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Background
Toyota Motor Company was founded in 1937 by the Toyoda
family.
Business was relatively unsuccessful until Eiji Toyoda introduced
the method of lean production after studying Ford’s Rouge plant in
Detroit in 1950.
This lean production method became known as the Toyota
Production System.
The production executive, Taiichi Ohno, successfully helped
Toyoda improve his company using this new production method
and mode of thinking.
Environment
Cultural
Company as a community: lifetime employment, access to company
facilities, seniority-based wages (in return for 1/3 work force layoff in
1946) ; as a return, employees must be more flexible and actively
promote interests of company >> Implications: labor = Fixed cost
Economic
Postwar conditions put Japan into a country lacking significant capital,
so that Japan had to rely mostly on producing its own technology.
Political
The Ministry of Int’l Trade and Industry (MITI) encouraged Japanese
firms to enter the automobile industry despite established competitors
from the West by imposing high tariffs discouraging imports and
prohibiting foreign ownership.
Japan’s work force, under Western influence after WWII, grew more
powerful and more demanding, thus limiting producers’ efforts to
reduce labor costs.
Environment (cont.)
Demographical
The domestic market was very small and un-uniform. Thus, goods had
to be very tailored to specific consumer taste. E.g. luxury cars for
officials, small cars for city residents, etc.
Technological
Commitment to innovation and improvement
Large skilled-labor pool to draw from
Social
Commitment by employees to work
Country Differences?
Western “careers” vs. Japanese “community”
4 areas of importance:
Leadership: Toyota’s large-project leader w/power vs. Western
coordinator
Teamwork: from many functions, ties with department, and general
interest in promoting team, not department
Communication: conflicts resolved in beginning, more people => less
people
Simultaneous Development
Competitive Advantages
Reliability
Product variety
Production plants in North America build 2-3 products at a time, as
opposed to one by Western firms.
Firms keep models for an average of four years, as opposed to an
average of close to ten years by Western companies.
Western companies sell almost twice as many cars of the same model
as Japanese firms do.
Suppliers – Lean Production Supply
Chain
Organized suppliers into functional tiers
First-tier suppliers: worked together in a product-development team
Second-tier: made individual parts
Lack the ability to think and act globally rather than from a narrow
national perspective
Evidence that plants that perform best are those with very strong
Japanese mgmt presence in early years of operations and those that
have moved slowly and methodically to build up their domestic supply
base
Need managers and suppliers that understand lean production and are
committed to it, mostly Japanese
Financial figures
In fiscal 2003, ended March 31, 2003, Toyota’s consolidated net
revenues increased 9.2%, to ¥15.50 trillion, operating income rose
16.3%, to ¥1.27 trillion, and net income was up 34.9%, to ¥750.9