Enhancing Management Decision in Toyota - Lab Report Example

The Role of Knowledge Management in Enhancing Management Decision in Toyota Technological advancement and continuous innovations have motivated organizations and businesses to react to changes in the global competition. Organizations have to reorganize, re-evaluate and reprogram outdated functional programs and activities, and realign them to the present trends for improvement and competition. Personnel and field people, ordinary employees, including middle-level and top management have to refocus along the line of technological innovations. External and internal environments in organizations are becoming complex; thus they are handled with a globally-oriented brand of management, with the aid of Information Technology. Corporate management is now handling a global-scale brand of management, requiring a different kind of strategy, much distinct from traditional management. Advancement in technology is fast; innovations are applied every minute. There is what we call Web 2.0, or web-enabled infrastructure allowing business-customer and business-to-business interaction. This spawns databasing or shared repositories. The internet has revolutionized business functions and introduced countless innovations in the globalized world. Technology paved the way for information revolution, knowledge-based economy, and various kinds of learning in the global environment and setting. Toyota Motors is a knowledge-based, global firm, leading the world in the car manufacturing industry. It has been the world’s leading car manufacturer, with branches worldwide, but recently a controversy has hounded its worldwide operations and colorful past, probably putting its leadership in the car industry in question. Problems over the hybrid Prius’ quality lapses that included braking problems and sticking gas pedals forced a global recall of 8.5 million vehicles, 6 million of them from the United States. Questions have arisen: how will Toyota resurrect from the ashes of a tainted hybrid Prius? Will it ever become the once glorious company which started its humble beginnings from a troubled Japanese economy? This essay will delve on the company Toyota, as a whole, and the particular technical aspect of its success – the introduction of knowledge management. For all of its successes, knowledge management played a key role in Toyota’s rise to ‘stardom’. Another question may come out: is it the same tool that put it down? Toyota has been on the forefront of car making because of an effective strategic and operational management coupled with an efficient and competitive workforce. Their strategies involve innovations in production, marketing, sales and promotions, and branding. But to top it all, it has been able to handle knowledge management like it is a part of ordinary business. In the 1950s Toyota was only a small company, averaging 18,000 vehicles per year. As years passed on, management perfected the so-called Toyota Production System – this is the Japanese way, a means of achieving mass production efficiencies with small volumes. (Lynch, 2008, p. 772) Toyota expanded to become export-oriented and began to open manufacturing plants in many countries including the United States, operating in the same strategy. Taiichi Ohno, the chief engineer then, started experimenting to improve production. Along with a determined workforce, he introduced the kaizen and kanban concept of production. Kaizen means “continual improvement”. Toyota engineers cut or shortened some stages of production to save time and provide flexibility. (Gourlay, 1994, p7, cited in Lynch, 2008, p. 773) The kanban was used to signal employees when to order or replenish parts or products. The process is a traditional way of using coloured cards especially designed to give notice to workers on the products’ availability. The strategy provided for a cellular layout arrangements of plant machinery rather than ‘linear layouts for production lines’ which allowed workers to operate a number of machines and let them work in teams to provide layout (Lynch, 2008, p. 773). Toyota’s research and development ventures are one of a kind. It has continually used R&D in design, production and manufacturing – it has come up with combining parts in one process rather than two or more. The Toyota Production System with its flexible production methods proved effective because Toyota was able to feel the gains when it was still struggling as a small company. Lynch (2008) emphasizes that “it took many years for Taiichi Ohno to develop kaizen and kanban, and to have them adopted across the company” (p. 772). In the 1960s-70s, a US-trained manager Shotaro Kimaya introduced into Toyota a concept of a separate company – but under Toyota – to sell spare parts. It was very successful. With globalization and outsourcing, Toyota outsources many of its parts, but maintains quality. With Prius, Toyota has used tremendously one of its most valued assets – a qualified and talented workforce working inside Japan. Kimaya introduced many marketing innovations in the company during the 1960s and 1970s. Kimaya and Ohno set up dealer networks, cheap financing for customers, and a strong and dedicated salesforce. Export of cars and products was begun and by the 1970s “40 percent of all production was being sold outside Japan, especially in the US” (Lynch, 2008, p. 772). The continual improvement concept is, in fact, continuing and commendable. The company went international and established manufacturing plants around the world. Toyota has maintained its workforce, making sure they remain in the company for longer period even during economic crisis, such as the Prius problem. Other innovations also were for an increase of market share: dealer networks and cheap car finance for customers. Through outsourcing and a good relationship with its suppliers because of an effective communication network via the internet and Information Technology, the company is able to minimize surplus inventory and lower cost of parts and products. In the 1980s, Toyota penetrated the US market, with American company Ford struggling (Grubb and Lamb, 2000, p. 58). Toyota and General Motors took hold of the opportunity and joined forces by reopening GM’s Fremont, California, assembly plant, posing a threat to Ford in the U.S. market. It was also a