Toyota’s Cost Leadership Strategy, Objectives, And Performance Measures

Performance Measures/KPI

Discuss about the Toyota Internal Processes Perspective.

Toyota follows cost leadership strategy

Toyota has its origin in Japan in 1937. It has become a multinational corporation. It is selling its product in 160+ countries. Toyota defines its path globally by: -“The Toyota Way”. Respect for People and Continuous Improvement are two guiding principles that drive “The Toyota Way”. These two principles follow the 5 aspects: Challenge, Kaizen (Continuous Improvement), Genchi Genbutsu (go and see), Respect and Teamwork. Toyota’s generic strategy is to minimize cost of production to attain cost leadership (Dennis, 2016). The company should excel at following three business processes in order to satisfy shareholders and business processes:

Toyota should leverage its brand value by creating a new product line like motorcycles. It would have competitors like Honda in this segment.  Toyota in the past has built its image by quality products and customer experiences. The objective is to increase more penetration. It is necessary to maintain the promise of delivering excellent value to customers in terms of quality, delivery time, pricing and post sales service. It should also focus on On-Time Delivery and repair quality. Also, it should measure its success not only in terms of customer satisfaction but also supplier and dealers satisfaction. Toyota has network of suppliers worldwide. The mock survey which is already conducted in the company should be increased to large number of dealers to understand their expectation and perception from Toyota product. The company should work with business partners in such a way to achieve long-term, stable growth and mutual benefits. However the company should not stop tapping new partnerships. To tackle competitors it should enhance marketing and brand promotion strategies like VAS. It should try to expand its sales in urban and semi-rural areas. This can be done by expansion of Toyota Dealer network. It should enhance its profitability by expanding export operations. Toyota should grow itself by entering into new market or selling to newer segments. It will support its cost leadership strategy. It enables the company to maximize its sales volume. This ensures profits despite of relatively low selling price.

To mitigate the risk the company wants to strengthen the two core field’s quantity and quality. Toyota should also look at human resource utilization and strengthen corporate governance mechanism. Toyota should work in close collaboration with the government in order to implement new developmental approaches. It is necessary that Toyota creates advanced technologies and promote the new technology created products and services. It should improve fuel efficiency of product by using new and faster technologies. Toyota should confirm with all safety standards and enhance the quality of life for workers and customers. Toyota should safeguard company assets. It should focus on capability enhancement i.e. production, sales and others to strengthen its roots in the countries (Tregear, 2015). It should synergize quality and quantity through its processes. Lean manufacturing focuses on overall organization strategy by continuous review of processes (Chiarini & Vagnoni, 2016). It should bring material optimization. It should also focus on increasing market prices of OEM products. It can do SWOT analysis in this regard and form supplier exclusive network to provide OEM products at affordable range (Hines, 2016). Toyota should also make itself flexible for changing government policies and regulations. In order to reduce material wastage, it should reduce the packaging of material by 8% by putting data tracking system in a process. Reuse and recycle the packaging material. It should focus on continued innovation. With increasing expansion, it is necessary that for continuous business improvement it should increase product monitoring.

Toyota should increase its efforts on promoting low carbon products in order to have low carbon in future. It should increase Research and Development efforts in developing hybrid or eco-friendly cars .It should be in in parallel with the usage of new technologies such as alternative fuel vehicles. Toyota should also come up with incremental innovations like easy seat for disabled people (Debnath, 2015). The company should also increase its dependence on solar plants and rain water harvesting mechanisms (Chiarini, 2016). It should also promote judicious use of natural resources in the supply chain (Solaimani & Latifi, 2016). It should reduce consumption of electricity, LPG and water. It should invest in recycling.

References:

Chiarini, A. (2016). Corporate social responsibility strategies using the TQM: Hoshin kanri as an alternative system to the balanced scorecard. The TQM Journal, 28(3), 360-376.

Chiarini, A., & Vagnoni, E. (2016). Strategic Planning for Lean Production, Comparing Hoshin Kanri with Balanced Scorecard. In Understanding the Lean Enterprise (pp. 221-236). Springer, Cham.

Debnath, S. C. (2015). Environmental regulations become restriction or a cause for innovation–a case study of Toyota Prius and Nissan Leaf. Procedia-Social and Behavioral Sciences, 195, 324-333.

Dennis, P. (2016). Lean Production simplified: A plain-language guide to the world’s most powerful production system. Crc press.

Hines, P. (2016). Toyota supplier system in Japan and the UK. In Developments in Logistics and Supply Chain Management (pp. 113-124). Palgrave Macmillan, London.

Solaimani, S., van der Veen, J. A., & Latifi, M. (2016). How Supply Chains Can Benefit from Open Innovation: Inspiration from Toyota Production System. World Academy of Science, Engineering and Technology, International Journal of Industrial and Manufacturing Engineering, 3(10).

Tregear, R. (2015). Business process standardization. In Handbook on Business Process Management 2 (pp. 421-441). Springer, Berlin, Heidelberg.