Toyota as One of the Legends in the Space of Automobiles - Case Study Example

Background After reading the case study ‘The car manufacturer that rules the world- or why 26 million Corollas can’t be wrong!’ and answering to the answers, the brainstorming process took place leading to a mesmerized feeling of analyzing the hidden power behind the making of a Leader. As written in the case in many ways it was luck, but good management built upon the luck. Toyota has been considered as one of the legends in the space of automobiles. Although the journey to success was not this easy for Toyota but still it has been able to stand tall in the competitive market because of a variety of reasons that includes the quality of deliverables and higher emphasis on reducing the cost by reducing the inventory and best utilizing the efficiency of the workers with the help of management practices discovered at Toyota itself. Toyota has taught efficient management practices to the managers across the globe and given multiple management terms like ‘Kanban’ (based on reducing inventory by visual card system) and ‘Kaizen’ (the process of continuous improvement). At Toyota, the leadership decisions are not only taken at the top rung of organizational hierarchy but also nurtured and practiced at the lowest level as well. Workers are imbibed with the a feeling of seeking continuous improvement at the work place by improving efficiency and come up with more practical solutions to improving efficiency than relying too much on the technology. Welfare of the employees is at the top of agenda list for Toyota and employees realize this by delivering to their maximum capacity. SWOT Analysis: Strengths New investment by Toyota in factories in the US and China saw 2005 profits rise, against the worldwide motor industry trend. Net profits rose 0.8% to 1.17 trillion yen ($11bn; £5.85bn), while sales were 7.3% higher at 18.55 trillion yen. Commentators argue that this is because the company has the right mix of products for the markets that it serves. This is an example of much focused segmentation, targeting and positioning in a number of countries. In 2003 Toyota knocked its rivals Ford into third spot, to become the Worlds second largest carmaker with 6.78 million units. The company is still behind rivals General Motors with 8.59 million units in the same period. Its strong industry position is based upon a number of factors including a diversified product range, highly targeted marketing and a commitment to lean manufacturing and quality. The company makes a large range of vehicles for both private customers and commercial organizations, from the small Yaris to large trucks. The company uses marketing techniques to identify and satisfy customer needs. Its brand is a household name. The company also maximizes profit through efficient manufacturing approaches (e.g. Total Quality Management). Weaknesses Being big has its own problems. The World market for cars is in a condition of over supply and so car manufacturers need to make sure that it is their models that consumers want. Toyota markets most of its products in the US and in Japan. Therefore it is exposed to fluctuating economic and political conditions those markets. Perhaps that is why the company is beginning to shift its attentions to the emerging Chinese market. The company needs to keep producing cars in order to retain its operational efficiency. Car plants represent a huge investment in expensive fixed costs, as well as the high costs of training and retaining labour. So if the car market experiences a down turn, then it would be a burden. If on the other hand the car market experiences an upturn, then the company may miss out on potential sales due to under capacity i.e. it takes time to accommodate. This is a typical problem with high volume car manufacturing. Opportunities. Lexus and Toyota now have a reputation for manufacturing environmentally friendly vehicles.Both are based upon advance technologies developed by the organization. Rocketing oil prices have seen sales of the new hybrid vehicles increase. Toyota has also sold on its technology to other motor manufacturers, for example Ford has bought into the technology for its new Explorer SUV Hybrid. Such moves can only firm up Toyotas interest and investment in hybrid R&D. Toyota is to target the urban youth market. The company has launched its new Aygo, which is targeted at the streetwise youth market and captures (or attempts to) the nature of dance and DJ culture in a very competitive segment. The vehicle itself is a unique convertible, with models extending at their rear! The narrow segment is notorious for it narrow margins and difficulties for branding. Threats. Product recalls are always a problem for vehicle manufacturers. In 2005 the company had to recall 88000 sports utility vehicles and pick up trucks due to faulty front suspension systems. Toyota did not give details of how much the recall would cost. The majority of affected vehicles were sold in the US, while the rest were sold in Japan, Europe and Australia. As with any car manufacturer, Toyota faces tremendous competitive rivalry in the car market. Competition is increasing almost daily, with new entrants coming into the market from China, South Korea and new plants in Eastern Europe. The company is also exposed to any movement in the price of raw materials such as rubber, steel and fuel. The key economies in the Pacific, the US and Europe also experience slow downs. These economic factors are potential threats for Toyota. 