Contents 1. INTRODUCTION................................................................. ............................................................ 2 2. BRIEF TOYOTA B ACKGROUND ...................................................................... ............................ 2 3. PESTEL Analysis of TOYOTA .................... ................................................................................ ..... 4 3.1.

PORTERS FIVE FORCES ANALYSIS OF TOYATA ............................. ................................ 6 3.2. SWOT ANALYSIS .......................... ................................................................................ ......... 9 4. VALUE CHAIN ANALYSIS ............................................ .............................................................. 10 5. COST EFFICI ENCY ........................................................................... ............................................ 11 6. STRATEGIC CAPABILITY ........ ................................................................................ ................... 12 6.1. RESOURCES .......................................... ................................................................................ 12 6.1.1. TANGIBLE RESOUCES ................................................... .............................................. 12 6.1.2. INTANGIBLE RESOURCES .. ................................................................................ ........ 13 6.1.3. HUMAN RESOURCES ............................................. ...................................................... 13 6.2. THRESHOLD RESOURC ES FOR TOYOTA .................................................................. ....... 13 7. COMPETENCIES ..................................................... ...................................................................... 14 7.1. T HRESHOLD COMPETENCIES........................................................... ................................. 14 7.2. UNIQUE RESOUCES AND CORE COMPETENCIES ........................................................... 15 7.3. CORE COMPETE NCY ............................................................................ ............................... 17 8. Critical Success Factor .................. ................................................................................ .................. 19 9. Critical Success Factors of Toyota .................... ............................................................................... 20 10. Diversification.......................................................... ....................................................................... 24 11. C onclusions ..................................................................... ................................................................ 28 12. Referenc es.............................................................................. ......................................................... 29

1.INTRODUCTION In this fiercely aggressive business world, the goal of most firms is to establi sh distinctive or unique capabilities to gain a competitive advantage in the mar ketplace through utilising the most of their core competencies. Competencies ref er to the fundamental knowledge owned by the firm (knowledge, know-how, experien ce, innovation and unique information), and to be distinctive they are not confi ned to functional domains but cut across the firm and its organisational boundar ies. Today, business enterprises in developed countries operate in a more compli cated, and more regulated, environment. The strategic task, then, is to create a distinctive way ahead, using whatever core competencies and resources at its di sposal, against the background and influence of the environment. Through these d istinctive capabilities the organisation seeks sustainable competitive advantage . Competition in many domestic and international markets appears to be entering a new phase, in which product quality and performance are becoming more importan t to customers than price. In such markets, the effective management of the new product development process is the essence of competitive advantage. Due to such changes, a review of the organisations strategic capabilities is a must if they are to keep up with the demands of the changing times. This paper analyses the s trategic capabilities of Toyota Company in face of the ever-stiffening competiti on in the automotive industry, as a potential tool to further strengthen Toyotas position in the automobile market. 2.BRIEF TOYOTA BACKGROUND Toyota Motor Corporation is a famous Japanese multinational corporation, and is considered the worlds second largest automaker of automobiles, trucks, buses, rob ots, and providing financial services. Its founder is Kiichiro Toyoda, born in 1 894, and the son of Sakichi Toyoda, who became popular as the inventor of the au tomatic loom. Kiichiro inherited the spirit of research and creation from his fa ther, and devoted his entire life to the manufacture of cars. After many years o f hard work, Kiichiro finally succeeded in his completion of the A1 prototype ve hicle in 1935, which marked the beginning of the history of the Toyota Motor Cor poration. The first Type A Engine produced in 1934 was used in the first Model A 1 passenger car in May 1935 and the G1 truck in August 1935, and led to the prod uction of the Model AA passenger car in 1936. In addition to being famous with i ts cars, it still participates in the textile

business and makes automatic looms that are now fully computerised, and electric sewing machines that are available in different parts of the world. It has seve ral factories around the world, which serve to manufacture and assemble vehicles for local markets. The corporations factories are located in countries such as t he United States, Australia, Canada, Poland, France, Czech Republic, United King dom, Turkey, South Africa, Brazil, Argentina, Venezuela, Mexico, Japan, Indonesi a, Pakistan, India, Mexico, Malaysia, Thailand, China, Vietnam, and the Philippi nes. Despite the many locations of its factories, its headquarters is located in Toyota, Aichi, Japan. It invests a great deal of time and effort in its researc h into cleaner-burning vehicles, such as promoting a Hybrid Synergy Drive and ru nning a Hydrogen fuel cell in its vehicles. It has significant market shares in developed countries, such as the United States, Europe, Africa and Australia, an d has significant markets in South East Asian countries. Its brands include the Scion, its division in the United States, Guam and Puerto Rico, and the Lexus, w hich is Toyotas luxury vehicle brand. Aside from producing cars and other types o f automobiles, such as SUVs and coasters, Toyota also, participate in rallying o r racing. The companys presence in Motorsport can be traced to the early 1970s, w hen OveAndersson, a Swedish driver, drove for Toyota during the RAC Rally in Gre at Britain, and in succeeding years, Toyota Team Europe was formed. Up to the pr esent, Toyota cars are still being used in a variety of racing events in differe nt countries around the world. These events include the CART in Vancouver, the L e Mans, the Indy Racing League, the NASCAR, and the Toyota F1 Series. .

