Operations and Business Systems Management - Essay Example

Operations and Business Systems Management (OBSM) – The case of Toyota Motor Corporation I. Introduction In the modern market which is characterized by an intensive competition between the companies of all industrial sectors, the design and the application of an effective operational strategy is a challenging task. For this reason, Santos et al. (2000) suggested that each company should prioritize its objectives trying to identify the sectors where the corporate activity should be concentrated. Moreover, the above researchers stated that ‘according to its characteristics, objectives and the resources available (human, physical, financial etc.), each company prioritizes some competitive criteria, according to market tendencies and concentrates its efforts to get a competitive position relating to concurrence’ (Santos et al., 2000, 2). The above issue was also examined by Rand (1999) who found that one of the most important advantages for a company that operates in the modern market is ‘visibility’ which was defined by Rand as ‘the capability to see and to understand the condition of the revenue-producing process as the revenue plan unfolds; the condition of the process is determined by the products position in the supply chain relative to the actual demand, i.e., the process is in good condition if the product and all of its components can be moved from their location in the process through the balance of the process in time to meet the date the product is scheduled to be shipped’ (Rand, 1999, 97). The above issues have to be considered when evaluating the corporate strategy followed by a company within a particular industrial sector. In this paper, Toyota is used as a ‘sample’ firm in order to investigate the level of effectiveness of corporate strategic plan as it is usually structured in most manufacturing companies around the world. The particular elements of the above company’s strategy (i.e. the most significant parts of its strategic plan) are then used in order to test the company’s ability to achieve its targets with a special reference to the ‘process types’ and ‘layout types’ that the company has chosen to use within the borders set by its strategic plan. Finally, the capacity strategy adopted by the organization is identified and evaluated taking into account the company’s internal and external environment and mostly its competitors both in the local and the global market. II. Toyota – Company overview Toyota Motor Corporation is one of the most significant corporations in the automobile industry. The company was founded in 1894 and has soon become one of the world’s leading competitors in its area of operation. As for the net of its operational centres and branches around the world, this is constituted by 12 plants, 11 manufacturing subsidiaries in Japan and 51 manufacturing companies worldwide while its business activities cover an extended area globally with an active presence in more than 26 countries. The main priority of the company’s strategy is the retention of its current position in the global market while protecting the environment (Witte, 2001) at the highest possible degree from the possible damages that its operation may cause. The last fiscal year the company’s performance was increased (see Table 1) reaching the level of 1,104.7 billion yen with a significant number of employees (65,798) in the company’s operational centres worldwide. Table 1 – Toyota Motor Corporation - Unconsolidated accounts (April 2005 – March 2006) [1] Employees 65,798 Net sales 10,191.8 billion yen Income before taxes 1,104.7 billion yen Net income 765.9 billion yen 2005 marked the year that Toyota ‘concluded a basic agreement with Fuji Heavy Industries for the formation of a business tie-up [1]. Moreover, the company has proceeded to a series of significant projects globally. More specifically, ‘in the Czech Republic, Toyota started joint production of the Aygo with PSA Peugeot Citroën, and in China, Toyota began production of the Prius and the Crown-their first-ever production overseas; In India, South Africa and Argentina Toyota launched the IMV Project, which seeks to develop more efficient production and supply systems on a global scale[1]. As for 2006, it is characterized by the introduction by the company of an advanced management structure trying to prevent any possible negative consequences from the expansion of its commercial activities globally. III. Description and evaluation of company’s performance objectives One of the most important parts of Toyota’s strategy is its innovative production system which offers to the company the chance to meet a high volume of production annually and to achieve high levels of profits within relatively short periods of time. Its particular production system is called ‘lean manufacturing system’ or ‘Just-in-Time system’. The application of this system ensures that the company will be able to meet the deadlines of products’ delivery as set by the order – line system applied in the company worldwide while at the same time quality remains at high levels. Apart from the application of the above described production system, the company has proceeded to the development of its human resources’ working value through the application of a series of seminars in all business units. Moreover, the provision of equal opportunities has been recognized as the most important issue for the company’s human resource management. On the other hand, the company shows an active respect towards both its business partners and its shareholders in an effort to retain the balance on the interests of all parties involved. As