Toyota Motor Corporation (TMC) is one of the leading automobile manufacturers in the world. The company has its head office located in Aichi Japan. The company’s business activities include motor vehicle production and sales. The multinational company has manufacturing and assembly plants located all over the world; in North America, Latin America, Asia, Africa, Oceania and Europe. By June 2010, the company had about 320,590 employees located in the company’s branches all over the world. The company was founded in 1937 by Sakichi Toyoda.
The company continues with its traditional philosophies that were introduced by the founders of the company. These are providing quality products where quality starts with the customer. The company continues to put customers’ needs in high regard as seen in the slogan, “Rewarded with a smile by exceeding your expectations”. In March 2011, Toyota Motor Corporation launched a new vision that would ensure Toyota to remain the leading company in the industry through quality products, innovation, and through environmentally friendly conditions (Toyota Motor Corporation, 2011).
Toyota’s quality assurance is based on the Total Quality Management (TQM) activity. Under TQM, all employees, regardless of where they are located, are taught how to be independent, motivated, and how to apply the philosophies of “Customer First”, “Continuous Improvement”, and “Total Participation” to improve products and services (TMC, 2011). Kaizen (improvement) is applied in all functions of the organization: in human resources, in production, in sustainability, in improving internal processes, and in improving quality in order to meet customer satisfaction.
Kaizen is also applied in creating mutual trust relationships with all TMC’s stakeholders. External Environment Business external environment are those external factors, events and conditions outside the business that may influence operations and activities of the business. These may be cultural issues, politics, government policies and natural environment. These are some of the factors that have affected and may still affect Toyota Motor Corporation. A recent example of a natural environment is the effects of the recent earthquake in Japan. The earthquake interfered with the country’s infrastructure.
This will cause delays in the transport of the ordered vehicles from the country as well as possible disruptions in the supply chain. Competition in the motor industry has continued to grow in the last few years. There are more firms coming up in the automotive industry. In addition to this there are rapid changes in automotive technology. This is also influenced by the changing demands by the consumers. Consumer needs keep changing at a high rate. Other factors that may affect the production process will include government policies. A change in taxes in any of the country will affect Toyota’s performance.
As such companies in the automotive industry must keep changing the technologically in order to remain competitive. Economic trends may affect Toyotas business performance. The performance of the economy affects consumer’s purchasing power and spending patterns. An example is the recent financial crisis which contributed to Toyota’s negative performance and losses in the year 2009. (There were other factors that contributed to this loss, mainly the vehicle recalls). Changes in foreign currency exchange rates also directly affect Toyota sales or production where the vehicle parts have to be exported or imported.
Toyota’s Strategy Toyota’s corporate goal is to “enhance its corporate value by maintaining its position as a market leader in the automotive industry and by continuing its growth through global operations and through products reflecting Toyota’s advanced technology that target the local demand in each market (SEC, p. 9). ” In order to achieve its corporate goal, Toyota plans to further enhance its technology, supply capability and marketing, as well as, improve its quality control, and strengthening its cost-competitiveness and personnel development. SWOT Analysis.
Strengths * Strong focus on R&D activities * Diversified product base * Toyota production system keeping costs comparably down| Weaknesses * Lapses in product quality negatively hurt the company’s brand image and sales * Aging product lineup * Declining credit rating| Opportunities * Poised to benefit from increasing demand for hybrid electric vehicles * Global production restructuring plan * Opportunities in Asian market| Threats * Competition in the global automotive market * Tightening emission standards increase production costs * Appreciating Japanese Yen against the U.
S. Dollar| To overcome its aging product lineup weakness, Toyota has developed the following product strategy as shown below: Toyota’s Product Strategy * Product appeal * Improve styling and feel * Market products which meet customer needs of each region * Offer vehicles that inspire enthusiasm to customers * Environmental credentials.
* Bolster its line of hybrid models greatly * Market future green vehicles (PHV,EV,FCV) * Improve energy efficiency further in gasoline engines Toyota believes that maintaining leadership in research and development and improving its efficiency are essential in increasing its competitiveness in the global automotive growth.
To maintain its leadership in research and development, Toyota is focusing on the following: * Further improvement of its hybrid technology in efforts to preserve the environment * The improvement of fuel economy technology in gasoline engines * The improvement of engine performance and fuel economy in clean diesel engines * The development of automobiles powered by fuel cells and other nontraditional fuel technologies, and * The improvement of technologies that pursue driving and vehicle safety.
