Lecture 12 Current News Asian Air Pollution Affecting World s Weather Air pollution in China is impacting worldwide weather Often more than 100 time worse than acceptable limits set by WHO Who is to blame Consumers corporations Takeaways from Presentations Nike Ethics companies didn t know about working conditions Google don t be evil then enter a culture of censoring Walmart Movie Save Money live better Do we really save that much money All their goods are made in China Some economists credit Wal Mart s single minded focus on low costs with helping to contain US inflation BUT others charge that the company is the main force driving the massive overseas shift to China in the production of American consumer goods The US is exporting raw materials to Third World countries and importing their manufactured products This is a reversal of former economic relations we used to import raw materials then export finished goods now it s the other way around Is Walmart good for America Who has benefited from Wal Mart Who has not benefited low income families and other consumers China local producers businesses workers at factories suppliers How should Wal Mart balance the needs for worker benefits low prices for consumers and high profits for shareholders Lower benefits and pay Consider the decline of Rubbermaid What factors contributed to this decline Price of resin went up which was beyond their control This means that Rubbermaid has to raise their cost of production raising price Walmart basically gave them the finger and said that they wouldn t buy their products at the new prices They were so dependent on walmart that changing their prices would ruin them The only thing that matters to Walmart is prices Is Walmartization of America reversible Can Walmart and other retailers return to the days of higher prices the overall trend appears to be that were moving towards a model of cheaper costs and cheaper labor and the lowest cost wins This is a movement away from stakeholders to shareholders the workers lose out If Wal Mart raises their prices the consumers will just go somewhere else Do you know anyone who works at Walmart If so how would you characterize their experience Toyota Key concepts Applications Profile They don t care about their employees if you quit they don t care They ll just hire someone in your place Has the documentary influenced how or where you will shop Japanese management corporate governance Shareholder vs Stakeholder institutional change cost benefit analysis incentives global market supplier relations employment relations human resources management inventory control quality management In 1947 Toyota was a little known domestic manufacturer producing about 100 000 vehicles a year In 2005 they sold 8 54 million cars In 2007 Toyota surpassed GM to become the largest automobile company in the on the Fortune Global 500 Toyota Motor is the 10th largest company in the world world 2012 Toyota has factories all over the world and manufactures and assembles vehicles for local markets Toyota operations in the U S data for 2006 taken from Wikipedia Employed around 34 675 people Invested USD 15 5 billion Produced 1 2 million vehicles using US and foreign auto parts Sold 2 54 million vehicles Donated USD 340 million to nonprofits Currently has in total 10 plants Purchased USD 28 billion in parts and supplies from 30 states Created around 386 000 jobs in the United States as result of Toyota s spending and demand from suppliers Celebrated its 50th year anniversary in the United States in 2007 In 1910 Sakichi Toyoda goes to US and is fascinated by cars He makes a deathbed wish to his son Kiichiro to study the auto industry He started a small production system This is different from US production which is very large scale The key turning point was WWII Car manufacturers have to be 50 owned by Japan They impose high tariffs on any imports After the war they want to keep manufacturing autos but ran into problems Labor relations Laborers workers had great bargaining It was very hard History for companies to fire workers Economy is devastated and there is no demand for cars Mass production was not suited for Japan Toyota Way Small batch production wanted to eliminate waste the lean way Wanted to remove defects inventory motion workers worked in teams quality circles Harmonious Labor Relations the employees were given implicit guarantees Lifetime employment and seniority pay Inventory control and supplier relations The typical car has more than 10 000 parts and coordinating it is hard The american way is massive vertical integration In the 1950s Toyota production starts to increase they are faced with the dilemma Should Toyota increase its capacity to manufacture components in house in line with the growth in production of autos or should the company contract out GM 68 of parts are made in house Ford 50 Toyota 25 Why do they contract out so much They wanted lower capital expenditures take advantage of lower wages lower risk not as much capital tied up in non liquid assets How would you characterize Toyota s relationship with their suppliers More cozy than GM and Ford They want long term relationships with the suppliers long term employment but with the suppliers They want the workers of those companies to have trust in them too Toyota took a minority stake in some of their suppliers cross shareholding when they invest in each other so if they both do well they both benefit Suppliers became part of Toyota keiretsu set of companies with interlocking business relationships and shareholdings a supplier network What are the benefits of a relationship like this You have a lot of stability which is mutually beneficial You can have a long term vision which makes more innovative What are the drawbacks R D If one does poorly so does the other Prices and quantity are less important compared to the relationship so they might not be paying the best prices You don t get the innovative new players and creates a barrier to entry for people who haven t forged that relationship Results Surge in labor productivity Production at lower cost compared to GM and Ford International Expansion US Initial entry into US market late 1950s was a disaster and they withdrew in 1964 the japanese cars were not made for American roads or american driving They reentered the market in the late 1960s The big break for Toyota was the oil crisis There was a huge demand for fuel efficient cars Toyota ran into political