Busi 4321: International Business Final Project Group Members



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BUSI 4321: International Business

Final Project

Group Members:

Maryam Al Khalifa 200801068

Danah Al Zaben 200900141

Section: 202



Submitted to:

Dr. WEGDAN MAHMOUD HAGAG

Due Date: 30th of December, 2012



Table of Contents
Abstract ……………………………………………………………………….. 3

Company Background …………………………………………………………4

Foreign Direct Investment method …………………………………………... 5

Cultural Analysis ……………………………………………………………… 7

Toyota market mix …………………………………………………………….. 9

Product ……………………………………………………………………. 10

Promotion ………………………………………………………………….. 11

Price ……………………………………………………………………….. 12

Physical Distribution/ Place ………………………………………………. 13

Conclusion ……………………………………………………………………… 14

References ……………………………………………………………………… 15

Abstract
Most of companies in any part of the world invest their products and services in other foreign countries in order to increase their sales. This kind of investment would be really beneficial for the investing company and this paper talks about the direct investments of Toyota Company and what format it is using. This paper aims to clarify how Toyota chooses going through Greenfield or acquisition formats which will be based on the venture itself whether it is new or already existing. This paper will analyze Toyota’s studies for different foreign cultures based on culture determinants and the four dimensions of Hofstede’s theory. In addition, the paper will clarify the marketing mix of Toyota and what product, price, promotion and place does it use to apply its distribution and communication strategies. So, whatever what will be found about Toyota is the best that it could reach so far and any possible improvements are possible to be done.

Company Background

Toyota is a Japanese international automaker established in Toyota, Aichi, Japan. In 2010, Toyota hired over 300,734 people all over the world and was the known as the biggest automobile manufacturer in terms of production. Toyota is likewise the eleventh biggest company all throughout the globe in terms of revenue. In July 2012 the company stated that it had made its 200 millionth vehicle. The company was built by Kiichiro Toyoda in 1937 as a derivative from his father's business Toyota Industries to generate automobiles. Three years prior to that, in 1934, while still a section of Toyota Industries, it made its first product known as the Type A engine. In 1936, its first passenger car referred to as the Toyota AA was also created. Toyota Motor Corporation group corporations are Toyota (such as the Scion brand), Daihatsu, Lexus and Hino Motors, together with several "non-automotive" businesses. TMC is a segment of the Toyota Group, one of the biggest corporations in the world. Toyota expanded on October 31, 1957. It developed its headquarters in Hollywood, California. The company’s operation in Hollywood started in 1958 and it reached a total of 288 vehicles. 287 of which were Crown Sedans and one was Land Cruiser. With the present economic commotion, sales of car in the United States and throughout the world have been very slow-moving. And the table below shows SWOT analysis for Toyota.



Strengths

Weaknesses

  • New investment by Toyota Company in factories in the United States and China resulted to increase in profit in 2005.




  • Expanded product assortment, highly targeted promotion and a commitment to quality and manufacturing.




  • In 2003, Toyota exceeded its competitors by becoming the World's second biggest carmaker having 6.78 million units. A lot of people are now considering as the largest carmaker even greater General Motors.

  • The company makes use of marketing methods to satisfy and identify the needs of the customers as it focused on case video and customer relationships.

  • Manufacturers have to ensure that it is their models that clients want rather than competitors’.




  • Majority of the products are target to Japan and the United States only.




  • Exchange rates performance can indicate the narrow margins in the car industry being reduced.




  • The company has to be aware to continue produce cars so as to maintain its operational efficiency.




Opportunities

Threats

  • Toyota now has a reputation for producing environmentally friendly cars.




  • Rocketing oil prices have perceived sales of the new hybrid vehicles upsurge.




  • Toyota has likewise sold on its equipment to other motor producers



  • Toyota is to focus on the 'urban youth' market. The company has introduced its new Aygo, which is directed at the quick-witted youth market.




  • In 2005 the company had to evoke pick-up trucks and 88,000 SUVs due to defective front suspension systems.




  • Toyota is confronted with tremendous inexpensive rivalry in the car market. Competition is snowballing almost daily, with new participants coming into the market from South Korea, China, and Eastern Europe.




  • Exposed to any undertaking in the cost of raw materials including rubber, fuel, and steel.




  • The key economies in the US, the Pacific, as well as Europe also experience slowdowns. These economic facets are possible threats for Toyota.




TABLE 1: SWOT MATRIX –Toyota

Foreign Direct Investment Method:

Each company around the world has its own method of investment whether it was in the home country or the foreign country. And when talking about the foreign direct investment (FDI) it is found that one of two forms is used, the first is green field which includes the establishment of a new project or operation in the foreign country. The second form includes acquisition or merging which means joining another country that already exists. FDI helps in the economic development of the particular country where the investment is being made (economywatch, 2010). Besides that it is dependable in investing capitals.



