Toyota case study Task 1 a) Brief overview of the critical importance of strategic operations management to a world class company. AND b) Critical review of Toyota’s strategic operations management activities from manufacturing, product/service and administration perspectives. a) Strategic operations management is of great importance to any organisation.
The very existence of organisations in the modern competitive world depends on mass customization, Lean production, agile manufacturing, customer-centric provision (Strategic Operations Management, Second edition, Steve Brown, Richard Lamming, John Bessant and Peter Jones), and so on – depend on the ability of the organization to actually do these things. Here strategic decisions play a crucial role. In my opinion Strategic operations management is a holistic approach, covering the whole organisation, touching different aspects of business.
Further strategic operations management can be vitally important in achieving business goals, and gaining competitive advantage. At this point, I find it is worth to define the terminology – ‘Strategic Operations management’. According to Slack and Lewis, operations strategy holds the following definition: “Operations strategy is the total pattern of decisions which shape the long-term capabilities of any type of operations and their contribution to the overall strategy, through the reconciliation of market requirements with operations resources”( Slack et al 2007, p69).
Generally strategic operations management activities are critical to the customer satisfaction & innovation. There are four types of advantages for strategic operations management in a given business (Slack et al 2007, p22); 1. Strategic operations management can reduce the cost of producing products and services, and increase the efficiency. When we analyse the case of Toyota Corporation, it is evident that cost is one of the critical competitive factors for the corporation, thereby strategic operations management at Toyota will definitely, help the company to reduce the cost and gain efficiency. . Strategic operations management can increase the revenue by increasing the customer satisfaction through good quality and service. As we analyse the Toyota Corporation, we can find the emphasis on customer focus and quality, this would increase the customer satisfaction and increase the revenue for the company. 3. Strategic operations management reduces the amount of investment required by increasing the capacity of the operation, and innovative resource deployment.
Automobile industry in general is characterised by neck – to – neck competition, here any reduction in investment reflects in the cost, and eventually in the price to the customer. So, it is definitely going to be important for Toyota Corporation. 4. Strategic operations management provides the basis for future innovation, by building a solid base of operations skills and knowledge within the business. This is also a vital point for Toyota, strategic operations management would help the company to develop long term capabilities, which would play a key role in the future direction of the company.
While exploring the relevance of Strategic Operations Management, it is equally important to have a look at the four perspectives (Slack et al 2007 p, 69) as follows: Operations strategy might be a top-down or a bottom-up process when considering the business and corporate strategies. Similarly, an operations strategy might be developed in response to market requirements (i. e. market-led) or be based on the capabilities of its operations resources. Fig. 1. task 01 . SOURCE: The four perspectives on operations strategy, OPERATIONS STRATEGY, SLACK AND LEWIS, PEARSON EDUCATION LTD.
When analyzing the four perspectives, it would become clear that the ‘Top – down perspective’ would help us to understand the relevance of Strategic Operations management. Top-down Perpective The top-down perspective is the one from where the operations strategy coming from. It is supporting the corporate strategy, business strategy and the functional strategies of an organisation. Now let us take the case of Toyota as a synonym to the proposed world class organisation, so that we will be able to analyse the importance of strategic operations management.
While analysing the ‘Top – down Perspective’, we would come across with three levels of strategic decisions in an organisation; At corporate level At business level At functional level Let us get closer to the Toyota Corporation, as we analyse the strategic decisions at corporate level , we find it is related to positioning the Toyota Corporation in the global, economic, political and social environment ( Slack et al 2007, p63). It would help Toyota to make decisions on; ? The types of business that the organisation wants to be in ? The markets that the organisation would like to operate ?
Allocation of cash between different businesses/SBUs Secondly, the strategic decisions at Business Level would help the individual business units to formulate mission and objectives. It would help the organisation to formulate the business strategy relevant to individual business units operating under the corporate umbrella. Here, business strategy helps the business towards its particular customer, potential markets and competitors. For example when we analyse the Toyota Corporation, we find the following information; The Company operates through three business segments.
The Automobile segment is engaged in the design, manufacture and sale of car products, including sedans, minivans, 2BOX cars, sport-utility vehicles and trucks, as well as the related parts and accessories. The Finance segment is involved in the provision of financial services related to the sale of the Company’s products, as well as the leasing of vehicles and equipment. The other segment is involved in the design, manufacture and sale of housings, as well as the information and communication business. As of March 31, 2012, the Company had 507 subsidiaries and 212 associated companies (The New York times August 2, 2012).
So the strategic operations management holds key for the individual business units in Toyota to adhere to the corporate strategy, and develop missions and objectives concerning the individual business units. Finally, the strategic decisions at Functional level would help different departments or functions at an organisation to organize themselves to support the business strategy. For example, in the case of Toyota Corporation, the operations department, marketing department, product/service development department and others would be directed to adhere to the business objectives.
For example, in the case of Toyota Corporation, the emphasis would be given to the management of different departments in the business. Getting closer, we can take the example of Lexus segment of Toyota, where functional level strategic decisions would help different departments in Lexus unit to organize themselves to achieve the business objectives. When we analyse the importance of strategic operations management at Toyota, we can simplify the findings as follows; When considering the ‘Top – down perspective’: Toyota management directs or formulates the strategy as what business to do, it is the considered to be at corporate level.
The company decides where it wants to be in 10 to 15 years at this stage. For example Toyota at corporate level emphasized the following principles; Toyota Global Vision “Rewarded with a smile by exceeding your expectations” Toyota will lead the way to the future of mobility, enriching lives around the world with the safest and most responsible ways of moving people. Through our commitment to quality, constant innovation and respect for the planet, we aim to exceed expectations and be rewarded with a smile. We will meet challenging goals by engaging the talent and passion of people, who believe there is always a better way. http://www. toyotaglobal. com/sustainability/csr_initiatives/csr_concepts/policy. html accessed 19th September). Here we find the examples for the corporate level decisions as follows; The emphasis is on the quality The emphasis on innovation The emphasis on building capabilities (HR) Again, at business level we find the following facts at Toyota; the appropriate question at business level is “How should we compete in the chosen industry or business? ” Here Toyota formulates the mission statements for the company, and locates the strategic objectives.
