Toyota in China: Selling at 'China Price'


Code : COM0082

Year :

Industry : Automobiles

Region : China

Teaching Note:Not Available

Structured Assignment :Not Available

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Introduction:Toyota Motor Corporation (Toyota), the world's biggest automaker by market value had always strived to be a cost and quality leader. Since its inception, the automaker has followed 'The Toyota Way' and introduced a bundle of manufacturing philosophies together called the 'Toyota Production System'(TPS) that focused on elimination of waste, shortening of lead time - resulting in cost reduction at every stage in the manufacturing process. In 2000, Toyota brought into effect a new cost reduction programme, Construction of Cost Competitiveness for the 21st century, also known as CCC21. This programaimed at 30% cut in the procurement costs over a three-year period. With TPS as the foundation of the cost reduction programme, Toyota was able to reduce the number of auto components used in its cars. By early 2005, Toyota was successful in saving costs to the tune of $10 billion.

In 2005, Toyota's newinitiative for cost-cutting came from China. Toyota has 'China price' as its new benchmark, to price its auto components. This price benchmark is estimated to pressurise Toyota's traditional suppliers to reduce the costs. As Toyota has to deal with surging steel prices and the strong yen value that decreases Toyota's non-Japan profits, it remains to be seen whether its cost-cutting strategies would be as successful as those cost reduction initiatives which Toyota implemented previously.

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