Thursday, September 19, 2019
Toyotas Decision to Build a Plant in France Essay -- Business Managem
Toyota's Decision to Build a Plant in France Background In late 1996, Toyota began to look at the whole of western Europe for a site for its ultra-modern plant. Belgium, the Czech Republic, France, Germany, Poland and the UK all seemed to be the most promising investment recipient, but the list was quickly left a head-to-head battle between Europe's oldest foreign investment rivals - France and the United Kingdom. At first, the UK seemed the obvious choice. Toyota had its only European car assembly plant at Burnaston, in the UK's Midlands, where a skilled workforce and well-established automotive infrastructure and cluster of related firms are available. However, at the end of January, company president Hiroshi Okuda voiced doubts about investing in the UK because of its hesitation to fully participate in the European monetary system. In 1997, Toyota finally announced plans to build a $660 million car plant in Valenciennes, 60 km from Lille, France. Evaluation 1.     The reasons for French government to invite Toyota to invest in France are attributed to the benefits of foreign direct investment (FDI) to France as the host country. a.     Resource-transfer effect           Toyota can make positive contribution to French economy by supplying capital, technology, and management resources that would otherwise not be available and thus boost French?fs economic growth rate. -     Capital      Toyota, as a multinational enterprise (MNE), because of its large size, reputation, and financial strength, has access to financial resources which may not be available for French local firms like Renault or Peugeot-Citroen. These financial resources can be originated from Toyota?fs internally-generated cash, or from capital markets. As a reputable and financially strong company, it may be easier for Toyota to have access to such resources than French local companies do. -     Technology      Technology plays important role in economic growth of a country, since it can stimulate economic development and industrialization. Technology can be incorporated into both production process and the product itself. In case of Toyota, the French government may be benefited from its advanced technology which it passed to its French employees, therefore improves the employees?f skill without additional investment to develop their own indigenous product and process tech... ...mic mismanagement will cause drastic changes in a country?fs business environment that adversely affect the profit and other goals of a business enterprise. If the French economic is in turmoil, Toyota?fs investment in this country will also be affected. c.     Legal Risk      Legal risk is the likelihood that a trading partner will opportunistically break a contract or expropriate property rights. This may also happen to Toyota?fs when its trading partner in France infringes contract agreements. Beside those three risks, Toyota also faces the cultural risk since the ?grules of game?h of doing business in France with French people is different with that in Japan and other countries where Toyota already put its investment. The French language and culture can be a problem for Japanese firms used to speaking English when working overseas. Conclusion The decision to build a plant in France is a part of Toyota's global strategy in Europe. The company has already built plants in UK, Belgium, Poland, and Turkey. Supported by other plants in Europe, which supply the manufacturing components, the French plant will strengthen Toyota's position to penetrate European market.
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