1) Discuss why other car companies would have difficulty in replicating Toyota’s culture. Toyota has a unique culture and it has managed to excel in the areas of logistic management, supply chain management as well as the quality control. Most people think that initially it was luck but Toyota has managed to capitalize very well on that initial luck. The company is an employee centric company which always thinks for the welfare and development of the employee. Employees therefore also have a lot of connectivity for the company and toil hard for benefit of the company. In Toyota the culture boasts of learning after practicing. Most of the managers are role models for the employees who practice as they preach. Company develops the managers from the very basic in which Managers are technical guys who know the nitty-gritty’s of the system. Quality and efficiency are one of the major positives for the company. The top management is very peculiar about the quality which has been ingrained in Toyota’s blood from the very beginning. Initially, in order to compete with the likes of GM and Ford in the US market Toyota had to be both cost effective as well as provide excellent quality because any return of the product due to bad quality used to cost the Japanese company dearly in terms of the delivery costs. Even a single issue in terms of the quality of deliverables leads to a stoppage of the production line until the issue was resolved. Moreover with workers dealing with multiple machineries, a group of workers had knowledge about every single machine and therefore they could contribute significantly on the reason of the defect. Therefore it helped the companies in two ways- first employees developed team spirit by discussions on the quality and second employees honed their skills and gained knowledge by practicing and the stoppage of entire work presented the requisite significance of quality to the workers. 2) Discuss the importance of centralized management training, such as that provided at Toyota University, for building a common culture. What are the strengths and weaknesses of such an approach? There must be a common culture prevailing in an organization which reflects the strength of that organization. In order to maintain management standards over such a vast company, Toyota has established Toyota University near its headquarters to train senior manager from all over the world. The centralized management training needs Leadership, a good leadership. Leadership is not a practice, not a study, but an art to getting the results in your favor by utilizing the inherent potential in your colleagues/subordinates. There are various approaches followed my multiple people in order to get the results in their favor, but it can predominantly be divided into the following three categories:- 1. Authoritarian Or Autocratic 2. Participative Or Democratic 3. Delegative or Free Reign Toyota believes in second type of leadership i.e. Participative or Democratic – Here the leader tries to take a democratic view of the situation in hand and tries to have the say from each and every employee. The key benefits of this process are as follows:- a. The subordinates have a sense of belonging towards the team. They cherish on every favorable return for their team and strive hard to make the team result a success. b. It is particularly useful when team leader have some idea about the work and the team members possess the information about the remaining one and the contribution of both of them is an essence to make the event a success c. When the team members are enthusiastic and knowledgeable, it is bound to give good results as many minds thinking on a problem yields better solution than one. However one of the drawbacks of this method is that the decision making process is delayed and a prerequisite of team members being both smart and experienced. The uniform cultural ethos at Toyota is never challenged and therefore there is no scope of improvement sought to the existing ones. However, a change in market scenario may require even the cultural ethos to change. For an instance the major reason for putting a higher emphasis on the quality, thereby stopping the entire production line, was to reduce the cost of transportation on for the finished product to various other countries, then Toyota did not have a manufacturing centre out there. But with the change in global scenario and development of manufacturing centers in multiple countries, this process could have been altered for better results. 3) What difficulties, and benefits, would a strong culture, such as that at Toyota, present to an organizational change program? Organizational culture is the personality of the organization. As we judge the personality of a person by his communication skills, knowledge, body language etc, similarly we can tell the culture of an organization by looking at its aim, vision and finally the output i.e. its result. The most asked question in this recession period is “What can we do to make our business survive in this competitive world and grow?” The answer is innovation, creation and change. Organizational change (internal) as well as market change (external) must be adopted in order to survive and grow. Practitioners are coming to realize that, despite the best-laid plans, organizational change must include not only changing structures and processes, but also changing the corporate culture as well. What really makes Toyota different is the strength of its culture. Based upon satisfying customer needs, there is no comfort zone in Toyota. It stresses the relentless pursuit of excellence and attention to even the tiniest detail. We can measure culture; therefore we can identify and