strategy, on the part of Toyota, to learn how efficient American workers could become under Toyota’s finely tuned management system. (Grubb and Lamb, 2000, p. 58) The automotive industry is much affected by the global financial crisis as a result of the financial collapse in Wall Street. Mass layouts and companies closing shops were a trend. GM got help from the government. But Toyota remained in the limelight only to be disturbed by some technical flaws. Toyota has survived through the years. Its programs, strategies, and plans of the future are as strong as ever. The past can build a future for Toyota. Its management is institutionalized as well as the personalities behind the founding and operations. Toyota is a long tradition of management from its original founder down to a long line of car builders and business innovators. To mark it all, Toyota has not recorded operating loss since the 1940s. Its strength is its operational and production strategies and the people behind the system. Its workforce is composed of well-trained engineers and technicians who are trained inside not outside the company thereby maintaining their unique way of building cars. Toyota does not believe in firing employees; it trains its own work force and not in a university or from other outside sources. This could be one of the reasons why despite the current Prius problem, management has maintained that quality has always been a Toyota trademark. How it is going to deal its downward trip in sales and shares will put to the test its leadership. Toyota’s own leadership model says, "Never fail to reward merit, but never let a fault go unremarked." Was Toyota over-confident of its strategy and operational make-up? Humans create knowledge in social interactions. Toyota has created structures, places and mechanisms for the creation of knowledge, be this through the interaction of employees and managers, and the physical structure. Through the networks that the company has created throughout the world, Toyota has maintained a product-development process unique from the rest of car manufacturers even those from the United States. Its wealth of knowledge-based system is unchallenged and can never be equaled. Watts (2003, cited in Nonaka and Peltokorpi, p. 91) states: “The small world network properties enable the coexistence, even in a sparse network, of a high degree of clustering, and of short average path lengths to a wide range of nodes.” Through interaction in the network, with the aid of the internet and Information Technology, people and firms input data and information, along with their knowledge, expertise, and wisdom. “Knowledge creation occurs through the dialectics of tacit and explicit knowledge; direct experiences during the socialization phase enable the accumulation of tacit knowledge.” (Nonaka and Peltokorpi, p.91) Prius was a concept that Toyota developed into and from a knowledge-based technology, what is described as “core technology, path-breaking vehicles, and new routines of product development for the 21st century” (Nonaka and Peltokorpi, p. 93). The concept evolved from the idealistic vision and creative imaginations of Toyota engineers to develop a twenty-first century vehicle. This is what made Toyota a world leader, for without this innovation, management believed it was on a “steady path of incremental innovation, rather than moving radically to a new level of existence.” Toyota was determined to be on top, and still management has maintained that it will continue to do so. Radical innovations are products not previously available, products that improve performance significantly, or products removing some undesired quality (Hage and Hollingsworth, 2000, cited in Nonaka and Peltokorpi, p. 88). Prius is one example – this is a highly-computerized hybrid car, but as to how tested was this – technically – before it was totally introduced to the public is still in question (or it was only questioned because of the series of complaints, and accidents). Toyota maintains the Prius is a tested product, the result of years of innovation, experimentation, added with knowledge and expertise from a pool of valued engineers, technicians, and consultants. Not to distract Toyota’s dreams, recently millions of cars have been recalled for repair but some complaints inside the United States have remained. Toyota drivers in the US have complained that their cars had sped up by themselves after they were fixed. President Akio Toyoda has faced a US congressional inquiry and has vowed to resurrect Toyota and gain its former foothold in the car manufacturing. A knowledge-based technology, the concept of Prius as the car of the future started from mere ideas and innovations of other Toyota cars to a contribution of inputs and storage of knowledge from the organization’s database and expertise of Toyota engineers. How it failed is not a question here, but how it succeeded at first is what we should talk about. Hybrid Prius is a promise fulfilled by Toyota management to help reduce materials detrimental to the environment and to see to it that manufacturing plants are environmentally friendly. Management’s decision to push through with the Prius project was motivated by their desire to help in minimizing global warming, the need for low-emission vehicles. This gave Toyota an opportunity to break old technical systems with revolutionary, environmentally friendly technologies. It had long worked to reduce emissions in internal combustion engines. Toyota had been into the program of Zero Emission Vehicle, and one of Prius’s features is its being fuel efficient. Prius engineering program is done almost entirely in-house, meaning “every bit of design, engineering, parts production, and assembly” is done in-house with “no-partnerships, no contractors, no suppliers of major components or systems” (Nonaka & Peltokorpi, p. 94). But Prius is a radical innovation characterized by “high risk and uncertainty”. This in-house production proved very beneficial for three reasons: It enabled the accumulation of knowledge, techniques, and skills – Prius produced more than 300 patents in its entire built. The hybrid was done in a short time because of the in-house strategy. Mr. Yaegashi commented that they have a six-year advantage of mass-producing hybrid cars because of the in-house strategy. The company improved technology