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Running head: What are Toyota’s success factors?

What are Toyota’s success factors?

Moon (Aaron)

International American University

Operational management & Supply chain

Mar. 18. 2014

Dr. Young

Toyota is one of the most well-known manufacturing companies having many cars
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Running head: What are Toyota’s success factors?
models in the world and producing millions of cars each year for a wide variety of consumers.

Most people of all ages know and pay for buying familiar Toyota’s products, such as Toyota

Prius, Toyota Camry, Lexus, etc. How could Toyota develop? There are a few questions about

Toyota: What have been the key success factors for Toyota? Has Toyota done the right thing

about design and reliability of production and service for customers? How can Toyota develop

better in the future? Through the aspects of operational management and supply chain, it is

necessarily to find answers to solve the question by identifying and comparing this topic.

The main success factors of Toyota compared to other auto manufacturer are two things.

First is marketing strategy about production design. Toyota produces many kinds of cars for the

U.S. market such as family sedans, sports utility vehicles, trucks, minivans, etc. Also, Toyota

offers different price points to customers such as lower-cost Scions, mid-priced Camry, the

luxury Lexus, etc. So designing these different products include meaning about listening to

different customers, building the cars they want, and then crafting marketing to reinforce each

make’s image. (Kotler & Keller, 2012, p. 352) “Toyota marketed their cars as being hip and fun

with memorable slogans like, “you asked for it, you got it, Toyota,” and with commercials

involving young Toyota drivers jumping in the air. As a result, the Japanese’s marketing

campaign along with continuing problems from the Big Three auto manufacturers, allowed

import cars to make up about 20 percent of the US car market by 1980... Toyota marketing

strategy was to market Lexus as a separate company with almost no references to Toyota, a

heavy emphasis towards quality customer service and it had a separate dealership network from

Toyota. This production marketing strategy has allowed Lexus to become one of the best selling

luxury cars in the US by 2000.” ("Toyota: Developing Strategies for Growth," 2006) As
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Running head: What are Toyota’s success factors?
mentioned above, this marketing method helped to increase surprising sales for company.

The second is production design for lean manufacturing. Efficiency is the ratio of actual

output to effective capacity; Actual output cannot exceed effective capacity and is often less

because of machine breakdowns, absenteeism, shortages of materials, and quality problems, as

well as factors that are outside the control of the operations managers. Effective capacity is

design capacity minus allowances such as personal time, and maintenance. (Stevenson, 2009)

Toyota think efficiency is very important to produce cars. So the company uses lean

manufacturing and does continuous improvement with efficiency. (Kotler & Keller, 2012, p.

352) “When lean succeeds, it creates efficiency by eliminating seven types of waste, ranging

from raw materials to worker time. It examines every activity and asks how each contributes to

customer value. It took decades for lean to catch on in manufacturing, but it's moving more

rapidly into the service sector. It turns out that identifying bottlenecks so mortgages can be

processed in a day is similar to eliminating constraints to making a car in one day.” (Jones, 2007)

As using this lean manufacturing, Toyota could reduce all things like worker time, costs.

However, Toyota has not done the right thing about design and reliability of production

and service for customers. At first, Toyota’s automobiles have consistently ranked high with

good production quality and absolute service reliability. It means that most people could buy

Toyota’s cars easily with sufficient belief. But Toyota experienced a massive recall of over 8

million of its vehicles in 2009 and 2010. A lot of problems ranging from sticking accelerator

pedals to sudden acceleration to software glitches in the braking system affected many Toyota

famous brands, such as Lexus, Prius, Camry, Corolla, Tundra, etc. (Kotler & Keller, 2012, p.
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Running head: What are Toyota’s success factors?
352) To top it off Toyota was busy hiding this fact to customers. “Toyota Motor Corp. is the

latest to give the impression that it had to be dragged screaming and kicking to disclose the truth

about potentially lethal defects in its products. Since the fall, Toyota has issued recalls on 10

million vehicles for problems related to unintended acceleration, with about 2 million vehicles

subject to more than one recall. This week the company said it would recall about 437,000 Prius

hybrids and other models because of brake problems. Stuff happens, and Toyota still makes a

pretty darn good car. I used to drive a RAV4, and before that a Corolla… But Toyota's actions

throughout this mess – the initial denials, the obfuscating, the gradual acknowledgment of safety

issues – suggest that its priority first and foremost has been to cover its crankcase, not safeguard

its customers.” (Lazarus, 2010) This was not right action about design and reliability of

production and service for customers. So Toyota had difficulty to remain their rank at that time

for this reason.

