ORGANIZATIONAL CHANGES IN

TOYOTA

Group 4, Section B
PGP/20/077 DEVESH PRASAD MISHRA
PGP/20/078 DHRUV BHATNAGAR
PGP/20/081 GUNUPURU NANDITA
PGP/20/090 MADHANI JAY
PGP/20/091 NISHANT PARTE
PGP/20/096 PARMAR VIVEK
 Table of Contents
OBJECTIVE ......................................................................................................................................... 3
BACKGROUND ................................................................................................................................... 3
CULTURE ......................................................................................................................................... 3
TECHNOLOGY ............................................................................................................................... 3

Levels of Technology at Toyota ..................................................................................................... 3

DOMAIN AND UNCERTAINITY .................................................................................................. 4
Toyotas Intensive Strategies .......................................................................................................... 6
TOYOTA ORGANIZATIONAL REVAMP - 2013 ........................................................................... 6
ANALYSIS AND SOLUTION DEVELOPED ................................................................................... 7
Key Advantages of the new structure: ............................................................................................ 8
Impact of re-organization of the structure on organizational culture.......................................... 8
TOYOTA ORGANIZATIONAL REVAMP - 2016 ........................................................................... 9
WHY THE CHANGE? ..................................................................................................................... 9
2016 ORGANIZATIONAL REVAMP ANALYSIS .................................................................... 10
Objectives of organizational restructuring: ................................................................................... 10

OVERVIEW OF NEW ORGANIZATIONAL STRUCTURE:.............................................. 10

Business units: .............................................................................................................................. 10
CONCLUSION ................................................................................................................................... 11
REFERENCE ...................................................................................................................................... 12
OBJECTIVE

To study the organisational structure changes in Toyota Motor Corporation throughout these
years. Also relate the study to the concepts of organisational structure of OB-II.

BACKGROUND

Toyota started in 1937, growing out of Toyoda Automatic Loom Works, headed by Sakichi
Toyoda. Toyota Motor Company was founded by Kiichiro Toyoda, Sakichi's son. Due to the fact
that Toyoda had a meaning in Japanese, it was decided, after a large contest, that the company
name would be changed to Toyota, which held no meaning in Japanese.

In 1950 the company experienced its one and only strike. This strike proved to be a major turning
point in the history of Toyota as Toyotas labor policies and management style emerged from this
stoppage. Both sides were firmly committed to establish the principles of mutual trust amongst its
members, a corporate philosophy that still guides Toyotas growth today.

The TMC currently boasts over 18% of American landscape for automobiles sold with respect to
market share. Moreover, the TMC is strategically positioned in over 180 and countries worldwide.

CULTURE
Toyota create and maintain a people-centric culture that sustains consistent growth, innovation,
profitability, and excellence. Toyota build the culture of continuous improvement by:

Attracting, developing, and engaging exceptional people

Encouraging problem solving at all levels of your organization
Making management accountable to employees
Inspiring your people to be committed to the company, family, and community
Turning your HR department into the arbitrators of fair and consistent daily practices
Using a top-down and bottom-up planning process to involve everyone in achieving
breakthrough goals

TECHNOLOGY

Levels of Technology at Toyota

1. Individual level: R&D employees must be technically skilled and innovative whereas for the
maintenance staff the knowledge about various machines is essential to say the least.
2. Functional level: different functions deploy different technology. For eg: Engine shop uses
batch process for the manufacturing where other departments might use
3. Organizational level: Focus is on leveraging information technology to integrate suppliers
and dealers to streamline the information flow across the supply chain. Also, ERP is used to
improve efficiency.
4. Technical Complexity: It is a measure of the extent to which a production process can be
programmed so that it can be controlled and made predictable to avoid any uncertainty in the
outputs achieved and also to bring in the much needed consistency to the deliverables. At
Toyota motors a high technical complexity is observed where in the conversion processes can
be programmed in advance and automated to the most extent.

DOMAIN AND UNCERTAINITY

The environment for Toyota Motor Corporation has been divided in the General and Specific
Environments like any other organization. For an organization like Toyota which has both
manufacturing and customer presence across many countries, the specific environment and the
general environment is different in different countries.

