This case study analyses the corporate culture of Toyota by using two theories and then analyze the national cultures of Japan and USA by using two theories and its impact on the corporate culture of Toyota. The models of “Edgar Schein” and “Charles Handy” will be used to analyze the corporate culture of Toyota while the models of “Greet Hofstede” and “Fons Trompenaars” will be used to analyze the national cultures. Afterwards the case study will discuss the climate of Toyota and the impact of the same to its success. Also the case study will analyze the reasons as to why the Toyota Company had to face failures and whether the company culture had any impact in the same. It will also point out on how the culture of Toyota had become inflexible over a period where the company was facing rapid expansions in to other countries and how it had impacted the success of the company. Finally the author will provide with suggestions and advice as to how Toyota could do in the future on developing their corporate culture.
Toyota was established as a commercial vehicle manufacturer in 1937 with a capital of ¥ 12 million. By 1948 Toyota’s debt was 8 times than its capital value. In 1950s Toyota studies US plants, including Ford, and supermarkets during a 12 week study visit. They see little improvement since his previous trip but use supermarkets as a model for just-in-time production. Toyota entered the US in 1958 by launching its model the Toyopet. It established its first overseas production unit in Brazil in 1959 and entered the European market in 1963. Besides manufacturing, the company started a global network of design and R&D facilities covering the three major car markets of Japan, North America, and Europe.
The company underwent rapidexpansion in the 1960s and exported fuel-efficient small cars to different countries across the world. By the early 1970s, Toyota‘s global vehicle production was behind that of only GM and Ford. The oil crisis in the late 1970s gave a major boost to Toyota, with many people shifting to smaller, fuel-efficient cars, where Toyota had a significant presence. In 1988, Toyota opened its first plant in North America in Georgetown, In 2000, Toyota‘s global production exceeded five million vehicles.
By November 2003, Toyota‘s market capitalization touched US$ 110 billion. In 2006, Toyota became the third largest car and truck seller in the US, surpassing Chrysler Group LLC13 (Chrysler). In 2007, Toyota with sales of 2.6 million vehicles overthrew Ford from the second position in the US auto market. About two-third of Toyota‘s workforce was located outside Japan at that time. In July 2008, Toyota replaced GM15 as the largest automaker in the world. In the financial year 2008, Toyota emerged as the largest automobile manufacturer in the world.
2. National Culture & Toyota Culture
3.2. What is Culture
“Culture is not something you can manipulate easily. Attempts to grab it and twist it into a new shape never work because you can’t grab it”- Prof.John P. Kotter “Culture” could be defined as “the sum total of the beliefs, values, rituals, rules & regulations, techniques, institutions, and artifacts that does characterize human populations”. Sociologists generally talk about the term socialization process, referring to the influence of parents, friends, education, and the interaction with other members of a particular society as the basis for one’s culture. These influences result in learned patterns of behavior common to members of a given society.
3.3. National Culture
3.4.1. National culture according to Fons Trompenaars model Fons Trompenaars teamed with Charles Hampden-Turner and developed a theory on culture. Universalism vs. Particularism – Universalism cultures are strictly rule-based behavioral cultures where particularistic cultures tend to focus more on the exceptional nature of present circumstances. Toyota had been a company who was working on relationship based culture where they have even treated the suppliers as of their own. They value these relationships and trusts that through such practices they will achieve success. Specific vs. diffuse – This the manner which the organization or the culture handles their communications (Low context vs. High context) it is obvious that the Japanese belongs to low context and it was the case in Toyota as well where they value long term relationships with employees and its suppliers. Individualism vs. Collectivism – Individualism is about the rights of the individual.
It seeks to let each person grow or fail on their own, and sees group-focus as denuding the individual of their inalienable rights. Communitarianism is about the rights of the group or society. It seeks to put the family, group, company and country before the individual. It sees individualism as selfish and short-sighted. It is clearly proven that Japanese works as groups and all team members and senior managers altogether will decide together on many strategies. Inner-directed vs. Outer-directed (“Do we control our environment or work with it?”) – An inner-directed culture assumes that thinking is the most powerful tool and that considered ideas and intuitive approaches are the best way. An Outer-directed culture assumes that we live in the ‘real world’ and that is where we should look for our information and decisions. The Japanese culture had strong beliefs on thinking power. Even at Toyota they created their own environment through introducing TPS and Toyota way.
