Management of a World Class Company Toyota

10 October 2016

Toyota is the largest automobile manufacturer in Japan[1] and it is also the largest worldwide as of the first half of 2012[2] by volume of sold cars ahead of General Motors and Volkswagen AG. The company was created in 1937 by Kiichiro Toyoda as a spinoff to Toyota Industries to create automobiles. As of 2012, Toyota own several different brands as Lexus – luxury cars, Scion – brand only for North America, aimed towards the Generation Y and 51% in Daihatsu – the oldest car manufacturer in Japan. Akio Toyoda is the current CEO of Toyota, he is grandson of the creator Kiichiro Toyoda[3].

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Toyota have produced more than 200 million cars all over the world with their biggest market in North America – 32%, followed by their home country Japan – 25%, Europe – 14% and Asia – 11%[4]. Toyota is publicly traded company of three of the major Stock Exchanges: New York Stock Exchange(NYSE), London Stock Exchange(LSE) and Tokyo Stock Exchange (TSE). In the end of 2009 and the beginning of 2010, Toyota recalled 9 million cars on various technical faults[5]. 5. 3 million of them was over a faulty “all-weather” floor mat, additional 2. 3 mil. For a faulty accelerator pedal and 1. 7 for both problems.

On 14th of November 2012, Toyota announced that it will recall additional 2. 7 mil. cars over problems with the steering wheel and water pump system. This comes four weeks( 10th October) after another 7 mil. cars recalled over faulty electric windows mechanisms[6]. The 2010 recalls hit the company hard with huge financial loses, because of the recalls and stop of production for some time of the affected vehicles. Severe damage to the brand in the eyes of the public. An estimate of 1. 93 billion dollars were lost, because of missed sales, output and another recall related costs[7].

A 15% drop in shares was experienced by the company. Toyota is one of the leading manufacturers in pushing the hybrid electric vehicles. Their hybrid technologies make them the first company to mass produce such an automobile with the Toyota Prius in 1997. As of October 2012 the Prius around 3 mil. units[8] . 19 other Toyota branded vehicles are also available with the hybrid technology. So are models from the Lexus sub-brand. II. Management of Toyota Motor Company 1. Coprporate Governance of Toyota Motor Company Toyota Motor Company(TMC) is a public listed company, which means everybody can buy shares in it.

This mean that the is a specific corporate structure and management operations. Toyota is with top-down centralized way of management. The company is headed by Fujio Cho, he is the chairman which in the Japanese system, that puts him in charge of the country’s and world’s largest automaker. He is only the second person to head Toyota and to not be from the Toyoda family after they stepped out in 1995. He joined Toyota in 1960 and previous titles include: Managing Director, Senior Managing Director, Vice President, President and Vice Chairman of the Board. He stepped in as a chairman in September 2006[9]. 960–1966, apprentice and training employee; 1966–1974, Production Control Division; 1974–1984, manager in Production Control Division; 1984–1986, manager in Logistics Administration and project manager in Production Control Division; 1986–1987, manager in Administration; 1987–1988, manager of Toyota North America Project and executive vice president of Toyota Motor Manufacturing USA; 1988–1994, president of Toyota Motor Manufacturing USA; 1994–1996, managing director; 1996–1998, senior managing director; 1998–1999, executive vice president; 1999–, CEO and president[10].

The Vice Chairman of the Board is Takeshi Uchiyamada since April 2012 and also serve as Vice President of the Company. Mr. Uchiyamada served as Executive Vice President of Toyota Motor Corp. since June 2005, as the Chief Production Control & Logistics Officer of Toyota Motor Corp. since 2004, as Senior Managing Director of Toyota Motor Corp. from 2003 to June 2005. He served as the Chief Vehicle Engineering Officer of Toyota since 2003 and joined Toyota in 1969[11]. Akio Toyoda is the President and Chief executive officer of the company.

