This paper explores multiple published articles discussing Toyota Motor Company’s strengths, weaknesses, opportunities and threats. A review of Toyota’s decisions to hide important information prior to recalls leads us to a discussion of where Toyota can go from here. The paper includes recommendations for Toyota Motor Company in order to move forward after their 2010 recalls. In addition, organizational changes will assist Toyota Motor Company in overcoming their recall problems.
Quality Management within Toyota Motor Company
After a number of discouraging recalls at Toyota Motor Company in 2010, a number of quality management techniques were implemented. Toyota Motor Company’s SWOT Analysis played into the newly implemented quality management techniques. Toyota’s strengths allowed them to fight back quickly against these recalls that could have ultimately led to Toyota’s fall from one of the top motor company’s. Toyota Motor Company’s strengths include dominant position in the marketplace, strong brand recognition, strong focus on research and development, and broad production and distribution network. In addition to Toyota’s strengths, their weaknesses were reviewed in order to find opportunities to capitalize upon. The recalls were obviously a large weakness at Toyota. Opportunities were reviewed which included the growth of the global automotive industry. Last, Toyota’s threats were reviewed. Here it was found that powerful competition is a worry for Toyota Motor Company.
After the review of Toyota Motor Company’s SWOT Analysis, the issue of the recalls was assessed. Analysis shows the issue within Toyota Motor Company did not appear overnight. However, secretive management styles let the company astray. A diagram was created by functional area to summarize how Toyota has responded to these recall problems. The functional areas reviewed include management, production design and safety, quality, and manufacturing.
Last, the analysis of Toyota Motor Company’s recall and quality management issues are discussed from a point of solving the problem. Recommendations are discussed that will help Toyota Motor Company to turn their weaknesses into strengths. Method Discussion
• Dominant position in the marketplace
• Strong brand recognition
• Strong focus on Research & Development
• Broad production and distribution network
• Product recalls have the ability to negatively affect brand image
• Declining sales in crucial geographic areas
• Growth of the global automotive industry
• Potential benefit from partnering with BMW
•The outlook for the new global car market is strong
• Powerful competition
• Appreciation of the Japanese Yen
• Environmental regulations
Strengths. Toyota has a number of internal product strengths as noted in the SWOT Analysis table above. Toyota’s market share in 2011 was 16.5 percent, its highest market share in 4 years. This strong market share allowed Toyota to hold a competitive advantage against their competition. In addition to holding a dominant position in the marketplace, Toyota possesses strong brand recognition through a number of brands. These brands include Toyota, Lexus, Prius, Corolla, Yaris, Camry, Sequoia, 4Runner, Scion tC, Highlander, Land Cruiser, and a number of other brand names. These brands are some of the most desired premium brands in the world according to the Company Profile report for Toyota Motor Company documented by MarketLine. Another strength of Toyota is their strong attention to research and development. According to the Company Profile report, Toyota’s focus on research and development is pointed towards the creation of new and improved products.
Research and development operations are conducted at 14 facilities located around the world. This strength has allowed Toyota to increase the technology included in existing products. One of these products, a Pre-collision System (PCS) helps drivers avoid collisions. Overall, the strong focus on research and development has been a big strength for Toyota. Last, Toyota’s production and distribution network has been a big strength for the company. Toyota produces automobiles, related parts, and other components through more than 50 manufacturing companies throughout 27 countries and regions, not including Japan. As mentioned on the Toyota Motor Company website, major locations include Japan, the United States, Canada, the United Kingdom, France, Turkey, Thailand, China, Taiwan, India, Indonesia, South Africa, Australia, Argentina, and Brazil.
As reported by Toyota Motor Company, during fiscal year 2013 the company had consolidated vehicle sales totals of 8.871 million units (TCM, 2013). As reported by Toyota Motor Company, this was an increase of 1.519 million units compared to the previous fiscal year. In addition to the widespread production of Toyota products, the company has a large distribution network. Toyota’s distribution network is one of the largest in Japan encompassing four sales channels (Toyota, Toyopet, Corolla, and Netz). In 2012 the distribution network of these channels was comprised of 283 dealers. In addition to this network, Toyota operates over 170 Lexus sales channels in Japan. As reported by Toyota Motor Company, in fiscal year 2013 these networks accounted for the following vehicle sales: Japan sales totaled 2.279 million units
In North America vehicle sales totaled 2.469 million units
In Europe vehicle sales totaled 799,085 units
Asia came in at total vehicle sales of 1.684 million units
Central and South America, Oceania and Africa came in at 1.640 million units As you can see, Toyota’s distribution network is widespread allowing for diversification and a wide reach of clientele, ultimately boosting revenues and sales. Weaknesses. A large focus of the case study focuses on the weakness of Toyota’s product recalls. As many are aware, Toyota has encountered a number of recalls in the recent past. It is a concern that these recalls could negatively affect Toyota’s brand imagine ultimately leading to decreased sales for the company. When searching for Toyota recalls it was easy to find a few recent recalls. The most recent is a recall of 700,000 Toyota Prius models which were recalled over electronic issues in the United States (csmonitor.com, 2014).
