That the Toyota Motor Corporation has cut a niche for itself within the automobile industry is a fact. Founded in the year 1937, the Japan-based automobile company has indeed grown to be a market leader in the production and sales of automobiles across the globe. A look into its profile reveals that it has a global workforce of about 320,080 which has been very instrumental towards its emergence to be a large multinational. Its steady rise saw the displacement of General Motors two years in addition to maintaining its status as the world’s most profitable organization since 2006. There is consensus within the automobile sector that Toyota’s success is attributed to its efficiency in the sales and production in all its global market segments, including the U.S.A. Against this backdrop, this research paper seeks to examine the stated company’s strategy in the context of its global operations with particular emphasis on the Lexus Strategic Business Unit.
Positioning for Greater Global Competitiveness
In the wake of heightened competition amongst various market players, the importance of an organization positioning itself for greater global competitiveness cannot be overlooked. This strategy is important since it enables an organization to expand its market development, reduce costs, venture into new businesses, and realize the advantages of scope and scale due to the overall impact of increasing the market penetration. Nonetheless, the concept of creating greater competitiveness globally is multifaceted and thus takes on board various organizational strategies. It is not only the drive for increased profitability that has culminated the increased motivation amongst organizations to be globally competitive. Other factors gravitate on the increasing need by companies to operate globally, as well as, fast changes in the marketplace. Hence, one of the ways through which the Toyota Company has developed its global competitiveness is through the development of a top-notch production system in all its markets along with the putting in place a strong financial resource base. According to external observers, the company has embraced the concept of best practices for its entire production system. Cumulatively, these practices have seen the company build a reputation for having quality automobile products and services under the auspices of flexibility and efficiency.
Other than having a strong financial resource base, the creation of a unique production system by Toyota is anchored by its own management philosophy as is evidenced by its own culture. External business observers have attributed the establishment of the so-called Toyota way or philosophy to a number of guiding strategies internalized by this multinational corporation. Such strategies are especially important since they provide a platform for the company to create a favorable business environment across its expansive yet diverse international market. One of these strategies is captured in terms of being able to use long-term philosophy to base its management decisions. Creation of a continuous flow process as a tool for bringing problems unto the surface is the second strategy. The third strategy of the top-class production system at Toyota is presented through the use of the pull systems as a means of avoiding overproduction. A detailed analysis of the company’s organizational culture shows that it has a level workload strategy. Fifth and equally important production guiding strategy is the use of standardized tasks which in turn allows for employee empowerment and continuous improvement.
Additionally, Toyota’s production system is premised on the strategy of the complete elimination of fixing problems, but rather getting the right quality for the first time. The importance of a competent and dedicated workforce is very fundamental to global competitiveness. In this regard, Toyota’s seventh strategy is in terms of the development of exceptional teams and individuals who are committed to its philosophy. Operating in the global arena calls for mutual respect for the suppliers and extended partner networks by both helping and challenging. Therefore, it is no doubt that Toyota Motor Corporation is guided by this strategy as explicitly shown by its production system in all its market areas. This multinational’s quality production system is given the much-needed impetus through the incorporation of technology. The ability to make decisions slowly through consensus building while considering all available options followed by fast implementation of the same is the other guiding strategy for this company’s production system. For instance, in the wake of quality concerns in its American market, several cars were recalled having been found to be faulty. This strategy is complemented by its philosophy of always having fast hand information of the situation as is captured in its genchi genbutsu (go and see) philosophy upon which such critical decisions are based.
Toyota’s production line is hailed to be the first in the introduction of hybrid vehicles in the automobile sector. The use of thoroughly tested and reliable technology has seen this multinational company produce this type of vehicles for mass sale both within and out of its international market. The Toyota Prius is one of such examples. Essentially, this company’s technology saw the introduction of gasoline-electric cars, and in this case, it is reported to have sold approximately 1 million of such cars globally during the year 2007. Furthermore, the company has introduced several other technologies such as automatic parking system. According to its strategic market plans, the next decade might see the introduction of all-electric vehicles across the globe. The use of technologies has enabled this multinational to produce quality automobile products that serve its large clientele base and process. The other way through which this company is positioning itself for greater global competitiveness is by diversification of its automobile products.
