TOYOTA MINI-CASE STUDY
Question 1: why do you think Toyota waited so long to move much of its manufacturing for European sales to Europe?
Toyota delayed its decision to move manufacturing for European sales to Europe because of several factors. The market conditions prior to the falling value of the Euro indicated potential for expansion and growth even without a manufacturing facility. Despite only 24% of European sales being manufactured from its four facilities in Europe by 2001, Europe was Toyota's second largest foreign market in 2000. Hence, Toyota Motor Europe Manufacturing (TMEM) expected an expansion of its European sales from 634000 to 800000 units by 2005 (Eiteman and Stonehill, 2010). Furthermore, the early decision to manufacture the Yaris in Japan proved fatal because it diminished the sense of urgency to move manufacturing in Europe, perhaps explaining why the Valenciennes facility was merely an assembly plant.
Using the yen as its cost base made the importation of key subcomponents and complete cars for sale from Japan increasingly costly. Thus, relocating manufacturing to Europe would not have helped mitigate the exchange rate effect or prevent further losses.
Question 2: If British pound were to join the European Monetary Union would the problem be resolved? How likely do you think this is?
If the British pound had joined the European Monetary Union, the pound and the Euro would have had relatively equal values, allowing TMEM to reconsider using the yen as the cost-base and use the pound instead. Such an alteration would have made Shuhei's initial plans more effective. He had received approval to seek local sourcing and procurement alternatives for the British manufacturing operations but the falling value of the Euro against the pound reduced "the effectiveness of this solution" (Eiteman and Stonehill, 2010, p.317). Had the...