Question

Toyota is the largest single firm in Japan. Toyota is primarily an automobile manufacturer but controls many companies in their supply chain. Which type of cooperative strategy does this represent?

Answer 1

Toyota's control over its supply chain exemplifies a vertical integration strategy that capitalizes on economies of scale and international trade to foster innovation and competitiveness in the global market.

Step-by-step explanation:

Toyota's strategy of controlling many companies in its supply chain represents a vertical integration cooperative strategy. This strategy allows Toyota to maintain a level of control over its supply chain, ensuring consistency in quality and the availability of parts. By being the largest firm and a dominant force in the automobile industry in Japan, Toyota leverages economies of scale, which reduces the average production costs by spreading them over a larger number of units. Moreover, participating in international trade helps Toyota combine these lower costs with the ability to compete globally and offer variety to consumers. This global competition drives innovation and responsiveness to consumer demands, leading to the production of better-quality vehicles.

Answer 2

The situation you described, where Toyota controls many companies in its supply chain, is indicative of a vertical integration strategy. Vertical integration involves a company expanding its business operations within the same industry but at different stages of the production value chain. In this case, Toyota's control over various companies in its supply chain reflects a form of vertical cooperation.