Here Toyota emphasizes the performance objectives such as Quality, dependability, flexibility, cost. At the very functional level in Toyota, the emphasis goes to alignment of the particular function to the business objectives, for example the production at Toyota Corporation; Here, the focus of Toyota goes to quality, reduction of waste (JIT), continuous improvement. Further, Hayes and Wheelwright’s four stages of operations contribution would help us to understand how the strategic operations management contributes. According to
Hayes and Wheelwright there are four stages of operations contribution( Slack et al 2007, p37) as mentioned below; 1. Internal neutrality – at this stage the strategic operation holds the company back from competing effectively, and focus given to avoiding mistakes. 2. External neutrality – at this stage the strategic operation emphasizes on implementing the best practices in the market. 3. Internally supportive – this stage is characterised by building operations resources, and by gaining company’s competitive or strategic goals.
From Toyotas’ case, we can find that the company’s operation is striving to build long term capabilities. 4. Externally supportive – the focus on this stage goes to providing foundation for the long term competitive success. From the case given, it is becoming evident that the company is keen to build long term competitiveness. (Fig. 2. Task 1. The four-stage model of operations contribution by Hayes and Wheelwright) As a conclusion, we find that Strategic Operations management is quite important to any organisation as in the case of Toyota.
It helps an organisation to device competitive strategies, acquire new markets, and respond to customer requirements, development of long – term plan for the organisation, process management and so on. Does it pay to an organisation? Well, it does for example, when, in the late 1990s, Toyota announced their strategic intention to expand capacity and produce more automobiles – in what was already an oversaturated industry – they did so knowing that they had exceptional operations capabilities that would outperform other competitors.
By the beginning of 2004, Toyota had indeed fulfilled their promise and had become the number two car producer in the USA ( Strategic Operations Management, Second edition, Steve Brown, Richard Lamming, John Bessant and Peter Jones, 2005) b) Critical review of Toyota’s strategic operations management activities from manufacturing, product/service and administration perspectives. Stakeholder analysis could be used to illustrate the strategic operations management activities at Toyota. By analysing the stakeholders, we will certainly have an idea about the expectations of different stakeholders. Stakeholders are the people and groups who may be influenced by, or may influence, the operation’s activities” (Slack et al p. 39). We can utilize the ‘Five performance objectives’ from Slack ( Slack et al 2007, p39) to broaden the scope of stakeholder analysis. According to Slack there are five performance objectives for any type of operations as below; Quality Speed Dependability Flexibility Cost ( Slack at el p39). Five performance objectives to Toyota Quality Expectations from stakeholders Quality of product/service, safe vehicles.
Type of stakeholder Customer Shareholders Society How Toyota can address? All parts are made to specification All assembly is to specification The product is reliable The productive is attractive and blemish – free Speed Reduced throughput time and waiting time. Customer Shareholders Dependability On time delivery Customer Partners; dealers Flexibility Availability of different models to choose from Customer Suppliers Toyota Cost Lower price and superior performance Customer Toyota ( Slack et al 2007, page 40) Time between dealers requesting a vehicle and receiving the same is kept to minimum.
On time deliver of spares to the service centers. ( Slack et al 2007, p40) On – time delivery of vehicles to dealers On – time delivery of spares to service centers. The introduction of new models Mix flexibility Volume flexibility – ability to adjust the number of vehicles manufactured Delivery flexibility ( Slack et al 2007) Reduction of cost in purchasing Reduction in staffing cost Reduction of costs in technology and facilities When analysing the stakeholders of Toyota Corporation, we can find the following; Internal stakeholders: investors/shareholders, employees/managers.
External stakeholders: customers, governments, society/community, suppliers/business partners, environmentalists. (http://www. toyota-global. com/sustainability/stakeholders/ accessed 23rd September 2012) 1. Customers According to Toyota the policy statement towards the customers goes like this 1. “Provide safety and reliable vehicles that inspire enthusiasm at affordable prices. 2. ”Listen sincerely to customer voices and continue to reinvent ourselves through sufficient information disclosure and dialogue. ” (http://www. toyotaglobal. com/sustainability/stakeholders/ accessed 23rd September 2012)
What customer expects? Quality How Toyota addresses? Matching of the expectation Safety and reliability Toyota emphasizes quality in manufacturing/production, in design, in service and values increasing transparency. For example the focus on doing things right at the first time, explains as how quality matters to Toyota. The company strives to provide the customer with quality products and services. Furthermore, the TQM principle of Toyota allows total quality management through development, procurement, production, to after sale service.
