ASB 4904/5 International Business Coursework
Changes in the external environment that have influenced the Forces of Globalisation in the last 5 years
The Toyota Motor Company is a Japanese company founded in 1937 and emerges into the global market because of its appealing design, and assembly. It manufactures and sells minivans, passenger cars, commercial vehicles and automobile parts in Japan, Europe, North America and Asia. The Toyota company is the leading car manufacturer brand and the 8th largest company in the globe (Global.toyota. 2021). However, the recent disruptions in the global automobile market have been significantly impacted in response to increasing sales and exports of products into the overseas market.
In the last five years, the world has observed significant changes in the global business environments due to various factors of Globalisation. The Production cost, Productivity cost and labour or wage are considered the initial driving forces of globalisation. In that case, global trade liberalisation is the key factor in bringing the digital revolution. In the case of the globalisation of products, it is highly essential to have low tariff barriers for offering cost-effective products in each segment of vehicles.
The automotive firms are very much aggressive against the other automobile companies due to the innovations and marketing. The Toyota company competes with other car manufacturing companies worldwide in terms of marketing and innovation. Currently, the automobile sector has faced numerous social issues such as regulations on exhaust gas, oil crisis, increased traffic accidents and lastly the ageing of the society.
However, in recent years due to the impact of the Covid-19 virus the global car industry has faced significant challenges. According to Kufelová and Raková, by 2020 the Japanese car maker Toyota has decreased its global sales by only a third to 1.82 million vehicles in March 2020 (BBC News, 2021). Due to this reason, Toyota sales dropped by 22.6% in March. As the overall performance of Japanese car sales during the pandemic, it fell to 26.5 million which was the lowest in the last four years. Finally, due to the lack of employees and demand reduction of Toyota cars during the pandemic, Toyota Peugeot Citroen Automobile has shut down its production facility (BBC News, 2021).
During the recent Russia-Ukraine war, after Russia ban exports of cars till the end of 2022, the automakers faced challenges to operate plants in Russia. This leads to Toyota and Hyundai ceasing their operations in Russian plants. Toyota is the top Japanese automobile company that procures around 80,000 vehicles annually in Russia. As the company was facing supply chain-related issues during the covid-19 and yet the new war situation made the external environment of Toyota further complicated because of the crisis in Ukraine (Miroudot, 2020). Automakers do not find alternatives for important parts that are made in Ukraine including wire harnesses.
Along with that from the year 2020, the automobile industry has faced issues with delays in semiconductor chipset production and other critical raw materials that have led to a slow down of the recent initiatives of electrification of vehicles.
The two biggest markets for Toyota are the US and Japan. But currently, the industry is shifting into Electric vehicles. The market share of EVs is around 4.4% in North America. However, currently, the EV volumes and plug-in hybrid cars account for 1% only of sales by Toyota and the current trend is shifting towards EVs among customers. Therefore, the company is facing challenges in bringing EVs into the market.
Differences between the terms ‘global supply chain’ and ‘global value chain’
The supply chain is considered as the relationship between the supplier and the company. The supply chain deals with supplying raw materials for the production and distribution of any specific product. In simple terms, the supply chain is the interconnection of different functions involved in manufacturing products from raw material to the finished product until it reaches the end customer.
Therefore the global supply chain involves multiple countries where the product can be sourced from either single or different countries and may produce in other countries and then supply to global customers (Hauge, 2020). Therefore the supply chain is highly collaborative and multidisciplinary which offers great benefit for the company via integrated and diversified sourcing of material, improving the efficiency of logistics as well as reducing logistic costs. On the other hand, the value chain refers to the ability of a company or organisation in creating value for the customer which is more than the cost of providing its goods or services (Bacchetta et al. 2021). In more simple terms the value change involves a set of activities that are aimed toward creating or adding value to the final product.
The supply chain objectives are minimising the cost of the product to benefit the customer through producing high-value products with intense cost-to-price ratios and tight margins. Another objective of the supply chain from the customer’s perspective is mass customisation which involves higher technology to make a high volume of products with quality that may increase the high margin of the product. Another objective of the supply chain is product differentiation which is based on the provider perspective which is focused on producing at low volume but getting high merging is the aim.
International trade, production and investment are increasingly organised within the global value chain where it involves different stages of the production process among different countries. Organisations try to enhance their production process by locating different stages across numerous sites. The difference between the supply chain and value chain in terms of its source is the supply chain is used basically for the management of organisation operation in terms of employees’ perspective (Toyota-industries.com, 2021).
Organisations enhance their supply chain network in such a way that it supports the employees to reduce the operation time into different processes within the supply chain. On the other hand, the value chain is a more business management-oriented process where from the company’s perspective it is focused on creating value for the customers so that the customer becomes attracted to the brand (Toyota-industries.com.2020).
