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Table of Contents

01
Objectives: Page No-1
To study evolution of Toyota
To study its strategy and structure
To study its culture
Toyota- A learning Organization

02
Toyota-Evolution of Strategy
Page No-3 and Structure

03
Toyota Current Organizational Page No-13
Structure

Zooming In: Toyota Recall

04
Page No-15 Crisis of 2009

05
The Toyota Culture Page No-17

06
Page No-20 The Learning Organization

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 OBJECTIVES
The objectives of this report are studying the following:

1. Evolution of strategy and structure of Toyota

2. Current organizational structure of Toyota

3. Toyota Recall Crisis of 2009

4. Culture of Toyota

5. How Toyota is a learning organization

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 EVOLUTION OF STRATEGY AND
STRUCTURE
In this part of the document, we will be analysing the structural changes and Strategy followed
by the company to reach the pinnacle in terms of quality and automotive technology. The
narrative will be by the year, covering most of the significant changes made to the organization
since its inception.

1918 – Sakichi Toyoda invented the first automatic loom and set up the Toyoda Spinning
and Weaving Company. This led to a reduction in defects and improvement in yields as the
imperfect fabric was not produced. The foundation for attention to quality and design of
equipment to stop automatically was laid at this time.

1929 – The Platt Brothers, a British Company was so impressed by the loom that the
acquired the production for 100,000 Euro. The proceeds were hence carried forward by his
son Kiichiro to develop automotive technology at Toyoda.

1936 – The company launched Model AA (3.4 L, 64 HP), its first-ever passenger car.
The aim of Toyota was to create cheaper cars than that of General Motors and Ford.

1937 – Toyota Motor Company was established as a separate company from Toyota
Automotive Loom Works. The newly established company started its operations at Koromo
plate the following year.

1943 – Toyota Motor Company Limited merged with Chuo Spinning and in the same
year, it established Aisin Seiki, an automotive parts manufacturer. The merger enabled Toyota
to divert some of the plant equipment and labor force to military industries.

1947 – Toyota like many other Japanese automakers started heavily invested in the
truck and naval production for the Japanese army during WWII. Following a wreaked economy
due to the aftermath of the World War forced Toyota to shut down its automotive production.

1950 – As an aftermath of WWII, due to high inflation many companies faced a lot of
problems purchasing materials and achieving profitability. The scarce resources were being
pumped into select industries to jump-start the economy. Joseph Dodge, then President of
Detroit Bank was sent in to implement changes to curb inflation. Dodge raised utility charges
and added a robust taxation system that allowed the economy to come out of a long spell of
inflation.
Following the Dodge Line stabilization (the reforms to curb inflation taken by Joseph Dodge),
based on a corporate revival plan, a total of 2146 employees were laid off, reducing the
number of personnel to 6000. President Kiichiro Toyota decided to resign.
The company was able to avoid bankruptcy with the help of corporate financing from several
banks. This was conditioned on dividing the company and establishing a separate sales
company. The separation allowed Toyota Motor Co to focus on engineering and production
and Toyota Motor Sales Co. to focus on marketing and sales. Thus, a unique and balanced
foundation was created for Toyota.
Both companies at this time followed a Functional Structure with a centralized management
system as was essential at the time of this crisis.
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An overview of the organizational structure of Toyota Motor Co. is shown below:

1957- Toyota established Toyota Motor Sales USA. Toyota observed that American
workers were at least 9 times more productive than the Japanese ones. They discovered that
the issue was not with the people but with the process. Hence, throughout this year and
coming years company focussed on streamlining the production process to boost efficiency
and tasks were broken down into specialized, separate parts, with each employee performing
activities according to a specific job description.

1958- Toyota established Toyota Do Brazil. Toyota entered the industrial vehicle field
with the launch of its Model LA Forklift. This was followed by setting up of many production
units across Europe, Asia, and North America.

1960- Toyota highly valued the innovation and technology and established Toyota Central
Research & Development Laboratories, Inc., with capital from 10 Toyota Group Companies.
This department was insulated from intervention by any other. Its sole intention was to
coordinate and integrate all developmental phases. It could be from basic research to forward-
looking technology development and product development to ensure TMC develops leading
cutting edge vehicles.

1962- Toyota exploited economies of scale by setting up manufacturing plants on every

habitable continent. In 1962, Toyota entered Thailand and established Toyota Motor Thailand
to enhance its manufacturing.

1964- Recognized by Ministry of International Trade and Industry as the first company
contributing to export. TMC became the first company in Japan to get this recognition which
resulted in the development of good relations between the government and the auto-
manufacturer.

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 1966- This year also saw the release of Toyota Corolla, one of the most popular cars of
all times. In 1966, Toyota Motor Co. Ltd. entered into a cooperative alliance with Hino Motors.
The reason being Japan becoming a member of OECD (Organization for Economic Co-
operation and Development), the US asked Japan to liberalize capital transactions which
forced many of the local automobile makers in Japan to ally to compete with the foreign auto-
makers. Negotiations for a cooperative alliance between Toyota and Hino motors began in
January 1965 with Mitsui bank as the intermediary. On 15th October 1966, a joint statement
was issued, and on 19th October 1966, a memorandum related to the cooperative alliance was
signed.

1967- In 1967, during Japan-US Trade and Economy Joint Committee held in September
of 1967; the US asked Japan to liberalize the capital transactions in Japan. Owing to
continuous pressure from the US, the Japanese auto industry was forced to strengthen its
international competitiveness through size increase. Sanwa Bank approached Toyota Motor
Co. Ltd. about working together with Daihatsu Motor Co. as many of the models sold by
Daihatsu were directly competing with that of Toyota and Daihatsu didn’t want to liquidate
those models. Hence, both companies came to an agreement that they would manage their
companies independently and responsibly. And hence on November 9, 1967, Toyota Motor
Co., Ltd., Toyota Motor Sales Co., Ltd., and Daihatsu Motor signed an MoU about forming a
cooperative alliance.