3.4.2. National culture according to Greet Hofstede’s model National cultures can be described according to the analysis of Geert Hofstede. It has five dimensions –• Power Distance, • Individualism, • Masculinity, • Uncertainty Avoidance, • Long-Term Orientation. Japanese national culture had a huge influence in corporate culture of Toyota even though they had their operations stretched towards the other parts of the world. Power Distance – By means which you could understand “the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally”. As per the table given below, it shows that Japan has more power distance than of USA culture. It’s clear as where all the strategic decisions were taken through the head office of Japan through a hierarchical layer who had more authoritative power.
Most of the decisions were dependent on fewer individuals. Individualism – Individualism is the one opposite of collectivism that is the degree to which individuals are integrated into groups. “Individualism pertains to societies in which the ties between individuals are loose: everyone is expected to look after himself or herself and his or her immediate family.” In Toyota all employees were treated equally important, referred as knowledge workers and everybody was given the freedom to come up with ideas. As per the table given below USA can clearly been seen as individualistic culture where as Japan is more towards Collectivism culture. Masculinity – is the degree to which ‘masculine’ values like competitiveness and the acquisition of wealth are valued over ‘feminine’ values like relationship building and quality of life.
According to the table, both Japan and USA are having high Masculinity characteristics but it’s much higher on Japanese cultures. In Toyota, they were obsessed to overtake their competitors and become as the largest automaker in 2008 simply to prove their power proving masculine approach towards their competitors. Uncertainty Avoidance – focuses on the level of society’s tolerance for uncertainty and ambiguity. A High Uncertainty Avoidance ranking indicates the country has a low tolerance for uncertainty and ambiguity. This creates a rule-oriented society that institutes laws, rules, regulations, and controls in order to reduce the amount of uncertainty. Japanese try to avoid uncertainty by planning everything carefully. Japan is a culture that depends on rules, laws and regulations.
Japan wants to reduce its risks to the lowest and proceed with changes step by step. The United States scores a 46 compared to the 92 of the Japanese culture. Uncertainty avoidance in the US is relatively low, which can clearly be viewed through the national cultures. In Toyota, you could see that they make all the related parties (Supplier, Designers, Engineers, Dealers and Partners) involved in the manufacturing process right from the designing stage to marketing the product so that they produce exactly what is needed with minimum risk. Long-Term Orientation – focuses on the degree the society does or does not embrace long-term devotion to traditional values. High Long-Term Orientation ranking implies that the country embraces to the values of long-term commitments and respect for tradition and where long-term rewards are expected as a result of today’s hard work. This is very evident as Toyota has spent much revenue and focus on R&D activities even at tougher times.
Hofstede’s Dimension of Culture Scales
When considering these factors, it is obvious that Toyota (which comprises with Japanese culture embedded to its organizational culture) will have a significant impact to its culture when working in USA as USA culture is much more different to than Japanese culture.
3.4. Culture of Toyota
3.5.3. Toyota’s culture according to Edgar Schein’s Theory Schein’s three levels of culture model were developed in the 1980s. Schein identifies three distinct levels in organizational cultures: 1. Artifacts and behaviors
2. Exposed values
3. Basic Assumptions
Artifacts of Toyota – Artifacts are the visible elements in a culture. Artifacts can be easily recognized by people. Artifacts can be dress codes, furniture, art, work climate, stories, work processes, organizational structures etc..Toyota’s artifacts could be * Fuel efficient vehicle manufacturer
* Concentrated highly on maintaining quality and minimizing waste. Basic Assumptions of Toyota – Basic Assumptions reflect the shared values which are within the specific culture. These values oftentimes will not be especially visible to the members of the culture or the external parties. Assumptions and espoused values are possibly not correlated, and the espoused values may not at all be rooted in the actual values of the culture. This may cause great problems, where the differences between espoused and actual values may create frustrations, lack of morale and inefficiency. Toyota, when they ventured in to U.S. is when conflict in culture start to appear. Japanese corporate culture often conflicts with American management styles is partially due to a basic underlying assumption of Japanese culture.
