1.

Introduction
Toyota Motor is one of the largest automobile manufacturers in the world. The company is engaged in the design, manufacture, assembly and sale of passenger cars, minivans and trucks and related parts and accessories. The company also provides financing to dealers and their customers for the purchase or lease of Toyota vehicles. Toyota has 50 manufacturing facilities in 27 countries and regions. The company operates through three business divisions: automotive, financial services and other. Toyota produces automotives in two categories: conventional engine vehicles and hybrid vehicles. Toyotas product line-up includes subcompact and compact cars, mini-vehicles, mid-size, luxury, sports and specialty cars, recreational and sportutility vehicles, pickup trucks, minivans, trucks and buses. Toyotas subsidiary, Daihatsu Motor Company, produces and sells mini-vehicles and compact cars. Hino Motors, another subsidiary of the company, produces and sells commercial vehicles. Toyota also produces forklifts and several other kinds of materialhandling equipment, such as automatic-guided vehicles, automatic rack systems, power shovels, towing tractors and aerial work platforms. The company sells its products under the Toyota, Lexus, Hino and Daihatsu brands. Under the Toyota brand, the company includes models such as the Camry, the Corolla and the Avensis. Lexus is the luxury car division of Toyota Motor, and is operated as an entity separate from the Toyota brand. Lexus also produces the luxury sports utility vehicle, the RX330. In Japan, the company sells luxury cars under the brand name Crown and the Century limousine. The Prius is the companys mass-produced hybrid car. Toyotas subcompact and compact cars include the four-door Corolla sedan, which is one of Toyotas best selling models. The Yaris, marketed as the Vitz in Japan, is a sub-compact car, designed particularly for European consumers. The companys sport-utility vehicles and pickup trucks include the Tacoma and Tundra pickup trucks. Toyotas models for the minivan market include the Alphard, Sienna, Estima, Hiace, Regius Ace, the Noah and the Voxy. In FY2008, the company recorded total sales of 8,913,939 units, as compared to the unit sales of 8,524,659 units in 2007. Out of the total sales, the company sold 2,958,314 vehicles in North America; 2,188,389 vehicles in Japan; 1,283,793 vehicles in Europe; 956,509 in Asia; and

remaining 1,526,934vehicles in other countries. Furthermore, the company produced a total of 8,547,200 units in FY2008, as compared to 8,180,951 units in FY2007. Toyotas financial services business provides finance to dealers and their customers for the purchase or lease of Toyota vehicles. Toyotas financial services also provides retail leasing through the purchase of lease contracts originated by Toyota dealers. Furthermore, Toyota Finance (TFC) in Japan and Toyota Motor Credit (TMCC) and other overseas subsidiaries and affiliates provide sales financing for Toyota's products and the products of its subsidiaries and affiliates. Toyotas network of financial services currently covers 32 countries and regions. At the end of March 31, 2008, the companys net finance receivables outstanding for all of Toyotas dealer and customer financing operations were approximately JPY10.3 trillion (approximately $90.4billion), representing an increase of approximately 2.7% as compared to the amount outstanding as of March 31, 2007. The majority of Toyotas financial services are provided in North America. During FY2008, approximately 61.9% of Toyotas finance receivables were derived from financing operations in North America, 12.6% from Japan, 13.1% from Europe, 4.0% from Asia and 8.4% from other areas. The companys other segment includes its operations in telecommunications. Toyota currently holds around 12% ownership interest in KDDI, a full service telecommunications provider in Japan. The company also designs and manufactures prefabricated housing and handles information technology related businesses, including certain intelligent transport systems and an ecommerce marketplace called Gazoo.com.

Origin of the report

The report started to take place in Stratagic Management (MBA 600) Class when our course instructor said that submitting a term paper in mandatory or else the course will remain incomplete. The report consists of the Strategic Management of Toyota. The origin of the report should also include all of the course materials and class lectures as it would have been impossible for us to complete the report without the course materials and class lectures which were provided before we were asked to prepare and submit.

Objective of the Study

General Objective: The general objective of preparing this report is to fulfill the requirement of the course MBA 600 of MBA Program through gaining the practical experience about the dividend policy.