1970- Establishment of Toyota Production System, also known as TPS. TPS is the
originator of the concept we call lean manufacturing. It was founded on conceptual principles
of ‘Just in time’ and ‘Jidoka’ (or, automation with a human touch). It was built on the principles
and approach created by Sakichi Toyoda himself and his son Kiichiro Toyoda. The main
objective of TPS is to eliminate three key issues, namely, overburden, inconsistency, and
waste. Under this system, a process is created that can be easily repeated, thereby eliminating
the inconsistency in the production line. This reduction in inconsistency leads to minimization
of stress or overburden as there are fewer mistakes occurrence. Minimization of stress leads
to a massive reduction in waste. Toyota Motor Co. Ltd. has been able to apply this TPS system
to the highest level of efficiency, which later became the core of lean manufacturing that is
studied today extensively all around the world.

1971- As Toyota was involved in multiple ventures, it introduced a divisional organization

system (head office, textile machinery, industrial vehicle, vehicle, and Obu plant). This led the
company to focus on various activities independently for better management and monitoring.
Toyota focussed on differentiation by hiring people from the native country where they set up
manufacturing plants to bolster the production.

1890d

1975-Toyota Motor entered the prefabricated housing industry and established the
Housing Group and Toyota Motor Sales Co. Ltd. established the Special Housing Department
as their respective core organizations for production and sales. Toyota office and shop were
launched in December of the same year. Concerning production and sales, Toyota truly
became a stateless corporation as its manufacturing units spread in different parts of the
world.

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1977-Toyota opened its Toyota Technical Center in Ann Harbor, Michigan, which was
engaged in engineering design and research and development. Toyota, from the very
beginning, had its sight set on efficiency in its production and design optimization.

1981 – The 1980s marked the start of Toyota’s expansion to manufacture in the US
market. Toyota wanted to enter into a partnership with one of the American automakers with
the hopes of developing a compact car that would help restore the American automotive
industry.
Ford was Toyota’s first preference, but after multiple attempts and failed negotiations to center
in on a project, negotiations were concluded.
Shortly after the failed talks with Ford, a proposal for an alliance with General Motors was
received. Following the imposition of the voluntary import restraints on vehicles manufactured
in Japan, the joint production with GM would have a beneficial effect on the relations between
the US and Japan. The possibility to expand production into the world’s largest automobile
market with little investment was a very lucrative proposal for Toyota.
Despite concerns over supplying technological secrets to competitors and sharing production
expertise, a basic agreement to use GM’s Fremont plant in California was reached in 1983.
This involved creating a new company with 50-50 investment by both Ford and GM and a term
of no more than 12 years from the start of production.
With the learnings from the joint venture and the growing demand of starting production in the
US, the North America Project Committee was established for evaluation of sites and logistics
for plants to be made in US and Canada.
Toyota Motor Manufacturing Kentucky and Toyota Motor Manufacturing Canada were
established in 1986. A diverse workforce was selected through a fair process, and an
extensive training program was designed to facilitate the transfer of knowledge. A fundamental
principle of developing the local economies was followed. Consequently, procurement of parts
and materials was carried out by an open-door policy based on the quality, cost, on-time
delivery, and development capability of the suppliers. The integration of the local economy
and the setting up of production units in the US was integral for the successful expansion of
Toyota into the North American markets.

1982 – The global economy was in a slow-growth phase following the oil crisis of 1979.
Due to the shrink in disposable income, the passenger vehicle market naturally took a hit. The
number of new Toyota vehicles registered in Japan fell for the second consecutive year.
The worldwide economic recession that had developed led to increased trade friction.
Restraints were placed on the export of Japanese-made passenger cars to the US and the
European Community. This eventually forced Toyota, who had been exporting cars, to start
manufacturing in the US. At this historical turning point where automakers needed to make a
swift decision and more efficient use of economic resources, the senior management of Toyota
Motor Co. and Toyota Motor Sales Co. realized the need of a decisive action to tackle the
impending crisis.
So, to achieve fast-reacting stewardship of its business and the responsibility of transferring
the production overseas, Toyota Motor Co. and Toyota Motor Sales Co. decided to merge. To
facilitate the merger, the company followed an interlocking of directorates and transfer of
leadership.
On July 1982, Toyota Motor Corporation was established. A new corporate nameplate was
unveiled, a new symbol for the company. A message from the Chairman to all employees

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proclaiming the end to the post-war period of Toyota signified the start of a new chapter for
the automotive giant.
Following the merger, Toyota started taking measures to mitigate the uncertainty from its Task
environment. By increasing the number of visits to vendors and giving out low-interest loans
to vendors for investment in strategic units.
These measures soon bore fruit with the number of new Toyota vehicles registered in Japan
increasing to 1,524,000 units, a 2% year on year increase. A year later, Toyota had a market
share of 40.2 percent, passing the 40-percent mark for the first time in nine years.
Diversification: In 1982, Toyota Motor Credit Corporation was established to manage
financial services. It provided financing for vehicle purchasing primarily, while also providing
other related services such as credit cards and home loans to expand its connections with
customers.

