Analysis of strategy of Toyota Motor Corporation operating in Vietnam pdf

In 1950 the Toyota Motor Sales Company was establishedand the company began production on the BJ Toyota Jeep, the BX truck and the SG small truck.. In 1982 the Toyota Motor Sales and Toy

Group’s member: Nguyen Thi Ha Phuong – ID: 1001030497

Ngo Thi Ngan Ha - ID: 1001030113

Tran Thi Quynh Trang - ID: 1001060189

Part 1: Background of Toyota Motor Corporation’s road to

Internationalization 1

1.A brief history of TMC 1

2 Toyota’s major sectors of operation 2

2.1 Electric technology 2

2.2 Cars 3

3 Results of Toyota Motor Corporation’s business activities 3

4 An analysis of the choice of foreign markets 4

Part 2: Business strategies of the TMC in Vietnam 5

1 Toyota Motor Viet Nam (TMV) 5

2 External analysis 6

2.1 Macro environment analysis (PESTLE analysis) 6

2.2 Industry analysis 8

3 Analysis of strategic issues of TMC in Vietnam 11

3.1 International strategies of TMC in Vietnam 11

3.2 Business strategies of TMC in Vietnam 15

3.2.1 Corporate-level strategy 15

3.2.2 Business-level strategy 17

3.3 Organizational structure of TNC in Vietnam 21

3.4 Modes of market entry 22

3.5 Performance 23

Part 3: Conclusion and recommendation 26

1 General assessment 26

2 Recommendation 26

References 27

Part 1: Background of Toyota Motor

Corporation’s road to Internationalization

1.A brief history of TMC

The Toyota Motor Corporation was founded in 1937 byKiichiro Toyoda It originally started as a subsidiary of hisfather’s company Toyoda Industries The first vehicle, theToyota AA, was produced in 1936 whilst the company wasstill associated with Toyoda The brand as we know it becameestablished as an independent company in 1937 and changedtheir name to Toyota The name change was implemented tosignify a separation of work and home, to simplify the pronunciation and because itonly took 8 brush strokes (which is considered lucky) to write in Japanese Toyotaopened their first factory in 1938 but it had to be cease production during WorldWar II

In 1950 the Toyota Motor Sales Company was establishedand the company began production on the BJ Toyota Jeep, the

BX truck and the SG small truck In 1956 the Toyopet chainwas established The first vehicle to be sold under this namewas the Toyopet SA The product line was discontinued in the1960s due to negative connotations with the words toy andpet During the 1960s Toyota opened a new research anddevelopment facility as well as establishing a prominent presence in Thailand.During this time Toyota also celebrated the production of its 10 millionth model

In 1982 the Toyota Motor Sales and Toyota Motor Company formed a merger tobecome one company, the Toyota Motor Corporation Following this the companyentered into a joint venture with General Motors called the New United MotorManufacturing Incorporated or NUMMI Toyota operated a manufacturing plant inFremont, California as part of the deal In 1989 Toyota launched their new luxury

product line Lexus Toyota then followed this by focusing more on luxury vehiclesthroughout the 1990s, adding vehicles such as the Camry sport, Scion, Prius andTundra to their product line.

Toyota are currently one of the largest corporationsdeveloping hybrid vehicles for the commercial market Thecompany have also been involved in many cutting edgetechnological developments involving aerospace research androbotics Toyota have also been involved in many educationalphilanthropy projects over the years including running theToyota Technological Institute since 1981, which offersscholarships to high school students Currently the company are working on thePrius plug-in hybrid which will be a fully electric vehicle that uses lithium-ionbatteries to extend its driving range

A few statistics reveal the scale of Toyota’s operations, 75 years on from the AA:

- Worldwide production of Toyota vehicles (including sub-brands such as Lexusand Daihatsu) was 6.9 million in 2011

- It has 50 overseas manufacturing companies, in 27 countries and regionsworldwide

- Toyota vehicles are sold in more than 160 countries and regions

- In the 2012 financial year Toyota Motor Corporation’s net income was 283.5billion yen – approximately £2.24 billion

2 Toyota’s major sectors of operation

from the subcompact Toyota Yaris, to compact Corolla, to mid-size Camry, andfull-size Avalon Vans include the Previa/Estima, Sienna, and others Several smallcars, such as the xB and tC, are sold under the Scion brand

- SUVs and crossovers

- Pickup trucks

- Luxury-type vehicles

As of 2009, the company sold nine luxury-branded models under its Lexusdivision, ranging from the LS sedan to RX crossover and LX SUV Luxury-typesedans produced under the Toyota brand included the Century, Toyota Crown,and Toyota Crown Majesta A limited-edition model produced for the Emperor ofJapan was the Century Royal

3 Results of Toyota Motor Corporation’s business

activities.

