The Change That Made Toyota Successful Globally - Case Study Example

The Change that Made Toyota Successful Globally Toyota Motor Corporation is a multinational company with a head office in Japan, which is manufacturing and selling cars, trucks, busses and robots all over the world. It was founded in Japan in 1933 by Kiichiro Toyoda (Toyota Motor Corporation), and has become one of the most successful world automobile corporations. Everything started form manufacturing looms – the founder of the company set a goal for himself – to make the best looms in the world. With time it was decided to move Toyota into the car business and in 2008 the company celebrated its 50th anniversary of working in the USA, and won a Reputation Institute’s Global Pulse 2008 (Dennis 2008). This award was given to the corporation for respect, trust and positive feelings consumers hold toward the company. Toyota Production System, managerial strategies, changes and innovations employed have become an example of successful and efficient work for companies like Ford, Chrysler, and General Motors (Taylor 1997, 100-108). Nowadays the company works worldwide, and has 53 manufacturing companies in 27 countries and regions, including 9 in the US, and 10 in Japan. The vehicles are sold in more than 170 countries and regions. The company has regional headquarters for Asia, North America, and Europe. (Toyota Motor Corporation 2007). Among their automotive brands are Toyota, Lexus, Hino, and Daihatsu. Now the company is expanding its operations in Europe and Russia, and this year plans to introduce to the European market low-emission vehicles (Yahoo!Finance 2008). Being the first company to have developed a successful hybrid technology, and having invested into it $800 million, Toyota plans to employ it in the nearest years, and transfer to hydrogen gas fuel some time around 2020 (Rajagopal 2005, 1). The company has succeeded in the introduction of the new concept due to the high demand for hybrids. Ford and Nissan followed the trend having being licensed by Toyota. However, the Toyota Group also deals with housing, financial services, GAZOO, marine vehicles, communications, and biotechnology among other areas (Toyota Motor Corporation). Since 1951, the corporation hasn’t lost any money but, on the contrary, continued prospering having earned the highest net profit of $17 billion in 2006 (McFarland 2007). Probably among the reasons of such a success is the fact that Toyota is the company which sets specific and high standards in the processes of manufacturing and product development. They have succeeded in all the aspect of managing production. The effectively used approach tends to clarify and standardise all the parts of both actual manufacturing and managing processes. The competitive advantage created by the company has proved to be successful and has lead the organization to the edge of success, away from the competition. Surely, creating a competitive advantage is impossible without a previously developed strategy. In most cases organizations create competitive advantage by means of lower price, outstanding technology, demand, or marketing. This can also be achieved by developing a new management approach. Norton (2006) outlines that though 90% of companies don’t manage to execute the new strategy, 10% of those which do, benefit in billions of dollars. However, in order to achieve the success a company must overcome four barriers: leadership, structure, process and technology. Leadership here means, first of all, providing clear and thoughtful support for innovation, its effective planning and introducing. Bill George’s article “Why its hard to do whats right” (2003, 95-100) draws CEOs’ attention to the importance of realizing what the real purpose of decisions and actions being taken is. George points our that sometimes managers focus on pressures and people that are irrelevant to the actual goal. In such situations they are lead by ambitions, idealism and listening to wrong people. Surely, others should be paid attention to, but important is to determine who and when should be listened to. Besides, very important are the relationships a manager builds both with the employees and the clients – successful partnership not only improves the company’s image, but leads to other successful contacts and projects. And, of course, managing an organization involves managing finances. This requires a CEO to pay much attention to securing even the smallest lines of credits and work with supplier’s credit managers closely and openly. In such a way a company can invest in the future and, consequently, remain successful in years to come. The last important point a manager cannot underestimate is sharing responsibility: all the decisions or actions should be analyzed and approved by the company’s senior management. Each issue should be discussed in order for the best option to be chosen (Jacobs 2006, 11). The second step is structure: the structure of the organization should correspond to the processes it implements. According to Cristensen and Overdorf (2000, 66) there are three ways the manager can use to cope with risk and, accordingly, with change that may be caused by it. They are: - creation of new organizational structure within corporate boundaries in which new process can be developed; - spinning out an independent organization from the existing gone and developing new processed and values within it required to solve the problem; - acquiring a different organization whose processes and values close match the requirements of the new task. And, ideally, each company should tailor the team structure and organizational location to the process arid values required by each project. As a result, the processes being implemented within the company, and technologies corresponding to them should be adjusted to the corresponding structure, renovated and changed if needed. One more important thing to consider is that there is always a possibility of risk influencing company’s strategic planning and strategy (Durbin 2006). Therefore, objectives should be flexible enough in order for the company to be able to adjust them to particular circumstances in case market environment or other factors influencing company’s operations change. Besides, not only management, but each separate employee of the company should be aware of such objectives, strategies and special programs in order to understand his/her particular part in their achievement better, and feel free to initiate actions aimed at their achievement. Every employee should have clear responsibilities and duties in this or that project in order for everyone to know and understand one’s role in its implementation. Hence, even though the resources might be limited, they should be focused on increasing of their value through the qualitative approach, which means that each member of the process should be committed to one goal – a qualitative product. Here important is to adequately balance the strategic and tactical work against the goals to be achieved. Therefore, each project should be analyzed considering not only the pure profit, but time, effort and other kinds of investments as well. The purpose of such an analysis is to define whether the value of the given project is still relevant. In case it is not, organization’s ability to grow, develop and transform may decrease (ibid). So, though