1988- As the exports to the US market grew, Toyota saw the need to establish an
oversees manufacturing unit to bolster its sales. This led to the establishment of the following
two units in the US. TMC established Toyota Motor Manufacturing in Kentucky. It is Toyota’s
largest manufacturing unit in the world. It began the production in May. It is manufacturing
many of Toyota's models, namely, Camry, Lexus, Avalon, etc. Also, TMC established Toyota
Industrial Equipment Manufacturing as a joint venture with Toyota motor sales in Columbus,
Indiana. The production began in 1990. The US became one of the most important locations
for its manufacturing in the North Americas. Reverse innovation led to America exporting some
of the Toyota models to Europe and even Japan

1989 – Toyota Motor Corporation henceforth referred to as TMC was slowing down by
the bloated organizational structure and the elaborate hierarchical system in place. The
organization has lost the flexibility to respond to environmental changes. To counter this
problem, TMC decided to implement several reforms.
The organization conducted a flattening system which eliminated sub-sections and combined
sections into departments. This established a simpler, two-level organization consisting of
divisions and departments. By reducing the number of managers and controlling the diversity
of posts that people held in the company, decision making trickled down to the lower rungs of
the organization.
The number of managers decreased from 1800 to 900 within the remaining placed in positions
providing support. Renaming of positions and through the implementation of Job Qualification
System, (to integrate managers into different classes, e.g. “General Manager Class” and
“Deputy General Manager Class”) employee satisfaction was ensured.
Various cultural changes were implemented in the organization as well. The practice of
referring to managers with the Japanese honorific “san” after their names were started to
create a more open and integrated environment.
The changes implemented helped accelerate decision making and promoted the delegation
of authority. Formalization was reduced, and the number of approvals needed to get the
decision through was reduced to 3 or less.

1992 – Being faced with inefficient communication and coordination between tasks and
to counter the environmental uncertainties of the 1990s, TMC decided to revaluate the product
and technology development to be competitive for the 21st century. Initiative Future Project 21
was launched to consolidate problems in the existing structure and implement solutions to
make the organization future-ready.

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The existing structure of TMC was like that of a matrix organization, with liaison roles such as
product managers responsible for coordination between departments. However, due to the
increase in the number of employees, product development projects, and narrower
specialization, coordination had become difficult.
TMC Product Development Organization Structure in 1991

The above representation shows how in 1991, the General Manager had to coordinate
between 48 departments in 12 division. The chief engineers generally complained of having
less autonomy and control over the functional managers. The Functional Managers having
had to coordinate between an average of 15 employees did not have time to manage
interdependencies and handle complicated interfaces. Engineers did not have a broad enough
view of the organization, which caused problems in developing a well-integrated product.
These problems were typical to that of a matrix organization that had become saturated.
The competitive environment of 1991 meant that rapid production growth was needed along
with an aggressive product strategy. New product introductions and frequent replacements
meant that the organization needed to be more flexible.
TMC made two major changes. First, it divided all its new product development projects into
three centers. These were designed such that the highest inter-project design
interdependencies lie within a center. Sharing this platform design among various product
lines enabled TMC to maximize resource utilization. Second, a fourth center was created to
support vehicle systems by standardizing products across systems. Important changes made
were:

 Reducing the number of functional divisions: Merger of existing divisions creating wider
responsibilities within divisions. The number of touchpoints for the vehicle project was
greatly reduced
 Reducing the number of projects handled by each project manager: Distribution of
projects were done as per the workload and the inter Life Cycle dependencies of the
projects
 Establishment of a planning division for each center: These were the growth council of
the center which studied the environment and were responsible for resource allocation
and providing direction to each center
 Changing the hierarchy to enable the chief engineers
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 Changes in the number of divisions and
departments
60
50
40
30
20
10
0
1976 1991 1993

Division Department

The new structure helped reduce development costs by 30%. The average number of
prototypes used in project developments also came down by 40%. Communication and
coordination improved significantly which helped cut down project lead time by a couple of
months.
The move can be summarized as a shift from a functional oriented matrix structure to multi-
project management with strong Inter-Project Integration as well as Cross-Functional
Integration.

2000- To oversee its finance companies worldwide, the company established Toyota
Financial services. It caters to more than 30 countries and regions, including Japan.
Toyota Financial Services mainly focusses on auto-loans, leases, and Toyota dealer floorplan
requirements. It helps customers in financing. This year also marked the starting of Sichuan
Toyota Motor in China.

2001-TMC established Toyota Motor Manufacturing France in Onnaing near the city of
Valenciennes. To enhance its presence in Europe, TMC came up this manufacturing unit.
Currently, the French plant is manufacturing D-4D turbo engines and Toyota Yaris.

2002- To promote itself as a brand with superior capabilities, Toyota entered Formula
One (F-1) competitions in 2002 and since then has had a regular presence. The same year it
entered into a joint venture with PSA Peugeot Citroen to form Toyota Citroen Automobile
Czech. Production started in 2005. It manufactures the Toyota Peugeot model for its sales in
Europe. In the very same year, TMC established Toyota Motor Manufacturing de Baja
California, Toyota Kirloskar Auto Parts and Toyota Motor Industries Poland. Toyota went
ahead with establishing Advanced Logistics Solutions Co., Ltd. to plan distribution systems
and operate distribution centers. Toyota followed global expansion through international
strategic alliances.

2003- Launching of Toyota Avensis model in Europe. Also, this year, Toyota
manufactured its first Lexus outside Japan in the US, followed by establishing Toyota Home
(housing retail company), Toyota Motor Manufacturing, Texas and Toyota Motor
Manufacturing, Alabama. These steps were taken TMC to increase its manufacturing capacity
for the US market. For Toyota, the US was its largest market and it understood the need to
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customize its products for the US and hence it proceeded with setting up of many
manufacturing units there.

2005- This year TMC started its Australian Research and Development base. It was
entrusted with basic research, forward-looking and leading-edge technology development and
product development. Also, TMC established Toyota Motor Manufacturing, Russia. This very
year Toyota introduced its Lexus brand in Japan and also company acquired an 8.7% stake
in Fuji Heavy Industries as a part of its diversification.

