Toyota South Africa Motors Corporate Social Responsibilities Policies and Practices in South Africa

Toyota South Africa Motors Corporate Social Responsibilities Policies and Practices in South Africa

Toyota South Africa Motors’ Introduction & Background Information

Toyota South Africa Motors (TSAM) is based in South Africa and is a subsidiary of Toyota Motor Corporation (TMC). TMC is an automobile company that designs, manufactures, assembles, and sells motor vehicles. TSAM is South Africa’s umbrella for Toyota’s motor dealers. It was established in 1961 and deals with three main vehicle brands: Lexus, Hino, and Toyota. These vehicles, commercial and passenger, meet the needs of clients within and beyond South Africa (TSAM, 2018/2019). Of the three brands, the Hilux has been South Africans’ favorite vehicle for the last four decades.

TSAM operates under Toyota Motor Corporation’s guidelines. Thus, it shares a mission and vision. Toyota’s main reason for existence is to enhance safe and responsible mobility around the globe as an industry leader. To achieve its vision, the company intends to ensure quality, innovate consistently, and respect the natural environment, and offer services and products beyond the clients’ expectations joyfully. Furthermore, the corporation intends to tap into the diverse talent and passionate individuals who hold optimistic beliefs about the future to tackle challenges.

According to (Venter, 2011), Toyota’s popularity in South Africa has been reducing following its inability to produce low-cost vehicles. The current competitors include Volkswagen and Hyundai. The company will face numerous challenges while trying to retain its leadership position in the market.  Finally, TSAM’s response to the COVID-19 pandemic is impressive, which is part of its CSR activities. Andrew Kirby, the CEO, pledged R15 million, which should support the preventive activities and tools. The CSR project was dubbed Toyota Reach (Toyota, 2020).

Toyota Motor Corporation Background Information

Toyota Motor Corporation (TMC) has been a market leader in the automotive industry. However, the external environment has been varied, creating a situation characterized by different economic, geographical, political, and cultural factors. The increasing cost of fuel compelled most consumers to seek fuel-efficient vehicles that consume less fuel. This meant that the organization had lower sales of its high-fuel-consumption vehicles. The shift was also motivated by the increasing environmental concerns that are associated with the use of motor vehicles. This led to the manufacture of fuel-efficient hybrid vehicles, increasing competition. The drop in fuel prices occurred during the US recession in 2008 and affected the world’s economy. Revenue in the automotive industry was reduced by 15.4 percent in the following year due to the economic recession that mainly affected Europe (Nkomo, n.d). This meant that consumers had less money, making it impossible to purchase vehicles, which were already consuming high amounts of fuel.

The company’s production capability has been affected by natural disasters such as earthquakes and floods. Toyota Motor Corporation is based in Japan. The country has experienced a series of natural disasters owing to its high earthquake risk. The Tohoku earthquake in 2011 was among the worst occurrences, leading to the temporary cessation of production activities. Floods that occurred in Thailand in the same year affected the production of at least 150,000 vehicles (Nkomo, n.d). These calamities affect the company’s output and profits as well. However, it is not within the company’s control. Regardless, Japan’s political environment is peaceful, thus enabling the automotive industry players to carry out their activities fearlessly.

Reasons for Toyota Motor Corporation’s entry into South Africa

Various factors motivated Toyota Motor Corporation’s entry into South Africa. First, the increasing demand for vehicles in the region created an opportunity for growth. The income of developing countries has increased in the recent past. In the case of South Africa, TSAM records a high demand for affordable used cars. Through Automark, TSAM can deliver used vehicles to South African clients at affordable rates. Besides, the South African market also demands new vehicles from TSAM. In 2019, the company targeted to sell at least 130,000 new vehicles domestically (TSAM, 2018/2019). This target was higher than the previous year’s target. This implies that the domestic market purchases such numbers annually.

Secondly, entry into South Africa provides an opportunity for low costs of labor. This reduces the cost of production and leads to higher margins than production in already developed countries. Thus, the opportunity to produce the same quality of vehicles at a cheaper cost and sell them to the ready market enticed the international player to venture into South Africa. Also, it is possible to produce in South Africa and export to other countries. Furthermore, productivity and production capacity increase as disruptions that arise from natural disasters are absent. The presence of international automobile companies in developing countries created an opportunity for financial institutions to provide motor vehicle loan products (Nkomo, n.d). As a result, more individuals can purchase the used or new vehicles from the company, increasing its profits significantly. Therefore, growth and cost reduction opportunities motivated TMC’s entry into South Africa. These opportunities have materialized successfully as TSAM remains a renowned Toyota dealer in the country.

