Business - Management Theory: Toyota

Business - Management Theory: Toyota Case Study Toyota Case Study In an increasingly globalized marketplace, many companies have been forced to reduce costs and staff, improve supply chain management techniques and generally become leaner competitors just to survive. Some companies, though, have managed to prosper in the face of these challenges to assume leadership roles in their respective industries and one such company today is Toyota Motor Corporation.

According to Warner, "Toyota Motor Corporation is the largest of eleven car manufacturers in Japan, being responsible for about 40 per cent of car sales in the Japanese market. It is also now undoubtedly one of the biggest automobile manufacturers in the world." To help identify how Toyota achieved this success where others have failed, this study uses Henry Mintzberg's "Five Managerial Mindsets" management model. According to Mintzberg, "You can't create a manager in a classroom.

Management is a practice that has to combine a good deal of craft, namely experience, with a certain amount of art, as vision and insight, and some science, particularly in the form of analysis and technique." According to Mintzberg, each of the components of the managerial mind has a dominant subject of its own that can be analyzed to discern valuable insights (1): Self. For reflection, the subject is the self: There can be no insight without self-knowledge; Relationships.

Collaboration takes the subject beyond the self into the manager's network of relationships; Organization. Analysis goes a step beyond relationships to the organization -- organizations depend on the systematic decomposition of activities that analysis is all about; Context. Beyond the organization lies the subject of the worldly mindset, context - in other words, the worlds around the organization; and, Change. The action mindset pulls everything together through the process of change -- in self, relationships, organization, and context.

A description of the focal organization, Toyota Motor Corporation, is provided in Section II below. II. Description of the Focal Organization. Toyota Motor Corporation (hereinafter "Toyota" or "the company") has three principal business segments: Automotive Operations. This segment engages in the design, manufacture, assembly, and sale of passenger cars, recreational and sport-utility vehicles, minivans and trucks, and related parts and accessories. Financial Service Operations. The Financial Services Operations segment is principally engaged in the provision of finance to dealers and their customers for the purchase or lease of Toyota vehicles.

This segment also provides retail financing, retail leasing, wholesale financing and insurance, credit cards, and mortgage loans. Other Operations. The Other Operations segment is responsible for the design and manufacture of prefabricated housing and information technology related businesses, including intelligent transport systems and an e-commerce marketplace, called Gazoo.com. The company was founded in 1933 and is headquartered in Toyota City, Japan; the company markets its vehicles in Japan, North America, Europe and Asia.

Toyota is recognized around the world for its progressive management techniques and efficient manufacturing process that have taken the best of what was available and made them uniquely their own (2). For example, the widely used just-in-time inventory approach was developed and first implemented by T. Ohno of Toyota. In fact, much of the company's current success is attributed to Toyota's ?hno; during the 1970s, he implemented a broad program of managerial experimentation and reform at Toyota.

This executive graduated from the Nagoya Higher Industrial School and had been employed for more than 10 years at Toyoda Spinning and Weaving, a corporate predecessor of Toyota Motors.

According to Tsuitsui, "?hno rose steadily up the corporate hierarchy -- moving from manager of Toyota's main machine shop in 1947, to general manager of the Motomachi factory in 1959, to executive vice president in 1975 -- and under his guidance what is now known as the Toyota production system was developed, systematized, and installed throughout Toyota's manufacturing operations." Today, the company competes in the Major Auto Manufacturers industry sector; a comparison of the company with its major competitors is provided in Table 1 below. Table 1. Director Competitor Comparison.

Feature Toyota Ford GM Honda Industry Market Cap: 15.13B 16.57B 16.69B Employees: 29.61K Qtrly Rev Growth (yoy): Revenue (ttm): 90.59B Gross Margin (ttm): EBITDA (ttm): 31.52B 8.58B 4.09B 10.40B 10.41B Oper Margins (ttm): Net Income (ttm): 13.58B 6.82B 9.58B 5.36B 1.10M EPS (ttm): P/E (ttm): PEG (5 yr expected): P/S (ttm): Source: Yahoo! Finance, 2006. According to Everett and Strach, a number of Japanese multinational corporations enjoy leadership positions in their respective markets; for example, Toyota passed Chrysler's U.S.

monthly sales, the first time one of Detroit's Big Three had fallen to fourth place in the U.S. Today, the company remains a leader in the difficult field of new product and manufacturing process development, and they.". successfully preserve the 'spirit' of their companies through special human resource management approaches." While the company lags behind General Motors (the world's largest automobile manufacturer) and Daimlerchrysler AG in the international market, its sales in the North American market continue to experience increasingly rapid growth as shown in Table 2 and Figure 1 below.