expanding its operations and entering most of foreign markets, which was considered to be a very difficult task (Taylor, 1997), Toyota managed to create a chain of dedicated suppliers and experienced managers to promote its products all over the world. Their strategy overseas was more aggressive together with intensification of work on designing and presenting new models in Japan as well. In general Toyota Production System, which is actually the innovation that the company successful globally, was deeply studied and even copied by many car manufacturers, but none of them was able to copy the success the System brought to Toyota. That happens because all the principles Toyota follows are not to be simply copied, but profoundly understood and comprehended. Their Production System is a patented manufacturing methodology, which lead the company to pioneer in such concepts as lean production and manufacturing design (McFarland 2007). A bright example of implementing it on practice took place more than twenty years ago. At that time General Motors’ California plant employing over 5000 people was in great trouble. Employees struggled from absenteeism, and held 3-4 strikes a year. The company’s management was about to close the plant. However, they decided to turn to Toyota, their closest competitor. The created venture to operate the plant employed GM’s employees again, and Toyota’s managers to supervise them. The reopened plant had none of the previous problems: employees’ performance was excellent, production doubled, sales and customer satisfaction increased. The major factor to have influenced the success is considered an employee management system introduced by Toyota management. According to McFarland (2007), one the greatest assets valued in the company is its employees – they are respected, well-treated, and listened to. As a result, according to the research conducted by McFarland, such employees bring the company to pioneering new products, opening new markets, and designing and implementing new approaches to business. So, instead of simply giving orders to people and waiting till they are performed, Toyota created a one-team environment, trains and gives employees an opportunity for independence, creativity, and self-evaluation. As a result they on their own determine their strong and weak sides to be improved (Karlsberg & Adler, 3). Besides, through discussions with management employees can express own idea to impact the general performance of the enterprise. So, through each element of Toyota’s operations system, like in-time delivery or lean staffing, is important for the overall success, the most significant is their people management approach (ibid). Toyota gives a person an opportunity to not just perform one’s work, but to feel important in the company – any employee has a right to stop the production line in case one thinks there is something wrong. One more reason Toyota is so successful consists in the fact that the company is able to adapt changes and innovations easily and smoothly. This, of course, is not as easy as it seems, and required mangers to perform a great work. But the result – improvement of manufacturing processes, work’s being easier and faster to do, strong organizational culture and philosophy – is worth that volume of effort. Successfully introduced change, reorganization and innovation lead to inevitable growth and development of any organizational setting. Besides, the principles Toyota follows are applied to all the part of the work: not only manufacturing, but all the other areas of company’s operations. Among Toyota’s most famous innovations is their great investment into the research of cleaner-burning automobiles like Toyota Prius which combines gas engine with an electric motor. Another part of the corporation’s success is in its well-structured and effective cooperation with suppliers. Toyota does not only have good relations with its suppliers, but also takes all the necessary steps in order to improve these relations, and make supplier’s work easier. They understand that company’s success depends not only on quality of its inner processes, but also on the quality of its cooperation with other companies. Among the major principles of the Toyota Production System is strong and constant devotion to the highest quality. If there is any problem occurring in the production process, the manufacturing equipment automatically and immediately stops in order for defective products not to be manufactured. The work is not renewed until the problem is eliminated. Another concept Toyota relies on is that the company should produce only what is demanded, at the exact time when it is needed, and in the needed amount (Toyota Motor Corporation, 2006). Therefore, Toyota is devoted to the principle that all their automobiles, no matter where they are produced, are to be of the same high quality. The company also puts great emphasis on making their foreign plant as independent form the Japanese office as possible. Another concept Toyota follows consists in educating people about the company, giving them strong motivation, encouraging their devoted work (Ina, 2006). According to McFarland (2007), one the greatest assets valued in the company is its employees – they are respected, well-treated, and listened to. As a result, according to the research conducted by McFarland, such employees bring the company to pioneering new products, opening new markets, and designing and implementing new approaches to business. So, on its way to success Toyota has shown the world how to manage a business. Through years the company has been an example for the rivals for its excellent management practices, highly developed technologies, productive organization structure, and general operational concepts. The company showed to not only be unafraid of innovations, but also be able to implement those innovations in the best possible manner due to the high standards of conducting business it is devoted to. Bibliography Christensen, C.M. and Overdorf, M., 2000. Meeting the Challenge of Disruptive Change, Harvard Business Review, 78(2), p.66. Dennis, V., 2008. Toyota Earns Most Respected Company Accolade for Leadership, Performance. [Online] RecruitingFly. CheesmanGROUP, LLC. 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[Online] Available online: http://people.ischool.berkeley.edu/~hal/Courses/StratTech07/Articles/Articles05/Dup/News%20Clipping.doc [Accessed 16 November 2008]. Taylor, A., 1997. How Toyota Defines Gravity. Fortune, 136(11), pp. 100-108. Toyota Motor Corporation, 2006. Toyota Production System. [Online] Vision and Philosophy. Toyota Global Design. Available online: http://www.toyota.co.jp/en/vision/production_system/ [Accessed 16 November 2008]. Toyota Motor Corporation. History of Toyota. [Online] Available online: http://www.toyota.co.jp/en/history/index.html [Accessed 16 November 2008]. Toyota Motor Corporation. Manufacturing. Worldwide Operations. [Online] Available online: http://www.toyota.co.jp/en/about_toyota/manufacturing/worldwide.html [Accessed 16 November 2008]. Yahoo! Finance, 2008. Toyota slashes 2009 global sales target on weakening demand - UPDATE 2. [Online] Finance News. Comment and Analysis. Available online: http://uk.biz.yahoo.com/28082008/323/toyota-slashes-2009-global-sales-target-weakening-demand-update-2.html [Accessed 16 November 2008]. Read More