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TOYOTA Management Case Study Hiroshi Okuda in Toyota Nur Firdous Majid & Jatin Naresh 5/18/2009 Table of Contents Contents Page Number Introduction 1 Question 1: Okuda’s Leadership Styles 2 – 4 Question 2: Transactional or Transformational Leader 5 – 7 Question 3: Radical changes When Company Is in a Crisis 8 – 9 Question 4: Charismatic, Visionary and Culturally Consistent with Japanese Practises10 – 12 Conclusion 13 Reference List 14 – 15

EXECUTIVE SUMMARY Hiroshi Okuda, a Japanese leader, became the president of Toyota in 1995. He was known for his outspoken and aggressive personality. He is also rather frank and is never afraid to speak his mind.

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For example, one question about his competition prompted Mr. Okuda to say, “I don’t understand why Ford chose that kind of styling for the Taurus; it is too round. In Japan, that styling was popular four or five years ago. ” (McFarlin & Sweeney 2006, p. 426) He was much different than the other executives in Japan where these

Japanese executives usually remain unseen. During his time as the president of Toyota, he adopted many leadership qualities. Firstly, he led Toyota on being a household name.

Besides that, he also came up with various innovations and managed Toyota according to his unique style. Okuda was also known as a transformational leader as he implemented many drastic changes to the company. A leader should recognise the circumstances and organisation of the company before choosing to become a transactional or transformational leader as they exhibit very different qualities.

When a company experiences a crisis, a leader should be able to make some radical changes in order to turn the company around. This is exactly what Okuda does. Okuda is definitely classified as a charismatic and visionary leader. He got things done using his personal charm. Moreover, he always had a vision of the future. INTRODUCTION In this report, we will be discussing the leadership style adopted by Hiroshi Okuda while he was the President of Toyota. Besides that, we will also be debating on whether he is a transactional or transformational leader.

This report also includes the explanation how a company should react when dealing with a crisis, whether the leaders should implement radical changes or simply carry on with their current management style. Moreover, this report also discusses on whether Okuda is a charismatic and visionary leader plus whether his leadership style was culturally consistent with Japanese practises. We gathered information on Toyota, Hiroshi Okuda and his leadership style from many different sources such as books, online articles, journals, newspaper articles and also some trustable online information.

This information was then analysed and interpreted in order to provide a chronological series of action by Toyota from the time before Okuda became the president until after he was retired. Question 1 : How would you describe Hiroshi Okuda’s leadership style? Cite specific examples supporting your choice. Hiroshi Okuda, the man that led Toyota on being a household name Hiroshi Okuda is the person who has led Toyota Motor Corporation to become one of top brands and a successful company in the world. He became president in 1995 (Businessweek 1997) and hen later became Chairman in 1999, currently he is the senior advisor and Director of Toyota. Okuda was the first person outside the Toyuda family to run the company. Okuda changed Toyota’s conservative style to a more aggressive one (New York Times 1998). He is very frank and speaks his mind out to the public, and he believes innovation is the way to progress. He is clearly different from other leaders as he openly states his ideas publicly and even the problems and solutions. Okuda’s innovations and leadership

Hiroshi Okuda developed an efficient assembly-line method called the Toyota Production System (TPS). This system changed the ways factories are run worldwide, it was famously known as “the Toyota Way”. This method which was perfected by Toyota enabled on eliminating waste, reducing defects and maximizing flow. Hiroshi Okuda taught this system to many other organizations as he wanted to share his method with world to make it more productive and save resources (Frederick 2004). Okuda saw the need for hybrid cars long before the world demanded them.

He started the engine technology that would allow for the world to have fuel efficiency and zero emission cars. Okuda believe innovation was the way to success, that’s why he introduce to the world is first mass-market petroleum-electric hybrid car, the Prius (Frederick 2004). He believes in making the environment better and cleaner, so he moved forward with is project on inventing the hybrid car the Prius which is immersive popular in the market now. Even celebrities from Hollywood are seen driving them due to their environmental friendly features.

