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In Automobile Industry, Toyota as a car manufacturer needs no introduction. Founded in 1937 by Kiichiro Toyoda, initially wanted to manufacture cars but was making military trucks as he was compelled by Japanese government. Toyota actually started attracting the world from 1980.The strange thing is none of Toyota cars have flashy designs or attractive performance. But they are engineered to excellence and refined quality integrated in them. These qualities asked the customer to come back when he thinks of his next car and a new customer to think of Toyota when he thinks of his first car. In fact these are the qualities which made money for Toyota when most of its competitors were almost bankrupt. Toyota had framed such an image for itself, which the other car manufacturers only dream to achieve in a decade or two from now. Interestingly their approach to achieve this was strikingly simple. Taichi Ohno, the father of Lean management answered this question as "All we are doing is looking at the time line," he said "from the moment the customer gives us an order to the point when we collect the cash. And we are reducing that time line by removing the non-value-added wastes."(Taichi Ohno).Starting from this approach emerged many efficient manufacturing techniques which revolutionised the global manufacturing industry. According to Norman Bodek, The most important objective of this Toyota's production system is to increase production efficiency by continuously eliminating waste. And as a result Toyota was a runaway success. Be it the hybrid technology or Electrical fantasy or the much hyped Hydrogen generation. Toyota leads the way and acts as an example for others to follow. This report is a comprehensive analysis of Toyotas orientation towards the market place, its marketing mix, its strengths and weakness which influence its sustained competitive advantage.
Toyota's Drive to Success
Toyota is among the leading companies in the automobile industry. The quality, performance and the styling of their products reflect its brand name from other corporate giants. It mainly works with Japan as its base. It has its manufacturing unit in Japan which acts as a base for its various operations. It slowly expanded its presence to various parts of the world grabbing customers' attention. To slowly managed to pull itself above all its competitors by grabbing a better place in the automobile industry.
The current economic conditions affected various companies in the world and Toyota is one among them. The products developed by this industry are costly as they have additional special features and comforts. In the current economic crises customers are not looking forward to spend more money. In order to attract more customers Toyota must cut down its production costs and decrease its final product cost to gain lot of customers.
Customers are mainly attracted to Toyota due to its quality. But as they are concentration more on developing more and new products every year they are slightly distracting from their quality. Defects in the quality are affecting the components like warranty, service and performance which drop its brand value. This is driving away the customer's attraction from them.
The decline in its quality minimised its sales and ultimately the company lost its revenue at a high level. The current recession ignited this scenario. As the world is stepping out of recession and the economy is improving it is the best time for the company to move out of this situation by developing their products with high standards and reduced costs. This can help the company to capture the market. The product's promotion depends on the place as well as the standard of the product. This can help the company in retaining the top position in the market.
In the new series of vehicles manufactured by Toyota there is range of vehicles which encounter the problem of accelerator pedal sticking abruptly which has resulted in many fatal deaths and injuries. Toyota had to face round about $2billion loss due to this problem of accelerator pedal sticking. This problem resulted in 43 fatal crashes, all were Toyota vehicles out which 52 fatal deaths and 38 injuries were encountered. This has cost Toyota a huge damage from all sides, as in its brand name reputation, huge losses to company's profit & also need to explain to media and government. Toyota decides a solution for this problem by giving a recall in which they will be providing solutions to all already sold vehicles in market involving this problem without any penny charged to their customers.
Root cause of the Problem
The cause of the problem is some kind a friction device used to provide the driver a feel of accelerating by adding a resistance material to gain stability of pedal. This friction assembly has a "shoe" which rubs against the adjoining surface during its operation. Due to wear and tear and environmental conditions this friction material may begin to get locked or stick instead of free release. Sometimes the friction may increase to such an extent that pedal returns very slowly to its idle position, even harder to depress and when the abrasion is very intensive the pedal may stick, leaving throttle partially open. Which leads to unintended acceleration which means that even after stopping accelerating the will be still accelerating.
