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Best in France Project – Toyota Case Study

Best in France Project – Toyota Case Study. Best in France Project – Toyota Case Study. By HEC MBA Sept’04 participants : - Eric JUILLET de SAINT LAGER - Saurabh KUMAR - Steven OPIO - Kihyeon PAK With the special participation of : - Henri MAS, former Valenciennes Sous-Préfet

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Best in France Project – Toyota Case Study

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  1. Best in France Project – Toyota Case Study TOYOTA Case - HEC MBA Group ES2A

  2. Best in France Project – Toyota Case Study By HEC MBA Sept’04 participants : - Eric JUILLET de SAINT LAGER - Saurabh KUMAR - Steven OPIO - Kihyeon PAK With the special participation of : - Henri MAS, former Valenciennes Sous-Préfet - Yves LOUZE, current Director of Valenciennes Chamber of Commerce and Industry - Jean-Luc LEGAREZ, current Vice Director of Valenciennes Métropole Community - Vincent BOUVIER, current Valenciennes Sous-Préfet - Christiane HENNEAUX, current Project Assessor at Valenciennes Sous-Préfecture - Didier LEROY, current Senior Vice President of Toyota Motor Manufacturing France - Nicolas FAYOL, current External Relation Manager at Toyota Motor Manufacturing France - Shingo KATO, current Toyota France Secretary-General - Laurent FISCUS, former Sous-Préfet in Mission fully dedicated to the Toyota project TOYOTA Case - HEC MBA Group ES2A

  3. Table of Contents • Key features on the case ……………….….………..……….…. p. 4 • Toyota and the European market ............................................ p. 6 • Objectives of the players ……………………...…………………. p. 8 3.1. for Toyota .…………………..……………………..……….……… p. 9 3.2. for France .…………………..……………………..………….…… p.10 • Decisional criteria ……………………………………………..….. p.11 4.1 in favor of the French candidacy ………………...……………..… p.12 4.2 not in favor of the French candidacy …..………………………… p.14 4.3 first list and short list decision matrix ……..…………………...… p.16 • Actions developed by the players ………………………..…..… p.18 5.1 by France, prior to and during the project ….............................. p.19 5.2 by Toyota ………………………………..…………………..….….. p.21 • Key factors of success in this project ………………….....……. p.22 • Sustainable development post-project ………………..…..…… p.24 • Appendix & exhibits ………………………………………..…….. p.26 TOYOTA Case - HEC MBA Group ES2A

  4. Part 1 Key features on the case TOYOTA Case - HEC MBA Group ES2A

  5. 1. The 5 key ideas of the Toyota Onnaing project  Clear initiative taken by one French region  Strong commitment of Toyota on the long run  Two players both took a huge risk in the project  Fundamentally different cultures understood each other  Human dimension continuously present along the project TOYOTA Case - HEC MBA Group ES2A

  6. Part 2 Toyota and the European market TOYOTA Case - HEC MBA Group ES2A

  7. 2. Toyota strategic & tactical approach  Boost car sales outside Japan (appendix #15)  Europe becomes the most profitable market after the US  Design and produce the cars close to the final market  Small cars is the biggest segment in Western Europe  Opportunity in 1999 with suppression of quota on imported cars TOYOTA Case - HEC MBA Group ES2A

  8. Part 3 Objectives for the two players TOYOTA Case - HEC MBA Group ES2A

  9. 3.1 Toyota objectives • A new and modern plant in Europe located as close as possible to customers and suppliers (appendix #12)  Develop the leanest auto plant ever with the obsession of cost reduction and management efficiency (appendix #14)  Operate the plant within 2 years as opposed to usually 3 • Achieve an ambitious level of productivity mainly by optimizing the management of Human Capital • Establish a strong brand image as a local & European producer TOYOTA Case - HEC MBA Group ES2A

  10. 3.2 France objectives  Attract investment to generate business for local supply companies (appendix #0)  Create jobs to fight regional unemployment  Indirectly accelerate the modernization of the French automotive industry  Promote French technological notoriety abroad  Boost exports to bolster the country’s balance-of-payments TOYOTA Case - HEC MBA Group ES2A

  11. Part 4 Decisional criteria for Toyota TOYOTA Case - HEC MBA Group ES2A

  12. 4.1 Criteria in favour of the French candidacy 4.1.1 Economical factors  Proximity with Western European customers and auto part suppliers  Location in the Euro zone (money, customs and economy influence)  Employment reservoir providing both available and skilled industrial work-force  Modern infrastructure with roads, rail-ways, fluvial network, airports and maritime harbours (appendix #13)  Country offering a strong potential for the growth of commercial market share TOYOTA Case - HEC MBA Group ES2A