Again, the continuous improvement principle also giving insights towards the quality concept. ( http://www. toyotaglobal. com/sustainability/stakeholders/customers/quali ty. html accessed September 25th 2012) By using technologies to avoid the occurrence of accidents, by developing technologies to reduce the amount of damage by collisions, dependable safety management concepts, by providing driving information, by passenger protection, damage mitigation, rescue, accident warnings. (http://www. toyotaglobal. com/sustainability/stakeholders/customers/safet y. html accessed 25th September 2012)
Yes At this point, I would disagree to an extent! The engine fault on Lexus model compelled the company to recall the model. (http://www. telegraph. co. uk/mo toring/news/7865157/Toyotaplans-recall-of-Lexus-modelsover-engine-fault. html 25th September 2012) Further the customer reaction to the same could be found in the link below. http://www. consumeraffairs. co m/automotive/toyota_engine. ht ml Opportunity to feedback and receiving of the information. Low price Toyota emphasizes listening to the customer, and giving timely and prompt feedback. ( http://www. toyotaglobal. om/sustainability/stakeholders/customers/quali ty. html accessed September 25th 2012) Reduction of cost throughout the operations process JIT, Inventory control, avoidance of waste every time are few measures that the company adopted towards this idea. On time delivery Various models to choose from 2. Employees Policies towards the employees depicted in the following sentence. “Create working environments for various employees to work proudly and with loyalty and confidence in fulfilling their potential, which realize their self-growth” (http://www. toyotaglobal. om/sustainability/stakeholders/employees/ accessed 25th September 2012). Yes Yes Dependabilit y Flexibility What employees expect? Safety & health How Toyota addresses? Matching of the expectation Pride Confidence Creating safe and healthy working environment ( http://www. toyotaglobal. com/sustainability/stakeholders/employees/ accessed 25th September 2012 ) Creating an environment full of vigor and enthusiasm. (http://www. toyotaglobal. com/sustainability/stakeholders/employees/ accessed 25th September 2012 ) Providing stable working environment, and fair working conditions. http://www. toyotaglobal. com/sustainability/stakeholders/employees/ accessed 25th September 2012 ) Yes Yes Not really! The recent lay off in Australia could contradict this statement. ( http://www. abc. net. au/new s/2012-04-17/toyotas- Equality in all aspects Opportunit y Creating harmonious, dynamic working conditions at Toyota. (http://www. toyotaglobal. com/sustainability/stakeholders/employees/ accessed 25th September 2012 ) Development of HR (http://www. toyotaglobal. com/sustainability/stakeholders/employees/ accessed 25th September 2012 ) ayoffs-necessarymontgomery/3956820 accessed 25 September 2012) Yes Yes 3. Business partners Toyota’s policy towards the business partners, that includes the suppliers goes as follows; “Contribute for economic development of local communities with open stance to new suppliers and dealers and through sustainable growth based on mutually beneficial business relationships with dealers/distributors and suppliers” (http://www. toyotaglobal. com/sustainability/stakeholders/partners/ accessed September 25th 2012) . What business partners expect? Equal opportunity How Toyota addresses?
Toyota keen to give equal opportunities for the suppliers around the world, supplier CSR guidelines and openness. Openness policy What matters to Toyota? Quality, low price. Contribution to local economic vitality through localization: good corporate citizenship. Fairness in receiving information Long term procurement fair competition based on Quality, equal opportunity, an open-door policy low price Stable relationship mutual benefit based on Mutual benefits mutual trust Trust Unified cooperation with Trust partners. http://www. toyota-global. com/sustainability/stakeholders/partners/#policy accessed 25th September 2012 4.
Global society and local communities The Toyota policy in this regard is mentioned below; “Reduce environmental burdens through lifecycle by developing various eco-friendly vehicles and technologies and making them prevail”. Be aware of responsibilities of developing and producing vehicles and contribute for realization of new mobility society free from traffic accidents and congestion. As a good corporate citizen, respect the culture and customs of every nation and contribute to social development. http://www. toyota-global. com/sustainability/stakeholders/society/environment. html accessed 25th September 2012) .
What Society/ community expects? Eco – friendly vehicles CO2 reduction How Toyota addresses? Development of eco-friendly models. Conserve energy and reduce the amount of CO2 in production/manufacturing, distribution and sales. Emphasis on re-cycling based utilization of resources. Boost monozukuri with nature What matters to Toyota? Preservation of the nature Protection and safety of the nature Conservation of resources Environmentally friendly manufacturing Safer mobility Preservation of resources. Provide eco-mobiles Production of safe and Safety people and environmental friendly preservation of the vehicles nature.
Comfortable and carbon Providing eco-friendly designs, free mobility innovative designs for comfort. Innovation in life style Innovation in style by http://www. toyota-global. com/sustainability/stakeholders/society/mobility. html accessed 25th September 2012 ) Social welfare Social welfare programs Jobs Creation and opportunity for employment. Infrastructure Infrastructure development activities. Traffic safety Education and training http://www. toyota-global. com/sustainability/stakeholders/society/contribution. html accessed 25th September 2012 http://www. toyota-global. com/sustainability/stakeholders/society/environment. tml accessed 25th September 2012. 5. Shareholders The polices towards the shareholders are explained as follows; “Ensure sustainable growth by fostering the virtuous circle, Always better cars” Enriching lives of communities, Stable base of business. “Global Vision for Those We Serve” ( http://www. toyota-global. com/sustainability/stakeholders/ accessed 25th September 2012) What shareholders How Toyota addresses? What matters to Toyota? expects? ROI Sustainable profitability Sustainable profitability. and cost reduction. Done through regional strategy, business strategy and product strategy.
Respect for the agreements Honor the law Foster visionary management style Dividends and shares Dividends based on investment plans, business results, cash revenues http://www. toyota-global. com/sustainability/stakeholders/shareholders/ accessed 25th September 2012 6. Governments Toyota’s policy towards local, national and international governing bodies expressed in the following statement; “ We comply with local, national and international laws and regulations as well as the spirit thereof and we conduct our business operations with honesty and integrity” ( http://www. oyotaglobal. com/sustainability/csr_initiatives/csr_concepts/policy. html accessed 25th September 2012). What Governments expect? How Toyota addresses? Compliance to law Comply laws at local, national and global levels. CSR policies http://www. toyota-global. com/sustainability/csr_initiatives/csr_concepts/policy. html accessed 25th September 2012 7. Environmentalists – Toyota explains this in in sustainable mobility (http://www. toyota. com/about/environment/ accessed 25th September 2012) What environmentalists expect?