Project Objective:
The objectives of this report are the followings:

To know history of the company To identify the Poters Five Factors and their effect on the company SWOT Analysis of the company Strategy formulation and implemention of TOYOTA

Limitations
There were certain limitations of the problem we face regarding preparing the report. The limitations are discussed below.
1. A very short time was required to make such a vast report. We needed to collect a lot of information about bond, debenture, long term loan, total asset, equity, debt etc. But the time constraint was there. 2. Some of the unavoidable conditions also had a deterring effect on preparing the report. (Like electricity) 3. The time was very limited as the report was asked to be prepared in the end of the semester. Moreover, reports of other course also have to submit within the short period of time which made it even more difficult for the report to be completed in time.

2. Potters Five Factor

1 Rivalry between existing competitors :

With the rise of foreign competitors like Ford, Chevrolet and GMC in the 1970's and 80's, rivalry in the Toyota auto industry has become much more intense. Firms compete on both price and non-price dimensions. The price competition erodes profits by drawing down pricecost margins while non-price competition (e.g., new car rebates and interest free loans) drives up fixed cost (new product development) and marginal cost (adding product features). One of the other reasons there is such high rivalry is that there is a lack of differentiation opportunities. All the companies make cars, trucks or SUVs. The competitors are compared to one another constantly. In recent years there has been significant market share variation, another indication of rivalry and its very strong threat to profits. (Scribd Inc. 2011)

2. Threat of entry by new competitors

The presence of new firms in an industry may force prices down and put pressure on profits. There are, however, barriers to entry that tend to protect established firms. One would expect the production of automobiles to require significant economies of scale, an important barrier to entry. The new entrant would have to achieve substantial market share to reach minimum efficient scale, and if it does not, it may be at a significant cost disadvantage. While the evidence suggests that economies of scale in the auto industry are substantial, there are also indications that large size may not be as important as commonly assumed. Nevertheless, entry would represent a large capital investment to any new firm and the body of research still indicates that economies of scale represent a substantial barrier to entry. Consequently, entry is currently a weak threat to profitability.

3. Price pressure from substitute or complementary products

While five-forces do not directly consider demand, it does consider two factors that influences demand substitutes and complements. Although new cars generally are slightly price elastic, suggesting few real substitutes (e.g., bus and rapid transit), the demand for a particular model is highly sensitive to price because of the availability of close substitutes for a given model. A change in the price of a complementary product (e.g., gasoline, batteries, and tires) could have a significant impact on the demand for automobiles. The rising price of gas, an important complementary product, is likely to affect some firms more than others depending upon the vehicle composition. Recent rising fuel prices are likely to have a more impact on the firms (GM, Ford Motor and Daimler-Chrysler) whose most profitable models are energy inefficient pick-up trucks and sports utility vehicles. While Toyota has their hybrid series of cars which are efficiently using green energy (electricity). On balance, the overall impact on Toyota profitability from substitutes and complements is weak to moderate.

4. Bargaining Power of Buyers

Buyer power refers to the ability of individual customers to negotiate prices that extract profit from the seller. Individual consumers have some influence over price within a given dealership, but little power over manufacturers. Customers can easily, and with little cost, switch to other auto dealers. Furthermore, customers now have access to market information (prices and costs) from the Internet that enhances their negotiating power. But when you have many individual customers, each representing a small proportion of total sales, they will have little bargaining power with manufacturers and therefore pose a weak threat to Toyotas industry profit.

5. Bargaining Power of Suppliers

Auto manufacturers require labour, parts, raw materials and services. The cost of these inputs can have a significant effect on profitability. Whether the strength of suppliers is weak, moderate or strong depends on how much bargaining power they can exert. The auto manufacturers have large supplier networks that appear to exert little bargaining power. Nevertheless, the United Auto Workers (UAW), the only supplier of labour, has historically exerted a great deal of leverage over the benefits and wages provided by Toyota. Because of this historical dominance by the UAW and the uncertain results of their current negotiations with Toyota, one has to characterize supplier power, at least in this segment of the Australian market, as a strong threat to profits The following table summarizes the results of a fiveforces analysis of Toyota :

