Referrence an-introduction-to-toyota-motor-corporation

Referrence an-introduction-to-toyota-motor-corporation

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  An introduction toToyota Motor Corporation: A Case Study The Toyota Motor Corporation is a leading automobile manufacturer with production sites spread around the globe. The company’s strengths have been a strong market position, a recognisable brand, and a highly focused research and development strategy. Like most Western multinational corporations it has been developing a competitive strategy in emerging markets; and in 2013 held 5 per cent of China’s automobile market. Toyota’s production output has been increasing steadily and in 2012 it became the first company to make over 10 million vehicles in a 12 month period. Although this figure dropped to 9.98 million vehicles in 2013 the company was predicting an output of 10.43 million vehicles in 2014. Yet this apparent success has come at a price. Until recently, the company was renowned for its approach to quality. Traditionally the firm has been successful at combining reliability and product quality with low prices, fuel efficiency, and good design. Arguably, it remains one of the world’s most efficient multinational corporations (MNCs). In his article on Toyota, Fujimoto (2012) asks the question: “How has Toyota been able to remain competitive since the middle of the 20th century?” (page 26). To date the company’s achievements have been due to the efficiency and effectiveness of the Toyota Production System (TPS) which is underpinned by a philosophy of lean production and kaizen. The closest equivalent term to kaizen is continuous improvement (often referred to as Total Quality Management or TQM in the developed economies). This approach has been evolving since the company was founded in 1926 and enables Toyota to achieve vertical and horizontal strategic integration. Unlike Western MNCs, Toyota’s focus has been on quality, particularly the elimination of waste (muda), rather than an obsession with costs and cost reduction. In 2001 the company launched the Toyota Way which is an expression of the company’s values which stem from the five principles of the founder of the company, Sakichi Toyoda (see http://www.toyota-global.com/company/vision_philosophy/guiding_principles.html for more details). The Toyota Way is a direct reflection of Toyota’s culture which can be summarised as: teaching people how to act, think and feel. The company culture is based on kaizen (e.g. finding solutions to the root causes of problems rather than the symptoms of the problem; eliminating waste (muda); teambuilding and mentoring; thoughtful decision-making followed by rapid implementation; and long-term thinking). The latter is in stark contrast with the classic short-termism of many Western MNCs. Given the close connection between continuous improvement and learning the company has always believed in cultivating or nurturing a learning climate; and a learning climate characterised by collaboration and co-
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  operation, both ofwhich require high levels of trust. This learning climate acknowledges the role of social learning. Thus the company believes that people learn from each other and that teams are better than individuals at solving problems. In the 1980s when Western firms started to wake up to the threat of Japanese competition there was widespread adoption of certain methods or techniques. The most popular of these were quality control circles; although Western firms shortened the name to quality circles. However, successful implementation of quality circles was limited due to the de-contextualisation of the method. Western managers simply failed to appreciate that quality circles were a part of a wider system of quality management and improvement, including the learning climate with its emphasis on social learning. The Toyota Way also sets out the company’s approach to innovation which has tended to focus on incremental changes or improvements (again reflecting the kaizen philosophy). Toyota has continued to make improvements to conventional technology, as well as developing the application of new technologies (e.g. the development of hybrid and more economically friendly, low carbon cars). This approach to innovation also reflects the company’s attitude toward sustainability. As part of TPS Toyota pioneered the concept of lean production or manufacturing which involves increasing value, reducing waste and respecting people; and all of these are consistent with the Toyota Way. Yet persuading managers and employees to embrace sustainability initiatives has proven to be challenging at times; even though the company’s culture is already predicated on a belief or commitment to incremental change. In 2009 Toyota suffered its first ever loss. This was despite two of its principal competitors, General Motors and Chrysler, falling into bankruptcy that same year. In 2008 Toyota had become the world’s leading automobile manufacturer. At that time the company’s reputation was arguably at an all-time high. Toyota was a byword for quality and value for money. Yet a year later it was issuing profit warnings. More disaster struck on 2010 when Toyota’s reputation as a quality brand was severely damaged by a recall crisis. Over 10 million vehicles had to be recalled due to technical faults (e.g. brake pedals and floor mats). Then news broke that Toyota had actually been suffering from quality issues for some time but had been relatively successful in keeping this information out of the media spotlight. Essentially Toyota’s management had failed to tackle effectively the stresses and challenges of maintaining quality while at the same time reducing costs and pushing for record production levels. This veil of secrecy wasn’t a new thing. In the 1990s Toyota had been forced to buy back pick-up trucks from its American customers in order to avoid potentially