3.PESTEL Analysis of TOYOTA Currently, Toyota faces a need for accelerated investment, in order to deploy th e new technologies, for pressing geo-political, economic, environmental and soci etal reasons. Political Observers will see a continuing progression in the ruino us steps which have forced the industry into a socio-politico-economic corner. W hether this is related to flat demand or to the companys creation of an ever-wide r range of vehicles that many buyers seem to care little about, there is a probl em. The company is likewise linked closely to the policies of governments, the e arnings of banks. Little wonder then that so many emerging countries are keen to develop an auto sector or that there is such a political pressure to protect it in the developed countries. Toyota Company is currently dominated by little mor e than a handful of firms, each wielding colossal financial, emotional and polit ical power. The companys approach to dealing with political institutions has not always been brilliant. It tends to be good on technical issues, although it has not always fully presented the longer-term options, in order to make the choices and their implications clear. EconomicFor much of the developed world, and incr easingly for the developing world, Toyota Company is a pillar company in auto mo bile business, a flag of economic progress. Without Toyota Company in automotive industry, it is impossible to develop an efficient steel business, a plastic in dustry or a glass sector other central foundations of economic progress. The Toy ota Company has been a core company, a unique economic phenomenon, which has dom inated the twentieth century. However, the automobile industry including the Toy ota Company now suffers from a series of structural schisms and has become riddl ed with contradictions and economic discontinuities. For the capital markets and the finance sector, it has lost a lot of its significance, as a result of ever declining profits and stagnant sales. The proliferation of products means that i t has become hopelessly wasteful of economic resources. While all these and more sound like a very gloomy assessment of such a vast economic phenomenon, the ind ustry is not in the end despondent. A different future is possible for the indus try, a highly desirable one.

Social As part of the development in automotive industry, the Toyota Company act ually affects the society as a whole. It employs millions of people directly, te ns of millions indirectly. Its products have transformed society, bringing undre amed-of levels of mobility, changing the ways people live and work. The social v alue of the additional mobility that this industry brings involves the value of the people being able to commute over longer distances easily, among many others . For most of its existence the Toyota Company has been a model of social discip line and control and it is not just that the auto sector offers a pillar of someth ing else. There are, on the other hand, particular social issues to address in m any developing countries, often those that are the result of an undertone of rel igious faith. Toyota company has the role to play in helping develop the mobilit y of such countries and it can be achieved at an acceptable social cost of the c ountry is prepared to learn the necessary lessons from those who have traveled t his route before it, and to make the necessary investments. Technological The To yota Company works on a scale so awesome and has an influence so vast that it is often difficult to see. The level and diversity of technologies that it must de ploy are increasing, which imposes both new investment burdens and new uncertain ties and risks. Roughly a million new cars and trucks are built around the world each week they are easily the most complex products of their kind to be mass-pr oduced in such volumes. The industry uses manufacturing technology that is the c utting edge of science. But still, the potential for developing coordination ski lls, intellectual capabilities and emotional sensitivities through electronic te chnologies remain far from fully exploited. There are numerous additional near-t erm technological opportunities to adapt the company to changing energy availabi lity. The possibilities suggest that automotive technology is unexpectedly robus t and provides a powerful defence against energy starvation even if the real pri ce of oil climbs steadily during the next couple of decades. Legal Toyota Compan y is subject to numerous technical directives and regulations, as well as legisl ation of a more legal nature. The legislation covers areas such as competition l aw, intellectual property law, consumer protection and taxation, and emissions ( air quality and fuels). When the auto parts industry reached full development, a ccelerated technological efforts were made to create a web of local suppliers th at would make it possible to meet the growing legal requirements for the nationa l integration of production.

Environmental Other than the vehicles themselves, and the roads and fuel needed to run them; the business is intricately tied to the manufacture of a wide range of components and the extraction of precious raw materials. Indirectly, it brin gs people road congestion, too many fatalities and a wave of other environmental troubles. The effect to the Toyota Company is that they needed to establish R&D centres to take advantage of research infrastructure and human capital, so that they can develop vehicle products locally to satisfy the requirements of the en vironmental and safety regulations more effectively. 3.1 PORTER S FIVE FORCES ANALYSIS OF TOYATA Michel Porter, an authority on competitive strategy, contends that a corporation is most concerned with intensify of competition within its industry. The level of this intensity is determined by basic competitive forces. "The collective str ength of these forces", he contends, "determines the ultimate profit potential i n the industry, where profit potential in the industry, where profit potential i s measured in terms of long run return on investment capital". In carefully scan ning its industry, the corporation must assess the importance to its success of each of the 5 forces, those are as follows: threat of new entrants, rivalry amon g existing firms, and threat of substitute products or services, bargaining powe r of buyers, bargaining power of suppliers. The strong each of these forces, the more limited companies are in their ability to raise prices and earn greater pr ofits. A high force can be regarded as a threat because it is likely to reduce p rofits. A low force in contrast, can be viewed as an opportunity because it may allow the company to earn profits. In the short run, these forces act as constra ints as a company's activities. In the long

