Reference no: EM133220703

Introduction to Business Operations and Services Assignment - Toyota Case Study

Learning outcomes - Knowledge outcomes:

1. Explain and interpret the practices and processes involved in Business Operations and Services.

2. Describe and summarise a number of possible techniques which can inform decision making for Business Operations and Services.

Skills outcomes:

1. Apply of a range of numerical decision-making models and techniques.

2. Apply and explain the factors involved in the managing of Business Operations and Services

A Golden Opportunity for Ford and GM by Bill George

With Toyota, the Japanese car company, caught in a downshift, competitors should make aggressive moves to capitalize, says HBS professor Bill George. For starters, they need to improve their auto lineups for the long term. He explains how Ford and GM can best navigate the industry landscape ahead. Key concepts include:

For U.S. automakers to accelerate production while Toyota remains wounded is not a long-term strategy for success.

Ford and GM could secure market share gains by investing windfall profits into making products more competitive for the next decade. In this regard, Ford has the jump on GM. Toyota's tragic automobile recalls offer a historic opportunity for Ford's CEO Alan Mulally and General Motors' new CEO Ed Whitacre. After years of decline, they can re-establish the pre-eminence of American-made autos if they are wise at leading through this crisis.

In the past month Toyota has recalled almost 9 million vehicles-more than the entire number it sold the past three years. The irony is that Toyota gained significant market share in the past decade at the expense of its American competitors by offering superior quality vehicles. Now quality has become Toyota's Achilles' heel.

No doubt, Toyota will regain some of its lost market share in the short term, if the automaker's production systems can respond by increasing production rates without incurring problems of their own. The bigger question is, will Ford and GM be able to capitalize on this opportunity for the long term?

I was with Whitacre when he initially learned that Toyota was suspending sales of 57 percent of its autos sold in the United States. He responded immediately by directing his executives to ramp-up production as quickly as possible.

While Whitacre and Mulally maximize current sales, taking advantage of this opportunity in the near term is not a long-term strategy. All too often, both GM and Ford have squandered similar opportunities by simply raising prices and profits, as they did during the three-year import quotas in the mid-1980s. They must recognize that no matter how wounded Toyota is in the short term by its quality problems, this company is a very tough and able competitor that will move quickly to revamp its quality and its product offerings.

As if that was not enough challenge, few months later, Toyota's problem was compounded when Japan, was hit by a 9.0-magnitude earthquake. Tsunami waves in excess of 40 meters high travelled up to 10 kilometres inland and three nuclear reactors at Fukushima Dai-ichi experienced Level 7 meltdowns. The impact of this combined disaster was devastating, with over 25,000 people dead, missing or injured. In truth, the disaster was three calamities in one - an earthquake, a tsunami and a nuclear emergency. Recovering from such a catastrophe was unprecedented. The event was not just a humanitarian crisis, but also a heavy blow to the Japanese economy: 125,000 buildings were damaged and economic costs were expected to be ¥16.9 trillion. In the weeks following the disaster, approximately 80% of Japanese automotive plants suspended production and Mitsubishi UFJ Morgan Stanley Securities estimated utilization at other plants were below 10%. Across the industry, monthly production dropped nearly 60 percent during the year. Markets outside of Japan were affected as well. Toyota, Honda and Nissan, the three major Japanese automotive original equipment manufacturers (OEM), exported a significant amount of their Japanese production to serve foreign markets.

Declines in Japanese production impacted product availability in those export markets. In addition, overseas production had expanded in recent years, but only 70% - 80% of the production components were sourced locally with the remaining 20% coming from Japan. Disruption to the Japanese supply base affected firms and factories around the world. Toyota, Honda and Nissan were all impacted by the disaster as almost half of their production facilities were destroyed and about 50 of its critical suppliers were impaired.

As the newly appointed Operations Manager for the Toyota, you have been asked by the Senior Management Team to prepare a 3000-word report to:

1. Advise Toyota on why and how they should implement risk management strategy that can minimize or withstand such shock when it occurs again.

2. Explain how you would introduce a companywide operations improvement strategy. This improvement strategy must include the tools and techniques that you have learned in this module.