Monday, June 25, 2012

Toyota should be more globalized

Hirokazu Kitahara

Considering the Japanese yen appreciation, Toyota pursues to reallocate the units to be produced in each country. In 2011 while its internal production capacity is around 3.6 million units, the internal sale is 1.2 million units. This means 2.4 million units were made to export from Japan to other countries. Thanks to Toyota Global New Body Line, Toyota can produce each type of vehicles in any factory. This flexibility makes it possible for factories in Japan to produce any types of vehicles demanded by the world market.

However, beyond the scope where the flexibility of production can cope, the strong Japanese yen has a negative impact on Toyota’s bottom line. Therefore, Toyota decided to take two measures. Firstly, it increased the target market share from 44.4 percent in 2011 to 55.6 percent in 2015. By increasing internal sales, it intends to mitigate the impacts caused by strong yen as long as possible. Next, Toyota decided to decrease the internal output by 400 thousands units and to enhance output in emerging economies like China.

Although Toyota says in Vision and Philosophy that "from development and design to production, as well as sales and service, Toyota has now achieved consistent globalization and localization," it seems that Toyota pays too much attention to the internal production and market still now. Considering the trend of strong yen and the declining Japanese population, Toyota should shift its production allocation more drastically.

However, this mismatch does not come from their failure of implementing strategy. The global strategy is set partly cosmetically. Toyota is still a Japanese company and not a global company. But the situations surrounding it require for Toyota to consolidate its public and private selves in strategy. To implement its global strategy, Toyota itself should be more globalized.

[1] Toyota aims for 55% of Japan market
[2] Toyota to cut Japan output over high yen
[3] Toyota Global New Body Line
[4] Toyota Global Vision

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