Question

b. Evaluate the statement in the case made by Toru Sakuragi that "… Toyota has been caught between a need to cut costs to overcome the strong yen and the need to improve quality to prevent recalls." And that "They are now pursuing both strategies but they are essentially at odds with one another." Is this a realistic strategy? Do you have suggestions for how the strategy might be improved?

Answer 1

Answer:

Both strategies can be at odds with each other, because cutting costs can reduce the quality of the cars produced and exported, leading to the undesired effect of increasing recalls, which is precisely the other thing that Toyota wants to reduce.

Explanation:

For this reason, Toyota should try instead to improve quality instead of cutting costs, so that its cars become so desirable that even a strong yen does not prevent consumers from buying.

This strategy can be contrasted with country-wide strategies when it comes to export goods: some countries depreciate their currency and/or rely on the export of cheap goods, these countries tend to be less competitive, and the strategy may not live up to expectations. Italy implemented this strategy until it adopted the euro, and could not devalue its currency anymore.

On the contrary, other countries aim for quality even if their currency is strong. This is the German strategy, which has maintained a healthy export economy when it had the mark, and now with the euro, both strong currencies.

In conclusion, Toyota should try to be more like Germany, and less like Italy.