In 1950, Eiji Toyoda visited the Ford Motor Company’s River Rouge Plant in Michigan, which

typified the US model – vertical integration and a hierarchical organisational structure. During
the visit, he was especially impressed by two factors: the high level of waste at the River Rouge
Plant and the lack of multi-purpose equipment.
After the River Rouge experience, Toyoda, together with Ohno, made a major decision, unique
for that time, to provide their employees with lifetime employment in return for their total
commitment and loyalty to the firm. Toyoda and Ohno diligently sought to establish a work
environment in which management and labour could work together in a co-operative, creative
manner to design a system that would minimise waste. They called this arrangement ‘muda’.
This decision provided a strong foundation for eventually establishing the TPS. Toyota thus
positioned itself to benefit from economies of scale and dedicated life-time employable workers.
But there was another factor: it had been told by the Japanese government that it should not
produce cars because this product would require two major resources that the Japanese economy
possessed only in short supply, namely petroleum and iron ore (Drucker 1981).
Therefore, creating a network of suppliers and continuous investment in assembly lines with an
eye on minimisation of waste also became important ingredients of its positioning strategy. TPS,
as currently implemented in Toyota plants in Japan and Georgetown, Kentucky, is defined by its
architects as “… a framework of concepts and methods for enhancing corporate vitality… which
enables companies to achieve continual gains in productivity while satisfying customers'
expectation for quality and prompt delivery” (Toyota 1995).
Toyota and the TPS epitomise the competitive standards of the ‘new economy’ described by A.
P. Carnavale (1991) as focused less on price and more on quality, variety, customization,
convenience and timeliness. By setting global standards in efficiency, productivity and quality,
Toyota has become a benchmark for other manufacturers. Michael Cusumano of MIT has
declared that there was no comparable car company that combined “superior skills in all the
critical areas: manufacturing, engineering and perhaps marketing”(Fortune 1998, October 26).