Management Theory and Environmental Forces of Toyota Company - Research Paper Example

Management Theory and Environmental Forces: Toyota Company Case Study Year of Study/Semester: Submitted: Introduction and Overview of Toyota Company The Toyota Motor Corporation, also commonly known as Toyota, has grown throughout the history of time to become one of the most established car manufacturing companies across the globe. As of today, the company has become a fully-fledged multinational with its Headquarters in Japan. Toyota is also hailed to be the world’s leading automaker by sales. On average, this company has a workforce of approximately 320,808 in all its global outlets spread across different regions of the World. Founded in the year 1937 by Kiichiro Toyoda, the company began as a spinoff from the then Toyota Industries to manufacture automobiles. Three years before its inception, in 1934, the Company, while still operating as a department under the Toyota industries, was able to manufacture Type A as its first product. Against this backdrop, the company manufactured Toyota AA as its first car for passenger use two years later. (http://www2.toyota.co.jp/en/about_toyota/overview/) Currently, the company owns and operates the Scion as well as Lexus brands. To add to that, it also has a major stake in terms of shareholding in Hino and Daihatsu motors. Yet still, the company has minority shareholdings in Isuzu motors, Fuji Heavy Industries, Mitsubishi Aircraft Corporations in addition to Yamaha motors. Also the company has a total of 522 subsidiaries. As of today, the company is headquartered in the famous Toyota city, Aichi found in Tokyo Japan. In an attempt to further strengthen its market leadership position, the company has diversified its activities. Hence, apart from its main automobile business activity, it provides financial services through its Toyota Financial services division. In addition, the company has taken on building robots. To this end, the Toyota Motor Corporation which is composed of Toyota industries and Toyota Financial services has been established as the major stakeholder in the Toyota Group; which has been cited to be one of the world’s largest Conglomerates. On a different note, just as the other major market players of the world, this company posted an annual net loss to the tune of US $4.4 billion as was reported in May 2009, a development which was attributed to the unprecedented 2007-2009 world economic meltdown. Toyota’s entry into the United States car market was marked by shrewd business tactics. Faced with the challenge of oil crisis way back in the year 1973, the US consumers in this lucrative car manufacturing business began to have strong preference for the smaller cars as a cost-cutting strategy. In this regard, a great deal of emphasis was placed on the need to have cars with a better fuel economy. American car industry players on the other hand held the notion that small cars were only used as a market entry strategy and therefore they were of low quality this being a mechanism to keep their prices low. Aimed at protecting its market, the United States had opted to impose stiff taxes on car imports from as early during the 1960s. For instance, the 1964 Chicken tax imposed a 24 percent tax on all imported commercial vans. In response, Toyota and other companies decided to establish plants in the country. A couple of years later, this company entered into a joint venture operation with GM known as NUMMI, and the new United Motor Manufacturing Inc.- a move that enabled it to establish an automobile manufacturing plant in California, Fremont. (http://www2.toyota.co.jp/en/about_toyota/overview/) 1.0 Management Theories in use at Toyota A closer look into the activities of Toyota and its market operation framework reveals that the company is using the scientific theory of management. Presented by Fredrick Taylor, this theory has been cited to have provided the much needed impetus to the development of what became to be known as the era of modern management. Developed during the late 19th and early 20th Centuries, Taylor was decrying the apparent inefficient, awkward, and ill-directed movements of an individual and therefore was advocating for a paradigm shift from the conventional method of personal management to scientific method of management. Under the former method, the manager was usually expected to be quite a brilliant individual and therefore other people were expected to follow them. In his defense of his method, Taylor was of the idea that the use of scientific method would provide a platform for cooperation and efficiency among workers as argued by Zastrow (2009). In particular, he believed that the scientific method would allow for the workload to be evenly shared between all the workers and the management. The management’s main task in this regard would be to perform the instruction and science of business. The company workers would on the other hand be tasked with the role of performing labor in which case the each person or group is placed in the area to which they are best suited. According to Morgan (2006), this method of management is characterized by the process of careful measurement and specification of tasks. From the company records and market operation structure it is evident that that Toyota’s management is using this method. This can be captured by the division of its automobile activities into specific segments and divisions. Hence workers are grouped based on their unique abilities relative to the various elements of the process of car manufacturing whereby each team or group is assigned a particular section of the wider car manufacturing process all the way to the point of sale. For instance, there is a team specifically charged with the responsibility of assembling the car engine while another is assigned to handle the car electronic system. The management on the other hand provides clear and specific instructions to these teams in terms of what the final product should entail. This method of management appears to be compatible with this company since its activities are routinized and involve assembly of various components of the car. The other theory of management which is currently being used by this car manufacturing firm is administrative as advanced by Fayol. This has been evidenced by the careful coordination of all the activities within this company by the management at every level. From the company profile, it is possible to observe that the management has incorporated the concept of division of labor in all its divisions. Furthermore, at the divisional level, workers have been coordinated through division of labor although they function as a single unit. Though complex, this theory has been integrated well with the scientific theory of management. 