TOYOTA : Origins, Evolution, And

Current Prospects


The growth of Toyota has been one of the great success stories of Japanese industry during the last half century. 1947: Toyota was a little-known domestic manufacturer producing around 100,000 vehicles a year. 2004: Toyota stated that the company and its affiliates would produce a record 7.84 million vehicles ,ahead of Ford and 2nd only to General Motors in global industry 2006: It raised its production targets to 85 million vehicles - betterthan expected sales in both North America and Asia. If Toyota meets this goal, it could surpass GM to become the world¶s largest automobile-company.





. Kiichiro wanted Toyota to reestablish as automobiles manufacturer. ƒ New labor laws introduced by the American occupiers increased the bargaining power of labor and made it difficult for companies to layoff workers. Problems faced by Toyota doing this: ƒ Japanese domestic market was too small to support efficient-scale mass-production facilities. ƒ North America and Western Europe were full of large auto manufacturers eager to establish operations in Japan. ƒ The Japanese economy was starved of capital. thus difficult to raise funds to finance new investments.€ € Post World War II.

€ 1ST: The economies came from spreading the fixed costs involved in setting up the specialized equipment required to stamp body parts and manufacture components over as large a production run as possible. than a variety of tasks.The basic philosophy behind mass production was to produce a limited product line in massive quantities to gain maximum economies of scale. the economies involved in long production runs were reckoned to be considerable. Idea behind this: the worker became completely familiar with single task. € € . Since setting up much of the equipment could take a full day or more. 2ND : Each assembly worker performs a single task. thus increasing labor productivity. and perform it much faster.

quality inspectors. Expensive cost of warehousing and inventories tied up capital in unproductive uses. The mass production system was unable to accommodate consumer preferences for product diversity. whose jobs logically could be performed by assembly line workers.€ Long production runs created massive inventories to be stored in large warehouses. and tooling specialists. since workers became lax about quality control. The extreme division of labor resulted in the employment of specialists such as foremen. long production runs resulted in the production of a large number of defects. € € € € . The sheer monotony of assigning assembly line workers to a single task generated defects. If the initial machine settings were wrong.

Reduced the time required to change dies on stamping equipment from a full day to 15 minutes by 1962 and 3 minutes by 1971. Ohno directed production workers to perform the die changes themselves. € In comparison. . Reduced the time it took to set up the machines for stamping out body parts. in early 1980s many American and European plants required between 2 and 6 hours to change dies.€ € € € Manufacture auto body parts in small batches.

Toyota also reduces the number of excess workers like foremen and supervisors and believes in multi specialization of its work force.€ € € Conventional mass producing system produces each required part in bulk and stores the inventory in warehouses. € The benefits of this reduced cost are passed on to the customers of Toyota and its investors. Toyota on the other hand produces each part in small quantities as compared to a conventional mass producing system. . Advantages: € Toyota drastically cut down the time taken to complete certain processes € Reduced the cost of production.

€ Group the work forces into teams the need for specialist € Reduce € Create more flexible work force productivity € Increased workers .

€ Fords mass production.a wasteful process € Reasons: 1. Defects getting carried forward . Little incentives to correct the error themselves 2. An enormous amount of rework required to fix it 3.

3. approach Stop the assembly line if a problem emerged Find the ultimate cause and solve it the Kanban System Just in time Signal technique Elimination of buffer inventories Decentralizing the responsibility € Developing 1. .€ Ohno¶s 1. 2. 4. 2.

2. Four reasons seemed to bolster this decision: Toyota wanted to avoid the capital expenditures required to expand capacity to manufacture a wide variety of components Toyota wanted to reduce risk by maintaining a low factory capacity in case factory sales slumped.€ The company decided that while it should increase in-house capacity for essential subassemblies and bodies. € 1. . it would do better to contract out for most components.

Toyota managers felt that the American practice of inviting competitive bids from suppliers was selfdefeating. € .3. and low-cost external sources of component supply. Toyota managers realized that in-house manufacturing offered few benefits if it was possible to find stable. 4. high-quality. Toyota wanted to take advantage of the lower wage scales in smaller firms.

€ 1. 2. The consequences of Toyota's production system included a surge in labor productivity (number of vehicles produced per employee) a decline in the number of defects per car(performance of Toyota plant) .



through its dealers. Much of these data came from monthly Or semiannual surveys conducted by dealers.€ The ultimate aim was to bring customers into the Toyota design and production process. To this end. € . Toyota Motor Sales assembled a huge database on customer preferences.

prices. colors. model types. and other features. € Expanding internationally € Transplant Operation € . Toyota also used these surveys to estimate the potential demand for new models. This information was then fed directly into the design process.These asked Toyota customers their preferences for styling.

