Strategic Failure at Toyota

With an established framework in place TPS, Toyota was known for its VFM offerings that distinguished themselves from the market due to quality and durability. But in recent times there was a strain on strategic goals of the company to achieve a best fit between quality, customer value and quick growth and profitability. Its marketing mission of offering the best customer experience was lost in race of world auto market dominance. Some of the strategic failures that occurred to the incident are 1. Operations failure: Outsourcing parts assembly: Toyota has always maintained a high level of quality due to its quality testing units but in the process to achieve inorganic growth numbers parts manufacturing was outsourced and then integrated into the final assembly and since the volume of outside engineering grew so high that the quality testing was rendered lower than expected to deliver high volumes across a multitude of different models. Also Toyota was facing the issues of complication of product design, complication of global product mix, complication of production base network, rapid expansion of production volume and other factors, all at the same time. Therefore, Toyotas supply of human resources for quality control might not have been able to tackle all these issues, particularly at overseas bases. Reduction of development time: The development time for new models were reduced heavily to bring out new models in succession and multiple models were manufactured on the same platforms to derive maximum growth. This rapid development cycle led to oversight on placement of failsafes due to which a number of issues like the one under study occurred. 2. Marketing Failure: Toyota never marketed itself as the most quality car manufacturer in the world but due to its processes and external reports its popularity as a quality manufacturer grew. There have been incidents due to assembly/testing failures by other manufacturers also

but the impact on Toyota was maximum due to firstly, the delayed response to the event as Toyota believes in following a structured process to be followed in any event and secondly the inability of the top management to agree that there were shortcomings in the failsafe

mechanisms and that the products will be looked into, one theory is that Toyota had been using ETCS successfully in Japan since at least 2003, without any malfunctions serious enough to become a public issue, so the instant reaction to any problems was that of disbelief. In any case a proper marketing strategy would have upheld the Toyota quality System instead of the current Toyota Quality Myth.

Strategy Map Explained

Toyota is benchmark example of a company with excellent strategic alignment. In spite of its size and complexity Toyota has managed to keep its strategy, organization and people perfectly aligned with its main purpose: pursuit of harmonious growth and enhancement of profitability. Toyota is driven by this corporate purpose, and the purpose is clearly understood and internalized by its senior management and employees. At Toyota employees are continuously trained in the 'Toyota Production System' (TPS), or in what the author Jeffrey Liker called 'The Toyota Way'. A continuous and overall attention for product quality and cost awareness has become an almost religious way of life for everyone in the organization. This has been effected by a bottom up policy alignment to achieve maximum customer value it starts with the learning and growth focus on the employees who are trained to face impossible challenges and learn from mistakes to make experimentation a part of work and challenge everyday situations, an example of this would be when plant workers decided they could build their own AGV robots (used to deliver parts to the assembly line) for far less money than they were paying robot suppliers. Thus soft innovation is a part of Toyotas strategy map. Next level of strategy is defined by the internal processes which are aligned for maximum waste reduction and efficiency, TPS allows Toyota the shortest development cycles in all the Industry. This leads to customer level strategy, Customer value has always been at the centre of The Toyota Way the innovation comes from keeping in mind what car would the customer want to drive rather than what to do next and this has brought some of the best manufactured models including the Prius. Lastly when all stops of the strategy map are aligned to deliver best customer value the company can derive maximum profitability from the sales or retained customer earning derived from its excellence in quality, cost in short customer delight. Why alignment to strategic map derailed in a year? Toyota was faced with something they had rarely experienced before: quality problems. Known as the builder of the most reliable cars on the planet Toyota in a year had more recalls in the US than they had over the previous 10 years combined. After analysing the causes Toyota discovered that the problems were a result of the enormous growth in sales in the previous years. To keep up with production Toyota had expanded its manufacturing capacity in Europe and the US to the extent that their 'Toyota Way' training program couldn't keep up with the influx of new workers. The new workers weren't sufficiently aligned with the Toyota business purpose and Toyota's almost religious focus on quality and manufacturing efficiency. Faithful to one of the key elements of their business purpose ('pursuit of harmonious growth') Toyota responded by temporarily sizing down production and stall sales to ensure that the proper alignment did take place. References

1. http://www.advancebusinessconsulting.com/advance!/strategic-alignment/strategicalignment-business-cases/the-rise-of-toyota.aspx 2. http://www.china.org.cn/opinion/2010-03/08/content_19556981.htm 3. http://www.wiglafjournal.com/communication/2010/06/toyota-%E2%80%94-crisismanagement-at-its-worst/ 4. Impact of Toyota Recall on Corporate Reputation, paper by Michiharu Sakurai (Visiting Professor of Accounting Josai International University Tokyo, Japan) Available at http://www.jiu.ac.jp/books/bulletin/2010/info/sakurai.pdf