4 An analysis of the choice of foreign markets

Any ambitious enterprise that is going to achieve and sustain profitability and profitgrowth, no question, would have to expand business abroad, to gain extra marketand sales, and profit in result, by employing benefit of location and large scaleeconomies, experience and learning sharing effects Therefore, US market with its

economic conditions is one of the most attractive environment for any firm toexpand foreign market.

Toyota Motor Corporation operates both automotive, under the brandToyota,Lexus,Hino and Daihatsu, and non-automotive and can be seen as one ofthe best known automobile manufacturers According to Japan Corporate Newsnetwork, in 2007, the firm sold over 8.5 million vehicles in more than 170countries Based on Toyota Motor Global News, the major ConsolidatedSubsidiaries of Toyota Corporation across the world mainly locates in NorthAmerica, Latin America, Europe, and Asia/Oceania

Toyota’s early way into market was quite struggling In 1957, Toyota tried to enterthe US market, by establishing a subsidiary in California Later, it proven to be anightmare; the Toyota cars performed poorly in road tests on US highway.Obviously, Toyota people had not did enough homework on the basic localconditions in US market, simplyhow Americans used cars Due to lack of localresponsiveness, Toyota closed down its subsidiary and withdrew from market.Back home, the company started to study the feedback from American consumersurveys and US road tests, redesigned several of its models accordingly, andreshaped its market reputation considerably in US market late 1960s, selling wellwith welcomed product characteristics and consistently falling prosuction costretail prices Thanks to the oil price following the Israeli/Arab conflict, USconsumer shifted to small fuel-efficient cars in droves Toyota was among the mainbeneficiaries Though this desire for small fuel-efficient cars in US markethappened without Toyota’s prediction, it comformed to the traditional demand forthis nature due to the lack of natural resource at home, in Japan However, marketchanges In early 1980s, imoport quotas imposed by United Stated over Toyotastagnated export growth substantially To cope with this problem, Toyota’s firstoverseas operation, NUMMI, was born Toyota established a 50/50 joint venturenamed New United Motor Manufacturing, Inc with General Motor in USA in 1983

Part 2: Business strategies of the TMC in Vietnam

1 Toyota Motor Viet Nam (TMV)

Company name: Toyota Motor Company Vietnam

Date of establishment: September 5, 1995(officially went into operation 10/1996)Total investment: 89.6 million dollar.

 Main areas of activity:

- Installation, producing the kind of cars and auto parts

- Provide warranty service and repair cars

- Order processing and purchase from the supplier Vietnam, including businessprocessing, automotive spare parts for processing, packaging and export

- Perform the import of cars

- Imports of automotive parts and equipment, specialized machinery Toyotastandards

- Consulting, training, support and implementation of internal businessdevelopment, and maintenance services for the products Toyota Toyota Groupcompanies, agents, candidate agents and the service station authorized Toyota

Toyota Motor Company Vietnam (TMV) is a joint venture between 3 partners:

- Toyota Motor Corporation Japan (70%)

- Machine Dynamics Corporation and Vietnam agricultural machinery (20%)

- Vice General Manager: Ms Dang Phan Thu Huong

2 External analysis

2.1 Macro environment analysis (PESTLE analysis)

According to Viet Nam Registry Department, the use of cars in Vietnam areskyrocketing, at the end of August 2007, there were nearly 722,000 cars incirculation, more than 66,000 units compared to end of 2006

Assess trends related to globalization, Vietnam is being recognized as a member ofWTO which will stimulate growth in the domestic automobile market, thusaffecting the growth of this industry Professional production and strengthening thesales network are two main directions to the car manufacturing companies toimprove their competitiveness when Vietnam joins the WTO According to thegeneral assessment of the experts, in 2008 car’s price will be lower than in 2007due to financial markets’- real estate’s fluctuation, the plant and boost domesticproduction capacity, competitive with current imported cars.The level of overallgrowth is expected to remain at about 10-20% in 2008 - an attractive growth

