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TOYOTA MOTOR CORPORATION
Recalls at Toyota: Can there be proactivity in
prevention?
Yinka Daramola
• Toyota Motor Corporation was founded 78 years ago in 1937
• The Toyota production system (TPS), its methods and standards of
excellence have been lauded and modelled in management science
and manufacturing for decades
• A leading global automaker on several metrics including sales and
production volume
• 2015 global revenues of approximately $189.2 billion.
Background
• Global net income also grew an impressive 19.2% from the
previous year to $17.87 billion
• Operates in five main markets: Japan, North America, Europe, Asia
and Other
• Other includes Central and South America, Oceania, Africa, and the
Middle East
• Renewed sales growth in North American market
• Recent spate of recalls of Toyota vehicles between 2009 and 2015
• This indicates failures in Toyota’s production system to maintain
quality standards
Background
• Slackened quality control practices have led to the recalls of millions of
Toyota vehicles
• The most recent recalls on account of substandard airbags could affect
over 50 million cars on US roads
• Toyota has historically been celebrated as a leader in total quality
management and production efficiency
• These recalls are costing the company billions of dollars in financial and
reputational capital
Problem
• Why is an industry leader in quality and productivity
repeatedly finding itself ignominiously issuing recall orders?
• Toyota’s corporate image and reputation for being a quality
conscious firm is being adversely affected by these recent
recalls
• Toyota’s best efforts are clearly no longer yielding the sort of
quality control required to minimize output defects
• This paper aims to outline some possible SRM strategies to
address a reoccurrence of the recall problem in the future
Project Goal
• Track record for dedication to highest quality standards and innovativeness in
design
• Positive global social impact as indicated by the millions of employees on the
company’s payroll, and CSR activities
• Strong sales growth and financial stability
• Top ranked global automaker by revenues and production capacity
• Adaptability to market behavior
SWOT Analysis Strengths
• Brand power and technological leadership in the automotive
manufacturing industry
• Weakening internal control processes as manifested by
frequent recalls over the last six years.
• The firm’s growing size and increasing product complexity is
affecting its ability to exert commensurate control on critical
inputs.
• Japan dependency: Most of the Toyota’s income is still earned
from Japan. It needs to seek for ways to increase market share
in other markets.
SWOT Analysis Weaknesses
• World economic recovery over the last year with increasing consumption
in US and European markets.
• Already in a position to take advantage of increasing consumer demand
for hybrid vehicles. Significant investment will be required to increase
capacity to meet this potentially explosive demand.
• Potential to further grow sales or market penetration in developed and
emerging markets
• Potential to improve quality control and internal efficiencies by
decentralizing control in its five main markets
SWOT Analysis Opportunities
• World economic recovery over the last year with increasing consumption
in US and European markets.
• Already in a position to take advantage of increasing consumer demand
for hybrid vehicles. Significant investment will be required to increase
capacity to meet this potentially explosive demand.
• Potential to further grow sales or market penetration in developed and
emerging markets
• Potential to improve quality control and internal efficiencies by
decentralizing control in its five main markets
SWOT Analysis Opportunities
• Falling consumption in emerging economies such as China
• Competing brands are also expanding into global markets and could
potentially erode market share
• Brand erosion and improving competition in global markets
• Consumption taxes stagnating growth in Japanese markets
• Increasing global demand for low carbon emissions automobiles may
impact bottom line in the short term and change the entire business
outlook
SWOT Analysis Threats
• Disruptive innovations in electric car manufacturing (for example, Tesla’s
e-cars) are likely to completely transform existing production processes
• Unavoidable exchange rate fluctuations can negatively impact profitability
of operations in the differing markets
