Toyota-ica

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Industry and Competitive AnalysisChapter 2 : Economies of Scale and Scope

Case Study : PT. Toyota Motor Mfg Indonesia

PROGRAM STUDI MAGISTER MANAJEMENFAKULTAS EKONOMIKA DAN BISNIS

UNIVERSITAS GADJAH MADA

Kelompok I :Danang Ika WidanaMeidi Indah Nurmiati


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Content :

1. Company Profile2. Theory

Case Study on PT. Toyota Motor Manufacturing Indonesia

2.1 Economies of Scale

2.2 Economies of Scope

2.3 Special Sources of Economies of Scale & Scope

2.4 Product Life Cycle

3. Conclusion


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1st STEP

TAM

(Distributor &

importer)

MULTI ASTRA

(Assy Plant)

TOYOTA

MOBILINDO

(Component

Plant)

TOYOTA

ENGINE

INDONESIA

(Engine Plant)

TOYOTA

ASTRAMOTOR

AI : 100

Distributor

CBU Importer

Service-Parts

ManufacturerExporter

AI : TMC

51: 49

AI : TMC

5: 95

TMMIN

TAM

2nd STEP (1989) 3rd STEP (2003)

AI : TMC

51: 49

AI : TMC

49 : 51

AI : TMC43: 57

AI : TMC

51: 49

1976

1971

1973

1982

AI : Astra InternationalTMC: Toyota Motor Corp.

1. Company Profile


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MPV PU / Truck

Passenger

Medium

Mediumup

Premium

Loadcapacity

Low

Medium

Small

Sedan SUV

HILUX

HILUX D-Cab

Avanza

RUSH

LEXUSLX

LEXUSRX

LEXUSLS

LEXUSIS

VIOS

LEXUSGS

Commercial

ProductionModel

Product Line-up

Nav 1 + Etios


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Welding Shop

Utility

Part Painting

Main Office

Test Course

( 1 Km)

Painting Shop Press Shop

Commond Yard

Employee Center

Polyclinic

Domestic Part Area

Final Test Area

West Assy Canteen

Assembly Shop

Painting Canteen

Plant EstablishmentGround Breaking : May 29, 1996Operation Started : March 10, 1998

Inauguration : April 20, 2000Investment : USD 60,700,000

1st Capacity UpStart Construction : Jan, 2003Investment : USD 14,300,000New Capacity : 75,000 units/year ( 2 shift )

2nd Capacity UpStart Construction : May, 2005Investment : USD 40,300,000New Capacity : 100,000 units/year ( 2 shift )

Area : Land 100 HA ( Used 30 HA )

Import Part Area

Logistic Warehouse

Mosque

Toyota Karawang Plant # 1 Lay Out


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2.1. Theory

Economies of Scale

The cost advantages that enterprises obtain due to size, with cost per unit ofoutput generally decreasing with increasing scale as fixed costs are spread outover more units of output.

Source : www.wikipedia.com


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U-Shaped Average Cost Curve

L-Shaped Average Cost Curve

-Average Cost decrease by increasing ofproduction quantity.

-Average Cost achieve minimum onspecified production quantity and increase.

-Average Cost decrease by increasing of

production quantity.

-After achieved minimum efficient size(MES) the average cost would be stable.

Average Cost in PT. TMMIN

EXAMPLE:

TMMIN try to expand output run upagainst capacity constraints.

EXAMPLE:

TMMIN try to expand output by build anew production plant produceefficiently


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1st Plant (Current)

2nd Plant (New)

WA T W

T

A

(1,000 Unit/Yr) 1st Plant 2nd Plant Total

Production

Capacity110 120 230

P


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2.2. Theory

Source : www.wikipedia.com

Economies of Scope

Reductions in the average cost (cost per unit) associated with increasing the

scale of production for a single product type, economies of scope refers tolowering the average cost for a firm in producing two or more products
http://en.wikipedia.org/wiki/Average_costhttp://en.wikipedia.org/wiki/Average_costhttp://en.wikipedia.org/wiki/Average_costhttp://en.wikipedia.org/wiki/Average_cost


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2.3. Special Sources of Economies of Scale & Scope

1. Economic Density

2. Purchasing

3. Advertising

4. R & D

Spreading Fixed Cost


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R&D...

Toyota conduct Regular Research and Development to find out an outstanding

automotive technology.

Example : Research to find out hybrid car

THS IIFCHVTHS

Ultimate eco-car

CNG DPR

DPNR

Common-rail VVT-i

Lean Burn

D-4

EV

DieselEngine

Alternative Energy

GasolineEngine

ElectricVehicle

TOYOTA puts big

concern in

searching for theultimate eco car

withHybrid

Technology as its

key technology


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What is Hybr id System

+

Fusion between an internal combustion engine andelectric motor, achieving different function through

different power combinations to create optimum synergy and

output.


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2.3. Special Sources of Economies of Scale & Scope

1. Economic Density

2. Purchasing

3. Advertising

4. R & D

5. Physical properties of production

6. Inventories


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Inventories...Toyota implement Just In Time (almost No inventories)

Paint

PartMaker

M/C ProcessMaker

Casting

Body

Press

Line

Off

FlatSupplier Assembling

Part Forging

Body Painting Total AssyPress

Body

Press

Painting

Finish

Hammering

PartMakerupplier

Just in Time : Pull System Production by Next Process


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Proses Sebelum(Mae Koutei)

Proses Berikut(Ato Koutei)

Line

StrainerTempatShipping

KanbanLeader

KanbanLeader

Box Kosong

PartPart Supply

Just in Time Tools : Kanban


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2.4. Product Life Cycle in PT. TMMIN

Automotive industry is follow Product Life Cycle

Introduction Growth Maturity Decline

To prevent declining sales, PT. TMMIN conducted innovation

Like : Minor Change, Big Minor Change, Full Model Change


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Toyota Innova Life Cycle

No Year Phase

1 Sept 2004 Introduction. First period produced in Indonesia

2 Aug 2008 1st Minor Change

3 Aug 2009 2nd Minor Change (introduction of Innova J-Grade)

4 July 2010 3rd Minor Change

5 July 2011 Big Minor Change

6 Aug 2012 4th Minor Change

Case Study


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Example of Big Minor Change


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3.Conclusion

1. PT. TMMIN implement economic of scale :

- Firstly TMMIN implement : U-Shaped Average Cost,however after production is over max plant capacity

TMMIN will built new factory and finally implement

L-Shape average cost.

2. PT.TMMIN also implement special sources of economies scale &

scope, they are:- Economic Density

- Purchasing

- R&D

- Inventory

3. PT.TMMIN also implement innovation in their PLC


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