Figure 1 Domain Diagram

The Specific environment comprises of the following: -

1. Competitors- There is an intense competition prevailing amongst the automobile

manufacturers. The competition comes from global manufacturers like GM, Ford, Toyota,
BMW, Chrysler, Daimler, Honda, Nissan, Tata, Volkswagen, Volvo etc. and regional
manufacturers like Maruti Suzuki, Ssangyong, Citroen etc.

2. Suppliers They form the backbone of the entire manufacturing operation as over 70% of
the parts of a vehicle are procured from outside the organization. Toyota uses the keiretsu
mechanism to form symbiotic interdependencies.
 3. Government They decides on crucial matters like taxation policies, import-export
policies, land acquisition, labor laws, worker compensation welfare policies,
environmental policies and other things like, corporate social responsibility and capital
raising norms.

4. Customers - Taste and requirement of customers is different in different countries. For

instance, in USA, the preference is for vehicles like Sonata Hybrid (environment friendly
cars with latest technology), whereas in countries like India, the predominant preference is
for smaller cars like Eon, etc.

5. Distributors - They are a very important resource for the growth of the company. Since
purchasing a car is an expensive proposition, people prefer manufacturers based on
vicinity of dealership and service centers.

6. Unions They are the representatives of the labor force which is crucial to carrying out
the operations of the company. However, Toyota has had its share of labor unrest in 2014
which resulted a decrease of 50% in its production for that period.

UNCERTAINTY

1. Complexity- This is high when the specific and general forces are highly interconnected.
One example for complexity is the changing economic forces that causes a change in
consumer preferences and buying patterns. The continuing Economic downturn from 2008
to 2010 has changed the customer preferences from expensive local made cars to foreign
made brands.

2. Dynamism- This is high when the specific and general environment forces move very
quickly. Technological changes in this industry is very fast and unless companies adapt
quickly they will be rendered obsolete.

3. Richness- Resource richness is said to be high when there is an abundance of resources

available in the organizations domain. One example to point out to the lack of resources
could be the lack of skilled engineers in countries like India and China and for which is not
the case for firms headquartered in Germany

INTER ORGANIZATIONAL INTER-DEPENDENCIES

Toyota has been able to work in tandem with its suppliers as well as other support organizations to
ensure mutual growth. A few strategies which they followed are mentioned below
 1. Competitive Interdependencies
2. Symbiotic Interdependencies

Toyotas Intensive Strategies

1. Market Penetration.
2. Product Development.
3. Market Development.

TOYOTA ORGANIZATIONAL REVAMP - 2013

In January 2010 Toyota was forced to recall millions of cars after problems with brakes, floor mats
and acceleration pedals was identified in its vehicles. This led to a stop in the sales and production
of eight of its most popular models. Sales plummeted affecting company's position in the global
industry. Though there were quality issues involved but some analysts felt that the crisis
communication team of Toyota was weak which led to a delay in identifying and addressing the
situation.

Organization structure of Toyota which was centralized and the power was concentrated in Japan
(and US division could not take decisions independently) was also responsible for the accelerator
crisis. The limited power in the hands of American subsidiaries hampered the crisis management
process as there was only limited contact between the engineering team in USA and the sales team
responsible for collecting safety information.

So in order to strengthen its management structure toward realizing the Toyota Global Vision
announced in March 2011, Toyota Motor Corporation (TMC) announced that it will implement
executive, organizational and personnel changes. The new structure was based on a review of the
organization's way of working and making decisions, and aimed at achieving real competitiveness
and realizing sustainable growth and thus improve decision making and crisis management.

Subsequently in April 2013, Toyota optimized its organizational structure in an effort to better fulfill
the Toyota Global Vision by manufacturing ever-better cars. Together with the four newly
established units encompassing the automotive operations, the TNGA Planning Division was
supposed to be responsible for driving medium- to long-term technology-based product strategies
under TNGA, while the Product and Business Planning Division would focus on generating market-
based product and business strategies.

