Organizational Managing Change Success of Toyota - Research Paper Example

 Organizational Managing Change Table of contents Toyota 4 Identifying and understanding changes in Toyota 5 Changes in marketing strategy of Toyota 5 Changes in job retention strategy 5 Use of analytical techniques 7 Drivers of change 7 Strategy employed 7 Change tools employed 8 Interrogation of the purpose of the change and its effect on the problem of performances 9 Integration and application of theory to the topic 10 Critical analysis of strategy employed and tools used 12 Evaluation and justification of alternative change strategies 13 Recommendations 14 Conclusions 15 References 16 Bibliographies 18 Introduction The word ‘Change’ is wide and vast. Change in the business scenario has huge implications. It includes the process of moving forward through learning from the previous mistakes, looking for different alternatives, inventing new ways etc, in order to get a better result. As we are nature’s creation, as long as nature keeps changing we need to change in order to survive and as we keep changing organisations are needed to be changed, because they are comprised of us. Organizational change is also a process of finding out different alternatives, generating new ideas in order to perform more efficiently and more effectively. In today’s competitive environment, changes are more sudden and frequent. It has become a normal part of the life. The ability with which people cope up with changes is very important for better individual and organizational performances because today they are much attached to their working life. Any organizational changes like mergers, acquisitions or downsizing have direct or indirect impact on them. So managing changes is very important. There are various external and internal factors that result changes like that of increased competition, innovation of the new technologies, redesigning of the organizational structure, change in top management etc. There could be various reactions at various levels in the organisation due to changes. There are various ways to manage those reactions, like management can communicate and explain the reasons of change to the affecting employees or can even involve employees in the ongoing process of change, provide them with emotional support by being empathetic among others. Toyota Toyota is one of the largest multinational corporations, established in 1933 in Japan by Kiichiro Toyoda. It was a division of Toyoda Automatic Loom Works. In 1937 independent business unit of Toyota Motor Company was set up. Company merged up with Toyota motor sales in 1982 and also went into joint venture with General Motors in 1984. Today, the employee strength in Toyota is more than 316,000 across the world. Apart from producing cars, today company also provides financial services. Main competitors of Toyota motors are General Motors, Honda, and Mercedes-Benz. Toyota surpassed GM in terms of sales to become the largest car manufacturer in the world. Due to the global recession company was forced to downsize its part-time employees for the first time and was expected to make loss first time in the last ten years. Identifying and understanding changes in Toyota Changes in marketing strategy of Toyota Toyota was known as a fun and fuel efficient car makers in the US market till 1989. At that time US luxury car market was dominated by Mercedes-Benz and BMW. But to increase market share and to stay ahead in the competition, Toyota changed their strategy of being only fun and fuel efficient, cheap car makers and decided to enter into the luxury car market of US by introducing the brand ‘Lexus’. It longed to grab the US luxury car market. But company was afraid that it might affect their brand image. To overcome this challenge Toyota decided to market Lexus as a different company. A totally new dealership and customer service network was created for Lexus. This strategy of establishing Lexus as a totally separate brand which had no association with Toyota was hugely successful and by 2000 it became one of largest sold luxury car brand in US.1 Changes in job retention strategy This global recession has resulted to a sharp fall in demand of cars. This has affected Toyota like other car manufacturing companies in the world. Although Toyota became the largest car manufacturing company in the world in terms of sales, but as a result of sharp fall in demand, its sales has decreased from the last year. Its annual sales fell first time in the last ten years. Toyota, like other Japanese companies believe in protecting jobs at any costs. But for the first time in the history of the company it was expected to make loss in the financial year of 2008 due to the fall in overall demand of cars across the world and they were forced to lay off some of its temporary workers.2 In 2008 US car market was badly affected due to sudden financial turmoil. Like other car makers, Toyota also faced the heat. One of the main worry of the company was its Tundra plants, which was oversized. Due to fall in demand Toyota was forced to cancel the second shift in San Antonio plant and totally halt production for three and half months. Although employees were involved in various training for value addition and skill enhancement programs which eventually improved their performances in terms of assembly process.3 Use of analytical techniques Drivers of change Toyota changed its strategy in 