Toyota's Business Strategy Increases Profits by 9%

Toyota shows other businesses how to increase profits with their new business strategy of diversification, experimenting with emerging markets and exploring multiple revenue streams.

According to an NYTimes.com business article, Toyota is slowly gaining ground in their efforts to overtake General Motorls as the leading global automaaker by sales. “Operating income has become more equally balanced among the regions, with significant higher contributions from growing markets, specifically emerging and resource-rich countries,” Takeshi Suzuki, a board member, said in a statement.

That is a winning strategy for the company, analysts said.

“It’s a good thing for Toyota to diversify its revenue sources away from North America into the emerging markets,” said Hirofumi Yokoi, senior manager for Japan and South Korea forecasts at CSM Worldwide, a provider of automotive market forecasting services. “Mixed revenue sources will help the company hedge against risks in specific markets.”

While sales declined in North America, they increased in Asia, especially in Indonesia and Thailand, and in other regions including South and Central America, Africa and Oceania.

In the nine months through December, less than half of Toyota sales came from its showrooms in North America.

(image frm boston.com)

Sales to North America slid to 44 percent from 57 percent a year earlier, while Asian sales rose to 25 percent from 15 percent.

Toyota, which is widely expected to overtake G.M. in annual sales in 2008, has also expanded its global production footprint. Late last year, the company opened a plant in St. Petersburg, Russia, with a capacity to produce 50,000 cars a year.

The Russian factory is scheduled to begin operating next year and initially produce about 20,000 cars a year, Toyota said.