The issue of centralization of decision making led to some serious problems faced by Toyota in the
past which ultimately resulted in the reorganization of the structure of the company. This issue is
not limited to Toyota only. In fact it is a common problem faced by many multinational companies.
Thus it is imperative to understand the subject matter and analyse the solution proposed.

ANALYSIS AND SOLUTION DEVELOPED

Toyota moved from centralized global hierarchy structure to a more decentralized global structure.
Here is a look at the new structure

Figure 2 New Structure

This new structure has the following main characteristics:

1. Global hierarchy: Toyota has still maintained the global hierarchy structure however the
decision making abilities of regional and business unit heads has been increased. It is a lot
less centralized than before.
2. Geographic divisions: There are 8 horizontal regional divisions as part of Toyota No. 1
and Toyota No.2 (Japan, North America, Europe, East Asia and Oceania, China, Asia and
Middle East, Africa, and Latin America and Caribbean). Each regional head reports to the
companys headquarters. This brings the ability to tailor products according to a region.
3. Product-based divisions: The company has four divisions which have been divided based
on the separate business-models each division will follow:
(a) Lexus International which meant to promote the Lexus brand as a separate in-
house company
(b) Toyota No. 1 for operations in North America, Europe and Japan where the focus
is on capturing replacement demand in a stagnant market by expanding sales and
incorporate advanced technologies in fields such as environment and safety.
 (c) Toyota No. 2 for operations in all other regions where the focus is on capturing
new customers by introducing appropriate products that fit market needs in a
growing market.
(d) Unit Center, which is responsible for engine, transmission and other related
operations and encompasses all operations from components planning to the
development of production technologies and functions.

Key Advantages of the new structure:

Greater degree of flexibility compared to the old centralized hierarchical
organizational structure.
Better capable to responding to regional market conditions.
Response time to product quality issues decreased and promotes growth.

Impact of re-organization of the structure on organizational culture

Following its reorganization implemented in 2013, Toyotas organizational culture underwent
significant change. Prior to 2013, its organizational culture emphasized a sense of hierarchy and
secrecy, which translated to employees perception that all decisions must come from the
headquarters in Japan. However, after 2013, the new organizational culture comprised of the
following attributes:-

Teamwork Toyota started using teams in most of its business areas. One of the companys
principles was that the synergy of teamwork leads to greater capabilities and success. This part of
the organizational culture emphasized the involvement of employees in their respective teams.

Continuous Improvement through Learning - Toyotas new organizational culture facilitated the
development of the firm as a learning organization. As learning organization it utilized information
gained through the activities of individual workers to develop policies and programs for better
results.

Quality - Quality became the heart of Toyotas organizational culture. The success of the company
is typically attributed to its ability to provide high quality automobiles.

Secrecy -Toyotas organizational culture has a considerable degree of secrecy. However, the level
of secrecy declined following the reorganization of the company in 2013. Before 2013, information
about problems encountered in the workplace had to go through the firms headquarters in Toyota
City, Japan. However, following the reorganization, the companys organizational culture did not
emphasize secrecy as much. For example, problems encountered in US plants were now
disseminated, analyzed, and solved within the North American business unit of Toyota.
Implications of Toyotas Organizational Culture

Quality improvement and problem solving through teamwork

Enhancing organizational flexibility and facilitating rapid problem solving.

TOYOTA ORGANIZATIONAL REVAMP - 2016

WHY THE CHANGE?

So far only three car makers have neared or hit the 10 million annual sales plateau General
Motors Co., Volkswagen AG and Toyotaand each has stumbled technically or financially in the
aftermath. In 2009, as Toyota approached the mark, it was hit with complaints of unintended
acceleration that led to millions of recalls and a $1.2 billion settlement of a U.S. criminal
investigation.

As per 2013 organization structure, one unit handled developed markets, a second dealt with
emerging markets, and a third oversaw important components such as engines and transmissions.
The fourth contained Toyotas Lexus luxury division. The division into 4 units was to ensure that
each unit could apply the most appropriate business model and aim for steady growth. The plan was
to clarify operations and earnings responsibility and to speed up decision-making. The automaker
also implemented major structural changes in 2011 with the aim of promoting autonomous region-
based management.

