Toyota Process Improvements
Toyota Summary
Despite its many struggles, Toyota has become a global behemoth in the automobile, as well as other, industries around the world. Indeed, they have jostled back and forth between General Motors (GM) as the largest automobile manufacturer in the world and they dwarf GM in total revenue. However, even as their own former executives will point out, that growth and success has come at a very steep cost with the recent acceleration malfunctions that some of their cars have experienced (Yahoo, 2013).
Temporarily setting aside their recent travails, Toyota’s overall performance and history is quite impressive. They are fairly distant from their apex, which occurred in 2007 just prior to the global recession, but Toyota’s stock price is quite high. After peaking at just above $100 USD in 2001, there was a noticeable swoon from 2002 to 2003, but the stock came roaring back from 2003 to 2007, peaking at nearly $140 USD in 2007. The stock has since fallen off and went as low as just over $60 USD per share after its peak, but the stock is currently on an upswing and currently sits at just over $100 USD per share as of the writing of this summary (Yahoo, 2013).
Toyota has more than 325,000 employees worldwide and boasts annual revenues of $276 billion USD. None of their competitors are even close to this, with GM being at $152 billion and Ford being at $134 billion USD. It should be noted that much of Toyota’s revenues come from areas other than passenger cars, not unlike their Japanese counterparts Honda and Mitsubishi. Toyota’s enterprise value, as of late February, stands at nearly half a trillion (yes, that’s a “T”) and they do so on a profit margin of just over 3.5%. Their operating margin is 2.84% (Yahoo, 2013).
Toyota Process Improvements
Toyota has engaged in a number of processes over recent years and many are described in the case study that is the basis for this assignment. Toyota in prior years has had a very hard road to travel due to the lingering perceptions regarding hostilities between the United States and Japan during World War II, but those are starting to fade. A total of three processes will be summarized and analyzed.
Internationalization/Localization
As noted in the introduction, many people are cognizant of the fact that Toyota is at its genesis a Japanese car company. Indeed, the case study notes that most decisions of import are made in Japan, not the United States. However, the case study also notes that great efforts have been undertaken to “localize” Toyota as an American car company. Indeed, Toyota has a significant United States presence and a lot of Toyota cars and trucks sold in the United States are made there, or at least nearby elsewhere in North America. The efforts have had good results as many modern car buyers focus on quality and performance when buying cars and they are less centered (as compared to past generations) on the country of origin of the company who makes the car. Some say that the fact that the cars are made here makes it just about as American as Ford and GM even if the ownership is not all domestic.
Toyota should continue driving home the fact that much of what goes into an American-driven Toyota is indeed American in terms of who puts the cars together and who sells/markets them as well. Toyota has (and needs to continue) to stay away from nationalism and patriotism because Ford and GM will win that argument every day of the week. Chrysler has lost some standing because they are owned in large part by a foreign car company (Fiat).
The benefits of this strategy are obvious. More Toyotas being sold means more safer cars and this is for the betterment of all Americans and this is a point they should focus on. Many people crave the notoriously safe cars of BMW and Mercedes, but Toyota can position themselves as a cheaper alternative and they can also push their luxury Lexus line as an option that can be chosen instead of the pricy exotics. The impacts to the organization are higher sales and more repeat buyers, assuming that Toyota keeps their quality and safety principles intact. This leads into the major opportunity. The case study notes that quality is the first priority and volume is behind that. This should always be the case and bad things will happen again if Toyota stumbles. The fact that Toyota is not a domestic car maker will be used against them by opportunists.
Dealer/Parts Network
A struggle that has been encountered by many car makers is the “complex web” (as the case study calls it) of dealers, parts suppliers, offices and so forth that have to be managed when running a car company. Toyota has nearly nine thousand employees in the United States alone and they (as well as the dealers) are strewn across the United States.
The management of inventories, parts and customer support in general needs to be as complex as it needs to be but it should not be made less simple than it can be. Building up the corporate morass of bureaucracy is idea because it limits the company’s ability to react to crises, such as the accelerator problem. As noted in the case study, the company should grow as fast as it can WITHOUT sacrificing quality and safety and this needs to be true even if it means ceding market share to the competition. If there is a way to grow faster without sacrificing quality and safety, then it should be implemented. However, slow and steady will win the race over the long haul, as the competitors at GM and Ford will almost certainly have the same growing pains if they act too swiftly. Growth should be measured, organic and at a pace that allows for the proper foundation and framework to be laid without installing procedures and frameworks that are dysfunctional.
The benefits to managing operations effectively are obvious. Less money is spent fixing errors and the company headcount and administrative overhead will not get bloated and expansive. The impact to the organization will be an efficient and cohesive unit that has what it needs to survive and thrive while at the same time not leading to people twiddling their thumbs or repeating each other’s work. Everyone has an assigned task and everything gets done in a timely and effective fashion.
Family vs. Non-Family
The comment by Jim Press at the opening of the case study sets the tone for this section. Management structures that involve family to any degree can be dicey, even in a public corporation, because family priorities are often at odds with those of non-family entities. Press tries to indicate that non-family interests are the “evil” ones with Toyota. His rhetoric is a bit simplistic, but it certainly proves that in-fighting needs to be stopped.
As for how this process of communication and decision-making can be crafted to avoid lack of consensus and bickering, shareholders can exercise their muscles and the upper echelons of the company need to lay down the law and note that even if a decision is acrimonious to some, everyone needs to move on afterwards in a synchronized fashion. Anyone who resorts to childish behavior and speech needs to be shown the door. The benefits of this are that there is no obvious dissention and discord with upper management and the final decisions, even if not everyone agrees with them, will be implemented in a strong fashion. Lastly, Toyota should not give deference to the Toyoda family when undergoing the above. Someone speaking out of turn needs to be slapped down because it’s a cancer to the company if that does not happen. Majority rules and who is the higher-up in the company should win the day unless it is obvious safety is being compromised, which is a danger given what happened with the accelerator drama.
References
Yahoo. (2013, February 24). TM Profile | Toyota Motor Corporation Common Stock – Yahoo! Finance. Yahoo! Finance – Business Finance, Stock Market, Quotes, News. Retrieved February 24, 2013, from http://finance.yahoo.com/q/pr?s=TM+Profile
Yahoo. (2013, February 24). TM: Summary for Toyota Motor Corporation Common- Yahoo! Finance. Yahoo! Finance – Business Finance, Stock Market, Quotes, News. Retrieved February 24, 2013, from http://finance.yahoo.com/q?s=TM
Yahoo. (2013, February 24). TM Key Statistics | Toyota Motor Corporation Common Stock – Yahoo! Finance. Yahoo! Finance – Business Finance, Stock Market, Quotes, News. Retrieved February 24, 2013, from http://finance.yahoo.com/q/ks?s=TM+Key+Statistics
Yahoo. (2013, February 24). TM Competitors | Toyota Motor Corporation Common Stock – Yahoo! Finance. Yahoo! Finance – Business Finance, Stock Market, Quotes, News. Retrieved February 24, 2013, from http://finance.yahoo.com/q/co?s=TM+Competitors
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