2006- As a part of its ongoing process of increasing manufacturing units, Toyota went on
to establish Toyota Motor Engineering and Manufacturing North America, to carry out Toyota’s
R&D and manufacturing operations in North America, Guangzhou Toyota Motor, a joint vehicle
production and sales company with Guangzhou Automobile Group, establishing Toyota Motor
Asia pacific in Thailand, opening of Technical Training center of Toyota Jin Bei of China
Automotive Industry in Shenyang city, Liaoning Province, China.

2007- To influence its external environment Toyota entered in a joint project for
commercializing bio hydroformed diesel, a second-generation biodiesel fuel was started with
The Tokyo Metropolitan Government, Nippon Oil, Toyota, and Hino Motors. This shift marked
a long term thinking by Toyota taking into account the dearth of non-renewable resources and
it increased its hold on the government.

2008- Toyota increases its focus on research and development to compete against the
growing market for automobiles. It established Toyota Research Institute of North America on
the Ann Arbor, Michigan campus of the Toyota Technical Center. Furthering the new
generation vehicles, it developed Toyota FCHV, a fuel cell hybrid vehicle which can operate
in extremely cold weathers (-30 degrees Celsius). Toyota signed a share exchange agreement
with Central Motor by which it became a wholly-owned subsidiary of Toyota. Also, Toyota
started the construction of Toyota Kirloskar Motor, Toyota’s automobile production and sales
company in India. Technology saw a boost as Toyota developed the ‘Winglet’, a compact and
personal transport assistance robot.

2009- To focus on the customer satisfaction and safety Toyota developed a Supplemental
Restraint System which is a rear-seat center airbag, to reduce the severity of injuries incurred
in a side-on collision by the rear-seat passengers. This year also marked the recall crisis.
Toyota had to recall its 3.8 million vehicles in the US due to floor mat issues. This year Toyota
withdrew from the Formula One racing owing to its worst financial losses. The major reason
for the crisis was the strong centralization that causes Toyota’s poor decision making and
delayed response towards safety issues. Toyota Kirloskar Motor, the Indian unit of Toyota
released a new car concept for India.

2010- Toyota unveiled the concept version of the ‘Etios’, a compact car for the Indian
market. This year, Toyota, Nissan, Mitsubishi Motors, Fuji Heavy Industries, and TEPCO
formally established CHAdeMO Association.This consortia of competitors showed Toyota’s
willingness to expand its base through alliances. It was instituted with the mission of creating
the optimal fast charging in order to expedite the realization of e-mobility globally. It is a DC
charging standard for electric vehicles. As of today, CHAdeMO has completed 10 years of its
existence. Toyota signed an agreement with Tesla motors to initiate the development of an
electric version of RAV4. IN the third quarter, the company planned to establish Toyota Fleet
Leasing, an automobile leasing company to cater to the needs of big corporates in Japan.

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2011- Toyota and Microsoft entered into a strategic agreement to build a platform for the
company’s next-generation telematics services by making use of the Windows Azure platform.
As a part of this, the two companies planned to invest $12 million in Toyota Media Service, a
Toyota subsidiary that offers digital information to its customers. At the Shanghai New
International Expo Center, Toyota displayed its approximately 50 production and concept
vehicles. Toyota entered into a Technological collaboration with WiTricity Corporation,
furthering the use of wireless charging systems. It was aimed at implementation of wireless
charging for automobiles. Toyota also increased its social network presence by launching
Toyota Friend, a private social network for Toyota customers and their cars by entering into a
strategic alliance with Salesforce.com. This year was full of environment-friendly steps taken
by Toyota. Firstly, Toyota Motor Corporation, and Toyota Central R&D Labs., Inc. developed
a simulator that could measure the tropospheric ozone concentrations across South and East
Asia. The simulation was aimed at reducing energy consumption and limit the emissions of
substances in South and East Asia that cause global warming. Then TMUK (UK subsidiary of
Toyota) and British Gas worked together to install a large-scale solar panel array at Burnaston
Plant. In the same month, Toyota collaborated with Nomura Real Estate Development Diakyo
and Toyota Housing to launch environment-friendly vehicles. Further Toyota Motor Europe
agreed to participate in a joint project with Evelop Belgium to install wind turbines in Belgium.
2011 led to many mergers, the prominent ones being that of Kanto Auto Works, Central Motor,
and Toyota Motor Tohuku to form Toyota Motor East Japan. These mergers maximized the
strength of each Toyota group company enabling effective and efficient usage of resources.
This very year Toyota unveiled a lot of its cutting edge technologies such as Pre-Collision
System (PCS) with collision avoidance assist, glare-preventing adaptive driving beams (ADB)
and a pop-up hood for reducing the pedestrian injury. In November, it started producing a new
four-cylinder, in line ’AR’ engine at its plant in Nansha, China. Further Toyota signed an MoU
with Intel to begin joint research on next-generation in-vehicle multimedia systems that would
replace current navigation systems. Toyota, ULVAC, Kanematsu, Kandenko, Suzuyo Shoji,
Chubu Electric Power, Development Bank of Japan, Honda Motor, and Mitsubishi Motors
agreed on establishing an organization to provide membership based quick charging services
for users of electric vehicles. And hence company collaborated with Yamaha Motor in the
communications-linked next-generation vehicles. Then Toyota went to on to sign another
MoU, this time with BMW aimed at developing new environmentally friendly technologies.

