Pitfalls in the Toyota Expansion Strategy The Ess…

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Pitfalls in the Expansion Strategy The Essence of the Issue

Currently, media of the Toyota Motor Corporation (recalling and repairing vehicles of charge) is pervasive. Some of the are emotional, and there are shades of bashing combined with the to politicize the issue.

Isao

Professor, Waseda University School

A recall of unprecedented

Currently, media coverage of the Motor Corporation recall and repairing vehicles free of is pervasive. Some of the reports are and there are shades of Toyota combined with the movements to the issue.

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the fact is the current recall an extremely grave situation for as the reigning King of Quality. In of 2009 in the U.S. a problem the accelerator pedal getting on floor mats resulted in the of 5.55 million vehicles, 13 models. In January of 2010 in the and Europe, a total of 4.2 million were recalled in response to a with accelerator pedals stuck when pressed And in February, problems with the in the Prius were detected in the U.S. and Europe, resulting in a recall of 430 thousand vehicles. As amounts to a total recall of than 10 million vehicles, it be regarded as a remarkable situation.

The three pitfalls lurking in the of quality problems

The question is: how did a large scale recall as occur? The answer lies in the pitfalls lurking in Toyota’s development up to now.

The first lies in the rapid expansion and development that Toyota At its peak in 2007, Toyota’s sales figure reached million vehicles, which nearly double the total just ten years priorjust shy of 5 vehicles in 1997. From to 2007 in particular, Toyota’s increase in vehicles sold was to the total annual number of sold by Mazda.

In order to such rapid expansion, the of products must be increased and sourcing and production must be In fact, there has been a toward local production and the of new parts manufacturers abroad has increased. Quality control has been insufficient for this expansion of business.

The second lies in expanded standardization of In order to reduce costs, the toward standardization was accelerated for that had traditionally been for each model. As a result, a problem occurred with one the scope of the recall increased all at which is directly connected to the rise to an unprecedented number of recalled. In fact, in terms of vehicles manufactured domestically, were four cases in where the total number of recalled did not exceed 50 thousand but nine cases in 2004 the total number of vehicles grew to 1.9 million vehicles.

The third pitfall lies in toward making vehicles These days, it is fair to say vehicles are a mass of electronic and software. Even Toyota, its mechanical prowess, is nowhere sufficient in terms of knowledge and when it comes to electronics and The current Prius recall, for was caused by an error in software with a discrepancy of 0.06 The automobile is a product which, as it renders the strengths and experience of the obsolete.

From a pyramid to a network configuration

How should proceed going forward? situation requires far more superficial measuresnothing short of a overhaul of the business system. Up to the Toyota has operated under a shaped business system as keiretsu, or, affiliated chain. was at the apex, the parts makers and Aisin Seiki were below Toyota, and the next of makers continued in the same down the pyramid to form a of centralized power.

This All Toyota business as it is known, involved a common for all stakeholders. In this system, it was easy to unify and communicate as well as to collect information the field. It was a system which on tacit understanding, intuition, and between the lines, and it was this system that led to Toyota’s up to the present.

But in an environment such as the one, with more half of sales and production abroad, this system has its As local sourcing and local are expanded, relationships must be with companies and partners from those up to the present. And applies not only to existing manufacturers, but to entirely new partners and supplying new parts such as software, and other componentswidening the of stakeholders.

In the current accelerator case, the supplier CTS (of Indiana, is not a parts manufacturer under the umbrella. It is no small feat to the Toyota code of values and quality standards, but as CTS is an independent supplying other companies as Toyota is no more than one of

The way to create a new business system with such parts abroadas well as the way to collaborate affiliated companiesposes a significant for Toyota. The way forward should not be on the firm solidarity of family of the system up to now, but rather on goals and objectives, while the independence of and drawing on the respective and characteristics of each stakeholdera that should be called a configuration business system.

In the All Toyota way, it was crucial to solidarity, but major changes are now including the goal setting and framework, as well as the means of and training. It is not a matter of quality by a homogeneous group, but rather how to global quality by a heterogeneous This is the very challenge Toyota faces going

Isao Endo

Professor, University Business School; Board Member of Roland Strategy Consultants

Biography

Endo graduated with an degree from the School of at Waseda University and received an MBA Boston College’s Carroll of Management. Professor Endo up his current position after for Mitsubishi Electric Corporation and for an strategic consulting firm.

Toyota Endo

As of the Waseda Business School program, Professor Endo the business school. The professor serves as chairman of the Supervisory in Japan for the leading western consulting firm, Roland Strategy Consultants. More just deciding on strategies, Endo is highly esteemed for his in support of implementation which results. Professor Endo is on the Supervisory Board of the Roland Headquarters in Germany and is an Adjunct of Strategy at Cheung Kong School of Business in China.

Professor Endo’s primary include Forging Power in the Visualization, Ultra-micromanagement, Premium Restoring Power in the Field of the above from Toyo Inc.), MBA Operational Strategy Inc.), An Introduction to Corporate (Nikkei, Inc.), Doubt Wisdom” in Business! (PHP Shinsho), Competitive Source Kenkyujo), and Future Sketch Publishing Co. Ltd.)

Forging in the Fieldas selected as number one the 2004 Reader’s Choice of Books in the business book journal, TOPPOINT. Visualization won the (Sixth) Nikkei Business Book Award.

www.isaoendo.com

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