• Volatility of the prices of critical inputs such as steel, glass, remain an
operating uncertainty
• Growing impact of government regulations on profitability and product
complexity
SWOT Analysis Threats
• Toyota needs to refocus its supplier relationship management (SRM)
practices to restore and maintain optimum output quality
• Supplier certification and evaluation practices need to be improved
upon and the supply chain shortened
• This can be accomplished by fostering closer associations with
suppliers through keirestsu-type relationships
• Managing Toyota’s increasing multiplicity of suppliers and
components also requires continuous investment in state-of-the-art
SRM technologies
Solution
• An intimate knowledge of supplier systems and processes is
essential to collaboratively developing long term relationships and
enforcing quality standards
• Streamlining the firm’s supplier portfolio to include and nurture
only those who have demonstrated quality and global
competitiveness consciousness, flexibility, and adaptability
Solution
• Involving suppliers in new product development and sharing
process improvement standards or technologies at supplier
facilities can also yield a competitive advantage
• A pervasive management proclivity to aggressively pursue short
term earnings growth or cost reduction was the root cause of the
problem
• Although outsourcing cannot be completely avoided, it can be
managed proactively by incorporating supply chain risk management
strategies
• Introspective and collaborative brainstorming with key suppliers is
required in order to create successful and sustainable cost cutting
strategies for Toyota
Conclusion
Aoki, K., & Lennerfors, T. T. (2013). The New, Improved Keiretsu. Harvard
Business Review, 91(9), 109-113. Retrieved from
http://search.ebscohost.com.ezproxy.nu.edu/login.aspx?direct=true&db
=buh&AN=89716266&site=ehost-live
Chung, R. B., & Kleiner, B. H. (2012). Dissecting Toyota's woes. Industrial
Management, 54(1), 12-15. Retrieved from
http://search.ebscohost.com.ezproxy.nu.edu/login.aspx?direct=true&db
=buh&AN=70548655&site=ehost-live
Cole, R. E. (2011). What really happened to Toyota? MIT Sloan Management
Review, 52(4), 29-35. Retrieved from
http://ezproxy.nu.edu/login?url=http://search.proquest.com/docview/8
75531966?accountid=25320
References
Fan, D., Geddes, D., & Flory, F. (2013). The Toyota recall crisis: Media impact on
Toyota’s corporate brand reputation. Corporate Reputation Review, 16(2), 99-
117. doi: http://dx.doi.org/10.1057/crr.2013.6
Gent E. (2015, 21 August). Toyota to switch airbag inflator supplier following recalls.
Institute of Engineering and Technology, 7. Retrieved from
http://eandt.theiet.org/news/2015/aug/toyota-inflator.cfm
Jones, J. M. (2010, March 2). Americans, Toyota owners still confident in Toyota
vehicles. Retrieved from http://www.gallup.com/poll/126236/Americans-
Toyota-Owners-Confident-Toyota-Vehicles.aspx
Muller J. (2013, April 13). VW is already the world's leading automaker. Forbes
Business. Retrieved from
http://www.forbes.com/sites/joannmuller/2013/04/18/vw-is-already-the-
worlds-leading-automaker/
References
Qlik Tech International (2015). Balancing priorities in the supply chain. Retrieved from
http://docs.media.bitpipe.com/io_12x/io_123987/item_1185343/How%20Data%
20Discovery%20Reveals%20Unseen%20Associations%20and%20Opportunities.pd
f
Saporito, B. (2010). Spotlight. Time, 175(6), 17. Retrieved from
http://ezproxy.nu.edu/login?url=http://search.ebscohost.com/login.aspx?direct=t
rue&db=a2h&AN=47999632&site=ehost-live
Taneja, S., Pryor, M. G., and Sewell S. M. (2012). Toyota recalls: a strategic leadership
perspective. International Journal of Business and Public Administration. 9(2),
125-140
Toyota Motor Corporation (2009). Performance overview, Toyota motor corporation.
Retrieved from http://www.toyota-
global.com/investors/ir_library/annual/pdf/2009/pdf/p08_09.pdf
References
Toyota Motor Corporation (2012). Quality assurance activities. Retrieved from
http://www.toyota-
global.com/company/history_of_toyota/75years/data/company_information/
quality/quality_assurance.html
Toyota Motor Corporation (2015). Financial summary FY 2015 (April 1, 2014 through
March 31, 2015). Retrieved from http://www.toyota-
global.com/investors/financial_result/2015/pdf/q4/summary.pdf
Toyota Motor Corporation (2015). Toyota financial highlights. Retrieved from
http://www.toyota-global.com/investors/financial_data/high-light.html
Toyota Motor Sales (2014). Lookup safety recalls & service campaigns by VIN.
