Business

Globalisation and Toyota

Globalisation and Toyota

Introduction

In recent years the automotive industry has changed radically and changes that have occurred can be summarized in the context of globalization. In this global stage of transformation, production centred segment of low-end cars and changes in labour regulation have made a production structure in which flexibility and reasonableness of the costs have become key to remaining competitive in a segment of market where the selling price of the product is a key variable. This paper discusses how globalisation has affected the biggest auto manufacturer in the world - Toyota.

Discussion

Globalisation

Globalization is the process of increasing global interdependence in all areas, such as economy, politics, culture, environment, and communication, etc. This consolidation of global relationships is at the level of individuals, companies, institutions and countries. The main causes of globalization are the technical progress, particularly in the communications and transportation technologies, as well as the political decisions on liberalization of world trade (Buckley & Ghauri 2004, pp. 81-98).

Toyota

Toyota has grown its production from 100,000 in 1947 to 9.3 million in 2008, making it the number one automobile maker in the world. The astounding growth is due largely to Toyota's manufacturing system, which contrasts sharply with the conventional mass production system of GM and Ford. A striking difference between the mass production system and Toyota's manufacturing system is the amount of time it took to set up machines for stamping out automotive body parts. For Toyota, the quicker the time, the more economical and efficient the process was, which reduced the need for specialists and eliminated worker down time by increasing their productivity. In addition, the mass production system emphasized producing a limited product line in large quantities to gain economies of scale, while Ohno Taiichi at Toyota felt such long production runs created massive quantities that had to be stored in warehouses, which would not be cost-effective. More importantly, if the machine settings were wrong, such long production runs (e.g. 500,000 door handles) would result in a significant number of defects and be costly. 

Geographies of Economies & Trading blocs

Trading blocs are groups of nations who form an economic union or customs union. For example, the European Union aims at not just a customs union but also economic union - harmonisation of taxes / monetary policy and moves towards a single currency. NAFTA is the North Atlantic Free Trade association. Trading blocs like the EU do speed up the process of globalisation; however, also brought forward multiple challenges for automotive manufacturer. The EU has expanded to over 26 countries and has a combined population of 356 million. Within the EU, there has been a marked integration of the national economies. Trade amongst members has increased. There has also been greater movement of capital and labour (Chousa & Castro 2006, pp. 83-108).

The Trade Bloc has various benefits, such as uniform export and import policies for automotives. Nevertheless, the Bloc favours domestic automotive manufacturers such as Volkswagen, BMW, and other manufacturers in EU and GM in ...