Challenges facing the Toyota Motor Corporation in South Africa

The promise of low manufacturing costs in South Africa and other developing countries does not eliminate the cost challenge. The automobile industry in South Africa continues to battle costs from other quarters, which affect productivity. South African port charges are the highest compared to Argentina, Brazil, and China. The cost that TSAM has to incur to move a 40-foot container is $821, which is ten times the amount that Chinese port authorities charge. Besides, the cost of purchasing a new vehicle is relatively high, as the average citizen requires at least 160 weeks to make the purchase. In the USA, 26 weeks are enough to make the purchase (Ambe, 2014).

TSAM understood the cost challenges associated with operations in South Africa. While costs related to cargo clearing are beyond the control of the company, it maneuvered around providing affordable vehicles for South Africans. Through Automark, TSAM was able to sell used cars that met the quality standards of its mother company. These vehicles were more affordable, and demand was high as financing institutions provided loan products to enable such purchases. The product’s demand is visible as TSAM tries to balance the ratio of sold to new vehicles. This implies that the locals purchase more used vehicles. The opportunity to use trade-in offers motivated clients to purchase. For the company, unnecessary costs associated with shipping and actual assembly are eliminated (TSAM, 2018/2019). Other cost factors are entirely dependent on government policies, making it difficult to work around them.

Secondly, the lack of ready skills in South Africa to match the quality of cars that Toyota produces posed a challenge (Ambe, 2014). Moving into the developing nation, Toyota experienced a skills gap. While most assembling employees may have worked in different car dealers, the critical skills related to high-quality vehicles are lacking. Therefore, the company had to create training programs and invite the dealers’ employees regularly. To meet the client’s expectations, TSAM, through the Toyota Touch program, conducts training for both employees and staff members from the dealers (TSAM, 2018/2019). The company continues to hire individuals with the right attitude. This approach enables the manufacturer to instill the desired skills among all staff, to support production and quality, and to improve the entire customer experience.

Lessons Learned and Conclusion

Based on this analysis, TMC’s entry into South Africa was motivated by the increasing demand for vehicles. As the financial capability of the developing countries improved, the individuals had more disposable income. However, new cars are expensive. Therefore, TSAM was able to provide an alternative and ensure sales kept moving. Automark makes it possible for clients to purchase used vehicles. This allows the citizens to take advantage of the loan products that banks offer. Some of the challenges that the company face include cost and lack of a skilled workforce. The sale of used vehicles solved some of the issues related to the cost of shipping, assembly, and port clearance. TSAM set up a training program to instill the necessary skills and knowledge in employees with the right attitude.

References

Ambe, I. M. (2014). Difficulty To Overcome Supply Chain Challenges Faced By Vehicle Manufacturers In South Africa. The Journal of Applied Business Research, 30(5), 1539-1550.

Nkomo, T. (n.d). Analysis of Toyota Motor Corporation. Retrieved from https://scholar.harvard.edu/files/tnkomo/files/analysis_of_toyota.pdf

Toyota. (2020, August). Toyota South Africa Motors Pledges Multi-Million Rand Support To Kzn Health. Retrieved from https://toyotaconnect.co.za/toyota-south-africa-motors-pledges-multi-million-rand-support-to-kzn-health/

TSAM. (2018/2019). Sustainability Report. Retrieved from https://live-media.toy-backend.co.za/pdfs/reports/SustainabilityReport.pdf

Venter, I. (2011, May). Toyota hopes to retain SA crown amid rising rivalry, recalls and a colossal natural disaster. Creamer Media.

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Toyota South Africa Motors

Topic selected (select from the list below)
Name of company (or Trade Partnership) to be analyzed
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Students shall select one topic from the following:

Cultural differences between the US and another developing country and their impacts/implications on business strategy for a global company
Policies and practices of Corporate Social Responsibilities of a multinational company in a developing country
Benefits and Challenges of a selected global entry strategy of a global business into a developing country
Impact/influence of the legal and political environment of a developing country on the global company doing business in that country
Policies and Practices of Government in a Developing Country in Dealing with corruptions and Ethics in Global Business
Opportunities and Challenges of a Regional Economic Integration or Trade Partnership from the perspective of a developing country