with less costs. Through in-house R&D, Toyota has reduced costs of major hybrid components. More knowledge has been created in the developmental drives including alternative energy, such as natural gas; diesel engines; gasoline engines; and electronic vehicles. (Nonaka and Peltokorpi, p. 98) Prius revolutionary because of the clean-air and fuel-saving features – with the lowest emissions possible, an action guideline that concerns the environment, and one of the contents of the Earth Charter of 1992, which Toyota started to focus as part of alternative technologies programmes. When Prius was finally decided for production, it was the first mass-produced and best selling gasoline-electric hybrid car in the world. Before the complaints and problems surfaced, Prius proved the practicality of hybrid cars. Toyota’s Electronic Vehicle Development Department started the systematic study of the hybrid system, combining an engine and a motor. The in-house strategy of building the Prius enabled Toyota “to develop an internal stock of rich tacit knowledge and reduce dependence on external partners during the early development phase.” This technique of imbedding knowledge in a product yielded economic returns and internal knowledge for the company technicians and engineers, while only utilizing external knowledge later, “when smoothing the manufacturing processes and cutting down costs.” It was supposed to be a perfect game for Toyota. But it did not anticipate that a problem as serious as Prius would come out later. There is the presence of the success curse in a company that has enjoyed continued successes right from the start. Toyota’s R&D has introduced a lot of innovations. It is this department that makes suggestions and concepts for product development from its database of knowledge and expertise of engineers and consultants. The Prius project was started by a study group headed by vice-president of R&D, Mr. Yoshiro Kimbara, whose primary objective was to find alternative ways to increase future competitiveness in late 1993. Later, Mr. Kuboshi, the chief engineer of Celica, was recruited to head the initiative, and he used his network to select ten middle managers for a small study group which was then called Generation 21st Century (G21). It was indicated that the final output should be a mass-produced, mass-marketed, fuel-efficient vehicle. The group then proposed to the Toyota Board the following: A large inner space vehicle by making the wheel base as long as possible; Seats at a higher position to make it easier to get in and out of the car; More aerodynamic characteristics by making the body height about 1,500 mm; Improved fuel efficiency by 50 percent in comparison to the vehicles in the same class; A small engine and efficient automatic transmission. The project mission was that Prius should be the global small car for the 21st century. The G21 concept deviated from other product-development projects at Toyota – it has to be without external sources help. This meant by focusing on internal resources, there would be increased focus, commitment, and full utilization of knowledge resources, with full management support to give the team relatively free access to resources. The new leader of the group, Mr. Uchiyamada, was given a free hand, without any inside politics, “freedom from component sharing and commonalities, marketing considerations, and product hierarchy.” (Nonaka and Peltokorpi, p. 95) The vehicle’s development was aided with further aerodynamics, maximum interior space, and ergonomics. Management also held a competition to increase diversity in the vehicle design. Five submissions were chosen for further evaluation, and two reached the final competition. These were from the Design Department at the Toyota headquarters and Calty Design Studio in California. The battery technology was another case in point: the batteries needed to be small, but powerful enough for smooth functioning, and reasonably priced and have a long life-cycle. This was the part that Toyota did not have in-house, and so it had to form a joint venture with Matsushita Battery Industrial Co. Ltd. (MBI) who had knowledge of developing batteries for electric-powered vehicles. The Electronic Vehicle Development Department had also cooperated earlier with MBI to develop a nickel hydrogen battery for RAV-4. This external operation brought with it the problems of developing the ba or the knowledge management for smooth interaction. Close coordination was employed through shared mindset and movement of management-level employees, open dialogues, and shared understanding between and amongst managers and employees. Test drives took place in July and August 1997 in extreme conditions in Japan, Nevada, California, and New Zealand, with battery requirements tested in real conditions by engineers of Panasonic EV Energy. Problems were noted and several modifications were made. The Prius was unveiled to the press in October 1997, and was received with wonder and surprise. Company decided to raise production from 1,000 to 2,000 units per month. The Prius also received numerous awards for its innovative product concept and technologies. It can be concluded here that the Prius is a product of expert knowledge management reinforced with data and information from a database of experiences and expertise of a dedicated work force who have been working as a team for Toyota. Knowledge management played a great role in the decision to pursue the Prius project. The problems as complained by customers have not been rightly pinpointed, but President Toyoda was emphatic in saying that it does not involve the electronic system. The pool of expert engineers is still working on it and have assured the world that it will maintain the quality cars that Toyota has been famous about. The hybrid Prius that came out from a knowledge-based technology is still considered a success. References Grubb, T. and Lamb, R. (2000). Capitalize on merger chaos. New York: Simon & Schuster, Inc. Lynch, R. (2008). Global Automotive Vehicle - Strategy in a Mature Market and Toyota: What is its Strategy for World Leadership. In Strategic Management, 5th edition (Financial Times/ Prentice Hall), pp. 767-775. Toyota (2009). Where we started. Available at: http://www.toyota.com/about/our_business/our_history/index.html (Accessed 19 January 2009). Read More