Value Management: Value Chain Analysis on Toyota

This post provides a comprehensive portfolio of the various business activities of Toyota Motors Co. The introduction includes Toyota’s history as well as general knowledge about the business process of the company. TOWS Analysis and Value Chain Analysis include information about primary and support activities that help the company to maintain operations, meet customer expectations and gain competitive advantage. The conclusion of this report provides recommendations that may help Toyota to maintain the productivity and attract more customers.

INTRODUCTION TO TOYOTA

Kiichiro Toyoda was the founder of Toyota Motor Corporation and the automotive-centred Toyota Group. Kiichiro was a keen, skillful inventor and the continuous resolve of invention helped him to create the business base acquired from his father, Sakichi Toyoda. With the incessant drive towards innovation and invention, Kiichiro extended into the automotive business and build the groundwork of Toyota Group that you see today.

In 2008, Toyota's sales surpassed General Motors, making Toyota number one in the world. In 2010, Toyota employed 350,005 people worldwide, and was ranked the third-largest automobile manufacturer in 2011 in terms of production, behind General Motors and Volkswagen Group . Toyota is also ranked as the eleventh-largest company in the world by revenue. In July 2012, the company reported it had manufactured its 200-millionth vehicle.

In order to mandate the achievement of such a high level of production and demand for vehicles, the company has established different long-term strategies, integrated corporate philosophies that help to set a balance on the demand and quantity of the products. In addition, continuous improvement of communications with its partners in order to rake in investments and find the competitive advantage that aids Toyota to constantly meet customer expectations. Moreover, these strategies involve the use of enhanced technologies that help to ensure quality and safety of the products.

The mission of Toyota Motors is the provision of the best qualified service and products as well as cooperation with dealers. “Since its foundation, Toyota has been using its guiding principles to produce reliable vehicles and sustainable development of society by employing innovative and high quality products and services” 

SITUATIONAL ANALYSIS

         Strengths and Opportunities (SO) strategies

Successful companies identify their strengths in order to take maximum advantage of their opportunities. Toyota uses its global presence in order to join forces with countries with developing economies and capitalize into these countries. To sustain at the position as leading motor vehicle manufacturer, Toyota Motors also increased its investments into "green" technologies and support constant research on other types of technologies such as safety and enhanced motility that helps the company to produce cars with high level of safety and quality and as a result, Toyota is able to meet customer expectations and gain competitive advantage

         Weaknesses and Opportunities (WO)

Toyota has expanded into the European market, increasing the number of sales worldwide and their profit growth, in order to endure its leading image. Moreover, the company plans to reposition its less profitable production plants into developing countries like India and South Africa. Furthermore, it is vital to diminish support that comes from Japan to enable each foreign production locations to become more independent. For example, the Toyota plant that recently commenced productions in Texas made supreme use of the expertise from the Toyota plant in Kentucky which has been refined over the past 20 years. This strategy also benefits Toyota as it evades the fluctuation of Yen in the Japanese economy

Toyota's Reach

       Strengths and Threats (ST)

With the use of "green" engines in the production process of the cars, Toyota can reduce influence of the rising price on the fuel and thereby provide customers with a more environment-friendly mode of transportation. Toyota Motors’ Guiding Principles urges the production of high quality products and therefore it pays great attention to all operations and activities, technological development and their workforce. Toyota identifies the importance of employee morale and satisfaction hence provides a more than suitable amenities and conditions of work, as Toyota believes that a motivated workforce results in better operations and the adequate use of enhanced technologies adds quality to their products, and this inclusive concept gives Toyota the prospect to cater to its customers’ needs.

       Weaknesses and Threats (WT)  

The approach of relocation of several plants to emergent economies which was described above, will not only benefit Toyota to elude the impact of currency fluctuations, but also gives the opportunity to be less reliant on the government of Japan. Another aspect of WT strategies encourages Toyota Motors to concentrate on each specific section of the motor vehicles they produce, for instance, the production of luxury cars. This strategy helps to focus on a more niche market of luxury cars, enabling Toyota to stretch their worldwide market and further widen their immense product list.

VALUE CHAIN ANALYSIS OF TOYOTA

Value chain analysis is a systematic approach that helps to identify and examine the developing of competitive advantage. All organisations comprise of activities that link together to develop the value of the business, and these activities collectively form the organisation’s value chain. This analysis process includes activities which are further allocated into primary and secondary activities, which combine to form the value delivered by the company. Such activities may include procurement, manufacturing, distribution and marketing.

The Primary Activities

The primary activities in Toyota's value chain analysis include inbound logistics, operations, outbound logistics, marketing and sales service.

       Inbound logistics

The main aspect of Toyota Company’s value chain analysis is the inbound logistics. Inbound logistics use JIT (Just-in-Time) system of production as it decreases the inventory cost. JIT helps Toyota to optimize their assembling and production process as well as to minimize parts going to waste or getting unused as inventory. Inbound logistics are the goods that the company receives from its suppliers and store for some period of time until the moment when they will be used in the production process. Toyota company does not have and is not able to create own raw materials that are needed for assembling of cars, thus it has to collaborate with a third party.

Toyota orders the raw materials from all over the world and in the interest of maximizing their availability of raw materials; they maintain good relationships with their suppliers. Toyota uses Just-in-Time system to manage the supply of raw materials as well as optimizing the supply and production processes.