  13. 4.1 Criteria in favour of the French candidacy 4.1.2 Human factors  International prestigiousimage of France (arts, luxury, culture)  Proximity with Brussels European HQ (makes communication easier and accelerates decisions)  Good quality of life offered to the Japanese and their families  Capacity to take into account the protection of the environment  France is perceived as a “complicated” country which provides a challenge to overcome TOYOTA Case - HEC MBA Group ES2A

  14. 4.2 Criteria not in favour of the French candidacy 4.2.1 Economical factors  Non competitive labour cost (appendix #1&2)  Non productive 35 hours law (appendix #20)  Expensive fiscal burden (appendix #3&4)  Constraining labour regulation  Restricted subsidies for foreign investment TOYOTA Case - HEC MBA Group ES2A

  15. 4.2 Criteria not in favour of the French candidacy 4.2.2 Human factors  Non English speaking country (appendix #16)  Latin culture never experienced before by Toyota  Very complex French administration organization (appendix #7&8)  Bad image of French professionalism abroad  Individualistic relationship to labour values (appendix #5&6)  Poor infrastructure in the French province for foreign expatriates TOYOTA Case - HEC MBA Group ES2A

  16. 4.3 Location decisional matrix 4.3.1 First short list of 40 possible sites TOYOTA Case - HEC MBA Group ES2A

  17. 4.3 Location decisional matrix 4.3.2 Second short list of 4 possible sites TOYOTA Case - HEC MBA Group ES2A

  18. Part 5 Actions developed by the two players TOYOTA Case - HEC MBA Group ES2A

  19. 5.1 Actions developed by France 5.1.1 Before the project • Prospect investment projects very early (appendix #9&10) • Adopt basic psychological behaviour during the negotiation • Seek the national optimum before the regional optimum • Build trust to show long term commitment TOYOTA Case - HEC MBA Group ES2A

  20. 5.1 Actions developed by France 5.1.2 During the project • Organize the French administrations in team • Appoint a sous-préfet in mission fully dedicated to the project • Set administrative procedures in project management • Adapt the type of communication to Toyota corporate structure • Prove the 35 hours law is no constraint for a new company • Assist the investor in recruiting & training its work-force • Create adequate infrastructures for expatriates TOYOTA Case - HEC MBA Group ES2A

  21. 5.2 Actions developed by Toyota  Develop a new format of plant enabling the most cost-effective management of human capital  Evaluate each options including all human factors & audit them concretely on the floor  Understand the French regulation and abide by it (appendix #19)  Identify corporate values and share them with local employees  Establish the right management system before recruiting the right talents accordingly (appendix #17) TOYOTA Case - HEC MBA Group ES2A

  22. Part 6 Key factors of success TOYOTA Case - HEC MBA Group ES2A

  23. 6. What led the project to a genuine success  Each player sought to identify the expectations and constraints of the other player  French administrations involvement in speeding up usual heavy procedures (appendix #11)  Respect and compatibility between cultures (appendix #21&22)  Mutual trust in human relationships  Transparency in the working relationships TOYOTA Case - HEC MBA Group ES2A

  24. Part 7 Sustainable development TOYOTA Case - HEC MBA Group ES2A

  25. 7. Further investments after the 1st project  Car manufacturing industry is both labour and capital intensive, so any capital investment is made for the long run (appendix #18)  Reach of full plant capacity  Increase of production capacity • Continuous process improvements • Vertical integration of strategic components  Increase the network of suppliers around the plant  Launch of new product lines … ? TOYOTA Case - HEC MBA Group ES2A

  26. Part 8 Appendix & exhibits TOYOTA Case - HEC MBA Group ES2A

  27. Direct foreign investment abroad in M€Direct foreign investment in France in M€ #0 – Annual French foreign investments TOYOTA Case - HEC MBA Group ES2A

  28. #1 – Hourly labour cost across Europe in 2004 TOYOTA Case - HEC MBA Group ES2A

  29. #2 – Social charges across Europe in 2004 TOYOTA Case - HEC MBA Group ES2A

  30. #3 – Total fiscal weight across Europe in 1998 TOYOTA Case - HEC MBA Group ES2A

  31. #4 – Value added tax across Europe in 1998 TOYOTA Case - HEC MBA Group ES2A

  32. #5 – Unionization rate across Europe in 1995 TOYOTA Case - HEC MBA Group ES2A

  33. Evolution of the French unionization rate in % of the active population #6 – French unionization rate TOYOTA Case - HEC MBA Group ES2A

  34. #7 – French administration structure TOYOTA Case - HEC MBA Group ES2A

  35. #8 – French administration involved with Toyota TOYOTA Case - HEC MBA Group ES2A

