You know Japan’s world is upside down when the fabled Toyota Motor Corp. is a global laughingstock. A name once synonymous with quality has fallen so far that Americans are actually rushing out to buy Detroit’s clunkers.
On Tuesday February 9th Toyota said that it would recall over 400,000 Prius and other hybrid vehicles worldwide to address problems with their brakes. On Tuesday February 9th Toyota said that it would recall over 400,000 Prius and other hybrid vehicles worldwide to address problems with their brakes.
Toyota needs to reverse course, and fast. Too bad the “For Dummies” book publishers have yet to add “PR-crisis” to their stable of how-to titles. Toyota needs all the help it can find. As this costly tale unfolds, it’s worthwhile to take stock of some early lessons for corporate Japan. Here are five.
Toyota Motor is no stranger to cost-cutting. In recent years the automaker has slashed expenses by as much as $3.3 billion annually by implementing thousands of changes suggested by employees and keeping a tight rein on spending. In light of facing its first loss in 70 years, Toyota is trying to squeeze out an extra $1.4 billion in savings, and it looks as if nothing is sacred.
Workers are being encouraged to take the stairs rather than elevators, to save electricity. The heat in factories has been turned down, so workers are now wearing extra sweaters to stay warm. And on Jan. 19, Lexus engineer Takayuki Katsuda and two colleagues drove from headquarters in Toyota City to Tokyo for the Japan launch of the Lexus RX sport-utility vehicle. Though the trip took four hours, vs. 90 minutes on the Shinkansen bullet train, they saved about $300 in train fares. Source: Businessweek
This week is a legendary week for Toyota, the Japanese automaker. They surpassed General Motors (GM) in worldwide sales figures posted in the first quarter of this year.
There is a wide discussion among industry experts and executives on the fairness of Toyota’s success. However, one thing is sure this pole position doesn’t seem like a one hit wonder but a sustainable success. Toyota is still pressing forward and is riding on the wave of environmental-friendly cars. I’m keen to see what will happen in de global car industry for the upcoming years ahead [source].
Companies like HSBC, Samsung Electronics, and Ranbaxy Laboratories all champions from emerging markets have followed similar paths to global success. Each of them first forged distinctive ties in the difficult circumstances of its home market and then mastered the art of transferring its business DNA; the core skills and supporting organisational culture that help it make money, reliable, in diverse markets.
To pull of this trick, a company must train – and then trust – a cadre of global managers who understand its distinctive capabilities but are also independent enough to modify them to fit local needs.
Thus, to succeed in the wider world, a company must develop a cadre of talented international executives who carry its DNA – core skills and organisational culture – and have experience in diverse markets. After recruiting these men and woman, often from business schools around the world, leading global corporations use extensive apprenticeships and formal rotations through a wide range of functions to train them.
HSBC, for example, puts 400 handpicked international managers through a global-rotation program that trains them to respond quickly and effectively in troublesome situations. These managers learn to distinguish the nonnegotiable aspects of a business model from those that can be modified as necessary.
With the right group of executives, a company’s coordination process run smoothly because the participants have mutual trust, and dotted-line reporting relationships work because executives know each other well. They can conduct vital business informally – through social contacts – and job rotations give them a well-rounded perspective on the challenges in a variety of markets. The company avoids entrenched power structures and thus becomes stronger than any group of individuals within it.
America is the world’ s biggest market for cars and General Motors (GM) is the world’s biggest car manufacturer. In a few years, Toyota’s relentless growth is likely to render this statement only half true.
After several recent pieces of bad news and a share price languishing at a ten-year low, GM has revealed how it intends to keep itself at the top, at least for the moment. On Monday April 4th, Rick Wagoner, the firm’s chairman and chief executive, said that he would assume direct responsibility for GM’s North American operations in an attempt to reverse the company’s decline. But it is unlikely that GM and Detroit’s two other car making giants, Ford and Chrysler (the Detroit-based arm of DaimlerChrysler), will be able to keep Toyota and the rest of Japan’s high-revving carmakers at bay for long.
Is there anything US car suppliers haven’t tried to counteract the enormous purchasing power of the handful of car manufacturer that make up their customer base? As the suppliers’s profit margins have been squeezed again and again, they have responded with an array of strategic initiatives, including diversifying their customer base, going global, positioning themselves further upstream in the value chain, and actively helping to design components in hopes of capturing more value than they could by simply bending metal. In the 1990s, the industry also went through an M&A wave that many hoped would deliver the heft needed to push back against the car manufacturers.
Currently, facts speak for themselves, dwindling market share in the face of fierce competition from Japan has forced General Motors to shake up its management. Ford faces similar problems. DaimlerChrysler’s American arm is taking advantage of their misfortune but may be held back by problems at the group’s European operations. Detroit has bounced back before. Can it do so again?
The winning car suppliers of the future won’t try to fight size with size to gain an advantage against their big customers’s purchasing power. Only a restructuring that focuses on excellent processes as well as excellent products will provide the precision-targeted leverage suppliers need to fight back effectively and to preserve the long-term health of their industry.
Building Deep Supplier Relationships
Two Japanese automakers have had stunning success building relationships with North American suppliers – often the same companies that have contentious dealings with Detroit’s Big Three. What are Toyota and Honda doing right?
The Supplier-Partnering Hierarchy
Conduct joint improvement activities.
- Exchange best practices with suppliers.
- Initiate kaizen projects at suppliers’ facilities.
- Set up supplier study groups
Share information intensively but selectively.
- Set specific times, places, and agendas for meetings.
- Use rigid formats for sharing information.
- Insist on accurate data collection.
- Share information in a structutred fashion.
Develop suppliers’ technical capabilities.
- Build suppliers’ problem-solving skills.
- Develop a common lexicon.
- Hone core suppliers’ innovation capabilities.
Supervise your suppliers.
- Send monthly report cards to core suppliers.
- Provide immediate and constant feedback.
- Get senior managers involved in solving problems.
Turn supplier rivalry into opportunity.
- Source each component from two or three vendors.
- Create compatible production philosophies and systems.
- Set up joint ventures with existing suppliers to transfer knowledge and maintain control.
Understand how your suppliers work.
- Learn about suppliers’ business.
- Go see how suppliers work.
- Respect suppliers’ capabilities.
- Commit to coprosperity.
You know Japan’s world is upside down when the fabled Toyota Motor Corp. is a global laughingstock. A name once synonymous with quality has fallen so far that Americans are actually rushing out to buy Detroit’s clunkers.
Recent Comments