Select and analyze a specific transnational corporation, including its global operations and political activity. What strategies does it pursue? For example, does it outsource? Is it vertically integrated, or does it rely on a network of suppliers? A transnational corporation (TNC) is a commercial enterprise which controls large facilities, does business in more than one country, and there isn’t one particular country that is considered its national home. A big advantage of being a transnational company is that they are able to keep a larger amount of responsiveness to the local markets where they keep facilities. There are many big transnational corporations and Toyota Motor Corporation is one of them. They produce a full range of model offerings from mini vehicles to large trucks. In 1957 when the first prototypes of the crowns were exported to the United States Toyota had expanded the sales of the automobile across the entire globe. For more than fifty years Toyota vehicles have been sold in more than 170 countries and regions in throughout the world. They continue to develop their exports, and the localization of their bases. Their policy is “producing vehicles where the demand exists.” They have 51 bases in 26 different countries and regions. There is …show more content…
also design and R & D bases in nine locations overseas, showing that “from development and design to production, as well as sales and service, Toyota has now achieved consistent globalization and localization.” Along with the obstacles that this globalization of production succeeds in dealing with, the most important is quality assurance which requires that “no matter where Toyota vehicles are made, they must have the same high level of quality." There is no label on Toyota vehicles that says “Made in The USA” or “Made in Japan”, but instead they opt for one label for all which is “Made by TOYOTA.” This means that there is a need to spread Toyota’s manufacturing philosophy the “Toyota Way” to all of their overseas bases. It is important to reduce the support that comes from Japan to let each of the overseas locations become self-sufficient. As an example, the Toyota plant in Texas which recently began production made greatest use of the know-how from the Toyota plant in Kentucky which has been cultivated over the past 20 years. Toyota believes that by educating people that is the way to achieve quality assurance and to spread the “Toyota Way.” In 2003 they established the Global Production Center (GPC) within the Motomahi Plant in Toyota City. In 2006 regional GPC’s were established by Toyota in the United States, the United Kingdom, and Thailand in order to carry out corresponding activities in the North American, European, and Asia-Pacific regions.
The GPC’s would provide consistent personal training. It also teaches plant personnel how to prepare for the production of redesigned and different vehicle models. Traditionally, when production switched to a new model, a number of employees from Japan would be dispatched to overseas bases. Now, members from all of the overseas affiliates gather at the GPC to refine the design drawings and confirm feasibility of implementation.
Toyota pursues outsourcing as their corporation’s strategy. There are a lot of companies that go with outsourcing because of cost reductions and staffing flexibility, and an outcome of increased business agility, but not all companies succeed. The mechanics of outsourcing are usually much more complicated than just moving jobs or production lines from one place to the other and many companies fail when attempting it.
Whatever a corporation’s reason may be to outsource any type of operation, there are as many possible dangers as bountiful rewards on the long road to success. Recent research suggests that all but the best laid schemes will often go wrong. Lyda Bigelow, who is from the University of Utah’s David Eccles School of Business, has led a team that found out that companies are more likely to fail when they outsource components critical to their competitive abilities. “This is a critical strategic choice that firms make,” Bigelow said. “Companies need to retain adequate control over specialized components that differentiate their products or have unique interdependencies, or they are more likely to fail to survive.”
It has been suggested that outsourcing can reduce labor costs between 25 and 50 percent. That allows companies that usually have slim profit margins to drastically increase the bottom line and keep shareholders happy. But it is easy to forget the underlying costs of the process. Bigelow’s research shows that the failure rate for companies that choose to outsource production is increased by up to 70 percent, depending on the level of risk the company is willing to assume with technological changes, type of product being outsourced and its original market share.
According to Bigelow, in the current environment, extreme competition is forcing firms to shift their focus to the reduction of costs without compromising value to customers. But not everyone is successful. She cites the recent case of Toyota as an example, which in its haste to overtake GM as the biggest auto-manufacturer in the world outsourced a number of components in their vehicle’s electrical systems and accelerators. Toyota’s motivation was rapid expansion, and in order to achieve that they had to cut cost, but the cut corners were just unplanned side effects.
Toyota parts today come from as far as Japan, Thailand the US, and others. The firm had developed an excellent reputation based on their strong and reliable links to their suppliers, but in their expansion bid, old partners were traded for cheaper manufacturers. Since October 2009, the company has recalled about 8.5 million vehicles because of factory defects, mostly floor mat interference with the pedals, and a sticky accelerator. The recalled accelerator pedals were all produced by a factory based in Elkhart, Indiana, in the US; none of the pedals manufactured by the original supplier Denso Corp in Japan have shown any problems. It was also speculated that a design shift in favor of an electronic throttle has been problematic. The company also has announced it will be recalling as many as 412,000 additional cars for issues with the steering.
Toyota’s former president and the current vice-chairman Katsuaki Watanabe has claimed that “the fact that Toyota is growing suddenly shouldn’t be used as an excuse.” But the company’s own research suggests that outsourcing at a time in which it sought to grow fast might have led to the company’s later issues because they had to rely on suppliers who often did not have sufficient incentives to maintain and improve quality.
“In this situation, it’s no surprise when things break down,” Bigelow said. “In 2004 and 2005, Toyota’s premier goal was to overtake GM. This desire for rapid expansion, combined with an increased level of complexity in its auto designs, left Toyota with few supply options, as generating an in-house infrastructure to accommodate the increased production would’ve taken years.”
Toyota’s outsourcing strategy broke one of Bigelow’s key rules; outsourcing parts of the operation that were essential for its overall success. In the long run the company might have reached its goal of exceeding GM as the world’s largest car manufacturer, but the cost of the recalls is estimated at over $2 billion and the dent to its once flawless reputation for great quality automobiles.
Outsourcing has become a political nightmare in the U.
S., where the Obama camp has latched on to Mitt Romney’s past role as chief executive at Bain Capital, a company charged with outsourcing US manufacturing jobs to China. Romney in turn accuses the incumbent of depleting American jobs himself. Because it was election year, every American company who partakes in outsourcing was pushed under the microscope, and Apple was no exception; it has been on the receiving end on some extremely negative press. Criticism mostly revolves around American jobs having been lost when faced with the low wages paid to the staff at the Foxconn factory in Southern China where the iPhone is
assembled.
Transnational Corporations exert a great deal of power in the globalized world economy. Many corporations are richer and more powerful than the states that seek to regulate them. Through mergers and acquisitions corporations have been growing very rapidly and some of the largest TNCs now have annual profits exceeding the GDPs of many low and medium income countries.
Works Cited: http://www.businessdictionary.com/definition/transnational-company.html http://www.economist.com/blogs/graphicdetail/2012/07/focus-1 http://www.toyota-global.com/company/vision_philosophy/globalizing_and_localizing_manufacturing/ http://www.businessdestinations.com/work/opinion/a-model-strategy/