International Business: Toyota Business Model
An international business is one which has offices both in the parent company and in other nations regardless of the business culture. Any business that wants to establish a name outside its home country needs to be flexible, open and accepting of the guest nation’s business culture. In order to succeed it has to compete with the guest nations businesses and create its own identity. It is hard to beat another manufacturer on its own turf as the business norms are not always well accepted by international business models when they venture into a new market.
However, one manufacturer who not only entered a new market but managed to gain a stronghold in the market usurping the position of the countries local manufacturers is Toyota. With its unique business vision and its core focus on customer support, Toyota has shown that technology alone is not a road map to success in today’s’ competitive global market. The users of the product have to come first and it is their needs and wants that should go into the design of the product to make it a success above the ordinary.
Toyota, one of the biggest names in car manufacturers is a Japanese company which has become almost a household name in the US. At a time when gas consumption, better mileage and customer comfort are the needs of the people, Toyota has stolen the US market from the US companies like Ford and GM. The latter are finding it hard to survive with the competition they face from this Japanese manufacturer.
What makes Toyota the success it is today and how does the Toyota business model differ in the US and abroad? While the US embraced the Japanese concept of Total Quality Management in their business models throughout the last decade and got ISO certifications, the Japanese take TQM, one step forward with their concept of Kaizen, or continuous improvement. They do not allow their product line or their customer feedback to become stagnant. The business models that emerge from Japan are such that they focus on the business as a whole, rather than separate aspects of the individual. (Spears, 2004)
The Toyota business model is one of the most progressive and futuristic in terms of production and management we see in the business industry today. Many companies have implemented the Toyota strategy and created a successful venture. The success of the Toyota strategy is what makes the Toyota brand one of the top selling brands in the US and around the world.
Taiichi Ohno, developed the Toyota Production System and his theory was, “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’.” With this philosophy the company created a brand that may not be top of the line luxury, but is a brand of convenience for the customer with enough sophistication to keep customers satisfied.
The Toyota brand has the highest rate of customer satisfaction because Toyota always keeps the customer in mind when creating car features. The production line is such that any malfunction or imperfection is halted through sensors and through the workforce individuals who have been trained to ensure that every car that hits the road works to the customer’s satisfaction. (Barkman, 1989) Further, with rising gas prices, hybrid models are emerging that work to conserve fuel and create a car that saves the customer their dollars. The Toyota design models are derived from customer feedback and every year the model is improved for the customers.
While US firms mostly have a three to five year production cycle after which they get results, the Japanese version is more direct and it always keeps the customer in mind. In the US they have focused on the people. Toyota is a learning company. In the US it has a flexible policy of management while keeping its core structure strong. It has a set standard of quality and all the cars under its management follow that standard. It does not aim for the high end market; rather it targets the masses and thus, develops cars for the middle class and higher middle class. They do have high end luxury cars like the Avalon and [Lexus in a different category] but Toyota is mainly for the masses and with a customer service that is legendry it has taken the US market by storm.
The reason the US manufacturers have failed to compete with this Japanese manufacturer is because the management. The US car manufacturer focuses on the product and not the customer. They cannot match the technology but neither can they match the people’s management. The structure of the US firms is based on the traditional managerial styles which goes top to bottom while the Toyota firm allows self-managed teams. These teams are based on human values and profit is rewarded on individual and team basis. This eliminates waste of production, and talent.
If we walk into a Toyota showroom today, anywhere in the US you see value for the customers. Customers are treated as valuable entities and not simply buyers. Their convenience comes first and the salesmen try to accommodate the buyer in any way possible. Complaints are handled with efficiency and the customer is always given the right of doubt. If a lemon is bought, it’s not fixed, its replaced. That is the quality of service Toyota provides in the US. Is this service reflected throughout the world?
Yes, throughout the world Toyota is giving the people what they require. In the US cars are manufactured according to the US standard-fuel efficient cars, low smoke emission, fuel injected system for engines etc. Everything is as per US standards. The cars produced or these regions differ from those in the other parts of the world. In the Middle East where the terrain is different, cars are bigger and more luxurious. Every part of the manufacturing process is customized for its target nation and that is what makes Toyota a success. The designs of the car, the customization of the buying process, the management and the marketing all reflect the customer and not the company. This makes Toyota a brand for the people and that is what makes it the one the top selling brands in the US and abroad today.
Toyota always keeps the future in mind and its business targets the upcoming markets while maintaining the present sales. Toyota is one brand that keeps its customers and retains them through sheer satisfaction. The quality it presents in its designs is far surpassed by any other brand in its class and it is through this ingenuity that it maintains its market.
As Fujio Cho, Chairman of the Toyota motor corporation says, “Always think about what your next step will be. Continuously improving yourself is the mark of a true professional.” The Toyota approach in every nation has three main facets, keeping inventory to a minimum or ‘the just in time’ concept. Ensuring that all parts of the assembly process are completed correctly in the first go; keeping errors to a minimum, and cutting human costs to the lowest possible fraction. (Toyoda, 1987) This approach then allows for a design of cars that is smaller than usual [compared to Ford or GM], low priced and fuel efficient in an energy starved market.
An international business sin this global environment has to constantly struggle to survive for competition is fierce, Toyota through its tremendous growth and design technology is proving that it is a force to be reckoned with.
1. Barkman, W.E.(1989), In-Process Quality Control for Manufacturing. New York: Marcel Dekker.
2. Spear, S (May 1, 2004) Learning to Lead at Toyota. Harvard Business Review.
3. Toyoda, E. (1987) Toyota: Fifty Years in Motion. New York: Kodansha International.