run, however, it may be possible for a company, through its choice of strategy, to change the strength of one or more of the forces to companys advantage. Threat of New Entrants New entrants to an industry typically bring to its new capacity , a desire to gain market share and substantial resources. They are, therefore, threats to an established corporation. The threat of entry depends on the presen ce of entry barriers and the reaction that can be expected from existing competi tors. Global entrants may pose a threat to Toyota's market share, especially fro m other Asia, Europe & U.S.A. car market leaders. Toyota as global car manufactu ring company started its production of vehicle outside Japan in 1959. Toyota has established its own car manufacturing plant in different countries in Europe an d successfully operating its business activities. Ford, BMW & Jaguar already has secured market position in the British market environment, therefore their thre at is made all the greater as they now have knowledge of the British market syst em and are building their customer and loyalty base. On the other hand Toyota is trying to adopt the market share in Europe. Toyota as a multinational enterpris e has already launched its product to the online market and is currently mature stage of online product cycle. However Toyota's online venture is in mature stag e besides this they are always aware of what the potential threats to its busine ss are. More established online car manufacturing company, who have already iden tified and possibly combated the risks to their market share, may gain a competi tive edge here, like rival Ford. Threat of substitute products or services Subst itute products are those products that appear to be different but can satisfy th e same need as another product. Substitute products on the market could pose a t hreat to Toyota's if customers are price sensitive. Ford, BMW, Vauxhall, Mitsubi shi etc all goods at affordable prices and target the lower end of the quality c onscious customers. If Toyota's car prices are competitive as a result of the qu ality of the vehicle or service being acceptable inferior and the production cos t are low, this will ultimately challenge Toyota's cost leadership pricing strat egy. Bargainingpower of buyers: Buyers affect an industry through their ability to force down prices, bargain for higher quality or more services and play compe titors against each other. The customer is ultimately king when they are car com panies' consumers. They can exert more power

over Toyota's online than offline as the technology involved offers them the fre edom of choice not just of product but also of vehicle companies as it is conven ient to switch. Bargaining power of end users is not necessarily exerted on line regarding price sensitively of goods. The sensitively surrounds the pricing str ategy used by Toyota's as cost leadership and differentiation. Bargainingpower o f suppliers Suppliers can affect an industry through their ability to raise pric es or reduce the quality of purchased goods and services. Toyota's look to their internal means and market share to determine whether they have power over the s upplier and exert to gain their competitive edge. Suppliers are forced into comp rise, lowering their already competitive prices. Toyota also looks to improve th eir own efficiencies in choosing their suppliers. This strategy is entitled, tog ether faster, simpler. A program to improve the quality levels of service from t he supplier the force is to then pass this on to the customer. As the industry i s subject to inflation, interest rate increases, exchange rate fluctuations and labor laws, Toyota as a car manufacturing company aware of their low cost strate gy and look to competitive pricing to begin with the supplier, so that the inter nal competing demands for finances are prioritized. Rivalryamongexistingfirms In most industries, corporations are mutually dependent. A competitive move by one firm can be expected to have a noticeable effect on its competitors and thus ma y cause relation or counter efforts. For example: car manufacturing industries d ominated by Toyota, Honda, BMW, Ford, and jaguar increased all level of competit ive activity to such an extent that any price reduction or new product introduct ion is now quickly followed by similar moves from other car manufacturing compan ies. Porter contends, it is important to look beyond one's immediate competitors , as there are other determinants of profitability. Specifically there might be competition from substitute products or services. Buyers may perceive these alte rnatives as substitutes; even though they are part of a different industry.

3.2 SWOT ANALYSIS StrengthsOne of Toyotas most potent strength is that they are one of the worlds be st known brands. As they have been in the business for several years now, the ex perience that they have in manufacturing cannot be overemphasised. They already have built a solid reputation for being a dependable automaker. Additionally, th ey have the strength of being diverse with respect to their product lines, havin g affiliated automotive brands including Aston Martin, Ford, Jaguar, Land Rover, Lincoln, Mazda, Mercury and Volvo, which allows clients to choose from a variet y of car models to fit their lifestyle. They are also known to be supportive of societal causes, in particular the fight for breast cancer and support after the September 11 attacks in the U.S. They pioneered the moving assembly line, which became their mechanism for making vehicles more efficiently and faster, therefo re more affordable. Traditionally Toyota's international operations were a sourc e of that allowed the company to maintain its position as the second largest aut o maker in the world and to respond to GM's competitive moves. WeaknessesThe com pany's organisational structure has become inefficient as the company became mor e complex. This hindered Toyota's ability to manage its international network of subsidiaries, branches, and companies. The weakness of its organisational strat egy reflects to the speculations over the likely performance of Toyota in the fu ture, as the companys financing section is swamped down by hefty outstanding debt s. The firm is not in risk of bankruptcy, but the Toyota management is in a tigh t spot, and has to be extremely vigilant to not make it any tighter. There is al so a notable management issues within the company. Finally, because of the incre asing competition, the company has witnessed a decline in overall sales, a weakn ess on their part as they have somehow failed to overcome the challenges that ad ditional competition brings. Opportunities Toyota Motors Company has the distinct opportunity to have cleaner engine emissions, in alignment with their corporate responsibility to become en vironment-friendly. Through working with environmental groups to help clean the environment, they also have the opportunity to further enhance their image to th e general public. Since they have already started investing in Solar Power, the end is a more viable prospect. Toyota could further widen the scope of their opp ortunities through specialising and rationalising its worldwide operations on a