2019 - In April, Toyota announced that it would allow other companies to use nearly
23000 patents related to its hybrid technology. The move by the company was in the hopes
that the technology will enable other key players to step into the hybrid vehicle market, thereby
increasing infrastructure-related development. The move would enable Toyota to capitalize on
the mass manufacture of hybrid vehicle technology leading to lower costs and greater
customer acceptance. Toyota hopes to slash capital outlay by half for CapEx investments in
new plants for electric vehicle components. They believe that this approach will reduce
investment costs significantly.
Along with the benefits, the above strategy also brings the risk that Toyota could lose this edge
by offering its hybrid technology to other automakers. But according to Shigeki Terashi,
Executive VP of Toyota “Even if an automaker can develop and produce a car using our
systems and parts which complies with emissions regulations, its overall performance would
never be the same as ours." This reflects a combination of the company’s rational approach
and the bounded rationality of the company’s VP. The step can be asserted by the fact that
even Tesla famously opened access to its electric vehicle patents in 2014 but there’s little
evidence that any major automakers have used that technology developed.

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 TOYOTA CURRENT ORGANIZATIONAL
STRUCTURE
Toyota Motor Corporation has consistently endeavored to innovate its organizational and
executive structure towards the achievement of the goal of manufacturing better automobiles
and develop a talented and diversified workforce.
Toyota introduced management based on Region in 2011 and a business unit in 2013. The
structure underwent significant changes in 2013. This was a response to the safety issues
and corresponding product recalls that started in 2009.
In the old organizational structure, Toyota followed centralized global hierarchy like a spoke-
and-wheel structure. The company’s headquarters in Japan made all the major decisions.
With all communications only through the headquarters (Centrality), there was no individual
communication between the departments However, this organizational structure was widely
criticized for slow response times to address safety issues.
Often reproached by external media, Toyota learned from its past mistakes. In 2015, the firm
appointed its first non-Japanese executive vice president. Substantial changes were
implemented in April 2016 by Toyota- Shifted from Functional to Product-Based
organization.
The first non-Japanese Executive Vice president in the technical domain was appointed in
2017. Henceforth, appointing the right people for the right position in the executive line up
was heavily promoted by TMC. (Recruit Executive)
Based on the span of control, organizational height and use of line versus staff position, an
organization establishes its structure.
MATRIX structure
Toyota follows a matrix organizational structure which transitioned from Divisional
organizational to Functional to Product Based Organization. Matrix structure divides
authorities of functions and product structures. In the Toyota structure, Leaders play a key
role in the success of the company. (Formal Position) Toyota has few layers of the span of
control of the leader at the bottom of the organization. Their philosophy is to separate
responsibility to the lower level. This helps for decision making and a smooth flow of
information for achieved the objectives.
Team leader and group leaders have three basic responsibilities. These are supporting of
operations, promotional of the system and leading change. The group leaders play a crucial
role in the development of the Toyota structure
Global Hierarchy. Toyota still maintains its global hierarchy despite its reorganization in
2013. The company has enhanced the decision-making power of regional heads and
business unit heads in the current organizational structure. The decision-making processes
became more decentralized. Nonetheless, all business unit heads still report to the firm’s
global headquarters in Japan.
Geographic Divisions. Toyota’s new organizational structure has eight regional divisions
(Japan, North America, Europe, East Asia and Oceania, China, Asia and the Middle East,
Africa, and Latin America and the Caribbean). Each regional head report to the company’s
headquarters. Through these regional divisions, the organizational structure helps in
improvement of services according to the environment and market condition of the region.

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Product-based Divisions. Another feature of Toyota’s organizational structure is the set of
product-based divisions. The company has four of these divisions: (a) Lexus International,
(b) Toyota No. 1 for operations in North America, Europe and Japan, (c) Toyota No. 2 for
operations in all other regions, and (d) Unit Center, which is responsible for engine,
transmission and other related operations. This feature of Toyota’s organizational structure
supports the development of brands and product lines. (Differentiation)
Adding Positions: In 2017, the position of executives within the company was revised and
encouraged the appointment of people with high levels of expertise irrespective of their age
or time with the company. With the advent of electrification, connectivity and other
technologies, TMC strongly emphasized on entering a phase of COMPETITION and
Coordination. As a result, in order to boost innovation and strengthen cooperation, Toyota
changed its Executive lineup.

Adding department: With the aim of redoubling TPS efforts outside of manufacturing
divisions and enhancing competitive strength and productivity, TPS Group was established
in January 2018. In June, the logistics division was brought within the TPS Group. The
vehicle development center was established to hone manufacturing abilities in the real world
along with strengthening the competitiveness of its product from the viewpoint of its
customer.
Planning, Forecasting, and Responsiveness: Advanced planning and advanced
development functions for electronic controls, for powertrains, and for various vehicle
platforms, were consolidated that until now were separated among the TNGA Management
Division. TMC aims to further strengthen the competitiveness of its products
Horizontal linkages: Lean approaches to link processes ranging from advanced planning
and development to mass product development at its in-house companies responsible for
specific vehicle types were utilized for improving development speed.
Toward sustainable growth, TMC has cultivated its workforce by creating structures—

 Through establishing business units,

 Restructuring its regional headquarters, and
 Introducing an in-house company system―that enabling leaders to make quick
decisions and act according to the needs of each business and region allowing the
flexible deployment of human resources.

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 ZOOMING IN:
TOYOTA RECALL CRISIS OF 2009
2009 probably saw the worst crisis in Toyota’s history. Under the then CEO, Katsuagi
Watanabe’s reign, the company implemented a series of aggressive cost-cutting measures to
compete with Carlos Ghosn of Nissan as well as to maintain its footing in the wake of global
alliances formed by other competitors. From 2001 to 2006, Toyota had managed to reduce its
manufacturing costs by $10 billion, and profits soared. Toyota had become the world’s largest
car manufacturer and occupied 16.2% of the US market share, the highest after General
Motors.

