Assessment 2

Task : Discuss Toyota’s approach to strategic management of knowledge and organizational

learning and also evaluate its use of strategic frameworks and tools.

Gideon Zoiku

Student ID Number: R1810D6621760

Course: UU-MBA717-ZM-38957: Strategic Management

Tutor: Costas A. Photiou

Date: 25th July, 2022

Introduction

Due to globalization and the fast-changing dynamics of the business environment, companies need
to create structures and ideas for managing its resources to remain competitive. Strategic
knowledge management and organizational learning are important elements needed to be
developed upon by companies to remain competitive. This is as a result of their capability to
provide strategic results related to capacity building and competitiveness (Jeon et al, 2011).

This paper is to discuss Toyota’s approach to strategic management of knowledge and

organizational learning and also evaluate its use of strategic frameworks and tools.

Toyota Motor Corporation is a Japanese multinational automotive manufacturer with its

headquarters in Toyota City, Aichi, Japan. Kiichiro Toyoda was the founder and incorporated it
on August 28, 1937. Toyota is one of the largest automobile manufacturers in the world, producing
about 10 million vehicles per year.

Businesses are seeing the importance of managing knowledge if they are to continuously persevere
competitively and grow. Other firms are beginning to dynamically manage their knowledge and
innovation (Ferreira et al., 2015). Knowledge does matter, but the question is when, how and why?
(Carayannis and Campbell, 2009). Today, knowledge matters further and in ways that are not
always predictable or even controllable. Knowledge mechanisms are highly complex, dynamic
and adaptive (Carayannis and Campbell, 2009).

Knowledge management and Organizational learning

Strategic management focuses on the general character and direction of a company. It is the art
and science of formulating, implementing, and evaluating cross-functional decisions that help an
organization attain its objectives (Ansoff et al., 2018). According to Morden (2006), what an
organization is now and what is it will be in the future is highly dependent on strategic
management.

Knowledge is awareness, consciousness or familiarity gained by experience or learning (Johnson,

Scholes & Whittington, 2011, p. 43). Knowledge as an intangible asset of a company is considered
a valuable asset of the company which plays a vital role in maintaining the company’s

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competitiveness in the business environment (Gray, 1999). How knowledge is managed
determines the competitiveness and success of the company in the long term. It is key to solving
problems in relation to competitiveness and innovation faced by organizations today
(Wickramasinghe, 2003). Knowledge management is the process of influencing organizational
knowledge to foster long‐term advantage to a business and is based on a business strategy that
involves various knowledge‐centric business processes and developing organization structures to
support these (Shankar, Gupta and Narain, 2003).

According to Nonaka and Takeuchi (1995), knowledge is not limited to one person but is shared
by all other persons (human resources) within an organization. This idea is similar to the ‘routines’
concept of Nelson and Winter (1982). Knowledge or technology is divided into two types namely
‘explicit’ knowledge or information and ‘tacit’ knowledge or ‘know-how’ (Kogut & Zander,
1992).

According to Nonaka and Takeuchi (1995), tacit knowledge is rooted in the human brain through
continuous learning on jobs and experiences gained. Explicit knowledge on the other hand is that
which is transferred in writing in books, documents etc.

Knowledge creation

Toyota uses ‘kaizen ideas’ in its production activities and are ideas generated by individual
workers to solve problems identified on the floor of production which is confirmed, investigated
and cause determined by the production floor leader. The ultimate end result of the Kaizen idea is
to reduce waste and improve productivity. According to Monden (2006), the individual workers
are motivated to come up with ideas to help solve the problem identified. These ideas are
aggregated and submitted for further action to be taken. This type of problem-solving technique is
called an ‘emergent strategy’ or ‘’bottom up’’ strategy. Emergent strategies are associated with
processes from daily activities or decisions and it involves the participation of the whole
organization (Rothaermel, 2018). This strategy is one source of Toyota’s knowledge diversity.
According to Zack (2002), strategic knowledge management involves tools and frameworks
organizations use to gather, create and disseminate knowledge to aid in the formulation and
strategic decision making.