regional basis and to develop a network organisation in which its subsidiaries w ould increase their transnational linkages. Besides Toyota learning about the po ssibilities of producing quality automotive products in their areas of operation at a comparative cost advantage, other relevant factors could bring about new o pportunities for exporting vehicles: the parent company's efficiency-seeking str ategy; its competitive disadvantage in the small-car segment of the market and t he competitors' moves in this market-segment; and the new more flexible regulati ons in the respective countries in which they have manufacturing plants. Further , with Toyotas existing capability to innovate on automobiles, they have the oppo rtunity to penetrate a still larger scope of market. Threats. As with any firm i n the automotive industry, Toyota faces very tight competitive rivalry in the au to market. Competition is escalating, with the threat of new entrants continuous ly flowing into the market from South Korea, China and new plants in Eastern Eur ope. Toyota is also exposed to the risk of movement in the price of raw material s such as steel, glass, rubber and fuel. The key economies in the US, Europe and the Pacific are also experiencing slow downs lately. These economic factors are latent threats for the company under analysis. Further, substitute products suc h as Natural gas, Electricity, Ethanol, Vegetable oil, Sunlight, Water poses a d istinct threat to the sustainability of company sales. While Toyota strategies r esponded to the local opportunities and competitive advantages that were built o ver time in different national markets, the competitiveness of foreign operation s was also dependent upon the company's management capabilities and its overall position in the industry worldwide. If such factors were to perform under expect ation, their competitiveness in the international scene would suffer seriously. 4.VALUE CHAIN ANALYSIS Value chain is a tool to identify and to analyse the origins of competitive adva ntages and the activities of the business could be grouped into two: primary and support activities. What activities a business undertakes is linked to achievin g its competitive advantage, and Toyota seemed to be best prepared to implement a global strategy, because of the superior competitive advantages of its foreign operations compared with GM and Chrysler. Paradoxically, Toyota's rivals showed a greater disposition to use resources from outside of the United States. It wa s not

until 1994 that Toyota focused on developing a global strategy as a means to enh ance its competitive position in the industry. Before then, Toyota largely focus ed on building a strategy that would allow the company to recover its competitiv e position in its own home market, which was essential for survival. An analysis of the structural and institutional factors that shaped Toyota's strategic resp onse both to the new industry rules and the short-term challenges posed by other industry competitors explains this paradox. A number of broad sustainability ch allenges set the context for all of the value chain activities. These issues app ly across the value chain: (1) Population growth; (2) Urbanisation; (3) Child mo rtality; (4) Maternal health; (5) Infectious diseases; (6) Biodiversity; (7) Los s of ecosystem services; (8) Poverty; (9) Education; and (10) Gender Equality. A ll these issues are attended to by the Toyota Motor Company in alignment with th eir efforts to maintain sustainable competitive advantage through preserving the good public image that their clients expect from them. 5.COST EFFICIENCY An important strategic capability in an organization is to ensure attention is p aid to achieving and continually improving cost efficiency. This will involve bo th resources and competencies to manage costs. Customers can benefit from cost e fficiency in terms of lower prices or more product features for the same price. For Toyota, Lean production changed product development and engineering techniqu es of manufacturing. One of those techniques is Die-change technique which gives cost efficiency. In which dies can be changed frequently using rollers. Dies we re changed by workers themselves, instead of experts, which reduces time and oth er related costs. This results the following. a. More profits if small batches a re manufactured b. Large Inventory holding cost got reduced c. Stamping mistakes were easily identified before the car is assembled d. Quality of car increased By minimizing the wastes the cost will automatically reduces. So the techniques like kanban systems, quality at the source, just in time, uniform plant loading and by Focused factory networks Toyota reduced its cost. By Energy conversion it reproduced energy required for production. By this also it saved cost.

6.STRATEGIC CAPABILITY Strategic capability is the adequacy and sustainability of the resources and com petencies of an organization for it to survive and prosper. It is underpinned by the resources and competencies of an organization. Strategy is concerned with m atching a firms resources and competencies to the opportunities that arise in the external environment. Increasing emphasis on the role of resources and capabili ties as the basis for strategy is the result of two factors. First, as firms indu stry environments have become more unstable, so internal resources and capabilit ies rather than external market focus has been viewed as a securer base for form ulating strategy. Second, it has become increasingly apparent that competitive a dvantage rather than industry attractiveness is the primary source of superior p rofitability. 6.1RESOURCES Resources are normally three types. 6.1.1 TANGIBLE RESOUCES: These are physical assets of an organization such as pl ant, equipment, land, and mineral resources. And financial assets like cash, securiti es, and borrowing capacity. For Toyota: financial resources: Cash: 4,871.8 billi on Yen Plant:Toyota Motor Engineering & Manufacturing (TEMA), headquartered in E rlanger, Kentucky, is responsible for Toyota's engineering design and developmen t, R&D, and manufacturing activities in the U.S., Mexico and Canada. In 13 manuf acturing locations across