Toyota the huge automobile company has been investing in foreign countries since a long time because it benefits from the low price of products and the cheaper services of labors. Actually Toyota found to be one of the most famous cars companies which care about investing in new businesses. In 2010 Toyota decided to invest in many projects in the U.S and according to LLC (2011), Toyota Motor was the top company with 11 projects, creating more than 500 jobs. Four Toyota projects established individual product quality offices, each dealing with a specific issue, such as hybrids or heating and cooling systems. Four additional Toyota projects were announced in Indiana to bolster its automotive assembly plant in the state. This means that as Toyota Company invests directly in foreign countries through Green field form because investing in a new business in foreign countries is not hard for such a big company and will definitely generate profit and lower the cost. Well- known car manufacturers, such as Hyundai, Toyota, Volvo and Volkswagen a new Got hard to be done reenfield projects in 2010, along with companies that are focused on the production of electric vehicles, such as South- Korean headquartered CT&T and British based- Tanfield (LLC, 2011). On the other hand, when thinking deeply about the economical condition of Toyota it will be easily figured out that this company had been doing so well so far. Researches show that Toyota had been merging with other companies and sharing them their regulations through the acquisition format of FDI. “Toyota Tsusho Corporation” is a Japanese company which is considered to be a part of Toyota. It helps in distributing the company’s logistics and services. On the other hand, big companies such as Toyota are really required and needed for other companies to work with and that is why Toyota is also directly investing in foreign countries by getting merged with different companies in order to increase the revenue for both countries and end up with a huge sales amount. Actually Toyota Company has put in its consideration specific countries to invest in and get merged with foreign companies there. According to helpme.com (2011), Africa becomes the new area for investing business of many companies because Africa has many interesting factors that can attract foreign investors. The most important factor is low labor cost. Toyota also invests in this area because of this reason and it intends to expand its business in this region, moving from Asia to Africa. So the acquisition between Toyota with any company in African is definitely profitable for both companies because Toyota will increase the sales of the other company and increase the demand for the products in Africa besides that it will get the benefit of the low cost and labor which will increase the value of the manufactured products. Progress was made in Toyota's joint venture with PSA Peugeot Citroën (PSA). In March 2002, Toyota Peugeot Citroën Automobile Czech s.r.o. (TPCA) was established in Kolin, in the Czech Republic, and plant construction under way, joining production of small cars will start from 2005 to target annual output of 300,000 vehicles (helpme.com, 2011). So Toyota Company invests through Greenfield and acquisition formats even though acquisition is preferred more because it is quicker to implement besides that it increases the gained skills and learned technology for both companies.

Recommendations:

Even if Toyota is big company which is ready to take risks when investing in a completely new venture in foreign countries, this will not change the fact that the results might not be satisfying all the time so Toyota should keep investing using Greenfield but must focus more on acquisition format in order to avoid any losses.



Cultural Analysis:

Culture is the social environment which humans live in and defines our behavior. Culture is the full range of learned human behavior patterns (Neil, 2006). It consists of values and norms that relate to our lives. Basically, values include how people think about actions and defining what is right to be done while norms are guidelines of our behaviors and actions and norms are considered to be the implementation of values. The culture of any society is defined based on the determinants of the language, religion, education, economical condition, policies and the social structure.

When Toyota directly invests in a foreign country it takes in to consideration those determinants and then it chooses the best country which fits the plans and the sales of the venture. The economical level is always taken in to account when investing in a foreign country. Toyota invests chooses to invest in Canada, Africa, Asia, U.S, UK and many other countries after studying the economical condition there to be sure that no inflation or economical crises affects its sales and by looking at the economical conditions in these countries it is found that they do not usually face crises but even when they face that such as in Africa Toyota will definitely avoid investing during that period of time and waits until situations get back to normal then it will directly invest again because these besides other countries will guarantee the increase in Toyota’s sales. Also, when Toyota directly invests it takes in to account the low cost of labor who are paid. On the other hand, it is luckily for Toyota that those countries speak English language which is also understood by the Japanese, and also well educated in a way that allow them use all their experience and skills and this will ease communicating more with those cultures to be more specified about their plans, ventures and sales. In addition, there is no doubt that Toyota deals with those cultures because it already studied the satisfying government’s policies and regulations and its support towards dealing with the existing and the new businesses which encourages Toyota to invest more.

