A cross cultural management study on Toyota

The aim of this paper is to identify what role culture has played in the organizational structure and management technique of Toyota.

Toyota is now the world’s leading automobile industry, knocking out rivals car maker; General Motors (Marr, 2009). The Toyota Motor Company was established in 1937 and 30 years later it entered the US market in 1967. By 1980, the company already had about 20% of the US car market as the indigenous car companies started experiencing customer dissatisfaction. The company based its entrant strategy into the US on the following;

Fuel efficiency as compared to ‘gas guzzling’ American cars

Environmental friendliness

Superior build quality

The introduction of the luxury-car line

The real reason for the company’s success nevertheless was based on the introduction of Japanese style of production, operation and management. According to Liker and Morgan (2006), management principles must extend beyond the shop floor as they do at Toyota.

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The ‘Toyota Way’ is a set of standards that harness the Toyota (Japanese) culture. These standards are applied by the Japanese in virtually all their dealings. Although they are moderate by nature hardly showing emotions, they are still very thorough and they apply the successful cultural traits in almost everything they do. The most important aspect of Toyota America is the techniques the company has used to stay successful given the obvious cultural differences between Toyota Japan and its biggest foreign subsidiary. The Japanese and the Americans have distinctly different business cultures however; the company has been able to work in harmony for decades. The major differences are; communication skills, winning attitude, methodology of maintaining strategies etc for both the countries – Japan and United States. Thus, we can say that while establishing a new company in host country culture is highly important.

HOME-COUNTRY BUSINESS VALUES (JAPAN)

Managerial Autonomy and Long-term Planning

Very often, Japanese employees are engaged to the companies for ‘lifetime employment’. It is therefore probable that managers are not pressured to meet requirements financially and employee related.

Corporate Rigidity and Hierarchy

Japanese companies like Toyota are very hierarchical in nature and as such have distinctive and autonomous power bases. The roles of top managers are defined and incline towards strategic development of the company. The business unit managers are the ones responsible for initiating and supervising new projects.

Participatory Decision-making

The practice of exploring ideas of employees by senior management is known as Nemawashi in a given project. The idea behind the Nemawashi is to obtain participation of all employees in the decision-making process. The Japanese style of management is a bottom-up approach as compared to the rather autocratic top-down style of management.

HOST-COUNTRY BUSINESS VALUES (UNITED STATES)

Low Context

There is more or less an uncongenial nature of communication in American organizations. Expectations of employees are communicated in competency statements or the criteria of their performance. On the other hand however, the Japanese may be more contained in their communication.

Individualism

Employees and indeed managers in the United States are often defined by their personal achievements and place little importance in group achievements. Americans also do not place much value on trust as they are likely to engage in business with strangers not necessarily friends or family unlike their Japanese collectivist counterparts.

Free Will

Americans generally have more free will and are less accepting of fate. They are more inclined to change and affect their work environments.

BASIC FEATURES OF JAPANESE AND AMERICAN MANAGEMENT TECHNIQUES

JAPAN

UNITED STATES OF AMERICA

Rotation of jobs

Performance of tasks

Generalist roles

Jobs are defined

Collectivist

Individualistic

Protection of employees

Human Resources

Rationalism

Rational management

Pragmatic

Strategic management

Innovation of work groups

Specialist know-how

(Adapted from Thurley and Widenius, 1989)

HOFSTEDE’s THEORY OF CULURAL DIMENSIONS

In the mid 1970’s, Geert Hofstede, the Dutch academic , carried out an extensive survey at IBM and introduced his ‘theory of five value dimension of culture’ through which he investigated the influence of national culture. In his theory the organisation culture is defined as “an idea system which is extensively shared between organisational members”. A definition of culture and how culture can be measured by managers of international organisation according to their country’s values and norms was provided by Hofstede.