Frederick (2004) also states that when many other carmakers were not keen on making hybrid cars as they thought it wouldn’t be profitable but Okuda said that “any carmaker that thinks that hybrid cars are not profitable, should start looking a new line of work”. This is how confident Hiroshi Okuda was with his inventions and products and the Prius is one of their most popular and profitable cars in markets all over the world. Okuda is keen to promote the Prius, which he feels is a clear sign of Toyota’s development on technology and creativity.

He predicts Toyota will create a big change in the “field of engine production and driving equipment production. “(Clark 1998) Okuda believes in investing on Research and Development as efficiency is not enough for moving a company forward, it needs to continue innovating (Frederick 2004). However, this year due to world economic recession they have reduced their spending by 10% from $9 billion to $8 billion (The Wall Street Journal 2009). Toyota brings together ideas and technologies for implementation which matches with the corporate requirements, including designs, manufacturing, marketing, and product planning.

Each new innovation must be tested out extensively before it is suitable for inclusion in a specific vehicle program (Morgan and Liker 2006, p 44) Managing Toyota the Okuda way Hiroshi Okuda has one key management rule which is time. He believes that time and patience are the keys for Toyota to progress and he says they will continue doing what they do best which is producing good cars, introducing new technology and making contributions to society (Clark 1998). Okuda states that Toyota must hire more experts from foreign countries as they can assist in car designs and car development.

He wants the Japanese workers to gain knowledge from the foreign workers and he wants to hire good people for Toyota whether they are Japanese or non-Japanese. Foreign workers are now becoming executives in Toyota and helping promote Toyota globally, all this are Okuda plans of growing Toyota to provide cars for all age-groups, personal or company people. He changed the management attitudes as he felt that younger executives had more ideas and imagination for Toyota to progress.

He announced a new policy that took away titles of general managers at the age of 55 and managers at the age of 50; however they were allowed to stay in the firm but with less responsibility (McFarlin & Sweeney 2006, p. 427). Okuda wanted a young workforce of executives to bring in their talents and lead Toyota to continue growing. Conclusion Hiroshi Okuda is the leader that has brought Toyota Motor Corporation to its position in the world now. He has chosen “Moving Forward” as its new slogan which means we have a passion for innovation and discovery (Lagorce 2004).

Toyota is now 2nd biggest carmaker behind General Motors and its sells the most number of cars worldwide. His leadership skills were different from others but very successful and he made many innovations to the system which is used in other organizations too. Question 2 : Was he a transactional or transformational leader? Compare and contrast both. Should managers be one or the other – or can they be both? Introduction Hiroshi Okuda has been a Senior Advisor of Toyota Motor Corporation since 23rd June 2006. Mr. Okuda serves as a Corporate Auditor of Toyota Industries Corp.

He joined Toyota Motor Corporation in 1955 and served as its President from 1995 to 1999 (BusinessWeek 2008). When he became the president in 1995, Hiroshi Okuda vowed to cure Toyota’s “big-company disease” (BusinessWeek 1997). Is Hiroshi Okuda a transactional or a transformational leader? One of the most obvious reasons as to why I suggest that Okuda observes transformational leadership is due to his unconventional behaviour performance (Charismatic Leadership 2009). Apparently he had the advantage of getting easily noticed by others. More importantly, he was very outspoken and frank.

An example was a dinner he held with American journalists, where he more than held his own in English (McFarlin & Sweeney 2006, p. 426). Okuda’s leadership style reflects unconventional behaviour also because he imposes his aggressive style in managing Toyota Motor Corporation. This is very unusual among other Japanese executives because in Japan, executives are supposed to be concealed. According to McFarlin and Sweeney (2006, p. 427), Okuda feels that being aggressive is extremely important in changing Toyota’s traditional and conservative image to a more modern one as to remain competitive in the market.

Okuda changed many things about the company, much of which appeared to be for the better. For example, he felt that Toyota was due for a shakeup, given its erratic performance prior to his arrival (McFarlin & Sweeney 2006, p. 427). He mentioned that Toyota had become big and lethargic which initiated him to carry out some drastic measures. An example of the drastic changes that Okuda implemented is changing the conventional Japanese management style where lifetime employment is consistent within the culture.

