMENT OF OBJETIVES

 To restore disrupted production of Toyota Motor

 To produce automobiles of great quality at best prices

 To regain the trust of customers to Toyota Motors product

V. AREAS OF CONSIDERATION

 Flexibility in determining expenditure

 Establishment of export markets

 Use of most efficient work practices

 Effective cost controls

 Access to the latest available and most efficient technology and techniques

 Optimum capacity utilization

VI. SWOT ANALYSIS

STRENGTH

 Strong market position and brand recognition

  Extensive production and distribution network

WEAKNESSES

 Growing global automotive industry

 Growing partnership with BMW

 Strong outlook for the global new car market

OPPORTUNITIES

 Growing global automotive industry

 Growing partnership with BMW

 Strong outlook for the global new car market

THREATS

 Intense competition

 Natural Disasters

VII. ALTERNATIVE COURSES OF ACTION

 Toyota needs expansion to another country

 Toyota may engage to a third party quality audits

 Enhance environmental education

ADVANTAGES

 Crisis won’t hamper production by installing production facilities globally

 Third party quality audits can share best practices that can strengthen product
quality and can serve to validate existing programs and provide
recommendations for growth or change when deemed necessary
 Environmental training will raise environmental awareness of employee and it
will improve actual work activities

 A benefit of operating overseas is that many foreign countries offer lower

operating costs, particularly reduced labor costs
DISADVANTAGES
 Intellectual property is generally at greater risk in expanding production
overseas. At a minimum, the know-how to manufacture products may be
 applied to competitors’ products. In some cases, all or part of a design may be
stolen to create a “knock-off” product.

 Companies will generally lose some control and visibility when they outsource
production
VIII. CONCLUSION
 Toyota is in need of support industries and infrastructures around the world by
continuously supplying products and services in order to continue its
production in times of crisis

IX. RECOMMENDATION
 Toyota should do contingency planning in order to mobilize its staff and
suppliers and integrate its production in times of crisis.
 Toyota should accelerate its business expansion into rapidly growing
emerging countries by thoroughly and meticulously monitoring market
conditions in respective regions.
 Toyota should also strive to establish production and supply structures to
realize optimum product pricing and delivery, and to enhance the value chain
to provide a wide range of customer services in each country and region.
 Toyota should pursue the development of environmentally conscious,
energy-saving products while incorporating functions and services
demanded by customers and delivering them to the global market.

X. ACTION PLAN

In March 2011, Japan was shocked by a deadly earthquake and Tsunami. The 9-
magnitude quake was the largest tremor to hit the country since 1850. At that time,
Toyota built 45% of its vehicles in Japan. After the earthquake most of Toyota’s
Japanese plants were closed for nearly two months. In addition, Toyota’s north
American production was cut to 30% for the subsequent 6 months due to a shortage
of 150 different parts which should have been produced by Toyota’s Japanese
plants. Toyota had a 77% fall in profits in the second quarter of 2011, equivalent to
$1,36BN.

To mitigate risks in case of future hits, other Japanese automakers started to build
redundant inventory, selected multiple or even redundant suppliers and adopted
more standardized components for different vehicles. The entire philosophy of Just-
in-Time was under attack and Toyota had to decide how to react.
In 2011, Toyota executive VP Shinichi Sasaki told Reuters that Toyota is developing
a five-year plan that would enable a recovery from a hit within two weeks.

The plan comprised four actions. First, Toyota adopted some components that are
standardized across all Japanese automakers so that they could be manufactured in
several locations and shared among automakers if needed. Then, Toyota built a
database with information about thousands of parts stored at 650,000 supplier sites,
which helps bypass bottlenecks when one supplier gets knocked out of commission.
In addition, Toyota decided to regionalize the supply chain. Regionalization will
reduce the fragility of global supply chains containing the impact of a disruptive event
to a single region. The last action was to force suppliers to hold as much as a few
months’ worth of inventory of specialized components.

Toyota had a hard-testing of its revised production system when a series of

earthquakes happened in April 2016. Toyota initially suspended all production in
Japan. But within days Toyota bounced back with plans to bring the plants online
starting April 25. Toyota restored full production by Thursday, April 28. The success
of the hard-testing showed that Toyota was on the right path.

Nevertheless, with extreme events becoming more probable, Toyota should further
improve its supply chain resilience. In this light, Big Data could support Toyota in
increasing the overall transparency of its supply chain, providing live information
about potential disruptive events at supplier sites, their inventory level and WIP
status. Toyota should also consider a dualization of its most relevant suppliers,
switching from a single supplier to a more balanced approach which would involve
different suppliers delivering same components. Last, inventory management needs
to be integrated in the Toyota philosophy. The Just-In-Time is an efficient way to
reduce wastes but not resilient to unpredictable extreme events.