The Reasons for Sustainability of Toyota Company - Paper Example

Introduction

This paper focuses on an analysis of the Toyota Motor vehicle company and the entire vehicle manufacturing industry in Japan and the world as a whole. Toyota Motor vehicle company started operations in 1937. The company concern itself with the manufacture of minivans and commercial vehicles. An analysis of the reasons behind the Obsolesce of some vehicle company provides insights into the history of the Japanese automobile industry. Throughout history, the automakers have dealt with Inhibiting factors and the enabling factors in the industry. The continued existence of Toyota company is a clear indication of its competitive advantage and its ability to deal with the impacts of the industry factors.

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Reasons for Obsolescence

Inhibiting Factor: Increase in Fuel Prices

In the recent past, a high number of automobile manufacturers have had to close their production operations following the drastic increase in fuel prices. An oil shock occurred in the period between 2007-2008 and the unexpected followed by some Japanese motor companies having to close their operations (Kallis & Sager, 2017). The most hit companies were those dealing with the production of big cars including the guzzling pickups that consumed a lot of oil.

Inhibiting Factor: Environmental Concerns

Environmental management issues and health awareness have contributed to the shift in consumers tastes. The move added to the obsolesce of car manufacturing companies that deal with the production of cars that are compatible with diesel fuel (Nkomo, 2013). Survival in the current vehicle manufacturing industry depends on the extent that companies can produce vehicles that promote efficient use of fuel and therefore minimal environmental damage and the production of cars that use a clean source of fuel including electric and solar power.

Inhibiting Factor: Stiff Competition

There is stiff competition in the Japanese motor vehicle industry from within the country and large abroad car manufacturing companies. The success of any automaker depends on their ability to afford the necessary capital spending to ensure the production of high-quality vehicles and the ability to sell cars at low prices (Fujimoto, 2014). Despite producing high-quality products, some companies wide up operations in some brands since despite the vehicles being of high quality most of the customers would not afford.

Enabling Factor: The Availability of Innovations to Imitate

After the rise in oil prices. The innovative manufacturers responded by producing hybrid electronic vehicles. Others reacted by devising small cars and diversifying their small cars portfolio to enhance consumers' choice (Nkomo, 2013). The automakers who were reluctant in shifting their focus from pick-up trucks to small cars failed as they expected that the price of fuel to fall eventually making the consumers return to the use of big vehicles.

Enabling Factor: Increase in Affordability

The current trend involving a rise in manufacturing costs mobile industry may not affect cars demand due to the rise in disposable incomes. Most of the countries are on an improving trend regarding economic development, and as income increases, there is an increased propensity to but vehicles. Similarly, the is a significant rise in the number of companies that offer financial support to individuals who are desiring to purchase vehicles.

Impact of the Factors

Focus on Research and Development

The position of the fuel economy is a significant determinant of the type of vehicles demanded in the market and vehicle manufacturing companies are required to remain flexible in their operations. The rise in fuel prices contributes to the demand for fuel-efficient cars. By contrast, when the oil prices are low, the customers are interested in other aspects of vehicles including comfort, performance, and style. The sustainability of the Toyota Company is attributable to its focus on producing a variety of small cars (Sisson & Elshennawy, 2015). Despite the rise in fuel prices, Toyota company maintain its sales since small companies are desirable despite the changes in oil prices.

Production of High Quality but Affordable Cars

The high competition contributes to the desire by vehicle manufacturers to produce high-quality products. The availability of a wide range of differentiated products makes consumers to perform a thorough background check about the performance of different brands before making a purchase decision. With the advent of the internet, consumers are now more aware of the actual cost of vehicles are they are unlikely to accept a massive increase in prices (Nkomo, 2013). The negotiation power of consumers has improved with the improved access to dealers' information about the cost of the vehicles, and it is up to vehicle manufacturing companies to ensure that they produce both high quality and affordable cars.

Adherence to Fuel Laws and Standards

The environmental concerns have contributed to the development of fuel economy standards that are extremely expensive to implement. The government has put in place fuel efficiency targets that favor the production of light vehicles and the revision of earlier passenger cars. The Japanese fuel economy policies in Japan involve progressive taxes depending on vehicle weight (Leard, Linn, & McConnell, 2017). The Toyota Company focus on producing light vehicles makes its products desirable by consumers due to the low associated tax. Moreover, a system is put in place to help buyers in identifying cars that are past the set standards.

Flexible Production Plants

The current market trends demand changes from the traditional automotive industry that depended on the production of large volumes of the same model of vehicles. At present, production efficiency depends on the capability to implement flexible production plants that makes it easy to adjust to market changes. Flexible production plants ensure that motor vehicle companies can diversify and they incur low costs even when producing in small scale (Monden, 2011). The Toyota Production System allows Just in Time Inventory System, a concept that supports flexibility in production.

Partnerships with Suppliers and Producers

The ability to forge partnerships with companies providing technology suppliers provides an added advantage in product development. In addition to forming long-term relationships with suppliers, successful Japanese manufacturing companies also consider joint product development (Nkomo, 2013). Toyota Company Partnership with BMW since 2012 has enabled the cooperation between the two companies including the involvement in the joint development of the architecture of sports cars and the fuel system. The partnership has allowed the two companies to produce technologically superior products by sharing innovation costs.

Conclusion

To sum it up, the Japanese automobile industry has seen increased innovations in the recent past as a response to stiff completion, change in consumer preferences and the rise in fuel price. Some companies have reacted positively including Toyota Company by establishing flexible production plants and focusing on research and development. Other companies that have taken a slow pace in the adoption of innovations have suffered obsolesce with time.

References

Fujimoto, T. (2014). The long tail of the auto industry life cycle. Journal of Product Innovation Management, vol. 31, no.1, pp. 8-16.

Kallis, G., & Sager, J. (2017). Oil and the economy: A systematic review of the literature for ecological economists. Ecological Economics, vol. 131, pp. 561-571.

Leard, B., Linn, J., & McConnell, V. (2017). Fuel prices, new vehicle fuel economy, and implications for attribute-based standards. Journal of the Association of Environmental and Resource Economists, vol. 4, no. 3, pp. 659-700.

Monden, Y. (2011). Toyota production system. CRC Press.

Nkomo, T. (2013). Analysis of Toyota Motor Corporation.

Sisson, J., & Elshennawy, A. (2015). Achieving success with Lean: An analysis of key factors in Lean transformation at Toyota and beyond. International Journal of Lean six sigma, vol. 6, no. 3, pp. 263-280.