Hiroshi Okuda announced a new policy that swiped general managers from their title at the age of 55 and managers at age 50. This action was carried out based on his belief that only younger executives have the vigour and imagination to run a big company like Toyota (McFarlin & Sweeney 2006, p. 427). I strongly agree with his confidence as older managers tend to lack the capability to sustain a big company such as Honda, Mitsubishi and Toyota itself. Most of them are not able to keep up with the most current issues and technology in order to keep the company active and competitive in the market.

This is due to the fact that the performance level of a person starts to deteriorate after the age of 50 (McLaughlin 2001). However, McFarlin and Sweeney (2006, p. 426) claim that the other Japanese executives and managers beg to differ. They believe strongly in their traditional seniority-based promotion system. Schermerborn (1993, p. 135) also agrees that Japanese management has been popularized for its emphasis on several factors, such as long-term employment outlook and job security, slow promotion and emphasis on broad job experiences.

During his time as the president of Toyota, Okuda had completely overhauled Toyota’s traditional promotion system and remodelled it with new emphasis on merit. For example, Okuda retired about one third of Toyota’s top executives and replaced their positions with younger men, some jumping several grades with one promotion (McFarlin & Sweeney 2006, p. 427). Should managers be a transactional or a transformational leader? Is being a transformational leader better than being a transactional leader? A question as such is often thrown at us. However, there is never a distinct and objective answer to this.

On the contrary, it is rather subjective. The requirement to be a transactional or a transformational leader depends on the organisation itself. Certain organisations require transactional leader where not much changes for the company is necessary. These type of companies are usually satisfied with their management style and do not wish to change it. On the other hand, some companies may be desperate for a transformational leader as require drastic changes in their current management style in order to sustain their company. Transactional leadership refers to managers doing things right.

A transactional leader maintains and controls the short term view of the company. They basically follow the conventional style adopted by the organisation or company they work for and continue on with it, without implementing any drastic changes (Transactional Leadership 2001). Examples of transactional leaders are the presidents of Toyota before Hiroshi Okuda was appointed, namely, Tatsuro Toyoda (McFarlin & Sweeney 2006, p. 427). Transformational leadership on the other hand refers to the leaders doing the right things (Transformational Leadership 2009).

A transformational leader typically transforms or changes the organisation of a company. Furthermore, a transformational leader usually has a clear vision for the future. Their presence would generally make a difference, although not always for the better because some of the followers may not agree with the changes that he implements. According to Bass in 1993 (cited in Transformational Leadership 2009), typical transformational leadership behaviours include idealised influence, inspirational motivation, intellectual stimulation and individual consideration.

In this case study, Okuda shows a few transformational leadership behaviours. For example, he showed intellectual stimulation by challenging organisational norms and encouraging divergent thinking as I have mentioned at the beginning part of this question. Besides that, Okuda also shows inspirational stimulation by not being afraid to take risks in decision making. For example, he moved ahead by taking jobs that others did not want. For instance, many at Toyota were convinced that the project of building a manufacturing facility in Taiwan should be discontinued. Okuda, however, thought differently.

When everyone was on the verge of giving up, he restarted the project and led it to success. This reflects his drive and ability to overcome obstacles. Conclusion In today’s world, in order for a company to accelerate and remain competitive in the market, a transformational leader’s presence in the organisation is crucial. Only a good transformational leader would be able to come up with innovative ideas and strategies to bring the company at par with the new era. Question 3: When a company is in crisis, do you believe that a radical change in leadership is required to turn the company around?

Why? Why not? Introduction Whenever a company is in crisis, I believe a change is required to bring the company back up but the bigger the company is the harder it is to change. A big company has many sectors and employees, so to change the whole system or line of work it will take a great deal of time on implementing changes. Some companies get affected by economic crisis while others get affected by its competitor’s products or failure in new products. The chairman or CEO needs to implement the changes as their leadership qualities are put to the test on how they can overcome these challenges.

