Toyota Management Analysis, Research Paper Example

The Toyota Motor Corporation is among the world’s largest manufacturers of automobiles. Although the company is headquartered in Japan, it has a global reach, selling cars, trucks, vans, and other vehicles in markets around the world. Along with its factories in Japan, Toyota also maintains manufacturing facilities in the United States, Germany, India, China, and Eastern Europe. The company has over 300,000 employees worldwide, and in 2012 it produced more automobiles than any other manufacturer (Ayapana, 2014). The sheer magnitude of Toyota belies its humble beginnings; it began mass-producing its first line of automobiles in the 1930s, turning out only a few hundred vehicles the first year. In its infancy the company focused on producing small cars largely for its domestic market; by the mid-20^th century it had expanded its sales and manufacturing processes into the U.S. and Europe, where it competed against larger and more popular vehicles. By the 1970s the sharp increase in the prices of oil and gas prompted U.S. customers to turn to smaller, more fuel-efficient cars, affording Toyota the opportunity to expand its sales numbers significantly. Toyota’s successes in international markets eventually prompted domestic manufacturers in the U.S. and Europe to adopt many of the company’s approaches to technological innovation and efficient organizational culture. While Toyota has been plagued with a number of manufacturing issues that have led to recalls of some of its automobiles, the company has continued to maintain a prominent position among global automobile manufactures. The success of Toyota is attributable to several key factors, from the quality of its products to the structure and culture of its corporate organization.

Background and Overview

The organizational culture of Toyota has long been built on a number of guiding principles. These principles influence both the way that the company’s corporate structure and management system function and the specific manufacturing processes Toyota uses to build its products. In the early years of the Toyota Corporation the company adopted many of the standard principles and processes of mass-production that had been developed and established by U.S. manufactures such as the Ford Motor Company. It was under the aegis of Henry Ford that the Ford Motor Company first built the large-scale assembly lines and other factory processes that enabled Ford to produce affordable and popular automobiles. At the dawn of the automobile age, cars and trucks were often produced singly by small manufacturers, a situation that was inherently problematic for a variety of reasons. The process of building single cars was time- and labor-intensive, and the proprietary nature of such a production approach meant that cars were expensive, unreliable, and difficult to repair.

The Ford Motor Company virtually invented the mass market for automobiles by standardizing parts, process, and finished products. This approach made it possible for Ford to produce cars in much greater numbers, and the standardization of parts meant that cars could be repaired more easily and that repairs could be done by virtually any capable mechanic. The mass-production methods of Ford paved the way for the contemporary automobile market as it exists today, as independent dealerships across the United States went into the business of selling Ford automobiles to their local customers. Car buyers did not have to go to the factory to make purchases, and if their cars broke down they could be take to the same dealership for repairs. Ford’s Model T automobile became enormously popular in the U.S., and within a few years the entire nation was engaged in building paved roads, gas stations, and other forms of public and private infrastructure designed to serve the needs of newly-minted drivers.

The success of Ford and other U.S. manufacturers inspired others around the globe to follow suit. The Toyoda Automatic Loom Works of Japan, a textile manufacturer, had already adopted a number of production processes that would underpin those used when it shifted to the production of automobiles (Togo & Martin, 1993).  The term “Toyota Production System” (TPS) currently defines the combination of organizational philosophy that, coupled with specific manufacturing processes, serves as the basis for the company’s organizational structure and culture (Liker & Convis, 2011). Before the creation of the TPS nomenclature, however, the underlying principles were already firmly in place, rooted in the company’s history as a textile manufacturer. The Toyoda Loom Works had developed a number of automated machines and coupled them with an assembly-line manufacturing process that made it possible for the company to produce its products quickly and efficiently. The Japanese principle of jidoka served as the basis for the TPS; according to Toyota, the term translates as “automation with a human touch” (Toyota-gobal.com).  The philosophy that mechanical process and human activity must function in harmony was first adopted by Toyoda Loom Works, and would remain integral to the company’s organizational culture when it made the transition from making textiles to manufacturing automobiles (Liker & Convis).