SWOT Analysis
Strengths
Strong financial performance The company has recorded a strong financial performance in

recent years. Toyota Motors revenues increased at a compound annual growth rate (CAGR) of 11.1% during 200408, from JPY17,294,760m (approximately $151,848m) in 2004 to JPY26,289,240m (approximately $230,820m) in FY2008.The company also witnessed significant growth in profitability. The companys operating profit grew at a CAGR of 8.3% from JPY1,666,890m (approximately $14,635m) in 2004 to JPY2,270,375m (approximately $19,934m) in 2008. The net profit of the company grew at a CAGR of 10.3%, from the net profit of JPY1,162,098m (approximately $10,203m) in 2004 to reach JPY1,717,879m (approximately $15,083m) in 2008. Similarly, the cash from operating activities grew at a CAGR of 8.1% from JPY2,186,734m (approximately $19,200m) in 2004 to JPY2,981,624m (approximately $26,179m) in 2007. During 200408, the average operating profit margin and net profit margin of the company stood at 9.1% and 6.5%, respectively. The strong financial performance of the company has contributed to its market dominance. This, in turn, enhances investors confidence in the company. Brand image Toyota is one of the leading automotive brands in the world. In the annual ranking of top 100 global brands by BusinessWeek and Interbrand in 2008, Toyota figured in the sixth position. According to the survey, Toyota's brand value has surged by 6%, to reach $34.1 billion in 2008. Furthermore, it is the highest ranking automotive brand name in the world. It is ranked well ahead of its competitors like Mercedes, BMW, Honda, Ford, Hyundai, Porsche and Nissan. For instance, in the same period, Ford has been faced with a number of troubles, including a failure to meet its goals for SUV mileage gains or to exploit its well-regarded Escape hybrid; subsequently, the brand value of Ford fell by 12%, to $7.9 billion in 2008. Toyotas luxury car, Lexus, also has an independent ranking in the top 100 global brands. The brand value of Lexus was around $3.6 billion, with a ranking of 90. Some of the other popular product brands of the company include Corolla, Camry, Sienna, Prius and Scion. The
7

companys strong brand image gives it significant competitive advantage and helps the company to register higher sales growth in domestic, as well as in international markets. Strong performance in Asia region Toyota Motor registered strong business growth in the Asian region. The revenues of the company in this region grew at a rate of 41.7%, from JPY1,969,957m (approximately $17,296.2m) in 2007 to reach JPY2,790,987m (approximately $24,504.9m) for the FY2008. Furthermore, the company registered strong growth in its profitability position. The operating profit of the company from Asia increased to JPY256,356m (approximately $2,250.8m) in 2008 from JPY117,595m (approximately $1,032.5m) in 2007.The vehicle sales of the company in the Asian region increased by 21% to reach 956,509 units for the financial year ended March 2007, from the unit sales of 789,637 units in 2007. The company registered favorable sales in Indonesia and increased its production capacity in Thailand responding to the increase in demand for IMV models (Hilux and Fortuner) from outside Asia. Furthermore, the production in Asia also increased by 27.3% to reach 961,000 vehicles in 2008. Increasing vehicle sales and operating profits in the Asian region indicate an opportunity for the company to consolidate its operations in this emerging automotive market, and become Research and development activities Toyota Motor has strong research and development (R&D) capability. The company incurred large expenditure for its R&D activities. For instance, the total R&D costs of the company stood at JPY959 billion (approximately $8.5 billion) in FY2008, JPY891 billion (approximately $7.8 billion) in 2007 and JPY813 billion (approximately $7.1 billion) in 2006. Furthermore, the company employed nearly 34,000 engineers and technicians for its R&D activities. The companys R&D activities focus on the environment, vehicle safety, information technology and product development. In recent years, the company has come up with new innovations across product categories such as hybrid vehicles, electric vehicles, fuel cell hybrid vehicles, gasoline engines and diesel engines. For instance, in May 2008, the company developed Toyota FCHV, a fuel cell hybrid vehicle which can start and operate in cold regions at temperatures as low as -30 degrees Celsius. The strong R&D capability
8