understand any one organizations unique culture. Being able to measure culture, however, does not mean we can change it quickly as a prelude to transforming and improving the organization. We must learn about a companys existing culture--identify and understand it--to bring about any real change1. The culture of Toyota promotes leadership at every stage. Even the ground staff gets a chance to present his idea in front of the management. With this system the ground staff feels a lot more connected to the work and constantly reach out to think and suggest on the ways to cut costs as well as increase the efficiency. Since he has been handling the job directly, his suggestions on the subject matter may be of good help. However for an organization in an authoritarian style of leadership has been practiced till date, presents one of the toughest challenges for a paradigm shift to the democratic style. The leaders at the top may be reluctant for the change because of the reduced power that they could exercise after the change has been implemented. Moreover, the habit of expressing the thoughts openly will have to be inculcated amongst the employees as opposed to their defensive stand. But after the implementation of such changes have been done and the employees at every level are smart enough to contribute fruitful ideas then there is a higher probability of the organization reaching new heights. 4) ‘The origins of an organization’s problem lie in the organization’s successes’. Drawing upon the Toyota case, and other sources which you feel are relevant, evaluate this statement. ‘The origins of an organization’s problem lie in the organization’s successes’. This is perfectly true in relation with Toyota. The production and delivery of Toyota in the very beginning was limited only to Japan. In order to enter the US market, it had to compete with the likes of GM and Ford. The production line of these companies was much higher as compared to that of Toyota. Moreover in order to create a brand name for itself Toyota had to deliver quality with a substantial cost difference in its favor. Therefore Toyota had to rejuvenate itself. Toyota therefore placed increased significance on the quality deliverables stopping the entire production line even in case of minor defect. Toyota implemented ‘Kaizen’ or the process of continuous improvement in order to improve the quality of the end product. Moreover, in order to reduce costs, Toyota resolved to the decision of reducing the inventory cost by not producing much of extraneous material. It therefore implemented the system of ‘Kanban’ or the card system in order to indicate the requirement of the stocks which has now become a global formula for success. Two kinds of kanban (the production instruction kanban and the parts retrieval kanban) are used for managing parts. Following is the Conceptual Diagram of Kanban System2: The JIT production was defined as3 producing only necessary units in a necessary quantity at a necessary time resulting in decreased excess inventories and excess workforce, thereby increasing productivity. The Just in Time system was introduced in order to reduce the inventory to a minimum i.e. no storage-no warehousing. Therefore reducing cost and improving quality which were imperative for Toyota to compete with the US companies has now become the reason for it being one of the very few automobile giants in the world delivering excellent value for its shareholder’s money. Conclusion: Toyota is one of the biggest brands in the automobile industry in the 21st century. For the first time since the early 1930s, General Motors cannot call itself the world’s largest automaker. Its sales fell behind Toyota in 2008, a year when G.M. celebrated its 100th anniversary and narrowly avoided a bankruptcy filing amid a significant downturn in the economy4. The case study ‘The car manufacturer that rules the world- or why 26 million Corollas can’t be wrong!’ reflects the strong culture and the application of wise decisions by the manufacturing company under difficult circumstances. Although it was nowhere near to the likes of GM and Ford in terms of the production scale and output capacity, still it managed to steal the show by drastically reducing the cost and improving the quality with the help of intelligent management decisions. The case study reflects that how management can put emphasis on one of the key attributes thereby guiding the entire workforce to achieve the result in their favor. It also shows that how promoting leadership at every level can make thousands of brain to reach a common goal. The case study indeed is an excellent report to make the budding managers survive in this competitive world. References: Bunkley, Nick. (2009). Toyota Ahead of G.M. in 2008 Sales. The New York Times.Available from: [Accessed 2 May 2009]. Clark, D. R. (21 August, 2008). Leadership Styles. The Skagit Watershed Council. Available from: [Accessed 2 May 2009]. Clement, Ronald. (1994) Culture, leadership, and power: the keys to organizational change. Available from: [Accessed 28 April 2009]. Liker, Jeffrey. (2004) The Toyota Way. New Delhi: Tata McGraw Hill Liker, Jeffrey and Michael Hoseus. (2008) Toyota Culture. New Delhi: Tata McGraw Hill. Sato, Masaki. (2008) The Toyota Leaders: An executive guide. New York: Vertical Publication Shimizu, Koichi. Transforming Kaizen at Toyota. Okayama University. Available from: [Accessed 28 April 2009]. Swot Analysis Toyota. Marketingteacher.com Available from: [Accessed 30 April 2009]. Toyotas Kaizen Experience. Center for Management Research. 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