Retrieved from http://www.toyota.com/recall
References
Toyota Recall (2015). Consumer safety affairs. Retrieved from http://toyotarecall.org/
United Nations (2013, 18 December). World economic situation and prospects 2014:
Global economic outlook (chapter 1). Retrieved from
http://www.un.org/en/development/desa/publications/wesp2014-
firstchapter.html
Wisner, J.D., Tan, K.C., & Leong, G.K. (2012). Principles of supply chain management: A
balanced approach. Mason, OH: South Western Cengage Learning
Sauter, M. (2013, September 13). The world’s largest automakers. Retrieved from
http://finance.yahoo.com/news/world-largest-automakers-222430745.html
Yu, X., & Tang, T. L. (2011). Sustainability in supply chain management: Suggestions for
the auto industry. Management Decision, 49(4), 495-512.
doi:http://dx.doi.org/10.1108/00251741111126459
References

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Yinka Daramola- Avoiding Recalls at Toyota Motor Corporation

  • 1. TOYOTA MOTOR CORPORATION Recalls at Toyota: Can there be proactivity in prevention? Yinka Daramola
  • 2. • Toyota Motor Corporation was founded 78 years ago in 1937 • The Toyota production system (TPS), its methods and standards of excellence have been lauded and modelled in management science and manufacturing for decades • A leading global automaker on several metrics including sales and production volume • 2015 global revenues of approximately $189.2 billion. Background • Global net income also grew an impressive 19.2% from the previous year to $17.87 billion
  • 3. • Operates in five main markets: Japan, North America, Europe, Asia and Other • Other includes Central and South America, Oceania, Africa, and the Middle East • Renewed sales growth in North American market • Recent spate of recalls of Toyota vehicles between 2009 and 2015 • This indicates failures in Toyota’s production system to maintain quality standards Background
  • 4. • Slackened quality control practices have led to the recalls of millions of Toyota vehicles • The most recent recalls on account of substandard airbags could affect over 50 million cars on US roads • Toyota has historically been celebrated as a leader in total quality management and production efficiency • These recalls are costing the company billions of dollars in financial and reputational capital Problem • Why is an industry leader in quality and productivity repeatedly finding itself ignominiously issuing recall orders?
  • 5. • Toyota’s corporate image and reputation for being a quality conscious firm is being adversely affected by these recent recalls • Toyota’s best efforts are clearly no longer yielding the sort of quality control required to minimize output defects • This paper aims to outline some possible SRM strategies to address a reoccurrence of the recall problem in the future Project Goal
  • 6. • Track record for dedication to highest quality standards and innovativeness in design • Positive global social impact as indicated by the millions of employees on the company’s payroll, and CSR activities • Strong sales growth and financial stability • Top ranked global automaker by revenues and production capacity • Adaptability to market behavior SWOT Analysis Strengths • Brand power and technological leadership in the automotive manufacturing industry
  • 7. • Weakening internal control processes as manifested by frequent recalls over the last six years. • The firm’s growing size and increasing product complexity is affecting its ability to exert commensurate control on critical inputs. • Japan dependency: Most of the Toyota’s income is still earned from Japan. It needs to seek for ways to increase market share in other markets. SWOT Analysis Weaknesses
  • 8. • World economic recovery over the last year with increasing consumption in US and European markets. • Already in a position to take advantage of increasing consumer demand for hybrid vehicles. Significant investment will be required to increase capacity to meet this potentially explosive demand. • Potential to further grow sales or market penetration in developed and emerging markets • Potential to improve quality control and internal efficiencies by decentralizing control in its five main markets SWOT Analysis Opportunities
  • 9. • World economic recovery over the last year with increasing consumption in US and European markets. • Already in a position to take advantage of increasing consumer demand for hybrid vehicles. Significant investment will be required to increase capacity to meet this potentially explosive demand. • Potential to further grow sales or market penetration in developed and emerging markets • Potential to improve quality control and internal efficiencies by decentralizing control in its five main markets SWOT Analysis Opportunities
