Comparing Technology Management at Toyota and Volkswagen - Research Paper Example

ANALYZING AND COMPARING TECHNOLOGY MANAGEMENT AT TOYOTA AND VOLKSWAGEN Table of Contents Introduction 3 1.Globalization Strategies 3 1.0 Approaches to Globalization 3 1.2 The Competitive Advantage of Nations 4 1.3 Technology Planning Methodology for the Firms 4 1.4 Managing Technology on Global/Local Basis 5 2. Manufacturing/Technology Interface 5 2.1 Production Learning curve 5 2.2 Manufacturing Decisions 6 2.3 Managerial Strategies for Manufacturing 7 2.4 Sources of Manufacturing Competitiveness 7 2.5 Globalization – Determining Manufacturing Location 7 3. Marketing/Technology Interface 8 3.1 Roles of Marketing in a Global Strategy 8 3.2 International Marketing Strategies 8 3.3 International Marketing Decisions 8 3.4 Segmenting Industrial Markets 9 4. Organization/Technology Interface 10 4.1 Approaches to Technology-Organization Interaction 10 4.2 Organization and the Technology Life Cycle 11 4.3 Organizational Structures 11 4.4 Management Style 12 4.5 Leadership, Organizational Change and Culture 12 Conclusion 12 References 14 Introduction Advancement in technology in the past few decades has spurred rapid economic growth of major business corporations in the global society. Technology management allows these organizations to control their manufacturing technology fundamentals to ensure that they create a competitive advantage over other organizations in the same industry. The function of technology management in any organization is to provide an understanding of the value of technology owned by the organization. As long as there is value for the end customer, continuous development and management of technology remains to be one of the most valuable resources of an organization. Toyota and Volkswagen are two companies in the automobile industry and have employed different technology management strategies; from planning to product design, optimization to operation, and marketing. This report critically analyzes and compares these two companies in terms of globalization strategies, manufacturing/technology interface, marketing/technology interface, and organization/technology interface. 1. Globalization Strategies 1.0 Approaches to Globalization Toyota and Volkswagen are two automobile manufacturers that are well known and have been in existence for a number of years. The two companies have adopted different strategies to reach their goal of manufacturing high quality automobiles at a lower cost and attain a larger share of the global automobile market. Toyota has international markets in Europe, USA, Australia, Russia, China and Africa. Strategies used to succeed and develop business in these markets are mostly created by specialists from the Japanese company. The first strategy is KAIZEN strategy – meaning continuous improvement. It is a cross-functional strategy for gradual improvement of product quality, productivity, and competitiveness by directly involving all staff (Béndek, 2016). Toyota have also put up a global quality product strategy which focuses on research, creativity & innovation, as well as development of newer technologies. The automotive company is a global leader in research and development (R&D) of advanced automobile technologies. There are nine locations for design and R&D set up by Toyota overseas. This shows how Toyota have achieved globalization from product design to development and production, through to sales and service. According to Schmid & Grosche (2008), Volkswagen have adopted almost similar strategies to globalization as Toyota. The company uses intelligent innovations and advanced technologies to improve product quality and shape customers’ satisfaction in a bid to gain a position in the world’s automotive market. Another strategy put forth by the Vollkswagen is to develop large growth markets and promote sustainability through implementation of environmental protection measures in the company’s materials, technologies, processes and products. The company has developed an international network of R&D with several R&D sites. 1.2 The Competitive Advantage of Nations Since 1960s following World War II, Japanese economic development has been majorly attributed to its technological advancement in the automotive industry. There is huge competition from the country’s automakers including Mitsubishi, Mazda, Honda, Subaru, Nissan, Suzuki, Isuzu and many others. Automobiles from these manufacturers continue to enjoy excellent reputation in the global market (Nkomo, 2015). However, the Toyota Motor Corporation has outperformed all its national competitors owing to its superior product quality through continued improvement. In Germany, Volkswagen face competition from rival automotive companies like BMW, Mercedes-Benz, Porsche, Audi, and many others. Volkswagen has gained competitive advantage over these local rivals through the company’s physical resources, including several production plants and machines, and financial resources. The largest percentage of subscribed capital is held by the International capital Markets, which is the key funding strategy of the company (Volkswagen Group, 2016). 