He is also President of Toyota Finance Australia Ltd. , Toyota Motor North America, Inc. and Toyota Motor Credit Corporation since June 2009. Mr. Toyoda serves as Senior Adviser of Toyota Media Service Corporation. He has been the President of Hitachi Ltd and Honda Motor Co. since March 2009. He served as an Executive Vice President of Toyota Motor Corp. from January 21, 2005 to June 2009, Senior Managing Director and Chief of Asia & China Operations Officer since 2003 and also served as its Division General Manager of Taiwan & China Offices. He joined Toyota in 1984[12].

The company also have 7 Executive Vice Presidents,63 Directors, 7 Corporate Auditors, 18 Senior Managing Officers and 35 Managing Officers[13]. The company’s top management priority is to steadily increase corporate value over the long term. In order to achieve that, Toyota builds favorable relationships with all of its stakeholders, including shareholders, customers, business partners, local communities and employees. In house committees and councils are used for monitoring and discussing management of the company from the viewpoint of the stakeholders.

In 2003 was introduced the current system of management in which Chief Officers, who are directors, serve as the highest authorities of their specific operational functions across the entire company, while non-board Managing Officers implement the actual operations[14]. Toyota’s philosophy of emphasizing developments on the site, the Chief Officers serve as the link between management and on-site operations, instead of focusing exclusively on management. The company have different divisions all over the world, United States of America, The United Kingdom.

In the UK the division is headed by a General Manager – John Burton. He is responsible for two branches of the company, the office and shop floor. In the office part there is Assistant General Manager, Senior Manager, Section Manager, Specialist Engeneer – Senior, Specialist Engeneer, Lead Administrator and Administrator. For the Shopfloor we have the same structure till Section Manager with the adition of Group Leader- Senior, Grouo Leader, Team Leader and Team Member. As a publicly traded company Toyota have issued 3,447,997,492 shares and have 668,186 shareholders. 2. The Toyota Way

The most important created in the managerial sphere by Toyota is the Toyota Way. The Toyota Way is a set of principles and behaviors that underline the Toyota Motor Corporation’s managerial approach and production system. Toyota first explained and summed up those philosophy, values and manufacturing ideals in 2001, calling it “The Toyota Way 2001. ” It consists of principles in two key areas: continuous improvement, and respect for people[15]. The principles for a continuous improvement include establishing a long-term vision, working on challenges, continual innovation, and going to the source of the issues or problems.

The rules relating to respect for people include ways of building it and teamwork. Toyota’s management philosophy has evolved from the company’s origins and has been used in the terms “Lean Manufacturing” and Just In Time Production, which it was very important in developing[16] Toyota’s managerial values and business methods which are known collectively as the Toyota Way. Toyota uses five principles for their operations: • Challenge • Kaizen (improvement) • Genchi Genbutsu (go and see) • Respect • Teamwork[17] Another part of the Toyota Way is the Toyota Production System.

The Toyota Production System (TPS) is an integrated socio-technical system, developed by Toyota, that Cover its management philosophy and practices. The TPS organizes manufacturing and logistics for the company, how it interacts with suppliers and customers. The system is a major predecessor of the “lean manufacturing. ” Taiichi Ohno, Shigeo Shingo and Eiji Toyoda developed the system between 1948 and 1975. [18] Originally called “just-in-time production,” it develops on the approach created by the founder of Toyota, Sakichi Toyoda, his son Kiichiro Toyoda, and the engineer Taiichi Ohno.

The principles of TPS are embodied in The Toyota Way. The main objectives of the TPS are to design out overburden (muri) and inconsistency (mura), and to eliminate waste (muda). The most significant effects on process value delivery are achieved by designing a process capable of delivering the required results smoothly; by designing out “mura” (inconsistency). It is also crucial to ensure that the process is as flexible as necessary without stress or “muri” (overburden) since this generates “muda” (waste).

