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Toyota Case

VIEWS: 17 PAGES: 3

									CHAPTER 15: ORGANIZATIONAL CULTURE

CASE: Developing Chinks in the Vaunted “Toyota Way”

         “There is the world car industry, and then there is Toyota. Since 2000 the output of the
global industry has risen by about 3m [3 million] vehicles to some 60m [60 million]: of that
increase, half came from Toyota alone.”1 Toyota has enjoyed a dramatic growth spurt around the
globe, and it is on the verge of making more cars abroad than at home.2 As of March 2007,
Toyota marketed vehicles in more than 170 countries and employed approximately 299, 400
people worldwide. In addition to its parts manufacturing and vehicle assembly facilities in Japan,
Toyota has 52 manufacturing companies in 26 nations and regions.3
         Toyota’s strong corporate culture is the “glue” that holds these far-flung “operations
together and makes them part of a single entity.4 “Spend some time with Toyota people and 
you realize there is something different about them. The rest of the car industry raves about
engines, gearboxes, acceleration, fuel economy, handling, ride quality and sexy design. Toyota’s
people talk about ‘The Toyota Way’ and about customers.”5 Toyota’s customer focus is
legendary. Jim Press, head of Toyota’s North America sales, says, “[t]he Toyota culture is inside
all of us. Toyota is a customer’s company.  Everything is done to make [the customer’s] life
better.”6
         Toyota’s culture, labeled The Toyota Way, has five distinct components: kaizen, genchi
genbutsu, challenge, teamwork, and respect. Kaizen refers to the process of continuous
improvement, and it is as much a frame of mind as it is a business process. Genchi genbutsu
focuses on going to the source of a problem, finding the facts, and building consensus through
arguments that are well supported. Challenge encourages Toyota employees to view problems as
a way to help them improve their performance rather than as something undesirable. Teamwork
puts Toyota’s interests before those of any individual in the company, and promotes sharing
knowledge with other employees. Toyota’s employees exhibit respect for other people and their
skills and special knowledge.7
         Toyota’s culture has served the company very well for many years. Indeed, competitors
marvel at Toyota’s culture and its ongoing success. As one General Motors’ planner observed
privately, “the only way to stop Toyota would be the business equivalent of germ warfare,
finding a ‘poison pill’ or ‘social virus’ that could be infiltrated into the company to destroy its
culture.”8
         Over the years, “Toyota has adapted well to changes facing the automotive industry by
establishing sound processes and procedures. It has made continuous change and improvement
the essence of its business philosophy: each year thousands of improvements are suggested by
employees and many are implemented.  It has built its success with products that are made
according to the all-embracing ‘Toyota Way’. In fact, so confident is Toyota of its quality and
reliability record, that it allows rival companies to visit its factories all over the world.”9
         Recently, however, some chinks seem to be developing in the armor of Toyota’s vaunted
culture. An internal Toyota study compared the company’s products against its competitors’
products  component by component, car by car  and found Toyota’s products to be superior
in just over half of hundreds of components and vehicle systems. Toyota judged such quality
performance to be unacceptably mediocre.10 In reference to the United States market, some


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business analysts say that Toyota’s rapid growth is one cause of the company’s growing quality-
control problems. For example, in 2005 “Toyota recalled 2.38 million vehicles in the U.S., more
than the 2.26 million vehicles it sold  a sign that indicates Toyota is troubled not only by
manufacturing problems but also by design flaws.”11
        Katsuaki Watanabe, Toyota’s CEO, “thinks Toyota is losing its competitive edge as it
expands around the world. He frets that quality, the foundation of its U.S. success, is slipping. He
grouses that Toyota’s factories and engineering practices aren’t efficient enough. Within the
company, he has even questioned a core tenet of Toyota’s corporate culture  kaizen, the
relentless focus on incremental improvement.”12 Mr. Agata, one of Toyota’s manufacturing
experts, points out that Toyota needs to depart from its history of steady, incremental
improvement and develop radical new ways of manufacturing vehicle components more
economically.13 Watanabe also argues that “The Toyota Way” of the future needs to embrace
kakushin  revolutionary change in Toyota’s design of factories and cars. Watanabe wants
Toyota to reduce by half the number of components that it uses in a typical vehicle, and to create
new fast and flexible plants for assembling these simplified cars.14
        How will Toyota’s global organizational culture change as the company embraces
kakushin?