1990 from being just the cheap car manufacturer to venture in to the luxury car manufacturer, because it wanted to grab the luxury car market of US. It realized the fact that it won’t be able to survive in competition only by manufacturing cheap, fuel efficient cars. There are external drivers which forced Toyota to change their policy of protecting jobs in any way. This external driver was global recession, due to which company’s sales have fallen sharply and company was forced to lay off few of its temporary workforce. Due to the fall in overall demand of cars, the company had stopped its Tundra firm of San Antonio for more than a quarter. As the sales were decreasing, company had to reduce its cost of operation. Strategy employed Toyota introduced Lexus as a brand which did not have any association with its mother company. There was totally separate dealership and supply chain network for Lexus. The brand Lexus was in no way associated with the brand of Toyota, because Toyota was renowned for making cheap and fuel efficient cars, but Lexus was the first brand Toyota in the luxury car market. Again in this current global recession company changed its strategy of protecting jobs at any cost. Company forced to adopt the strategy of to lay off few of its temporary workers. Toyota, when stopped its Tundra firm of San Antonio, its 1800 employees were kept on the payroll, worked on to improve their skills, took training sessions. They were rotated in the skill enhancement sessions, which improved the assembly process of the firm. Change tools employed Toyota used different change tools in the process of making various strategic changes. They came up with Lexus with completely different marketing strategy. They created different system altogether for Lexus. A separate supply chain network was created for Lexus. Again when company decided to stop production various skill enhancement programs was initiated although there was not any production process going on. Interrogation of the purpose of the change and its effect on the problem of performances Toyota changed its strategy in 1990. It decided to step in the US luxury car market. Main purpose of this change in strategy was to grab the growing luxury car market in US. When company introduced its luxury brand Lexus in US, they created a totally different network in terms of dealership and customer care. They did not want to associate the brand Lexus with the brand Toyota. Because Toyota was an established brand in the cheap but fuel efficient car market in US. Toyota was successful to establish Lexus as a luxury brand in US. Lexus sales outnumbered the sales of Mercedes-Benz, Cadillac, two biggest names in the luxury car market in all over the world.4 Toyota forced to lay off a section of its temporary workforce and stopped production for few months in one of its plant in US. Toyota had to take these steps to fight with global recession, which reduced the overall demand of cars. This reduced the company’s total cost of operation, which helped them to survive in the highly competitive car market at the time of recession. Other car manufacturing giants like GM or Chrysler, few of the biggest competitors of Toyota was incurring huge loss. GM finally filed for bankruptcy. But Toyota never made loss in the history of the company. So to avoid that situation they had to take those tough decisions. Although company expected to make loss in the last financial year, but it was not as bad as GM or Chrysler. Integration and application of theory to the topic According to Wyatt Warner Burke’s ‘Organisations Change Theory and Practice’, change is necessary for any organisation. There are various external and internal factors because of which organisations might have to change their fundamental strategy and certain viewpoints. This will have impact on the people of that organisation. Organizational change must be based on proper data in order have success out of those change. If these theories of Wyatt Warner Burke are related to this case, it can be realized that how these theories are actually applied. Toyota, whose fundamental concept was not to cut jobs at any costs, was changed because of an external factor recession. Company was constrained to lay off temporary workers.5 In ‘Making Sense of Change Management’, author explained that there are various types of strategic changes, but theoretically there are mainly four types of changes which deserve mention. These are 1) structural changes, 2) cultural changes, 3) commercial and 4) relevant process change. There is structured way of making organizational change, which is explained in this book by a model on strategic change process which describes that behind the change process there are external and internal factors. Few analyses like market industry analysis, customer analysis, stakeholder analysis and organizational analysis needed to be done. Then proper change management plan needed to be drawn. Then change process should be started through appropriate implementation and management. When Toyota decided to change their strategy by introducing luxury brand Lexus they actually followed a proper process. They did the proper market analysis, customer demand analysis before taking the final decision.6 In ‘Organizational transformation’ by Amir Levy, Uri Merry it is explained that there are three different approaches of managing the changes. One is facilitating the process of paradigmatic