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    165592

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    Toyota Motor Sales, USA Ine Toyota Motor Sales, USA, Inc. In 1991, top-leve at Toyota Motor Sales, USA, Ine. (TMS) were discussing the merits of ‘4 significant organizational change that would increase the authority and responsiblity given t0 TMS's regional general managers (GMs). The proponents for change argued that the GMs should be given authority for most of the activities that determined the success or failure of their region. ‘The activities included finance, marketing, human resources, and possibly even port-of-entry oper’- tions, in addition to the dealer-support functions they already had. If these changes were made, then it would make sense to evaluate the GMs in terms of profit, rather than primarily sales. Opponents of the change, however, feared that fa profit target would force the regional GMs to focus excessively on short-term profit and sacrifice "TMS"s goals of growth in the US market and long term commitment to customers. They were also afraid that the regional managers were experienced with sales-related functions but lacked some of the experience necessary to fill a profit center manager's role effectively. ‘THE COMPANY TMS was a wholly owned subsidiary of Toyota Motor Corporation of Japan (TMC), the third largest automobile manufacturer in the world (after General Motors and Ford). TMS was founded in 1957 to operate as TMC’s US marketing and sales organization. TMS bought vehicles from TMC manufacturing plants in Japan (and, later, when plants were established, in the United States and Canada), sold them to Toyota dealers within the US, and helped the dealers sell them to customers. In 1990, TMS was the largest seller of import cars and trucks in the United States, with sales of over fone million units (market share of 7.6%), revenue of approximately $14 billion, and approximately 5,000 employees.’ hibit, 1 shows the TMS organization chart It shows thai all of the TMS car-related functions reported to Bob McCurry, executive vice president Most of the finance and administrative functions reported to Yale Gieszl, senior vice president. "TMS’s primary function was to provide vehicles, parts, and service and sales support to Toyota and Lexus dealers within the United States, all of which ‘were independently owned and operated. The support for the 1,200 Toyota dealers was provided by nine regional offices and three distributorships ‘with which TMS had contracts.” The nine regional offices, which were operated under a wholly owned TMS subsidiary, Toyota Motor Distributors (TMD), were located in the metropolitan areas of Portland (Oregon), cisco, Los Angeles, Denver, Kansas City, Chicago, Cincinnati, New York, and Boston. The three distributorships were Gulf States Toyota (Houston), Southeast Toyota (Deerfield Beach, Floridgy, and Central Atlantic Toyota (Baltimore) (sce Exhibit 2). Gulf States Toyo Southeast ‘Toyota were privately owned distributors, Central Atlantic Toyota was formerly a privately owned distributor that TMS acquired in 1990. ‘THE REGIONAL GENERAL MANAGER ROLE ‘The TMD regional GMs, who reported to Al Wagner (group vice president, Toyota Sales), had three im North America, TMC also operated manufacturing fies, located in Califo, Kentucky, and Canada; technology centers, oh and California and a desi cent located in Then enies wer not part of TMS's operations. ir were contacted 0 a8 tide corporation wih ase fisted with TMS. Sales of Lexa vellicles were Soondinted through four area offies reporting tothe Group vice president, Lexus Sales “This case was prepared by research assistant Patrick Henry and Professor Kenneth A. Merchant Copyright © by Kenneth A. Merchant 283 Chapter 7 Financial Responsibility Canters primary responsibilities. First, they were respons- ible for all dealer-telated activities in their regions, Which included retail vehicle sales, parts sales, and service. Second, they were responsible for super- xl evaluating their employees. The regions employed between 40 and 70 employ including ficld travelers (sales representatives), staff personnel, and regional management. (Exhibit 3 shows an organization chart for a represe region.) And third, they were respoi achieving sales penetration, customer satisfaction, nd operating budget objectives. A typical region had an annual operating budget of $12-16 million dollars. The regional operating budget was not a significant expense from the corporate standpoint because the amounts were small as compared with the national promotional budget, but expense con: trol was still considered an integral part of the regional GM's job. The ways in which the regional GMs allocated their time varied significantly depending, fore (on their management style, the size of the regioys, the Ket conditions, and the quality of the re dealer network. However, dealer-related activities, particularly involving new retail. car and truck sales, usually took precedence over the GMs’ other roles. Most GMs spent more than 50% of their time on dealer-related matters, such as assisting sales programs and improving dealer ‘operations. According to Al Wagner, the group vice president for Toyota Sales, regional GMs had to be cheerleaders in good economic times and Jirefeghters in bad economic times. He explained that cheerleaders motivate and inspire their people and those of their dealers, while a firefighter attacks problems, The biggest potential problem in the firefighting role was dealer cash flow, Dealers financed their own inventories, and ifsales were

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