Reference no: EM133048802
Toyota: "America's Best Car Company"
Two-tiny sedans left the port of Yokohama in August 1957, bound for California-the first exports from Toyota. The four-door clunkers flopped. The car, which looked like a brick with a roof on top, was prone to overheating and vibrated at speeds of more than 60 miles per hour. By late 1960, Toyota realized it had made a mistake and pulled the Toyopet Crown off the market. A less determined company might never have returned after this humiliation. But Toyota came back a few years later with a better car and has gone from strength to strength ever since.
The world's most profitable automaker-and soon to be its biggest-now has a 15% market share in the U.S., where it sold 2.5 million cars and trucks . . . [in 2006]. Because Toyota is already bigger than Chrysler in the U.S. and is about to pass Ford, Automotive News, the industry bible, has retired the "Big Three" moniker; GM, Ford, and Chrysler will henceforth be known as the Detroit Three. Toyota's presence in the U.S. is now so routine that the 3,322 business leaders Fortune surveyed named Toyota one of America's Most Admired Companies for the second year in a row-boosting it to third place overall, behind two American perennials, General Electric and Starbucks. Toyota has returned the compliment, making an entrance into that most American of sports-we're talking NASCAR-and introducing a full-sized, Texas-built pick-up truck, the Tundra.As the story of the tarnished Crown hints, nothing was inevitable about Toyota's success. It has managed to survive discriminatory taxes, import restraints, and the occasional xenophobic hissy fit-U.S. workers taking sledgehammers to imported cars-to become something of a model citizen. There's no question that coming fresh, Toyota had some advantages over Detroit: It was unburdened by retiree obligations, union contracts that had been bid up over decades, and brands like Oldsmobile that refused to make money (or die). And yes, it was lucky to have small cars ready to sell when the first oil shocks hit in the 1970s. But the most important reason that Toyota became America's most prestigious automaker is that this quintessentially Japanese company has been better than Detroit at reading the American car psyche. Toyota has never been a style leader. It has never created a car as iconic as, say, the Ford Mustang. But it discerned correctly that many car buyers don't need hot thing. They just want a trouble-free product that looks fine-and they will pay a premium for it.
One way Toyota reads the public mind is the think tank at Toyota Motor Sales in Torrance, Calif., where a research department staffed by 116 people monitors the industry and keeps tabs on demographic and economic developments. Its mission: to predict consumer trends and creates an lineup of cars and trucks to capitalize on them. Each professional is expected to spend time out in the field talking to car buyers. The Japanese have a name for it: genchi genbutsu-go to the scene and confirm the actual happenings.Most big companies have something like it; what distinguishes Toyota is that its executives actually listen and have turned those insights into profits. When researchers found in the mid-1990s that Toyota was losing young buyers to hipper brands like VW, its marketers dreamed up the hugely successful Scion. Another case: GM was fooling around with electric cars as far back as the 1980s, but it was Toyota that tapped into the appeal of the green revolution with hybrid-powered Prius. The Prius accounts for less than 5% of US sales, but Toyota has won a fortune in good publicity. . . .
Beginning in 1988, when it started production in its first assembly plant in Georgetown, Ky., Toyota has been careful to locate each new assembly plant in a different state, partly to maximize congressional clout. "It is better to be spread as broadly as we can be spread," says Josephine Cooper, who runs Toyota's Washington, D.C., office. Toyota has no political action committee, but it has built an effective lobbying operation. "Toyota is a public relations case study-a masterpiece of managing the message," says marketing consultant George Peterson of AutoPacific. "People refer to it as the Teflon car company." In 1989, for example, when the new Lexus had to be recalled to fix the high mounted brake light, Toyota still emerged with its new-car smell unsullied when it returned the cars fixed, washed, and with a full tank of gas.
Toyota has sunk deep roots in the U.S., especially in the middle of the country, where it has built parts and assembly plants and technical centers in a north-south corridor stretching along 1-75. The latest, a $1.3 billion assembly plant in Mississippi to make the Highlander SUV, is due to open in 2010, Toyota employs 34,600 Americans directly and 400,00 more indirectly at suppliers and dealers. Every year, Toyota buys $28.5 in parts and materials from U.S. suppliers, most of which goes into the 1.2 million cars and trucks that it builds here-about half the total it sells domestically. And when it is time to clear inventory, Toyota can be as brassy as any Yank.
In this sense Toyota can look as American as baseball, hot dogs, apple pie-and yes, Chevrolet. But in terms of how it's managed, that is not quite the case. Every U.S. function-sales and marketing, R&D, manufacturing-reports to Japan. U.S. managers sometimes endure 20-hour roundtrip flight to attend a single meeting. Japanese "coordinators" in the U.S. shadow each operation and make their own reports to headquarters. Organizationally it looks like a nightmare, but somehow the two- language, two-culture hybrid works.
Source: Excerpted from Alex Taylor III, "America's Best Car Company," Fortune (March 19, 2007): 98-104 c2007 Time Inc. All rights reserved.
QUESTIONS:
1. What evidence can you identify, in this case, of Toyota's being open system?
2. Which approach, mechanistic or organic, would be better for a company like Toyota that designs, manufactures, and sells technically sophisticated products such as cars and trucks?
Explain.
3. What evidence of centralization or decentralization can find in this case?
4. From the standpoint of Toyota's culture, what does the story of the failed Toyopet Crown symbolically say to both new and long-term employees?