enables the company to build a broad range of vehicle portfolio and improves its competitive strength in the automotive industry. Toyota production system Toyota developed the internationally recognized production system known as the Toyota Production System (TPS) to achieve mass-production efficiencies even for small production volumes. The TPS is based on the just-in-time and Jidoka principles. Just-in-time is a production method through which the company plans to manufacture and deliver necessary parts and components in the right quantity in a timely manner and allows the company to maintain low levels of inventory. Through Jidoka (an automation process used in the manufacturing operations), the company can stops the work immediately when problems arise in its production process to prevent the manufacturing defective products. Furthermore, some of the leading companies like GE, Bayer, across the world adopted the TPS to improve the efficiency of their manufacturing operations. This system helped Toyota to build quality into the production process by avoiding defects and preventing the waste in its manufacturing operations. Furthermore, it improved the companys brand image.

Weaknesses
Poor profitability of financial services segment Toyotas financial services segments operations mainly include loans and leasing programs for customers and dealers. The companys financial services segment witnessed poor operating performance in the last five year period. During 200408, the revenues of the company from this operating division grew at a CAGR of 19.7% to reach JPY1,468,730m (approximately $12,895.4m) in 2008. Although the revenues grew at a higher rate, the operating income from this division declined significantly. The company recorded the operating profit of its financial services operations at JPY86,494m (approximately $759.4m) for the FY2008, representing a compounded annual decline rate of 12.3% from the operating profit of JPY145,998m (approximately $1,281.9m) in 2004. With operations across the world, the financial services segment consumes considerable resources of the company. For
9

instance, the total assets of the financial services operations of the company stood at around JPY13,942.3 billion (approximately $122.4 billion), constituting 43% of the companys total assets, which stood at JPY32,458.3 billion (approximately $285 billion) as of March 2008. Continued poor profitability of the financial services division is likely to pull down the overall financial performance of the company. Expenses related to post retirement benefits for employees Toyota Motor provides pension benefits and other post-retirement health and life insurance benefits to employees. During the FY2008, the company incurred post retirement benefit expenses of JPY80,761m (approximately $709.1m). The company also paid a total of JPY76,476m (approximately $671.5m) for the post retirement benefit plans during 2007. Furthermore, by the end of March 2008, the company's projected pension and post-retirement benefit obligations stood at JPY1,693,155m (approximately $14,865.9m) as compared to the planned assets of JPY1,282,048m (approximately $11,256.4m), resulting into an unfunded status of JPY411,107m (approximately $3,609.5m). Sizeable unfunded post retirement benefits would force the company to make periodic cash contributions towards bridging the gap between post retirement benefits obligations and planned assets, which would reduce cash available for growth plans.

Opportunities
Increasing demand for hybrid electric vehicles Worldwide demand for light hybrid electric vehicles (HEV) is estimated to reach 4.0 million units by 2015. Rising energy costs and increased emissions regulations are likely to increase the demand for HEVs, as hybrid engines are more fuel efficient and less polluting than conventional gasoline and diesel engines. Cost disparities between HEVs and conventional light vehicles are expected to decline as production volumes increase. The primary markets
10

for HEVs will be within Triad countries (the US, Western Europe and Japan), although the rapidly growing Chinese market is also expected to experience relatively strong demand for these fuel efficient and environmentally friendly vehicles. Toyota Motor is keen to capitalize on the growing demand for hybrid electric vehicles. The company has spent a large amount of money for the development of hybrid vehicles over the years. The cumulative total of Toyota Motors hybrid vehicle sales reached 1.5 million in June 2008. Furthermore, the company plans to expand its hybrid lineup and achieve annual sales of one million hybrid vehicles by early 2010. For this, the company plans to introduce demand-creating products. For instance, the company scheduled to launch the iQ ultra-efficient package vehicle in Japan and Europe in 2008. The iQ was specifically designed to reduce CO2 emissions and realize higher fuel efficiency. Furthermore, in January 2008, Toyota Motor announced its plans to commence sales of lithium-ion batteryequipped plug-in hybrid vehicles to fleet customers in the US and elsewhere by 2010. The company also launched models such as the Prius and LS600h hybrids at the 2008 Beijing International Automotive Exhibition, held at the new China International Exhibition Center in Beijing. The companys emphasis on hybrid technology will enable it to capitalize on the positive market trends in this segment to enhance its market position. Opportunities in Asian market The Asian automobile market is expected to drive global demand for light vehicles through much of this decade. China, India and Association of South-East Asian Nations (ASEAN) countries are the major driving markets for the Asian automotive industry. For instance, new car production in China is expected to increase from 6.3 million units in 2007 to 9.4 million units in 2012, while new car production in India is forecast to increase from 1.3 million units to 2.5 million units during the same period. The company is taking significant steps towards increasing its presence in the Asian markets. In China, Toyota Motor operates seven joint ventures and two wholly-owned foreign enterprises. Guangzhou Toyota Motor Company (GTMC), a joint vehicle production and sales company established with Guangzhou Automobile Group, is an important joint venture for the company in China. The company aims at expanding its model
11