To improve its efficiency, Toyota is working with suppliers to “increase the efficiency of development, its creating a production structure that can better withstand fluctuations in demand and exchange rates, its reducing the lead times from development to sales, and its strengthening sales capabilities in line with local conditions (SEC, p. 15). ” Competitive Advantage and Sustainability The competitive advantage and sustainability for car manufacturers can come in many aspects. M.
Reza Vaghefi is a Professor of Strategic Management and International Business, who had analyzed where Toyota have maintained and developed their competitive advantage where it was based on a corporate philosophy known as the Toyota Production System. The Toyota Production System (TPS) grows creativity by encouraging employee participation, and brings high level of employee loyalty. Moreover, Toyota’s philosophy in making things right and making the vehicles ordered by customers in the quickest and most efficient way.
Sometimes TPS or Toyota Production System is also called a “lean manufacturing system” or a “Just-in-Time System or JIT. Toyota is well-known for their fuel efficient vehicle. One of their Toyota green investments in hybrid vehicle is Toyota Prius. Toyota Prius was release in Japan in 1997 with accumulative worldwide sales of 3. 0 million units by February 2011, followed by the competitor, Honda Insight in 1999. Like Toyota with their Prius, Ford and General Motors created hybrid cars like the SUV, Escape, Explorer, Expedition and EV1 electric cars.
According to Business Week Magazine, Ford and General Motors have several recalls in their SUV mileage and also lost customers who had signed up for the General Motors EV1 because of the electric heater and battery pack, whilst Toyota Prius have limited breaks failure. Toyota implemented the issues by using the system, “Just-In-Time” or JIT by Autonomation, SMED, and Challenged Faced and Results. Autonomation is characterized as intelligent automation or automation with a human touch by Shigeo Shingo. There are four (4) principles that apply to quality control by using Autonomation System.
The first is detect the abnormality, second principle is stop, followed by fix or correct the immediate condition, and lastly investigate the root cause and install a countermeasure. The intention of Autonomation System is that if there are any unusual situations when making cars, it detects defects automatically and the workers will stop the production line and will not proceed until workers fix the problem. By using the Autonomation System, this will prevent negative economic impact. Toyota implemented the issues by SMED. SMED stand for Single Minute Exchange of Die.
This indicate on how to set-up time in re-engineering the machines in less than ten minutes. One of the videos I observed took twenty minutes of preparation to rebuild a machine using the lean manufacturing, this includes mold preparation for 0 to 3. 5 minutes, mold allocation for 3. 50 min. to 6 min. , mold alignment for 6 min. to 10 min. , component installation for 10 min. to 15 min. , which gives a total trial run for 15 min. to 20 min. The time of changing model was shortened from 6 hours 57 minutes to 20 minutes by using the lean manufacturing workflow.
The last issues Toyota implemented are Challenged Faced and Results. There are several challenges faced by implementing Just in Time by Toyota, and the first challenge is training Toyota employees to do a number of different tasks based on work-flow patterns. Second is reconstruct the preliminary structure of the car and should fit perfectly. Finally, examine the assurance of quality and manufacturing process of the parts used to build the machine before delivering to consumers. Learning Value of Examining Company-Management.
The “Toyota Production System” (TPS), which is also known as “Just in Time” (JIT), is well known among all the manufacturers, companies and organizations in the world. Effective and efficiently use and realization of the concepts and philosophy of the TPS is the fundamental reason of what makes today’s Toyota one of the biggest and most profitable automobile manufacturers in the world. The TPS was created by three people of Toyota back in early years. Those three are the founder of Toyota, Sakichi Toyoda, his son Kiichiro Toyoda, and the engineer Taiichi Ohno.
While they were shopping in a supermarket in the United States, these three were so impressed by the simple idea of an automatic drink re-supplier. When the customer wants a drink, he takes one, and another replaces it. By this inspiration, they developed the famous TPS. The three main objectives are to avoid overburden, inconsistency and waste. The final goal of those three objectives is to eliminate unnecessary work and waste of resources. TPS believes that unnecessary work and waste of resources are the worst things to have in company’s production cycle.
To achieve that big goal, there are several small goals which are much more specific to reach in daily production: (1), Minimize waste (zero waste): TPS requires manufacturers to remove any possibilities to have any unreasonable waste. (2), Minimize inventory (zero inventory): TPS believes that having too much inventory is the evidence of a company’s bad production system. (3), Minimize set-up time (zero set-up time): TPS believes that shortening set-up time contributes a lot to controlling cost and raising efficiency. (4), Minimize process lead time: Minimizing process lead time makes a production system more controllable and more efficient.