Finally the tactical improvements of waste reduction or the elimination of muda are very valuable. There are seven kinds of muda that are addressed in the TPS[19]: 1. Waste of over production (largest waste) 2. Waste of time on hand (waiting) 3. Waste of transportation 4. Waste of processing itself 5. Waste of stock at hand 6. Waste of movement 7. Waste of making defective products The system, is one of the biggest aspect of the company, it is responsible for having made Toyota the company it is today.

For long time Toyota has been recognized as a leader in the automotive manufacturing. [20] It is a myth that “Toyota received their inspiration for the system, not from the American automotive industry (at that time the world’s largest by far), but from visiting a supermarket. ” The idea of Just-in-time production was originated by Kiichiro Toyoda, founder of Toyota. [21] The question was how to implement TPS. When reading descriptions of American supermarkets, Ohno saw how the supermarket operated with the model he was trying to accomplish in the factory.

A customer in a supermarket takes the desired amount of products off the shelf and buys them. The store restocks the given products with enough new ones to fill up the empty shelf spaces. Similarly, a work-center that needed parts would go to a ‘store shelf’ (the inventory storage point) for the particular part and ‘buy’ (withdraw) the quantity it needed, and the ‘shelf’ would be ‘restocked’ by the work-center that manufactured the part, making only enough to replace the inventory that had been withdrawn. 22] While low inventory levels are a key outcome of the Toyota Production System, an important element of the philosophy behind its system is to work intelligently and eliminate waste so that only minimal inventory is needed. Many American businesses, having observed Toyota’s factories, set out to attack high inventory levels directly without understanding what made these reductions possible. The act of imitating without understanding the underlying concept or motivation may have led to the failure of those projects. In 2004 a professor from University of Michigan, Dr.

Jeffrey Liker published a book “The Toyota Way” in which he called Toyota way “a system designed to provide the tools for people to continually improve their work”. [23] “Since Toyota’s founding we have adhered to the core principle of contributing to society through the practice of manufacturing high-quality products and services. Our business practices and activities based on this core principle created values, beliefs and business methods that over the years have become a source of competitive advantage. These are the managerial values and business methods that are known collectively as the Toyota Way. —Fujio Cho, President Toyota (from the Toyota Way document, 2001)[24] According to Liker in the Toyota Way the people are what bring the system to life, working, communicating, resolving issues, and growing together. The Toyota Way encourages, supports, and in fact demands employee involvement. It is a system designed to provide the tools for people to continually improve their work. Toyota Way means more dependence on people, not less. It is a culture, even more than a set of efficiency and improvement techniques.

You depend upon the workers to reduce inventory, identify hidden problems, and fix them. The workers have a sense of urgency, purpose, and teamwork because if they don’t fix it there will be an inventory outage. On a daily basis, engineers, skilled workers, quality specialist, vendors, team leaders, and—most importantly—operators are all involved in continuous problem solving and improvement, which over time trains everyone to become better problem solvers. In it Liker summarized it in 14 principles. The principles are organized in four broad categories: 1)

Long-Term Philosophy, 2) The Right Process Will Produce the Right Results (this utilizes many of the TPS tools), 3) Add Value to the Organization by Developing Your People, and 4) Continuously Solving Root Problems Drives Organizational Learning. [25] 1)Long-Term Philosophy 1. Base your management decisions on a long-term philosophy, even at the expense of short-term financial goals. It is needed to replace the short term decision making with philosophical thinking of purpose. Understanding that the organization is bigger than money and that long term value for the customers and be responsible. )The Right Process Will Produce The Right Results 2. Create a continuous process flow to bring problems to the surface. Time management is very important, it must not be wasted. Creating good flow of the work with materials and people. 3. Use “pull” systems to avoid overproduction. Providing customers with everything they want when they wanted it. There is no need for costly overstocking. There need to be flexibility with the day-by-day shifts in customer demand not convoluted forecasts. [26] 4. Level out the workload (heijunka). (Work like the tortoise, not the hare. )

