Toyota Motor company Losing its Quality Edge

Topics: Management, Strategic management, Quality control Pages: 12 (4853 words) Published: October 11, 2014
1. Executive Summary:
Toyota Motor Corporation is the leading global automobile manufacturer operating in more than 140 countries and boasted sales of 9.75 Million vehicles during 2012 compared to key rival General Motors at 9.29 million vehicles (Dawson, 2013). Toyota’s consistent delivery of superior quality, reliability and durability has been cited as the key success factors behind their ascension to global leadership in 2008 (Feng, 2010; Takeuchi, Osno and Shimizu, 2008). (Spear, 2004) postulates that the Toyota Production System (TPS) which incorporates the company’s legendary lean manufacturing practices coupled with the business philosophy of always placing the customer first; enabled them to repeatedly outperform their competitors on quality, productivity and cost reduction. The TPS became the benchmark for manufacturing practices in other industries ranging from aerospace to consumer goods. Toyota has won prestigious international quality awards including the Malcolm Baldridge Award, The Japan Prize and the Deming Prize which is Japan’s highly coveted award for quality achievement which further entrenched their quality heritage.

In light of Toyota’s impeccable reputation for placing the customer first and the company’s coveted quality heritage, the 2009 recall crisis shocked consumers and the subsequent negative publicity presented the biggest threat to the Toyota corporate brand reputation in the company’s history (Fan, Geddes and Flory, 2011). According to (Taylor, 2012) Toyota had received consumer complaints related to unintended acceleration as early as 2002. The author intones that the company not only denied the problem but failed to take action until the problem escalated into a full scale quality crisis in 2009, following a fatal crash involving a Lexus ES 350 with a jammed accelerator in North America. According to (Thompson et al., 2012) Toyota recalled approximately 4 million motor vehicles, following the accident. Further steps were taken around the world involving an estimated total of 8 Million vehicles (Saporito, Schuman, Szczesny, & Altman, 2010). This was ensued by a U.S. government investigation coupled with millions of dollars in heavy fines as well as legal actions from the victims (Feng and Danilovic, 2010).In addition the impact on Toyota’s financial performance was catastrophic. The company reported an operating loss of ¥436 Million during 2009 which represented a 75% decline against 2008. Net Revenues declined by 22% from a robust ¥26.2 Billion in 2008 to ¥20.5 Billion in 2009 (Toyota Motor Corporation Annual Report, 2012). Taylor, (2012) further noted the severity of the crisis on Toyota’s market share in the U. S. which tumbled from a high of 18.3% during 2009 to 12.9% in 2011. The recall crisis, beget the question of how did a company renowned and admired worldwide for its rigorous quality assurance falter and jeopardize its most valuable asset? The following section of the report attempts to answer how a company such as Toyota went awry from a strategic management perspective. 2. Toyota’s problems, a result of flaws in the company’s implementation efforts? It is well documented in strategic management literature that effective strategic planning enhances company performance; however successful implementation is necessary for value creation (Hahn et al., 2010; Thompson et al., 2012). This section evaluates the various elements of successful strategy implementation and (Beer and Eisenstat, 2000) mention six silent killers of strategy implementation existing in most companies that managers avoid confronting- (Addendum 1) 2.1 - Staffing the organisation:

Staffing the organisation with both talented managers and employees with appropriate skills and intellectual capital constitute a key component of successful strategic implementation (Thompson, et al., 2013). Saporito, Schuman, Szczesny & Altman, (2010) identified Toyota’s rapid global expansion as one of the key factors...
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