of its suppliers, a series of principles and ethics ensures that their cooperation with the company is based on the mutual respect and understanding of needs. The issues described above as well as the concern for the physical environment are the main issues of the corporate strategy and for this reason the company has adopted several measures to ensure that all its demands and needs will be effectively protected. Under these terms, the main corporate objectives as they can be derived by the firm’s strategic plan as analyzed above, could be summarized as follows: a) provision of high quality products to customers, b) protection of the environment, c) concern for the firm’s human resources, d) protection of shareholders’ interests, e) close cooperation with suppliers. In this context, the identification and the evaluation of firm’s main performance objectives will have to follow the principles set by the theoretical and empirical research made in the business area. The application of relevant models should be also examined to the extension that it could be helpful towards the identification of business needs and its prospects for the future. IV. Methodological approaches for the achievement of corporate performance objectives When referring to a multinational company, the identification of corporate goals and objectives can be a challenging task. Regarding this issue Nelso (1997, 49) found that multinational organizations usually present ‘a challenge to some forms of job analysis, and traditional recruitment and selection practices that center around a job to be analyzed in terms of relatively stable tasks’. As for the human resource management followed by most corporations, it has been proved that it tends to follow specific principles referring mostly in two areas: ‘(1) leadership and employee motivation, and (2) HR practices (recruitment and selection, training, performance appraisal, and compensation management); Both areas have peculiar connotations in the context of strategic alliances, although other typical problems associated with cooperation between firms may arise’ (Lajara et al., 2002, 35). Towards this direction, it has been stated by Conner et al. (1996, 38) that in order ‘to improve its effectiveness and have greater impact, the human resource function must understand how to add value in the organization by helping line managers align HR strategies, processes, and practices with business needs; this will require HR professionals to perform increasingly complex and at times paradoxical roles’. On the other hand, Krishnan et al. (2001, 259) studied specifically the area of supply chain management and found that this sector ‘has become an important part of strategic planning in both large and small businesses since the 1990s as firms increasingly choose outsourcing as an externally-driven strategic growth path’. Under these terms, Griffith et al. (2005, 254) stated that ‘a firms global supply chain consists of multiple business partners across a wide number of countries; at the same time as a significant commitment of finite resource stocks (e.g., human resources, time) is necessary to manage supply chain relationships, strategy decisions aimed at maximizing performance cannot be made related to a single relationship to the exclusion of others while by appropriately allocating governance resources across relationships, a firm can maximize overall performance where performance is conceptualized under the rational goal model that views firms as striving for efficiency and productivity’. Taking into account the above views, the strategy of the company could be evaluated using a series of models. These models can also help in order to identify the ‘process types’ and ‘layout types’ that the particular company uses in order to achieve the desired level of production. One of these models is the Performance Reference Model which can be used in order to evaluate a company’s strategic plan in accordance with the resources available and the firm’s cooperation with its internal and external environment (see Figure 1). At a first level, the Performance Reference Model ‘begins with strategic analysis to determine what must be done, and with what priority; business activities are identified, based on strategic goals and business drivers from the vision and mission of each organization; a business case is written to document the AS-IS assessment and justify improvements and then the transformation to the TO-BE architecture is launched, which results in measurable business outcomes including client/customer satisfaction data’ [2]. At a next level, ‘performance measurements are reviewed and this provides feedback into the subsequent strategic plans’ [2]. In the case of Toyota, the ‘process types’ used can be located in the production system as it is applied in all production units of Toyota globally. Given the type of market in which Toyota operates the application of this system should be characterized as the best possible solution towards the achievement of a high volume of production internationally. Figure 1 – Performance Reference Model [2] From another point of view, the strategy followed by the company could be evaluated using the Porter’s Five Forces model. In fact, this model represents with high accuracy the current strategy followed by Toyota regarding all its operational activities. More specifically, the firm’s main objectives as presented above are among the elements that are taken into account when applying the particular model. In the case of Toyota, the corporate strategy if evaluated using the Porter’s Five Forces model (Figure 2), it can be proved to be totally effective and