Toyota Motor Corporation - Losing 'The Toyota Way'?
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Case Code: BSTR385 Case Length: 20 Pages Period: 2005-2010 Pub Date: 2011 Teaching Note: Available |
Price: Rs.600 Organization: Toyota Motor Company Industry: Automotive Countries: Japan; Global Themes: Organizational Culture, Globalization |
Abstract Case Intro 1 Case Intro 2 Excerpts
"As grave as the current troubles are, they are symptomatic of a larger problem at Toyota: It got carried away chasing high-speed growth, market share, and productivity gains year in and year out. All that slowly dulled the commitment to quality embedded in Toyota's corporate culture."
- BusinessWeek, in March 2010.
"We maybe slacked in some of our core principles [like] attention to the basics of manufacturing. It was as if we were engaged in car manufacturing in a virtual world and became insensitive to vehicle failings and defects in the market. Now we understand the gap between virtual world and real world, and we're working hard to fill those gaps. We want to pursue the basic performances in our cars-run, turn, stop-and secure the confidence of our customers."
- Akio Toyoda, President of Toyota, in July 2010.
Crisis at Toyota
On August 26, 2010, Toyota Motor Sales USA, the US-arm of Japan-based automobile major, Toyota Motor Corporation (Toyota), announced that it would recall around 1.13 million Corolla and Corolla Matrix vehicles manufactured between 2005 and 2008. The reason cited for the recall was faulty electronic control modules (ECMs), which could stall the engines. Toyota planned to replace the ECMs free of cost. Commenting on the recall, James Bell, Market Analyst at Kelley Blue Book , said, "As if to rub gasoline in Toyota's already painful wounds, this round of recalls is in response to consumer complaints of unexpected and therefore dangerous engine stalling, rather than the equally unexpected acceleration problems earlier this year."
By late August 2010, Toyota had recalled more than 11 million vehicles over a period of ten months. The vehicles were recalled for different problems ranging from pedals getting lodged under the floor mats causing unintended acceleration, to sticking accelerator pedals. Due to these problems, Toyota was forced to suspend sales and the production of several of its vehicle models in the US. This was followed by significant recalls in Europe, and later by the recall of the Prius Hybrid and the Pontiac Vibe. The problems refused to die down, and the recall was extended to the Lexus, Camry, Highlander Sequoia, Venza, and Avalon.
Analysts attributed the quality lapses to Toyota's shifting focus from quality to growth and the drastic cost-cutting measures that the company undertook. They also blamed the company's organizational structure for the problems, saying that it hampered smooth communication between Toyota's headquarters and its offices in other countries. According to Takahiro Fujimoto, Professor of Economics, University of Tokyo, "Toyota faced excessive or overwhelming complexity that even its strong capability could not handle adequately. At the same time, simultaneous pressures came from volume over-extension, possible quality arrogance caused by its long track record of quality excellence, collapse of demand in the U.S. (particularly luxury sales due to the financial crisis), plus other mistakes and some bad luck -- creating something like a chemical reaction"...
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