Clean mobility Preservation of natural resources How Toyota addresses? Eco-friendly designs Reduced use of resources, and promotion of eco-friendly designs and fuel efficient vehicles and technologies. http://www. toyota. com/about/environment/ accessed 25th September 2012 Globalization also plays an important role in strategic operations management activities (Slack et al 2007). Globalization is characterised by the extension of operations supply chain to cover the whole world (Slack et al p680).
It is becoming clear that the world is becoming a small place to do business, here enormous opportunities lie, so do the threats or challenges (slack et al 2007). For example the advent of internet technologies paved the way for new business models. Here, the availability of a website making you an international player. Let us take the case of Toyota, where e-procurement would revolutionalises the entire process and contributes to cost reduction, and quality control. The most important point to note is that, the real competition between supply chains and, the business networks, and it is not between various companies.
Let us evaluate as how globalization poises the challenges and opportunities to Toyota in a brief; ? ? ? ? ? ? ? ? ? Global markets; Global competition and global focus Competitors, partners & customers from around the world Global sourcing- Global presence Global value chains – increasing complexity & competition Global access to knowledge & new technologies High level of customer awareness & expectations Accelerating pace of technological change Rapid pace of product commoditization Innovation & mastery of global value chains are preconditions for business success
As the world is the market for Toyota, the following points becoming important in manufacturing, product/service and administration; Product/service perspective 1. Global design – because of the global market focus, Toyota has to emphasize the design patterns matching the appetite and attitude of global customers. Here strategic operations management has to give importance to transferability of product/service. (Slack et al 2007 p 681). 2. Flexibility – due to this factor the necessity for wide range of options becomes important.
Here, the R& D department has to work closely with the emerging design preferences to match the expectations. 3. As Toyota (corporate level) defines the operations strategy, operations managers must pay attention to the five performance objectives found at the business level of strategy, in order to efficiently deliver the company’s products, or services to the market and maximize the profitability. 4. Harmonious relationship with partners such as suppliers, dealer’s e. t. c becomes important. 5. Toyota’s hybrid car initiative can be considered at this juncture. In manufacturing perspective 1.
Globalization requires international quality standards from Toyota; it forces the strategic operations management of Toyota to emphasize the quality factor in every product. We can find the TQM, TPM e. t. c as a result of this focus (http://www. toyotaglobal. com/company/vision_philosophy/guiding_principles. html accessed 25th September 2012 ) 2. Cost reduction – this is another challenge to the Toyota Corporation; globalization is facilitating hundreds of automobile manufactures to compete in the international arena, here lower price, and higher quality pays off.
Better supplier/partner relationships, total reduction of waste, inventory control are a few commendable practices put forth by the company. 3. Continuous improvement is another feature of Toyota’s operations management. 4. Flexibility and dependability is another focus in the manufacturing arena. 5. Layouts of facilities need to be taken into consideration, because it is related to the culture of particular region. 6. Process technology development is another factor for the strategic operations management to consider. Here availability of skills, serviceability and maintenance options e. t. to be taken into consideration ( Slack et al 2007 p681) 7. Capacity planning and control is another area to explore. Here Toyota explore JIT technique. 8. Inventory planning and control is the other area affected by the globalization. Toyota innovated inventory reduction techniques to cope with the challenge. 3. Administrative perspectives 1. Respect towards different cultures and beliefs holds the key here. Toyota’s respect policy is focused towards this aspect. 2. Job design is an area coming under the theme. Here cost of labour, skill availability, cultural impacts etc. to be taken into consideration. 3.
Another vulnerable area is business itself, here proper business recovery plans to be in place. 4. Better supplier management is another important factor, which will contribute to quality, and cost reduction. 5. Environmentally sensitive operation is another challenge to tackle. 6. Knowledge management is another area to focus. As the world becomes a global village to do business, the problems would escalate with the new competitors, new products, low pricing, better quality. At this stage, Toyota has to emphasis on continuous improvement principle to avoid the mishaps – the recalling of the product and associated amage to the brand, loss of revenue etc. Task 02 Critical assessment of Toyota’s global capability and evidence of competitive advantage in their product and services. The organizational capability of a firm can be found evenly throughout the entire organization, and it is the same case when it comes to Toyota Corporation. A firm’s organizational capability as a source of its profitability may be disproportionately found in its manufacturing functions such as factories, technical centers, and purchasing organizations. We may call it manufacturing capability (i. e. , organizational capability in manufacturing).
Toyota’s half-century stream of profitable years is often attributed, to its manufacturing capability, including that of the Toyota Production System (Monden, 1983, 1993; Womack et al. , 1990; Fujimoto, 1998, 1999). Toyota’s global capability lies in the development of long term capabilities, effective utilization of resources, sincerity towards the waste reduction, Toyota production system, JIT, continuous improvement, customer focus, enhanced supplier networks, emphasis on quality, customization, Toyota’s inbound logistics management controls the inventory control and so on( www. toyota. om a brief over view, accessed 24th, 25th September 2012). In the case of Toyota developing key human resource, and fostering the development of key capabilities could be figured out. As we analyse the Toyota corporation, it is becoming clear that the organisation is keen to develop right resources for the company (https://www. toyota- global. com/sustainability/report/sr/pdf/sustainability_report11_se. pdf accessed 25th September 2012). At Toyota the corporate level strategy directs the organisation to long term objectives. For example the emphases for quality, innovation, reduction waste, continuous improvement e. . c originate from this point. But, often corporate level strategies are characterised by inflexibility and bureaucracy, because it is derived from the corporate level. At business level Toyota Corporation emphasizes the individual business objectives such as quality, cost, flexibility and dependability. Here the individual business units of Toyota (for example Lexus), should align the strategies according to the corporate objectives. Finally, the functional level strategies are concerned about adopting the steps necessary for achieving the business objectives. At this level, the articular function for example manufacturing; has to follow the objectives set forth by the business. It is time for us to evaluate the competitive advantages, based on the five performance objectives; (Slack et al 2007, p 39) 1. Quality 2. Speed 3. Dependability 4. Flexibility 5. Cost Performance objectives Quality – conformance to customer expectations ( slack et al 2007, p40) Competitive factor High quality How it creates competitive advantage for Toyota Toyota emphasizes the quality throughout the operation. A good example to support this statement is the Lexus series vehicles.