appropriate as all the particular ‘forces’ as presented in the relevant model are ‘faced’ by the company through the application of a series of ethics, principles and standards of cooperation. Figure 2 - Porter’s Five Forces of Industry Competition (Porter et al., 1985) Threat of New Entrants Bargaining Power of Suppliers The Industry: Jockeying for position among Rivals Bargaining Power of Customers Threat of Substitute Products or Services Another ‘theoretical model’ that could be used in order to evaluate the strategy followed by Toyota regarding the achievement of its objectives, is the model of Slack which is characterized by the existence of ‘five performance objectives’ which are the following: a) cost, b) quality, c) flexibility, d) reliability and e) debendability. The above objectives have been achieved by the company through the following strategies: a) the application of an innovative production system which can ensure that the cost involved in the production activities, will be limited, b) the constant development of technology used in all stages of production (offering products of high quality to the company’s customers), c) the existence of a series of financial schemes available to the customers for the payment of the company’s products, d) successful handling of any complains ensuring the fair compensation of customers in cases that a failure has been found to exist in a specific product of the firm and e) a long term successful presence in the particular industrial sector combined with a strong relationship with a high percentage of the current or potential car owners around the world (justified by the quality of products and services delivered by the company to all its customers). V. Conclusion and Recommendations The corporate strategy as it has been designed and applied in the case of Toyota Motor Corporation should be evaluated regarding its particular components. At a first level and specifically referring to the human resource management sector of a strategic plan, Slowik (2001, 77) supported that there are ‘specific predictors that can be discussed during both recruitment and selection that can have a direct effect on resolving retention problems; In essence, recruiting, selection and retention issues can be managed effectively by correctly targeting the information that predicts hiring mistakes and high turnover while encouraging candidates with potential to view the employer and possible job offer favorably’. On the other hand, Robertson et al. (1995, 547) stated that ‘‘because private sector organizations are driven primarily by market or consumer preferences, organizational effectiveness is more readily measured in terms of efficiency and profitability; as a result, change activity can be implemented and assessed using these narrow criteria as the primary basis for evaluating their success, possibly making it easier for these change efforts to be successful’. However, the evaluation of the corporate strategy cannot be based only to the quality of change management efforts as they take place through the relevant initiatives of the firm’s leaders. There are also other issues that need to be examined. The type of the production system applied by a company is characterized by Ciscel et al. (2005) as having a significant importance for the enhancement of the firm’s performance. More specifically, the above researchers supported that ‘several variables play parts in the transition from a manufacturing-based production system to that of a flexible, logistics-based system while the changes in the system of production can be traced to globalism, outsourcing, and retailing power’ (Ciscel et al., 2005, 429). Moreover, the supply chain management has been also proved as having major importance regarding the status of the firm’s performance both in short and long term. For this reason, Cook et al. (2001, 14) stated that corporate managers should focus on the following tools of supply chain management: ‘making and keeping relationships, implementing new technology in the supply channel, the use of forecasting to increase supply chain effectiveness, outsourcing to increase efficiency, and cost management as a strategic weapon’. The above views of theory if combined with the models presented above can lead to the assumption that the corporate strategy of Toyota Motor Corporation has been based on the appropriate principles supported by the relevant tools of strategic analysis as provided by the rules of the corporate management. Moreover, the application of a series of ethics and standards in all the company’s departments ensures the development of the firm’s performance on a long term basis. References Ashforth B. E. (1995). Emotion in the workplace: A reappraisal. Human Relations 48(2): 97 Ciscel, D. H., Smith, B. E. (2005). The Impact of Supply Chain Management on Labor Standards: The Transition to Incessant Work. Journal of Economic Issues, 39(2): 429-437 Conner, J., Ulrich, D. (1996). Human Resource Roles: Creating Value, Not Rhetoric. Human Resource Planning, 19(3):38-46 Cook, J. S., Debree, K., Feroleto, A. (2001). From Raw Materials to Customers: Supply Chain Management in the Service Industry. 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(2001). ‘Objective Pre-Employment Interviewing: Balancing Recruitment, Selection and Retention Goals’ Public Personnel Management, 30(1): 77-89 Witte, A. E. (2001). Competitive Advantage and Cultural Paradigms: An Exercise in Brainstorming for International Communication. Business Communication Quarterly, 64(2): 55-60 http://www.toyota.co.jp/en/sitemap/index.html [1] http://www.balancedscorecard.org/bscit/prm.html [2] Read More