Verical strategy to the production stages upstream of

Verical integration

The vertical integration strategy can be adopted by specialized enterprises to improve their profitability and to ensure control over certain stages of the production process.

By attracting in the enterprise that applies such a strategy to the production stages upstream of the process up to the stage of obtaining the raw materials – upstream integration – or downstream, up to the distribution phase of the products executed – downstream integration – it will benefit from the profits made at each stage of production.

Implementation of the vertical integration strategy can be achieved either at the level of the whole chain or by dominating some key points or critical stages within it.

Backward integration

Orocombre

An example of backward integration of Toyota is the Orocombre case. The Japanese car maker participates through its trading company Toyota Tsusho with 15 percent of the Australian lithium manufacturer Orocobre. With the 232 million dollar investment, Toyota apparently wants to secure above all access to lithium for the batteries of future electric cars.

Toyota Tsusho and Orocobre founded a joint venture in 2010 to extract lithium from the salt lake Salar de Olares in Argentina. The local lithium plant Olaraz went into operation in 2014. Toyota Tsusho has now established a worldwide distribution network for lithium from Olaroz.

Together with Orocobre, Toyota Tsusho will not only accelerate the expansion of the Olaroz project through Phase 2 development, but will also develop the value chain through joint investment in a lithium hydroxide project in Japan.

JTEKT

JTEKT Corporation is corporation created in January 2006 upon the merger of Koyo Seiko Co. and Toyoda Machine Works. JTEKT Corporation produces driveline components, steering systems, machine tools and bearings.

Aisin Seiki

Aisin Seiki supplies drivetrain, engine, body and chassis, and other main automotive parts for Toyota. Aisin also offers life products, such as furniture and sewing machines, energy systems, welfare products, and others. Aisin is 30% owned by the Toyota Group of companies

Denso

Denso Corporation is a global automotive components manufacturer. Despite being a part of the Toyota Group, sales to Toyota Group are for less than 50% of the total revenue. 25% of the company is owned by Toyota Motor.

 

 

Toyota Boshoku

The merger between Toyoda Boshoku Corporation, Takanichi Co. Ltd., and ARACO Corporation in 2004 led to the company Toyota Boshoku as it is today. It produces car seats and other textile materials.

Forward integration

Toyota applies somehow a forward integration in its strategy. Forword Integration in toyota had as effect the product diversification. They entered the car rental and car financing businesses, in order to increase sales. In Japan, Toyota has 5 line sales companies and it owns 320 sales shops and 2600 sales points.  

Coopetition on supply chain

Collaboration between competitors is common in car manufacturing. Toyota, Peugeot and Citroen made a collaboration to design and produce a small car. They shared their R&D and manufacturing facilities. In the end, each company marketed the new model with minor modifications and under different names. The collaboration was a success and, as a result, it is expected the collaboration to continue in developing the models of Citroen C1, Toyota Aygo and Peugeot 107 at a joint Toyota Peugeot Citroen Automobile (TPCA) facility in the Czech Republic.

Because they collaborate to create mainly the same car, but with small variations, the supply chain gains some advantages. First, the massive production makes it easier for the companies to find better prices and better suppliers. Second, the delivery to the retail points and showrooms will be cheaper, as the fill rate of the trucks will be constantly exploited at maximum, because there are more deliveries to be made.

A disadvantage of this kind of collaboration may be the similarities between the products. As a result, there are no notable differences between the 3 products. Therefore, companies must put more work into the marketing area.

Cooperation with other companies and which technologies

Suzuki

Toyota Motor Corporation and Suzuki Motor Corporation have signed a memorandum to examine the possibilities of developing a business partnership between the two companies to jointly contribute to addressing social issues and the sustainable development of a car-based society

Since October 2016, companies have exchanged information and discussed areas where they can collaborate in a manner that ensures free and fair competition, and have agreed to start concrete reviews of this partnership in areas such as environmental protection, safety, information technology and the mutual supply of products and components.
Mazda

Japanese manufacturers Toyota and Mazda chose Alabama to build their new US factory where they will invest $ 1.6 billion.

Toyota, will take 5.05% of Mazda’s shares for 50 billion yen (454 million dollars), while Mazda will take up 0.25% of Toyota’s shares, a package equal to the Mazda shares purchased by Toyota.

The partnership between Toyota and Mazda is a significant step towards the consolidation of the Japanese automotive industry, where about six different manufacturers compete for customers and capital. However, in a period of increasing development costs and technological changes, especially the emergence of electric vehicles, many small manufacturers do not have the resources to keep up with their larger rivals.

BMW

Since 2011, BMW and Toyota have collaborated and have exchanged technologies. BMW supplies diesel engines, and Toyota offers access to the hybrid technology available. Toyota’s European division will benefit from the 1.6-liter and 2.0-liter diesel engines that will be offered on the 2014 models. Meanwhile, BMW engineers will work closely with Toyota specialists to develop the hybrid technology of the BMW Group. At this point BMW has the most powerful hybrid models in the world (X6 hybrid) and Toyota has the most economical.

The two businesses may even work on a fuel cell automobile device, which incorporates a hydrogen tank and motor, by 2020. Toyota said it desired to introduce a new gas cell vehicle around 2020 using the collectively developed technology, while BMW stated that a launch date had not been decided.
The 2 corporations reiterated that they had no plans for a capital tie-up.

 

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