It was discovered that employees from related national cultures work in similar fashions, thus the chance of internal conflict could be reduce. Hofstede’s model is an important tool that helps managers to maintain cross-cultural relations and understand differences in value sets and behaviour.

The following diagram shows the five dimension of Hofstede theory:

Source: http://www.provenmodels.com/11/five-dimensions-of-culture/geert-hofstede

CULTURAL DIMENSIONS FOR JAPAN AND THE UNITED STATES

Power Distance

This is the level of power which is equally distributed within the society as well as its degree of acceptance by society. Cultures of high power distance prefer hierarchical bureaucracies, high regard for authority while low power distance tends to favour personal responsibility and autonomy (Geert Hofstede, 2003).

The diagram shows Japan is greater accepting of power inequality than USA. But both countries are below the world average (WA).

Individualism Vs Collectivism

This is the level of individual and group interest for different actions. Cultures of high individualism highly value free will but in a collective culture group needs are more significant than personal needs. (Hofstede, 2003)

According to this graph, USA is the highest ranked country of the world for individualism. Americans greatly emphasize personal interest and individual decision-making as well as seeking positive benefit for the individual. In contrast, Japan has a collective culture also below the world average of individualism. Japanese prefer group work and group decision making and try to seek the best group outcomes.

Masculinity Vs Femininity

It measures the degree of goal orientation of the society. Social status, position, success, money these all are view in masculine society. On the other hand, feminine cultures emphasize human relations and quality of life (Hofstede, 2003).

With comparison to USA, Japanese society is considered to be more masculine. It is a male dominating society where work, status, money taking priority over personal life and families. On the other hand, Americans have more relaxed lifestyle and showing concern for others.

Uncertainty Avoidance

Cultures of high uncertainty avoidance allow individuals to manage well with risk and new innovations on the other hand greater job security and high level of standardization appear low uncertainty culture. (Hofstede, 2003)

According the Hofstede cultural dimension, a significant contrast between America and Japan can be seen in uncertainty avoidance. Japanese are more concerned with rules and regulations and less informality, but in contrast Americans are less concerned with rules and regulations, they like to take more risk and are quite happy to make their own decisions.

Time Orientation

The level of which a society does or does not value the commitment for long-term and respect for tradition that significantly hampered institutional change (Hofstede, 2003).

One of the main discrepancies of American and Japanese culture is time orientation. The diagram shows Japanese prefer long term well planning for long term rewords. In contrast Americans more likely to prefer short term planning, goals and rewards.

TROMPENAAR’s THEORY

Another important tool of measuring the cultural discrepancies is Trompenaars’s value dimension which is defined by Fons Trompenaars and Hampden-Turner. They used a database of more than 30,000 results to define a set of dimensions during their cross cultural studies. According to Trompenaars and Hampden-Turner (2005) there are seven main dimensions of cultural discrepancies.

Universalism vs. Particularism

Communitarianism vs. Individualism

Neutral vs. Emotional

Defuse vs. Specific cultures

Achievement vs. Ascription

Human-nature relationship (internal vs. external control)

Human-time relationship

Using some of the selected Trompenaars’s value dimensions there are some examples exist between cultural differences of America and Japan. As a neutral culture, Japanese people show little emotion in business discussions, where as USA has an affective culture. Body contact, emotional expression and norm are part of the American culture.

In defuse culture the authority level at work reflects into social culture and in specific culture the authority has completely different relation with each social group and business and private agenda is completely separate.