Over the past several years with million mark sales, Toyota has faced numerous challenges,
including large-scale global recalls due to parts defects. The recalls tarnished Toyota's reputation
for quality and raised questions about its ability to respond quickly to customers' concerns. With
these changes in organization favouring a product-based structure, Toyota is seeking to address
these quality issues and simplify work processes, which have in many cases involved a
disproportionate amount of time and effort as a result of the cross-functional co-ordination currently
in place. The company's most recent large-scale recalls have been over issues such as faulty
seatbelts, power-window switches, and Takata airbags.

Bigger was better in the past, and thats why we were all expanding, one senior executive at Toyota
said. But at this scale, weve come to a point that being too big is perhaps not a good thing. Since
the Japanese automaker sales more than 10 million of vehicles, it needs better organizational
structure.

2016 ORGANIZATIONAL REVAMP ANALYSIS

With the 2013 revamp, the increased decision-making power of regional heads has reduced
headquarters control over the global organization. Now Toyota Motor Corp. was considering a
management structure that groups businesses according to the product type in a shift away from a
focus on geography. The move marks Toyota's second biggest management overhaul . Toyota has
given these companies as much autonomy as possible, including human resources, external affairs.
Presidents of each company now have more authority and Toyota is aiming to nurture next-
generation leaders by making this change.

The goal is to cut costs to free up resources to develop cars that are lighter, more fuel-efficient and
packed with new technology. The fundamental goal of this overhaul is to create a company built
around product-based organizations, rather than function-based organizations. Doing so will enable
the dissolution of barriers within the company and eliminate unnecessary coordination work, thus
helping to ensure that all team members efforts will be leveraged toward the purpose of making
ever-better cars and developing a talented workforce.

Objectives of organizational restructuring:

To link work processes ranging from R&D to manufacturing, thereby enabling the
development of ever-better cars and strengthening TMCs workforce
To enable individual business units to make decisions more quickly and independently
To strengthen the functions responsible for formulating mid-to-long term objectives and
corporate strategies

OVERVIEW OF NEW ORGANIZATIONAL STRUCTURE:

Business units:
1) Creation of product-based in-house companies :- Seven product-based in-house companies
will be responsible for short- to mid-term product strategy and development.
 Innovative R&D and Engineering Company
Toyota Compact Car Company
Mid-size Vehicle Company
CV Company
Lexus International Co.
Power Train Company
Connected Company

R&D, production engineering, and manufacturing operations, which are organized by function at
present, will be divided into advanced and mass production categories, and then allocated to
each company. Toyota Group affiliates responsible for vehicle development and production will
also contribute to these in-house companies where necessary. To help streamline operations from
planning through to manufacturing, full responsibility and authority will be given to the president
of each in-house company.

2) TMCs two region-based business units, Toyota No.1 and No2, will be maintained and
strengthened

A strong local presence in markets around the world will continue to allow Toyota to engage new
fans and build strong regional operations. TMCs existing region-based business units, Toyota No.1
and No.2, will serve to check and balance the operations of the new product-based in-house
companies.

CONCLUSION

So, with this change, the organization is able to keep up with the rapid growth it was aiming for, in
terms of communication and coordination at each level. The centralized structure is now delegated
to divisional levels and product groups. Now it is less bureaucratic and decentralized. This would
eliminate the problem of highly bureaucratic process. It made Toyota more nimble and responsive,
streamlining work processes on a company-wide basis.

Now it could focus on long term strategies, concentrate on research and development and
future growth with this kind of organizational structure changing from divisional and functional
level to product level.
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http://www.autonews.com/article/20140525/OEM11/305269965/what-toyota-learned-
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https://hbr.org/2014/03/the-crisis-management-lesson-from-toyota-and-gm-its-our-
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http://www.autonews.com/article/20160118/COPY01/301189930/toyota-mulls-new-
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