The supply chain involves requests for products made by customers and supply chain operations performed by the employees and finally distribution of the product to customers through logistics. However, the value chain process followed by getting a request from a customer organisation, look for the product value by performing different tests so that the product can add value to the customer. The role of the supply chain is to make customers satisfied with the timely delivery of products. However, the value chain is focused on providing value through their product so that the company or brand gets a competitive advantage via enhancing the customer experience with the product or services.
Impact of Predicted changes
The Toyota Company is a global vehicle manufacturing brand known for its production and supply chain capabilities. Additionally, the company in Japan is also known for its excellent value among customers. Not only that, but Toyota is also very much popular for the excellent engineering that has allowed it to manage its value chain very effectively (global.toyota.2021). The study has outlined that due to the Coorg-19 Toyota in Southeast Asia and North America was facing challenges with managing production due to unexpected events in the supply chain regarding the shortage of employees as well as raw material or components of car components (BBC News, 2021).
In this case, the product is “Toyota RAV4” (PBS NewsHour.2022.). The Toyota company has around 14 plans in North America where the tin manufacturing plant is located in the United States with a total of around 176000 employees. Due to the global shortage of semiconductor chips, Toyota in North America and Japan was forced to temporarily shut down the production of Toyota RAV4 cars (Global.toyota.2021). In this section, the studies focus on discussing different elements of the global value chain concerning the Toyota Company’s operation.
Inbound Logistics
The inbound logistics operation in Toyota consists of two separate functions where the first operation involves transporting parts from supplier to the plants and the second operation is to take the global inbound logistics to transport the parts from Japan to North America and European plants (Cil, Demir and Yaman, 2020). In this process, Toyota has followed the localisation of products where 75% of non-domestic cells were produced from Japan in 2012 (Global.toyota.2021). Due to the localisation of production, Toyota was being able to use just-in-time supply chain systems. Toyota follows a lean manufacturing process to gain a competitive advantage in the production process and create value for the customer.
Outbound Logistics
In terms of outbound logistics operation, the Toyota company has more than 150 distributors and 8900 outside of Japan. To transport its produced vehicles from the assembly plant to the dealers, it uses railroad and truck, common carriers. In this process, the distribution of products is followed by 3 categories: distribution of produced vehicles in North America, distribution of reduced vehicles into the overseas market and the Scion model for distribution (Toyota-industries.com, 2021). In distribution into North America of Tata’s products the vehicles produced from the plant are transported into a facility where the products are gate prepared for shipment into different dealership offices throughout North America via track and train. On the other hand, the distributions in the overseas market Toyota uses large vessels for transporting produced vehicles in Japan sports to North America and further the products or transported to different dealerships where delivery times can vary depending on the logistics of production and the distance between the other overseas ports.
References
Bacchetta, M., Bekkers, E., Piermartini, R., Rubinova, S., Stolzenburg, V. and Xu, A., 2021. COVID-19 and global value chains: A discussion of arguments on value chain organization and the role of the WTO (No. ERSD-2021-3). WTO Staff Working Paper.
BBC News, 2021. Global supply chain: Toyota extends Japan production stoppages. [online] Available at: <https://www.bbc.com/news/business-59646699> [Accessed 13 August 2022].
Cil, I., Demir, H.I. and Yaman, B., 2020. Lean logistics in the 2020s and a cast study about logistics and supply chain management in Toyota Boshoku Turkey. In Global perspectives on green business administration and sustainable supply chain management (pp. 276-315). IGI Global.
Global.toyota. 2021. Integrated Report 2021. [online] Available at: <https://global.toyota/pages/global_toyota/ir/library/annual/2021_001_integrated_en.pdf> [Accessed 13 August 2022].
Hauge, J., 2020. Industrial policy in the era of global value chains: Towards a developmentalist framework drawing on the industrialisation experiences of South Korea and Taiwan. The World Economy, 43(8), pp.2070-2092.
Miroudot, S., 2020. Reshaping the policy debate on the implications of COVID-19 for global supply chains. Journal of International Business Policy, 3(4), pp.430-442.
PBS NewsHour. 2022. Toyota slashes production as pandemic strains supply chain. [online] Available at: <https://www.pbs.org/newshour/economy/toyota-slashes-production-as-pandemic-strains-supply-chain> [Accessed 13 August 2022].
Toyota-industries.com, 2021. Annual Financial Report 2021. [online] Toyota-industries.com. Available at: <https://www.toyota-industries.com/investors/items/2021_annual_financial_report_E.pdf> [Accessed 13 August 2022].
Toyota-industries.com. 2020. Toyota Industries Report 2020. [online] Available at: <https://www.toyota-industries.com/investors/items/TICOReport2020_E_full.pdf> [Accessed 13 August 2022].
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