week 8 final project

Week 5: MNC Section V International Strategy

Q1. Which of the four international business strategies does your MNC (Toyota Manufacturing Company) use in the host country (United States)?

Out of the four international business strategies used by multinational companies, Toyota’s manufacturing company uses a transnational strategy to carry out its operations in the United States. The choice for this strategy by Toyota is to differentiate its products and operations across geographic markets to account for local differences and enhance the multidirectional flow of skills between different subsidiaries in a foreign market. Toyota has Americanized its operations in the U.S. and nearly all its operations appear as if it is an American company. Toyota positioned itself in the American market not as a foreign competitor with the primary aim of weakening the American economy and strengthening the Japanese economy, but it positioned itself as an American manufacturer with a foreign origin. To account for local differences and the multidirectional flow of skills within its subsidiaries in the United States, Toyota hired American managers in order to give itself an American image and facilitate political acceptance (Ichijo, 2005). Its strategy to present itself as an American company and to abandon its cooperative competition philosophy is the main reason behind its success in the American automobile industry.

Q2. What are the advantages/disadvantages of the chosen international strategy?

There a couple of advantages that a business gets from transnational strategy. Toyota has received political acceptance in the United States because it has presented itself as one of the American companies with a foreign origin. Therefore, the strategy allows a business to operate with less political interruption because it is perceived to contribute to the economic growth of the host country (Fan, Nyland & Zhu, 2008). In addition, by hiring locals who understand the market landscape of the host countries allows Toyota to position itself perfectly in the American automobile market giving it a greater business opportunity. Furthermore, the transitional strategy allows for better market penetration and quick customer base creation. Multinational companies that do not involve themselves locally in foreign markets where they sell their products, they are more likely to experience less positive reception (Fan, Nyland & Zhu, 2008). Furthermore, transnational strategy facilitates better cultural understanding as the company interacts with the local market audience and understands their cultural perspective. This allows the company to offer goods and services that the customers can resonate with.

A major disadvantage of transitional strategy is that it can be complex since a company has to abandon how its does business to adopt the market demands of the foreign market. For example, Toyota had to abandon its cooperative competition doctrine to reinvent itself as an American company. It can also be challenging for a multinational company to centralize all locations spread globally. Transnational strategy is not about having offices and manufacturing plants in foreign locations, but also involves their integration to core business strategy. For example, Toyota has to make sure that its American subsidiaries align with the overall core business strategy.

Q3. Why do you believe that your MNC (Toyota Manufacturing Company) chose the strategy you argue?

Toyota chose the transnational strategy to address the issue of cost pressures and pressures for local responsiveness. America has an already established automobile industry and a large percentage of its population is used to American cars. Therefore, it was hard for Toyota, a Japanese automaker to penetrate into the American market. First, the company would face significant political resistance as it would perceive as a threat to the local automobile companies. Other international strategies would not have worked well for Toyota, especially for the American market. America has a strong economy and well-established automakers focusing on the American market. Therefore, Toyota would have faced profound rejection if it entered the American market to compete with the local automakers.

Q4. Would you have chosen a different one? Why or why not?

Analyzing the for international strategies that multinational companies can use to enter foreign markets, the transnational strategy is the most effective strategy for Toyota to penetrate America. For other markets such as developing nations, Toyota can use other international strategies because of the nature of the market. However, the American automobile industry requires a different approach. America is focused on fostering its domestic economy and thus takes priority in protecting its local industry before allowing foreign companies to enter the market. If Toyota used a different strategy rather than transnational, it would be perceived that it is coming to compete with local companies, weaken the American economy and strengthen that of Japan. Therefore, it would have received significant political and economic resistance.

Q5. Part B Q.5 International Business Strategy

Based on the matrix given, the main reason for MCN’S-TOYOTA used the transnational strategy to enter the U.S. automobile market was based on high pressure for local responsiveness. Toyota had to use an international strategy that increases political acceptance in the U.S. and also resonated with consumer taste and preferences by understanding the market by hiring American managers who understand the automobile landscape.

References

Ichijo, K. (2005). Rapid Penetration into the Emerging Markets–The Toyota Way.  Critical Eye, 62-62.

Fan, D., Nyland, C., & Zhu, C. J. (2008). Strategic implications of global integration and local responsiveness for Chinese multinationals: An area for future study.  Management Research News.