line up in China. For instance, the company started the production of new Corolla at Tianjin FAW Toyota Motor plant in May 2007, and Yaris at Guangzhou Toyota Motor in May 2008. In India, the company operates Toyota Kirloskar Motor (TKM) to design, manufacture and market automobiles. Furthermore, Toyota decided to construct a second plant in India with an annual production capacity of 100,000 units. This plant is scheduled to commence production of the Corolla and other passenger vehicles such as newly developed compact cars in 2010. Furthermore, the company is also looking to increase its production capacity in countries like Thailand, Indonesia and Malaysia. The strong manufacturing and marketing operations in Asian markets would help the company to achieve higher market share in this growing market. New models Toyota Motor launched several new models in FY2008. For instance, in April 2008, Toyota Motor displayed a total of 50 concept vehicles at the 2008 Beijing International Automotive Exhibition, held at the new China International Exhibition Center in Beijing, China. The company launched its models including the compact Yaris, the new Vios and Lexus LX570 SUV, along with concept cars such as the iQ compact and the personal mobility vehicle I REAL. The company also displayed models such as the Prius and LS600h hybrids and the GOA (Global Outstanding Assessment) collision-safety body represented by a Camry and Crown models. In the following month, the company launched its redesigned Alphard (a luxury multi-purpose vehicle) as two different vehicle series, the Alphard and the Vellfire *2. Furthermore, in June 2008, Toyota Motor developed Toyota FCHV, a fuel cell hybrid vehicle, which can start and operate in cold regions at temperatures as low as -30 degrees Celsius. Besides helping to garner additional revenues, new models will also help the company to revamp its aging model line up.

12

Threats
Competition in the global automotive market The worldwide automotive market is highly competitive. Toyota Motor faces strong competition from automotive manufacturers in its various markets. The competition among various auto players is likely to intensify in light of continuing globalization and consolidation in the worldwide automotive industry. The factors affecting competition include product quality and features, the amount of time required for innovation and development, pricing, reliability, safety, fuel economy, customer service and financing terms. Increased competition may lead to lower vehicle unit sales and increased inventory, which may result in a further downward price pressure and adversely affect the companys financial condition and results of operations. Tightening emission standards The European Union (EU) Commission and the EU Parliament have adopted a directive that establishes increasingly stringent emission standards for passenger and light commercial vehicles for model years 2005 and thereafter (known as EURO 4). Under the directive, manufacturers will be responsible for the emission performance of these vehicles for five years or 100,000 kilometers, whichever occurs first. A more stringent emission standard (EURO 5) is also on the table of the EU legislative bodies and is likely to be effective from 2009. The EU Commission intends to define even more stringent emission standards (EURO 6), which, if adopted, would become mandatory around 2014 or 2015. In 2005, the states of New York, Massachusetts and Vermont adopted the California Zero Emission Vehicle (ZEV) regulation, while the state of Maine adopted the ZEV regulation as of the 2009 model year. The state of New Jersey will adopt the ZEV regulation starting from 2009.China adopted Step3 and Step4 emission regulations for light-duty vehicles in 2005. These regulations are similar to EURO3 and EURO4. Step3 was implemented from 2007 and Step4 will be implemented in 2010. South Korea adopted the enforcement regulation of the Special Act on Capital Region Air Quality Improvement. Accordingly, some manufacturers shall be required
13

to sell low emission vehicles which meet a more stringent emission standard than those meeting the national standard. In addition, several Asian countries adopted regulations which are similar to EURO2 and EURO3. In Australia, EURO4-equivalent regulation was implemented in July 2008.The emission standards adopted across various regions can result in additional costs for product development, testing and Manufacturing operations of Toyota.