One of the merits of product diversification is that it provides an avenue for increased market penetration while at the same time creating a new customer base. In particular, the unique needs of different consumer segments under the same product line are met. Most importantly, it allows an organization to create a new client base in addition to creating a new market. According to information from its profile, there are about 70 different car models under the Toyota brand name from which its customers can choose. Incorporation of current technology has also seen this company introduce luxury car models as the other type of products. In 2009 Toyota introduced nine luxury branded car models under the Lexus division which ranged from LX SUV to RX Crossover and LS sedan among others. Other than automobile production and sales, the company provides financial services through its subsidiary Toyota Finance Corporation specifically put in place to serve the larger Toyota Corporation customers. The other non-automobile sector ventured into by this company is the aerospace in which case it is Mitsubishi’s Aircraft Corporation minority shareholder; having invested a total of US $67.2 million for the production of the much-awaited Mitsubishi Regional jet.
The Lexus Strategic Business Unit
Toyota employs a number of strategies as already highlighted. The Lexus brand was launched into the US market in 1989. In the face of fierce competition, the Toyota Lexus brand was able to attain rarely matched success. The Toyota Company saw the opportunity of gaining a foothold in the luxury car market. Despite being a division of the Toyota group, Lexus had to counter the influence of market leaders such as the Mercedes-Benz, Jaguar, Cadillac, Lincoln and the BMW.
It is a prudent practice that before launching a product, the industry dynamics are understood. In this regard, the Toyota Company interviewed consumers and dealerships in order to understand their needs, habits, and desires in regards to driving. It is against the results of the interrogation that the Toyota Company realized that it could not launch its new product using the brand name, Toyota. Based on the findings, the US market could not consider the Lexus LS400 truly a luxury brand if it was sold among the Toyota Corollas. Thus, the dealerships were chosen to observe stringent criteria.
The emphasis of the brand was on the superiority of its quality. This holds since the company spent much money from 1983 to 1989 developing the new car. Up to four hundred fifty prototypes were built by twenty-four engineers. The primary goal was to gain an advantage in producing quality cars to defeat the Mercedes S Class which was the market leader. Thus, the Lexus brand used the strategy of pursuing superiority. After several tests, the company produced a high-quality car and in the process took the competition in the luxury market to a new level.
The strategy of the Lexus unit also entailed the establishment of a striking value proposition. As the Lexus motto read, the company pursued -“The Relentless Pursuit of Perfection”. The unit then heavily advertised the new car highlighting its focus on quality, technology, attention on details, etc. The unit also focused on the extension of superior after-sales experience. In this regard, the unit offered free car washes, loaner cars, and free drop off.
The underlying competitive environmental trends that impact the business unit are centered on stiff competition from other luxury car manufacturers. The luxury manufacturers such as the BMW, Mercedes-Benz, Jaguar, keep on seeking improvements on their products. However, the fact that the Lexus unit focused on producing quality products that were diligently built, although, priced lower than the other competitors explains why the brand gained a foothold in the industry.
In the past five years, the Lexus SBU faced challenges given that the cars were recalled because the cruise control had problems. In addition, the braking light housing was deemed to be at fault. Given the fact that the car unit was young, there were possibilities of suffering a devastating blow. However, the action taken by the SBU proved a masterstroke as customers have continued to remain loyal.
It is discernible that the Lexus Unit has expanded in the US and other parts of the world. The major emphasis is on the product design, quality and customer service. For companies seeking to pull away from crowded markets, the Lexus Unit approach is a commendable model.
The SBU aligns with the company’s corporate strategy in a big way. For instance, the Toyota Company Corporation heavily rests on diversification as well as product differentiation. In diversifying, the company is able to produce different products for various markets. Using the product differentiating strategy, the company is able to separate its products from those of its competitors. Based on the paper, the Lexus SBU sought to enter the crowded luxury market. In entering the market, the company had to differentiate its products from those of competitors as well as from its own products of lower quality. Similarly, the strategy of focusing on quality products at lower prices aligns with the overall strategy of diversification since such move enables the company to enter a number of markets hitherto left out.