Toyota's Decision to Build a Plant in France
Background
In late 1996, Toyota began to look at the whole of western Europe for a site for its ultra-modern plant. Belgium, the Czech Republic, France, Germany, Poland and the UK all seemed to be the most promising investment recipient, but the list was quickly left a head-to-head battle between Europe's oldest foreign investment rivals - France and the United Kingdom. At first, the UK seemed the obvious choice. Toyota had its only European car assembly plant at Burnaston, in the UK's Midlands, where a skilled workforce and well-established automotive infrastructure and cluster of related firms are available. However, at the end of January, company president Hiroshi Okuda voiced doubts about investing in the UK because of its hesitation to fully participate in the European monetary system. In 1997, Toyota finally announced plans to build a $660 million car plant in Valenciennes, 60 km from Lille, France.
Evaluation
1. The reasons for French government to invite Toyota to invest in France are attributed to the benefits of foreign direct investment (FDI) to France as the host country.
a. Resource-transfer effect
Toyota can make positive contribution to French economy by supplying capital, technology, and management resources that would otherwise not be available and thus boost French?fs economic growth rate.
- Capital
Toyota, as a multinational enterprise (MNE), because of its large size, reputation, and financial strength, has access to financial resources which may not be available for French local firms like Renault or Peugeot-Citroen. These financial resources can be originated from Toyota?fs internally-generated cash, or from capital markets. As a reputable and financially strong company, it may be easier for Toyota to have access to such resources than French local companies do.
- Technology
Technology plays important role in economic growth of a country, since it can stimulate economic development and industrialization. Technology can be incorporated into both production process and the product itself. In case of Toyota, the French government may be benefited from its advanced technology which it passed to its French employees, therefore improves the employees?f skill without additional investment to develop their own indigenous product and process tech...
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...mic mismanagement will cause drastic changes in a country?fs business environment that adversely affect the profit and other goals of a business enterprise. If the French economic is in turmoil, Toyota?fs investment in this country will also be affected.
c. Legal Risk
Legal risk is the likelihood that a trading partner will opportunistically break a contract or expropriate property rights. This may also happen to Toyota?fs when its trading partner in France infringes contract agreements.
Beside those three risks, Toyota also faces the cultural risk since the ?grules of game?h of doing business in France with French people is different with that in Japan and other countries where Toyota already put its investment. The French language and culture can be a problem for Japanese firms used to speaking English when working overseas.
Conclusion
The decision to build a plant in France is a part of Toyota's global strategy in Europe. The company has already built plants in UK, Belgium, Poland, and Turkey. Supported by other plants in Europe, which supply the manufacturing components, the French plant will strengthen Toyota's position to penetrate European market.
The leading manufacturing industries are metallurgy, mechanical and electrical engineering, chemicals, and textiles. In 1986, France ranked third in Europe in steel production, with an output of 14.8 million metric tons and second in aluminum output. These and imported metals are fabricated into a wide range of mechanical and electrical equipment marketed throughout the world. French locomotives, turbines, electronics equipment, nuclear power plants and submarines, and television systems are famous for their innovative design, as are French automobiles, such as Citroen, Peugeot, Simca, and Renault, and French aircraft, such as Mirage, Concorde, and Airbus. In 1985, France ranked fourth in the world in production of passenger cars and third in output of commercial vehicles. A wide range of chemicals, including perfumes, pharmaceuticals, nitric acid, sulfuric acid, and fertilizers, are also produced. The French textile and garment industry has long been known for its high fashion, although in recent years the industry has lost many former markets to lower-priced imports from countries with lower labor costs.
The main question is who is helping Toyota create malfunctioning cars? According to British Broadcasting Corporation, Toyota has agreed to a $1.2 billion deal with the United States safety probe. The problem with this deal is that Toyota is helping its origin country, Japan, conceal their master plan against the United States. This master plan is a big problem that will affect not only the citizens of the United States, but also the future generation. The main problem is that Toyotas has been manufacturing defect cars in the U.S. Over the past four years, American car regulators have been investigating on these defective cars and safety issues. Based on their research, Toyota has recalled over ten million cars over issues with brakes, accelerator pedals and floor mats. In addition, Toyota has intentionally concealed information about the defective cars, according to Attorney General Eric Holder. “This has been the largest criminal penalty yet imposed on a carmaker in the US” states Attorney General Eric Holder. This brings up the question, why did Toyota purposefully manufacture malfunctioning cars?
France engages in quite a few secondary economic activities such as manufacturing, machinery and transport equipment production, aircraft production, and pharmaceutical items. This part of the economy makes up about 26% of France’s gross domestic product and 25% of its labor force (“CIA 2001”, 1). Manufacturing plays the largest role out of all of the secondary economic activities with a contribution of 16% to the gross domestic product. Behind it are the construction and energy generation companies which account for 4% and 3% of the gross domestic product (“Economic Structure”, 1).
...mportant role in the export of nuclear technology. The electricity used in France is mostly produced from nuclear energy. In addition, internal combustion engines were also a technology that originated from France. There are many technologies that came from France such as refrigerators, electric generators, and parachutes. Moreover, France was a crucial country in the development of photography. The country has a huge railroad system, the Societe Nationale des Chemins de Fer Francais, that linked many of the French cities together as well as nearby countries allowing for faster transportation. France is also known for their development of high-speed transports such as some of the world’s fastest trains. On top of that, it has the largest market of electrical vehicles in Europe. Furthermore, France is one of the leading countries in the development of aircrafts.