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  bad publicity aboutdangerous corrosion in the vehicle frames. The 2010 crisis erupted after a series of fatal accidents made it impossible to keep the situation secret. The attempted cover-up caused shockwaves across the globe. By February 2010 Toyota’s CEO Akio Toyoda had given in to mounting pressure and had agreed to appear before a US congressional hearing which was investigating the recall crisis. In that same month emails were leaked to the media which revealed that Toyota managers had misled US regulators by concealing the full extent of the technical problems (particularly the problem with car mats). A few weeks later senior executives were further embarrassed when a memorandum was leaked, revealing how management had been warned by workers that safety standards were being compromised by the firm’s (relatively new) strong stance on cost-reduction. In effect Toyota’s management had allowed the company culture to drift away from the traditional values and principles encapsulated in the Toyota Way. As adverse publicity mounted Akio Toyoda visited China to apologise personally for the company’s mishandling of the situation. At the company’s annual general meeting in June 2010 a shareholder harangued Toyoda for weeping during a media interview. In February 2011 Toyoda formally apologised again and said that he was “deeply sorry” for the way in which the company had managed the recall crisis. The US government fined Toyota the maximum possible for its failure to recall cars promptly (i.e. $32.4 million). Before the recall crisis it would have been unthinkable that Toyota would have allowed anything like this to happen. Yet the unthinkable had happened. Not surprisingly surveys revealed that consumers had developed negative perceptions about Toyota with many believing that the company had handled the re-call crisis in an unethical manner. Toyota’s managers even admitted that they had not been briefed about the technical problems. They also appeared unable, unwilling or unprepared to explain the causes of the faults even though the Toyota culture was predicated on a kaizen philosophy of identifying the root causes of a problem. Toyota’s predicament grew worse when it was revealed that the company had been slow to respond to customer complaints. Instead of getting to grips with the problem the company had buried its head in the sand. Initially it denied the existence of a problem and only responded once the truth had leaked out in a rather piecemeal and sporadic fashion. It was even revealed that Toyota had to be pressured by safety officials in Japan and the US before it initiated the recall process. Had Toyota executives, managers and engineers wasted too much time on analysing the problem? Was the decision-making process at fault? Why hadn’t the Toyota Production System addressed these quality problems before the vehicles were shipped? What had happened to the company’s
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  commitment to theToyota Way? Had its approach to operations failed? And if so why? A particularly critical observation was made by Taneja et al (2012): Toyota’s problem did not appear to be a poor strategy but rather poor implementation of its strategies and core competencies already in place which had already proven successful as they tried to expand globally. They forgot who they were (page 136). Subsequent investigations revealed that the Toyota production system was not necessarily the principal cause of the faults. Rather, the cause(s) lay in product development, particularly the design and testing processes. Toyota had taken its eye off quality and had become too preoccupied with a major cost reduction campaign (which involved an ambitious cost reduction target of 30 per cent). The company had become worried about the growing competition from low-cost but high-quality competitors In different markets (e.g. Hyundai in Korea, Geely in China, and Tata Motors in India). Technical problems including sticky accelerator pedals and malfunctioning software appeared to be the result of sub-standard design and testing processes. Toyota substituted traditional mechanical systems with new technologies and software which relied heavily on computer-aided designs and simulations. However, this wasn’t necessarily the root cause of the problem but rather another symptom of the company’s decision to relocate the Toyota’s production base overseas. Could this aspect of managing Toyota’s operations have been better handled? And if so, how? As the company was recovering from this crisis another disaster struck: the tsunami. Toyota’s profits slid badly (by 18.5 per cent at one point) as the company suffered from parts’ shortages. Essentially, the company’s supply chain broke down as hundreds of the company’s suppliers were badly affected by the disaster. Lean production relies on stability and routine, the same processes working in the same way day-in, day-out. This stability and routine was severely disrupted by the after effects of the tsunami. Rebuilding was needed. But this was a painful process involving redundancies, not only in Japan but other countries (e.g. Australia). This went against the grain for Toyota and challenged several of the company’s values and principles. Events have raised questions about Toyota’s approach to managing its employees which has been based traditionally on the company’s ‘Human System’ model. This is – and has always been - an integral component in the Toyota Way. There is an expectation that managers and employees share the same values and goals. Employee commitment to the company is gained through a management commitment to improving working conditions. In that sense it is very much an implicit psychological contract.
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  The training anddevelopment of employees is also crucial to the Toyota Way; and this is consistent with the company’s values and principles (including its emphasis on learning). Yet the company approach to human resource management and development is both rigid and control-oriented. For instance: induction. Induction involves new employees undertaking a 5 week orientation programme, which is run by the HR function which also co-opts personnel from other departments to assist. This programme is the start of an intensive socialisation process (with the new employee undertaking further induction in their own department or function). Employees are subjected to daily feedback on their progress. There are educational presentations on a range of topics (e.g. health and safety) and they are introduced to senior executives who explain and promote the principles of the Toyota Way. Induction often involves some form of physical as well as mental conditioning (for instance, the use of calisthenics). Induction is followed by ongoing training and development with a particular emphasis on on-the-job training. In fact, this approach to training has historically been one of the strengths of Toyota. The company is also a strong believer in on-the-job development (e.g. learning through job rotation). Recently, there has been an increase in classroom teaching as globalisation influences the company’s approach. One of the challenges of on-the-job training is that the production line continues to operate at normal speed. The Toyota Production System is heavily inter-connected. Thus slow downing one stage in the production process actually affects the whole system.
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