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Knowledge diffusion and sharing

The role of knowledge creation is borne by production floors in each plant. Once knowledge is
created in these production floors its uses three modes of transferring it throughout the company.
Toyota uses three mediums in diffusing knowledge namely, Knowledge diffusion by direct
interaction, knowledge diffusion by OMCD (operation management consulting division), and
knowledge diffusion by GPC (Global production center).

Knowledge diffusion by direct interaction

In Toyota, knowledge is disseminated via the direct interaction between hierarchies at each plant.
It involves the transfer of knowledge via direct connections between Toyota plants (Higuma &
Suh, 2017). For instance, knowledge gained at the assembly point may be disseminated if it proves
useful for other plants and is shared between hierarchies at various plant.

Knowledge diffusion by OMCD (operation management consulting division)

This division is made up of teams in different study groups who jointly discuss solutions for issues
in relation to production. The hierarchies in various groups transfer knowledge and solutions
created to other production points that may need it. According to Higuma and Suh (2017), the
OMCD transfer knowledge in two forms;

1. By developing and setting standards based on knowledge gained from each plant and
disseminates it. This solves disparities in knowledge gained from various plants.
2. Knowledge gained from domestic plants, overseas plants and suppliers is directly used in
problem solving.

Knowledge diffusion by GPC (Global production center).

This mode of transfer sets the most basic skills needed in automaking and develops tools to teach
these skills with well explained visual manuals to workers on the production floor.

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Role of knowledge in an organization

According to Tseng (2016), knowledge management is vital within an organization because

1. It helps speed up access to information and knowledge.

2. Decision making is made easier when in process.
3. It fosters innovation
4. As in the case of Toyota, it improves efficiency in its production processes.
5. Creates value for customers investment

In conclusion, Toyota’s domestic knowledge network maintains a balance between the

diversification and standardization of knowledge created on the production floor through a mix of
nodes at various standardization levels.

Organizational learning

According to Kiernan (1993), learning will become the only viable option to corporate extinction
amidst the need to stay competitive, globalization, the need to innovate and the constant change in
information technology.

Organizational learning is knowledge acquired by individuals and it readily made available and
applied in the decision-making process of an organization or used to influence other within the
same organization (Miller, 1996).

Toyota Production system uses Kaizen activities in its production floors. Once the results of the
kaizen idea implemented has a positive effect on productivity, it becomes set standard. Over time,
the standards implemented on each plant are developed to meet changing conditions both internally
and externally. The Kaizen ideas is generated by workers in productions floors. The leaders then
confirm and compiles the ideas as a solution which is then submitted (Monden, 2006).

Toyota engages in constant learning by way of construction of new plants and refurbishments to
existing plants to meet changing market demands. According to Fujimoto (1997), Toyota
constructed new assembly plants, both domestic and abroad and also implemented new assembly
systems. As a response measure to unique conditions on various production floors, unique
production systems were created. The ‘Toyota (lean) production system’ drove superior

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organizational learning, innovation and control with positive implications for customer-oriented
outcomes. According to Dyer and Nobeoka (2000), Toyota domestic knowledge network
expanded overseas.

According to Heisig (2009), the important success element engaged in knowledge management
and strategic options include human-oriented elements (culture, people, and leadership),
organization-oriented factors (processes and structures) and management-oriented factors
(strategy, goals, and measurement).

According to Volti (2005), Toyota has developed its production chain worldwide such as in the
US, Australia, Asia, the EU etc. Its plant manufacturing and assembling cars can be found in other
markets such as China, Argentina, Mexico etc. Volti (2005), furthermore went to say Toyota
realized that the failure to take advantage of the potential of new markets can result in negative
outcomes to its position in the business environment.

Toyota Production System (TPS) is a good example of operational effectiveness. Toyota

Production System and its operational effectiveness constitutes a competitive advantage for Toyota
(Liker, 2004). Knowledge sharing and organizational learning played an important role in
establishing and harnessing the power of the unique Toyota way.

Conclusion

The development of human resources becomes an urgent priority. An effective Strategic

knowledge management fosters a good understanding of its human resource capital as an asset and
how to capitalize on it to gain a competitive edge over its competitors for survival. According to
Mu and Benedetto (2011), once an organization has a mutual partnership network, individuals will
easily meet one another's demands, enabling collaboration, facilitating information exchange and
sharing, and increasing resource integration productivity.

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