change, strategic planning and change and future envisioning.7 In ‘making sense of change management’ by Esther Cameron, Mike Green it is explained that decisions of organizational change bring many scenarios from which firm can have some valuable inputs. Toyota also when brought some change by halting production employees faced various new situations which was actually good for their performances.8 Critical analysis of strategy employed and tools used Toyota established Lexus as a separate brand from Toyota itself in US luxury car market, because company was not sure about the acceptance of the prospective clients. Lexus as a Toyota brand as Toyota was renowned for cheap and fuel efficient car. But if Toyota would have associate the brand Lexus and brand Toyota it could have enhanced the brand image of Toyota itself. People might have recognized Toyota as such a car manufacturer who can manufacture any types of car irrespective of luxury car or cheap but fuel efficient car. Toyota established a totally separate network in terms of dealership and customer service for Lexus. Company could have used this network for other brands of Toyota also. It would have been an aggressive marketing strategy for the brand Toyota. Again when Toyota decided to stop production in its Texas based plant but it did not let their employees to bear the affect in lieu of retrenchment or lay-off. Rather, there were various training sessions for skill enhancement which actually helped them to improve the assembly process. Although this reduced the cost of operation but there were some additional cost of training. Evaluation and justification of alternative change strategies Toyota could have utilized the whole network of Lexus for other brands. It would increase the company’s total network; its marketing and operational efficiency would have increased. If brand Lexus was associated with the brand Toyota overall brand image of Toyota could have increased. When company totally halted production for 3-1/2 months in one of its Tundra plant, it affected all the employees of that particular firm. Instead of totally halting production in one plant if company could have reduced production in various different plants in alternative months the overall impact on the employees would have been much lighter. The risk of employee dissatisfaction would have been lesser. Recommendations It is recommended that Toyota as an already established brand should be much more aggressive in terms of their marketing activities. If it is launching a new brand irrespective of the pricing, it should utilise its systems for other upcoming or already introduced brand. Toyota should not dissociate any of its brands from the mother brand ‘Toyota’. This global recession is appearing to be tough challenge for the company. It is struggling to retain the previous sales figures as the demand of cars have sharply fallen. Company should have come up with better quality fuel efficient cheap cars, which was company’s core competency, not only in top car markets but in all over the world. At the tough time like this recession company should not just totally halt production in one plant but it could reduce production in more than one plant as a cost cutting process. Company could have gone for salary reduction, incentives and bonus schemes could have been reviewed to reduce the total cost of company. Conclusions Toyota is the biggest car manufacturer in the world today. It has never made any loss before this global recession. Company which has always taken the policy of protecting jobs, have been forced to cut jobs due to this financial turmoil. This actually proves that even the big companies like Toyota, GM are actually not recession proved. Most importantly it proves that only thing is constant is change. It is inevitable. Any policy or any strategy cannot be constant for the entire life, irrespective of the size of the company. Any kind of change has direct or indirect impact on firm’s employees. But the satisfaction or dissatisfaction of employees due to the changes totally depend upon the management i.e. how the management communicating these changes. Like Toyota, even after halting production in the factory employees were involved in various training and skill enhancement sessions. So, management of change is crucial to deliver better individual and organizational performance. References THE SECRETS OF LEXUS’ SUCCESS: HOW TOYOTA MOTOR WENT FROM ZERO TO SIXTY IN THE LUXURY CAR MARKET (September 2005). Columbia business school, [Cited on august 11, 2009]. Biggest by Default: Toyota May Be Number One, But It Still Faces Challenges, (February 04, 2009). Strategic Management. [Cited on august 11, 2009]. How Toyota Turned Crisis Into Opportunity, (June 09, 2009). Quality News Today. [Cited on august 11, 2009]. The secrets of Lexus' success: How Toyota Motor went from 0-60 in the luxury car market, (2005-Sep). Columbia University Libraries, [online]. [Cited on august 11, 2009] available from World Wide Web: http://app.cul.columbia.edu:8080/ac/handle/10022/AC:P:41 Burke, W. W. (2002), Organization change. SAGE. Cameron, E. Green,M (2004), Making sense of change management. Kogan Page Publishers Levy, A., Merry,U (1986), Organizational transformation. Greenwood Publishing Group Bibliographies Hiatt, J., Creasey, T. J., (2003), Change Manangement: The People Side of Change, Prosci Paton, R. McCalman, J (2000), Change management. SAGE Read More