In addition, American culture is said to be more specific-orientated. Workplace and personal life is completely different in American culture whereas in Japan both linked with each other and it is diffuse-orientated society. (Peterson, et.al 1989)

Americans place more interest on contracts and are also known as universalistic. However, the Japanese are particularistic, believing interpersonal trust and relationship build-up; friendship comes before the contracts in Japanese culture. Japan is also known as an ascription society where people are rewarded on their background not on their individual task whereas Americans are focus on individual achievement. (Peterson, et.al 1989)

Finally, Japan and America both consider the ultimate goal of negotiation to be a contract. Both have high time sensitivity and believe in building agreement in top to bottom. Japanese believe in win-win negotiation and American’s prefer win-lose situation. Furthermore, Japanese approach of negotiation is very formal compare to Americans. (Peterson, et.al 1989)

GLOBALISATION AND LOCALISATION STRATEGY OF TOYOTA

Several researchers have suggested that different cultures have impact on strategic decision-making. The market strategy of Toyota is constantly improving to align with the ever-increasing customers’ needs in host countries. The organisation is improving their strategy in terms of products and services to make their customer more satisfied. Toyota the world’s largest automobile company has various products and services to satisfy customers’ needs.

Moreover, Toyota in Japan expanded the company to U.S and it has found success and has been one of the largest automobile companies in U.S. The US already had leading carmakers like GM and Ford but Toyota was still able to penetrate the US market. The Japanese giants found that it was important to use the globalisation strategy in order to expand the company to the U.S. Toyota Japan has learnt the culture of people in U.S including their behavioural patterns in order to determine how to relate with them. Globalisation is the strategy that companies have to adapt their product and service to suit with culture and people’s behaviour in the country that the company is entering. Some companies use the standardisation strategy with their business where the company can sell the same standard or design in its host country as well as in the host country. Toyota however, is very sensitive to their host country and builds its designs around the taste of the American people. This has proven to be more satisfactory for customers and has helped the company out-shine its other competitors.

Localisation is the other way that Toyota has found useful for business in America. Localisation is the strategy that relates to the products and services and it includes evolving the management of company. For example, Toyota brings the local information in managing strategy plans for company. This makes local people have the involvement in the making decision-making process and also can engage in strategy plan with company. Meanwhile, this strategy can also make a relationship with local labourers; create more networks with local producers or manufacturers including creating image of local company. This might be helpful for the company to build a consumer confidence for its brand and products. Localisation helps the positioning of the company and the product evolution as per local market demand. For example when Ford entered the UK market they used their American standard of left-hand car steering while UK consumers are used to right hand drive and this eventually resulted in failure of product in UK. Also localisation involves having a better understanding of the market demand and thus having an efficient management team co-ordination. Toyota has been successful in understanding the customer needs and has also been able to implement both technologies with adaptation to localise needs.

MANAGING ISSUES IN TOYOTA (JAPAN AND THE UNITED STATES)

Japanese management techniques like cellular technology (CT), just-in-time (JIT), total quality control (TQC), and employee participation (Bratton, 1992) have contributed immensely to the success of Toyota America. The Americans presume the Japanese style of management was probably contributory to the success of Toyota Japan hence their eagerness to restructure and re-engineer (Schneider & Barsoux, 2003 p109). In Toyota, problems are not treated as a ‘one-time glitch’ (Treece, 2006), rather they get to the root of all problems to avoid reoccurrence. This in essence is the Japanese culture of thoroughness in all aspects of their lives.

The Japanese attitude to quality has been applied in Toyota’s manufacturing. They operate a system of ‘zero defect’ to avoid releasing sub-standard products (Bratton, 1992). This was a key element in Toyota’s strategy in the United States which increased their success among Americans. Therefore, the application of ‘Japanization’ in Toyota’s strategy contributed to the success. The Japanese are known for their high productivity and this trait has been applied in Toyota America.

The Japanese style of their human resources management in a very unique and is depicted in the following diagram.

Figure 1.1

Core themes of the

Japanese approach to

people management.

(Adapted from ‘Japanization at Work by John Bratton)

Selection and Development

Toyota tends to select individuals who are interested in building up a long-term relationship with the company. The idea under-pinning this is their employees in the US will be more productive if they have a long-term commitment to the company. Potential employees that are excessively individualistic will more likely not be hired because of the collectivist nature of the Japanese culture. The Japanese culture embraces moderation in behavioural patterns.