1.1 Management Structures in Use at Toyota One of the structures of management which has been incorporated by the Toyota Company is the rigid task definition. This type of management structure has been necessitated by the fact that the company is operating on the scientific and administrative theories of management. Hence, this structure makes it possible for the company to assign its employees tasks based on their areas of specialization. This is especially critical in ensuring that there is division of labor in the company which in turn enables them to focus on their area of specialization in relation to their key competencies as put forward by Lankhost (2005). The need for coordination of all the company activities has also made it necessary for the workers to be given specific tasks although they are components of the larger process of car making. The above structure of management has been coupled with centralized control as the other structure of management. This is evidenced by the fact that Toyota has centralized all its activities in Tokyo in which case all its global outlets are subordinate to the directions from this place. Yet still, at the departmental level, all the activities are centralized within one office to which all the other departments report. The third structure of management in use at this company is the vertical communication. The said structure has the merit of complementing the aforementioned types of structures. In essence, this structure has been implemented due to the nature of the production process of automobiles which requires measurement and specification of tasks and responsibilities to the workers. According to Dickersbach (2009), the above types of management structures are embedded within the hierarchical structure of management. Organizations operating under this form of structure are usually characterized by a top-down type of management through the creation of a range of several layers of management as is the case with Toyota Motor Corporation in all its outlets and divisions. These structures therefore create an ideal environment for the implementation of high-degree coordination both within and without the company. In principle, this type of structure is conglomeration of all the above types of structures and is most suitable to any organization which operates on scientific theory of management. The other type of management structure being used by Toyota is the divisional one since the company has put in place distinct divisions within the lager automobile division. The case is similar even in its financial services division although in both cases, such divisions converge through the centralized form of management structure. According to Haslem (2009), these forms of structures of management can be grouped in one broad group known as mechanistic in which case the above become its characteristic elements or features. On the contrary, the company is not using the matrix management structure. Based on the nature of its production activities, this structure would be most suitable in the case where individuals would be grouped in independent automobile projects. In this type of structure every engineer for instance would be assigned to a given project headed by a different project team leader. This method has the merit of allowing workers to be involved in a range of projects relative to their skills or competencies. However, opponents of this type of management structure hold the view that it usually results to duplication of duties. Also, matrix management is prone to conflicts between the workers as well as the management and thereby negatively impacting on efficiency and consequently, output as has been put forward by Griffin and Gregory (2009). On the other hand, Toyota Motor Corporation’s mode of operation can be best linked to the era of Henri Fayol during the famous era of evolution of management. Fayal’s administration theories were developed in response to the continued use of the other theories especially bureaucratic ones as was advanced by Weber. According to Henri Fayol, the management was composed of five critical elements. These principles are; to plan and forecast, to command, to organize, to control and to coordinate. Planning and forecasting involved the process of anticipating the outcomes of the future and acting accordingly. The function of organizing on the other hand entailed the process of developing the resources of firms both human and material. The command principle on the other hand was concerned with keeping the actions as well as process of an organization running with the principle of coordination being captured through the process of aligning and harmonizing the various efforts of groups in an organization. Control as the last principle was aimed at ensuring that all the above activities were executed according to the stipulated or laid down procedures and rules. A closer look at Toyota’s mode of operation reveals that the company has integrated the above five principles in its activities (Bartol, David & Margaret, 2004) As one of the principles, the company operates under the culture of forecasting and planning through development of goals. These goals are usually represented in terms of both short-term and long-term plans in which case the company projects its output and turn over based on the prevailing market conditions. With respect to organization, Toyota Motor Corporation has an explicit framework for developing its resources in order to achieve its goals. The principle of command has been brought to the fore through the company’s management structure which is centered on ensuring that its activities run smoothly. Coordination which is a critical principle for the success of any market player is carried out at the various levels of its managerial hierarchy. Through control, Toyota Company ensures that all its activities at the divisional level are conducted in tandem with its goals and objectives. Faced with present-day 21st Century cut-throat competition, the importance of these five principles to Toyota Motor Corporation can not be overemphasized. To ensure that this theory of management was incorporated by organizations, Henri Fayol further developed fourteen management principles. Specialization or division of labor and the use of authority with responsibility are two of these principles. Unity of direction, command and discipline are the other principles developed by Fayol to complement the stated five principles of management. To add to that, Henri Fayol, came up with the principles of staff remuneration, order, equity, security/stability of tenure, centralization, scalar authority line, subordination of the individual interest relative to the general interest. Initiative and Espirit de Corps are the additional principles which he developed. Roth (1994), argues that these two principles show the clear cut distinction between Fayol’s theories of administration and those which were advanced by Weber during the time of modern management. Other than Toyota Company, it should be noted that Fayol’s principles are widely used by other organizations across the globe. The extensive use of the principle of authority among the current crop of organization is a clear evidence of its successes as presented by Lynch and Peter (2006). Most notably, these five principles have been incorporated and customized by different organizations and thereby helping to create organizational culture subject to the unique needs of every industry or sector. 