People and machines must not be overused. There must be leveled out workload. 5. Build a culture of stopping to fix problems, to get quality right the first time. Quality for the customer drives the value proposition. Building equipment capable of detecting problems and stopping itself. Developing a visual system to alert team or project leaders that a machine or process needs assistance. Jidoka (machines with human intelligence) is the foundation for “building in” quality. Problems must be solved quickly. 6. Standardized tasks and processes are the foundation for continuous mprovement and employee empowerment. Capturing the accumulated learning about a process up to a point in time by standardizing today’s best practices. Allowing creative and individual expression to improve upon the standard; then using it into the new standard so that when a person moves on, to easily hand off the learning to the next person. 7. Use visual control so no problems are hidden. Use simple visual indicators to help people determine immediately whether there are problems. [27] 8. Use only reliable, thoroughly tested technology that serves your people and processes.

Technology must be used for supporting the people not replacing them and it can lead to slow implementation. Tests can determine if it is viable to use new technologies. 3) Add Value to the Organization by Developing Your People 9. Grow leaders who thoroughly understand the work, live the philosophy, and teach it to others. Creating leaders inside the company and not sourcing them outside of the company. Such leaders must be role-models. 10. Develop exceptional people and teams who follow your company’s philosophy. Creating a strong, stable culture in which company values and beliefs are widely shared and used over a period of many years.

Corporate culture and teamwork must be adhered by the employees for exceptional results. [28] 11. Respect your extended network of partners and suppliers by challenging them and helping them improve. 4) Continuously Solving Root Problems Drives Organizational Learning 12. Go and see for yourself to thoroughly understand the situation (genchi genbutsu). Personal observation and data gathering for the problems that are encountered. Verification of information first hand. 13. Make decisions slowly by consensus, thoroughly considering all options; implement decisions rapidly (nemawashi).

Straightforwardness must not be accepted, alternative solutions must be taken into account. Also using other people for gathering information and helping with the decision is needed. 14. Become a learning organization through relentless reflection (hansei) and continuous improvement (kaizen). Using improvement tools to determine the cause of inefficiencies and apply effective countermeasures. Once waste is exposed, having employees use a continuous improvement process (kaizen) to eliminate it. Using hansei (reflection) at key milestones and after you finish a project to openly identify all the shortcomings of the project.

Develop countermeasures to avoid the same mistakes again. [29] By using TPS Toyota reduced time consumption and money, while it improved quality. This helped the company become the biggest company by 2007 and be very profitable. But in recent years it looks that the TPS is not working so well or it is abandoned altogether. The recent technical problems of Toyota showed to some that maybe the TPS is not so good, but if it wasn’t good or it can’t be used anymore, Toyota would have not be able to go back to the top in such short time. The problems maybe are not part of the TPS, but rather other factors.

Too big growth of the company in the 21st century. The central lead management don’t allow flexibility in tackling problems. Another issue it that problems become much more obvious with the increase of quantity and this will result in much more negative situation which can’t be handled or will be exploited by competitors. The complexity of cars is attributing factor to have more problems and this can’t be solved by the managers. Of course TPS can be blamed in some way. It support standardization in task and processes and when there is problem with one thing, that problem translate everywhere where standardization is used.

And finally a problem experienced by almost all big companies all over the world – slow response to problems, because of the amount of bureaucracy that comes with complex management in big organizations. 3. Toyota managerial problems The management of Toyota today are not very successful, after the big vehicle recalls there was a serious lack of admittance by Toyota CEO Akio Toyoda that something is wrong at that was most prominently seen in his press conference about that matter where he stated: “Believe me, Toyota’s car is safety.

But we will try to make our product better. ” Another big problem for the management is the dysfunctional organization structure and a secretive culture. After a problem experienced in Europe and this problem could have affected North America there was absolute no communication between the different branches of the company. [30] Instead of admitting that there is a problem Toyota denied that there are any problems with their cars. III. Conclusion As of mid 2012 Toyota is once again the leader in the automotive world.

