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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 - PowerPoint PPT Presentation
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25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 1
TMMFBest in France Project – Toyota Case Study
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 2
TMMF
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
Best in France Project – Toyota Case Study
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 3
TMMF
1. Key features on the case ……………….….………..……….…. p. 42. Toyota and the European market ............................................ p. 63. Objectives of the players ……………………...…………………. p. 8
3.1. for Toyota .…………………..……………………..……….……… p. 93.2. for France .…………………..……………………..………….…… p.10
4. Decisional criteria ……………………………………………..….. p.114.1 in favor of the French candidacy ………………...……………..… p.124.2 not in favor of the French candidacy …..………………………… p.144.3 first list and short list decision matrix ……..…………………...… p.16
5. Actions developed by the players ………………………..…..… p.185.1 by France, prior to and during the project ….............................. p.195.2 by Toyota ………………………………..…………………..….….. p.21
6. Key factors of success in this project ………………….....……. p.227. Sustainable development post-project ………………..…..…… p.248. Appendix & exhibits ………………………………………..…….. p.26
Table of Contents
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 4
TMMF
Key features
on the case
Part 1
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 5
TMMF
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
1. The 5 key ideas of the Toyota Onnaing project
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 6
TMMF
Toyota and the
European market
Part 2
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 7
TMMF
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
2. Toyota strategic & tactical approach
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 8
TMMF
Objectives for the
two players
Part 3
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 9
TMMF
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
3.1 Toyota objectives
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 10
TMMF
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
3.2 France objectives
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 11
TMMF
Decisional criteria
for Toyota
Part 4
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 12
TMMF
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
4.1 Criteria in favour of the French candidacy
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 13
TMMF
4.1.2 Human factors
International prestigious image 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
4.1 Criteria in favour of the French candidacy
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 14
TMMF
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
4.2 Criteria not in favour of the French candidacy
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 15
TMMF
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
4.2 Criteria not in favour of the French candidacy
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 16
TMMF
4.3.1 First short list of 40 possible sites
4.3 Location decisional matrix
Eco. criteria France UK Germany Belgium Poland Turkey
Proximity + + + + + + - -
Euro zone + + - + + + + - -
Economy + + + + + + + + + -
Labour cost - - - - - + ++
Lab. quality + + + - + +
Infrastructure + + + + + + + - - -
Subsidies + + + + + + -
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 17
TMMF
4.3.2 Second short list of 4 possible sites
4.3 Location decisional matrix
Mainly France France UKHR criteria Nord Alsace Lorraine Derbyshire
Anticipation + + - - -
Trust inspired + + + + +
Local pro-activity + + + + +
Huge challenge + + + + + + +
HQ proximity + + + + + + -
Environment + + + + + -
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 18
TMMF
Actions developed
by the two players
Part 5
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 19
TMMF
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
5.1 Actions developed by France
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 20
TMMF5.1 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
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 21
TMMF
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)
5.2 Actions developed by Toyota
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 22
TMMF
Key factors
of success
Part 6
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 23
TMMF
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
6. What led the project to a genuine success
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 24
TMMF
Sustainable
development
Part 7
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 25
TMMF
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 … ?
7. Further investments after the 1st project
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 26
TMMF
Appendix
& exhibits
Part 8
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 27
TMMF#0 – Annual French foreign investments
Direct foreign investment abroad in M€Direct foreign investment in France in M€
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 28
TMMF#1 – Hourly labour cost across Europe in 2004
0
5
10
15
20
25
30
Portug
al
Greece
Spain
Irland
Finland
Holland
Austria UK
Luxe
mbourg
France
German
y
Danem
ark
Sweden
Hourly labour cost in Euro
UE average labour cost
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 29
TMMF#2 – Social charges across Europe in 2004
0%
5%
10%
15%
20%
25%
30%
Danem
ark Irland
Luxe
mbourg UK
Portug
al
Holland
Finland
German
yAus
triaSpa
in
Greece
France
Sweden
Social charges in % of total labour cost
UE average social charges
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 30
TMMF#3 – Total fiscal weight across Europe in 1998
0%
10%
20%
30%
40%
50%
60%
Irland
Spain
Portug
al UK
German
yGree
ce
Holland
Austria
Luxe
mbourg
France
Finland
Danem
ark
Sweden
Fiscal pressure in % of gross profit
Average fiscal pressure in EU
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 31
TMMF#4 – Value added tax across Europe in 1998
0%
5%
10%
15%
20%
25%
30%
Luxe
mbourg
German
ySpa
in
Portug
al
Holland UK
Greece
Austria
France
Irland
Finland
Danem
ark
Sweden
VAT in % of retail price
Average Vat in EU
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 32
TMMF#5 – Unionization rate across Europe in 1995
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Sweden
Danem
ark
Finland
Irland
Austria UK
Portug
al
German
yHolla
nd
Greece
Spain
France
Luxe
mbourg
Unionization rate in % of workers
Average unionization rate in EU
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 33
TMMF#6 – French unionization rate
Evolution of the French unionization rate in % of the active population
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 34
TMMF#7 – French administration structure
levels … Frenchstate
Public establishment
Territorialcorporation
Consularorganization
Publiccompany
National1 president of rep.