North America, team members are producing 11 vehicles including the Avalon, Camr y, Corolla, Matrix, RAV4, Sienna, Sequoia, Tacoma, Tundra, Venza and the Lexus R X 350. 6.1.2 INTANGIBLE RESOURCES: These are non physical assets such as information, r eputation, and knowledge. Intellectual capital is an important aspect of the intangible res ources of the organization. This includes brands, business systems, and customer database. In a knowledge based economy intellectual capital is a major asset. F or Toyota: y y y y Information about the customer requirements. Trademark Good b rand name. Culture of Toyota: 1) Selecting employees for Life 2) People are the heart and soul of the Toyota Way 3) Stopping the line is everyones responsibility 4) Hiring Right person, in the right amount, in the right form at the right tim e 5) Funnel Model of Recruitment Many prospects lead to few hires 6) Training pe ople like Surgeons 6.1.3 HUMAN RESOURCES: It includes demographic profile of people in an organizat ion. The intangible asset of their skills and knowledge is also important. In knowledge b ased economies people are most valuable asset. For Toyota: some information abou t employee 6.2 THRESHOLD RESOURCES FOR TOYOTA y y y y y y Plant to produce automobiles. Capital required for production, distr ibution and promotional activities. Human resource needed for organization. Good brand name or good will in public. Manufacturing equipment. Raw material requir ed for production.

y Inputs like power, water. 7 COMPETENCIES Resources are important but how the organization utilized its resources is much more important. There would be no point in having equipment or valuable knowledg e or valuable brand if they were not used effectively. The efficiency and effect iveness of physical, financial and human resources in an organization depends on not just their existence but how they are managed. Competencies are the activit ies and processes through which an organization deploys its resources effectivel y. An organizational capability is a firms capacity to deploy resources for a desi red end result. Threshold capabilities are those capabilities for the organizati on to be able to compete in a given market. If an organization does not posses t hese resources it will be unable to meet customers minimum requirements and there fore be unable to continue to exist. For Toyota, 7.1 THRESHOLD COMPETENCIES y y Demand forecasting for future production. Manufacturing process: by using th e efficient manufacturing process only they will convert raw material into finis hed product in a better way. y y y y Give training to employee. By this they wil l perform better. Quality management: by this the organizations can give good qu ality products. Trading off time, cost and quality. Analyzing external market co nditions. Identifying these threshold resources and competencies are very important for an organization. If it does not pay attention to them they can not survive for a l ong time. They do not have capability to be competitive.

7.2 UNIQUE RESOUCES AND CORE COMPETENCIES Threshold resources and competencies are important but they do not create compet itive advantage. Competitive advantage is created and sustained if the organizat ion has unique capabilities and resources that competitors cannot imitate. Uniqu e resources are those resources that critically underpin competitive advantage a nd that others cannot easily imitate. For Toyota: y Plants that Operate in Harmo ny with the Natural Environment: For an automaker, making cars, i.e., manufacturing is the most fundamental opera tion. Toyotas Sustainable Plant Concept attempts to incorporate the concept of su stainability into manufacturing. Toward its goal of achieving a sustainable plan t based on the concept of "a plant that fully utilizes natural resources, while operating in harmony with the natural environment," Toyota established the follo wing three basic initiatives Energy reduction: Development and introduction of low CO2-emitting production te chnologies and daily kaizen (improvement) activities. By the end of FY2006, the Tsutsumi Plant had reduced its CO2 emissions by 50% or more from the 1990 level by taking such actions as installing an innovative gas engine cogeneration syste m. The Tsutsumi Plant plans to further conserve energy by eliminating energy was te. At the Takaoka Plant, Toyota is introducing low CO2 production technologies to reduce the number of drying ovens needed in its painting process. The technol ogies implemented on the new No.1 Painting Line, which began operation in 2007, and to be implemented on the new No. 2 Painting Line, are together expected to r educe the Plant's annual CO2 emissions by approximately 35%. Energy conversion: Utilization of renewable energy (solar, etc.). In the area of utilizing renewabl e energy, the Tsutsumi Plant installed a polysilicon-type photovoltaic power gen eration system with a rated output of approximately 2,000 kW. This system is one of the largest being used by an automobile production plant in the world and is

