Bunclub

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Indian Institute of Management Kozhikode

International Business (A)

Preliminary Report

on

Toyota – Choice of Countries or Investment Locations

Submitted by,
GROUP – 8
Vipin Sharan (PGP/19/238)
Vennam Anand (PGP/19/239)
Amar Sneh (PGP/19/245)
Abhishek Sharma (PGP/19/249)
Kunal Sapra (PGP/19/266)

Contents

Introduction to Study        

Statement of Problem        

Propositions/Objectives of study        

Methodology        

Source of data        

Presentation scheme planned        

Introduction to Study

This project mainly focuses on the Target Markets and the Modes of Entry considering Toyota as the company in context. If the customers are spread across the world, then the company in context has to adapt its basic value proposition.

One more question which has to be answered here is how to enter a market, what parameters to choose. The parameters we choose determines the strategy of a new market entry i.e. how to best enter them.

The target market selection is an important decision to make for the company while it is considering to expand globally. The company must consider when to enter the market, and weight all the relative advantages of a direct or an indirect presence in the different regions of the world. Large companies usually go for a direct presence, whereas the small ones go with the indirect presence, so that they gain the global competitive advantage by creating a worldwide resource network through alliances with suppliers, customers and sometimes competitors. Strategy for a company might not necessarily be applicable to the other companies in the industry.
We are taking the company in context as Toyota. The company started in 1933, devoting to the production of automobiles. It began with its expansion in the year 1960, by starting a research and development facility in Thailand. In 1963 it started with its manufacturing outside Japan, at Australia. It had created a biggest export market for itself. It slowly entered the markets like

• United States
• Indonesia
• Malaysia
• Singapore
• Philippines
• Thailand
• Australia

It also entered the central Asian markets of India and Bangladesh.

The figure here shows the Market Participation of companies in general, and the strategy decisions which are usually made in doing so.[pic 2]

Statement of Problem

After 30 years of its presence in Japan and establishing a brand name in the country, Toyota tried to globalize and start expanding its business. In the early 1960s it started to move its innovation to Thailand by starting a new research and development facility. It had a decent export market from Japan, by the end of the 1960s Toyota has established a worldwide presence, as it exported its 1-millionth unit during the time.

Based on this we framed our problem statement as to why and how the companies choose their countries in order to globalize. Motivation for this came from the fact that a Japanese company which created a global market for exports and established its presence in some of the developing countries.

The hypothesis which we want to test is that

Companies usually choose the developing economies for their expansion strategy.

The reason why we chose this hypothesis is that, there have been companies which were successful and which faded poorly by choosing the developing countries. We want to evaluate what more factors contribute to the success of the companies while expanding like

• Market’s size and growth rate
• Particular country or region’s institutional context
• A region’s competitive environment
• A market’s cultural, administrative, geographic and economic distance from other markets the company serves

Propositions/Objectives of study

The objectives of the study can be summarized as what institutional contexts are to be considered while expanding. A five-dimensional framework suggests that careful analysis of the below parameters is to be done before entering a region/particular country

• Political and Social Systems
• Openness
• Product Markets
• Labor Markets
• Capital Markets

Using Toyota as the context, we are going to evaluate the five-dimensional framework.

Also considering the question on the best way to enter a new market. Toyota followed a prior export based approach where a decent export base was created by Toyota in the target market, rather than licensing its products to gain experience in the newly targeted country/region.