       Operations

These activities comprise mainly of the manufacturing and assembling process of the motor vehicles. Other activities in the operations may include motor tuning, configuration of motor parts and final engine tuning. Toyota Motors have established and maintained the image of producing reliable and long lasting vehicles largely due to their well-designed and moderated operation process. One of the main factors of Toyota’s successful sales record is credited to their comprehensive implementation of an exquisitely planned operation system.

Toyota Production System (TPS) is an operation structure followed, which consists of the integration of the lean production concept and Just-In-Time (JIT) management, controls the production process in accordance with the customer requirements. Other operation activities also include the ‘Jidoka’ system; which stops the production process if any defects or other operational problems occur. Operational constancy is also a part of TPS and consists of ‘Heijunka’ concept which focuses on the uniform distribution of work at any position of the production process; Work Organization focusing on the accurate distribution of tasks in the correct order and description; and Total Productive Maintenance (TPM) which emphasizes on overall check-up of all equipment and tools used in the production process.

       Outbound Logistics

 On completion of the operation process, final products are transferred to the retailers, wholesalers and,  ultimately, to the final customers. Toyota controls the whole process of vehicles distribution, from the factory to  their branches worldwide, to ensure that the final products are delivered in the right place at the right time. Each  Toyota dealer is directly linked and controlled by Toyota, with few or no subsidiaries involved in the   distribution process. Outbound logistics of finished vehicles are the responsibility of Toyota Motor Sales. Parts Distribution manages the supply of service parts from the plant to the service centre. It supports service parts  production and shipping preparation which includes containerization and overseas shipping. This group is also  responsible for quality, technical support and overseas logistics and customs 

       Marketing and Sales

 In these activities, Toyota’s marketing department assigns new products to the precise group of targeted c  customers. Marketing and sales activities of Toyota also include emphasis of on their planned promotion mix and  marketing communication approaches, like advertising and sales promotions, as well as building groundwork f or offers that would be suitable for meeting the customer expectations and the company as well.

       Services

Services are the final aspect of the primary activities that mainly adds value to the products and ensures successful distribution as well as obtaining feedback and response from the customers. This includes all areas of service such as final checking, after-sales service, maintenance, complaints handling, training, repair services and additional customer services. Toyota recognises that its customers are the “driver” of the company’s success, thus it provides and improve several types of their offered services. As Toyota product’s main factor is reliability, therefore services are delivered by qualified personnel ensuring all services provided are of high quality. The importance of perfection ensures service excellence and more satisfied customers as well as sustaining a greater competitive advantage.

       Support Activities

Support activities include procurement, technology development, Human Resources Management (HRM) and firm infrastructure.

       Procurement

These activities are associated with the purchase of goods, materials, equipment and services, and focus on reducing the cost on purchases and receiving them on the assigned time. Toyota Motors uses e-buying and outsourcing methods to manage procurement activities. Furthermore, in collaboration with its suppliers, Toyota supports the reduction of environmental pollution that occurs during the delivery of supplies.

       Technological Development

These activities are the integration of constantly developing technologies in the processes used and help to create and maintain their competitive advantage. Every department of Toyota is build up on technologies; the main focus on technology development is to guarantee the customers of the safety of the vehicles. Toyota Motors combine forces with Collaborative Safety Research Centre located in U.S.A to reform safety checks of the vehicles and improvised test-drives as well as improving their overall product performance. Toyota has integrated safety technological systems that are aimed to provide safety of the drivers and vehicles. The first technology is PCS (Pre-Crash Safety) system that helps to predict possible crash and thereby minimizes the risk of damage and injuries. Pop-Up Bonnet technology is a definite design of the car frame structures that was created by Toyota Motors to avoid the damage caused to other vehicles and the pedestrians. Adaptive Driving Beam system was assimilated in some models of Toyota cars and helps to regulate high beam in automatic way.

       HRM (Human Resource Department)

It is the important part of the whole organizational business and thus Toyota Indus Motors Co. uses different tactics to sustain its employees. Other car manufacturing companies are considered as producers of high quality cars, however they cannot compete with Toyota in HRM (Human Resource Management), as well as its suppliers and methods of distribution. Toyota has a highly integrated Lean Production System in order to use the workforce in more productive and efficient way. The main concept of managing human resource is to expand the capacity and capability of the employees by providing them a material encouragement for the extra work, training to develop their working skills and various rewards. These methods lead to friendly and comfortable working atmosphere in the company that in turn increase in productivity and quality of the product and results in creating of the competitive advantage.

       Firm Infrastructure

These activities are connected with developing the strategic plans of the organization. MIS (Management Information System) plays a vital role in designing the strategic plan, organizing and controlling the various departments of Toyota such as finance, accounting and corporate strategy. Moreover, Toyota uses robotics system where people act as operators that make the production process fast and efficient.

Toyota's Value Chain Model

 Toyota may use value evaluations to accurately identify their under-utilized resources and thereby make better u se of these resources. Developing synergies may also aid in a stronger inventory control. Toyota may also en hance designing to further maximize their operations and offshoot process within the value chain processes  should re-modelled to support the value chain.

 The success of Toyota in Japanese and international markets involves production of motor vehicles with high l evel of  quality and safety,  as well as continuous improvement of technologies that are involved in all activities o f the company's operations. Toyota Motors has designed different models and concepts that help to increase pr oductivity and are focused on customer needs and preferences as the customer is the pioneer of Toyota’s  success. Furthermore, Toyota pays great attention to its workforce and motivates its employees with different v ariety of rewards. This method leads to production improvement and results in customer satisfaction.