Appreciating yen against the dollar Toyota is sensitive to the fluctuations in foreign currency exchange rates and is principally exposed to fluctuations in the value of the yen, the dollar and the euro. Toyotas consolidated financial statements, which are presented in yen, are affected by foreign currency exchange fluctuations. The changes in foreign currency exchange rates may affect Toyotas pricing of products sold and materials purchased in foreign currencies. Most of the companys business transactions are conducted in dollars, which are then converted to yen. In recent years, the yen appreciated significantly against the dollar. For instance, the average exchange rate for the yen in the first half of FY2009 (from April 1, 2008 to September 1, 2008) stood at $1=JPY106.1, a decrease of 11% (per $1) over the first half of FY2008 (whose average was $1=JPY119.3). Similarly, the average exchange rate for the whole of FY2008 was JPY114.3 to $1, which is significantly higher to the average exchange rate for the first half period of FY2009. The strengthening of the yen against the dollar can have a material adverse effect on Toyotas reported operating results, which may in turn affect the valuation of the company. a leading player in this region

14

Strategy Formulation :
Low Cost Strategy : Toyota company follows the low cost strategy. They try to reduce the cost significantly by maintaing a standard quality. As a result the price of the cars are very low in comparison with the other quality cars. The quality of the cars are also very good compared to their price. As a result they concquared a huge market. Toyota is now the market leader in the car industry in the Asian Market. Presently it the market share of Toyota in the American and European Market is increasing very fast by offering the hybrid cars. Best Cost Strategy : Even though Toyota is considered as the low cost leader in the car idustry they have introduced the Best Cost strategy by introducing the luxorious sub brand Lexus. The quality of the car is very good and compared to the quality the price is lower than other luxorious cars such as BMW, Ford, Mercedec-Benz and so on. Lexus has proved to be so much that it has become one of trhe best cars and 2nd highest selling car in the American Market.

15

Strategy Implementation
Toyota company follows the following steps to implement their strategy : Supply Management : Toyota Australia exports a total of 50,000 automobile, representing 55% of total Australian vehicle exports for the year. This has made Toyota Australias largest vehicle exporter, shipping to 33 countries worldwide and ensuring high quality standards in their products. In terms of supply chain, Toyota has long been recognized as one of the most efficient manufacturers in the world. It has been proactive in working partnerships with its suppliers to improve capabilities and increase local part sourcing. In addition, Toyota and its first tier suppliers also have benefits on the introduction of lean manufacturing into their operation. With a dedicated supplier development team in place since 1989, Toyota has successfully implemented lean manufacturing, benchmarking their Toyota Production System process. Toyota is a leader in the industry in terms of supplier capability development initiatives and a major contributor to building skills.

The key to Toyotas success would appear to be their highly effective supplier integration process that over the past 50 years has enabled the excellence of their internal hoshin kanri strategic management, cross functional process based management and Toyota Production System to be shared directly with their direct suppliers. In addition, over time, as the supplier integration system has been taught to their suppliers the excellence in performance was then outsourced to second and over time lower tier firms. The primary method to do this has been the kyoryoku kai or Supplier Association.

Toyota has a system to increase its online suppliers involvement, share valuable knowledge and prevent free riders in its supply chain. It was found that in the Toyota system, the suppliers were developing a dynamic learning capability that improved their competitive capabilities. In this type of network where manufacturers and suppliers are highly involved in the interactions and learning is known to as knowledge sharing network. The effects of knowledge sharing network on the coordination of supply chain and product customization forms the basis of Toyota Production System (TPS). Toyota believes it has much to gain
16

from developing strong ties amongst its suppliers and creating and sharing new knowledge to increase the efficiency of the entire TPS. The aim is to have members identify themselves as part of an interdependent economic network.

