Reference no: EM132221477

Toyota Stumbles: The world’s biggest carmaker went wrong How quickly things can change. When Toyota Motor Corporation dislodged General Motors (GM) as world’s biggest carmaker in the middle of 2008, many critics were ready to pronounce of the American automobile industry. And yet, only 18 months later, company president Aikido Toyoda, grandson of legendary Toyota founder Saki chi Toyoda, was being asked to appear before a congressional committee and explaining in a Washington Post editorial: “We have not lived up to the high standards you have come to expect from us. I am deeply disappointed by that and apologize. As the president of Toyota, I take personal responsibility”. To understand the extent of this apparent fall from world supremacy, we need to go back to the 1950s when engineer Tahiichi Ohno developed a set of operating practices that evolved two decades later into the Toyota Production System’(TPS). Incorporating principles of automation (jidoka), continuous improvement (kaizen), and just-in-time manufacturing (later termed lean manufacturing), Ohno’s ideas not only changed the automobile industry but also changed later 20th century manufacturing practices around the world. Toyota was renowned for an obsessive attention to detail and a frugality that prompted managers to label photocopiers with the cost per copy to discourage overuse and to turn down the heat in employee dormitories during working hours. As the benchmark for production quality, Toyota developed levels of customer loyalty that were the envy of its competition. Toyota owners fervently believed that the company was in a class of its own, and for this reason, the recent failures seem to have damaged the mystique of the brand that much more. From November 2009, the company was forced to recall nearly nine million vehicles for problems with “breaking issues” linked by U.S. regulators to 51 deaths-problems that are expected to cost Toyota more than $2 billion in repairs and lost sales in 2010 alone. In additional, the company is facing over 100 class action and 30 individual lawsuits in the United States and Canada. Inevitably, analysts, critics, and lawyers are looking for the reasons behind this dramatic change in the fortunes of this formerly renowned corporation. Finding that information has proved difficult given the traditional reticence of the Japanese culture. What seems clear is that a relentless drive for growth, combined with an apparent managerial arrogance based on decades of supremacy as the world’s best, created a willingness to transform an obsession with quality (the famous TPS) into an obsession with cost reduction that would make the executives at Wal-Mart proud. In 2000, Toyota produced 5.2 million cars. By 2009, it had the capacity to produce 10 million. Between 1995 and the end of 2009, Toyota doubled the number of overseas plants and manufacturing facilities in North America, Asia, and Europe in an effort to improve market responsiveness, manage currency issues with a strong yen, and sidestep potential trade disputes about car exports from Japan. At the same time, the company was pushing a program dubbed “CCC21” (Construction of Cost Competitiveness for the 21st Century) that was reputed to have cut $10 billion from global operating cost in only six years. However, it is how those saving were achieved that many critics now feel was the turning point for Toyota. Rather than staying true to the principle of kaizen –incremental continuous improvement alongside an obsessive commitment to product quality – designers pressured suppliers to cut procurement costs and modified designs to minimize installation times and "time to market” periods, allowing Toyota to get a new model to the market in 12 months rather than the industry average of 24 to 36 months. However, CCC21 then evolved into ”aggressiveCCC21,” and cost reductions started to require things like expensive plastic in vehicle interiors and thinner padding for car headliners-changes that started to make the cars look “cheaper” according to U.S –based service technicians. A relentless drive for growth, combined with an apparent managerial arrogance based on decades of supremacy as the world’s best combined to create a willingness to transform an obsession with quality into an obsession with cost reduction. It wasn’t long before problems arose. Between 2003 and 2010 the National Highway Traffic Safety Administration (NHTSA) opened eight investigations of unintended acceleration of Toyota vehicles. The company responded by blaming drivers for incorrect installation of interior floor mats, but several of the pending lawsuits allege that the company knew about the problems long before the issue exploded in 2009 and led to Aikido Toyoda’s 2010 confession in his testimony before a congressional committee: “I feel the pace at which we have grown may have been too quick .... Priorities became confused, and we were not able to stop, think, and make improvements as much as we were able to before.” Unfortunately for Toyota, the company’s problems are coming at a time when U.S automakers are emerging from their near collapse with a much improved reputation for product quality and a growing competence in creative vehicle design. How long it will take Toyoda and his successors to turn around the global giant that Toyota has become remains to be seen. What is clear is that the company which was a paragon of automobile quality now has a problem to address: a severely tarnished reputation. ANSWER ALL QUESTIONS You have been hired as consultant by Toyota Motor Company. Knowing that you recently completed a course on strategy implementation, management requests that you identify critical elements of the company’s approach to strategy execution and recommend any changes to its strategy or implementation efforts that are needed at this time. You are requested to address each of the following questions raised in the briefing

What is your assessment of the role of the company’s leadership, policies, operating practices and organizational culture in the implementation of its strategy? Illustrate your answer using examples from the case.