2.0 Environmental Forces One of the direct environmental forces is captured in terms of competitors. Competitors can affect the progress of any company either negatively or positively. Operating within a market environment characterized by heightened competition has the impact of increasing market operating costs in terms of advertisements and product differentiation. In some cases cut-throat usually result to significant reduction in prices which in turn translates to reduced sales turnover. In extreme cases, this might lead to losses among organizations. Hence, some of the major competitors to Toyota Motor Corporation are Nissan, Honda, Ford and General Motors. In their quest to have a stake in the market, these competitors more often than not have used price reduction as a feasible strategy of wading off Toyota’s influence in the global automobile market. Events of the just ended world economic meltdown saw the wide use of this strategy by these companies especially General Motors and Ford. It is imperative to note that price-based market competition strategy is often very costly due to its direct impact on an organization’s revenue or sales turnover. The other strategy which has been employed by Toyota’s competitors is innovation which is often reflected in terms of new technology which in turn has culminated into the development of new car models. The continued increase in competition has negatively affected the firm’s sales revenue since it has had to reduce the prices on some of its car models especially in the European market. In response, Toyota Motor Corporation has embarked on an ambitious project of innovation and product differentiation. Though expensive, product innovation enables any market player to respond to the unique needs of the customers in relation to their preferences or tastes. Improvement in the overall quality is the other merit of innovation to both the company and customers. This has enabled the automobile company to create a niche within the various market segments. In particular, the main focus of the company has been to develop fuel efficient cars as a counteractive measure to price reductions by its competitors. In order to lock out potential technological competitors, Toyota Motor Corporation opted to patent these technologies; a move which has enabled it to assert its position within the global automobile market as is reported on the company website. The second direct environmental factor affecting Toyota Motor Corporation is the consumer. The dynamic change among consumers influences the sales turnover and is usually captured as seasonal changes. Changes within the consumer domain are also brought about by preferences to specific models in relation to the emerging social trend in a given market. Seasonal change is on the other hand influenced by the prevailing economic conditions within the market and is directly proportional to the consumer purchasing power. From the general business environment, one of the indirect forces affecting Toyota is politics. Changes in the political arena across the globe have resulted in the development of market policies by new governments. In most cases such developments have resulted into the creation of domestic protectionism measures by these administrations. Establishment of such policies in the form of increased taxes on car imports by some European regimes has negatively affected the company’s sales turnover in these regions. The said policy developments have been more pronounced in countries such as Germany, United Kingdom as well as the United States of America. Faced with this challenge, Toyota Motor Corporation opted to operate under joint ventures with some of the native car manufacturing companies within these regions; a move which has enabled it to penetrate some of the world’s closed markets. From the standpoint of value driven management, it is imperative to note that the above stated forces are value adders. Though they tend to have negative impacts to this organization, they have provided an impetus to the growth and development of this corporation in the long run. One way of turning value destroyers into value adders is by taking advantage of the opportunities that they present in the first place as suggested by Barksdale and Teri (2002). In this regard, such constraints or challenges must be seen as forces of change within the affected organization in relation to the specific market needs. Hence, the development of a proactive and comprehensive operations management strategy is desired as is suggested by Griffin and Gregory (2009). (Word count = 2,963) References Barksdale, S and Teri, L. (2002). Rapid Strategic Planning .Washington, D.C: American Society for Training and Development. Bartol, K. M, David, M and Margaret, T (2004). Management: A Pacific Rim Focus. London: McGraw-Hill. Dickersbach, J.T. (2009). Supply Chain Management with APO: Structures, Modelling Approaches and Implementation of SAP SCM 2008. New York: Springer. Haslem, J.A (2009). Mutual Funds: Portfolio Structures, Analysis, Management, and Stewardship. London: John Wiley and Sons. Enterprise architecture at work: modelling, communication, and analysis. New York: Springer. Lynch, T.D and Peter, L.C. (2006). Handbook of organization theory and management: the philosophical approach. 2nd Ed. New York: CRC Press. Morgan, G. (2006). Images of organization. New York: SAGE. Roth, W. F. (1994). The evolution of management theory: past, present, future. New York. CRC Press. Toyota Company Homepage; (http://www2.toyota.co.jp/en/about_toyota/overview/). Accessed on December 10, 2009. Zastrow, C. (2009). The Practice of Social Work: A Comprehensive Worktext. 9th Ed. California: Cengage Learning. Read More