Discussion Questions
1. Describe Toyota’s culture from the perspective of espoused values and enacted values.
2. Using the perspective of the functions of organizational culture, explain the impact of “The
   Toyota Way.”
3. Using the perspective of the effects of organizational culture, explain the impact of “The
   Toyota Way.”
4. What challenges does Toyota face as it embarks on transforming its global organizational
   culture from kaizen to kakushin?

SOURCE: This case was written by Michael K. McCuddy, The Louis S. and Mary L. Morgal
Chair of Christian Business Ethics and Professor of Management, College of Business
Administration, Valparaiso University.




1
    Anonymous. (2005) Special Report: The Car Company in Front  Toyota. The Economist (January 29), Vol. 374,
    No. 8411, p. 73, from ABI/INFORM Research database (accessed October 22 2007).
2
    Anonymous. (2005) Special Report: The Car Company in Front  Toyota. The Economist (January 29), Vol. 374,
    No. 8411, p. 73, from ABI/INFORM Research database (accessed October 22 2007).
3
    Toyota Up Close. http://www.toyota.co.jp/en/about_toyota/outline/index.html (accessed October 26 2007).
4
    Anonymous. (2006) Survey: Inculcating Culture. The Economist (January 21), Vol. 378, No. 8461, p. 13, from
    ABI/INFORM Research database (accessed October 22 2007).
5
    Anonymous. (2005) Special Report: The Car Company in Front  Toyota. The Economist (January 29), Vol. 374,
    No. 8411, p. 73, from ABI/INFORM Research database (accessed October 22 2007).

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6
     Anonymous. (2005) Special Report: The Car Company in Front  Toyota. The Economist (January 29), Vol. 374,
     No. 8411, p. 73, from ABI/INFORM Research database (accessed October 22 2007).
7
     Anonymous. (2006) Survey: Inculcating Culture. The Economist (January 21), Vol. 378, No. 8461, p. 13, from
     ABI/INFORM Research database (accessed October 22 2007).
8
     Anonymous. (2005) Special Report: The Car Company in Front  Toyota. The Economist (January 29), Vol. 374,
     No. 8411, p. 73, from ABI/INFORM Research database (accessed October 22 2007).
9
     Cook, S., Macaulay, S., and Coldicott, H. (2005) Facing the Devil in the Detail. Training Journal (October), p. 32
     (5 pages), from ABI/INFORM Research database (accessed October 11, 2007).
10
     Shirouzu, N. (2006) Paranoid Tendency: As Rivals Catch Up, Toyota CEO Spurs Big Efficiency Drive; Culture of
     Institutional Worry Drives Mr. Watanabe; How Paint Is Like ‘Fondue’; Finding Limits to Improvement. The Wall
     Street Journal, eastern edition (December 9), p. A1+, from ABI/INFORM Research database (accessed October
     22 2007).
11
     Shirouzu, N. (2006) Paranoid Tendency: As Rivals Catch Up, Toyota CEO Spurs Big Efficiency Drive; Culture of
     Institutional Worry Drives Mr. Watanabe; How Paint Is Like ‘Fondue’; Finding Limits to Improvement. The Wall
     Street Journal, eastern edition (December 9), p. A1+, from ABI/INFORM Research database (accessed October
     22 2007).
12
     Shirouzu, N. (2006) Paranoid Tendency: As Rivals Catch Up, Toyota CEO Spurs Big Efficiency Drive; Culture of
     Institutional Worry Drives Mr. Watanabe; How Paint Is Like ‘Fondue’; Finding Limits to Improvement. The Wall
     Street Journal, eastern edition (December 9), p. A1+, from ABI/INFORM Research database (accessed October
     22 2007).
13
     Anonymous. (2005) Special Report: The Car Company in Front  Toyota. The Economist (January 29), Vol.
     374, No. 8411, p. 73, from ABI/INFORM Research database (accessed October 22 2007).
14
     Shirouzu, N. (2006) Paranoid Tendency: As Rivals Catch Up, Toyota CEO Spurs Big Efficiency Drive; Culture of
     Institutional Worry Drives Mr. Watanabe; How Paint Is Like ‘Fondue’; Finding Limits to Improvement. The Wall
     Street Journal, eastern edition (December 9), p. A1+, from ABI/INFORM Research database (accessed October
     22 2007).




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