Lifetime Employment

Although lifetime employment is not a contractual obligation, it is a culture that affects the behaviour of all Toyota staff as they see themselves as an integral part of the organisation. Thus, they tend to be more productive.

Seniority-based Rewards

The seniority based system of reward known as the nenko joretsu is a system of rewarding employees based on the length of time they have committed to the company. It is very common to have more elderly employees in managerial positions in Toyota both in Japan and the US.

Consensus Decision-making

The view-points and inputs of individual employees are highly valued in Toyota. The integrated work teams tackle issues affecting the organisation as a whole. This management technique is known as the ringisei approach.

Enterprise Unions

The ‘enterprise union’ is influential more in Japan as the employees of Toyota America belong to the ‘national union’. However, the idea of this management philosophy is that it creates ‘company consciousness’ rather than ‘union consciousness’ (Bratton, 1992).

To incorporate both cultures in the management of the company, Toyota not only hires Americans to work in Toyota America but they also hire some to work in Toyota Japan. This started in 1983 with the aim of letting the Americans understand the unique way that Toyota Japan operates (Chappell, 2007). The Japanese are less secretive with their operation strategy as they want their Toyota American counterparts to understand and inculcate the Japanese level of efficiency and quality.

There appears to be a seamless working relationship between employees of Toyota in Japan and America as many of the initial cultural barriers have been overcome. As early as the 1970s Toyota realized the need for cultural harmony between both countries and inculcated this into advertisements for the company (Yasuhiko, 1980). This strategy created appeal among the company’s American consumers. The idea was to break cultural barriers by coming off as a Japanese company as well as an American company.

In the aspect of decision-making, Toyota America operates a top-down approach as employees are assigned tasks rather than having increased input to the decision-making process (Dedoussis, 1995). This can be related the high power-distance in the Japanese culture.

According to Dedoussis (1995), “the Japanese management may be approached as an issue of devising appropriate managerial strategies for different segments of the global work-force in Japanese multinational corporations”. Perhaps more than any other country, the Japanese understands the importance of cultural fusion rather than mere domination. Japanese multinational corporations did not just saddle their American counterparts with their organisational and management culture rather special socialisation techniques were employed to ensure a seamless coordination (Florida & Kenney, 2000). Although it is uncommon for Japanese senior staff to socialise with the junior staff, Toyota America employed “the concept of ‘community of fate’ in which employees and employers are joined” (Gough & Fastenau, 2004).

CULTURAL SYNERGY OF TOYOTA

“Americanization is going on in every facet of our business” says Yoshi Inaba a senior managing director at Toyota (Taylor III, 2003). The Japanese despite having very strong cultural values realised quite early that one of the keys to successfully dealing with American customers and employees is cultural harmony. The culture of American for instance is that a good number of women are in the corporate sector and have even attain managerial positions while in Japan, women are only starting to be prominent in same. However, in Toyota America, women account for a fair number of the employees.

Also, the company realises that in order for it to be truly a multinational enterprise, top management positions need not be occupied by only Japanese. ‘American and non-Japanese executives are being placed closer to the centres of power at Toyota’ (Taylor III, 2003). This is important there is equal opportunity for all employees and rewards are based on merit rather than ethnicity.

CONCLUSION

In conclusion, we have established that Toyota is successfully managing the cultural differences between the home country (Japan) and its biggest host country (the United States). The cultural differences between Japan and the United States are such that the importance of cross-cultural management cannot be over-emphasized. It is also important to note that Toyota is sensitive to the cultural barriers and has taken steps to improve synergy between both cultures. The geographically decentralized structure of Toyota has proven it to be a truly multinational company. 

It is important for corporations to rectify any inherent lack of communication between the host and home countries as it affects development and growth. Toyota is doing quite well in that regard and its management techniques have been accepted as a benchmark of quality worldwide. Perhaps the management of Toyota has mastered the art of cross-cultural management