When Toyota invests directly in a foreign culture it applies Hofstede’s theory by measuring its dimensions. In fact, it has been found that Toyota which is located in the Japanese culture has a high power distance and when comparing it with another country that Toyota invests in such as U.S the results would be different. In a culture like America everyone is engaged in decision making process which leads to Minimum power distance and everyone feels equal importance in the organization (Sethi, n.d). Moreover, in Toyota the collectivism is high and important and by comparing it with other organization in a foreign country such as the Arab countries it will be found that they also have a high collectivism percentage. When taking U.S as an example of the comparison again, it is found that according to (Sethi, n.d) masculinity factor is more important in Toyota. They consider those males are more loyal than females. However there are female also working in the organization is given equal rights. So there is a complexity for Toyota to adjust them in a culture like America where the belief is on gender equality. Toyota has high uncertainty avoidance when the management does not often take big risks and this should be compared with the countries’ organizations that Toyota invests in.



Recommendations:

It was mentioned previously that Toyota Company directly invests in foreign countries in a way that both companies do not always match all Hofstede dimensions which may create conflicts sometimes and that is why Toyota has to look at this aspect carefully and study the results before making any move by making sure that the difference in dimensions would lead sometimes to deficiency in the investment.

Toyota Marketing Mix

Toyota Company comes up with a method to determine which approach is best for the company given its resources and objectives. They must also take into account the weaknesses and strengths as well as the threats and opportunities. To improve the aptitude of the company, marketing strategy is introduced. These marketing strategies will develop profitable marketing mixes for clear target markets. Marketing mix is made up four important elements to employ or analyze marketing campaigns. The main objective of the marketing committee is to enhance the marketing mix. Marketers may develop their outcomes as well as marketing value by applying the right amalgamation of the four P’s.

Distinct changes created to the marketing mix are perceived as strategic variations, while giving tremendous changes to it may be deliberated as strategic. The “Four P’s” of marketing are: product, price, placement, and promotion. Toyota marketing Mix fundamentals bring about the condition. If we direct to the most important Four P’s of marketing mix in Toyota company facets, we will much easily understand and obtain success in determining bright picture concerning Toyota Corolla customer base because these four elements are the basic aspects of any successful company. These four elements (Product Price, Palace, and Promotion) of Toyota Company are stated as follows:

Product

Toyota is one of the biggest companies to introduce hybrid electric vehicles and the leading company to mass-produce and vend such vehicles, particularly with the launching of the Toyota Prius in the year 1997. The company ultimately started offering this selection on the key smaller cars including Camry Lexus divisions, generating some hybrid extravagant vehicles. It branded such technology as "Hybrid Synergy Drive" and in Lexus varieties as "Lexus Hybrid Drive." Toyota corolla has been acquiring success when it comes to brand since 1970. The most renowned models were Corolla1976, 1978, 1986 and a number of other lists of the annual series of the models that are still recognized as memorable and powerful brand. Toyota Corolla brought together advanced manufacturing and promotion of Toyota vehicles since July 01, 1990. By way of gaining advantage of organized loyal customers prior to the start of manufacturing Toyota corolla brand, the company did not necessitate much hard difficulties to provide awareness and create customers base since the customers are already familiar about the products of the company compared to the products of other companies. Toyota Corolla is well systematized product in the market and its present products are GLI, ALTIS, XLI, and 2.OD. Each of these products offers features that are unique. They are made of good quality and they are also reliable.



Recommendations:

One of the most influential and dependable products that Toyota Motor Corporation has is the Hybrid cars, which provided strong support to the company to recover from its crisis. Thus Toyota should accomplish the demand on the environmental cars by seeking new and innovative environment friendly cars like the electric car.



Promotion

Promotion is the next most significant element of marketing mix. In the absence of this element, marketing mix will never become complete. Not only does this affect the business. It affects the entire aspects of the business. Toyota makes use of various diverse methods of advertising as majority of print advertisement of Toyota Corolla are separately focused at factors such as comfort, styling, performance, power, driving pleasure, and leg room. The commercials targeted young executives and Indian youths.

The company also made use of advertisements to lure individuals to buy the products. There are also brochures, leaflets, and posters that feature Innova, Land Cruiser, Prado, Toyota Corolla, and other Toyota cars showing that these products are for those individuals who demand style, performance, sheer driving, and power.

Other ways of promoting Toyota cars are through the use of display signs, billboards, advertisement, and broadcast. These are placed in various highways and expressways. The other sources of advertisement include Bill Boards, Display signs, bulletins and broad cast advertisement. The company does the advertising of corolla and Innova by placing billboards at various expressway and highways. Sales promotion, on the other hand, is done during trade fairs such as motor shows or auto expo. During these events, the company showcases its car varieties. These, in turn, help the customers to gather comparison between cars on the bases of features and colors. Personal selling also works well in the promotion of Toyota cars. This either works two-way between dealers and clienteles through personal communication.

Toyota is also taking advantage of technology by making use of emails, web banners and other expensive internet websites. Toyota Company also contributes to a number of social activities. It also offers support in the promotion of its products. Promotion strategy of Toyota aims to get into the minds of the people and to be able to participate fully in the competitive world of motors and cars industries. The company makes use of media, including internet and television, to advertise their products and services to the consumers’ market.

