Running head: OPERATIONAL MANAGEMENT 1

Operational Management in Toyota Company

[Name of Student]

[Name of Institute]

[Date]
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PART 1: JOURNAL ARTICLE REVIEW

Introduction

This assignment will critically examine the journal article in the first part, named as

“Why locate manufacturing in a high-cost country?” (Ketokivi et al., 2017). In the second part,

the theoretical models that were found in the first part will be applied on Toyota Company.

Critical Review

The article is going to be critically reviewed in the following ways;

Research Question

The study conducted by Ketokivi et al. (2017), is based upon three different perspectives.

The first perspective is based upon location, which implies that decisions regarding the economic

activity geographic are guided through the locational aspects. The second is organisational

perspective, which implies that the decisions regarding the economic activity geographic are

guided through the organisational aspects. The third and the last perspective can be labelled as

temporal perspective, which implies that the economic activity geographic are guided through

temporal considerations. The aim of this journal article is stated clearly, which gives the reader a

clear understanding of what the research is about. Following are the main research question of

this article as implied in the journal article title;

“What explains the decision to locate manufacturing in a specific geographic region or country?”

This research question is going to be examined with respect to the three perspectives that

are stated above. The perspectives that are stated above are formulated on the grounds of
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previous studies and examine the decision-making regarding the manufacturing location of a

product. It this study, decisions of 35 assembly locations are going to be evaluated, in order to

attain understanding regarding the decision of manufacturing location from different

perspectives. Another objective of this study is stated in the form of question below;

“When and why should policy makers be interested in production location decisions?”

In contradiction to the earlier studies, the manufacturing activities are not only

emphasised; however, the key relations between market, product development, production, and

supply chain are going to be examined. This fills up the gap in the available literature related to

this research topic.

Methodology

The research method adapted for the data collection has contributed in increasing the

validity and reliability of the study. In this research, qualitative approach was used to collect

information from workshops and interviews. The empirical data for this journal article had been

derived from in-depth research of thirty-five different value-chains. The linkages are examined

utilising three different concepts derived from the organisation design theories. These concepts

comprise of formalisation, specificity, and the last one is coupling. Coupling is the key idea in

the theory of organisation, specifically utilised for conceptualising the essential interdependence

features amongst two entities, and often explained on loose-tight continuum. In case of dyad of

production-supply, the coupling related to the product architectures.

In case of product development, it relates to product-development practical interface

interdependencies. At last, in the case of product-market, coupling places the production into

proximity to market. An association exhibits specificity when resource members’ profiles are
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structured by relationship. Formalised activity can be described as the one, which is performed

through observing the pre-determined rules. The data is gathered in the range of 2011-2013. In

spite of large amount of the cases, the data collection logic is related to the logic of multiple

case-study in Finland. The author had combined the identified concepts of coupling, specificity,

and Formalisation with “Production-Supply Dyad”, “Production-Development Dyad”, and

“Production-Market Dyad”. This has contributed in providing a clear demonstration about the

supply chain governance and its management (Ketokivi et al., 2017).

Findings

The analysed results or finding of the research article was effective in evaluating the role

of coupling, specificity, and Formalisation in the location decision-making. It has been suggested

that these decisions has some reflection of “interdependence”. The finding has provided a in-

depth analysis about such interdependence and its association with coupling, specificity, and

Formalisation. It was observed that coupling is considered to be a manifestation that is intuitive

to the interdependence and has more influence on location decisions than any other factors.

Evidence suggests that in Finland has high money expenditure is associated with food rather than

electronics, insurance, and education altogether. Moreover, such food consumption is reported to

be produced at domestic level.

The modern day globalisation related to innovation and technology is proven to be

ineffective in the country. Interdependence can be enhanced by increasing the specificity and

decreasing Formalisation. The findings of the article suggest that although the “Product-Supply

Dyad” is observed to be greatly Formalised with negligible coupling, the specificity is still

relevant. Analysis of the collected information from supply chains evaluated that “high-cost”
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country is linked with minimum of one of these factors of interdependence at the last phase of

production. It was further assessed that reduced Formalisation contributes in efficient and easy

management of relationship between production and development. It is due to the fact that when

the production is strongly “coupled” with the process of development, adapting the process of

relocation for one indicates relocation of another as well (Ketokivi et al., 2017).

Based on the observations, it can be interpreted that in low-cost country, production can

be occurred only in the presence of reduced specificity and increased Formalisation. This

situation is recognised to be more generic in terms of production at both offshore and outsource

level. Evidence suggests that reduced Formalisation, “tight” coupling, and increased specificity

create an ecosystem that is focused on national economy in terms of production. It can be

evaluated that in such ecosystem, high specificity of production can harm overall productivity.

However, it has been assessed in the findings that coupling is the leading element of

interdependence that is followed specificity and Formalisation in this context. Implication of

policies may be beneficial to replace the existing conventional decisions with more modified

thinking to improve the economic growth of the country (Ketokivi et al., 2017).

Limitation

The research design of the research was based on qualitative analysis of information

collected from different supply chains, contributing in developing more “theoretical

generalisation”. However, to gain more in-depth knowledge about location decisions,

“quantitative counter-factual analysis” should be utilised. Although qualitative is a reliable

source of data collection, quantitative approach could have increased the accuracy and

significance of the results present in the article.

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PART 2: Integrating the concept of Formalisation, Coupling, and Specificity in the

Operation Management of Toyota Company

Toyota Motor Corporation is recognised as the world’s biggest automobile company

based on its volume. The company manufactures as well as provides vehicles and automobile

parts all across the globe. It has been observed that Toyota Company has established its

operating business at different regions in the world including manufacturing companies that are

overseas. The company sells its vehicles in above 170 different regions and countries.