  36. #9 – Plant construction schedule early prospecting by Chamber of Commerce and Industry 1st meeting with Toyota at Valenciennes 2nd meeting with Toyota at the Paris Motor Show Toyota launch an official European tender for their project beginning of the site selection process  approach public announcement of the selected site site officially handed out  study plant construction labour training  selection machinery implementation pre-production  preparation launch in production  construction & training 1996 1997 1998 1999 2000 2001 TOYOTA Case - HEC MBA Group ES2A

  37. #10 – Plant production schedule TOYOTA Case - HEC MBA Group ES2A

  38. #11 – Zoom on the “preparation” phase  In only 9 months instead of usually 2 years France had to :  gain 82 votes in the Community of Municipalities to agree on the project  acquire 250 hectares of terrain with uncertain legal dispossession procedures  conduct urbanization and environmental authorization procedures  pilot clearing works (archaeological search, OTAN pipeline deviation, 2nd world war blockhaus destruction …) • pilot servicing works (road, rail, water supply, electricity & gas network upgrading) • carry out 8 public surveys related to the territory development planning • perform various administrative tasks to obtain residence permits and working authorizations TOYOTA Case - HEC MBA Group ES2A

  39. #12 – Toyota locations across Europe European HQ Engine plant 300km Final assembly Research & D TOYOTA Case - HEC MBA Group ES2A

  40. #13 – Importance of local infrastructures TOYOTA Case - HEC MBA Group ES2A

  41. #14 – Compact plant layout TOYOTA Case - HEC MBA Group ES2A

  42. #15 – Toyota market shares evolution TOYOTA Case - HEC MBA Group ES2A

  43. #16 – Communication theory in non-native language   Two people of the same tongue speaking their language 100% 100% = 100%   One different interlocutor listening to a native speaker 100% 50% = 50%   50% 50% Two people speaking in a third non-native language = 25% TOYOTA Case - HEC MBA Group ES2A

  44. #17 – Toyota philosophy, management & recruitment Toyota Philosophy Toyota Recruitment Strategy TOYOTA WAY 1st = define the right values (management system) 2 values = Respect andContinuous improvement TMMF management team had to guess in1997 that Proximity Communication andContinuous Improvement would be two suitable pillars TOYOTA PRODUC. SYST. 2nd = recruit the right talents and personalities Indicates the rightmanagement priorities From 40,000 applications Toyota identified through psychologicaltesting and confirming interview 3,300 employees with suitableprofiles (according to 10 dimensions representing the 2 pillars) TECHNICAL SOLUTIONS 3rd = define the short term goals to be achieved Indicates the bestpossible solutions day-to-day shop floor management andmanagement by yearly objective TOYOTA Case - HEC MBA Group ES2A

  45. Production launch – 1st shift 600 M€ and +1,500 people Production increase – 2nd shift +1,500 people New engine assembly line 100 M€ and +300 people Production increase – 3rd shift +500 people New logistic platform 80 M€ and +140 people New spare-part Toyota supplier 60 M€ and +120 people Press-tool capacity increase 20 M€ and +30 people #18 – Sustainable development 2001 2002 2003 2004 2005 … TOYOTA Case - HEC MBA Group ES2A

  46. #19 – Typical French agreement protocol Items specified in the agreement protocol of this project : • amount of the total capital investment • quantity of positions created • targeted date of launch • final sale price of the serviced terrain • ending date for all related clearing & servicing works  delay for the final delivery of all urbanization, environmental and working authorizations  average amount of all types of capital investment subsidy • assistance for labour recruitment and training TOYOTA Case - HEC MBA Group ES2A

  47. #20 – Average yearly activity per person TOYOTA Case - HEC MBA Group ES2A

  48. #21 – Cultural final quote on the project Extracts of the inauguration speech of Mr Hiroaki WATANABE, President of TMMF, on the 6th of January 2001 : « Before accepting to undertake this project, I had many prejudices about France and the French. But since I moved here I’ve been realising that the French and the Japanese are obviously different, but that they have also many things in common, among which a very strong culture. Let’s consider gastronomy : the delicacy for taste and aesthetics are a real passion for the French and the Japanese, because they express a strong cultural identity. (…) Similarly the Japanese and the French are capable to adapt and work together while remaining loyal to their culture. This is how our employees are now getting progressively used to our corporate culture while TMMF is taking progressively place in the Nord-Pas-de-Calais landscape. And I remain convinced that soon the direction of TMMF could be transferred to a French » TOYOTA Case - HEC MBA Group ES2A

  49. #22 – Monochronic & polychronic cultures Monochronic People (American)  Do one thing at a time Concentrate on the job Take time commitments Low-context + need information Committed to the job  Abide by the plans Great respect for private property Used to short-term relationships Polychronic People (French) Do many things at once Manage interruptions well Objectives can be possibly achieved High-context + already have information Committed to people and relationships Chang plans often and easily Borrow and lend easily Build lifetime relationships TOYOTA Case - HEC MBA Group ES2A

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