This is a study about Toyota Motors Corporation and the strategies it has implemented all through the years that have made it a model to other companies. The strategies can be applied to our company.
How was Toyota able to compete with its large competitors when it was a small company? The simple answer is through sheer determination and a company strategy or a series of strategies that catapulted it to volumes of sales.
Lynch (2008, p. 772) says that ‘since the early 1950s, Toyota was only a small company, averaging 18,000 vehicles per annum, but increased its production between 1950 and 2004’. Toyota introduced the “Toyota Production System which ‘originated as a means of achieving mass production efficiencies with small production volumes’” (Toyota Annual Report and Accounts 1998, quoted in Lynch 2008, p. 772). Toyota expanded to become export-oriented and began to open manufacturing plants in many countries including the United States, operating in the same strategy.
Lynch (2008, p. 772) says that Toyota’s successes between 1950 and 1980 could be attributed to the Toyota Production System. Taiichi Ohno was the chief engineer during that time who started experimenting to improve production. He introduced the concept which evolved from the Japanese kaizen and kanban concept of production. Kaizen means “continual improvement” in Japanese.
Toyota employed a strategy wherein it operated a separate marketing company to sell Toyota products. This was headed by Shotaro Kimaya, a US trained manager who introduced many marketing innovations in the company during the 1960s and 1970s. Kimaya and Ohno made the company successful in Japan, and made it a leader in marketing with “over 40 percent of the market” (Lynch 2008, p. 772).
Another operations management tool is the setting up of dealer networks, cheap financing for customers, and a strong dedicated salesforce. Exports of Toyota cars and products was begun and by 1970s “40% all production was being sold outside Japan, especially in the US” (Lynch 2008, p. 772).
Lexus is a Toyota subsidiary and part of the luxury segment of Toyota. This is a branding strategy where “the quality and finish on such car[s] is high and the profit margins substantial” (Lynch 2008, p. 770). It introduced the Prius, a hybrid power vehicle whose engine can work out with petrol and electricity.
Toyota used advertising and other forms of promotion to sell their products. “Branding and new product introduction” are a part of their strategy. (Lynch 2008, p. 770)
Toyota used research and development in its design stage and came out with combining parts to be produced in one process rather than two. With this method, time and cost are saved.
Kaizen is “continuous improvement” across every production. “Toyota’s engineers invented this approach to operations strategy” (Gourlay, 1994, p7, cited in Lynch 2008, p773). Some stages in production are cut or shortened to save time to provide flexibility.
Toyota also introduced the kanban system to signal employees when to order or replenish parts or products. This is actually composed of coloured cards especially designed to give notice to employees on the products’ availability.
The layout strategy provided for ‘cellular layout arrangements of plant machinery’ rather than ‘linear layouts for production lines’ which allowed workers to operate a number of machines and allowed them to work in teams to provide layout’ (Lynch 2008, p. 773).
Toyota had a close relationship with its suppliers and bought more products from them. By having a close contact or coordination with suppliers through computer linkages or the Information Technology, Toyota had the advantage of having supplies just in time for production.
Toyota allowed its employees and effective salesforce to work almost independently, but with the guidance of their supervisors who served not as bosses but as supervisors and mentors. The opportunity was tapped right at the very beginning when an effective manager and a loyal salesforce pushed through the market.
Moreover, Toyota has been able to integrate the process design and business functions effectively. Orta (2001) gives a summary of Sobek et. al.’s (1998) article “Another look at how Toyota integrates product development”:
- The company still uses written communication.
- Supervisors are chosen from among the employees whose role is as facilitator and mentor and not as boss.
- The chief engineer or leader has broad expertise over a particular department.
- Employees are better trained inside the company, and they don’t get much training or expertise from outside source.
- Toyota has standardized its processes and minimized the steps in the routine procedures.
- Checklists are still in use inside Toyota manufacturing plants.
Stakeholders expectation were met by Toyota’s continued progress and increase profit.
The automotive industry is very much affected by the global financial crisis as a result of the financial collapse in Wall Street. It is widely said that there will be a big reduction of jobs, and more and more employees in industries and manufacturing plants will be laid off. The major reason for this is that companies in the automotive business are sure to downsize and reduce production cost. A big challenge is awaiting the automotive business, Toyota in particular.
The Newsletter from Management Intelligence, by Edward de Bono and Robert Heller dated 18 January 2009, says:
“The true change manager starts with redefining the purposes of the organization in the light of fully analyzed external change. Next come the internal changes required if those purposes are to be met. Then you tackle the people, starting at the top. Will they or won’t they whole-heartedly accept the new purposes and internal reforms? If they won’t or can’t.”
Prius is now worth $22,000; Camry Hybrid is worth $26,150, and Highlander Hybrid is worth $34,7000. (Toyota, 2009) These products add up to the profit and prestige of Toyota. Toyota manufactured the custom-built cars, or cars made according to customers’ specification, the version of Dell Computer’s custom-built computers.
- We can use the Japanese concept of kaizen and kanban methods of production, i.e., through continuous innovation and improvement in our productions.
- We can open up a separate marketing company to sell other products aside from our main product.
- We also recommend setting up dealer networks, cheap financing for customers, and a strong dedicated salesforce.
- We have to tap the export business, and introduce our products outside the country.
Lynch, R., 2008. Global Automotive Vehicle – Strategy in a Mature Market and Toyota: What is its Strategy for World Leadership. In: Strategic Management, 5th edition (Financial Times/ Prentice Hall), pp. 767-775.
Sobek, D. K. II, J. K. Liker and A.C. Ward. 1998. “Another look at how Toyota integrates product development”. Harvard Business Review: 3-49. Web.
Toyota, 2009. Where we started. Web.