Most people know that Toyota grew too quickly as Toyota suggested. In 2006, Toyota

earned over $11 billion – more than all other major automakers combined. In 2007, it edged past

General Motors to become the world’s largest carmaker. And in 2008, it manufactured 9.2

million vehicles, 1 million more than GM and almost 3 million more than Volkswagen. (Kotler &

Keller, 2012, p. 352) However, when Toyota experienced a massive recall, Toyota lost trust to

customers and decreased their sales. So Toyota should endeavor to get customer’s trust over the

next year, 5 years, or 10 years. “TOKYO — Toyota Motor Corp. President Akio Toyoda met

with Japan’s prime minister today and promised to restore trust in the automaker’s cars as it

embarks on a broad campaign to repair its tarnished reputation. Toyoda pledged to improve

quality controls is his meeting with Japanese premier Yukio Hatoyama and other government
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Running head: What are Toyota’s success factors?
officials on the company’s problems.”("Toyota CEO promises to rebuild trust ", 2010)

For getting their customers’ reliability, Toyota should manage and maintain good quality

through Toyota designs flexibility into unique production system. (Stevenson, 2009) “Jidoka is

one of the core principles of the Toyota Production System... Jidoka is used at Toyota to

empower every worker to stop the assembly line whenever a quality problem is detected…

Unfortunately, Jidoka stopped at the end of the Toyota production line and was not extended to

the ultimate customer, the person that bought the car. What Toyota needs now is Zenjidoka…

Instead of confining Jidoka to the factory floor, Zenjidoka extends Jidoka to every employee

who has any contact with the end customer. When an employee hears directly or indirectly about

a customer problem or potential problem, that employee must stop, listen with sincerity, and take

action immediately.” (Bodek, 2011) Toyota will grow continuously in the future if the company

tries to avoid quality problems and manage their flexible manufacturing system well.

Also Toyota should identify the optimal operating level for developing capacity

alternatives. “Production units typically have an ideal or optimal level of operation in terms of

unit cost of output. At the ideal level, cost per unit is the lowest for that production unit. If the

output rate is less than the optimal level, increasing the output rate will result in decreasing

average unit costs. This is known as economies of scale. However, if output is increased beyond

the optimal level, average unit costs would become increasingly larger. This is known as

diseconomies of scale.” (Stevenson, 2009) If Toyota knows this operational management theory

and decide optimal operating level for developing capacity alternatives, Toyota will produce

constantly without large problem.

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Running head: What are Toyota’s success factors?

After all, Toyota is the same as other big company having many advantages such as two

factors. But this company has more great possibility of success as overcoming hardships of a

massive recall. Toyota’s operators should analyze company’s difficulties and strengthen their

advantages in accord with comfortableness of customers. It is expected that Toyota make new

innovative cars in various areas and be popular as a social company that communicates with all

the people across the world.

Reference
Bodek, N. (2011). Zenjidoka, Solving Toyota's Quality Problems.
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Running head: What are Toyota’s success factors?
http://www.qualitydigest.com/inside/quality-insider-column/emzenjidokaem-solving-toyotas-
quality-problems.html
Jones, B. (2007). Toyota's success pleases proponents of 'lean'. from
http://usatoday30.usatoday.com/money/autos/2007-05-02-toyota-lean-usat_n.htm
Kotler, P., & Keller, K. (2012). Marketing Management: Addison-Wesley/Prentice Hall.
Lazarus, D. (2010). Toyota, what's so hard about doing the right thing?, LOS ANGELES TIMES.
Retrieved from http://articles.latimes.com/2010/feb/11/business/la-fi-lazarus11-2010feb11
Stevenson, W. (2009). Operations Management (10 ed.): McGraw-Hill Irwin.
Toyota CEO promises to rebuild trust (2010). COLUMBIA DAILY TRIBUNE. Retrieved from
http://www.columbiatribune.com/business/toyota-ceo-promises-to-rebuild-
trust/article_225f7bd8-26ae-5f64-b92e-a1b83673637d.html
Toyota: Developing Strategies for Growth. (2006). from
http://lifeinmotion.wordpress.com/2006/12/23/%E2%80%9Ctoyota-developing-strategies-for-
growth%E2%80%9D/