It starts from the design, procurement, production, delivery and service. It reduces the cost by reducing the re-works, lessens the confusion (Slack et al 2007). It increases the dependability, and efficiency ( slack et al 2007) Speed – the elapsed time between, a customer requesting products/services and the delivery of the same kept to minimum ( Slack et al 2007, p42) Dependability – it means the customers receive goods and services exactly when they are needed. ( Slack et al, 2007, p 44) Fast delivery Reliable delivery Flexibility – ability to change operations in Wide range of some way. roducts Production flexibility – ability to produce new models. Mix flexibility – ability to produce wide range of products and services Volume flexibility – the operation’s ability to change its level of output Delivery flexibility – the operation’s ability change the timing of the delivery of its products and services. ( Slack et al 2007, p 46) Cost – it is about competing on price. Low price ( slack et al 2007) Still, the effort should be given for consistent conformance ( Slack at el 2007), recent years problems in Lexus, Reiz, High Lander ( Global business review 2012) spells doubts in the quality focus of Toyota.
Toyota’s JIT principles, inventory control and inbound logistics management emphasizes this aspect. It facilitates speedy decision making. It reduces inventories. It reduces the risks ( slack 2007) Toyotas JIT systems and planning and control systems would help the company to achieve the same. It increases the efficiency in the operation, saves the time, money and gives stability to the company. ( Slack et al 2007) At Toyota the flexibility holds the key with other performance objectives. Here the R & D division pays attention to designing the different models suited for different markets and consumers.
Again, the production process is capable of adjusting the volume. Finally the ability of Toyota in terms of rescheduling the manufacturing priorities. It would help the organisation to become agile, maintains dependability, and saves time. ( Slack et al 2007, p 47) At Toyota is one of the performance objectives. Automobile industry is characterised by the stiff price wars, and here cost reduction would help the company to achieve low price. Toyota is one of the pioneers in competing in price with various models. It improves efficiency.
But, here one point to consider the imitability of capabilities – other companies such as KIA poises stiff competition to Toyota with flexibility and price. Finally, as we focus on analysing the performance objectives of Toyota, we find the following; Quality Cost Speed Flexibility This is illustrated by way of a polar diagram here; It is critically important, that the companies examine the market to determine the needs and minimum requirements of customers; we can also refer to as order winning and qualifying factors.
As discussed by Slacks, Chambers and Johnston (2007) “order qualifiers are those aspects of competitiveness where the operation’s performance has to be above a particular level to be considered by the customer. ” Slacks, Chambers and Johnston (2007) also describe order winners as “the competitive factors that directly and significantly contribute to winning business. ” It is useful to consider the points put forward by Terry Hill, professor at the London Business School, (1985), such as order winning factors and satisfying factors, less important factors. For Toyota Corporation the order winning factors include; ? Quality ? Design ?
Dependability Satisfying factors ? Cost ? Range ( flexibility) Fig 4. Task 2 Terry Hill Order wining factors, qualifying factors, less important factors. Here we can easily come to a conclusion that for different customers, these factors would vary. For example the take case of Lexus vehicles from Toyota, here the order winning factors would certainly be the style, design, high quality, performance, and qualifying factors will be price or any other. The case would be other way around when we consider the Innova model. Task 03 Critical review of Toyota’s use of operations strategy to increase their overall effectiveness and competitiveness.
While analysing the activities from manufacturing, product/ service perspective, it is important to bear in mind the Top – down perspective of operations strategy. According to Slack et al 2007) The Top – down perspective consists of three levels of strategy; Corporate level Business level Functional level It is further related to matters such as; What type of business the organisations to be in? Cash flow management Management of SBUs (strategic business units) At Toyota the corporate level strategy directs the organisation to long term objectives. For example the emphases for quality, innovation, reduction waste, continuous improvement e. . c originate from this point. But, often corporate level strategies are characterised by inflexibility and bureaucracy, because it is derived from the corporate level. At business level Toyota Corporation emphasizes the individual business objectives such as quality, cost, flexibility and dependability. Here the individual business units of Toyota (for example Lexus), should align the strategies according to the corporate objectives. Finally, the functional level strategies are concerned about adopting the steps necessary for achieving the business objectives.
At this level, the particular function for example manufacturing; has to follow the objectives set forth by the business, in the case of Toyota; Quality Innovation Cost Flexibility Dependability You will find the TQM, Kanban, JIT techniques used by Toyota as a result of this emphasis. Again, when it comes to the product/service segment; Innovation (flexibility) Quality Customer focus Finally, at administrative perspective; Sustainable Location decisions Long term Capacity management efforts Continuous Resource development focus Long term Supplier relations e. t. c can easily identified.
The bottom – up perspective, of strategic operations provides flexibility to Toyota Corporation. Here, day –to-day experience from the bottom line is taken into consideration while formulating the strategy. When we analyse the Toyota Corporation, it is easy to understand the customer focus is a result of this perspective. Task 3 – 30 Marks Critical review of Toyota’s use of operations strategy to increase their overall effectiveness and Competitiveness. It will definitely be useful to regard the Top down perspective ( Slack et al 2007), while analysing the operations strategy at Toyota.
At Toyota, the corporate level strategy directs the organisation to long term objectives. For example the emphases for quality, innovation, reduction waste, continuous improvement e. t. c originate from this point. But, often corporate level strategies are characterised by inflexibility and bureaucracy, because it is derived from the corporate level. At business level Toyota Corporation emphasizes the individual business objectives such as quality, cost, flexibility and dependability. Here the individual business units of Toyota (for example Lexus), should align the strategies according to the corporate objectives.
