Toyota Corporations Management Concept - Essay Example

Section - A Growing rivalry among the organizations, forces of globalization, rapid changes in business practices fueled by innovations in technology has increased the necessity of companies to tune up their strengths according to the opportunities that unfold in the market. It is often realized that the environmental analysis is the initial step in the formulation of strategy. Environmental analysis means internal and external environment to identify the strengths, weakness, opportunities and threats. When we are planning for the future first the organization should have awareness about the internal and external environmental factors that can impact the organization. "When the environment audit is undertaken, the objective is to develop a finite list of opportunities, threats, strengths and weaknesses. Here the word finite list is emphasized because the job of the manager is not to make an exhaustive list of all the factors that may affect the organization. But focus should be on key environmental variables that could influence business"1. The importance of the environmental analysis is mostly realized by organizations but the depth of the analysis is often compromised. For example in Toyota Corporation, there is a management concept "to go to the roots". The meaning of this concept is that, when we are collecting information for analysis, the information should be collected from the source or in other words from the origin. When an external environmental analysis is done with information collected from the sources and decisions are made based on such in-depth data, the applicability and durability of strategic plans are considerably increased. The information from the external environment should be used to tune up the internal environment to meet the challenges and make good of the opportunities. When an organization needs to possess a competitive advantage its focus should be internalized rather externalized. The ability of a business concern to focus on its strengths and potential areas of improvement will lead to formulation of workable plans. Hence, the conflict between where we are and where we want to go does not arise. Wastage of time and money on formulating strategies which have to be later sacrificed to carry out day to day operations can be avoided. Many a times in a business organization, managers are faced with the challenge to modify the day to day operations to achieve the long term strategic goals and vice versa. This may be due to the gaps between the aspirations and actual business environment. The organization may aspire to achieve the mission and vision, but the ground reality faced by the company may create hurdles in the path. In an organization, long term strategic plans are useful to tune up the operations to achieve future objectives. But, it is often hard to follow the preplanned course of actions. This may be due to various reasons and mangers are often at the cross roads. Assigning priorities and making decisions becomes a challenge for the business managers when they have to decide the sacrifices that have to be made to get along in business. When we argue that often operational priorities derail strategic plans, it denotes that the culture in an organization is not oriented towards the strategic plans made. The external environment is ever dynamic and the strategy formulated should be flexible to accommodate the changes. When the strategists bring this concept into the strategy formulation right from the nascent stage then the situation of trade off of strategies can be avoided. When a person wants to achieve something in future the attitude, personality, values and other psychographic factors should be matching with what he/she wants to achieve. In an organization there are so many people working who have different kinds of needs. When different people work together to contribute towards the success of the organization, then the pattern in dealing with problems and the behavior of the employees should be assessed. This pattern of behavior is often called as the organizational culture. The culture of the entity has to be understood, emphasized and highlighted upon when the strategy is made. The understanding of the corporate culture also reflects in the ability of the firm to match its strengths with the opportunities in the business environment. A strategy made without an understanding of the culture will often create plans, which are not accommodative to the working style of the entity and hence, will bring down the practical usability of the strategic plans. Section - B Porter's five forces model effectively explains the extent to which cost leadership and differentiation strategy can be adopted simultaneously by an organization. As mentioned by him, it depends upon a number of factors such as the nature of the industry, level of competition, intensity of the rivalry, relationships with the suppliers, and bargaining power of the consumers and threat of new entrants. For example, Skoda cars can afford to differentiate its products, but it the company does not focus on cost leadership. It has to differentiate its products because the rivalry among the competitors is high in the automobile industry and the threat of new entrants is very high. But the company enjoys the benefit because it has a high bargaining power with both the customers and suppliers. Here, Skoda cars can adopt only differentiation strategy but not cost leadership. For a company to adopt both, the company should develop a strategy to differentiate its products without much increase in cost. When the product itself is differentiated from others then it becomes a new product and cost leadership is possible. This strategy si popularly called as the Blue ocean strategy. In a blue ocean, organizations differentiate their products to create new markets. It denotes all the industries not in existence today - the unknown market space, untainted by competition. Blue ocean the demand is created rather than fought over. in a blue ocean the companies create and capture new demand. in a blue ocean the value cost trade off is broken and new rules are established. There is ample growth opportunity for growth that is both profitable and rapid. To create a blue ocean, the companies give rise to new industries. Blue Ocean is created when an organization alters the boundary of an existing industry. The blue ocean is created by an organization when it parts from the traditional models focusing on competing in the existing market space. The examples of companies that have adopted this strategy are the eBay and Amazon. When a blue ocean strategy is adopted the company has a differentiated offering to the customer. This makes the company a pioneer in the industry. As the sales grows, it can have cost leadership through the bulk volume of sales. When new entrants enter the business, it is difficult for the imitators to copy the blue ocean strategy as they have to make the changes to suit their organization, which will increase the cost. Hence, we can confidently say that, when a company adopts a blue ocean strategy it can have cost leadership and differentiation strategies simultaneously. References 1. David R. Fred, Strategic management - Concepts and cases, Prentice Hall, New Jersey, 2007 2. Ledgard, Jonathan, Skoda leaps to market, www.strategy-business.com, 2005 http://www.strategy-business.com/press/16635507/05306 3. McConkey, D "Planning in a changing Environment", Business Horizons, September - October : 64, 1988 Read More