Functional Leval Strategy for Toyota

Table of Contents” Name of the PointsPage Number Executive Summary Chapter-01Introduction: 1. 1Origin of the Study 1. 2Objective of the Study 1. 3Methodology of the Study 1. 4Limitation of the Study01-02 Chapter-02About Strategic Management & Functional level strategy03 Chapter-03Topic of the Term Paper: Functional Level Strategy of Toyota Corporation04-08 Chapter-04Problems & Solutions09 Chapter-05Findings & Analysis10-11 Chapter-06Conclusion12 ReferencesI Appendix II-III Executive Summary In every organization strategic management has a direct impact on its business.

Strategic Management helps to attain superior performance and competitive advantage for an organization. Through competitive advantage and superior performance a company differentiates its product, create a brand loyalty and increase the profitability. Companies in an industry always try to be in a top most position. For these they need to select strategies about each and every function. Functional-level strategy increases the performance rate. Strategic managers analyze the weakness of an organization in its every department and select strategies for every function and turn it into strengths.

Specific strengths help companies to have competitive advantage over its rivals and increase the profitability which is an actual business goal of each and every organization. In BBA program, one of the most important parts of each course is to prepare a term paper on assigned topic related to the course. The term paper is prepared on strategic management in Automobile companies and functional-level strategy, which tries to show a company’s functional-level strategy in generic building blocks of attaining competitive advantage. Chapter-01 Introduction 1. 1)Origin of the study:

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We are a group of students in BBA program. In this Program, one of the important tasks of every course is to prepare a term paper on the assigned topic related to the course. In BBA program “Strategic Management” is a very important course. Our course teacher has provided us to prepare a term paper on assigned topic related to the course. We have prepared our term paper based on our course teacher’s assigned topic. 1. 2) Objective of the study: The main purpose of this report is to show a concrete overview of an organization and their Strategic Management.

The report will show the organization and their functional level strategy in achieving superior efficiency, superior quality, superior innovation and superior customer responsiveness to have competitive advantages in industry than its rivals. 1. 3) Methodology of the study: In preparing our term paper we have gathered information through the secondary resources. The whole information has been gathered from the internet and different books. 1. 4) Limitation of the study: The main limitation of the study is that the assigned sector or industry on which we prepared our term paper is about Automobile Company and their functional level strategy.

In Automobile sector of Bangladesh none of the companies are producing or manufacturing vehicles inside the country. Most of them are sole distributors of international motor vehicle’s company or they import the vehicles from various companies from others countries. For these, we couldn’t collect information through visiting the company. It is very difficult to make a term paper about a company and their functional level strategy by using secondary resources only. Chapter-02 About Strategic Management

Strategic Management refers to the managerial process of forming a strategic vision, setting objectives, crafting a strategy, implementing a strategy and then overtime initiating whatever corrective adjustments in the vision, objectives, strategy and execution are deemed appropriate. Functional level strategy: Functional level strategies are those aimed at improving the effectiveness of a company’s operations to achieve the superior efficiency, superior quality, superior innovation and superior customer responsiveness to have competitive advantages in industry than its rivals.

Superior efficiency helps to increase the productivity with limited resources and therefore lower costs, than its rivals. Superior quality can help a company lower its costs and differentiate its products and charge a premium price. Superior innovation can result in new products that better satisfy customer needs, can improve the quality of existing products or can reduce the costs of making products that customer want.

Superior customer responsiveness helps to create a brand loyalty, strong product differentiation which gives more pricing options, charge a premium price to increase the profitability. Chapter-03 Topic of the Term Paper “Automobile Company” Functional Level Strategy of Toyota Corporation About Toyota: Toyota Motor Corporation is a Japanese automaker. It is the world’s second largest automaker behind General Motors; however it ranks first in net worth, revenue and profit. It is also the only car manufacturer to appear in the top 10 of the BrandZ ranking.

