Introduction The case study is based on Toyota, a Japanese multinational corporation headquartered in Aichi, Japan.

In 2007, Toyota entered the “Big three space” by overtaking Ford in sales and continued the momentem during the first quarter of 2008 by overtaking GM in worldwide sales. However, due to the recent unintended acceleration recall, Toyota has fallen back to fourth place in sales, with Honda trailing in fifth place, allowing the Detroit Three to reclaim their Big Three title. In the following paper we look at how Toyota achived it’s position as number one. The “Toyota way’’ is analysed along with how the toyota workforce contributes to the companys success. In the last few months, Toyota recalled 8 million vehicles and halted production on 11 different models due to a plague of sudden accelerations in its cars. The crisis has rocked an auto company that for a half century had been synonymous with safety and reliability. The recent debacle at Toyota which has seen the company lose a reported $155 million per week and an astonishing $30 billion loss in Toyota’s valuation on the stock market. We take a look at how Toyota handled the recall crisis and evaluate if they have done a good job so far or if things could have been done better.


If you want one hundred years of prosperity. Become a learning organization through relentless reflection and continuous improvement Toyota believes that you must truly have a passion for developing the most highly skilled work force and know that in doing so the financial gain will take care of itself. Perhaps the most important long-term investment Toyota makes is in its people. live the philosophy and teach it to others Principle 10. to solve problems. The overriding philosophy within Toyota that allows them to persist in spite of the challenges is that only people are able to think. An intelligent and integrated human resources strategy is the only sustainable competitive advantage an organization can have whilst every other corporate asset can be bought or replicated virtually overnight. grow seeds. Principle 6. grow people. continuous improvement and innovation by encouraging employee participation. Standardized processes are the foundation for continuous improvement Principle 9. Base management decisions on a long-term philosophy even at the expense of short-term financial goals. 2|Page . A common expression heard around Toyota is “We do not just build cars. What Toyota does is gather competent and trainable people around the world and with considerable time and effort develop high levels of talent in the masses. If you want ten years of prosperity grow trees. we build people.” Chinese proverb Toyota's philosophy of empowering its workers is the centerpiece of a human resources management system that fosters creativity. Respect your suppliers by challenging them and helping them improve Principle 14. Develop exceptional people and teams who follow your company’s philosophy Principle 11. The philosophy of developing people is so pivotal to Toyota that six of the fourteen principles outlined in The Toyota Way are related to it: Principle 1.Workforce as a Competitive advantage “If you want one year of prosperity. Grow leaders who understand the work. and to improve.

confront negative news and make a convincing business case for immediate action. If the root cause of the problems Toyota is facing is failure by employees to make good decisions.If Toyota’s training was more effective. that they for years postponed making the announcement of a massive recall.Were their hires poor learners that did not change as a result of company training? 4. checks. The HR processes that must at least be considered as suspect include rewards processes.Did the retention program ignore people that brought up problems and as a result. Leadership development and succession. 3|Page . motivating. would the managers involved have been more successful in convincing executives to act on the negative information received? 3. It is vital that HR periodically test or audit each of the processes that could allow this type of billion-dollar error to occur. did these whistleblowers often leave out of frustration? 8. training processes. then the HR processes that may have influenced those decisions must be examined. The corporate culture . 1. Rewards and recognition . developing.Was the leadership process producing the wrong kind of leaders with outdated competencies? 7. but rather due to a companywide series of mistakes that are all related to each other. Was the corporate culture so biased toward positive information that employees learned not to make waves.Was this so poorly designed that it did not identify and report groupthink type errors? Did Toyota’s high level of trust of its employees go too far without reasonable metrics. Toyota’s problems are not the result of a single individual making an isolated mistake. and managing labor.The corporate culture created leaders so concerned with “saving face” and so adverse to negative publicity.What are the major HR issues that Toyota will face in the future Human errors that lead to corporate catastrophes could be the result of faulty HR processes. performance management processes and the hiring process. Retention . The performance management process .HR should have worked with corporate risk management in order to ensure that employees were capable of calculating the long-term actual costs of ignoring product failure information. Risk assessment .Were the rewards for demonstrating error-free results so high that obvious errors were swept under the table? 2. Hiring . and balances? 5. in spite of their professional responsibility to be heard on safety issues? 6. especially those related to acquiring. Training .

