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Table of Contents
1
1. INTRODUCTION...............................................................3
2. TIMELINE........................................................................3
3. CRITICALLY EVALUATE HOW WELL THE ORGANISATION
RESPONDED TO THE EXTERNAL AND INTERNAL CHALLENGES
OVER THE PERIOD CONCERNED...........................................11
3.1 CRISIS...............................................................11
3.2 RECALLS............................................................12
3.3 EARTHQUAKE/TSUNAMI......................................13
3.4 SURGE OF YEN...................................................14
4. CRITICALLY DISCUSS THE BASIS AND SUSTAINABILITY OF
THE COMPETITIVE ADVANTAGE OF TOYOTA..........................14
5. STRATEGIC OPTIONS AVAILABLE TO YOUR CASE
ORGANISATION TO ENSURE ITS SUCCESS AND SUSTAINABILITY
INTO THE FUTURE..............................................................16
6. CONCLUSION.................................................................17
7. REFERENCES..................................................................17
1. INTRODUCTION
2. TIMELINE
EVENTS
YEAR
2009
INTERNAL/
EXTERNAL
Toyota opts for a change in
leadership and appoints Akio Toyoda
INTERNAL as President.
[January] Plans to stop production
in 12 factories in Japan, also forecast
a 8,5% drop in sales for the year to
April 2009
[May] Plans to spend more than the
original 58.6 millions $ in its green
car ad battle against Honda
2009
INTERNAL
2009
2009
INTERNAL
EXTERNAL
[November] Is overtaken by
Volkswagen-Porsche as world largest
car manufacturer.
2009
was a
year
of
change for Toyota after doing its best performance in 2007-2008 the
company had to face a really bad performance, the appointing of Akio
Toyoda as president and the reduction in the productive activity.
Another event to highlight would be the crash of the car in San Diego
due to a defect with the accelerator pedal that would end up in
massive recalls the following year.
Some changes in its positioning can also be observed as the
launching of Brand Manifesto in July
YEAR
INTERNAL/
EXTERNAL
EVENT
[January] Recalls 2,3 million car
(Prius) and stalls sales on 8 models in
US
2010
INTERNAL
[January] Employees Toyota's British
plants are at risk of losing their job or
moving to part-time after the car
maker revealed it was expecting a
difficult year 2010 and would not
have enough work for all staff in
summer.
[February] Losses brand value after
recall, which could wipe up to 25% off
its brand value, according to Brand
Finance
2010
2010
EXTERNAL
EXTERNAL
2010
INTERNAL
2010
EXTERNAL
This year was characterised by the massive recalls that the company
had to do in order to prevent more incidents like the one that
happened in San Diego the year before. The judicial problems that
cost the company lots of money are repeated in the US and
inspections to as consequence also of the incicent of San Diego.
However the company manages to be back in profit after a disastrous
year. At the same time the company keeps doing actions to make the
customers buy given the crisis situation and add features that give
added value as the introduction of five year warranties in the Uk
YEAR
2011
INTERNAL/
EXTERNAL
EXTERNAL
EVENT
[January] 7 Insurance companies sue
Toyota over crashes caused by sudden
acceleration.
[January] Toyota was the largest
automaker in 2010 despite the companys
massive recall.
[February] Toyota's profits fell 39% in its
third quarter, weighed down by slow sales
at home and in Europe, the hangover from
huge US recalls and a stronger yen.
2011
INTERNAL
2011
EXTERNAL
[April] A federal judge in California said
that he will deny another request from
Toyota Motor Corp. to dismiss lawsuits filed
by car owners who say sudden-acceleration
2011
INTERNAL
2011
EXTERNAL
[July] Toyota is named the greenest
company in the world
[August] Toyota Motor Corp saw its net
profit fall 99% in its fiscal first quarter after
the yen surged and production stalled due
to the March 11 natural disasters.
2011
INTERNAL
The most remarkable event of the year 2011 is obviously the natural
disasters that happened in Japan, it is indeed the worst year of Toyota
from the period that this report is analysing. The production is
reduced due to lack in parts that are only manufactured in Japan and
the sales and profits drop drastically. The yen surge was also a critical
issue this year and the company is forced in April.
Some remarkable positive aspects are that is named the greenest
company in the world and the joint green technology venture with
BMW. In the media field stills try to attract young customers with
cheaper cars.
Judicial problems continue in US regarding the security of its cars.
YEAR
2012
EXTERNAL/
INTERNAL
INTERNAL
EVENT
[January] Toyota raises its sales target for
2012 due mainly to a government decision
to reintroduce subsidies for fuel-efficient
cars.
[January] Returns to the Super Bowl ad
arena focusing on reinvention
2012
INTERNAL
2012
INTERNAL
2012
EXTERNAL
This year after the disastrous 2011 was the resurge of the company,
and finally end with Toyota recovering the title as the largest
automaker in the world. It is interesting to take a look at the change
of slogan in US probably in order to recover the confidence of the
customers after the massive recalls, the judicial problems and the
investigations. They also do an advert for the Super Bowl focusing on
reinvention, that obviously follows the line of the change of slogan.
