Introduction
With competition in the business world today, the quality of decision made by managers to a large extent determines the success their business attains. The major difference between effective and unreliable managers is on the quality and timelessness of their decision. Making a decision whether it’s a minor or major decision is a process that should be understood by management. There are different methods/approach of making decision; each situation and organization use a different method to get a solution to its needs.
Toyota is an international leading automotive company which has growth through thick and thin to assume the world largest automotive producer. It assumed this position in 2008 after it over took General motors. This tremendous growth is attributed to strategic decisions that the company management has made. In specific the company uses scientific method of decision making (Provis, 2010). This paper analysis international market entry decisions made by the company and the process Toyota management used to come with the choice of country to invest in.
Brief history of Toyota
Toyota was founded in the year 1937, by Kiichiro Toyoda. As per reports released in December 2009, the company had total 71,116 employees distributed in all its branches. Despite the world financial crisis, the company was able to record an increase in sales and made a profit of US$4.2 billion. The company has an effective supply chain management and embraces technology in all its processes. For example it has started making electric motor vehicles and bio-diesel motor vehicles (Toyota Motor Company Official website, 2010).
The problem of analysis
International trade has been facilitated by globalization and companies are targeting markets away from their country of incorporation. However the decision to venture into one country and not in another determines the success of such a company in the new market.
The following is the process that Toyota Company uses to come up with the choice of country to invest in;
Problem analysis
The initial stage in making an international investment decision is to analyze the investment problem at hand. In this case, the company would like to diversify in other countries. It should evaluate how the current market is operating and come up with an effective foreign market entry strategy. The following are the things that Toyota Company considers before they choose a country A and not country B,
- What is the market intended to meet?
- Does the company have capacity to supply quality goods to the country?
- What is the brand name that the company is having at the moment? Will the brand name favor the company in the foreign country?
- Why does the company aim at diversifying its processes?
The initial stage is more on understanding the company’s strengths and weaknesses for better decision making (Ştefan, 2009).
Collecting data
In this stage the company management devices a team that is supposed to take data regarding the countries and products that it should invest in. This is to ensure that it comes up with alternative countries which have potential. The team may use data available in the company’s business intelligence systems or can borrow data from other sources like external data companies. The internet is crucial for this as it offers an overview of the market situation of the countries under consideration.
The teams come up with a number of countries that should be considered and an in depth analysis of the country follows. They may visit these countries and collect relevant data. The major thing that they focus in is to look at the special attribute that certain countries have that may be of benefit to the company. It may range from growing economy, high population growth rate with increased living conditions to the strong of Toyota’s brand name in the country.
Choosing the best alternative
After data has been collected, the next stage is to choose the best alternative for the venture. This takes a brain storming of the countries and weighing options. The kinds of leadership models and market entry strategies that will be required in the country are interpolated to ensure that the project will not be a failure. Cost benefit analysis, sales forecasts, operation costs forecasts are done on various countries (Higgs, Smith, & Mechling, 2010).
Targets country analysis
After the company has realized that it has some potential and can manage an international market, the next step is to make a choice on the country to venture into. This takes the form of an external audit of the market. The choice is made from a list of probable countries then zeroing in one country. The following are the factors that it looks into;
- What is the current market share of the company’s products in the country of choice
- Does the company have a strong brand name in the country of choice? At this level, it is important to analyze the changes in sales with the country, the products that the country seems to buy from Toyota
- Considering the legal situation in the country; this is where the managers consider taxation policies, foreign companies legal standing on area like property acquisition
- The resources available in the country; these resources may be in terms of labor availability, material availability, transport and communication networks.
- The economic growth rate of the country is considered.
- Competition that prevails in the country of venture is an important thing that the company considers. In most cases, it sends a spy, who undertakes an analysis of the market situation and the position that the company assumes in that country. The products that the people tend to use from the company are also captured. For example in most African Nations, Toyota Pickup and Lories are more common that they are in United States markets. Understanding such parameters assists the company choose its market segment more easily.
This is taking a PESTLE analysis of the country. This stage is crucial since it ensure that all data that might affect the company in the foreign market are undertaken. Those factors that offer opportunities are known and threats recognized for mitigation purposes (Anon, 2008).
Conclusion
Toyota is a world leading motor vehicle manufacturing company. It assumed this place in 2008 after it surpassed General Motor in terms of sales and production. The major driving force that has leaded it to the good performance is the quality of management decision. International markets accounts for a great potion of the company sales.
To venture in these markets, the company analyses its internal strengths and weaknesses and takes a deep analysis of the opportunities and threats offered by the foreign country it intends to invest in. This is a scientific decision making mechanism.
References
Anon.(2008). Decision Making. (p. 1). Great Neck Publishing. Retrieved from Research Starters – Business database.
Higgs, R., Smith, M., & Mechling, G. (2010). making better business decisions. Supervision, 71(2), 12. Retrieved from MasterFILE Premier database.
Provis, C. (2010). Virtuous Decision Making for Business Ethics. Journal of Business Ethics, 913-16. doi:10.1007/s10551-010-0564-4.
Ştefan, M. (2009). IMPROVING THE QUALITY OF THE DECISION MAKING BY USING BUSINESS INTELLIGENCE SOLUTIONS. Annals of the University of Oradea, Economic Science Series, 18(4), 996-1000. Retrieved from Business Source Complete database.
Toyota Motor Company Official website.(2010). Web.