The company was founded in 1937 by Kiichiro Toyoda as a spinoff from his father (Sakichi Toyoda)’s company Toyota Industries to create automobiles. In 1934, while still a department of Toyota Industries, it created its first product Type A engine and its first passenger car (the Toyota AA) in 1936. It is headquartered in Toyota, Aichi pref. , Nagoya, Aichi pref. and Tokyo, Japan. It also provides financial services through its division Toyota Financial Services and also creates robots besides automobiles.

The company along with the original Toyota Industries form bulk of the Toyota Group. Toyota owns and operates Toyota, Lexus, Scion, has a majority shareholding in Daihatsu Motors, and has minority shareholdings in Fuji Heavy Industries, Isuzu Motors, and the engine, motor cycle and marine craft manufacturer Yamaha Motors. The company includes 522 subsidiaries. Toyota plans to produce 9. 51 and sell 9. 36 million vehicles overall in 2007. It plans to produce 9. 95 and sell 9. 85 million vehicles in 2008 setting an industry record if it happens.

By January 8 ,2008, the company will drop “Motor” from its corporate name and call itself simply “Toyota Corporation”. Toyota will change the Japanese writing of its brand name from Katakana to Kanji and “Corporation” will move from the end to the beginning. Toyota today: Toyota has grown to a large multinational corporation from where it started and expanded to different worldwide markets and countries by becoming the largest seller of cars in the beginning of 2007, the most profitable automaker ($11 billion in 2006) along with increasing sales in, among other countries, the United States.

The world headquarters of Toyota are located in its home country in Toyota, Aichi, Japan. Its subsidiary, Toyota Financial Services sells financing and participates in other lines of business. Toyota brands include Scion and Lexus and the corporation is part of the Toyota Group. Toyota also owns majority stakes in Daihatsu and Hino, and 8. 7% of Fuji Heavy Industries, which manufactures Subaru vehicles. They also acquired 5. 9% of Isuzu Motors Ltd. on November 7, 2006 and will be introducing Isuzu diesel technology into their products.

Toyota has introduced new technologies including one of the first mass-produced hybrid gas-electric vehicles, of which it says it has sold 1 million globally (2007-06-07) [16], Advanced Parking Guidance System (automatic parking), a four-speed electronically controlled automatic with buttons for power and economy shifting, and an eight-speed automatic transmission. Toyota, and Toyota-produced Lexus and Scion automobiles, consistently rank near the top in certain quality and reliability surveys, primarily J. D. Power and Consumer Reports.

In 2005, Toyota, combined with its half-owned subsidiary Daihatsu Motor Company, produced 8. 54 million vehicles, about 500,000 fewer than the number produced by GM that year. Toyota has a large market share in the United States, but a small market share in Europe. Its also sells vehicles in Africa and is a market leader in Australia. Due to its Daihatsu subsidiary it has significant market shares in several fast-growing Southeast Asian countries. In the Fortune Global 500, Toyota Motor is the 8th largest company in the world. Since the recession of 2001, it has gained market share in the United States.

Toyota’s market share struggles in Europe where its Lexus brand has three tenths of one percent market share, compared to nearly two percent market share as the U. S. luxury segment leader. In the first three months of 2007, Toyota together with its half-owned subsidiary Daihatsu reported number one sales of 2. 348 million units. Toyota’s brand sales had risen 9. 2% largely on demand for Corolla and Camry sedans. The difference in performance was largely attributed to surging demand for fuel-efficient vehicles. In November 2006, Toyota Motor Manufacturing Texas added a facility in San Antonio.

Toyota has experienced quality problems and was reprimanded by the government in Japan for its recall practices. Toyota currently maintains over 16% of the US market share and is listed second only to GM in terms of volume. Toyota Century is the official state car of the Japanese imperial family, namely for the Emperor of Japan Akihito. Worldwide presence: Toyota has factories all over the world, manufacturing or assembling vehicles for local markets, including the Corolla.