Table 2. Major Automobile Manufacturers Ranked by International Sales. Company Price Change Market Cap P/E General Motors Corporation 16.57B Daimlerchrysler AG 59.16B Toyota Motor Corp. Ford Motor Co. 15.13B Honda Motor Co. Ltd. Source: Yahoo! Finance, 2006 as of December 1, 2006. The company's sales of vehicles in North America have grown rapidly over the past 15 years as shown in Figure 1 below. Figure 1. Toyota Sales of Vehicles in North America: 1990-2005. Source: Based on data in About Toyota, 2006. In fact, Toyota sold more vehicles in the U.S.

In November 2006 than Ford Motor Co., only the second time in history that the No. 2 domestic automaker was surpassed in sales by this Japanese competitor. According to Altman, "Ford reported that its U.S. auto sales dropped 9.7% in November compared with the same period a year ago. Toyota sold 196,695 vehicles in November, a 15.9% increase over November 2005, compared with Ford's 181,111." Finally, the company's net income for the period 2004 to 2006 is shown in Figure 2 below. Figure 2. Toyota Net Income: 2004-2006. Source: Based on data in Yahoo! Finance, 2006. III.

Assessment and Analysis the Focal Organization Using Mintzberg's Five Managerial Mindsets. The five managerial mindsets developed by Mintzberg and his colleagues (reflective [about self]; worldly [about context]; analytical [about organization], collaborative [about relationships]; and, action [about change]) for use in analyzing the forces at play in a given situation are applied to the company in Table 3 below. Table 3. Assessment and Analysis the Focal Organization Using Mintzberg's Five Managerial Mindsets.

Mindset Application to Toyota Reflective (about self) As a member of the "seven samurai" of leading Japanese industries, the current leadership at Toyota regards the company from this perspective. The corporate culture at Toyota is based on the founders' value systems, attitudes, beliefs, philosophy, and likes and dislikes.

A company's founders, for example, might have placed emphasis on hard work, honesty and punctuality, and believe in caring for employees and being responsive to their customers' needs; such founders bring these values and beliefs with them to the organizations they establish and a number of internationally recognized multinational companies such as Toyota owe much of their current culture and philosophy to their original owners.

Besides the company's founders' values and beliefs, organizational culture as a dynamic environment also reflects the learning and retention that have occurred over time, solutions to problems which have worked well enough to be considered valid and therefore to be taught to new members as the correct way to perceive, think and feel in relation to those problems.

Worldly (about context) Over the past three decades or so, Japanese production management techniques have been regarded as the best practices model for improving manufacturing processes in the U.S.; however, for most of the 20th century, it was the Japanese that looked to the United States for inspiration in factory management. In fact, Japanese auto manufacturers imported mass production techniques from Detroit in the 1930s, and various management techniques from the U.S. In subsequent years until further management refinements that were uniquely Japanese were introduced during the 1980s.

For example, as Tsuitsui notes, "From the start of automobile production at Toyota in the mid-1930s, the company's managers and engineers looked to the assembly lines of Detroit for inspiration.

Like the vast majority of prewar Japanese observers, however, the Toyota personnel -- while awed by the Fordist achievement -- were dubious that the American model of mass production could be replicated in Japan." Likewise, "There are some characteristics that Toyota has which betray its 'Japaneseness': harmonious industrial relations, company-based trades unions, quality circles, just-in-time and so forth." Analytical (about organization) Some analysts suggest that in recent years, all industrialized countries regardless of the type of capitalist system involved have experienced an increasing divergence between companies and the countries in which they are headquartered; this trend indicates that the outcomes of a country's companies, particularly those with international interests and activities, are independent of their country of origins.

