Toyota's Value Chain: Integrating Market Opportunities and Strategic Linkages

The Value Chain

• The Value Chain focuses on an organization’s activities and makes an attempt to relating them with the strengths of the firm which give it an edge over its competitors.
• The Value Chain capitalizes on the ideology that a firm is a collection of processes, machinery, technology, the environment, money, people, and equipment.
• By considering all the inputs as a meaningful system, a firm will be in a position to produce something valuable for the customers.
• A business gains competitive advantage as soon as it links its input activities and developing a systematic way of managing them as a single unit.
• This linkage is done through value chain analysis where a firm points out its primary and support activities present in its value chain (Anon., 2010).
• The primary and support activities are developed with regard to the making (creation) and delivery of a specific service or product offered by an organization.
• To implement an organization strategy, the value chain links the primary to secondary activities as a means of improving efficiency and effectiveness.
• Some of an organization’s support activities include technology development, procurement, finance, information management, human resource management, total quality management among others.
• The primary activities include streams such as marketing, sales, information technology and operations (Anon., 2010).
• The value chain supports a firm’s efforts of implementing selected strategies by considering every activity or service which is added to the service or product at every step.
• The value chain approach means that a firm is addressing the primary opportunities and constraints that it faces at different levels of its value chain.
• The structure of a firm’s value chain determines the firm’s behavioral dynamics, and these dynamics impact the performance of the value chain according to value chain competitiveness (Anon., 2010).

Value Chain Elements and Toyota

• There are five elements of the structure of a value chain, and this shall be analyzed according to Toyota.
• The first element is the end market opportunities which Toyota has at different regional levels, such as local, international, and national. Toyota’s value chain analysis would prioritize its end markets because they define the characteristics of its successful models of vehicles.
• The second element of an enabling business environment at different regional levels considers the laws, policies, regulations, public infrastructure (like roads and electricity), and international trade agreements relating to Toyota that allows its vehicles to move according to a value chain.
• The third element of vertical linkages between Toyota and other firms such as Subaru at different value chain levels are critical in moving its vehicles, fully made using quality parts from both firms, from the point of production to the end market where the benefits embedded to the vehicles are transferred to the customer (Kageyama, n.d.).
• The fourth element is the linkage between Toyota and a company like Subaru according to their departments which leads to a reduction in transaction costs, increase of the firms’ bargaining power and facilitate the creation of standards in the automobile industry.
• The fifth element is supporting markets with the existence of organizations such as Deloitte which offer the support services on financial matters (Holzer, et al., 2019), and the Kaplan & Stratton Advocates which offer the legal support services, among other organizations which offer support services (Kaplan & Stratton Advocates, 2018).

Porter’s Value Chain

In 1985, Porter developed a generic value chain which represents all the firm’s internal activities aimed at the production of services and goods (van Rensburg, 2006). It considers how a firm’s value chain is part of the value chain of a larger industry. The value chain contains primary activities which directly add value to the finished products of a firm and the support services which indirectly add value. Porter’s Value Chain analysis can be discussed according to Toyota. According to Porter’s Value Chain Model, the primary activities consist inbound logistics, outbound logistics, operations, services, and marketing and sales. The secondary services include firm infrastructure, human resource management, procurement, and technology.

The inbound logistics includes the activities of receipt of material and material input from other organizations. Toyota uses a Just-In-Time system of sourcing so as to decrease its inventory expenses. Operational activities consist of the manufacture and assembly procedures of Toyota’s vehicles. Through the company’s Toyota Production System (TPS), the company’s operational activities have become widely recognized for waste minimization in its processes (Toyota Motor Corporation, 2012). The outbound logistics activities, which are carried out through Toyota Motor Sales, include the transfer of the manufactured and operational vehicles to the wholesalers, retailers and the end customers. The marketing and sales activities for Toyota are handled by the firm’s marketing department which assigns newly manufactured models of vehicles to different target customers. The services activities of Toyota ensure that value is added to their vehicle models by taking in feedback and response from customers in the market.

For the support services, Toyota uses e-buying as one of the procurement activities. Toyota has installed the Pre-Crash Safety system into its vehicles, which works by predicting possible crashes so as to minimize risks of injuries and damages – a useful technology development. The company’s Human resource department uses the kanban system of minimizing waste to ensure its employees work according to the principles of a lean system (Toyota Motor Corporation, 2012).

Bibliography

• Anon., 2010. Chapter4: Value Chain Analysis. [Online] Available at: http://shodhganga.inflibnet.ac.in/bitstream/10603/92155/10/10_chapter%204.pdf
• Holzer, M., Glueck, J., Hoda, O. & Karew, J., 2019. Sourcing Innovation. [Online] Available at: https://www2.deloitte.com/insights/us/en/industry/automotive/merger-acquisition-deals-automotive-industry-transformation.html
• Kageyama, Y., n.d. Toyota expands partnership with Subaru parent Fuji. [Online] Available at: https://abcnews.go.com/Business/story?id=4627795&page=1
• Kaplan & Stratton Advocates, 2018. Intellectual Property. [Online] Available at: https://www.kaplanstratton.com/expertise/intellectual-property/
• Toyota Motor Corporation, 2012. Production Overview. [Online] Available at: https://www.toyota-global.com/company/history_of_toyota/75years/data/automotive_business/production/production/overview/index.html
• van Rensburg, A., 2006. The Value Chain as an Operations Reference Model. [Online] Available at: https://pdfs.semanticscholar.org/039d/a33049e04b92b566b28c4759320395ed37ae.pdf