Finally, the functional level strategies are concerned about adopting the steps necessary for achieving the business objectives. At this level, the particular function for example manufacturing; has to follow the objectives set forth by the business, in the case of Toyota; Quality Innovation Cost Flexibility Dependability You will find the TQM, Kanban, JIT techniques used by Toyota as a result of this emphasis. Again, when it comes to the product/service segment; Innovation (flexibility) Quality Customer focus Finally, at administrative perspective; Sustainable Location decisions Long term Capacity management efforts
Continuous Resource development focus Long term Supplier relations e. t. c can easily identified. It is equally important to manage the second – tier and first –tier suppliers as Toyota expands globally. Here, main advantage comes from the closer relationship with the suppliers ( Slack et al 2007). As the next step, we will have to analyse the Product life cycle influence on the performance objectives of Toyota ( Slack et al 2007), and this would help us to understand the competitiveness and effectiveness of Toyota’s operations strategy at various stage in the cycle. fig. 05, task 3 Source adapted from slack et al 2007, p72. Students, kindly draw one PLC based on my explanation below, and you can focus on page 72 for an idea) First of all we will have to understand the product/service ranges of Toyota here; Toyota automobiles, Engineering, FA, Intelligent Transport Systems (ITS), communication, financial activities, semiconductors and biotechnology, Marine and aerospace ( http://www. toyotaglobal. com/company/profile/non_automotive_business/new_business_enterprises/the_origin_and_ development_of_New_business_enterprises. tml accessed 28th September 2012) In a product/service life cycle model, we will come across with 4 different stages here; Introduction stage, growth stage, maturity stage, decline stage (slack et al 2007 p 72). 1. Introduction stage At introduction stage a company offers something new in design or performance, and here the competitors will be few in the market. Here it is important to develop flexibility to adapt to the changes in the market ( Slack et al 2007).
When it comes to Toyota Automobiles, the company has designed some great models; Lexus, Pirus, Innova , corolla, Land cruiser, Fortuner, and in bus category models such as coaster, Hiace, and in truck category vehicles such as Dyna (http://www. toyotaglobal. com/showroom/vehicle_gallery/ accessed 28th September 2012). At the introduction stage the customer for Toyota would always be innovators, who are keen to try to new design, models and features. Here competitors would be less, but in the case of Toyota they are compelled to compete with giants such as Mercedes, GM, and lately with Honda, KIA,Nissan etc.
At introduction stage the order winning factors will definitely be design, and the qualifying factors will be quality, range or flexibility. Here Toyota focuses on flexibility, quality and design. It will be useful to make an analysis with the latest Hybrid vehicles from Toyota. At the introduction stage this model was innovative and met with few competitors. Here, it is important to consider the other products such as Toyota finance service, biotechnology, communication, technology segment, engineering etc. and they all go through the same process. . Growth stage The second stage is characterised by the increasing volume of sales, increasing number of competitors (Slack et al 2007). The key focus at this stage will always be keeping up with the demand expectations and ensuring the quality ( slack et al 2007). When it comes to Toyota products and services, this stage is going to be faced with competitors, and here Toyota should emphasis the quality and demand. Toyota customers at this stage would be the ones who likes to copy the new style and quality, and the competitors will start to increase.
At this stage the order winning factors will be dependability ( ability to deliver according to the demand), and the satisfying factors will be the price, and flexibility). A good example to see how Toyota adopted this practice is to look at the range of Sedan models of Lexus; IS,ES, GS, LS (http://www. lexus. com/models/allVehicles/ accessed 28th September 2012) , where Toyota is trying to offer the range options for the customers to control the market. Here the main performance objectives for Toyota will be speed, dependability of product/service and the quality of vehicles.
Let us take the case of Pirus model as the model came into the market, we have seen the competitors chipping into the market such as GM, Mercedes etc. But, the quality and the ability to support the demand was the key for Toyota. Again, Toyota was clever enough to offer range of vehicles attracting different market segments. 3. Maturity stage Leveling of the demand is a noticeable factor at this stage. Here you would find that some of the competitors would withdraw from the competition due to the stiff competition.
And here only the bigger players would remain in the market. And the focus for companies will be in reduction of cost and reducing the price and allowing the profits. So, the operations will have to face with cost, production, supply issues ( Slack et al 2007). In the case of Toyota you can see the products such as Sedan entered into this stage. Here the company customers will be primarily mass market, and competitors almost established in the market. It is obvious that the order winning factors will be low price and dependability of supply.
Various models in Sedan range is an attempt to make flexibility happen in the market. Flexibility (or availability of different models), and quality will be qualifying factors. Here Toyota focuses on cost reduction, and dependability, expansion of market to increase the profitability. 4. Decline stage Decline stage has got few characteristics as follows; ? ? ? ? Sales decline Withdrawal of more competitors Price competition Cost focus ( Slack et al 2007) Here, customers will be late adapters (people who follow new style quite late).
For Toyota, the number of competitors will be less at this stage. Here, price war start to happen and the low price will be the order winning factors, and qualifying factors will be dependability of supply. Of course at this stage, Toyota would focus on cost objective. An analysis on Toyota’s products/services in Product/Service Life cycle Let us start with the case of Automobiles from Toyota in the first case. Here, we find that Lexus models are at maturity stage, and that’s the reason for Toyota’s efforts to bring range of vehicles in Lexus series.
You can find Sedan, SUVs, Hybrid ranges in the section (http://www. lexus. com/models/allVehicles/ accessed 28th September 2012). It was the same case with Corolla and we have seen that as it reached the maturity stage, Toyota R & D was successful in developing Atlis, Camry models to follow. Further Toyota was mindful about the main competitors such as; GM Ford Honda Let us take the case of Bus models from Toyota; we can find it clear that the company emphasizes on range as the product enters into the maturity stage.