 Socio- Economic Factors

However, the auto market after the Lunar New Year in 2008 is significantly lowertemperatures Stock slump, real estate freezes, bank loans are harder before mademany people hesitate when buying cars In many salons as well as imported carsnew cars, but vehicle for many buyers, car fairly quiet place

The numbers as 2 months of 2008, Vietnam population nearly $ 400 million spententered car, motorcycle sales are a member of the Association of VietnamAutomobile Manufacturers (VAMA) 1/2008 was 12084 vehicles , an increase of156% compared to the same period in 2007

Loại xe Bắc Trung Nam Tổng cộng

Xe du lịch 1,168 214 724 2,106

Xe đa dụng MPV 556 113 920 1,589

Xe 2 cầu việt dã SUV 276 53 280 609

$4 billion, of which less than 12 turnovers car seat is importing 94 million dollars,

10 times higher than the same period years ago

Low localization rate

As a rule, when granting investment would produce cars assembled in Vietnam, thecompanies have committed to achieve a localization rate of 20-40% after a period

of 5-10 years However, until this time, not companies that comply with thatcommitment Localization rate of automobile manufacturing joint venture inVietnam is very low Accordingly, companies are only 5-10% local content, theplan does not meet.There are two existing solutions to the automotive industrydevelopment The first is to increase the number of imported cars and domesticproduction as planned in the transport sector Second, the automotive industry onthe development of the strategy and "catch" the transport sector in order to reducedevelopment cost as well as other issues arise

Taxes - heating problem

In just one year the tax rate for cars in Vietnam are changed three times, soquickly,reflecting the non-transparent.Company representatives said GM Daewooreducing tariffs by 10% for finished vehicles will greatly impact the automobilemanufacturing companies in the country If this car to import large share of themarket in Vietnam, domestic manufacturers will have to consider whether tocontinue manufacturing or importing switch This causes unnecessary disturbance.

2.2 Industry analysis

The characteristics of the automotive industry:

- Is the product expensive and long-term internationalization for many types ofcustomers

- The competition is fierce both in the domestic market in foreign markets

 Therefore, the product should be attractive (operational features, quality, price) that the appeal must be accepted by the customer (in the market)

- Requires a large capital investment and long-term development,

- Accurate risk management is essential requirement to ensure the profit received

by the huge amount of capital investment

- Many other industry participants

- Investment in large

- Tech-automotive industry as a strategic industry and key in many countries

 It requires constantly create greater added value and benefits received Toyota and the automobile industry situation in Vietnam:

Toyota Vietnam is the market leader in sales of vehicles distribution to all relevantobjects

2007 was a year of increased automobile consumption record The growth of thecar market with no signs of stopping as sales Manufacturers Association assembledVietnam (VAMA) continues to set a new record for the month 11/2007, 18members of VAMA sold 10,110 vehicles, an increase of 167% compared to thesame period in 2006 and was the highest sales month in the history of thisassociation As for the product overall, Toyota led the market with 2,190 cars, wasfar ahead of Changhai 1,390 units behind Member Vinamotor third when sold1,335 vehicles Vidamco also ranks fourth with 1,016 units Ranked # 5 is still acommercial vehicle company, Vinaxuki (940 vehicles).

 About the competition

End of 2007, Vietnam's automobile market set a new record with more than100,000 units have been sold In the consumption of domestic enterprises 80 392vehicles and 28,000 imported vehicles Despite the record sales tank, but nowherecompared to the still rising demand In the last months of the year, bothdomestically produced vehicles and imported vehicles, both cars and trucks areselling cars and many are in a state of "fire" line In 2008,the car will not bemissing this time many companies have started to boost production to meet theneeds of automotive customers Toyota Vietnam will raise its capacity to 25,000vehicles in 2008 Mr Nguyen Van Quy - Deputy General Director of GM Daewoosaid line capacity of 10,000 vehicles is GM Daewoo / 1 year if production shifts /day, while producing 2 shifts / day to 20,000 vehicles / year The time is nowproducing one new song, from Tet will increase 2 shifts / day Ford Vietnam said itwill continue to increase capacity to meet the demand In recent times the autocompanies have to hire many workers in order to increase production shift Ford

Vietnam has recruited 300 employees Honda, Toyota, GM Daewoo also recruitnew employees from 150-300.