Parallelly, however, the number of faulty vehicles that Toyota recalled also grew. As a
company that had built its reputation around its highly reliable products, it even went as far as
dissolving a specialized task force it has established to investigate defects in 2009.

In August 2009, a Lexus ES350 accelerated uncontrollably to 120 mph in San Diego,
California. All four people on board were killed on collision. Reports of unintended acceleration
due to the accelerator pedal being stuck by other Toyota owners soon followed. As many as
19 fatalities were attributed to this defect, and widespread media coverage followed.

Toyota had just reported an operating loss for the first time since 1950 post the global financial
crisis of 2007-2008. In an already precarious position vis-a-vis sales, the organization did not
take very well to this disruptive shock in their environment and started displaying typical
reactor behavior, even though it was anything but that. People wondered whether
Watanabe’s cost-cutting policies were translating into poorer quality vehicles. The LA Times
claimed that Toyota had hidden safety information from motorists and that it had actually been
aware of the sticky pedal issue for quite some time. Toyota simply defended its position,
declared that the media had distorted the facts and reiterated its intention to defend its “well-
earned reputation for integrity”.

An initial investigation by the National Highway Traffic Safety Administration (NHTSA) pointed
towards improperly installed doormats. An earlier investigation by Toyota Europe in 2008 had
attributed a similar issue to high heat and humidity conditions, which had been dismissed as
“customer dissatisfaction” rather than a safety issue. In the U.S., Toyota finally issued a recall
for 4.2 million vehicles but distorted the NHTSA’s statements to claim that the recalled vehicles
had no significant defects in the pedal and footwell design, earning it a sharp rebuke from the
government agency. By the end of February 2010, Toyota’s stock value had fallen by USD 35
billion.

Looking at the problem from an organizational design perspective, the decision was a
programmed decision as Toyota cars have reported similar incidents in Japan in 1989.
Procedures were already in place as to what had to be done, and Toyota had attempted to
cover up the previous incident as well. The upper management’s reaction and decision
making, as well as public communication, can also fall under the Carnegie model of decision
making. Toyota could not identify the correct line of questions to focus on - what was the cause
of the sticky pedals? Would it make sense to come up with an honest, sincere apology in a
country with a culture as distinct as America’s rather than trying to downplay the incident?
They also engaged in satisficing and problemistic search by attempting to find quick and
minimum acceptable solutions to the issue.

Digging a bit deeper into Toyota’s structure during the time, we find that Toyota’s 38 shusas,
or the chief engineers were extremely insulated from market information. Operating out of
Toyota City in Japan, they were not privy to the complaints of customers kilometers away in
the U.S. They were, and are, also highly respected and given almost-absolute authority in the
corporation. Due to a strict vertical hierarchy and Toyota’s mechanistic design, lower-level

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US employees would hesitate to pass on information about customer dissatisfaction to the
shusas.

As the company expanded, the power distance between its Japanese headquarters and the
American subsidiary increased. Information was slow to pass up the levels to headquarters,
where most of the decision-making powers lay. The U.S. arm lacked a headquarters and was
mostly involved in advertising and services. Power was extremely centralized, there was
almost no delegation of authority and unidirectional flow of information. An article by CNN
commented on how Toyota had colonized instead of globalized. The Japanese board of
directors, who kept tight control on major decisions like announcing recalls, failed to analyze
distress signals from the U.S. market (i.e., ineffective boundary spanning) and recognize
Toyota’s stage of decline amongst the American customers. The distance ultimately led to
the gross misunderstanding of the ground situation and mishandling of the entire fiasco.

As a response to this, in 2011 Toyota restructured its operations to encourage a degree of

regional autonomy:

1. Delegation of Authority: While the hierarchical structure remained, the U.S. side could
now decide on recalls and other relevant decisions.
2. Quality Control Task Forces: North American executives in manufacturing, engineering
and sales would meet monthly and discuss potential quality issues. They would
analyse customer information directly.
3. Data Sharing: U.S. subsidiaries could now access manufacturing data of vehicles that
were made in Japan but sold in the U.S.
4. Devil’s Advocate Task Forces: A task force of engineers is given four extra weeks to
tear down new designs and use the car in creative ways to find all flaws possible.
5. Better Communication: Japanese engineers now had to mandatory travel overseas for
periodic checks. Customer complaints, queries, or even social media posts would be
automatically flagged and analyzed to find the root cause of dissatisfaction.

In 2013, Toyota further flattened its organizational structure to decrease response time to
environmental changes and certainties and tackle problems in a more flexible manner.

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 THE TOYOTA CULTURE
In its 82 years of existence, Toyota has developed a rich, complex culture. For years, the culture was
passed down from founders to employees in the form of rich oral traditions, quotes, myths, and
stories. However, as the organization grew, the company realized the need for proper documentation
to create a global company bound by high levels of sociability and solidarity. Thus, in 2001, the Toyota
Way was formally established.

Fig. xxx: The Toyota Way

The Toyota Way is a set of principles that forms the basis of managerial decisions and employee
behavior. It is pillared by two basic principles - continuous improvement and respect for people, and
is based on five core values:

1. Challenge: Toyota takes pride in challenging itself. It managed to transition from a loom
company to one of the largest automakers in the world. Post World War II, it set out to
compete with the eight times larger Ford and ended up being the second occupying the
second largest market share in the U.S., second only to General Motors.
2. Kaizen: Keeps the spirit of competition going, even if they are first in terms of automotive
sales. Kaizen is an inherent Japanese philosophy.
3. Genchi genbustu: This stands for workplace learning. A culture of drilling down to the source,
finding facts, building consensus, and taking decisions is encouraged. Chief engineers carry
out immense market research to understand customer requirements before coming up with
a new model.
4. Respect: Toyota Production System was earlier called Respect for Humanity System. When
people eliminate wastage through kaizen, it is considered as the greatest form of achievement
as he or she is developing his ability to think deeply about problems.
5. Teamwork: Leaders work on the floor and add team value. There is a sense of collective
responsibility.
Toyota’s success is widely attributed to the Toyota Production System (TPS) and its lean methods of
manufacturing. These are simply sub-methodologies that support the principles of kaizen or
continuous improvement. Thus, the Toyota Way supersedes the TPS since its core focus is on people
and continuous improvement, rather than only operational efficiency.