1.3 Technology Planning Methodology for the Firms One of standing principles of Toyota is to use reliable and thoroughly tested technologies in their products to serve processes and consumers. In other words, manufacturing pulls technology and technology is not pushed to manufacturing. Toyota Corporation coordinates and integrates all phases involved in the development of technology; from research on vehicle technology to implementation of cutting-edge technologies in development of its vehicle models. This is to ensure that the automotive corporation rapidly and continuously develops leading-edge, high quality vehicles (Toyota Motor Corporation, 2012). On the other hand, development of technology at Volkswagen starts with research on urbanization, individualization, flexibility, and globalization and integrating these trends in its revolutionary automobile concepts, with focus on vehicle body, powertrain, operation and safety. Early recognition of new technologies is systematically monitored and technology road mapping is used to coordinate both timing and content of development of vehicle projects to meet different needs of customers (Volkswagen Group, 2016). 1.4 Managing Technology on Global/Local Basis According to Ichijo & Kohlbacher (2007), Toyota is continously increasing the number and capabilities of its production facilities globally through strategic leveraging and creation of local knowledge. Toyota has changed its knowledge creation and management in the automotive development from its headquarters in Japan and then transfering it to affiliations and subsidiaries around the globe to concentrating in creation of knowledge by local staff in foreign markets in partnership with local partners. This strategy has been commonly termed by Toyota as “learn local, act global”. At Volkswagen, all technological processes are centrally designed at the automobile manufacturerer headquarters in Germany, like the Toyota, with the aim of ensuring maximum comfort, effeciency and customer satisfaction while caring for the environment (Volkswagen Group, 2015). The technolies developed are transferred to all its production plants based on the concept of consistent construction defined in product standards. 2. Manufacturing/Technology Interface 2.1 Production Learning curve Both Toyota and Volkswagen have expanded to the global market with production facilities located at their customer base. Over time, production processes have been improved through innovation and technology leading to increased units of production annually. In Toyota, production processes are continuously under development to improve product quality to meet customer needs. This has made Toyota one of the world’s largest car producer. The Volkswagen group is also constantly working to improve technology with current designs based on hybrid cars with focus on caring the environment. The high technology products have met price competition and the production learning curve of the two automobile companies have already moved down (Gorlach & Wessel, 2007). Figure 1: A typical production learning curve 2.2 Manufacturing Decisions Toyota has set-up numerous assembly plants as well as design and R&D centers overseas to suit each of their market. Of about 30,000 parts used in making a car, some are obtained from external suppliers, for example meters, seats, steering wheels, seats, headlights, windshields. The entire production system is socio-technically integrated, comprising of Toyota’s management philosophy. The Toyota Production System or better known as “just-in-time” (JIT) system organizes the manufacturing process as well as logistics, including interaction with all its suppliers and customers (Davies, 2016). The Volkswagen group has its headquarters in Wolfsburg and manufacturing facilities in 20 other European nations and 11 other countries across the US, Asia and Africa, all making up 120 production plants. With 610, 076 employees worldwide, the plants are capable of producing up to 42, 000 vehicle units on every weekday (Volkswagen Group, 2016). Europe serves as the most important region for Volkswagen component and vehicle production. VW’s production system is value-driven and synchronous - aimed at optimization and standardization of the manufacturing process. A new product development system has been devised, where hundreds of variations can be produced from the same basic chassis (Volkswagen Group, 2015). 2.3 Managerial Strategies for Manufacturing Through the JIT system, Toyota has strategized to enhance productivity and eliminate waste (lean production) by streamlining the process of manufacturing (Davies, 2016). Essentially, the system involves producing what is required, when it is required, and in the quantity needed at a specific time. Volkswagen’s manufacturing strategy is based on the use of one basic chassis to produce variations of vehicles to ensure that the automobile manufacturer saves on the production cost while maintaining distinct identities and competitive advantage for its vehicle brands (Volkswagen Group, 2016). 2.4 Sources of Manufacturing Competitiveness Toyota has integrated industrial robots in their manufacturing systems to lower the cost of production and improve quality. Robots are used in assembly, painting and welding processes (RobotWorx, 2016). Combination of automobile control technologies, industrial robot technologies and state-of-the-art IT technologies have helped the company to achieve lean manufacturing – which minimize the cost of production, increase quality, and keep the company’s products on a competitive edge. According to Joormann & Teunis (1986), Volkswagen started employing the use of CAD/CAM systems since the 1970s to increase the company’s competitiveness. Today, the company is able to design great products such as the Golf model with CAD/CAM systems (Gorlach & Wessel, 2007). The process of manufacturing is automated to reduce the cost of production. 