Toyota Case

Francis Kirby

Toyoto Motor Corporation

7/27/2014

Introduction

Toyota Motor Corporation is one of the largest and most diversified auto manufacturers in the world today with supply chains and production systems that span across over 70 nations with sourcing, procurement and quality management systems unified to their manufacturing centers. The high enormous complexity within these operations have made it essential for Toyota to create the most advanced supply chain management systems globally, the Toyota Production System (TPS) (Dyer, Nobeoka, 2000). This system is the backbone of their entire operations and is so complete in its coverage of supply chain operations, it takes approximately one year to get suppliers up to speed and to the point of meeting quality standards on it (Toyota Investor Relations, 2012).

The TPS is a foundational element of the mission of Toyota as well. As is stated in the company's annual reports and on the investor relations area of their website their mission is "To attract and attain customers with high-valued products and services and the most satisfying ownership experience worldwide and in key markets including America " (Toyota Investor Relations, 2012),.

To attain these high levels of customer satisfaction, all aspects of the Toyota business model must be synchronized to deliver the greatest levels of reliability possible at the lowest costs. The vision statement of Toyota as also defined in their financial statements is "To be the most successful and respected car company worldwide and in key markets including America" (Toyota Investor Relations, 2012).

Despite the recalls that occurred in the 2010 and 2011 timeframe, Toyota continues to reinvest in and continually look for how they can best improve worldwide Total Quality Management (TQM) performance, taking into account House of Quality, Lean Six Sigma and quality functional management initiatives, all aimed at increasing the reliability of their vehicles by driving up the quality levels of suppliers (Takahashi, 2010).

Toyota launched an extensive internal audit of their own to determine the factors surrounding the recalls and learned that specific factories had taken shortcuts and at one point had not performed supplier audits of incoming components in well over two months (Minhyung, 2010).

Internally Toyota had lost sight of its core values of product quality within the plants that had been the catalyst of the faulty products being produced that led to the globally embarrassing vehicle recalls (Johar, Birk, Einwiller, 2010).

Toyota has a very analytical culture and took the lapse in quality as a major challenge to improve. This became the catalyst of a renewed emphasis on quality and an even more stringent level of supplier quality management processes, procedures and systems (Toyota Investor Relations, 2012).

The intent of this analysis is to evaluate the strengths, weaknesses, opportunities and threats of Toyota Motor Company. The strengths and weaknesses will be analyzed from the internal environmental perspective, and the opportunities and threats from the external environment standpoint. Of the most potentially debilitating factors the company is facing today, product recalls and product quality could have a very detrimental effect on the value of the brand over time, a factor Toyota mentions in their quarterly filings with the United States Securities and Exchange Commission (SEC), (Toyota Investor Relations, 2012).

As Toyota is a very analytically-driven organization that has a strong engineering emphasis, their filings with the SEC also indicate their greatest potential growth is ahead of them with their intensive spending on research and development (R&D) in hybrid and hydrogen vehicles (Toyota Investor Relations, 2012).

Presented below is an analysis of the strengths and weaknesses of Toyota followed by an assessment of their opportunities and threats.

Analyzing Toyota's Strengths and Weaknesses

Of the many exceptional strengths that Toyota has today, one of the most difficult to imitate by competitors is their Toyota Production System (TPS) that orchestrates suppliers globally, all unified to a demand-driven production schedule (Dyer, Nobeoka, 2000).

The accuracy and precision of this foundation for supply chain management, optimization and supplier quality management has been also responsible for the company having the ability to branch quickly into new technologies as well. The TPS is used for sourcing hybrid- and hydrogen-based technologies that quickly are incorporated into prototypes and the next generation of vehicles. The TPS has become one of the primary factors the company relies on to fuel its second major strength, which is its exceptional level of research and development R&D) expertise and ability to execute quickly across their global development centers, all orchestrated at being the leader in their chosen vehicle markets (Toyota Investor Relations, 2012).

The strengths that Toyota has in R&D is also seen in how well the company manages its diverse series of technologies, ranging from small, highly efficient internal combustion engines, to the large-scale truck and commercial vehicle engines and the latest advanced in hybrid technologies (Toyota Investor Relations, 2012).

The R&D prowess of Toyota is very significant and is considered among the most advanced throughout the global automotive industry today (Rechtin, 2010).

Another significant strength Toyota has is their pervasive production and distribution network. The extensive supply chain system is managed via the Toyota Production System (TPS) as mentioned earlier (Dyer, Nobeoka, 2000).

This specific strength is with regard to their network of production centers located throughout Asia, Europe, the United States and Australia (Toyota Investor Relations, 2012).

The Toyota production network is designed to minimize the latency or lag time between getting a vehicle produced and approximately 7,000 dealer locations Toyota has globally. By designing their production network to be aligned with specific market needs and requirements, Toyota has successfully been able to create a foundation for advanced Kanban and lean manufacturing production processes by unifying their production and distribution centers (Drüke, Grübner, 2010).

This optimizes the production center's efficiency and makes the entire manufacturing