Toyota has manufacturing or assembly plants in Japan, Australia, Canada, Indonesia, Poland, South Africa, Turkey, the United Kingdom, the United States, France, Brazil, and more recently Pakistan, India, Argentina, Czech Republic, Mexico, Malaysia, Thailand, China, Vietnam, Venezuela, the Philippines, and Russia. Toyota has invested considerably into cleaner-burning vehicles such as the Toyota Prius, based on technology such as the Hybrid Synergy Drive. In 2002, Toyota successfully road-tested a new version of the RAV4 which ran on a Hydrogen fuel cell.

Scientific American called the company its Business Brainwave of the Year in 2003 for commercializing an affordable hybrid car. Funtional Level Strategy in Toyota: In analyzing the functional level strategies of Toyota we will actually analyze the activities or strategies towards achieving superior efficiency, superior quality, superior innovation and superior customer responsiveness than its rivals to have competitive advantages. These are given bellow- 3. 1) Achieving Superior Efficiency:

To be efficient and increase the production rate Toyota’s strategy helps them to reduce costs and increase the profitability rate. To be efficient they follow- i)Flexible Manufacturing, ii)Use JIT to reduce inventory , iii)Largest technology, iv)Productivity rate 5. 3% in 2004, v)19% productivity in assembling, vi)Reduce set up times, vii)Most efficient company in the world, viii)Low customer defection rate, ix)Tries to be more efficient through R&D, x)Improve quality control etc. All those help Toyota to reduce costs with wide range of products with competitive advantages of value creation than its rivals. . 2) Achieving Superior Quality: Toyota Motor Corp. has successively introduced to the world new models of cars highly important to the market since 2006, such as the American best seller Camry, world’s best seller Corolla, and the top-in-the-Lexus-series LS. So far, everything has gone smoothly without any trouble to the quality of each of the models. Some industry sources say, however, that the people who are actually involved in the production of those cars have been stretched out for too long. “This kind of situation can’t last long,” they say.

The company appeared to have been trying to avoid any defect in its production by setting up an inspection system like that under an emergency alert. It is thriving on achieving a sales increase of as much as 10 million units as early as in 2010. The company has also to meet the challenge of high technology advance symbolized hybrid cars, while it has to exert efforts for the production of cheaper-priced cars meet the competition from Chinese makers. Toyota is entering into new fields which it has never experienced before one after another. Risk always lurks in effort to maintain high quality.

To maintain quality they also do some tasks, this are- i)Customer first activity, ii)Directly supervised by the president as a whole in development, production and sales for improving the quality, iii)One of the largest companies with largest technology, iv)Use hybrid technology and plug-in hybrid technologies, v)TQM etc. All those helps Toyota to maintain its quality of products, increase productivity, reduce costs. Thus they differentiate their products and raise their brand loyalty to charge a premium price. 3. 3) Achieving Superior Innovation: To achieve superior innovation they follow- i)Research & Development, i)Emphasize on improving engine fuel efficiency, iii)Target doubling the innovation rate year by year, iv)Investing very much on innovation, v)Use hybrid technologies etc. Investing in innovation is risky. If successful, the benefits can build a competitive advantage that is difficult for others to eliminate. However, others will try and if you fail to execute as well in the future those benefits can disappear quickly. Toyota shows few signs of letting others catch up though. 3. 4) Achieving Superior Customer Responsiveness: The strategies to achieve superior customer responsiveness of Toyota given bellow- 1.

General Motors Corporation 2. Ford Motor Company 3. Toyota Motor Corporation 4. Daimler and Chrysler 5. Honda Motor Corporation All these helps Toyota to have superior customer responsiveness than its rivals and now Toyota’s customers are available at worldwide, created a brand loyalty which helps Toyota to charge a premium price. Chapter-04 Problems & Solutions Strategies taken by Toyota for some difficulties Toyota’s flexible manufacturing system was developed by one of the company’s engineers, Ohno Taiichi. After working at Toyota for five years and visiting Ford’s U. S. lants, Ohno became convinced that the mass production philosophy for making cars was flawed. He saw numerous problems, including three major drawbacks. First, long production runs created massive inventories, which had to be stored in large warehouses. This was expensive because of the cost of warehousing and because inventories tied up capital in unproductive uses. Second, if the initial machine settings were wrong, long production runs resulted in the production of a large number of defects (that is, waste). And third, the mass production system was unable to accommodate consumer preferences for product diversity.