As for Toyota Camry it is in the growth stage, by making volume, and market share. It is also important to have a look at the Toyota Qualis model which had gone to the decline stage, and it was replaced by the Innova, but the competitor Chevrolet came up with Tavera. Again the notable thing is the introduction of Hybrid vehicles from Toyota, this move is in its introduction stage, and we also find the competitors slowly entering into the same arena, however Toyota emphasizes quality and design to exceed the expectations.
Now let us have a reflection on various other products and services that Toyota got to offer; For example the latest move of Toyota to enter into finance and technology segment is a move from Toyota to develop capabilities, and range in product/service area. For example the financial segment of Toyota is in the introduction stage and so do the biotechnology and communication businesses. Here Toyota must emphasis the quality and dependability features to lead the market.
As we get closer we can find that the Toyota engineering segment is entered into the growth segment, where the focus is paid to quality, R to survive the competition. It is also important to look at the competition in the automobile industry. Many models from Toyota facing stiff competition from players such as Chevrolet, KIA, Hyundai who compete in price and quality. While analysing the product life cycle of Toyota we would come across with the areas that they have to concern about.
For example the Quality objective of Toyota got into real trouble with the engine problems identified in Sedan models, which eventually led to the recalling of thousands of cars. Here, Toyota must focus more about avoiding such big mistakes, it is not just the matter of re-work, but it affects the market leadership. Again the other area to think about is the competitiveness of Toyota in terms of innovation, Toyota was a leader in innovation from the beginning, however the recent growth of ompetitors making Toyota a follower at times, instead of a leader. Here Toyota R & D section should pay attention to. Again, another factor that Toyota can think about the market oriented product development, for example the growing markets in China, India and Brazil requires particular attention, here low price, quality, flexibility matters. So, Toyota has to think about adjusting supplier networks or think about vertical integration strategies ( getting control over the supply chain by taking the control of suppliers).
For example countries like China, India has got great potential, but both of them having indigenous cars in the market, here Toyota should think about alliances or partnerships to enter the market. And it would help the company to focus on low price. It is also important and possible to look at from the efficient frontier view ( Slack et al 2007), Frontier approach would help Toyota to position the main performance objectives in such a way to achieve the effectiveness in operation. When we take the case of Toyota, the variety factor is a concern for the organisation.
Here due to the high variety the cost becomes higher, and the only way to tackle these problems is to concentrate on limiting variety, by innovation of sustainable products, increasing product life in the life cycle period of a product, positioning of product at various stages in the life cycle etc. when it comes to Toyota what matters the most is consider the quality, cost and variety features in such a way to increase the efficiency of production. ( fig 06, task 3, adapted from Slack et al 2007 p 78) It is also possible to draw attention to the competitive factors by way of looking at the competitors actions.
This would give us an idea about the competencies of Toyota, and would help us to understand the key areas for improvement. Strategic Advantages of Toyota 1. Kanban System ( www. toyota. com )- Toyota’s strategic factor that differentiate them from other automobile manufacturers, is their production process. The JIT method has proven to be effective and efficient at saving costs for Toyota, therefore can charge less for their products. So, it would give them a competitive advantage over other auto manufacturers. Only when the parts are needed, do the suppliers provide the parts due to an integrated supply chain system.
Lean manufacturing also cuts down on storage costs and increases inventory turnover and speeds -up production. Toyota is about effectively using resources to maximize their production and maximize elimination of unwanted costs. 2. Organizing Suppliers It is an understanding from Toyota, that to have an efficient manufacturing system, there needs to be strong relationships with suppliers. Suppliers are integral part of the Kanban System, so it is vital to have close relationships with them to keep them up to date on new changes. They have a strong integration verses most automotive company’s vertical integration.
Horizontal integration merges competitors to gain a competitive advantage with large organizations. Toyota found that horizontal merge proves to be cost effective, risk reducing, and increase benefits (Hill, Charles W. L. ). Understanding the importance of good relationships with suppliers, Toyota sought out to assist with management, help engineering expertise, and even offered to finance potential investments (Hill,Charles W. L. ). Toyota strives for the best and only goes after the best suppliers of Japan and now the United States (Vaghefi, M. Reza). Strengths: Cultural Advantages 3.
Loyalty It is important to appreciate the cultural advantages. One of the cultural advantages is respect for hierarchy authority. Japan is much more devoted to groups then to individuals. Toyota reflects this in their employee’s devotion to the company and the constant desire to improve it. One of their fundamental beliefs is that every employee deserves respect (The Toyota vision). The decision making process is much quicker and implemented quicker due to this respect for hierarchy authority. This is one of Toyota’s strongest competitive advantages; they believe in empowering every employee to be innovative (Vaghefi, M.
Reza). 4. Continuous Improvement Coming from a culture that highly values pride in products, Toyota continues to work for improving the quality of the product, the manufacturing system, or relationships between suppliers. Toyota was built on the belief of continuous learning therefore this inspires continuous improvement. Specifically, Toyota makes their employee teams figure out what the problem. The employees are more educated on the product now and can be more attentive to look for similar defects (Hill, Charles W. L. ). Another way Toyota is improving their internal structure was through organization.
By organizing workforce into teams that perform similar tasks and grouping those teams into areas with similar tasks teams, Toyota’s manufacturing system can be more efficient. 5. Absolute Cost Advantages Because of their just in time system, Toyota has been able to significantly reduce costs and therefore have increase their profits more. Customer Switching costs Cars are liquidity assets and switching from one company to another can be easy. All customers have the opportunity to but whatever brand they desire, but once stuck with that vehicle, they are not as easy to dispose of the Rivalry among Establish Companies.