Although the problems that plagued the company for 2 years reduced their output, profits decreased substantially and the company image was severely damaged which led to the company losing a big sum of money and trust with their consumers, they managed to get out of the problem with relative ease. The company also realized some important things from all this: 1. They could not want to be a global leader and keep all the power in the hands of the headquarters in Japan. Even though they claimed that they are delegating management to other parts of the company around the world the crisis showed something different.

When a lot of the production is happening outside Japan they couldn’t afford to still maintain all the power in Japan. 2. They must create friends in order to advance even if they have millions of customers. The crisis left them with no real allies and protection. 3. Toyota learned that it must maintain its reputation every minute. Claiming that they are the best don’t help. Consumers want to see and experience that in the real world not just through ads and statistics. ———————– [1] Wikipedia, Toyota [2] Tim Higgins – Jul 26, 2012, Bloomberg, http://www. bloomberg. om/news/2012-07-25/toyota-extends-global-sales-lead-over-general-motors-vw. html [3] Wikipedia, Akio Toyoda [4] Wikipedia, Toyota [5] Christian Science Monitor, http://www. csmonitor. com/USA/2010/0129/Toyota-recall-update-dealers-face-full-lots-anxious-customers [6] BBC, http://www. bbc. co. uk/news/business-20321594 [7] BBC, http://news. bbc. co. uk/2/hi/business/8493414. stm [8] Mike Milikin 8 Nov. 2012, Green Car Congress, http://www. greencarcongress. com/2012/11/tmchybrids-20121108. html [9] Wikipedia, Fujio Cho [10] Reference for business, http://www. referenceforbusiness. om/biography/A-E/Cho-Fujio-1937. html [11] Bloomberg Business Week, http://investing. businessweek. com/research/stocks/people/person. asp? personId=646436&ticker=TM [12] Bloomberg Business Week, http://investing. businessweek. com/research/stocks/people/person. asp? personId=1828739&ticker=TM [13] Toyota Global [14] Toyota Global [15] “Environmental & Social Report 2003”. Toyota Motor. p. 80. [16] Strategos-International. Toyota Production System and Lean Manufacturing. [17] Toyota internal document, “The Toyota Way 2001,” April 2001 [18] Strategos-International.

Toyota Production System and Lean Manufacturing. [19] Ohno, Taiichi (March 1998), Toyota Production System: Beyond Large-Scale Production, Productivity Press [20] Brian Bremner, B. and C. Dawson (November 17, 2003). “Can Anything Stop Toyota? : An inside look at how it’s reinventing the auto industry” [21] Ohno, Taiichi (March 1988), Just-In-Time For Today and Tommorrow, Productivity Press, [22] Magee, David (November 2007), How Toyota Became #1 – Leadership Lessons from the World’s Greatest Car Company, Portfolio Hardcover, [23] Liker, Jeffrey (2004). The 14 Principles of the Toyota Way: An Executive Summary of the Culture Behind TPS”. University of Michigan. p. 36 [24] Liker, Jeffrey(2004). The 14 Principles of the Toyota Way: An Executive Summary of the Culture Behind TPS”. University of Michigan. p. 35 [25] Liker, Jeffrey (2004). “The 14 Principles of the Toyota Way: An Executive Summary of the Culture Behind TPS”. University of Michigan. p. 36 [26] Liker, Jeffrey (2004). “The 14 Principles of the Toyota Way: An Executive Summary of the Culture Behind TPS”. University of Michigan. p. 7 [27] Liker, Jeffrey (2004). “The 14 Principles of the Toyota Way: An Executive Summary of the Culture Behind TPS”. University of Michigan. p. 38 [28] Liker, Jeffrey (2004). “The 14 Principles of the Toyota Way: An Executive Summary of the Culture Behind TPS”. University of Michigan. p. 39 [29] Liker, Jeffrey (2004). “The 14 Principles of the Toyota Way: An Executive Summary of the Culture Behind TPS”. University of Michigan. p. 40 [30] Wall Street Journal, http://online. wsj. com/article/SB10001424052748704820904575055733096312238. html

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