CASE STUDY – Toyota EuropeWhy do you think Toyota ...
CASE STUDY – Toyota Europe
Why do you think Toyota had waited so long to move much of
its manufacturing for European sales to Europe?
automobile manufacturing industry is very complex and requires high capital or
intensive capital investment. The aim of the companies in the industry just
like any other business is to increase profits and reduce the cost of
operation. Immediate opening of Toyota’s operations in Europe meant that the
company would have to incur costs associated with acquiring new manufacturing
facilities, employees and much more at once. Therefore, this means that the
viable choice for the company was to grow into the process rather than an
immediate decision. Additionally, Toyota like many other manufacturers wished
to continue enjoying the benefits of scope and scale in manufacturing for as
long as they could. As a result, the company resisted the movement of
manufacturing into the regional and local markets (Toyota’s
European Exposure 8).
If the British pound were to join the European Monetary Union
would the problem be resolved? How likely do you think this is?
prides itself to be the beneficiary of being the only major European country
that is not euro based. There joining the European Monetary Union would
eliminate the currency risk between Europe and UK but will not eliminate that
between Japan and Europe. It would also remove the deviations in currency value
between the euro and the UK pound which would not be of much influence.
Therefore, this means that the change would not be of so much help to the
Toyota company predicament (Toyota’s European
If you were Mr. Shuhei, how would you categorize your
problems and solutions? What was a short-term problem? What was a long-term
to what I have summed up from the case study, the problems in Toyota seem to be
exchange rate induced pricing problems. The fall in the value of the euro
against the Japanese yen between 1999 and early 2000 was the most significant
and affected the company significantly. Most manufacturing operations had moved
to North America while the company still tried to continue the services in
Europe through exporting from Japan. The continuing strategy was introducing a
European-targeted product which was the Yaris Toyota model. It was however not
a good strategy putting into consideration the directions of movements in
exchange rates that took place during the time. It was advisable to continue
absorbing yen-based cost increases, through lowering margins on European sales
and assuming the market would not bear a going through the exchange rate
changes to solve the short-term problem. In the long run, a solution would be
to move the company’s operations the European Monetary Union ("Toyota's European Operating Exposure").
What measures would you recommend Toyota Europe take to
resolve the continuing operating losses?
the many options that the Toyota company had was to continue incurring the
operating losses and putting market share objects above profit making by
keeping the current pricing and operating policies. As a result, the euro would
regain its weakness against the Japanese yen. The continued operations of
Toyota in the UK as the UK stayed out of the European Monetary Union would
continue being a part of the problems the company was experiencing; therefore,
it would mean that the company withdraws its UK operations or the UK joins in
the European Monetary Union. The later had been in the considerations by the
country. The other solution would be to move more of the company’s cost
structure and manufacturing operations within the EMU just like other
multinational corporations. The activities would take place in any location in
Europe that is not the UK (Toyota’s European Exposure
1st ed. Pearson Prentice Hall., 2009. Web. 9 Nov. 2016.
European Operating Exposure". Chegg.com. N.p., 2016. Web. 9 Nov.