(5), Reduce the flows of raw materials among different department. (6), Use only reliable, thoroughly tested technology that serves customers and processes. It is a big part of Toyota’s quality control. After reaching these small goals, Toyota is able to produce required products at the right time and with the amount they need while minimizing cost and waste. People are another big part Toyota’s management concerns. The respect for people is an important concept of the TPS. In Toyota, people respect and understand each other. Everybody is taking every possible effort to build up good relationships with each other.
In most companies in the world, workers are treated as if they are machines. Those workers only follow their managers’ demands and do whatever the company wants them to do. However, unlike workers in those companies, Toyota’s workers are highly involved in the everyday’s production process. They are all working very actively. In addition, teamwork is also a very important term in the TPS. Every time a worker would find a problem or would have any suggestions or ideas in regard with making their production more efficiently, they would report it to their upper managers.
They share their opportunities to help other people in the company so that they could fully develop themselves. With these respect for people, the good relationship with each other, and great teamwork, the TPS believes they can maximize both, individual and team performance. All the above is the general picture of the TPS. The “Toyota Production System” does not only care about reducing cost and waste, but it also cares about the performance of people in the workplace. That’s what makes Toyota’s management so successful. Major Challenges and Changes.
Toyota Motor Corporation has developed a plethora of production techniques throughout the years, such developed techniques has made Toyota successful. Moreover, the price of being successful in car manufacturing sprouted challenges for the company as well. In the beginning of 2004, Toyota was getting many reports of consumers having problems with the accelerator of Toyota cars (Kinicki 49). The problems that were arising for Toyota was that the cars were having unintended acceleration. These problems of unintended acceleration lead to some serious accidents as well as fatalities (Kinicki 49).
Thus, Toyota’s quality control was being question by consumers and their reputation was savagely affected by mention events. In the early 2010 Toyota recalled 23 million cars from the United States (Kinicki 65). The problems of Toyota became very critical that even federal regulators were pressuring them to fix the matter. As problems were looming over the matter Toyota was no being able to pin point the root cause of the accelerator issue which Toyota officials had to tell Congress. In addition, another issue that consumers and regulators were having with Toyota was the slow response of the unintended acceleration.
The slow response had a very negative effect on the reputation of Toyota which built their technique surrounding the aspect of quality. Moreover, on having built their motto in the aspect of quality, Toyota’s strength is their technique “Toyota Way”, in which emphasizes the values of continuous improvement (kaizen) and eliminating waste (muda). Such mention values that Toyota has implemented in their systems of production have made them very successful as a car manufacturer (Kinicki 176). On the contrary to the strengths comes a weakness as to becoming one of the world’s largest car manufacturers.
Toyota started to build plants in other parts of the world and focus was being misdirected in terms of quality (Kinicki 176). Decisions were not being made efficient in terms of the response to critical issues surrounding the quality of the car. On the ethical dilemma of response time of dire problems consumers were starting to doubt the quality of Toyota. Thus, to develop a better response time and better quality control, Toyota’s Motor Corporation President Akio Toyoda concluded that many of these problems with the unintended accelerator loom because excessive focus on market share and profits (Kinicki 169).
The quality aspect of their technique was being short sighted. This bad timing for Toyota has enabled them to begin a new strategic plan for the company. Such plan includes the company reorienting their priorities such as focus more on the quality, and innovation rather than the quantity. Also, Toyota wants to streamline management so decisions can be made faster rather than slower. For example Toyota said the automaker’s board of directors will be reduced to 11 from 27, and executive overseas boosted to 15 from 13 (Kageyama).
In addition to their strategic plan, Toyota wants to focus on green technology. One of Toyota’s plans for the future is to focus more on maximizing resources to its full potential. For example, fuel efficiency which leads us to the hybrid car. Toyota is planning on launching 10 more hybrids by 2015 (Kageyama). As gas prices soar more and more consumers are looking into purchasing hybrid cars. One critic that gives a positive aspect for Toyota is that it was one of the top 15 companies that strongly have a culture that encourages innovation according to Bloomberg Business Week (Kinicki 321).
Having to be one of the top 15 innovative companies can help gain Toyota’s reputation back for the future. Additional Valuable Information The success of Toyota Motor Corporation in the United States can be traced to many factors. Some obvious ones include Henry Fords’ assembly line model, which created a huge pull for Japanese businessmen to create a competitive car that would sell. Ford showed the world what could be done through scientific means. Another reason for Toyota’s success is the implementation of Japanese precision and focused quality control in the work place.
A great factor that goes unnoticed is the way in which Americans have used creativity and know-how in entrepreneurship. In 1957, Toyota Motor Sales was established in a former Rambler dealership in Hollywood, California. Toyota was new to the landscape and did not have incredible sales at the very beginning. According to Charles Ebeling, a retired public relations executive, (who actually worked for Toyota in the 1970’s) Toyota took off with the grasp of American entrepreneurs, who knew how to incorporate television, internet marketing and details of car buying to effectively sell Japanese cars to Americans.
One of these entrepreneurs was Jim Moran. Moran founded Courtesy Ford, a Chicago based dealer in the 1950’s and later became part of the Toyota family in Florida (Southeast Toyota). Moran has an impressive track record, with his Toyota distributor (JM Family Enterprises) now selling 20 percent of all Toyota cars sold in the US. This is about a half a million vehicles per year. Moran introduced the Toyotathon, an annual sales event to America. He showed Toyota ways to sell used cars, and extended warranties.
Although Moran has passed away, his family now sees revenues at nearly 10 billion dollars annually. Toyota has been blessed with the innovation of American leadership in the automotive industry. Another man to look at is Greg Penske, who is CEO of Longo Toyota, serving the greater Los Angeles community. Longo is the largest of all Toyota distributors in America. It has benefited from the fame and knowledge of Penske’s father, Roger Penske, a former car racer converted to seller. These men have introduced countless American families to Toyota, as if it was more of an American car than anything else.
Toyota has had great representation in the states, being ahead of other companies in affordability, style, and environmental issues. While Toyota sells more vehicles in the United States than in Japan, there have been problems with the internal workings of the company in regards to management power and control. The accelerator malfunction crisis has opened a can of worms that Toyota must deal with; Americans have other options besides Toyota. The image of the company seems to have changed. At the core, Toyota is not functionally integrated into the United States. All decision making takes place in Japan.
The chairman of Toyota, Hiroshi Okuda has been responsible for the overwhelming global expansion that has led the auto maker into a hurried, aggressive move towards being the biggest and the fastest, possibly too soon. At Ford, CEO Alan Mulally holds a meeting every Thursday, where his top managers are able to share and communicate information with one another, in order to be on top of strategy and implementation. At Toyota in North America, all decisions report back to Japan. Some would say that this is the type of thing done by a very small company, who does not have the demands from an outside nation for change.
Toyota is however a gigantic company that needs to properly honor its largest business represented in America. Following the accelerator crisis, Jim Lentz, head of the American Toyota Motor sales stated that he had no power to order a recall, a gigantic blow to the moral quality of the company. Jim Lentz, who was then a big executive, was moved from head of Toyota Motor Sales, to head of Toyota Motor North America. Toyota has tried to bolster its attention to its American business by making communication more efficient between sales, manufacturing and engineering in regards to Japan.
Lentz has since moved to Chrysler, a sign of the changing times perhaps. Yoshimi Inaba, a prominent man in the corporation, who has the attention of President Akio Toyoda, has been moved to oversee Toyota North America and Toyota Motor Sales. This should help the communication element in the company. The crisis has left Toyota vulnerable, and could eventually allow companies like GM, Ford, and even foreign Volkswagen to overtake Toyota. In 2008, Detroit’s Big Three began to slash payroll, taking away retiree benefits and cutting jobs or replacing people with cheaper workers.
This sent Toyota on a new drive that would go against their contribution to employee satisfaction. Toyota began to give new workers the highest wages possible after five years instead of three. They built an onsite Medical facility at their San Antonio factory to cut health care costs. Employees could feel too “owned” by this kind of program. They have decreased starting pay at many plants. This is in order to stop GM from getting a worker to car advantage, sending Toyota quickly down from the top. Toyota has to deal with their competition in ways which seem cold and formal.
They must deal with these problems with careful consideration and forethought. In 2010 market share for Toyota has started to shrink, with the new “seven”, GM, Ford, Chrysler, Honda, Nissan, Hyundai, and Toyota. Hyundai, a Korean auto maker is on the rise. Its sales went up as much as thirty three percent in December. Toyota, in contrast was down by five point five percent. Sergio Marchionne of Chrysler, set his target goal of one point million vehicles in 2010. Ford was up twenty percent for the whole year.
The market share for Toyota is going down, and significant decisions have to be made, to keep Toyota from sliding all the way to the bottom of the new “seven”. Toyota is possibly becoming a cash cow.
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