take responsibility and do our best to build mutual trust.     4|Page . which it was instrumental in developing.Toyota Culture Toyota's management philosophy has been reflected in the terms "Lean Manufacturing" and Just in Time Production. Respect – We respect others. always driving for innovation and evolution. The "Toyota Way" is an expression of values and conduct guidelines that all Toyota employees should embrace.We improve our business operations continuously. Kaizen . share the opportunities of development and maximize individual and team performance. Toyota summarizes its values and conduct guidelines with the following five principles:  Challenge . Teamwork – We stimulate personal and professional growth. build consensus. Genchi Genbutsu – We believe in going to the source to find the facts to make correct decisions. and achieve goals at our best speed. make every effort to understand each other. meeting challenges with courage and creativity to realize our dreams. Under the two headings of Respect for People and Continuous Improvement.We form a long term vision. Toyota's managerial values and business methods are known collectively as the Toyota Way.

6. Adding value to the organization by developing its people. Toyota believes that people are the organization’s most significant asset.9. Learning organizations invest in the skills and knowledge of people. Principles 1. Their shared vision motivates them to make improvements beyond merely meeting their customers’ needs. A process for problem-solving. Recognizing that continuously solving root problems drives organizational learning. There are 14 principles belonging to the Toyota Way.11 and 14 focus primarily on developing people have been mentioned above: The rest are: 5|Page .The Toyota Way has four components:     Long-term thinking as a basis for management decisions.10.

customized range. 6|Page . Go and see for yourself to thoroughly understand the situation 13. Strengths  The "Toyota Way 2001.Respect for People and Continuous Improvement  Large range of vehicles  Maximizes profits through efficient lean manufacturing approaches  Strong brand image based on quality. Build a culture of stopping to fix problems. Level out the workload 5.2. Use "pull" systems to avoid overproduction 4. thoroughly considering all options.seen as a foreign importer. Weaknesses  Japanese car manufacturer . Create continuous process flow to bring problems to the surface 3. to get quality right the first time 7. environmental friendly." .  Exposure to fluctuating economic and political conditions in operating markets. Use visual control so no problems are hidden 8. thoroughly tested technology that serves your people and processes 12. Make decisions slowly by consensus. implement decisions rapidly Market Forces impacting Toyota and Recommendations Strategy formulation often begins with an assessment of the internal and external factors that will affect the organizations competitive situation. Use only reliable.  Toyota produces most of its cars in US/Japan whereas competitors may be more strategically located worldwide to take advantage of global efficiency gains.

 Changing demographics e. Opportunities  To expand more aggressively into new segments of the market.  Threat of substitute products –With Continuous Improvement being at the core of Toyota.especially in the emerging markets Threats  The recent recall fiasco faced by Toyota will take time to show signs of recovery in terms of Market Share.  Bargaining power of suppliers – According to the Toyota way. Toyota needs to capitalize on their strengths such as the “Toyota Way”. Criticism due to large-scale re-call made in 2009. However. (Aygo model)  To develop new cars which respond to social and institutional needs and wants. suppliers are considered an integral part of the team and trust supersedes price. number of large families is declining and Changing  Rising oil prices (fuel costs) and the costs of maintaining cars. threat of substitutes may be minimal. Sales. South Korea and new plants from Eastern Europe.g. and the image of being a supplier of high quality vehicles at affordable prices.  Rivalry among competitors – Heavy competition to make the highest sales and maintain market share (Big three). systems.  Bargaining power of Buyers – The oversupply in the car market has shifted the greater power to the consumer. their workforce.  Saturation and increased competition  Shifts in the exchange rates affecting profits and cost of raw materials. there are new entrants from China. Consumer Trust and Brand image. The opportunities for Toyota 7|Page . Industry analysis using Porter’s five force model:  Potential new entrants – Heavy investment acts as barrier to entry.  Continued global expansion .

Thus Toyota need to slowly but steadily succeed at damage control. Consumer Reports stopped automatically endorsing Toyota vehicles due to what it considered declining quality. The recall exposed Toyota’s larger issue: their inability to resolve a crisis that reportedly first surfaced in 2002 when complaints of sticky accelerators spiked. Whilst recalls of any nature impact car manufacturers. Two years later. Toyota Recall Fiasco Key to Toyota's problem is its perceived delay in identifying and addressing the situation. Toyota need to be smart and recover in the most graceful manner. However. The negative publicity caused by recalls takes a long time to fix. and however well it acts. 8|Page . Whatever Toyota says now. there is a sense that it ignored the problem until it was forced to take action. In 2005. Recent news reports suggest that Toyota failed or refused to disclose vehicle problems to federal regulators over a period of years. Toyota has their competitive advantage of people and systems.are endless with new customer segments to capture and new product features to introduce to its existing models. Whilst the industry does pose threats of new entrants and intense competition. caution is advised due to the recent recall incident. Toyota recalled more vehicles than it sold.