2.5 Globalization – Determining Manufacturing Location Toyota’s generic strategy combines both cost leadership and broad differentiation. Cost leadership involves minimizing operations and production cost and selling prices of their products, while the broad differentiation strategy requires development of unique products to retain the corporation’s competitive advantage against its rivals (Fujimoto, 1999). Combination of these two generic strategies continues to support Toyota’s markets segments in the global reach. VW automakers have adopted a flexible strategy in its manufacturing process that across all its global facilities that ensures that conventional, compressed natural gas, and electrified vehicles, and alternative powertrains are manufactured on the same assembly line. Particular attention is paid on the design and manufacture of environmentally friendly vehicles to leverage VW’s strengths and competitive advantage in the global market (Schmid & Grosche, 2008). 3. Marketing/Technology Interface 3.1 Roles of Marketing in a Global Strategy The corporation has developed an effective marketing mix called the “4 Ps” (Product mix, Place/Distribution marketing mix, Promotional mix & Pricing strategy). Toyota has a wide variety of products and the Product mix identifies and organizes outputs for customers in the target market. Place/Distribution market mix determines places where target customers can access Toyota’s products, mainly through dealerships and retailers. The promotional mix covers market communication with its customers using promotional activities, for instance, personal selling, product advertisement and promotion, and direct selling. The price strategy identifies how the company sets the price for Toyota products based on the market orientation and value (Hoque, et al., 2013). In terms of products, Volkswagen offers a variety of cars to meet different customer expectations. Promotion for the products is mainly done through advertisements. Each car model is manufactured in key locations and distributed to the targeted markets where potential customers can access them. The price setting depends on the car size, exclusivity and power of the engine (France-Presse, 2013). Both Toyota and Volkswagen have integrated R&D in product development process to produce more improved models. 3.2 International Marketing Strategies Toyota sets new product prices based product value, market forces and its existing price range, like in the case of Prius in the UK market as reported by Hoque, et al. (2013). The company’s strategy to penetrate in the international market is based on the development of new innovative technologies achieved through research and creativity to meet their customesrs’ needs. Toyota has greatly reduced inventory waste by the “Just-in-time” strategy; where a product is produced only when it is required, in a place where it is required, and in the required quantity. On the other hand, prices of Volkswagen products are value and customer satisfaction. The Volkswagen group is more focused on design of technologically advanced eco-friendly cars which also meet customers’ desires and dreams (Volkswagen Group, 2016). 3.3 International Marketing Decisions Toyota’s 53 manufacturing facilities are globally located in 28 regions, closer to the target markets to ease access of the company’s products (see figure 2). The main markets of focus are in the US, Europe, Canada, Australia, Indonesia, China and Africa. Northern America accounts for about 30% of Toyota’s sales (Hoque, et al., 2013). The company provides a wide range of products to cater for a variety of customer care and preferences; from economy class to middle class and luxury models like Toyota Lexus to eco-friendly models like the Prius. On the other hand, Volkswagen’s product positioning and marketing is largely based on its product design and branding into different segments, and product promotion through media campaigns. With 44 production plants across the globe, the company is able to make its products accessible to its customers (Volkswagen Group, 2015). Figure 2: Toyota’s oversea manufacturing facilities (Toyota Motor Corporation, 2015). 