Ford and Toyota - Case Study Example

Ford and Toyota Toyota: The Toyota Company has faced a recent scenario like the Harrison keys issues, in that it has relief too much on outsourcing and the knowledge and work to be targeted from that source. The Toyota Company has recently faced the issue of recall of several of its cars due to faulty steering and tires that are likely to burst. The problem in this case is a drop in quality that has occurred because of overloaded engineering staff. (Maynard and Fackler, 2006). The Company expanded into the United States but retained most of its development in Japan and during its period of global expansion, failed to hire enough engineers to keep up with the expansion. Toyota is also facing legal problems like Harrison Keys, in suits against them for faulty car parts. The Company has responded to the crisis that has necessitated recall of its vehicles by promptly hiring new engineers, hiring 979 engineers within the span of 2005 as compared to merely 310 in 2001. The company also carried out plans to hire 850 engineers in 2007. Moreover, the Company has also deviated from its corporate tradition of only hiring engineers who will stay and grow with the Company, focusing on hiring engineers in mid career. The Company has also issued numerous apologies and immediately recalled defective cars in order to avoid potential lawsuits, capitalizing on the good for the Company in the public eye. There are hectic efforts underfoot within the organizational framework of the Company to look into the quality issues and to make the necessary corrections. The Company has also created two additional managerial positions that are dedicated to maintaining quality control. These measures appear to have worked in the interim to help the Company maintain its sales figures. The fact that the Company is focusing on addressing the quality concerns and taking steps to redress the problems, appear to have reassured the public, which is used to the high quality of Toyota vehicles. The latest quarter sales figures showed that the Company is weathering the economic uncertainties and rising fuel prices in the global market and net profits rose to nearly $4 billion in the last quarter. (Fackler, 2007). This further appears to indicate that customers are willing to reply upon Toyota’s long term reputation for quality and forgive the recent aberration which has taken place. Ford: The Ford Company has also experienced problems similar to the scenario presented in the Harrison keys issues case, where disruptions such as selling off non core assets and discontinuing models which do not work has become an issue – in the case of Harrison Keys, it is the diminished important of print books and the need to cut down on this and branch off into other areas. (Tomlinson, 2002). For example, Ford’s links with Jaguar in its buy out of the model and supply of parts are in fact proving to be a hindrance to the Company, eating up time and resources which could be devoted to Ford’s other basic brands. The investment on the Jaguar has not justified the investment made into it. (Madslien, 2007). The Company however, appears to be pouring more management time and several billions of dollars into fixing the problems with the Jaguar, such as the use of common underpinnings in the cars.(Maynard, 2007). It is relying upon forecasts of sales, however the Jaguar constitutes a luxury fringe car and Ford does not have the resources to support such investment of time and money into this brand. Unlike Ford’s buyout of the Volvo, a basic car brand which has proved to be a money spinner for the Company and ranks as one of the Company’s best selling brands, the luxury car segment is inundated with other brands such as Mercedes-Benz, Lexus and BMW. As a result, the additional investments made by Ford into the Jaguar division are not resulting in increased profits for the Company and are proving to be a waste of resources. In reference to this problem therefore, the extent of Ford’s success in restructuring profitability appears to be limited with reference to the Jaguar. As pointed out by Madslien (2007), the Company has a remarkably short time frame to get exciting vehicles out and boost sales. Therefore, it needs to sell its luxury fringe card such as Jaguar and focus on its basic SUV’s, otherwise profitability may be difficult to attain and the Company may continue on its losing streak. The outcome of the Company’s specific response to this issue has therefore not been favorable. Identification of key concepts: Toyota: Toyota is facing some of the same problems that have been identified in the scenario. One of the problems that has cropped up concerns communication difficulties that the Company is facing with the overseas Indian e-publishing Company, Asia Digital Publishing, that is handling Harrison Keys’ formatting work. Since this Indian Company has come highly recommended, the problem appears to be mainly one of communication difficulties due to differences in time zones. Toyota has faced similar problems with its Japanese engineers. Opening new plants in the United States but allowing the work necessary to supply these units to rest solely in the hands of the Japanese engineers may have produced similar kinds of problems of communication difficulties caused by differences in time zones. It appears very likely that retaining most of the development in one country, i.e, Japan, while expanding into another country, may have created logistic difficulties in implementation of the car projects in the United States. It would have created difficulties in effective communication across country borders, since with different time zones, the American executives would have found it difficult to contact Japanese counterparts quickly and effectively when necessary and vice versa. Retaining development in Japan would have also restricted the applicability of Japanese engineering and methods used for the car models in the United States. Another difficulty identified in the scenario in the use of Asia Digital Publishing is their difficulty in keeping to deadlines. For example, as Pete Ross complains, he is never able to reach people at Asia Digital because they seem to be away from their desks. This could be caused by the time differences, however the net result is