Summarizing is a great year for Toyota that seems to in the right
direction to maintain its global domination in the car making businee
YEAR
2013
EXTERNAL/
INTERNAL
EVE NT
[January] Toyota reports that it has sold
EXTERNAL more than 5 million hybrids in the past 13
years.
[May] Toyota doubles its quarterly profits
for this year due to cuts and better sales,
on top of a weak yen.
2013
10
INTERNAL
INTERNAL
2013
INTERNAL
11
3.1 Crisis
To analyse how Toyota faced the global crisis it is important to outline
what the crisis meant for the automotive sector.
(Gachuz , 2011) "First it was the increase in fuel prices, oil prices
suddenly rose to levels never seen before, one then came the
financial crisis, the credit crunch began to affect first to USA and then
spread throughout Europe, Asia and reached world levels". According
to Gachuz (2011, p. 106) global economic recession resulted in a
decline in the demand for vehicles without precedent. The automotive
industry was then facing one of its worst moments in history.
Specifically for Toyota, global crisis meant that in fiscal year ended
March 2008 (2009), the company announced operating losses for the
first time in 70 years: $4.500 million (Mintel, 2009). The unusual
strength of the yen had more expensive exports and devalued its
external revenues in dollars or euros, impacting directly on the
balance. Although the main cause of these losses was clearly the drop
in sales of 8% (El Economista, 2009).
Regarding this crisis situation, Toyota opted for a return to their roots.
This change was symbolized by the appointment as president of Akio
Toyoda, grandson of the founder. At strategic level especially in the
short term meant "a cut in production to seven million vehicles in
2009, 20% less than in 2007" (El Economista, 2009).
They also try to cut costs in dispensable investments like it can be
seen in the timeline (e.g. Exiting Formula 1) also tried to expand their
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3.2 Recalls
This is considered one of the major problems that the company had to
face in the last decade, it started the 28th August 2009 when a Toyota
car crashed in San Diego, USA due to a defect with the accelerator
pedal. A company which one of its most important features of its
positioning was based in being among the safest carmakers in the
world was facing probably the biggest trust crisis in its history.
Toyota did not react properly in the first instances Toyotas belated
recalls, belated communications and disclosure, and belated public
apologies did far more damage to its reputation than the original
tragic accident. (Dietz and Gillespie, 2012). This bad handling of the
situation ended up with a damage of the companys image. According
to Bunkley, N. (2011) companys quality reputation dropped from 32%
to 19% of respondents to a Consumer Reports survey.
Toyotas strategy to handle the situation was based in an immediate
response. Two days after the crash, Toyota issued a statement
acknowledging its responsibility in the accident.
After a investigation, Toyota issued a direct customer safety warning.
However, authors Dietz and Gillespie (2012) consider that they took
too much time and that it was a negligence by Toyota, the authors
state that the Japanese company overlooked this latter intervention,
disastrously not issuing a customer warning about its all-weather
floor mats until the 29th September despite these being implicated in
fatal accidents two years earlier.
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After Toyotas next move was recalling 3.8 million affected vehicles.
This recall problem persisted in 2010 with 1.6million vehicles. And
research to find out how to fix the flaws.
Apart of the recalls Dietz and Gillespie (2012) list some of the
measures taken by the company, the most important would be
designing a new safety system, which combines five accidentavoidance technologies, a declared reversion of the Toyota Way and a
major restructuring with a reduction in Directors (27 to 11).
They also restructured the departments charged with Corporate
Planning and
Corporate Social Responsibility to quicken crisis responses.
Other measures taken in 2012 regarding this incident was a strong
media campaign to in the US to reassure the customers that even
leaded the company to change its slogan (from Moving Forward to
Lets Go Places) or the ad in the Super Bowl focused on
reinvention and the opening in Japan of a facility focused on quality
control to avoid further incidents or recalls.
3.3 Earthquake/Tsunami
11th March 2011 was a tragic day in Japan, one of the hugest
earthquakes ever registered shook the Japanese west coast followed
but a massive tsunami. 15,845
people lost their lives and the economic activity in Japan was reduced
drastically.
Toyota is a company with its production based in Japan, so the
catastrophe meant that the production needed to be reduced due to
lack in some parts that the company manufacture only in Japan.
According to CNN News (2011) the production in all Toyotas
manufacturing plants in Japan was reduced to 50%, and would be
fully stopped between the dates of April 28 to May 9 (2011). The
reduction in the productive activity in the plants in Japan meant for
the company a shortage in parts that made the global production
drop.
This so called reduction of production along with the surge of the yen
in this period (that will be approached below) ended up in a drop in
the net profit of a 99% in the first quarter of 2011 (Mintel, 2011)
Toyota anticipated in a statement that Japanese plants would reach
normal operational capacity between November and December 2011,
but there is no assurance that production will normalize by that time.