capable of supplying approximately half the electricity needed in the assembly p rocess. Additionally, part of the generated electricity is stored in batteries a nd used for powering the streetlights surrounding the Plant. 7.3Local community involvement and ecological preservation Tree planting at production plants: "Green for Tomorrow". In line with these thr ee basic initiatives, the Tsutsumi Plant begantaking actions toward the goal of achieving a sustainable plant. The goal of the sustainable plant concept is the creation of "a plant that fully utilizes natural resources, while operating in h armony with the natural environment." Toyota hopes that employees will look at t he efforts and feel proud to work at the Tsutsumi Plant. A sustainable plant can only be achieved when the plants facilities, organizational structures, and the awareness of the people who work there all become aligned in working toward this goal. y Toyota knows how to utilize workers very efficiently. Workers are the part of th e company. So they will work with more interest and enthusiasm. Workers are grou ped into teams with team leader. Team was asked to suggest ways to improve the q uality. i.e.,Kaizen, the technique of continuous improvement. Problems were rectif ied immediately by stopping the line unlike in Mass Production where the line wa s stopped after the completion of work. Workers learnt to rectify the mistakes. Slowly the line was never stopped and there were no errors in the system. y Supply Chain Modifications: Suppliers were organized into functional tiers. Diff erent responsibilities were assigned to firms in each tier. For Example, First t ier suppliers were responsible for working as an integral part of the product de velopment team. Second Tier of suppliers are formed from the first tier supplier s. They were assigned the job of fabricating individuals parts. Removed Vertical Integration among suppliers which lead to large bureaucracy. Suppliers were tota lly involved in Toyotas Product Development. y Toyota Technical Center (TTC), a division of TEMA, is located in Ann Arbor, Mich igan. Recent expansion in York Township has increased investment by $187 million . This new location is home to Toyota's first full safety test facility outside Japan.

8. CORE COMPETENCY These are the activities and processes through which resources are deployed in s uch a way as to achieve competitive advantage in ways that others can not imitat e. For Toyota: Toyota Production System or Lean Manufacturing System In Toyota Production System, it mainly focuses on the following. 1. Focuses expl icitly on perfection 2. Costs decline continuously 3. Focuses on Zero Defects 4. Focuses on Zero inventories 5. Enormous Product Variety

Here for Toyota Production System, the main strategy to achieve the above is to minimize waste (Muda), unevenness (Mura) and over burden (Muri). There are 7 types of wastes. Those are Waste from Overproduction, Waste of Waiti ng Time,Transportation Waste,Inventory Waste, Processing Waste, Waste of Motion and waste of correction. Toyota minimized these wastes by 1. Focused factory net works: These are small specialized plants that limit the range of products produ ced (sometimes only one type of product for an entire facility).They can do a be tter job because repetition and concentration in one area allows its work force and managers to become effective and experienced in the task required for succes s. By this technique Toyota maximized its output by using minimum inputs. It sav ed the time and it overcomes the problems of overburden and over production. Bec ause all plants have idea about what other plants are producing and how much qua ntity. according to other requirements. So they will produce

2. Kanban production control systems: Uses simple, visual signals to control the movement of materials between work centers. It identifies the part number and c ontainer capacity, along with other information, and is used to provide an easil y understood, visual signal that a specific activity is required. By this techni que Toyota minimized the material waste. It provides the raw material what exact ly the process wants. 3. Group technology: similar parts are arranged into families, and processes to make parts that are arranged in specialized work cell. It simplifies schedules, reduce transportation and ease supervision. By this technique Toyota reduced the waste of motions. So it saved more time. 4. Quality at the source: i) Do it right the first time ii) When something goes wrong, stop the process im mediately and address iii) Workers are trained and empowered to control their ow n process 5. JIT production: this system can be described as a system that produces and de livers finished goods just in time to be sold, subassemblies just in time to be assembled into finished goods, and purchased materials just in time to be transf ormed into fabricated parts. Just in time is a pull manufacturing system where p roduction starts only on demand. a. Produce what is needed when it is needed b. Intended for repetitive manufacturing c. Low inventory, ordered only as needed 9. Critical Success Factor Critical success factors (CSFs) have been used significantly to present or ident ify a few key factors that organizations should focus on to be successful. As a definition, critical success factors refer to "the limited number of areas in wh ich satisfactory results will ensure successful competitive performance for the individual, department, organization. Identifying CSFs is

important as it allows firms to focus their efforts on building their capabiliti es to meet the CSFs, or even allow firms to decide if they have the capability t o build the requirements necessary to meet critical success factors (CSFs). MAIN ASPECTS OF CSFs CSFs are tailored to a firm's or managers particular situation a s different situations (e.g. industry, division, individual) lead to different c ritical success factors. Rockart and Bullen presented five key sources of CSFs: the industry, competitive strategy and industry position, environmental factors, temporal factors, and managerial position (if considered from an individual's p oint of view). Critical Success Factors of Toyota Toyota is clearly a dominate leader in automobile manufacturing today. The princ iples employed at every level of the company have certainly led to a standard of quality that no one in the automotive industry can argue with. What these princ iples are and how they are implemented within the Toyota Corporation can certain ly help the automakers of the United States and indeed the world achieves the sa me success. When these 14 principles are listed and compared with some of the st rategies that United States automakers have employed, it becomes clear why Toyot a has succeeded as it has. Even though there are many critical success factors f or Toyota these 14 principles were considered as most important CSFs for growth of Toyota. The 14 Principles of the Toyota Way The Toyota Way has been called "a system designed to provide the tools for people to continually improve their wo rk" The 14 principles of The Toyota Way are organized in four sections: 1. LongTerm Philosophy 2. The Right Process Will Produce the Right Results 3. Add Value to the Organization by Developing Your People 4. Continuously Solving Root Prob lems Drives Organizational Learning