One of the main ways in which the jidoka philosophy was manifested in the company’s manufacturing process was that when a thread broke during the automated weaving process the machine would automatically cease operating. This ensured that any problem that arose –no matter how small- was identified immediately, before it could create larger problems. By dealing with even the smallest issues as they arose, the company was able to avoid sending out defective products (Togo & Martin). With this combination of quick and efficient manufacturing process coupled with the built-in failsafes guarding against defects, Toyoda cemented a reputation for low-cost, well-made products that would carry over to its new role as an automobile manufacturer. Inspired by the success of Ford’s manufacturing process and success in selling large numbers of automobiles, by 1936 Toyoda had sold off its textile-production assets, built its first automobile factory, and introduced its first mass-produced automobile, the Toyoda Model AA (Togo & Martin).

The Rise of a Global Organization

There is no way to assess or discuss the contemporary Toyota organizational culture or management structure without examining the manner in which it grew from a small company with one production facility to a global corporation; the story of the company’s culture and structure is firmly embedded in that history. Toyota (renamed from Toyoda Motor Company the year after it first introduced the AA) quickly gained popularity in its native Japan, but it struggled to achieve the same level of success on an international scale for decades (Togo & Martin). While the political and economic disruptions of World War II did not signal the demise of Toyota, there is no question that the repercussions of the war made it all but impossible for the company to establish a foothold in the U.S. or Western European markets in its aftermath (Togo & Martin). It was not until over a decade after the war had ended that Toyota first began selling its automobiles in the U.S., beginning with the Toyota Crown (a name that had been created by the company specific for Western markets).

Despite the company’s reputation for building reliable and inexpensive cars, Toyota faced significant economic and political challenges when it entered the U.S. market. In an age when gasoline was inexpensive and plentiful, U.S. car buyers of the 1950s and 1960s tended to favor larger cars, from the so-called “muscle cars” like the Ford Mustang to more sedate, but still popular, family cars like the station wagons produced by all of the major U.S. manufactures. The confluence of low gas prices and the post-war economic boom was reshaping America; from the construction of the federal interstate highway system to the explosive growth of suburban housing tracts, the automobile was at the center of these changes (Togo & Martin). For drivers in this era, bigger was better, and the small cars built and sold by Toyota had little mass appeal. Desite these challenges, the jidoka philosophy and the committement to quality and low prices allowed Toyota to steadily, if slowly, gain traction in markets outside of Japan.

The trend toward buying and driving large, American-made cars would continue for decades; throughout the 1960s import cars faced heavy tariffs in the U.S. and remained firmly behind domestic manufacturers in terms of sales. Among those who did buy Toyota products, the company was slowly building a reputation for quality, but this reputation alone was not enough to overcome the cultural, political, and economic hurdles Toyota faced in the U.S. and Western Europe. This seemingly-intractable set of circumstances would change virtually overnight, however, with the creation of an economic alliance of several Middle Eastern nations that supplied much of the world’s oil and gas. The Organization of the Petroleum Exporting Companies (OPEC) joined forces to establish standards for oil prices and to limit compettion with each other (Togo & Martin).  By the early 1970s the price of gas rose sharply, and the manipulation of the global oil market by OPEC led to a series of gas shortages around the U.S. and the world. U.S. car buyers quickly began looking at the cars made by Toyota and other Asian manufacturers in a new light, and by the end of the decade Toyota was on its way to becoming the world’s largest maker of automobiles. The philosophies that had underpinned the company’s birth, growth, and viability during the challenging decades of the mid-20^th century would continue to serve it as it reshaped the global automobile industry in its image.

The Toyota Way

From its beginnings as a textile manufacturer to its current position as a global leader in making and selling automobiles, the Toyota Motor Company has largely adhered to the same core philosophical principles. The jidoka philosophy, a somewhat-general term that applied to the way the company viewed the relationship between its people, its machines and its processes, would be refined and recast into a more specific and encompassing approach that has come to be known as “The Toyota Way.” Before the Toyota Way was first introduced under that name, however, it existed in practice for many years. The underlying purpose and intent of the Toyota Way is twofold: first, it is meant to ensure that the company constantly works to improve itself, its processes, and its products; second, it promotes the value and respect of the people who work for the company (Liker & Convis).  Many of the specific principles established under the umbrella of the Toyota Way have been adopted by other manufactures, both within and outside of the automobile industry.