that it hinders communication efforts on the whole and produces a detrimental effect on deadlines as well. As Pete puts it, the problems can be solved only through timely communication, however when the other party is unavailable to communicate with, it hinders timely, consensual discovery of solutions to problems. This also applies in the case of Toyota. The fact that the Company expanded its business but did not bother to simultaneously hire more engineers to handle the increased loads of work has product a direct fall in the quality of the products. Japanese engineers struggling to meet deadlines have compromised the quality of the products because they have been over pressured and unable to meet necessary time frames. Their lack of availability of and effective communication with American counterparts may well be a likely causal factor that has produced such a result. A significant issue in the Harrison Keyes case is the legal ramifications associated with copyright issues on the digitalized books, as well as previously published books. The Company is attempting to deal with it by carefully wording its new legal agreements with authors to permit them to digitize new works, but not including previously published works within the scope of the new agreements. In the case of Toyota, the question of faulty steering wheels and tires on previously manufactured cars sold during previous years which are still in circulation, give rise to serious legal ramifications as well. The existence of such cars means potential law suits that could be filed against Toyota by customers injured through the use of such cars. Toyota has acted well by recalling the defective cars and the existing public goodwill may have also helped to deflect the seriousness of the legal issues. Application of the scenario in the case of Ford: In the case of Ford, the most significant scenario in the Harrison Keyes company is the competition from low cost retailers which is eating into the business of the publishing Companies and posing a threat to its survival. In a similar way, Ford has been facing huge losses in recent years, largely due to the success of the lower priced Japanese imports that are available in the market. As compared to Ford cars, these are considered to be less expensive and of higher quality. Ford has been attempting to combat some of its losses through the purchase of other car brands such as Jaguar, the Land Rover and Volvo. However, as pointed out above, it has not met with similar results in the case of all brands. The luxury brand – the Jaguar in particular, is not proving to be an adequate return on the investments being made on it because of the existence of other brands in the market. The existence of other retailers in the market is also a problem that has led to drop in sales for Harrison-Keyes. Therefore both companies are facing a similar drop in profits, due to competition from others in the market. The Jaguar and Land Rover may both be categorized as fringe cars that are additional elements to Ford’s already existing basic car models, but these have not been profitable. The e-publishing program is also an additional measure to Harrison’s print publishing market, which is not proving its mettle. The problem with Harrison arises because the new software is proving to be faulty and not worth the investments that are being made on it. Both these companies are also relying on forecasting in fashioning their strategies. For example, Harrison Keyes is relying on figures furnished by Marsha Goldfarb on the project growth in the e-publishing industry, while Ford is also relying on forecasts about the future sales of its luxury line – the jaguar. However in terms of actual profits that are resulting from the efforts in question and the procedures and investments that are being input, it appears that in both cases, performance is not matching up to projections. Therefore it appears that in both cases, there may be too much reliance being placed on forecasts, despite evidence that is being furnished form the field on the faulty projections. Both Ford and Harrison are relying on the forecasts to make large investments despite indications that such investments are not producing the desired result. This may be contributing to the failure that is being experienced in both cases in terms of profitability and return on investment. It appears likely that both companies may have tyo pay closer attention to the feedback that is available in tailoring their investment decisions and restructuring their profit structure. The failure of both Companies to pursue such loss-reduction strategies may well mean that such the initiatives being promoted by both companies, i.e, e-publishing by Harrison and the Jaguar by Ford, may only end up reducing profits further, which will not be helpful to both companies in dealing with the competition that is being posed by other low end retailers. Toyota has shown sensitivity to the potential dangers of lawsuits and a drop in public perception of quality of Toyota products and taken drastic measures which have caused losses to it, to counteract such losses. As a result its strategies have produced a favorable outcome. This is however not the case with Harrison and Ford that have been pursuing the losing strategies despite evidence from the field. References: * Fackler, Martin, 2007. “Recent dings don’t dent Toyota Profit”, The New York Times, Retrieved November 6, from: http://www.nytimes.com/2007/11/08/business/worldbusiness/08toyota.html?ref=todayspaper&pagewanted=all * Madslien, Jorn, 2007. “Jaguar’s sale could secure Ford’s future”, BBC News, 12 June 2007, retrieved November 11, 2007 from: http://news.bbc.co.uk/1/hi/business/6744063.stm * Maynard, Micheline and Fackler, Martin, 2006. “A dent in Toyota Quality?” International herald Tribune, Retrieved November 6, 2007 from: http://www.iht.com/articles/2006/08/04/business/recall.php * Maynard, Micheline, 2007. “Ford seeking a future by going backward”, The New York Times, July 17, 2007. Retrieved November 11, 2007 from: http://www.nytimes.com/2007/07/17/business/17auto.html?pagewanted=print * Tomlinson, Heather, 2002. “The problems at Ford”, The Independent on Sunday, Retrieved November 11, 2007 from: http://news.independent.co.uk/business/news/article206345.ece Read More