In looking for ways to make shorter production runs economical, Ohno developed a number of techniques designed to reduce setup times for production equipment, a major source of fixed costs. By using a system of levers and pulleys, he was able to reduce the time required to change dies on stamping equipment from a full day in 1950 to three minutes by 1971. This advance made small production runs economical, which allowed Toyota to respond better to consumer demands for product diversity. Small production runs also eliminated the need to hold large inventories, thereby reducing warehousing costs.

Furthermore, small product runs and the lack of inventory meant that defective parts were produced only in small numbers and entered the assembly process immediately. This reduced waste and made it easier to trace defects to their source and fix the problem. In sum, Ohno’s innovations enabled Toyota to produce a more diverse product range at a lower unit cost than was possible with conventional mass production. Chapter-05 Findings & Analysis Toyota is the world’s second largest automaker behind General Motors; however it ranks first in net worth, revenue and profit.

It is also the only car manufacturer to appear in the top 10 of the BrandZ ranking. They follow numbers of approaches for functional level of strategies to achieve the superior efficiency, superior quality, superior innovation and superior customer responsiveness. The approaches of value creation function taken by Toyota are given bellow: Value Creation Functions & Roles: Infrastructure (leadership): i)Total Quality Management ii)Find ways to measure quality iii)Provide companywide commitment to efficiency iv)Companywide commitment to responsiveness to customers Production: )Use hybrid technology and plug-in hybrid technologies ii)Flexible manufacturing iii)R to develop process innovations iv)Rapid response through flexible manufacturing Marketing: i)Focus on customer first activity ii)Provide customer’s feedback on quality iii)Limit customer defection rate through their brand loyalty iv)R&D to develop new products Materials Management: i)Implement TQM ii)Implement JIT systems iii)Respond quickly customer demands(JIT) R&D: i)Process innovation for ease of production ii)Bring customers into the product developement process Information System: )Reducing monitor defection rates ii)Automate process iii)Reduce cost iv)Web-based information systems to increase customer responsiveness Human Resources: i)Institute TQM training programs ii)Pay for performance iii)Hire talented scietists & engineers Chapter-06 Conclusion Automobile companies are doing their business globally. So the market size is huge and there are so many companies involve in it. Technologies are changing and every time a new company introducing itself with new technologies of vehicles. Rivalry among the companies is increasing towards the global automobile industry.

So many companies are creating, so many companies are trying to survive, and so many companies have gone into liquidation. But among them some companies are differentiating its products with a ranking of brand loyalty. Top five companies General Motors Corporation, Ford Motor Company, Toyota Motor Corporation, Daimler and Chrysler, Honda Motor Corporation are in their position today only for their approaches taken towards achieving superior efficiency, superior quality, superior innovation and superior customer responsiveness. References Book: Charles W. L. Hill: University of Washington, Gareth R.

Jones: Texas A&M University. Strategic Management an Integrated Approach (6th Edition, Indian Adaption), USA: Houghton Mifflin Co. & India: Biztantra, An Imprint of Dreamtech press Websites: 1. http://www. google. com 2. http://en. wikipedia. org/wiki/Toyota 3. http://www. toyota. co. jp/en/about_toyota/overview/index. html 4. http://www. toyotaforklift. com/about_us/news/press_releases/0077. aspx 5. http://www. theoaklandpress. com/stories/060305/loc_20050603003. shtml 6. http://en. j-cast. com/2007/07/24009559. html 7. http://evop. blogspot. com/2006/02/innovation-at-toyota. html