Considering, the market of Toyota Company, it is necessary that the firm has efficient operations

management system (Dillon, 2019). Such management system has assisted the company in

examining its products and their quality. The key objective of Toyota’s operation management is

to make sure that the all the operations or functions within the firms are carried out efficiently

with adequate resource allocation, distribution, productivity, and decision-making (Huang, Yen

& Liu, 2014).

Applying the theory of Formalisation, specificity, and coupling in the operation

management can be beneficial for Toyota Company. Based on the prediction of “transaction cost

economics”, low specificity and coupling results in increasing the role of market as the

governance in the “buyer-supplier” relationship. Increasing the specificity in the market, may

result in making the manufacturing of vehicles more specific to the suppliers (Chiarini &

Vagnoni, 2015). This will be beneficial in gaining high number of suppliers through market

contracts. It can be predicted that “tight” coupling in operation management of Toyota Company

in the situation of interdependencies that can be reciprocated may contribute in increasing the

need for more integrated organisational structure, collaborative problem solving, and “heavy-

duty cross-functional” efforts (Suh, 2017).

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However, this case can be considered only in the Production-Development Dyad as it

demands for collocation of both product production and development. In the context of

Production-Market Dyad, production processes of the company can be influenced by the market

due to tight coupling concerning legal implications for local production, cost associated with

logistics, and availability of the production within the market. As Toyota Company has been

operated in different locations, it is necessary that the firm considers this factor of

interdependencies carefully as it can impact its market position. For the company, “loose”

coupling may be effective as it implies independency of production “location decision” from the

location of market. This means that the company can operate its business in different location

making its own decisions in the target market location (Monden, 2019).

Considering specificity in Toyota Company, it can be demonstrated that improved

relationship with the suppliers can be achieved. By working in close proximity with the supplier,

a “relation-specific investment” can be build. However, low specificity in the company can be

beneficial in gaining increased number of suppliers as demonstrated with high competition as

well as advanced technologies. Increasing the specificity implies activities related to

development become specific to production. The major drawback of such condition is the

incidence of overlap between the expertise of production and development. Being a part of

Production-Market Dyad demonstrates the need for responding in the local market through

specific product. Making the vehicles more specified to the local market and the arising needs

may contribute in increasing the market demand of the company products. This is due to the fact

that these products will be tailored specifically to satisfy the location demands (Suarez-Barraza,

Miguel-Davila & Vasquez-García, 2016).

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Such location decision may link the production operations to the cultural factor of that

market to gain competitiveness and more suppliers. However, it is essential to identify the extent

such needs should be tailored as such step is associated with cost and implications that has to be

considered. On the other hand, it is also observed that the company has gained its reputation in

the market due to its unique characteristics. Therefore, it can be suggested that the Toyota whilst

maintaining its own characteristics should respond to the local market needs (Dillon, 2019).

This means that being a part of a large supply chain, each operating firm of the company

must assess and manage its operational processes to integrate the market needs in an efficient

manner. Moreover, it is stated that in Toyota a high formalization degree is adopted in the dyad

of production and supply, which allows the organization to imply the operating procedures

across the boundaries of organization. In the context of relationships of supply chain, the

relationships that are highly formalized lowers the switching costs of the supplier, such as in the

case of Toyota (Chiarini & Vagnoni, 2015).

It can be summarized that the operations management of Toyota company covers several

decisions regarding the efficient and effective operations. Having an international range of the

automobile facilities and business all over the globe, Toyota utilizes a broad set of policies and

strategies for the decisions regarding operations management, integrating regional and local

conditions of automotive industry. It can be concluded that the integration of careful and

appropriate formalisation, specificity, and coupling in the operation management of Toyota

Company may assist in analysing effective strategies through which productivity and

development of the company can be enhanced. However, it is necessary to evaluate the country

where the business is being operated and the extent to which such factors of interdependencies

can be applied to improve the economic condition of both firm and the country.
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Toyota utilizes local, regional, and international location strategies. For instance,

organization is having localized manufacturing plants in China, USA, UK, and Thailand, along

with official dealerships in most of the countries except Mangolia, and few other in Africa and

Middle East (Monden, 2019). Therefore, Toyota addresses premeditated this tactical decision

area regarding the management of operations, with the help of mixed strategies’ set. Thus, it can

be concluded that Toyota employs an effective strategy for their operations management.
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References

Chiarini, A., & Vagnoni, E. (2015). World-class manufacturing by Fiat. Comparison with Toyota

production system from a strategic management, management accounting, operations

management and performance measurement dimension. International Journal of

Production Research, 53(2), 590-606.

Dillon, A. P. (2019). A study of the Toyota production system: From an Industrial Engineering

Viewpoint. Routledge.

Huang, M. C., Yen, G. F., & Liu, T. C. (2014). Reexamining supply chain integration and the

supplier's performance relationships under uncertainty. Supply Chain Management: An

International Journal, 19(1), 64-78.

Ketokivi, M., Turkulainen, V., Seppälä, T., Rouvinen, P., & Ali-Yrkkö, J. (2017). Why locate

manufacturing in a high-cost country? A case study of 35 production location

decisions. Journal of Operations Management, 49, 20-30.

Monden, Y. (2019). Toyota management system: Linking the seven key functional areas.

Routledge.

Suarez-Barraza, M. F., Miguel-Davila, J. Á., & Vasquez-García, C. F. (2016). Supply chain

value stream mapping: a new tool of operation management. International Journal of

Quality & Reliability Management, 33(4), 518-534.

Suh, Y. (2017). Knowledge Network of Toyota. Annals of Business Administrative Science,

16(2), 91-102.