* Japanese Corporate Decision-Making involves group where Americans make decisions as individuals. * Japanese management is much more focused on relationships with their employees than rules to ensure corporate goals are met. * Managers in Japan depend on the honor system to get work done, relying on their workers’ trust and good will * The traditional structures and the hierarchy maintained by Toyota * Functional managers acting as mentors to other staff to understand the values and the culture of the organization * Chief engineers played a vital role in the organization’ * All employees of all levels were treated as knowledge workers * Encouraged all employees to communicate in simple language and encouraged them to be a part of different clubs & groups to share ideas amongst them. * Personal relationships were valued on a higher level
3.5.4. Toyota’s culture according to Charles Handy Theory Charles Handy gave a classification to the organizations culture into range of four cultures. The four cultures he discusses are Power’, ‘Role’, ‘Task’ and ‘People’. Power Culture – Power is concentrated in a smaller group. Power radiates out from the centre, usually a key personality, to others in the organization who send information down to other departments, functions or units. After the Toyota Company had established after global expansion over different continents, the main decision making power was still with headquarters which reflects the control was centralized to Japan headquarters. Role Culture – This culture comprises with several functional units of the organization which have to implement the decisions.
The strength of the culture lays in specialization within its theses functional units. Interaction takes place between the functional specialism by job descriptions, procedures, rules and systems. Toyota showed lot of signs of role culture. During the Manufacturing process, they got the Engineers, suppliers and all the other related parties involved from the designing part to the sale of vehicle. Also they treated all employees as equal and each employee were given the opportunity to give their suggestions or express their feelings. Also Toyota had separate divisions operating for separate functions such as Sales, Finance, Legal, Manufacturing and R&D.
Task Culture – Such cultures are of organizations which are much involved in R&D activities. They will create temporary task teams to meet their future needs. Information and expertise are the skills that are of value here. In Toyota it was not much shown this type of culture but since Toyota were very aggressive in intensive R&D activities and they emphasized the fact that engineers to spend more time on core engineering and technical skill acquisition, it shows a little bit of task culture in existence in Toyota.
3. Corporate Climate
4.5. What is corporate climate?
Climate is defined as the recurring patterns of behavior, attitudes and feelings that characterize life in the organization. Climate impacts employee attitudes and motivation which directly impact on business performances.
4.6. Was the climate correct in Toyota
The corporate climate in Toyota was set right at the beginning and lost its way when the expansion process was taking place. As we all know, Toyota has been valued as an organization which been driven through its values, processors and philosophies. Their main focuses were initially on understanding the requirements of the users through intense R&D activities and fulfill the same while maintaining high level of quality. For such they had developed mechanisms such as TPS or Toyota way. The Toyota Way was invented, discovered, and developed over decades as talented Toyota managers and engineers, learned to cope with its (Toyota’s) problems of external adaptation and internal integration. Managers understand the challenges and context that led to active on-the-floor problem solving, not theoretical, top-down exercises. Communications were very strong amongst the functions units. With the rapid expansion and the globalized diversifications being carried out (more broadly in USA), Toyota turned in to an ambition driven company that ignored its traditions.
The practice of conveying the Toyota way to an alien culture was an uphill task and a costly exercise. Also there were signs that the top level of the company had its own issues. 1995 when Okuda became the President, he made some dramatic changes to the long lived traditions of Toyota culture by cutting costs, increasing focus on product development and revamping of the product designs. Under his leadership, Toyota went on massive overseas expansion in a rapid phase but the cultural development and the processed values were not conveyed in the same phase. Once the expansions were set the focus/objective of the company became to be the largest car making company in the world beating GM.
They were obsessed with this new vision. In parallel to this new vision somewhere in early 2000s, they launched the CCC21 cost cutting program. Due to such many of Japan employees were reduced from overseas plants and due to such the transferring of age old quality practices and corporate philosophy couldn’t be done to its subsidiaries. And finally due to new vision of being the largest car maker, more of production was focused than quality and Toyota looked for suppliers who could produce parts at a lower cost. Due to cultural change and knowledge gap between suppliers and Toyota, series of downfall in quality was observed later in Aug 2009.
4.7. Areas which went wrong with culture
As per the case study it is evident that the two countries naturally have different cultures and they will impact the new venture which has cross cultural dynamics. In Toyota culture, they were very concerned on the values and the processor and the people involved. It’s much towards the Japanese cultural influence. But with the expansions, such practices were not effectively transferred to the employees of USA where they were part of a different culture. Even though they set up different division set up in different parts of USA all the main decisions were taken from the headquarters which was in Japan.
