Question

Case 4-1 Toyota Motor Corporation

Toyota Motor Corporation is a leading, global manufacturer of motor vehicles. It has seven key operating principles that drive what the company does and how it does it:

• Honor the language and spirit of the law of every nation and undertake open and fair business activities to be a good corporate citizen of the world.

• Respect the culture and customs of every nation and contribute to economic and social development through corporate activities in their respective communities.

• Dedicate our business to providing clean and safe products and to enhancing the quality of life everywhere through all of our activities.

• Create and develop advanced technologies and provide outstanding products and services that fulfill the needs of customers worldwide.

• Foster a corporate culture that enhances both individual creativity and the value of teamwork, while honoring mutual trust and respect between labor and management.

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• Pursue growth through harmony with the global community via innovative management.

• Work with business partners in research and manufacture to achieve stable, long-term growth and mutual benefits, while keeping ourselves open to new partnerships.

The company consists of three business units: automotive operations, financial services, and all others. The company was started by Kiichiro Toyoda in 1937 and is headquartered in Toyota, Japan. The company has a workforce of more than 348,000 employees, and it sells its vehicles in 190 countries and regions. The company has won many industry awards including most trusted brand, longest-lasting vehicles, and best overall value.

Toyota has established itself as an industry leader in quality, reliability, and efficiency in its automotive operations. Its methods for product development, production, and operations have served as the benchmark for others in the industry. One set of practices that has enabled Toyota to achieve a sustainable competitive advantage is the Toyota eight-step problem-solving process that it deploys throughout its global operations. The steps include the following:

• Step 1: Clarify the problem

• Step 2: Break down the problem

• Step 3: Set the target

• Step 4: Analyze the root cause

• Step 5: Develop countermeasures

• Step 6: Implement countermeasures

• Step 7: Monitor results and process

• Step 8: Standardize and share success

Clarifying the problem (step 1) involves Toyota management and employees working in teams to obtain direct experience with the problem for themselves to understand the nature of the problem. Breaking down the problem (step 2) focuses on further analyzing the problem and decomposing it into subproblems that are more specific and manageable. Setting the target (step 3) involves Toyota management and workers agreeing to challenging goals for solving a problem (e.g., reducing defects) as well as mapping out a plan and timeline for achieving the objectives. Analyzing the root cause (step 4) refers to collecting empirical data to understand the underlying causes of a problem. This step is typically helpful in terms of identifying multiple causes of the problem. Developing countermeasures (step 5) focuses on teams of Toyota managers and workers brainstorming specific solutions to remove the root causes of a problem. Implementing countermeasures (step 6) is the actual deployment of the selected countermeasure. Monitoring results and process (step 7) is based on a process called Plan-Do-Check-Act (PDCA) that supports the effective implementation and continuous improvement of a countermeasure. Basically, PDCA involves implementing a countermeasure, evaluating its effectiveness, modifying the countermeasure to further improve it, and then implementing that countermeasure as a cyclical process. Standardizing and sharing success (step 8) focuses on “institutionalizing” the new practice or process into Toyota’s overall production and operational system. This could involve redesigning a process, changing rules and policies, job redesign, and realigning the culture of the organization. This also involves communicating the new practices or processes to others in the Toyota organization so that they may also learn from the success of the change and obtain guidance about how they can achieve similar results.

The decision-making and problem-solving process used at Toyota Motor Corporation has enabled it to produce some of the most popular and reliable vehicles in their respective market segments including the Camry sedan and the RAV4 sport utility vehicle.

Discussion Questions

1. How does Toyota address both decision making and problem solving in its operations?

2. How does Toyota’s approach to decision making and problem solving address the four management functions?

Answer 1

(1) How Toyota address both decision making and problem solving in its operations:

Toyota is able to address both the issues of decision making as well as problem solving in the most effective and efficient manner, such as:

• Proper policies and principles are framed out by the management to be followed by all in the organization, which helps in effective decision making in future.
• Proper breakdown of the problem is done so that the management can understand the depth of the problem and take effective decisions on time.
• Targets are set beforehand so that they can be achieved by the organization and problem can be solved quickly.
• Results are monitored from time to time, thus helping the management in proper decision making in the later stages.
• The success is shared with the entire organization so that the process can be implemented in the working of the organization and problems in future can be resolved easily.

(2) How Toyota's approach to decision making and problem solving help address management functions:

Toyota takes steps to solve its problems effectively and make decisions after analyzing the entire situation properly. This helps in addressing the four managerial functions (planning, organizing, leading and controlling) as follows:

• Planning: planning is important to be performed before any action is taken, it helps in bridging the gap from where the organization is and where it want to reach. At Toyota, the problems are solved by planning the steps in advance and then relying in those steps to achieve the targets set and resolve the issue.
• Organizing: it refers to the act of proper organization of everything and everyone in the organization and making sure that it is done as decided. At Toyota, everything is organized and pre decided well in advance which needs to be followed by everyone in the organization, be it the problem solving procedure or the rules and the regulations.
• Leading: it refers to the managerial function of effectively leading the entire organization towards a common goal and motivating them to work for the achievement of the objectives. At Toyota, the managers also lead the organization by framing out clear, precise and achievable rules, policies and principles, thus adding to the motivation level of the employees to work for the welfare.
• Controlling: it refers to the act of controlling the actions of everyone in the organization and also the steps involved in problem solving. At Toyota, proper control is exercised at every step and it is ensured that the work is being done as pert he standards, minimum level of deviation occurs, results are monitored at each step and finally deviations are corrected.