Toyota- focused differentiation, medium pricing, breadth of product line is low. Company is known for quality products, and nice styling.
As one of the leading automobile manufacturers in the world, Toyota ranks within the top three worldwide. Due to their unique business model, they are now have a market share of 14% in the first four months of this year. That is an astonishing 2.3% jump from the previous year. According to Autodata.com, the Toyota City based automaker ranks fourth in United States sales.
Toyota Motor Corporation is a Japan based company, whose headquarters are located in Aichi Prefecture. The company was founded by Kiichiri Toyoda in 1937. Currently the company’s CEO is Akio Toyoda. Toyota is basically into cars and it is one of the top players in the world in this industry. Toyota also owns two other brands namely Lexus and Scion, which gives the company a lot of advantage over it’s other competitors. Toyota manufactures sedans, saloons, suvs, muvs, pick-up trucks and buses. During the year 2013 Toyota had approximately 333,498 employees, who were working globally. In March 2013, Toyota was ranked as the thirteenth biggest organization globally in terms of its revenue. In the following table we can see the financial report of Toyota Motor Corporation in the year 2013-
Evidently, it was cheaper for the Toyota company to run overseas in Tokyo then here in Australia and so the factories shut down and moved to Tokyo for better flow on effects on the local economy. World cities significantly have dominance over other urban centres. Decisions that are made in world cities
First of all, Toyota has been very successful in differentiating on the basis of superior design and quality. This has led to Toyota being able to create a brand image that is very strong and one that brings to mind quality, long lasting cars when a potential customer sees it. The strength of Toyota’s brand image has been seen in recent years with the recalls and problems Toyota faced in dealing with these recalls. Toyota was able to survive these problems because they had such a long and proven track record of quality and superior. Another, area that Toyota differentiates is in technology. Toyota was the first successful mass produce the hybrid car on the market when it released the Prius in 2003. Being the first to get their hybrid on the market allowed Toyota to gain a large portion of the market share in the area of hybrid
By investing 25 million EUR in technology, the firm managed to reduce CO2 emissions by 20%. (Turi et al 2015) Van Tuijl (2013) examined in his work “Car making and upgrading: Renault in Romania” the importance and influence of the foreign car producer contribution in upgrading. I used this article in order to provide a more detailed overview of the current Renault-Dacia manufacturer and the integration process of Renault in the local industry. The Western European markets were getting saturated, but in the emerging countries, there was a rising demand for cars.
Toyota has adopted an expansion strategy aimed at increasing the company’s market share through sustainable growth. This will be done based on the delivery of high quality, and safe cars, at an affordable price. As the company seeks to expand to new markets, focus will be on maintaining an organizational culture that allows optimum efficiency in the ever dynamic global market.
These issues led to Toyota losing much of its brand equity as a leader in safety. According to an article in Time Magazine from February 2010, the automaker didn't just have safety issues in 2009 that led to the recalls, there had been smaller recalls for similar issues nearly every year since 2002. Historically, Toyota has been an organization that can take problems, root out their cause and turn the solutions into advantages over competitors. In this case, Toyota's complete lack of crisis management led to a major loss for the company both in 2009-2010 sales but something more precious and long-term, brand equity.
Toyota Motor Corporation is one of the largest automakers in the world. At its annual conference in Tokyo on May 8, 2008, the company announced that activities through March 2008 generated a sales figure of $252.7 billion, a new record for the company. However, the company is lowering expectations for the coming year due to a stronger yen, a slowing American economy, and the rising cost of raw materials (Rowley, 2008). If Toyota is to continue increasing its revenue, it must examine its business practice and determine on a course of action to maximize its profit.
After General Motors (GM), Toyota Motor Corporation is the second largest automotive maker around the globe; although, Toyota ranks in first place in profit, revenue and net worth. Toyota was established by Kiichiro Toyoda in 1937, as a by-product of Sakichi Toyoda's Toyota Industries Company, to produce Toyota automobiles. Headquartered in Bunkyo Tokyo, Japan (as well as Toyota, Aichi); Toyota offers pecuniary services with their Toyota Financial Services division. Toyota Industries, along with Toyota Motor Corporation, make up the Toyota Group. The Toyota Group consists of Daihatsu Motors, Scion, Lexus, Fuji Industries, Yamaha Motors, Isuzu Motors and of course, Toyota Motors. Toyota Motor Corporation operates globally with the automobile industry, which includes 522 worldwide subsidiaries (Toyota, 2010) (Sagepub, n.d.).
Companies should firstly pay attention to local conditions as law and regulations when deciding to locate and operate in a foreign country (Schuler and Rogovsky, 1998; Florkowski and Schuler, 1994). The impact of the French legal environment can be seen as minimal (Barzantny and Festing, 2008). An important flexibility is given to employers, and France is considered as a moderately regulated country in Europe, as opposed particularly to Ireland which is in the less regulated group (Nikandrou et al., 2005).