The overseas divisions were not given much authority. Also another facture was that in Japanese culture they need lot of paperwork to take a decision where in USA culture they take quick decisions. Due to such several crucial decisions could not be taken on time leading to losses and at times up to legal penalties. And the Rigid structures and the Hierarchy were not helping the operations or were not letting the company grow towards the future. As the decision making was solely with the headquarters, it did not empower or give an opportunity to the managers in the USA offices as they were to follow set orders or tasks. 4. Suggestion for way forward
5.8. How could Toyota do better in the future
When managing cross cultural issues, it is important that both parties spend a considerable amount of time on understanding each other’s cultures. It is very important that while the top level managers concentrate on the new diversification, the product lines and the bottom lines, they should strategize on how to manage the cultural issues as well. Toyota could have send the senior managers to USA prior to the expansions to really understand the culture of USA and same way they could have brought in the senior managers who were to be recruited from USA to Japan so they could have an deeper understanding of their corporate culture and the values. Same way they must be flexible on the structures and the Higher achy of the company by empowering the other unit heads to take decision and to be innovative from their end and back them on their decisions. Instead of adopting a culture where rewards are given on growth or production, it could be a combination of such and encouragement workers to perform better in order to collectively improve the company.
More relationships could have been built with the suppliers and the dealers in order to maximize the production output and to develop the exact required features. The workforce in the USA plants to have a combination of Japanese and USA employees even at the senior levels. This way the touch of the original Toyota values and philosophies will not die fast and could be incarnated to the other employees as well. While trying to be the leader in automobile market, its not advisable to use only the cost leadership. It’s shown in the case study and in many other articles which done by industry experts that due to severe cost reduction practices, Toyota lost its core value which is Quality on its product. Hence it’s always good to have a mixture of strategies when conquering a market. Another aspect is Quick decision making. It is very important that when workings with a culture like USA who are keen on quick decision making, Japanese should react fact to situation otherwise will be at the risk of obtaining losses. R&D activities must be focused on the correct path as such practices will define the future of the company.
If the R& D was done properly at Toyota they wouldn’t have acquired so many losses through recalls and poor product designs. And the sharing of information is a definite need when dealing with cross cultural matters. Since both cultural parties are new to each other such communications would bridge the gap. 5.9. Measures which they could take to effectively embed the proper culture to its employees As mentioned earlier, studying the involved cultures is an important process in any organization. For an example, the company which I work for (which is a leading Optical service provider in the country), they closely monitor the culture of the suburb or the region which they think of expanding before taking any key decisions. Same way, Japanese senior managers could have stayed in USA for long enough to get a grasp of their culture and understand their values and way of doing things. Understand the culture of the market which you are entering is a key strategy.
Secondly they could have brought in the USA managers whom were to take up senior position in USA plants much prior to the installation of the factories as n induction programme or as an apprentice programme so that the Japanese managers could really transfer the cultural aspects and the values of Toyota which has been practiced for the past decades successfully. In my organization we do such practices as we recruit employees from the region where we are planning to expand to and place them at out head office so that they will be well trained and would really understand our values. Similarly, we send one of our senior staff or Managers to the newly opened branch once its stetted up to be there for a certain period so that he will be an mentor to the others and also he will bring in the details of the prevailing culture of the said region.
Another thing Toyota must do is to empower the Managers from the said culture so that the decision making and other practices would be much more effective and related to the actual requirement. For this I could again take my company where all the branches are operated as separate profit centers and the Branch manager is empowered to take decision on behalf of the organization on many operational and at times on some strategic matters.
Also for the employees of the two cultures to have much closer ties, Toyota could use the prevailing technologies such as social networking sites whereby they could get the employees of two cultures to meet up on a virtual world and get to know better and even to share ideas amongst them. This way the belongingness and the team work will develop amongst the employees. In our organization, we organize staff day outing, workshops, outward bound training programmes and other get-to-gather activities whereby they will get to know each other better and share their ideas amongst them.
As most of the solutions are given in the previous paragraphs, the following points to be considered when managing cross cultural issues. When applied to cross cultural management of organizations different corporate cultures can be identified and proactive solutions must be developed to ensure compatibility between all parties and its cultures. And each culture must be valued as they are similarly valuable to both parties. When recruiting new employees it is very important to mentor them about the prevailing corporate culture and the values attached to these cultures. Train and socialize current employees to be more receivable for the coming alien cultures. Change and be flexible on organizational structure to give employees more control. Empower employees to make decision about their jobs.
The long lived traditions and the best practices should not be neglected at any time and more importantly the culture plays a very vital role on the organizations success.
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