Strategy exams and Toyota. Is it a barrier?

Toyota has been in the news for all the wrong reasons recently. The company has faced strong criticism following reports of unintended acceleration and braking problems. These problems have been linked to a number of deaths. The end result is that millions of Toyota vehicles have been recalled for remedial work.

Akio Toyoda, the boss of Toyota and the grandson of the founder of Toyota, gave evidence yesterday to the House of Representatives Oversight and Government Reform Committee in the States. Whilst this is a very serious problem for Toyota in terms of the damage to its reputation there was a comment made by US congressman John Mica which reminds us of another interesting topic of discussion for ACCA P3 strategy students involving Toyota.

Mica said: “This is an embarrassing day for Toyota and for the thousands of hard-working Americans who work in Toyota plants across the US.”

Whilst Toyota is a Japanese company it can also be considered to be a truly global company. In America alone for example there are over 33,000 direct Toyota employees.

There are numerous reasons why a company may open up manufacturing operations in another country. Access to technology skills, cheaper labour and being closer to its end market are a few examples. For car manufacturers though there is a big incentive for manufacturing in certain countries. Namely, in doing so they remove a potential barrier to entry involving duties on imported vehicles.

In some countries there are excessive duties on imported cars. By manufacturing within the country the cars are built locally and therefore are not imported and hence there is no import duty. This nicely removes a barrier to entry. Of course there are other potential barriers to entry but these will be discussed in future blogs.

Anyway, back to Toyota. They are indeed a global company with recent Toyota figures showing that there are 53 Toyota manufacturing companies outside of Japan in 27 countries.