Toyota engineers have given very simple & effective solution towards it which is tested and executed first by them and than implemented. In order to eliminate increasing friction caused, a precision cut steel enforcement bar is installed in accelerator pedal assembly which will terminate this problem which is aroused in rare cases. This steel enforcement bar will reduce the surface tension between the adjoining surfaces and shoe thereby avoiding harder depression and sticking of pedal. Since this solution is already tested rigorously, Toyota assures their customers that it is safe and sound and nothing is more important to them than their customer's safety and satisfaction. The problem is encountered only in those accelerator pedals supplied from a particular supplier therefore is the reason for only few models to encounter this problem and not all manufactures products of Toyota.
Competitive Advantage of Toyota
Since its inception after the second world war Toyota has framed such a differentiated image for itself in the car industry. This image provided Toyota a sustained competitive advantage for about more than 70 years. Many authors attribute this success to 'Toyota Production System'. This system minimises cultural and physical differences which helped Toyota to explore new countries successfully.
According to Fred J.Borch corporate principles are the umbrella principles which guide the decisions and activites of an organisation. Toyota operates on a strikingly simple but powerful principle that is to build highest quality, safest an most reliable automobiles in the world. As Toyota operates on lean management principles its advantage further got maximised. They are many other car makers which have entered into foreign markets and established a global presence but none has succeded as Toyota.The other major advantage Toyota has it is human resources strategy .It engages an employee to such an extent that if any worker on the shop floor finds a problem with the production he can pull the andon cord which stops production. Toyota feels that engaging an employee to such an extent increases responsibility and creates a sense of belonging among the workers. Though its Japanese counterparts Honda and Nissan are also branded for producing high quality cars .Toyota maintains the competitive edge through its efficient. Competitive advantage in automobile industry is all about delivering high value to the customer and providing exceptional customer care. Toyota has mastered the art of competitive advantage as no other company it is reputed to provide world's most safest and reliable automobiles with lowest maintenance cost when compared to industry average. This is one of the main reasons why though Toyota operates on a cost leadership strategy it uses premium pricing policy thereby maximising its profits. Toyota is also well known for its attention to detail a classic example for this nature is launch of its mobility program. Mobility program is aimed at disabled customers to get inside the car easily. Toyota has noticed that the disable people are finding it difficult to get inside the car. So it has designed the seat to come outside seat the disabled customer and take him in.
This is one aspect of Toyota which has contributed to such considerable success. Toyota has a strong eye on competition. This is one of the strongest quality which a car manufacturer should be having. The recent debacle of General motors also happened due to the same reason. According to Financial Times GM was concentrating on insensible designs and ignoring competition. Toyota provides an exceptional after sales support it infact maintains a owners club where owners can post their reviews, complaints, comments and suggestions. Which would be acted very promptly upon. Its supply chain management is also one of the main important factors which contributed this success, Toyota has a network of 300 component suppliers who provide Toyota with high precise quality. As they operate on JIT principles they can keep the inventory low maximising profitability.
Improvements to maintain competitive advantage
New Quality testing strategy
Toyota will have to adopt a better testing procedure in future so that recalls that have happened will not happen in future. Evidence shows most of the recalls have happened in plants situated outside Japan. The attention to detail which is widely inculcated in its Japanese plants should be bought to the other plants as well.
Senior managers at US should be sent to Japan to learn the quality procedures they adopt. Similar approach was followed by its Japanese counterpart 'Nissan'. Nissan UK has sent a team to Nissan Japan to study the quality procedures and have seen that the defective rates have fallen to less than 100 ppm(parts per million).
Another idea of improving these procedure may be outsourcing this function to a reputed testing agency like 'Lloyds'.Evidence suggest that many international manufacturing companies have improved their quality by many folds by using this strategy.
A consolidated supplier evaluation procedure
It is a well known fact that in every car on an average 60-70% of parts are supplied by suppliers.So understandbly suppliers are an integral part of success in an automobile Industry.A defective part supplied by an auto supplier would badly affect the reputation.Even the latest recall that badly affected Toyotas reputation because an of an incompetent supplier based in United States.This step is critical to business success in Auto Industry. Toyota should adopt more rigourous evalutaion procedure, strict norms of quality and maintain good relation with them as their success majorily contributes to Toyota's Success.