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 Fig. xxx: Levels of culture

Toyota’s culture can be divided into three levels.

1. Artifacts and behavior: This includes very visible aspects like the Toyota Way house, high-
quality ratings, community education programs, mission and value statements and TPS tools
like andon. The worker stops the assembly line as soon as a quality issue is detected and the
andon light goes on.
2. Norms and values: Aspects of the Toyota way like contributing to society, respect for people,
continuous improvement, a customer-centric model, self-reliance all fall under this level.
These are generally accepted rules of behavior and may not be written. Looking deeper into
andon, if a team leader is asked why they allowed the line to stop, they point that organization
places more value on quality than production numbers.
3. Underlying assumptions: This level encompasses everything Toyota deeply believes and acts
upon. Satisfying customers is a matter of honor. Executives are a part of a social institution
that will last beyond their lifetimes. In andon, one of the underlying assumptions is that the
workers’ key role is to identify and call attention to problems even if it leads to stopping
production

Even though Toyota is a global organization, its philosophy and culture are very eastern. Without
country-specific modifications, this may not always work out well. Figure xxx compares the Hofstede
culture scores for Japan and the USA.

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 Fig xxx: Hofstede culture scores for Japan, USA, and the World

The culture mismatch between American customers and Toyota’s Japanese executives can be best
highlighted by the 2009 Toyota recall crisis. Japanese culture is characterised by higher levels of
masculinity, uncertainty avoidance, long term thinking and lower levels of individuality. Structurally,
Toyota is a mechanistic organization. A mix of these emphasized a sense of hierarchy and secrecy.
Employees believed that all decisions should come from the Japanese headquarters and were hesitant
to pass on customer complaints because they feared a loss of face. Upper management attempted to
defend the company and its values and blamed the customers. Millions of cars were recalled, and
Toyota’s stock fell by almost $30 billion because of improper handling of quality and safety issues.

Post its reorganization in 2013, it was decided that country-specific modifications were necessary for
Toyota to survive as a global company. Since culture requires to be continuously modified based on
the requirements of the country and general environment, the Toyota way serves as a basic reference
and shall be built upon. According to employee perception, the four main cultural characteristics on
the order of decreasing significance are:

1. Teamwork
2. Continuous improvement through learning, i.e., a learning organization
3. Quality
4. Secrecy

Today, Toyota is one of the most admired companies for organization culture. Since Toyota has been
successful, its culture is still based on the above principles and values. Some of the means through
which it achieves its culture are a delegation, job rotation, classroom training, workgroups, quality
circles, rewards, and recognition.
Toyota aims to go beyond customer satisfaction to create long term relationships with customers. It
is moving beyond continuous improvement to strategic innovation.

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In today’s era, consumers don’t just choose products that satisfy their needs, but they look for
sustainable products and brands that promise a better life. Toyota had been build around the
same thought, and since its inception, it has adopted the culture of ‘Customer First’ by being
competitive and providing the best of comfort, quality, luxury, safety, and after-sales services.
The continuous strive to providing the best services to its stakeholders and growing by
innovation has made Toyota today one of the world’s greatest manufacturers. Unlike many
other organizations, Toyota could achieve all this only by being a learning organization. It
had realized that for the organization’s sustainable growth, its employees, and the organization
as a whole have to first commit to learning.
The three key elements adopted by Toyota to become a learning organization are as follows:
1. Identify root causes and develop countermeasures: Toyota believes in solving
problems systematically and being a process-oriented company, it prefers simple
metrics that may/may not be used at the plant level. Combining these ideologies, while
problem-solving Toyota relies only 20% on tools and the rest 80% is thinking. They
follow a five-why analysis in the process known as ‘practical problem-solving.’ They
first determine the root cause by prioritizing the problems in a Pareto analysis and then
by repeatedly asking the question of ‘why?’. During the whole process, they set targets
for improvement and generate and implement a countermeasure and evaluate the
results. As soon as a proposed solution is deemed effective, it is standardized, which
ensures that the learning is not forgotten and forms the basis of continuous
improvement.
2. Responsibility, Self-Reflection, and Organizational Learning (Hansei): This is about
taking individual accountability. It involves retrospection and looking at a situation from
the perspective of a problem and an opportunity, and then devising a workable solution
for it. It is all about learning and growing. The concept of Hansei is a part of Japanese
culture, so it was easily incorporated within Toyota Japan. But when Toyota finally
introduced Hansei to its U.S. managers in 1994, it was very challenging for the officials
there to make Americans understand this concept who were not engineered to take
criticism positively. For Toyota, Hansei is a practical tool for improvement and not just
a philosophical belief system, hence the Toyota Technical Center at the USA started
organizing hansei events and reflection meetings during and after the launch of a
vehicle. This practice helped its American employees to then ask questions about their
work and use five whys to find the root cause of the problem and find a solution to it.
Hansei had aligned Toyota employees around the globe to give and take constructive
feedback and work towards a solution.
3. Utilize Policy Deployment (Hoshin Kanri): Toyota understood that the key to
organizational learning could only be achieved when the goals and objectives of its
employees could be aligned with that of the company. Using Hoshin kanri, Toyota
involves everyone in continuous improvement by the process of cascading objectives
from the top management of the company to the lowest workgroup level. Competitive
goals are set at the executive level, and with each decreasing level, they become
specific, measurable objectives for the year that support the executive-level goals. A
simple process known as PDCA (Plan-Do-Check-Act) is followed through all levels that
ensure measurement and monitoring of success regularly wherein the progress report
flows upward from workgroup level to senior executives.