Key IT Solution
Making the best use of Information Exchanged :

The automotive industry is geared towards Just-in-time (JIT) manufacturing. JIT in short deals intimately with all areas of supply chain to reduce inefficiencies in transportation, processing, inventory and other business processes. In order to facilitate JIT, the automotive industry developed a fast and reliable communication network for all the key stakeholders involved, manufacturers, suppliers, importers and dealers, to share information. This industry driven initiative is called the Australian Automotive Network exchange (AANX). The four major car manufacturers in Australia are involved in the project. AANX provides IP based Extranets for the automotive industry in Australia. AANX Operates as a virtual point network (VPN), an internet-based infrastructure that allows users to send date to each other in a reliable and secure manner. It is a platform for conducting domestic and international business-to-business (B2B) e-commerce activities. The main component of the project consists of :

A network that is based on available Internet technology Operated by agreed and standardized service levels Demonstrating proactive management of trading partner connections Practice the best standard of security and privacy for transactions and interoperability between service providers

By connecting to AANX, the benefits reach beyond tangible gains such as cost savings. Some of the benefits include :

Pervasive supply chain communications Faster Business Cycles

17

Simpler integration into trading partners' and customers' online e-business systems and strategies Network Structure :

AANX is a multi-provider, virtual private network where service providers compete for customers and at the same time conform to standard service quality requirements such as security. Every trading partners share a similar physical infrastructure of the AANX. Within the framework, all electronic conversations traverse a secure and private connection between two trading partners. Risks: As for every computing network, AANX holds the risk of getting hacked for various reasons. There are two extremes: absolute security and absolute access. The closest we can get to an absolutely secure machine is one unplugged from the network, power supply, locked in a safe and thrown at the bottom of the ocean but that cannot be the case for AANX as multiple numbers of transactions keep happening all day long so it has to stay connected with millions of other networks. Even a secured internet is a bad neighbourhood now, and it isn't long before some hacker will tell the computer to do things like self-destruct, after which, it can give an overall bad reputation. Like for example in Japan, Sony Corp's handling of a massive Internet security breach is becoming a public relations nightmare reminiscent for Toyota Motor's as there is high security breach threat on Toyota Japans network.

18

Security:

As shown in the diagram, Equant and Connect Internet Solutions provide communication services for the network. Key trust is the certificate authority and vendor for providing IPSec security services. (Joseph Baez, Nurhazman Abdul Aziz, Tee Young Chew, Hoh Whay Loh, Cong Xue., 2005). Key trust provides the AANX network with four major security functions:

Secured Data Transmission - IPSec protocol is used to provide secure communication over public and private data networks. It is implemented through encryptions for permanent and dialup connections

PKI Digital Certificates - The use of Public Key Infrastructure (PKI) certificated within the AANX network enables all participants to achieve a high level of confidence when making transactions on the network

KeyTrust Professional Managed Services - Defines and verify network service levels and certification criteria AANX Community Directory - Central policy repository used by security gateways when sessions between trading partners are established

19

The network is the company

Australia's car manufacturers have started to implement major improvements to their production management systems in order to deliver real-time communications across the entire supply chain. With the introduction of AANX, key stakeholders are able to link the company's critical business systems that will in turn increase efficiencies and cost savings across all business divisions. Moreover, managers will have real-time visibility into different aspects of the organization. Commerce Plus is the central trading solution for AANX. It can significantly streamline the supply chain by allowing companies to collaborate and trade via the Internet. Recovery: A backup system ready for use at any time of the year would be the best recovery I can suggest for the AANX network. Although natural hazards are unpredictable, this can cause a lot of problem for AANX network Like for example Toyota Motor Corp Japan said it could take until the end of the year before production has fully recovered to levels before the massive earthquake and tsunami on March 11 devastated Japan, disrupting the supply of key parts.

20

Conclusion: With the arrival of the technology and development of Information Technology, computer mediated processes have undoubtedly changed the traditional supply chain management through the Toyota Australia to carry out their supply chain operations in the automotive industry. The analysis of the supply chain has improved significantly over the period of time, within the operation of IT. But still the use of IT on supply chain, results in weakness even after having benefits. The technology keeps changing year by year which is why supply chain will always need improvement to technologies current formation

21

Reference :
1. en.wikipedia.org/ 2. marketingteacher.com/ 3. mba-lectures.com 4. smj.strategicmanagement.net 5. www.navana.com/ 6. www.toyota.com/

22

23

24

25

26

27

28

29