Toyota Case Analysis

Table of Content

Corporation being the world’s largest car manufacturer is a good example of a company that embraces both cost efficiency and quality assurance techniques in dealing with management issues and in production concerns.  This study explores Toyota Corporation’s approaches in dealing with the changing global condition to remain competitive. At the same time, it determines the extent to which these approach consistent to be relevant to the organizational needs of the company.

Toyota continues to evolve utilizing its kaizen principles and kanban system to appropriately provide solutions to the basic needs of production due to increasing demand for the different models of Toyota cars worldwide. Various centers aside from the main headquarter which is stationed in Japan have been established to cater production needs, sales, and trainings to make supply match the demand.Toyota as it ventured to become a multinational company had to reform its organizational structure and design.  In order to adapt to the changing and unpredictable circumstances that may affect the business, it changed from functional to cross-functional form of organization.

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Therefore, it follows the concept of matrix type of organization wherein each center is mobilized and given autonomy in planning as well as in decision-making and problem-solving. As a multinational corporation servicing many parts of globe, it had to reform its organizational structure and design not to mention its production system in order to deliver various vehicles on time. These and many other aspects of Toyota’s organizational structure and production system are the subject of this study to find its connection with the recent reported cases of ‘recall’ of Toyota cars which for many experts a management problem and not simply production issues. This problem according to Dizikes is a test to the firm’s reputation.

The article seems to capitalize on the strengths of the company; however, greater problem has arisen which needs appropriate attention from the management.Outline and Discussion of the Major Issues/ProblemsSeveral disabilities have caused the management to overlook possible problem to arise. Some of these issues are:

  • the just-in-time manufacturing system may cause to affect the quality of spare parts;
  • cost reduction strategies worsen the efficiency of the product;
  • inventing a new model in roughly two years may not be enough to consume in research and therefore may lack superiority and efficiency of product;
  • Toyota’s organizational structure has a lot of complications.

As stated, “The origins of an organization’s problem lie in the organization’s success” (Case Studies 554).

The just-in-time manufacturing system or kanban system was conceptualized in the effort of Toyota Corporation to reduce inventory and to save cost. The aim of kanban system is “to reduce inventory to a minimum” (Case Study). There are mechanics in doing this: the company enhanced quality control to avoid reject products, inventory system is improved by ordering parts when stocks ran out, machine operators were expected to be” multiskilling” when there is surplus of parts (Case Study 552).The jus-in-time principle of Toyota in line with the product quality issue is inherently possible for organization having smaller market.

Beynon and Nichols emphasized that “production quality can only be improved by incurring higher production costs” (221) because in case of an organization that produces very large batches of production, increase in plant utilization, maintenance of machines and production site, and inventories of raw and finished materials require large expenses.

Toyota therefore cannot assume cost saving and quality efficiency at the same time. In doing so, technical problems relating to production of spare parts and the assembly of cars may affect the quality of the finished product. Guy even argued that many has understood JIT considering the many aspects that covered mass production in which “tracing the defect in the parts or materials” is time consuming and the low priority while the production is on-going (135).

He stated, “JIT makes it impossible to ignore defects” (135). The Taylorist separation of conception provides explanation why it happens. Because of the division of production process, workers do not understand his contribution to the whole process (Pickles 117) and therefore worker output is “only about one-third of what was possible” (Organization Theory 42).Given this, just-in-time principle will not lead towards overall customer satisfaction not unless product quality is ensured hundred percent and no complaints will be received from the car owners/users.

The case study stated that Toyota is so quick in developing new models which barely takes them two years through its “sophisticated design techniques” (553).  For Toyota, developing new model is a response to opportunity in dominating world economy. However, it is also emphasized that “over two-thirds of a new design contains existing parts” (553).  Other car manufacturers may dislike the idea of spending two years in developing new model having two-thirds of the spare parts are already existing.

In the same way, the development of Prius also paved the way for Toyota to reinvent its organization which took only two years. Woodward and Perrow research in 1960 explained the importance of technology in “determining the appropriate structure for an organization” (“Organization Theory 53).  The development of Prius Hybrid Car compelled Toyota to transform its organization from hierarchical to horizontal structure.  However, it should have been utilized well with appropriate researches made to align changes with employees’ skills and capabilities through intensive trainings and employee motivation.

It is stated that because of the “strains of going global” Toyota has already established 46 plants in 26 countries as of 2005 (Case Studies). In the case study presented by Griffin and Moorhead, Toyota has just started to reinvent their products and organization in 2004 from being “one of the world’s leading cost-cutters” (519). The reinvention of products and organization took Toyota several months only or years compared with other company in which changes usually take many years.  This condition has caused several problems in the case of Toyota.

