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Toyota’s Organizational Structure Essay

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Updated: Jul 8th, 2021

Throughout its entire market history, Toyota Corporation has been referred to as the flagship of the automobile industry due to the genuine quality of its produce. The concern’s annual revenues for the year 2009 have exceeded those of Chrysler and General Motors (Camuffo & Wilhelm, 2016).

However, despite its quality standards being the highest in the market segment, the company faced massive recalls in late 2009 – early 2010, which seriously undermined its reputation. The present paper will study Toyota’s organizational structure in detail to figure out which drawbacks it may contain and what changes need to be made to prevent the issue from reoccurrence. Although the concern’s organizational structure is explicitly formalized, it is evident that new strategies need to be addressed to develop an efficient P-O-L-C framework.

An Insight into Toyota’s Organizational Structure

The concern’s inner structure is explicitly formalized in rules: Toyota’s board of directors consists of Japanese people only. The company owners openly demand that all of the established rules are to be strictly followed. There are certain categories of decisions that cannot be made anywhere except Japan. The company’s heads choose the Kaizen philosophy as their major guide in planning business strategies (Camuffo & Wilhelm, 2016).

This model calls for continual improvement of the company’s facets and stands behind all innovation initiatives. In addition to the mentioned philosophy, the founding shareholders successfully utilize the Genchi Genbutsu model involving on-site monitoring of business processes. To ensure the desired quality of produce, Japanese people attempt to watch over the entire process of production, from assembly to coating.

One of the organization’s rules confers employees a right to halting production if any error is detected. Initially, this directive was introduced as a counter means to reduce the percentage of flaw produces. Considering the events of 2009/2010, one might suggest that the board of directors need to go further in this direction and grant their employees a voting entitlement in the matters of a product recall as well. Camuffo and Wilhelm (2016) indicate that the company’s top managers are usually slow at reacting to external threats. It is, therefore, recommended that local branches are given more resources and autonomy in the process of decision-making. The provided opportunity would allow local managers to respond to non-standard situations with less time spent.

The Elements of Toyota’s Organizational Structure

The quality of products has always remained one of the distinct and most relevant features of the company’s operation. However, it is not the only element Toyota focuses on when arranging the corporate structure. While being a leader in the market segment, the corporation resorts to its organizational culture to fully utilize human resource capabilities when designing innovations (Camuffo & Wilhelm, 2016).

The concern also benefits from the featured Toyota Production System (TPS), which marks the company’s sustainable position on the market. The mentioned system has allowed the concern to significantly improve performance and sidestep rivals. In addition, it helped Toyota to pose itself as a unique automobile manufacturer.

Continuous improvement through learning is yet another important constituent of the brand’s recognition. The company has closely examined the situation with the recall of eight million vehicles and made satisfactory conclusions. The analysis showed that the concern’s fast-paced internationalization “affected complementarities among organizational choices in supplier management” (Camuffo & Wilhelm, 2016, p. 9). The corporation needs to redirect attention towards the issue with suppliers and add supplier management to its priority list as well.

Pros and Cons of the Company’s Organizational Structure

By analogy with any other organization, Toyota’s vertical structure has both pros and cons. One of the company’s major achievements is attributed to the presence of efficient management. The chain of command is arranged in a way that conflicts and duplications are reduced to a minimum (Camuffo & Wilhelm, 2016). Also, the fast execution of commands provides a quicker and less troublesome implementation of changes when compared to the rest of the market players. In terms of management, Toyota has always had an edge over its direct competitors.

Nevertheless, when analyzing the concern’s structure, one can discover several drawbacks. The greatest shortcoming is linked to the fact that the corporation relies on effective leadership only. Yet, little attention is paid to the personality of a leader himself/herself. With such kind of approach, the company may make a large strategic misstep by hiring a new CEO specialist who, however, has no strong leadership qualities. The decisions this person makes tend to affect the entire organization; poor decisions may lead to the loss of a favorable market position.

Another huge disadvantage is a slow reaction to external threats. As was mentioned earlier in this work, it takes too long for Toyota’s board of directors to respond to these threats due to insufficient communication within a company. Senior managers often have limited access to the founding parties, which, in turn, results in a slow transition of information, delays in the introduction of countermeasures, and an overall loss in revenues.

Changes to Implement

With regards to the planning, organizing, leading, and controlling (P-O-L-C) framework, Toyota’s managers need to make a series of changes to prevent the issue from reoccurrence. Changes in planning must be targeted at improving the products’ quality, which should always be superior compared to quantity. As Camuffo and Wilhelm (2016) point out, the company’s focus on growth resulted in a drastic decrease in quality and served as a cause of massive product recalls. By switching attention from numbers to consumers’ satisfaction, the corporation can have the occurring situation changed.

As referred to as organizing, the emphasis should be made on developing a new organizational culture. A pro-client culture would be the primary step at winning back consumers’ devotion. Safety and performance are the two factors customers are guided by when selecting a vehicle. Such issues as unintended acceleration or brake failure force buyers to question the company’s safety standards and brand’s credibility in general. The new culture must show that adequate conclusions have been made.

The concern’s leadership should also be subject to substantial changes. Instead of concentrating on home-based decision-making, the corporation should give more autonomy to its foreign branches. One should clearly understand that effective decisions are made with the consideration of the needs and preferences of local consumers (Camuffo & Wilhelm, 2016). In terms of control, Toyota should introduce a renewed performance assessment system. The manufacturer must prove that it produces premium-quality parts again and that it will never allow the issues with brakes and acceleration to reoccur. To support this claim, the company must skip the idea of hiring temporary employees and focus on long-term cooperation only.

Conclusion

Toyota’s organizational structure is explicitly formalized in rules demanding that all company standards are strictly followed. While the inner structure gives the manufacturer noticeable advantages over its competitors, some drawbacks undermine the concern’s market reputation. To those drawbacks, one may refer a slow reaction to external threats, limited communication between senior and top managers, lack of qualified leaders, and others. For the company to regain its leading market position, a series of changes need to be implemented within the P-O-L-C framework: prioritizing quality, altering organizational culture, rearranging assessment systems, and more.

Reference

Camuffo, A., & Wilhelm, M. (2016). Complementarities and organizational (Mis) fit: A retrospective analysis of the Toyota recall crisis. Journal of Organization Design, 5(4), 1-13.

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