Introduction to Business

One of the renowned companies which have produced many types of product and are the part of Toyota keiretsu is not other than DENSO which is the third largest auto parts supplier in the world. Though DENSO spun off into a separate company but still 25% is still owned by Toyota. Besides manufacturing Auto parts they also manufacture water purifier, spot heater and biodegradation garbage disposals. But however, its real strength was the automotive parts industry only. DENSO has got a production facility in every world region except in Africa and Russia.

Although DENSO is a major supplier to Toyota, it also supplies parts to all the companies manufacturing automobiles in Japan. Usually this company is known for creating the QR Code, a two-dimensional bar-coding system which is particularly prevalent in Japan. DENSO has separates its production facilities into three parts i.e. manufacturing area, a subassembly area, and a final assembly area. It also supplies air conditioners to the plant on a JIT basis.

Q1.How has DENSO's relationship with Toyota affected its international strategy?

DENSO is part of Toyota's keiretsu. Toyota has a vertically integrated supply chain, which DENSO is part of. Toyota accounts for over half of DENSO's business. When Toyota expanded internationally, DENSO had to follow to supply Toyota's overseas plants. So Toyota initially set DENSO's international strategy However, DENSO started supplying other automakers with parts. Economies of scale are equally important for parts suppliers and assemblers. Toyota has also benefited from Denso's scale economy, which translates into lower costs, yet

Better quality products. The contradiction is that Denso has attained market power and pricing autonomy by becoming an oligopoly, which has freed it from Toyota's grasp somewhat. It attains this bargaining power through customer diversification, with Toyota's consent. But, Toyota paved the way for DENSO by being the first in many new markets, such as North America, and by supplying needed capital to DENSO.