It is very definite that a very complicated organizational structure of Toyota brings problem in the implementation of the system. First, complex organizational structure lessens order and discipline. Wren emphasized that training for order and discipline is more important in modern corporations because of the organization’s requirement for “extensive division of labor and … greater coordination of effort” (“Organization Theory” 42).   In the case of Toyota, problems in terms of coordination and control arise when it shifted from vertical to horizontal structure just to respond to the increasing demand for growth and feasible changes in the environment.

Changing to cross-functional structure often gives Toyota several problems which include “organizational performance” because organizing itself is “complicated and time consuming” (Daft 119).  Thus, the problem in terms of control and coordination can be expected to happen unless several measures have been undertaken until all employees get used to the new system. Furthermore, Daft noted that cross-functional nature of work may also limit the “in-depth knowledge and skill development” (119) of employees because of too much emphasis on teamwork.In addition, Toyota’s organization suggests that the company utilizes the balance between being functional and being bureaucratic.

According to Daft, combining functional matrix with product matrix is “hard to implement because one side of the authority structure often dominates” (111).  The ‘dual-authority structure in a matrix organization’ according to Daft is not advisable because only one approach “works better than the balanced matrix with dual lines of authority” (111) considering evidences from business cases.  Accordingly, this structure has disadvantages. First, in the case of Toyota, the coordination process that goes between the functional managers and engineers (product managers) is problematic because coordination is difficult to achieve between the two bosses.

That is illustrated through dotted lines which show that each manager is responsible with another manager in terms of reporting; in which case, the quality of produce is not met (Morgan and Liker 144).  Secondly, as Daft pointed out, each matrix (functional and/or product) has separate structure which makes combination difficult to implement (Daft 111).

Thus, it only proves that Pfeffer’s theory that organizations are like political arenas in such a way that “an organization’s design represents the result of the power struggles by these diverse coalitions” (“Organization Theory 56).  It this is the case, decision-making is less effectual because complexity of decision making is due to the “role that power and politics play in organizations” (Organization Theory 52).


Based on the evidences and empirical explanation for the occurrences of the problems, there are recommendations that may resolve the problem or improve the situations.First, Taylor suggested utilizing scientific methods in cases such as determining worker’s job, selection and training of workers, and cooperation of management and labor (Organization Theory 42) to improve efficiency. Do not simply rely on JIT principles; analyze the production process and improve the system. Secondly, there is a need for Toyota hurry things up; every product that will be invented must be scientifically tested; for higher competence, develop new spare parts for the new model.

Third, reduce too much cost-saving scheme in purchasing new spare parts from suppliers; cost reduction is good in inventory but not on spare parts.  Fourth, there is the need to reevaluate the organizational structure and find ways on how coordination and communication despite decentralized organization will be improved. Also, in line with organizational issue, it is also appropriate at this time that accountability within the organization and among department and centers be strengthened and valued.ConclusionAs stated, “The origins of an organization’s problem lie in the organization’s success” (Case Studies 554).

During the rapid growth years of Toyota, smaller and unpredicted circumstances were neglected as top management became overwhelmed by its successes. JIT and Kaizen principles are good but it has to be reviewed to find out its relevance considering the changes that occur at the present.  The paper only suggests that Toyota has to spend more in research and improvement of product. It is something worth to be doing than saying. Major reviews have to be undertaken alongside recall activities being done at this time.


  1. Beynon, H. & Nichols, T. 2006. The Fordism of Ford and Modern Management: Fordism and Post-Fordism, vol. 1. UK: Edward Elgar Publishing Limited.
  2. Daft, R. L. 2010. Organization Theory and Design. USA: South-Western CENGAGE Learning.
  3. Dizikes, P. 3 Questions: Steven Spear on Toyota’s Trouble. MIT News.http://web.
  4. Griffiin, R.W. & Moorhead, G. 2010. Organizational Behavior: Managing People and Organizations. USA. South-Western CENGAGE Learning.
  5. Guy, F. 2009. The Global Environment of Business. USA: Oxford University Press.
  6. Morgan, J.M. & Liker, J. K. 2006. The Toyota Produce Development System: IntegratingPeople, Process and Technology. USA: Productivity Press.
  7. Pickles, J. 1995. Ground Truth: The Social Implications of Geographic Information System. USA: Guilford Publications, Inc. Introduction to Organization Theory (file)Case Study (file)

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