  • 10. • Falling consumption in emerging economies such as China • Competing brands are also expanding into global markets and could potentially erode market share • Brand erosion and improving competition in global markets • Consumption taxes stagnating growth in Japanese markets • Increasing global demand for low carbon emissions automobiles may impact bottom line in the short term and change the entire business outlook SWOT Analysis Threats
  • 11. • Disruptive innovations in electric car manufacturing (for example, Tesla’s e-cars) are likely to completely transform existing production processes • Unavoidable exchange rate fluctuations can negatively impact profitability of operations in the differing markets • Volatility of the prices of critical inputs such as steel, glass, remain an operating uncertainty • Growing impact of government regulations on profitability and product complexity SWOT Analysis Threats
  • 12. • Toyota needs to refocus its supplier relationship management (SRM) practices to restore and maintain optimum output quality • Supplier certification and evaluation practices need to be improved upon and the supply chain shortened • This can be accomplished by fostering closer associations with suppliers through keirestsu-type relationships • Managing Toyota’s increasing multiplicity of suppliers and components also requires continuous investment in state-of-the-art SRM technologies Solution
  • 13. • An intimate knowledge of supplier systems and processes is essential to collaboratively developing long term relationships and enforcing quality standards • Streamlining the firm’s supplier portfolio to include and nurture only those who have demonstrated quality and global competitiveness consciousness, flexibility, and adaptability Solution • Involving suppliers in new product development and sharing process improvement standards or technologies at supplier facilities can also yield a competitive advantage
  • 14. • A pervasive management proclivity to aggressively pursue short term earnings growth or cost reduction was the root cause of the problem • Although outsourcing cannot be completely avoided, it can be managed proactively by incorporating supply chain risk management strategies • Introspective and collaborative brainstorming with key suppliers is required in order to create successful and sustainable cost cutting strategies for Toyota Conclusion
  • 15. Aoki, K., & Lennerfors, T. T. (2013). The New, Improved Keiretsu. Harvard Business Review, 91(9), 109-113. Retrieved from http://search.ebscohost.com.ezproxy.nu.edu/login.aspx?direct=true&db =buh&AN=89716266&site=ehost-live Chung, R. B., & Kleiner, B. H. (2012). Dissecting Toyota's woes. Industrial Management, 54(1), 12-15. Retrieved from http://search.ebscohost.com.ezproxy.nu.edu/login.aspx?direct=true&db =buh&AN=70548655&site=ehost-live Cole, R. E. (2011). What really happened to Toyota? MIT Sloan Management Review, 52(4), 29-35. Retrieved from http://ezproxy.nu.edu/login?url=http://search.proquest.com/docview/8 75531966?accountid=25320 References
  • 16. Fan, D., Geddes, D., & Flory, F. (2013). The Toyota recall crisis: Media impact on Toyota’s corporate brand reputation. Corporate Reputation Review, 16(2), 99- 117. doi: http://dx.doi.org/10.1057/crr.2013.6 Gent E. (2015, 21 August). Toyota to switch airbag inflator supplier following recalls. Institute of Engineering and Technology, 7. Retrieved from http://eandt.theiet.org/news/2015/aug/toyota-inflator.cfm Jones, J. M. (2010, March 2). Americans, Toyota owners still confident in Toyota vehicles. Retrieved from http://www.gallup.com/poll/126236/Americans- Toyota-Owners-Confident-Toyota-Vehicles.aspx Muller J. (2013, April 13). VW is already the world's leading automaker. Forbes Business. Retrieved from http://www.forbes.com/sites/joannmuller/2013/04/18/vw-is-already-the- worlds-leading-automaker/ References
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  • 18. Toyota Motor Corporation (2012). Quality assurance activities. Retrieved from http://www.toyota- global.com/company/history_of_toyota/75years/data/company_information/ quality/quality_assurance.html Toyota Motor Corporation (2015). Financial summary FY 2015 (April 1, 2014 through March 31, 2015). Retrieved from http://www.toyota- global.com/investors/financial_result/2015/pdf/q4/summary.pdf Toyota Motor Corporation (2015). Toyota financial highlights. Retrieved from http://www.toyota-global.com/investors/financial_data/high-light.html Toyota Motor Sales (2014). Lookup safety recalls & service campaigns by VIN. Retrieved from http://www.toyota.com/recall References
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