TOYOTA CASE STUDY ANSWER

 In July 2013, Yasumori Ihara (Ihara), Executive Vice President of Toyota Motor Corporation was readying plans to bolster Toyota's position in the emerging markets by expanding operations into Cambodia, Myanmar, and Kenya. According to Ihara, who was in charge of the company's emerging markets business, "Compared with North America, Europe, or Japan, where buyers are mostly replacement buyers, it's mostly first-time buyers in emerging markets. It's where the future growth is." 

The Japan-based Toyota was the world's largest automaker with a presence in more than 170 countries. In March 2011, Toyota announced its ‘Global Vision' in which emerging markets were given particular importance as part of its strategy. The company wanted to get 50% of its global sales from the rapidly growing emerging markets by 2015. The company considered China, Southeast Asia, India, and Brazil as its key emerging markets. In 2012, Toyota's consolidated vehicle sales was 8.7 million units, out of which 3.7 million were sold in emerging countries. 

But in the second half of 2013, Toyota was facing intense competition from its rivals both in the developed as well as the emerging markets. The company had invested a huge amount in emerging markets, but key emerging markets were facing a lot of volatility and sluggish growth. There were concerns that these markets were no longer attractive enough. In addition to getting Toyota's emerging markets strategy right, Ihara's main responsibility was to reverse the disastrous sales decline in China, where consumers were boycotting Japanese-built cars due to diplomatic tensions over some disputed islands. 

The global automotive market was highly competitive and competition was likely to intensify further with continuing globalization. The factors affecting competition included product quality and features, safety, reliability, fuel economy, the amount of time required for innovation and development, pricing, customer service, and financing terms. With growing economies and a low vehicle penetration rate, emerging markets were considered as the key source of growth for the global automobile industry. 

According to the International Monetary Fund, between 1988 and 2011, while the developed markets' of global GDP declined from 61% to 49%. Toyota's presence in the emerging markets dated back to the 1960s when it used to sell vehicles in markets like Taiwan, Brazil, South Africa, Thailand,

the Philippines, Malaysia, Russia, and China. In the initial years, Toyota was mostly exporting vehicles from Japan to these countries as it only had production facilities in Brazil, South Africa, and Thailand. 

During the 1970s, Toyota started producing multipurpose vehicles in the Philippines and Indonesia as families in these two countries tended to be large and therefore vehicles that could be used both for business and family were preferred. In 1976, Toyota launched the Tamaraw in the Philippines followed by the Kijang in Indonesia in 1977. In the 1980s, Toyota started producing vehicles in Taiwan and Malaysia followed by India in the 1990s. By the 2000s, Toyota had production facilities in all these emerging markets. In an effort to increase its presence in the emerging markets, Toyota began strengthening its supply system in the emerging markets and increasing localization. During the 2000s, the company set up a local parts distribution network and a supply chain to provide greater autonomy to affiliates in the emerging markets. 

Toyota's presence in South East Asia dated back to the 1950s. By 2012, 

Toyota had 14 production companies in Thailand, Indonesia, the Philippines, Malaysia, and other Southeast Asian countries. Under the Innovative International Multi-purpose Vehicle (IMV) project launched in 2004, Thailand and Indonesia became Toyota's global production centers. By 2012, Toyota was the market leader in Thailand, Indonesia, the Philippines, Taiwan, Brunei, and Vietnam. The IMV Project was intended to create an efficient production and distribution structure for pick-up trucks and multipurpose vehicles to meet the needs of consumers globally. Toyota applied the ‘genchi genbutsu' approach to observe and analyze the needs of each region and the types of vehicles used in those regions to develop and introduce IMVs. 

The IMV project included manufacturing diesel engines in Thailand, gasoline engines in Indonesia, and manual transmissions in the Philippines and India. The IMV project adopted a leaner development process based on a common platform, and developed five vehicles: three pickup trucks, a minivan, and an SUV, especially developed in 2004 for launch in over 140 countries. Though Toyota was still the #1 automaker in mid-2013, its position was coming under threat from a resurgent GM and Ford in the US market. 

Competition was catching up in the hybrid car market too. In its home market, the company was hit hard in late 2012, after government incentives for consumers to buy fuel-efficient models expired. In 2013, the Yen declined more than 12% against the dollar. In emerging markets, Toyota had to contend with intense competition from other Japanese companies such as

Nissan, Honda, and Suzuki, some of which had managed to entrench themselves in key emerging markets. Companies such as GM and Germany- based Volkwagen were also pushing ahead with their own emerging strategies. 

In 2008 and 2009, analysts were expecting emerging markets to become a safe haven for investors, considering the recession in the US and Europe post the global financial crisis. But as of 2013, while developed economies seemed to be strengthening, the emerging markets had underperformed in the previous couple of years. Analysts were also concerned about the vulnerability of the emerging markets which reacted strongly to modest changes in the world economy. In mid-2013, many emerging markets were struggling with rapid depreciation of their currencies. Countries such as Brazil, India, South Africa, and Indonesia were among the worst affected. 

Between May and September of 2013, while the Indian Rupee fell by 21%, the Brazilian Real fell by 17%, followed by the Indonesian Rupiah (15%), the Thailand Baht (8%), and the Russian Ruble (6%). Central banks in key markets like Brazil and India were working frantically to prop up their currencies. 

As of mid-2013, Toyota pursued the emerging market strategy with Asia as its ‘second mother base'. According to Toyota's Global Vision, the company aimed to implement its IMV Project strategy in the emerging markets by continuing to fortify its core models along with new hybrid models. It would also strengthen its production and supply bases, and enhance its cost competitiveness by 100% localized procurement. 

1. Analyze the automobile industry in emerging markets and discuss and debate whether automakers should focus on these markets. 

2. Evaluate the strategies adopted by Toyota to increase its presence in emerging markets. 

3. Discuss ways in which Toyota could get its emerging markets strategy right and bolster its position further in emerging markets. 

4. Give your suggestion for better marketing strategy