The principles are set out and briefly described below: Section I Long-Term Phil osophy Principle 1 y Base your management decisions on a long-term philosophy, e ven at the expense of short-term financial goals. y People need purpose to find motivation and establish goals. Section II the Right Process Will Produce the Right Results Principle 2 y y Crea te a continuous process flow to bring problems to the surface. Work processes ar e redesigned to eliminate waste (muda) through the process of continuous improve ment kaizen. The eight types of muda are: 1) Overproduction 2) Waiting (time on hand) 3) Unnecessary transport or conveyance 4) Overprocessing or incorrect proc essing 5) Excess inventory 6) Unnecessary movement 7) Defects 8) Unused employee creativity Principle 3 Use pulls" systems to avoid overproduction. A method wher e a process signals its predecessor that more material is needed. The pull syste m produces only the required material after the subsequent operation signals a n eed for it. This process is necessary to reduce overproduction. Principle 4Level out the workload (heijunka). (Work like the tortoise, not the hare). This helps achieve the goal of minimizing waste (muda), not overburdening people or the eq uipment (muri), and not creating uneven production levels (mura).

Principle 5 Build a culture of stopping to fix problems, to get quality right th e first time. Quality takes precedence (Jidoka). Any employee in the Toyota Prod uction System has the authority to stop the process to signal a quality issue. P rinciple 6 Standardized tasks and processes are the foundation for continuous im provement and employee empowerment. Although Toyota has a bureaucratic system, t he way that it is implemented allows for continuous improvement (kaizen) from th e people affected by that system. It empowers the employee to aid in the growth and improvement of the company. Principle 7 Use visual control so no problems ar e hidden. Included in this principle is the 5S Program - steps that are used to make all work spaces efficient and productive, help people share work stations, reduce time looking for needed tools and improve the work environment. 1) Sort: Sort out unneeded items 2) Straighten: Have a place for everything 3) Shine: Kee p the area clean 4) Standardize: Create rules and standard operating procedures 5) Sustain: Maintain the system and continue to improve it Principle 8 Use only reliable, thoroughly tested technology that serves your people and processes. Te chnology is pulled by manufacturing, not pushed to manufacturing. Section III Ad d Value to the Organization by Developing Your People Principle 9 Grow leaders w ho thoroughly understand the work, live the philosophy, and teach it to others. Without constant attention, the principles will fade. The principles have to be ingrained, it must

be the way one thinks. Employees must be educated and trained: they have to main tain a learning organization. Principle 10 Develop exceptional people and teams who follow your company's philosophy. Teams should consist of 4-5 people and num erous management tiers. Success is based on the team, not the individual. Princi ple 11 Respect your extended network of partners and suppliers by challenging th em and helping them improve. Toyota treats suppliers much like they treat their employees, challenging them to do better and helping them to achieve it. Toyota provides cross functional teams to help suppliers discover and fix problems so t hat they can become a stronger, better supplier. Section IV: Continuously Solvin g Root Problems Drives Organizational Learning Principle 12 Go and see for yours elf to thoroughly understand the situation (GenchiGenbutsu). Toyota managers are expected to "go-and-see" operations. Without experiencing the situation firstha nd, managers will not have an understanding of how it can be improved. Furthermo re, managers use Tadashi Yamashima's (President, Toyota Technical Center (TCC)) ten management principles as a guideline: 1) Always keep the final target in min d. 2) Clearly assign tasks to yourself and others. 3) Think and speak on verifie d, proven information and data. 4) Take full advantage of the wisdom and experie nces of others to send, gather or discuss information. 5) Share information with others in a timely fashion. 6) Always report, inform and consult in a timely ma nner. 7) Analyze and understand shortcomings in your capabilities in a measurabl e way. 8) Relentlessly strive to conduct kaizen activities.

9) Think "outside the box," or beyond common sense and standard rules. 10) Alway s be mindful of protecting your safety and health. Principle 13 Make decisions s lowly by consensus, thoroughly considering all options; implement decisions rapi dly (nemawashi). The following are decision parameters: 1) Find what is really g oing on (go-and-see) to test 2) Determine the underlying cause 3) Consider a bro ad range of alternatives 4) Build consensus on the resolution 5) Use efficient c ommunication tools Principle 14 Become a learning organization through relentles s reflection (hansei) and continuous improvement (kaizen). The process of becomi ng a learning organization involves criticizing every aspect of what one does. T he general problem solving technique to determine the root cause of a problem in cludes: 1) Initial problem perception 2) Clarify the problem 3) Locate area/poin t of cause 4) Investigate root cause (5 whys) 5) Countermeasure 6) Evaluate 7) S tandardize 10.Diversification is a form of corporate strategy for a company. It seeks to in crease profitability through greater sales volume obtained from new products and new ma rkets. Diversification can occur either at the business unit level or at the cor porate level. At the business unit level, it is most likely to expand into a new segment of an industry which the business is already in. At the corporate level , it is generallyand it is also very interesting entering a promising business o utside of the scope of the existing business unit.