 Substitutes

These kinds of small cars like the Toyota Yaris, Kia Morning, Hyundai Getz,Click consumers are particularly interested In addition to stylish, compact, richcolors, suitable for family activities, these vehicles are very fuel efficient,especially when gas prices increasing current Not just cars, but trucks selling allkinds are selling In 12/2007 of the first truck sold by VAMA members firms over6,000 vehicles Increased demand for trucks because many fear 2008 will increasecar prices News from Xuan Kien private enterprise, in 1/2008, they sold to dateover 100 trucks with sales of over 20 billion coins Mr Tran Ba Duong - GeneralDirector of Truong Hai Automobile Joint Stock Company said 12/2007 thiscompany sold 1,500 trucks and cars sold thang1/2008 estimate of more than 1,500vehicles as demand is rising

 Customers

The demand for cars rose sharply last year Besides cars imported goods are inshort supply and rising prices Many models have a very high demand as Camry,Prado, Lexus (Toyota), Accord (Honda), BMW and Mercedes Status with thecurrent car import of goods is very slow and always in a state are not enough of.Many companies order large quantities, but the taxi driver to do so far not meet due

to imported cars stuck in the ports and not much capital to import more cars at thesame time Not only the new small car kind of suck, but the newer vehiclesimported or domestically produced vehicles are priced between 25,000 more peoplewere interested in, such as the Hyundai Santa Fe, Honda Accord, 2008, Altis 2008Almost there what kind of new car market in Western Europe, North Americamost widely VN purchase The cars are priced between $ 70,000 50,000 Current-account for 30% of cars sold.Currently, if the customer wants to buy a car is todeposit, advance reservations months to get the car In fact, many companiesremain records of customer bookings, the new lunar vehicle can communicate.Next time, if the company continues to launch more new vehicles to "stimulus" isdefinitely in the VN car market will continue to bustling, vibrant

3 Analysis of strategic issues of TMC in Vietnam

3.1 International strategies of TMC in Vietnam

Facing a firm with foreign market orientations are two apparently contradictorygoals, to reduce cost by product standardization and to cater to local demands byproduct customizing, which unquestionably tends to raise cost In order to deal withthese two opposing ends, several international strategies have been worked out,namely global strategy, transnational strategy and multi-domestic strategy Globalstrategy focuses on increasing profitability and profit growth by reaping the costreductions that comes from economies of scale Products are standardized acrossnational markets Firms has top-down management and often lacks responsiveness

to local markets The strategy applies best when there are strong pressures for costreductions and minimal demand for local adaption A multi-domestic strategypractioner increases profitability by customizing the firm’s goods and services sothey provide a good match to tastes and preferences in different markets Thisworks most appropriately when customers show substantial difference in hobbiesand cost pressures are not too intense A national strategy aims to simultaneouslyachieve low costs through economies of scale and differentiate their productsoffering across geographic markets for local differences It fosters a multi-directional flows of skills between subisdiaries in the firm’s global network ofoperations

Firms that aim to expand foreign market initially intends to gain benefits foeconomies of scale by boost product and service standardization However, hereunavoidably arise problems of localization due to demand for firm responsiveness

to local conditions like customer taste and preference, local government regulationand cultural traits, etc In the international business matrix along two dimenstions

of pressure for cost reductions and pressure for local responsiveness, transnationalstrategy has the highest degrees along both dimensions

Amongst the typical international business strategies, Toyota, like many othermultinational enterprises, chooses transnational strategy The need to compete withinternational competitors like GM and Ford forced Toyota to look for greater costeconomies However, variations in consumers’taste and governemnt regulationsacroos countries mean that Toyota also has to be responsive to local demands.Therefore, Toyota confronts significant pressures for cost reductions and for localadaptation To cut costs by standardizing, Toyota has accelarated the process ofmoving towards fewer vehicle platforms, with goal of building a wide range ofmodels on a limited range of platforms that share many common components parts