As an example, Tayeb notes that during the last years of the 20th century, the stagnated Japanese economy did not significantly affect leading Japanese corporations.

Likewise, Lynn points out that, "Japan's recent economic problems may have far more to do with its financial and bureaucratic systems than its managerial systems." According to Everett and Strach, "Japan experienced a decade of zero growth in the 1990s and slumped into recession," but, "The global dynamism and success of Canon, Hoya, Honda, Toyota, TDK, Rohm and Sony, known as the 'seven samurai,' contrasted with the quagmire of the Japanese economy." The company's leadership is clearly forward-thinking as well with its emphasis on R&D into production hybrid models.

Collaborative (about relationships) Collaboration among the various business segments, as well as the managers within these units, has been a distinction at Toyota over the years, based in large part on the need to maximize scarce resources. Furthermore, the company's leadership has historically recognized when collaboration and cooperation with its major competitors can be in its best interests; for instance, the success NUMMI, the Toyota-GM joint venture, has been the focus of attention for both journalists and academicians alike.

In addition, the company ensures close collaboration among its various vendors and subcontractors: "Toyota requires their subcontractors to engage in compulsory process benchmarking activities in which trade secrets are exchanged among members of the outsourcer cadre so that they can collectively improve their effectiveness in service to the organization." Action (about change) According to Mintzberg, "Change is fine, and important, but the object of management development is learning. Our belief is that third-generation management development must extend the learning of the classroom well into the organization.

We call that 'teaching impact.'" The benefits of promoting a learning organization have not been lost on the managers at Toyota because product development is a particularly critical function within the automobile manufacturing industry. According to Bounfour, the superiority of the Japanese is based in large part on their ceaseless ability to place new products in the market.

In fact, the research required to develop a new automobile model was approximately three times less for Japanese companies than for their large generalist Western counterparts; furthermore, the average duration of development for the same Japanese manufacturers is approximately 30 per cent less than their Western competitors. IV. Conclusions and Recommendations. Conclusions. Although it is hard to argue with the company's stellar successes in recent years, it is also clear that every organization can be improved and Toyota is no exception.

As Smith and Thompson emphasize, the new approaches to management that have emerged in recent years based on theories of lean production promotes the superiority of Japanese production, particularly as developed by Toyota and through the experience of Western transplants, but ignores some important market realities and are based on potentially untenable assumptions. For example, as Baker and Maddux point out, "Lean thinking grew out of the efforts of Toyota to remove waste from its production, supply, and distribution processes.

While applied primarily in manufacturing settings, its focus is on enhancing value delivered to customers in any competitive setting through removal of waste in time, cost, resources, and space. Successful implementation of lean thinking assumes a significant level of process management expertise." While it would seem clear that the company enjoys this level of expertise today, it remains unclear whether the same techniques will allow Toyota to successfully overcome the new challenges facing auto manufacturers today.

For example, Toyota today is at the top of a large network of suppliers that are comprised primarily of small- to medium-sized enterprises (SMEs) and is well positioned to exploit its leadership position by forcing its vendors and subcontractors to conform to its management practices, and this practice allows Toyota to achieve these streamlined procedures without compensating these enterprise for their additional costs.

Notwithstanding the potential economic benefits that may accrue to a long-term relationship with an enormous multinational such as Toyota, to the extent that Western enterprises are compelled to transform their management practices in the short-term to comply with these unfunded corporate mandates may be the extent to which they decide the price is simply too high. In fact, some SMEs may bankrupt themselves in an attempt to comply with such corporate mandates from large multinational corporations.

Furthermore, the company's emphasis on profitability may adversely affect its ability to attract and retain loyal workers; in fact, in the past, Toyota has been compelled to solve its periodic labor shortage problems by building training centers just for this purpose. Recommendations. Based on the foregoing strengths and weaknesses, the company could benefit from taking the following initiatives, particularly in its North American market: Reassess its policy of forcing SMEs to comply with various.