Ansoff pointed out that a diversification strategy stands apart from the other t hree strategies. The first three strategies are usually pursued with the same te chnical, financial, and merchandising resources used for the original product li ne, whereas diversification usually requires a company to acquire new skills, ne w techniques and new facilities. The strategies of diversification can include i nternal development of new products or markets, acquisition of a firm, alliance with a complementary company, licensing of new technologies, and distributing or importing a products line manufactured by another firm. Generally, the final st rategy involves a combination of these options. This combination is determined i n function of available opportunities and consistency with the objectives and th e resources of the company. There are three types of diversification: Concentric Diversification, Horizontal Diversification, Conglomerate Diversification.

Diversification is the riskiest of the four strategies presented in the Ansoff m atrix and requires the most careful investigation. A firm should choose this opt ion only when the current product or current market orientation does not offer f urther opportunities for growth. In order to measure the chances of success, dif ferent tests can be done. y The attractiveness test: the industry that has been chosen has to be either attr active or capable of being made attractive. y y The cost-of-entry test: the cost of entry must not capitalize all future profits . The better-off test: the new unit must either gain competitive advantage from its link with the corporation or vice versa. Toyotas Diversity Strategy: Toyota is committed to the success of its 21st Centur y Diversity Strategy. The Toyota Diversity Strategy outlines the processes and p rograms will use them to achieve their diversity goals. At the core of their pla n are elements from which they will build a sustainable diversity platform: They aligned the diversity commitment to the tenets of the Toyota Way, respect for pe ople and continuous improvement. They secured the support of their senior managemen t. They established real goals ones that are actionable, ones that stretch them beyond the status quo, and, most importantly, ones that they can achieve now. Th ey have made themselves accountable and have established criteria by which they will measure change and will be judged. They have committed to a training and ed ucation program to acquire new skills and gain new understanding. They created a diversity management structure with the authority and conviction to push the or ganization toward its vision. They have committed to an ongoing communication st rategy and will communicate their commitment and progress in diversity to all wh o have a stake in the future of Toyota. Toyota is committed to developing a culture that views diversity as a pathway to a better Toyota. This commitment demands that they support the human resources aspect of the diversity

strategy. They are embarking on a five-prong plan to ensure that their diversity initiatives succeed throughout the organization. First, the senior management o f Toyota North American companies will communicate the strategy to every manager and associate. There will be a system-wide rollout, both orally and in writing. Second, the implementation of the diversity strategy will be driven by real ben chmarks and real timetables, which will be set forth in a written document to be provided to all relevant managers. Third, they will dedicate a lead manager in each area to ensure full compliance at all levels of the company. These lead managers will report directly to a seni or level executive on a quarterly basis.In addition, the organization will provi de incentives to managers (reflected in rewards, bonuses and positive performanc e evaluations) to ensure their full compliance with the diversity plan and their full energies to achieving the specific goals of the plan and meeting its timet ables. Fourth, they will have in place a planned deviation system, which will address s ituations where managers fail to achieve their established goals and timetables or commit less than their full efforts to achieving them. Finally, they will continue to work with outside organizations to ensure that th e strategy is working and remains state of the art. They believe that their dive rsity strategy is the first step in becoming the company strives to be.

11.Conclusions In 1982, it was observed that the automotive industry has been depended upon by other industrial sectors to provide them with means with which to optimise their investment capital because of the transfer of its technology, which basically m eans that the manufacturing and materials handling processes that revolve around mass auto production will be, in the future, far removed from their original us e through consulting engineering firms that undertake to design and equip factor ies. The tendency for car manufacturers, then, will be to focus on competition t hat would become more rigorous, giving special attention to profit-gaining activ ities and concentrating also on arranging for financial, marketing and industria l cooperation among car makers. Toyota, though it has started as a small company with lower price but maintained quality from the beginning. It was the first co mpany in the world which introduced lean manufacturing technology, and has uniqu e resources and core competencies. The 14 management principles which are the cr itical success factors and unique factors followed by Toyota made it successful company and others viewed these principles in such a way if any company followed these principles they will definitely get success. By following these unique re sources and competencies and diversification in different fields Toyota still re mained one of the successful companies in this competitive world.

12. References BOOKS y Gerry Johnson, Kevan Scholes, Richard Whittington, Exploring Corporate Strtegy , Seventh Edition, Pearson Education, U.K. y Jeffrey K. Liker, The Toyota Way, T wentieth Edition, Tata McGraw-Hill Publishing Company Ltd, New Delhi. y y The To yota Kata, Tata McGraw-Hill Publishing Company ltd New Delhi. Liker, J; Meier, D . (2005). The Toyota Way Fieldbook: A Practical Guide for Implementing Toyota's 4Ps. McGraw-Hill. ISBN 0071448934. y Liker, J (2004). The Toyota Way: 14 Managem ent Principles from the World's Greatest Manufacturer. Websites y Hino, Satoshi (20B05). Inside the Mind of Toyota: Management Principles for En during Growth. University Park, IL: Productivity Press. ISBN 978-1-56327-300-1. http://www.productivitypress.com/productdetails.cfm?SKU=3004. y Liker, Jeffrey ( 2004). The 14 Principles Of The Toyota Way: An Executive Summary of the Culture Behind TPS. http://www.si.umich.edu/ICOS/Liker04.pdf. y y y www.toyota.com www.g oogle.com www.googlebooks.com