While competitors drown in their red oceans. VI to save 2.7 Bn USD for Toyota!
Wow! Probably the most interesting article in ET today.
Already the most efficient car manufacturer in the world and soon to be the largest (unofficially, till the final 2007 numbers are taken into account) Toyota is projecting 2.7 Bn USD of annual savings for the next year. Toyota attributes this fabulous success to something called VI - Value Innovation.
Quoting the article in ET - ' VI seeks to lump some of tens of thousands of components in a car into modules and systems'. The sedan, Crown will be the first car to incorporate this. Toyota President, Katsuaki Watanabe, led this initiative called CCC21 ( construction of cost competitiveness in the 21st century) to save 9 Bn USD in the last 5 years. Toyota is planning to roll it out to its American and European suppliers.
Value Innovation is a method of strategic thinking that looks for Blue Oceans thereby making competition irrelevant. The Blue Ocean Strategy proposed by Chan Kim and Renee Mauborgne focuses on Business Innovation rather than looking at the old school of thought of fighting competition in Red Oceans. Toyota is talking of annual cost reductions with sustained revenue, while competition is still suffering from increasing cost pressures and labour union issues.
Toyota came out with this plan to keep a 10% OPM so as to keep up with the increasing commodity prices and consumers veering towards smaller and compact cars for mileage which have low margins. If this was not enough, Toyota chief is planning to scrap this current VI by 2010 and replacing it with a even more efficient scheme.
Bravo Toyota!
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