During the present times, competition between major automobile companies is intense. Between the large automobile companies in the States, competition continues to increase especially in tough economic times. Toyota has succeeded in narrowing the sales gap betweenFord and GM. Now Toyota holds 18. 4% of the market share of passenger cars while Ford holdsto 15. 4% and GM is 19. 3% ( Auto market review 2010) 6. Industry Competitive Structure Toyota competes in a consolidated industry in that there are few but powerful companies competing with them.
Consolidated companies are interwoven in their market because what one company does can have direct impact on a competitor. For Toyota, bringing in the just-in-time method has transformed how Ford and GM assemble their products. Weaknesses of Toyota 1. JIT SYSTEM OF TOYOTA Though the Kanban or the JIT system has proven to be a competitive advantage for Toyota, it can be a weakness as well. The JIT system is so interdependent, that a single problem with one supplier affects the whole system. The one supplier that does not provide the quality supplies to Toyota will halt the rest of production till the issue has been resolved.
Between unions, strikes, and product quality malfunction, Toyota is relying on every supplier to be on time with the best quality of products. Too much dependency can trickle down to parts of the manufacturing lines if the suppliers do not provide. Economics of Scale 2. Exit Barriers Automobile industries create high exit barriers since so much investment is needed to get an automobile organization started and maintained 3. Slower expansion to the growing markets As you analyse the expansion structure of Toyota, we would come across the fact that, Toyota is slow to expand to the market. This is one of the areas that require attention. . Increasing recall of vehicles Though Toyota Production System is hailed for the quality, the recent reports of ( 2010), recalling of cars proved to be damaging to the company. Task 4 – 10 Marks Relevant conclusions and recommendations. I would like to approach the conclusions/ recommendations by way of a SWOT analysis. Fig. 07 SWOT Analysis based on the Toyota performance Or You can use this Strengths of Toyota ? Toyota has a strong global presence, operating in more than 170 countries worldwide. Toyota has an excellent market penetration in key markets (US, China, and EMEA) and is now the world’s largest car manufacturer. Build your Toyota is a great innovation in the minds of customers, which helps them to customize the model of their choice (http://www. shopatgst. com/gstbuildyourtoyota/default. aspx? zip_code=70000 =null accessed 28th September 2012) ? Toyota is the world’s leading car manufacturer in terms of output and sales and is part of the “Toyota Group”, one of the world’s largest conglomerates. This puts Toyota in a vanguard position in terms of financial and investment opportunities as well as growth strategies (Toyota, 2009). Toyota is well known for its quality, reliability, durability, innovativeness, and value for money as well as its environmentally safe technologies. The company’s milestone is the Toyota Prius, the world’s bestselling hybrid car. The Prius is the first mass-produced hybrid car in the world and sold over two million units worldwide in 2010. ? The company operates on principles of continuous Improvement and respect for all (Liker, 2004). ? Toyota has a very strong presence in North America and Europe. It’s presence in Europe is strengthened by the formation of the Toyota Team Europe.
In the US, the company enjoys about 16 per cent market share—it is second to GM in terms of volume. ? Toyota has developed strong marketing and distribution strategies focused on meeting the demands of diverse segments. This is supported by high quality customer service and close engagement with customers. ? The company is an industry leader in manufacturing and production. Toyota minimizes costs and maximizes profit through efficient production approaches such as the lean manufacturing (Total Quality Management) and Just in Time. The company is also a first mover in automobile research and development (Krause et al. 2007). Toyota’s Weakness ? The company has suffered negative publicity due to a significantly high number of recalls (Hitokoto, 2010, May 13). From the fourth quarter of 2009 to the 1st quarter of 2010, the company recalled more than 8 million vehicles globally; this even led to temporary halting of production. ? Toyota has also been highly criticized for its heavy reliance on imports for inputs by Japanese car makers. ? The company suffered badly during the 2008 financial crisis and was forced to declare losses—the first annual loss in seven decades.
In May, 2009, TMC reported a net loss of $4. 2 billion (Hitokoto, 2010). ? Another weakness is that the company heavily depends on Japan and the United States as its primary markets. The company’s profits dropped by 20. 6% in Japan over the fiscal year of 2009, sending a red signal since the Japanese market comprise of 67. 3% of their total revenue. Opportunities for Toyota ? With rising oil prices, the company can take advantage of its continuous Innovation, particularly the manufacturing of green cars such as the Prius model to increase sales. Investment in advanced technologies and R activity will enhance the widening of product portfolio that meets the diverse needs of consumers seeking alternative sources of fuels away from fuel guzzlers. ? Innovation will help the company to produce cars which have greater performance and less damage on the environment. ? The company’s joint ventures in Europe, specifically, its partnerships with French automakers (Peugeot and Citroen) offer a number of key opportunities for Toyota to expand its production and supply in France. Toyota has the opportunity to develop new cars which fit the social and institutional requirements and needs. Fuel efficient, high quality and environmentally friendly vehicles can be attractive to consumers. The Hybrid technology was revamped in 2005 (Sanna, 2005). ? The company can continue with its global expansion—in particular in China and India, Russia. In these emerging markets, population and demand is accelerating due to rising qualities of life. Governments of India and China reduced automobile taxes so as to promote sales and curb declining sales. Toyota can diversify its engineering efforts into niches like power equipment, and other electrical and non-electrical machinery. Threats for Toyota ? Toyota is increasingly experiencing market and brand saturation and increased competition, cutthroat promotional campaigns from competitors. ? Unfavorable economic conditions such as shifts in the exchange rates have left Toyota struggling with low profits and increasing costs of raw materials. ? Predictions of economic downturn e. g. ecession, will negatively affect car purchases (especially the purchase of new cars). Household budgets are likely to tighten—leading to a decline in new car sales and potential validation of dealerships. ? Demographics are changing, for example, family sizes are decreasing—this undermines the demand for large family cars. ? Consumers are also changing Car usage; families are decreasing the usage of cars to take children to school, business are decreasing usage of car transport (by adopting information technologies such