Initial Aim. Rising level of income 2.Small cars € New entrants. Desire to hold onto US consumers € .Camry and corolla € Two factors 1.

and it had its sights firmly set on General Motors. Toyota was now a truly international company. goal of attaining a 15 percent share of the global market seemed attainable.€ The company had overtaken Ford to become the second largest automobile company in the world. € Its .

the world's largest.1 percent share of passenger car sales in 2003 and a 9.6 percent share of light truck sales. respectively.6 percent. € In . up from 11 percent and 7.€ Its overseas operations had grown from 11 production facilities in 9 countries in 1980 to 42 production facilities in 24 countries around the world by 2004 the all important U. Toyota held a 13. market. in 2000.S.

This compares with 23. In its American assembly operations.6 hours at General Motors.€ Toyota seemed to be maintaining a high level of productivity.4 hours at Ford. and 26. Toyota's ability to stay on top of productivity and quality rankings can be attributed to a company-wide obsession with continuing to improve the efficiency and effectiveness Of its manufacturing operations € .0 hours at Daimler Chrysler. Toyota took 20. 25.6 employee hours to build a car in 2004.

2. .. 4. 50 percent cut in the ~ost to add or switch models 50 percent reduction in the investment to set up a line for a new model 50 percent reduction in assembly line footprint € 1.€ Toyota has developed and installed a simplified assembly process known as the "global body line" or GBL. the GLB system has the following consequences: 30 percent reduction in the time a vehicle spends in the body shop 70 percent reduction in the tlme required to complete a major body change . 3. According to Toyota. 5.

They would finance suppliers and even have a small stake in the suppliers units. Toyota initially followed this strategy but eventually moved on to outsource majority of its components needs. Nearly half the components were met by in house production. The rest were outsourced to companies after a bidding process. € € € € . These methods gave suppliers more confidence and faith in the company.€ When Toyota began improving its production process the norm at the time amongst the European car manufacturers was to follow a policy of vertical integration in order to meet the demand for various components required in an automobile. Instead of receiving bids the company developed long term relationships with suppliers.

. The company takes the view points of customers very seriously and tries to develop products that match customers¶ expectations and comfort level.€ € € € € Toyota has a policy wherein it collects its customer¶s preferences through data banks available at its affiliates and dealer showrooms. Ever since the company used this strategy to redesign its model The Company has been making use of customers¶ preferences to evolve and redesign new cars. This has been one of the reasons the Toyota kept on gaining market share over its rivals. Long term implications of this strategy : the company has developed a reputation in developing cars that meet customers¶ expectations.

With regards to work force there may be a few countries where labor may not be as motivated as their counterparts in Japan. varies on a market to market basis. There can be certain markets wherein the company would be able to replicate the same levels of cooperation as experienced in Japan.€ While in theory it is plausible to replicate but in reality this may not always be the case. Some markets would have regulations that will prevent foreign investment in components manufacturing units. € € € € .

competitors have found it very difficult to imitate the drive of Toyota.€ € € € It lies neither with resources or technology but the fact that the company has been constantly able to improve on existing processes. While new technology or improvements in the process can be imitated. . Since Toyota is constantly making change it becomes difficult for competitors to imitate. This flexibility and drive to constantly improve on already established and industry accepted methods have being the backbone of the company¶s competitive advantage.

€ € € Its difficult to say. Keeping environmental factors aside the founding family now owns a very small stake in the company. € However if the company keeps moving forward and constantly seeks improvement then the company should be able to maintain its competitive advantage. . € If the initial drive to keep moving forward is lost then the company may not be able to maintain its advantage. There are a lot of factors that could come into play.

.Toyota like the rest of the auto industry constantly seeks new markets to tap. € Due to population and a growing number of middle class families Africa could be a viable option for Toyota to look at. € € At the same time investing into Africa could be a challenge to the company as the continent is plagued with political instability which could result in a lot of investment going to waste. € While Europe. North America and most of Asia saturated the company will most probably look to Africa to push its products.

Sign up to vote on this title
UsefulNot useful

Master Your Semester with Scribd & The New York Times

Special offer for students: Only $4.99/month.

Master Your Semester with a Special Offer from Scribd & The New York Times

Cancel anytime.