Recommendations:

Toyota Company has to reach out to customers and clienteles through direct marketing as well as more TV advertisements. In its promotional strategies, Toyota must emphasize that the Company has already resolved its safety problems and has developed vehicles in better ways than ever. Toyota Company has to concentrate more on safety standards, so as to avoid bad publicity.



Price

Toyota Company embraces different forms of pricing depending on their products. It makes use of optional-feature pricing, promotional pricing which can either be through low interest financing or longer payment terms, as well as warranties and service contracts, and differentiated pricing. For optional-feature pricing, an example of which is that of Innova. Customers can order side steppers, mud flaps, and other accessories. Low interest pricing is a method for short-term and is primarily during festive seasons. Longer-terms of payment are used for longer periods and therefore reduce the monthly payments. Warranties and service contracts is offered by the company for 3 years on all repairs using Toyota genuine parts. Location pricing is applied in different parts of the states. The price of the car remains the same all throughout and differs only in road tax as well as insurance rates.



Recommendations:

Maintain a competitive price. Lower cost of cars produced can increase sales.



Physical Distribution/ Place

The place of the company is another significant aspect to take into account. It focuses on the many aspects of the business. Toyota has been successful in establishing an overall position in the car industry. As a matter of fact, they implement genuine strategies to uplift the market position of the company. The company also has various dealers all over the world. These dealers are responsible in bringing the products closer to the people. Toyota products are distributed in over 50 states in the U.S. Apart from that, the company also operates in other countries all over the world. Toyota Company has over 1200 dealers. Toyota Company also makes use of two private distributors in the United States, which were recognized in 1968. Southeast Toyota Distributors was established by Jim Moran, and Gulf States Toyota Distributors was established by Tom Friedkin. Both have exclusive privileges to market vehicles as well as automobile parts in their respective states.



Recommendations:

Toyota’s net income from its chief markets Asia, Japan, Europe, and North America are 12.2%, 11.2%, 24.1%, and 34.4% respectively. In 2008, 57% of the units sold in North America were produced outside North America while 57.6% of the units that were manufactured in Japan were brought to other nations. This is one thing that Toyota should avoid since it makes the business lose money and this also makes it hard to offer a competitor price because of customs, currency exchange, and tariff.



Conclusion:

Throughout this paper different topics about Toyota were discussed regarding its direct foreign investment and the applied strategies which it uses in order to guarantee as much sales number as possible. This paper is important because it shows how companies at any part of the world can successfully and directly invest its products or services and have a lot of sales which increase the demand on those products. In order for Toyota to keep being competitive it needs to be aware when it is safe to go with the Greenfield or the acquisition formats. It should keep on studying the other foreign countries’ cultures in order not to get in conflicts with anyone. Toyota as a huge company should develop its own way of keeping the environment clean and safe by manufacturing the “electric cars’. All of that should be done in a lower cost that leads to increasing its products’ sales and raising their value. There is no doubt that when Toyota keeps updating itself with the newest strategies and processes it will definitely stay one of the most important automobile companies in the world.



References:

Company | TOYOTA MOTOR CORPORATION GLOBAL WEBSITE. (n.d.). TOYOTA MOTOR CORPORATION GLOBAL WEBSITE. Retrieved December 7, 2012, from http://www.toyota-global.com/company/

EconomyWatch. (2010). Benefits of Foreign Direct Investment. Retrieved December 30, 2012 from http://www.economywatch.com/foreign-direct-investment/benefits.html

Helpme. Com. (2011). Toyota Motor Company Limited. Retrieved December 30, 2012 from http://www.123helpme.com/view.asp?id=121682

LCC. (2011). Automotive In souring Investments. Retrieved December 30, 2011 from http://www.ofii.org/docs/Automotive_Greenfield_2010.pdf


O’ Neil. (2010). What is culture? Retrieved December 30, 2012 from http://anthro.palomar.edu/culture/culture_1.htm

Overview | TOYOTA MOTOR CORPORATION GLOBAL WEBSITE. (n.d.). TOYOTA MOTOR CORPORATION GLOBAL WEBSITE. Retrieved December 7, 2012, from http://www.toyota-global.com/company/profile/overview/

Sethi. (n.d). Analysis of Toyota and general motors. The Five dimensions. Retrieved December 30, 2012 from http://ar.scribd.com/doc/47555781/Culture-study-of-MNC-s

Toyota Marketing Strategy & Marketing Campaigns | Marketing Week. (n.d.). Marketing Jobs & Marketing News - Media, Advertising, Brands - Marketing Week. Retrieved December 7, 2012, from http://www.marketingweek.co.uk/brands/toyota/






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