A number of the principles of the Toyota Way have inspired the concept of “lean manufacturing” (Liker & Convis). While lean manufacturing can be both defined and applied in a number of ways, the term generally refers to a manufacturing approach that is intended to avoid waste in the manufacturing process and to produce only the number of products that are needed to serve a given market. In specific terms, lean manufacturing can be manifested in myriad ways. In a widely-known book on the subjects of the Toyota Way and lean manufacturing, the authors describe it as both a management philosophy and a specific set of practical processes (Liker & Convis). The fundamental philosophy of lean manufacturing is that anything which does not add value to the processes, products, or customers for an organization should be discarded. This philosophy shapes every aspect of a lean manufacturing organization, from the way it orders parts and manages supply chains for materials to the number of products it produces for sale to customers. The system used by the Toyoda Loom Company, which shut down the loom is even the tiniest thread broke, is an example of an early manifestation of lean manufacturing (Liker & Convis; Togo & Martin). By building a manufacturing process that responds to even the smallest error, larger problems –and the value they drain from the organization and the organization’s customers- can be avoided.

Embedded in lean production and the Toyota Way is the just-in-time production system. Just-in-time production focuses primarily on issues related to inventory control, from the number of parts and supplies order to the number of products built, stored, and shopped to customers (Liker & Convis). In terms of organizational structure, just-in-time (JIT) production and manufacturing systems require effective communication between and among people and processes both vertically and horizontally. The JIT system utilizes kanban, or “signals” that provide information in each direction of an assembly or manufacturing process; for example, as one step of a process is completed, a signal is sent back to those working at previous stages (Liker & Convis). This signaling process indicates that the parts or functions of the previous step are needed, which in turn signals those at previous stages to order parts or otherwise prepare for the next stage in the process. These kanban are also sent forward through the manufacturing process to inform those at subsequent stages that the previous stage has been completed. When JIT productions system function as intended, much of the waste associated with less-efficient processes, (such as ordering too many or too few parts and supplies) can be avoided.

Lean production, as exemplified in the Toyota Way, is not just an approach to manufacturing; it represents the overarching organizational culture of Toyota. In the context of Toyota’s manufacturing process, lean manufacturing has innumerable specific applications related to how the company builds its automobiles; in more broadly-applicable terms, however, lean manufacturing is built on several fundamental principles. For Toyota, these principles are as much philosophical as they are practical. Among the most important considerations in the Toyota Way is a focus on maintaining a smooth flow of operations; while this is not inherent to lean manufacturing in general, the Toyota Way has long emphasized an operational approach that is based on a constant, steady stream of activity from the beginning to the end of the manufacturing process (Liker & Convis). By eliminating waste and the uneven flow of manufacturing, the Toyota Way has allowed the company to develop operational processes that continue to serve it well.

Within the larger structure of the Toyota Way, the company has identified three types of waste: muda, muri, and mura. Loosely translated, muda refers to any activity that does not add value to the process or the products; muri refers to any aspects of the process that create an unnecessary burden on either the people or the steps in the process; and mura refers to a state in which the smooth, even flow of the process is disrupted (Liker & Convis). Taken together, these three types of waste are all interrelated, as a rise in one type of waste will likely (or even inevitably) lead to a rise in other types of waste. For example, if someone is engaged in activity that does not add value to the process, that disruption will lead to an uneven flow in the process; conversely, uneven flow in the process may lead to overburdening of others along the chain of activities that lead to the finished products. Earlier manufacturing philosophies such as jidoka, which shuts down a process when something goes wrong, can work well with the Toyota Way, but jidoka can also disrupt the even flow of the process (Liker & Convis). These potentially-contradictory approaches are taken into consideration when developing and implementing manufacturing processes, to ensure that disruptions are avoided as much as possible.