GM offered a month-long incentive to Toyota and Lexus buyers.  No further difficulties on the road for the affected or other models.  Put people before business  Enlist your friends to endorse and support your brand. Chrysler showed that it's focusing on its own brands and that their cars sell themselves.  Start talking and be visible.  Know when to get back to business How can Toyota make a comeback?  Swift fixes that work .” and take responsibility.for owners.The Detroit response: Ford implied that it can stand on its own and isn't exploiting the opportunity to steal Toyota customers. As chairman I would do the following to handle the situation and take the corrective action mentioned below:  Be honest about the situation and stay calm. Publicize testimonials from satisfied Toyota customers etc. Full recovery requires continued communication and actions to regain the trust of stakeholders affected by the crisis. 9|Page . What happens before a crisis – creating the right culture to avoid crisis incubation. and training managers likely to be part of a crisis response team – will play a large part in determining the fate of the organisation in the event of a crisis.  Resolution of the problems to the satisfaction of U. developing workable crisis management plans and processes.S. and Japanese investigators. potential repurchasers.  Say “I’m Sorry. and prospective buyers.

The second element is a hierarchical approach to management and a lack of open communication. junior employees who are best placed to spot early signs of crisis feel unable to point out flaws. I believe with the right leadership and internal cultural changes Toyota is on the road to recovery. problems go unnoticed and unresolved until they explode into a major crisis. It will take time for the brand to get back its original status. The Toyota way. True. The challenge is created by two elements of culture: firstly. As mentioned above. But not doing them will guarantee that car consumers will explore. other brand alternatives. Extended warranties to reassure current owners. It is imperative that Toyota addresses the internal issues it currently faces to avoid a recurrence in the future. It seems Toyota had a culture ill-equipped to quickly identify and address flaws. has open lines of communication from staff to management. an obsession with quality. Conclusion The above paper gives an overview of the Toyota culture. However. even seek. We conclude with the current recall fiasco that Toyota faced and have looked at what it can do to essentially recover. As a result. Where this exists. The HR issues faced and where Toyota stands in the Global environment. 10 | P a g e . Toyota is a global brand which has great value. and is undertaking actions to prevent any recurrences. which means that anything less than perfection is seen as shameful and embarrassing. It may take a long time before initiatives by Toyota reassure current owners or prospective buyers. The way in which they operate their business is a case study for most organisations today. the corporate culture created leaders so concerned with “saving face” and so adverse to negative publicity. reveals them publicly. and a willingness to address unpleasant truths. they are going through a PR crisis with the recent recalls and competition like the big three basking in the glory of the Toyota crisis. Thus Toyota need to take drastic steps to change the organisational culture to one that is vigilant for potential crises. and  Internal activities that offer assurance that Toyota truly understands why the problems occurred.

11 | P a g e . speaker and advisor to corporations around the globe). Toyota Motor Corporation. 3. Public Affairs Division. 2002. and is a noted author. John Sullivan / www.Chapter 1: the Toyota way How HR Caused Toyota to Crash by Dr.References Financial Times Excerpt from Toyota Talent 4 March 2010 (Dr John Sullivan is professor and head of the HR program at San Francisco State University.Report reproduced Oct.

Liker.Toyota culture: the heart and soul of the Toyota way By Jeffrey K. Tuesday 9 February 2010 Automotive News. Center for Quality People and Organizations The Toyota Way by Jeffry K Liker Reviewed by: Karishma Kamboj ( July 2006) Principles of Management by Daft Richard L (2009) http://marketingteacher. Can the company drive pricing back up? Posted by: David Welch on March 10. Jr) Harvard Business School Faculty on Toyota Recall Press Release Feb 16 2010 . Emeritus Toyota's incentive deals drive interest. 2010 Bloomberg Business Week 12 | P a g e .com Accelerating towards crisis: a PR view of Toyota's recall Jonathan Hemus guardian. 2010) ( Henry Fawell is a communications consultant for Womble Carlyle Sandridge & Rice PLLC in Baltimore and also served as press secretary to Maryland Governor Robert L. Ehrlich. Michael Stephen Toyota’s crisis response is a two part story By Henry Fawell (February 12. Chapman Professor of Business Administration. Greyser Richard P.

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