3.4 Segmenting Industrial Markets Toyota believes in a philosophy of the right car at the right place, and for the right people. Using demographic and psychographic segmentation, the company is able to provide its products to the target market. Its largest customer base are in North America – which provides 30% of its product market, Europe, Canada, Australia, Indonesia and China. Toyota’s emerging markets (see figure 3) have also contributed to increased sales, accounting for 45% vehicle sales in 2011 as reported by Toyota Motor Corporation (2012). The vehicles are built to meet specific needs of customers in their target market. The company allows its customers to lease their products and have the option to purchase the leased product at lease-end (Hoque, et al., 2013). Volkswagen is Europe’s largest automaker and has many of its production facilities in the continent, which also provides the biggest markets for its products. Other markets are in Australia, USA, Middle East and Asia. Volkswagen is largely focused to meet the needs of environmentally-sensitive customers through their environmentally-friendly models. Purchasing options include hire purchase and leasing (Volkswagen Group, 2015). Figure 3: Increase in Toyota vehicle sales in emerging markets 4. Organization/Technology Interface 4.1 Approaches to Technology-Organization Interaction Being among the largest automobile manufacturers in the world, Toyota and Volkswagen fall under the category of process production technology – where products are manufactured in an automated continuous process. The second approach of technology classification is based on the range of technologies involved, particularly the vehicle assembly lines with inputs and outputs. This technology organization in these companies can be classified as long linked (Fujimoto, 1999). 4.2 Organization and the Technology Life Cycle Like other great organizations, Toyota Corporation and the Volkswagen group have gone through the stages of the organizational life-cycle and are currently enjoying the maturity stage (see figure 4). Volkswagen’s approach to technology life cycle is to produce vehicles with lower fuel consumption and lower emissions and other environmental impacts. However, the problems mentioned earlier on Toyota about defect vehicles and Volkswagen about emission scandal, can show the problems faced by a growing and still evolving companies. According to Béndek (2016), technology is ever changing and advancing as long as R&D and innovations are still there, and eventually, production methods and processes change over time. The automobile industry is technology-driven, and as more improved technologies and innovations continue to be unveiled, more improved vehicles continue to be manufactured. Figure 4: Stages of Organizational Life-Cycle 4.3 Organizational Structures The two automobile companies have several manufacturing and R&D facilities in different regions of the globe managed from centrally located headquarters in their countries of origin. Each of the production facilities have their own organizational structure, from CEOs and executive managers to lower employees. This organizational structure can be classified as professional bureaucracy – where operations are decentralized and products are diversified (Schmid & Grosche, 2008). 4.4 Management Style Both Toyota and Volkswagen employ two styles of management; bureaucratic and project management. Bureaucratic management applies in the day to day production of already developed products. Project management is linked with the R&D Department to come up with newer products with more improved technology and meeting customer expectations while maintaining a competitive edge (Schmid & Grosche, 2008). 4.5 Leadership, Organizational Change and Culture Toyota has adopted lean leadership – carefully and intensively developed leaders to fit in its unique culture and philosophy following the traditional Japanese management practices. Most of the company’s senior managers and executives are selected from individuals who had risen through the ranks. However, this management style has been recently criticized for being too parochial for a globally run business – with shortcomings highlighted when there was a slow response to recalling of millions of vehicles over safety defects in 2009. This made the company to appoint three new non-Japanese board members for the first time in 2013, and further appoint outsiders as CEOs in Europe, U.S, Latin America and Africa (France-Presse, 2013). Volkswagen has cultivated a “no failure culture” kind of leadership. It is this culture that made CEOs to make a decision that was not of the best interest to Volkswagen Group - a decision to install a defeat device in 11 million vehicles designed to defeat emission tests (Bomey, 2015). This has called for change in Volkswagen’s culture to allow for more open discussions, willingness to allow and accept misstates, closer cooperation and giving more authority lower employees in the organization Conclusion Strategic technology management is key to establishing global competitiveness in the automobile industry. This ensures that competent products that meet the ever changing customer preferences are produced in a cost-effective way. Toyota and Volkswagen have employed different production and technological methodologies to sustain their global market share. Japan’s Toyota Corporation has attained global competitiveness in its different product models through years of continuous product improvement based on a lean manufacturing system to deliver vehicles that meet customer needs when they are required, where they are required, and in the required quantities. The Volkswagen group is also in a continual development of technology and innovation to meet tomorrow’s challenges in the automotive industry. Their technology is largely focused on developing vehicles with more powerful engines, greater operating range and comfortable ride, while consuming less fuel and producing fewer emissions and maximum environmental care. References Read More