The Human Factor

The principles embedded in the Toyota Way were not limited to guiding the company’s machines and automated systems; they also reflected a commitment to the value of the people that comprised the company.  This meant that the company emphasized the importance of investing in its employees in terms of educating them about the Toyota Way, which in made employees more invested in the company , its processes, and its philosophies (Liker & Convis). The Toyota Way also established systems though which employees at all levels and at all stages of the manufacturing process could contribute ideas and suggestions. In practical terms, for example, if an employee on the assembly line identified a way that a specific step or part of a process could be improved or refined –thereby eliminating waste and improving flow- that employee would have a means of expressing that idea to managers. Employees whose ideas were adopted were rewarded by the company, as were employees whose committement to the flow of the manufacturing process resulted in positive outcomes, thereby establishing an environment in which employees were invested and engaged in the Toyota Way (Liker & Convis).

Organizational and Corporate Structure

Toyota’s corporate headquarters is located in Japan, but it has corporate divisions in countries around the world (Toyota-global.com, 2014). The company’s President, Vice President, and senior board members are in Japan. Immediately below them are a number of groups which represent both specific product lines and national and regional headquarters. Among the regional divisions are the North America Operations Group, the Europe Operations Group, the China Operations Group, the Asia and Oceania Operations Group, and the Middle Eastern, Africa, and Latin American Group. The general corporate structure of Toyota Motor Company has been in place for years, but in 2011 the company announced that it was restructuring the organization to give regional executives more autonomy and control over their operations (Bloomberg, 2013). The centralized structure of the company which had served it well in the 20^th century was no longer as productive in the age of globalization (Ayapana). As the economic systems of many parts of the world endured the strains of the 2008 economic downturn, Toyota determined that the regional executives needed the power and flexibility to respond the circumstances specific to their regions. This restructuring left the corporate structure largely in place; instead of changing people or rebuilding divisions, the company simply reworked the policies, rules, and guidelines that had been built around the earlier top-down structure. This restructuring was philosophically aligned with the principles and values of the Toyota Way, as it emphasized the value and decision-making capabilities of those who oversee the regional divisions.

Conclusion

In terms of manufacturing philosophy, the Toyota Way is the approach that allowed the company to compete favorably against larger U.S. manufactures in the 1980s. As compared to Toyota, the large U.S. manufacturers had become unwieldy and inefficient. American cars, which had once had a reputation for quality, were no longer seen as reliable or desirable, and the costs associated with making them had growndisproportionately to their quality. As Toyota began to overtake U.S. manufacturers in the 1980s and 1990s, many of the principles of the Toyota Way and lean manufacturing were adopted by the U.S. companies. This manufacturing revolution that was born decades ago in a small textile plant in Japan has grown into an approach that has changed the way manufacturers around the world make and sell their products.

References

Ayapana, E. (2014). Shift in Toyota’s Corporate Structure Empowers Regional Execs. Motor Trend Magazine. Retrieved 31 July 2014, from http://wot.motortrend.com/shift-toyotas-corporate-structure-empowers-regional-execs-82567.html

Bloomberg.com,. (2013). Toyota Announces New Organizational Structure and Executive Chan – Bloomberg. Retrieved 31 July 2014, from http://www.bloomberg.com/article/2013-03-06/aAdLV7iTfAas.html

Liker, J., & Convis, G. (2011). The Toyota way to lean leadership (1st ed.). New York: McGraw-Hill.

To?go?, Y., & Wartman, W. (1993). Against all odds (1st ed.). New York: St. Martin’s Press.

Toyota-global.com,. (2014). Toyota Motor Corporation Global Website | 75 Years of Toyota | Organizational Changes | Last Organizational Chart. Retrieved 31 July 2014, from http://www.toyota-global.com/company/history_of_toyota/75years/data/company_information/management_and_finances/management/organizational/organizational_changes15.html

www.toyota-global.com,. (2014). Relations with Employees | Toyota Motor Corporation Global Website. Retrieved 31 July 2014, from http://www.toyota-global.com/sustainability/csr_initiatives/stakeholders/employees/