Strategy Implementation: Toyota Case Study - Essay Example

Strategy Implementation: Toyota Case Study Toyota has been a leading name in global automobile industry when it comes to addressing consumers’ needs and expectations in terms of innovation, quality and cost-effectiveness. Analysis of Toyota’s recent ventures and products along with cost and quality management techniques reveals that Toyota has been going through an internal debacle between family-based executives and non-family managers and board members (Shirouzu, 2010). Critical analysis of Toyota’s business strategies introduced in 2011 followed by major product recalls in 2010, revealed that it is now focusing on restructuring its work processes in order to focus more on quality management by dedicating a whole plant for research and development, and manufacturing compact and hybrid cards offering energy conservation and environment protection, for winning back its customer’s loyalty. Careful analysis of Toyota’s last massive vehicle recalls indicated that Toyota has been subjected to excessive criticism by American public which has further jeopardized its future in US. Northern America is one of the main market segments on which Toyota has incurred substantial costs and made changes in its organizational strategy for the sake of capturing this market. However, last recalls and recent quality issues have signaled quality compromises in Toyota’s overall business strategy which was mainly based on cost-effectiveness and heavy profit margins. It is important to note that the same strategy has brought substantial profits to the company in earlier years. When Akio Toyoda took over company’s reins, he dismissed earlier strategies and focused on embracing its actual values provided by its founders. Changes made in Toyota’s strategies as reflected in its annual report in 2011, indicated adherence to its old-school philosophy. Before performing analysis of Toyota’s business strategy, it is important to examine Toyota’s organizational culture. Toyota has a highly mechanistic organizational structure with considerably stable environment in the middle and lower management i.e. upper management is going through conflicts due to family and non-family executives’ differences. The work processes show comparatively less differentiation and lower integration in organizational functions. An example of this notion is Toyota’s dedicated factories in targeted markets. Furthermore, upper management or organization’s leadership is rested with the authority of decision making which has introduced standardization in its work processes from the very inception (Businessmate, 2009). As a result, Toyota has a culture based on strict hierarchy which is efficient in cost-reduction and overall quality management (Tharp, 2009). Analysis of Toyota’s new strategy has revealed that it has significant prospects of regaining public’s trust which has been lost due to massive recalls in 2010. One of the major strategies that it has adopted is smart grid manufacturing which focuses on manufacturing cars with efficient and environment friendly battery and home energy management. With substantial increase in awareness regarding environment protection and energy conservation, smart grid is a decision made a little late as other manufacturers have introduced similar cars i.e. TATA Nano etc, quite some time back (Toyota, 2011a). However, Toyota’s good will and hold on North American market will help it regain public’s trust in US. Another important strategy adopted is an extension of its production processes that would allow its workforce to focus more on quality management. Toyoda’s dialogue with company’s engineers revealed that quality issues arose because of Toyota’s incapacity to handle extended production demand (Shirouzu, 2010). Therefore, restructuring manufacturing plant in Tohoku will help the company regain its manufacturing strength. Also, ‘manufacturing where demand is’ can be an efficient ideology for maximizing market penetration. Thirdly, entering new markets by restructuring its production model will also be highly effective. It was found during financial statements’ analysis that Toyota has decided to focus more on compact and hybrid cars to address the demand for smaller, cheaper and environment friendly cars. By dedicating its three plants for production of compact and hybrid cars, mid-sized cars and Lexus, and product research and development respectively, Toyota is attempting to maximize its processes’ efficiency and effectiveness (Toyota, 2011b). Another important strategy is its usage of safe vehicle policy. Ensuring productions of vehicles with minimum accidents’ risk is already showing its compliance to founding vision of safe social mobility. Integrating human talent with the guidelines provided by government and environment protection bodies would lead to production of cars that are environment friendly and generally safe (Toyota, 2011c). Comparison of these strategies with Toyota’s overall mechanistic organizational structure and highly hierarchy-oriented culture reveals that it will be able to regain its customer’s loyalty. In the light of strategies identified above, it can be said that these strategies are precisely addressing consumers’ needs for smaller, energy-efficient and environment friendly, cheap cars. However, their success is dependent on high degree of controls in terms of cost and quality management. Analysis of Toyota’s guiding principles revealed its focuses on dedicating resources to enhancing quality of life in all the aspects of organizational management, using technology effectively and introducing creativity in the products and business processes along with forming strong strategic alliances (Toyota, 2011d). Toyota’s current production system are addressing these issues of quality and cost management through Just-in Time Production and Jidoka (production with human touch) (Toyota, 2011e). Production systems that are focused on higher controls and utilization of human intervention adhere rather well to Toyota’s current organizational structure and culture. Hierarchy-oriented business model with decision making authority resting with upper management would lead to higher cost-reduction and resuming better quality in Toyota’s products through efficient controls in performance management (McNamara, n.d). Careful analysis of Toyota, its organizational culture and structure lead to a conclusion that where earlier robust growth showed higher profits due to cost-reduction, its compromised quality resulted in loss of customers’ loyalty. As a result, Toyota had to perform a huge product recall in 2010. Followed by this blow to Toyota’s goodwill, several strategies like production of compact and hybrid cars were adopted to regain customers’ faith. Further focus on environment protection and energy conservation was another effective strategy showing Toyota’s compliance to corporate social responsibility. In order to achieve these objectives, Toyota has introduced major restructuring in its work processes that are not only efficient in resources allocation but also focus greatly on quality and performance management. Dedication of a single plant for R&D purposes is one such example of Toyota’s focus on regaining customers’ loyalty. References Businessmate.org (2009). Mechanistic vs. organic organizational structure (contingency theory). BusinessMate. Retrieved August, 2011, from http://www.businessmate.org/Article.php?ArtikelId=44 McNamara, C. (n.d.). Management function of coordinating/controlling: Overview of basic methods. Retrieved from http://www.managementhelp.org/cntrllng/cntrllng.htm Tharp, B.M. (2009). Four organizational culture types. Haworth White Paper. Retrieved August, 2011, from http://www.haworth.com/en-us/Knowledge/Workplace-Library/Documents/Four-Organizational-Culture-Types_6.pdf Toyota Global (2011a), New Business Activities. Retrieved from http://www.toyota-global.com/investors/ir_library/annual/pdf/2011/p25.pdf Toyota Global (2011b). Restore and Renew Our Production Structure for Further Growth. Retrieved from http://www.toyota-global.com/investors/ir_library/annual/pdf/2011/p21.pdf Toyota Global (2011c). Safe and Secure Mobility Toyota’s Approach to Safety, Retrieved from http://www.toyota-global.com/investors/ir_library/annual/pdf/2011/p13_17.pdf Toyota Global (2011d). Guiding Principles at Toyota. Retrieved from http://www.toyota-global.com/company/vision_philosophy/guiding_principles.html Toyota Global (2011e). Toyota Production System. Retrieved from http://www.toyota-global.com/company/vision_philosophy/toyota_production_system/ Read More