Toyota and Its Mode of Entry

1. Introduction

Toyota Motor Corporation was established in 1937. The company operates both automotive, under the brand Toyota, Lexus, Hino and Daihatsu, and non-automotive and can be seen as one of the best known automobile manufacturers. According to Japan Corporate News network, in 2007, the firm sold over 8.5 million vehicles in more than 170 countries. Based on Toyota Motor Global site , the major Consolidated Subsidiaries of Toyota Corporation across the world mainly locates in North America, Latin America, Europe, and Asia/Oceania. Furthermore, vehicle sales of Toyota can be broken down as 26.7% in Japan, 34.5% in North America, 14.4% in Europe, 9.2% in Asia and 15.2% in other regions . Toyota aims at localisation and collaborates with automobile companies in foreign countries in order to be the leadership in automobile market.

The consequential impacts on the firm and host countries vary according to different modes of entry. In order to identify why Toyota uses different entry modes in each part of the world, four countries, which are the United States, China, Brazil and Thailand will be used as case studies. This is because these countries are the main production bases and have potential markets.

2. Toyota in the US

Toyota began to export passenger cars to the US Toyota Motor Sales (TMS) in 1957 and adjusted their products to suit US consumer needs by increasing engine size and testing on the US highways. At that time, it was challenging for Toyota because there were three prominent dealers in the US market which were GM, Ford, and Chrysler. The �Big three’ held 95% of automobile market share. More importantly, Toyota faced a major problem in export because of the Voluntary Export Restraint Agreement which limited the export from Japan to the US.

However, using FDI measures to solve this problem, Toyota opened manufacturing operations by establishing five assembly factories, which created jobs for local people. In 1968, Toyota had a first mover advantage by launching the smaller Corolla and profited from the economy of scale. Despite fierce competition in the US, Toyota reached 25% of market share in 1978.

Furthermore, Toyota and General Motors had forged a 50-50 joint venture and created the New United Motor Manufacturing (NUMMI) in 1986. The main purpose for JV was the co-operation in labour management. Then, Toyota established Lexus dealership in the US in order to create the up market entry. However, the problems in using JV were that US factories could solely produce assemblies but did not have the capacities for product design and development.

In response to this constraint, Toyota began the wholly-owned operations. Toyota increased in growth continuously because they generated quality products and maintained good relationship with their dealers. Sohn (1994) asserts that between 1980s and 1990s the wholly-owned subsidiaries were prominent in the US. They provided manufacturers in Indiana, which of a Greenfield investment was useful for international firms.

According to BBC News, Toyota’s strategy is designed globally, manufacturing locally. However, Toyota might struggle with political problems because Toyota’s workers do not get involved in voting in the US unions. Toyota asserts that the rules of union might obstruct their just-in-time management system.

Over the past three decades, there has been a shift in the production patterns of the US automobile industry from US to Japanese, Korean and European manufactures by 2008. Given the Democrat majority in the Congress and ahead of the 2008 presidential election, labour unions are calling for preferential measures in favour of US automobile makers and the increase of production within the US. This includes the provision of tax exemptions for production of petrol-electric hybrid automobiles in the US. This attract producing Prius model to the US, as currently manufactured solely in Japan. Indeed, Toyota is seeking to introduce hybrid versions across its range of automobiles and is projecting that Camry will overtake Prius in representing a larger portion of its hybrid sales in the medium to long-term. Therefore, it is challenging for Toyota to adjust modes of entry in response to possible policy changes in the US.

3. Toyota in Brazil

Toyota first presence in the Brazilian market was through the establishment of “Toyota Do Brasil S.A. (TDB)” in 1958. By 1959, the company has opened its first plant in Ipiranga. From that point on, the company started domestic vehicles assembly in the form of wholly owned subsidiary (Toyota website). At that time, the actual company’s purpose in entering in Brazilian market was to avoid the interference of communism in Asia.

In 1962, Toyota shifted