Toyota Motor Corporation is a Japanese multinational corporation, and is considered the world’s largest automaker of automobiles, trucks, buses, robots, and providing financial services. The company adopts a philosophy in terms of its production system, which is named The Toyota Way.
Its philosophy in production involves a list of fourteen principles that are implemented in the company, and serve as guides to the operation of the company Resources Tangible resources Financial ResourcesToyota is the largest and the most profitable automobile manufacturer in the world. The company reported annual sales of $202 billion and net profit of $ 2. 4 billion in 2010. The company has cash equivalents of $43. 3 billion. The huge balance sheet and liquidity allows the company to employ cash easily and also to generate funds from outside. Organizational Resources Toyota has developed a powerful ‘dynamic capability’ in the form of consistently practiced ‘Rules-in-Use’ for organizational design, improvement, and adaptation. Spear, 2011) The firm effectively overcomes the problems of integrating functional know-how into new product development by the creation of cross-functional product development teams for new product development.
This helps to focus on all aspects on product launch simultaneously rather than sequentially and thus shortens the time to market. Physical Resources The company has factory all over the world to meet the demands of the local market and exploit the low cost manufacturing at several places.Due to its plants spread all over the world the company is able to synergize the overall demand faced by it and the low costs. Toyota is a pioneer in flexible manufacturing system (FMS) which enables it to produce a number of models at the same facility at a low cost. FMS allows the firm to respond the fluctuation in the demand of its models more quickly and efficiently.
Technological Resources Toyota has been able to manage its competitive advantage due to strong R&D in product development and especially in plant engineering & production processes.Toyota has been able to churn out products at rapid pace as it pioneered the use of platform system whereby multiple models can be formed on a same platform (chassis) by slightly modifying the platforms. This has helped to cut down the R&D costs drastically and bring the models to the market at quicker pace. The Just in time (JIT) lean manufacturing system was first adopted by Toyota and gives it a huge competitive advantage in terms of inventory management and production capabilities. Due to this, the company has been able to drastically reduce cost of inventory management.Intangible resources Human Resources Toyota is building both tangible (a new learning facility) and intangible (course content) structures relating to team member development that ensures a secure and steady flow of qualified human resources to conduct Toyota’s global business in the 21st century. Innovation Resources Toyota has always been a front runner in bringing innovative products and implementing new work processes. Being a proactive player has helped it to stay ahead of the competition.
For e. g. it was first to bring electric vehicle ‘Prius’ to the market and the competition is still catching up after a long time. There have been very few companies who have been able to implement “lean manufacturing system” as efficiently as Toyota. Reputational Resources Toyota enjoys a great reputation with the customers which has been based on trust developed over the period of time. The company has history of not shying away from its responsibility and making recalls even when customers are not aware of the problems.This has led to the customer perception about the company being honest and reliable Toyota name is synonymous with quality. The company has been able to do that by consistently delivering quality products to the customers at low cost and very rare problems.
Capabilities Manufacturing Toyota’s manufacturing capability – its system of “lean production” –integrates capabilities relating to the manufacture of components and subassemblies, supply-chain management, production scheduling, assembly, quality control procedures, systems for managing innovation and continuous improvement, and inventory control.The Just in Time (JIT) system implemented by the organization helps it to match raw material requirements to the production schedule. This helps the organization to keep the costs low and increase the profit margin. The excellent inventory management system helps the organization to maintain a competitive advantage over the vendors. Flexibility of their manufacturing processes could be used, not only to respond to environmental uncertainties, but also to change their competitive positions and, in some instances, even transform the nature of their industries (Hayes, 1996) Research ; DevelopmentToyota has mastered the application of lean principles not only in manufacturing but R;D as well. Further, the application of lean principles during the product development process is a critical, early enabler of lean manufacturing. Toyota’s product development system enables them to bring the highest quality products to market faster, and manufacture them more efficiently than most of the industry. Speed-to-market is achieved by maximizing effectiveness in both the product design and manufacturing stages.
Competencies Supply chain management is one of the core competency which enables Toyota to maintain a steady stream of raw material for the production even with a Just in Time (JIT) inventory system. This has helped them to maintain excellent inventory management system and on time production activities. Lean manufacturing system which helps to cut down on resource wastage other than value adding activities for the customer.
Toyota is considered a marvel at industrial engineering which has contributed the concepts like JIT and TPS which organizes manufacturing and logistics, including interaction with suppliers and customers The kind of culture developed in the organization helps the individual to see the process through this lens, that whether it adds value to the customer or not. Toyota enjoys excellent relationships with its vendors. The vendors at Toyota are considered as partners and Toyota helps in vendor development by both financial and non-financial steps.Toyota holds minority stakes in many of its vendors which helps in quality assurance for the products procured. Also the R&D of Toyota works in close collaboration of vendors and helps the vendor in manufacturing capabilities which results in a win-win situation for both the parties concerned. Another core competency is Toyota’s focusing on its product development technology under a single product-information-management program through standardizing and incorporating them.
Toyota has a fast-cycle new product development. It has been a front runner in developing common parts for the vehicles.Various models share many common parts and platform which brings down the R&D costs and shortens the ‘time to market’. No other organization has been able to do it better than Toyota. Toyota’s core competencies derive from its ability to blend its various core competencies across the whole organization. Toyota’s value chain activities, its linkages across them, and its linkages with the value chain of its suppliers are configured in such a way that they provide the Japanese competitor with a core competence or distinctive capability.
It is this capability which provides it with competitive advantage and which its competitors have found difficult to match. The underlying competence behind all this has been the culture of Toyota. The way Toyota has been able to do develop a consistent line of thinking among all the employees of different nations and origins which is exemplary. Toyota has always been open about its systems and procedures and yet the competition has not been able to catch up because, it may be possible to imitate the processes of an organization but it’s impossible to copy its culture.