2 parliaments1 government
state organizations (national research, social council…)
league of mayors and of council
presidents
chamber of commerce, indus.and professions
EDF, SNCF,La Poste,
France Telecom
Regionalregional préfet
+ ministries representatives
frequent representation
22 regionalcouncil
presidents
regional chamber of commerce, ind. and professions
operational representation
Departmentaldepartmental prefet
+ ministries representatives
unusualrepresentation
95 generalcouncil
presidents
departmental chamber of ind.
commerce & prof.
District districtsous-prefet
Agglomerationinter-municipal
unions and communities
Municipality36,000 mayorswith each one
municipal council
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 35
TMMF#8 – French administration involved with Toyota
levels … Frenchstate
Public establishment
Territorialcorporation
Consularorganization
Publiccompany
National1 president of rep.
2 parliaments1 government
state organizations (national research, social council…)
league of mayors and of council
presidents
chamber of commerce, indus.and professions
EDF, SNCF,La Poste,
France Telecom
Regionalregional préfet
+ ministries representatives
frequent representation
22 regionalcouncil
presidents
regional chamber of commerce, ind. and professions
operational representation
Departmentaldepartmental prefet
+ ministries representatives
unusualrepresentation
95 generalcouncil
presidents
departmental chamber of ind.
commerce & prof.
District districtsous-prefet
Agglomerationinter-municipal
unions and communities
Municipality36,000 mayorswith each one
municipal council
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 36
TMMF#9 – Plant construction schedule
1996 1997 1998 1999 2000 2001
launch in production
early prospecting by Chamber of Commerce and Industry
1st meeting with Toyota at Valenciennes2nd meeting with Toyota at the Paris Motor Show
Toyota launch an official European tender for their projectbeginning of the site selection process
public announcement of the selected sitesite officially handed out
plant constructionlabour training
machinery implementationpre-production
approach
study
selection
preparation
construction & training
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 37
TMMF#10 – Plant production schedule
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 38
TMMF#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
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 39
TMMF
300km
#12 – Toyota locations across Europe
Research & D
Final assembly
European HQ
Engine plant
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 40
TMMF#13 – Importance of local infrastructures
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 41
TMMF#14 – Compact plant layout
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 42
TMMF#15 – Toyota market shares evolution
1994 1997 1999 2004 2010*Toyota market share in the US 10% 11%
Toyota market share in Japan 40% 45%
Toyota market share in Europe 3% 5%
Toyota volume sold in Europe 800,000 1,200,000
Trade regulation across Europe
End of import sales quotas
Production sold in Japan 90% 50%
Production sold in the US 40%
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 43
TMMF#16 – Communication theory in non-native language
100% 100%
= 100%
100% 50%
= 50%
50% 50%
= 25%
Two people of the same tongue speaking
their language
One different interlocutor listening to
a native speaker
Two people speaking in a third non-native
language
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 44
TMMF#17 – Toyota philosophy, management & recruitment
TOYOTA WAY
TOYOTA PRODUC. SYST.
TECHNICAL SOLUTIONS
1st = define the right values (management system)
2nd = recruit the right talents and personalities
3rd = define the short term goals to be achieved
2 values = Respect andContinuous improvement
Indicates the rightmanagement priorities
Indicates the bestpossible solutions
TMMF management team had to guess in1997 that Proximity Communication and
Continuous Improvement would be two suitable pillars
From 40,000 applications Toyota identified through psychologicaltesting and confirming interview 3,300 employees with suitableprofiles (according to 10 dimensions representing the 2 pillars)
day-to-day shop floor management andmanagement by yearly objective
Toyota Philosophy Toyota Recruitment Strategy
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 45
TMMF#18 – Sustainable development
2001 2002 2003 2004 2005 …
Production launch – 1st shift600 M€ and +1,500 people
Production increase – 2nd shift+1,500 people
New engine assembly line100 M€ and +300 people
Production increase – 3rd shift+500 people
New logistic platform80 M€ and +140 people
New spare-part Toyota supplier60 M€ and +120 people
Press-tool capacity increase20 M€ and +30 people
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 46
TMMF#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
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 47
TMMF#20 – Average yearly activity per person
Nb of hours worked per year / person
1 400 1 450 1 500 1 550 1 600 1 650 1 700 1 750 1 800 1 850
France
Germany
Finland
Greece
Luxembourg
Irland
Portugal
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 48
TMMF#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 »
25th January 2005 TOYOTA Case - HEC MBA Group ES2A page 49
TMMF#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