Another very recent recall includes certain versions of the Lexus RX crossover. In this case, more than 261,000 vehicles are being recalled due to a brake issue (csmonitor.com, 2014). In addition to the many recalls, Toyota has been involved in a number of lawsuits. In December 2012, Toyota settled a suit by paying $17.4 million to the National Highway Traffic Safety Administration to settle claims related to the June 2012 recall of potential accelerator pedal entrapment issues. This bad press will ultimately result in a negative effect on consumer’s confidence in Toyota’s brand. In addition, the settlement of suits ultimately decreases Toyota’s profits. As a result of this bad press Toyota saw a decline in 2012 sales in important geographic areas. Declining sales in fiscal year 2012 were seen across North America, Asia, and Europe. Opportunities. As reported by the article, Global automotive industry to experience modest growth in 2012, a number of opportunities exist in the global automotive industry (2012).
The Japanese auto industry responded from natural disasters which had caused reduced inventories and production. It is forecasted that the industry will continue to grow increasing Toyota revenues. In June of 2012, BMW and Toyota signed a long-term partnership. The two companies are partnering on the developments that will help to increase market share and sales. This relationship is expected to increase technology between the two companies as well as result in new product development. In addition to these opportunities, the new car market is experiencing moderate growth which will assist in increased sales and profits. Threats. Intense competition in the worldwide car market has become very competitive. This competition will likely increase in the upcoming years as competitors add more technology and increase developments. In addition to the intense competition, the appreciating Japanese Yen has become a big concern for Toyota. Last, environment regulations have the potential to increase production costs. Emissions regulations that are updated periodically could cause issues in new car production.
Evolvement of Quality Management Issues
At first glance, it seems that Toyota’s gas pedal issue appeared overnight. However, upon further research, evidence was found to prove the opposite. As reported in the article Secretive Culture Let Toyota Astray, evidence that Toyota cars could suddenly speed up had been piling up for years (2010). At the time of the recalls, Toyota had known about this gas pedal problem for more than a year. The problem was stated to be Toyota’s secretive corporate culture in Japan which ultimately conflicted with United States requirements that auto makers disclose safety threats. New initiatives brought to the table by Toyota have attempted to correct the previous secretive culture of Toyota. Total quality management initiatives have been put in place to assist in better customer service and safety and repair issues. According to Jacobs and Chase, total quality management can be defined as managing the entire organization so that it excels on all dimensions of products and services that are important to the customer (Chase and Jacobs, 2014, p. 296). The table following this discussion addresses the steps Toyota has taken in response to its recent quality recall problems.
Quality Management Steps
• Managing Director names to oversee any safety-related issues
• Top down management approach
Product Design & Safety
• Troubleshooting teams known as Swift Market Analysis Response Teams work to find any safety issues that need to be reported Quality
• TAQIC – Toyota Advanced Quality Information Center staffed by a group of employees who compile repair reports from dealerships worldwide
• 1000 engineers hired to spot-check quality
• No drastic changes to assembly lines
As discussed in the diagram above, there were many opportunities for Toyota after their encounter with the recall situation. Akio Toyoda, the head of the company, acted quickly by implementing a top down management approach instead of the more popular Japanese “bottom up” approach that slows down the decision making. In addition, Akio cut board of directors by fifty percent and cut out management layers. Akio also began meeting with his top five advisers on a weekly basis. In these meetings decisions were made quickly. Akio pushed his team to make “always better cars.” This change in the way the organization is managed helped Toyota to stay on top even through the recalls.
Many recommendations have been made to assist Toyota Motor Company in improving the recall situation they encountered in 2011. Some recommendations Toyota should follow include as recommended by the North American Quality Advisory Panel include the following: Give North American operations more independence in making recall decisions Strengthen quality control processes
Extend development time of new products to include more safety tests Create a role of Chief Safety Technology Officer Create and launch a Safety Research Center focused on protecting the most important clientele (children, teens, and seniors) These ideas follow the concept of total quality management which focuses on two fundamental goals: Careful design of the product (in the case of Toyota Motor Company, the vehicle) Ensure that Toyota Motor Company systems can produce this design in a consistent manner Quality at the source seems to be a great way for Toyota Motor Company to proceed. Quality at the source means that the person who is doing the work is taking the responsibility for making sure the work meets specifications. As previously discussed, safety control will be a huge initiative for Toyota Motor Company going forward.
If implemented, these recommendations can do a lot to help Toyota Motor Company increase their organizational effectiveness. As previously discussed, many organizational steps were taken by Akio Toyoda after these recalls. It seems that Toyota could greatly benefit from organizational learning. As stated by Operations and Supply Chain Management, “it has been argued that organizational learning is critical to sustaining a competitive advantage” (Chase and Jacobs, 2014, p. 138). Organizational realignment was important to Toyota Motor Company after the 2010 and 2011 recalls. According to a Toyota news release in December of 2008 organizational changes include the establishment of the below:
A Government and Public Affairs Group which was focused on quick response to inquiries from around the world while also unifying public affairs functions. An Accounting Group aimed at strengthening the business management and financial management system of Toyota Motor Company. A Europe and Africa Operations Group intended to assist with business planning in African and Central Asia. The group was also established to conduct business promotion events in both Europe and Africa. A Production Engineering Group aimed at increasing the strength of the quality control system for semiconductors for hybrid vehicles. The recommendations made are important to Toyota’s future. Reorganization and creation of new groups within the organization will help Toyota to overcome these recalls.
Ingram, A. (2014, Feb 12). Toyota recall: 1.9 million Prius vehicles recalled to fix software glitch. Retrieved from http://www.csmonitor.com/Business/In-Gear/2014/0212/Toyota-recall-1.9-million-Prius-vehicles-recalled-to-fix-software-glitch Jacobs, F. R., & Chase, R. (2014). Operations and supply chain management. (14 ed.). New York, NY: