Case study discussion on The U.S. automakers and Toyota / and Decentralisation - Essay Example

Toyota overtook the three major companies in 2007 by producing more vehicles in global market and overtaking them in global sales. Toyota has by far been the largest automaker in Japan. Toyota’s effective application of Transaction Cost Analysis (TCA) has significantly helped it in surpassing the perennial world leaders, General Motors. To effectively succeed in global market, the Japanese Toyota Company relied on Transaction Cost Analysis in collecting accurate information regarding global market (Bengt and John 1998, p.79). Transaction Cost Analysis assisted the company in the analysis of social, environmental, and economic status in various global markets.

The collected information was very essential in facilitating adequate analysis of benefits and threats that prevailed in several regions in the global market. As a result, the Toyota Company introduced sport vehicles at relatively low prices compared to other global competitors. Additionally, the company’s automobiles were also reliable and attractive as per the global demands (Jeffrey & Harbir, 1998, p.661). The United States of America’s automakers rely on the Property Rights Model. In this model, the automakers distinguish not only the geographical settings and size of the company but also the business model.

Most of their operations are unionized thus leading to higher labour cost (Jeffrey 1996, p.271). Based on the available statistics, the Transaction Cost Analysis Model which is used by Japanese Toyota Company is more effective compared to Property Rights Model that is used by United States automakers. This can be substantiated by the fact that, in 2007, the Toyota Company used Transaction Cost Analysis and defeated united stated of America top three automakers. On the other hand, effective application of Transaction Cost Analysis has enabled the Toyota Company to significantly reduce the cost of its products in local and global markets.

Property Rights Model has increased the cost of operations for the US automakers, which has resulted to increase in cost of its products. The Toyota Company’s superior performance can be explained by its effective analysis of the global market to understand the market demands and global market dynamics. Adequate understanding of changes in global market has significantly contributed to the Japanese automakers success in global market. Essay Two: Decentralisation Decentralisation is the entire process of bringing back the decision making process close to the people (Gordon and Laura 1991, p.529). It entails the entire process of dispersal of decision making process to lower level employees in an organisation.

The decentralisation process takes place in two common model, the hierarchical model and market model(Jean-Francois 1993, p.529). The essay below will focus on some of the disadvantage of hierarchical model and market model in the organisation. Hierarchical Model Advantages Since most data are presented through hierarchical structures, the relationship between different layers is logically simple. Secondly, the means of communication in hierarchical model is incredibly efficient and effective.

This is due to the fact that, most communication in hierarchical models is channelled alongside a predictable and definite channel. A clear chain of command also defines the responsibility of every member in an organisation. Thirdly, a hierarchical model also offers a clear path of advancement in an organisation (Laura 1995, p. 1859)