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Another problem that the Japanese company had to face was that due
to the nuclear crisis in Fukushima that happened to be the main
electric energy source.
This tragic incident along with the surge of Yen made the company
even reconsider its Japan based production in November 2011 (Mintel,
2011)
15
16
TPS Basic Handbook states that there are two basic pillars in its
production model.
One of those pillars is the Just in Time system (JIT) whose target is to
produce and deliver the right parts, in the right amount, at the right
time using the minimum necessary resources. This system reduces
inventory, and if the company is able to handle it properly prevents
both early and over production.
Looking at JIT system it would not be wrong to state that Toyota has
an overall cost leadership competitive advantage. They are able to
handle the JIT system so they reduce a massive amount of costs by
producing just the necessary when it is necessary.
The other pillar of TPS is called Jidoka (Build in quality) and is based in
two ideas: enable a quality building process and separate men from
machines.
Jidoka is based in a production system where the machines stop
automatically if any trouble arises. According to TPS Basic Handbook
The goal is not to run continuously but in other words to stop running
automatically when trouble arises.
The other base in Jidoka is the separation of humans from machines
and this idea is directly related to the use that Toyota makes of
human capital. The company thinks that if machines are able to stop
17
18
Looking at the persistent rising in the price of the oil its seems like a
great alternative to keep doing efforts to develop electric and hybrid
cars that are way more efficient in terms of oil consumed.
Toyota needs to adapt its product to the market and it seems to be
what they are willing to do, according to its annual report (2013) The
global financial crisis that began in 2008 reminded us once again that
the foundation of sustainable growth is making cars that customers
love.
6. Conclusion
This report has analysed in first place the major challenges that
Toyota has had to face during the period approached. The way the
company reacted to these different challenges could be better but
even though the company has managed to be the largest automaker
in most of the years that the report approaches.
However the global economic situation does not leave time for relax
and Toyota will probably have to face many difficult challenges in the
near future so they have to keep following their ideals of respect for
people and continuous improvement if they want to keep being at the
top.
At the end, facing these difficult challenges, far from weakening it,
has make the company stronger and realise that a changing
environment like car making world requires continuous adaptation, as
the former President Katsuaki Watanabe said in 2009 Not the strong
will survive but those who successfully adapt to the new scenario
7. References
Juan Pablo Cardenal. 2009. Toyota combats its worst crisis in history.
Available at: http://www.eleconomista.es/empresasfinanzas/noticias/1165461/04/09/Toyota-se-ajusta-las-tuercas-paracombatir-la-peor-crisis-de-la-historia-.html#.Kku8Td8hQyBVawn.
[Accessed 02 April 14]
Bunkley, N. (2011) In Detroit, Toyota vows to earn trust, New York
Times, 10th January
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CNN Wire Staff. (2011). Toyota making drastic production cuts after
Japan quake, tsunami. Available:
http://edition.cnn.com/2011/WORLD/asiapcf/04/20/japan.toyota/.
[Accessed 15 April 2014.]
Toyota Motor Corp. (2012). Toyota Annual Report 2011. Available:
http://www.toyota-global.com/investors/ir_library/annual/pdf/2011/.
Last accessed 18 April 2014.
Toyota Motor Corp. (2014). Toyota Annual Report 2013. Available:
http://www.toyota-global.com/investors/ir_library/annual/pdf/2013/#2.
Last accessed 19 April 2014.
Art of Lean, Inc. (2008). Toyota Production System Basic Handbook.
Available: http://www.artoflean.com/files/Basic_TPS_Handbook_v1.pdf.
Last accessed 21 April 2014.
Oxygen. (). Mintel. Available:
http://academic.mintel.com.ezproxy.derby.ac.uk/search/?
submit_srch=1&q=toyota&country=0&time=. Last accessed 22 April
2014.
Juan Carlos Gachz. (2011). La crisis mundial en el sector automotriz,
China: aliado estratgico de Mxico?. Anlisis Econmico. XXVI (63),
106-107.
Porter, M. E. (1985) Competitive Advantage: Creating and Sustaining
Superior Performance. Free Press, New York, 1985.
Gary R Fane et al. (2003). Competitive Advantage The Toyota Way.
Business Strategy. 14 (4), 52-55.
Unknown. (2011). A Brief Introduction to Toyota Production System.
Available: http://riboparts.com/changeBlogsite.asp?
changeInfo=Forum%20for%20Lean
%20Production&changeClass=Lean
%20Production&changeName=&id=2223. Last accessed 18 April
2014.
Analysis Tools. (2013). Porters Generic Strategies. Available:
http://www.burgeen.com/main/porters-generic-strategies/. Last
accessed 19 April 2014.
Toyota Motor Corp. (2013). History of Toyota. Available:
http://www.toyota-global.com/company/history_of_toyota/. Last
accessed 15 April 2014.
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