Toyota is now a global learning organization only because of its resilience for success over
the last decade. An example of the advantage that Toyota gets by being a learning
organization can be shown by the fact that in 2016, the average number of implemented
improvement suggestions at the Georgetown, Kentucky Toyota plant was 11. This meant that
Toyota received eleven implemented improvements every year by every employee, where
most companies don’t even get one.

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By creating an environment of continuous improvement, Toyota has successfully been able to
drive innovation and bring impact. It has beautifully combined technology with design and
purpose. The instances mentioned below will give us a better idea of the future readiness of
Toyota.
1. The increase of ride-sharing and electric vehicles has transformed consumer beliefs
of connectivity in terms of ownership and environment. Toyota sees this as the future
of mobility and has been advancing Mobility as a Service (MaaS). In a new step
towards the direction of creating new mobility services, Toyota Motor Corporation
(Toyota) had formed a strategic partnership with SoftBank Corporation (SoftBank) by
establishing a joint venture company with the name MONET Technologies Inc.
(MONET).
The objective of this business development structure is to help realize a safer and
more autonomous mobility society by combining SoftBank's corporate philosophy of
"Information Revolution—Happiness for everyone" with Toyota's vision of "Mobility for
All." MONET, which started on 23rd January 2019 as a joint venture between two
corporations, has a total of 9 shareholders now. It also has a MONET consortium with
276 participating companies (by June 2019) like Amazon Web Services Japan Ltd.,
SAP Japan Ltd., etc. The aim of the consortium is to construct a MaaS open platform
in Japan and solve social issues and create new value in MaaS promotion/migration.

The following table shows the top executives at MONET and its main shareholders.
Company Name MONET Technologies Inc.

President & CEO Junichi Miyakawa

(Executive Vice President & CTO, SoftBank Corp.)

Representative Yoshihide Sugio

Director Vice (General Manager, Toyota Motor Corporation Connected
President and COO Company MaaS Division)

Director Koji Yamamoto

(Toyota Motor Corporation Connected Company Executive Vice
President)

Director Takatoshi Ayukawa

(General Manager, Advanced Technology Development Division,
Technology Strategy Headquarters, SoftBank Corp. Technology
Unit)

Shareholders Softbank Corp. (35.2%), Toyota Motor Corp. (34.8%), Hino

Motors Ltd. (10%), Honda Motor Industry stock company (10%),
Isuzu Motors Ltd. (2%), Suzuki Motor Corp. (2%), Subaru Corp.
(2%), Daihatsu Industrial Co. Ltd. (2%), Mazda Corp. Inc. (2%)

2. In April 2019, Toyota opened around 23,740 patents related to its hybrid car technology
that would be available to license for royalty-free use until 2030. Along with this, Toyota has
also offered paid consulting services to the license holders. This decision may have come in
the advent of the increasing popularity of pure electric vehicles in energy-efficient vehicles and
anticipation of decreasing demand for Toyota’s hybrid vehicles that make about 80% of hybrid
vehicle sales. By opening its patents for hybrid cars, Toyota has created an ecosystem that
would allow other carmakers to enter in the hybrid car market and thus help in keeping hybrids
on top in energy-efficient vehicles for long.
The idea is also to use these partnerships to bring down the investment costs by increasing
the scale of production of key hardware such as power control units and electric motors used
in hybrid and electric vehicles. The step would minimize resource dependence and influence
the environment to make more resources available.
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References:
1. https://www.toyota-
global.com/company/history_of_toyota/75years/text/entering_the_automotive_business/chapt
er1/section2/item1.html
2. http://insights.btoes.com/lean-resources/toyota-production-system-principles-introduction-to-
tps
3. https://en.wikipedia.org/wiki/Toyota
4. Toyota Motor Corporation by Marketline
5. https://www.toyotaglobal.com/company/history_of_toyota/75years/text/entering_the_automo
tive_business/chapter1/section2/item1.html
6. https://www.toyotaglobal.com/company/history_of_toyota/75years/text/entering_the_automo
tive_business/chapter1/section2/item1.html
7. http://insights.btoes.com/lean-resources/toyota-production-system-principles-introduction-to-
tps
8. https://www.toyotaglobal.com/company/history_of_toyota/75years/text/entering_the_automo
tive_business/chapter1/section2/item1.html
9. http://insights.btoes.com/lean-resources/toyota-production-system-principles-introduction-to-
tps

10. https://www.linkedin.com/pulse/toyota-principle-14-learning-organization-robert-b-camp/
11. https://www.reliableplant.com/Read/13439/toyota-learning-organization
12. https://www.ineak.com/tag/become-a-learning-organization/
13. https://www.forbes.com/sites/simonmainwaring/2018/11/13/purpose-in-action-how-toyota-is-
driving-growth-innovation-and-impact/#ac75d7247fbc
14. https://erticonetwork.com/toyota-agrees-on-strategic-partnership-for-new-mobility-services/
15. https://www.monet-technologies.com/
16. https://asia.nikkei.com/Business/Companies/Toyota-seeks-to-keep-hybrids-relevant-by-
releasing-trove-of-patents
17. https://www.autoblog.com/2019/04/12/toyota-hybrid-patents-plans-to-sell-hardware/

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