However some big companies in crisis do not make any changes to their system instead they introduce new products or give discounts, sometimes they just wait for the economy to get better. Some companies can reduce their cost of production and cut down on advertising during crisis. They might have to rework their managing style to suit to current market trends. (Business Week 2007) Many big companies such as Wal-Mart also faced crisis in 2006 when its growth was slowing down while its competitors growth was rising fast and as a result its shares were dropping, they needed to act fast to recover its losses.

They started making drastic changes to its domestic market, as it introduced new products at low costs and also started to explore new markets. McDonald’s Corp also faced problems during these years but they rectified it by cutting back on new-store building and concentrate on extracting more value from existing stores Toyota in crisis? Toyota was suffering in the mid-1990s and its position of 3rd biggest carmaker was in jeopardy. Toyota was losing market share to its competitors Mitsubishi and Honda in Japan. Toyota was too conservative and losing their domestic appeal.

They were losing money on every car they sold but still making small profit due to its sales on accessories and parts. The then president Shoichiro Toyoda compared Toyota’s problems to General Motors which also had their market share in the home country shrunk and had to depend on foreign sales. The recession has certainly taken a bite out of Toyota’s Japanese results, but the company must accept much of the blame for its troubles. It has failed to cater to younger buyers’ desires for zippy compact minivans and sport-utility vehicles. Until the mid-1990s, Toyota could depend on strong results at home to drive rapid expansion abroad.

Now, the pattern is overturned, and overseas profits are much more then in Japan. Already, Toyota must worry about keeping its No. 3 ranking among the world’s auto makers. Eventually, a low-profit domestic market could ruin its ability to finance its global ambitions and hold off rivals (Business week 1998). Then came along Hiroshi Okuda, who was named President in 1995. He knew the problems and publicly declared them but was looking at bringing Toyota back up but changes were required. He was very aggressive and outspoken in his methods and believed in innovation and using the imagination of young workers in the organization.

He led Toyota forward with his leadership qualities and changed the way Toyota is managed by hiring more foreign workers. He introduced a new way the factories were to be managed, the TPS way which is now being used by many other factories. He introduced many new vehicles to cater for all and played major importance in the design and quality of the vehicle. Okuda also assumed an aggressive approach to Toyota’s role in the domestic market. In late 1996 he made drastic cuts to Toyota’s vehicle prices in Japan, a move that enraged the competition.

In August 1998 Toyota extended its hold over the domestic market with the purchase of a majority stake in Daihatsu He also introduced to the world the first hybrid-powered (gas and electric) sedan, the Prius. Which is so popular in today’s market due to its environmental friendly features and has been very profitable for Toyota. Toyota currently has about 320,000 workers and with an employment growth of 5% per annum. During the fiscal year ending March 2008, Toyota did sales of $262,394. 0M with a net income of $17,146. 0M (Toyota motor corp. n. d. ). Conclusion

Most companies face a crisis during its time, but it all depends on how it overcomes its problems. There needs to be someone to take control and lead the company back into the right path. What changes are made or adjustments are made, all depends on the leadership of its Chairman or Top Executives. If the correct measures are not taken it could lead to a downfall or collapse of company. Sometimes companies merge with other companies to grow in the industry or save itself from bankruptcy. Companies should be flexible and ready for changes to suit with economic situation as the market is unpredictable.

Hiroshi Okuda’s leadership skills led Toyota to becoming one of most popular brand names and currently the 2nd biggest carmaker in the world. The changes and innovations he brought in changed many things in today’s world and he still continues Toyota further in the market. Question 4: Would you describe Okuda’s leadership style as (a) charismatic, (b) visionary and (c) culturally consistent with Japanese practises? Explain. Introduction Hiroshi Okuda was the first person outside the Toyoda family to run Toyota. Okuda imposed a rather exceptional leadership style during his time of service.

The term unique best describes him because he was nothing like the other Japanese executives who always remained in the shadow. Okuda, oh the other hand, was always in the scene and was known for his outspoken personality. In fact, even a friend said of Okuda, “He sticks out all over the place” (McFarlin & Sweeney 2006, p. 426). Okuda carried out many activities that he felt were beneficial to the Toyota Company. The Charismatic and Visionary Leadership Style of Hiroshi Okuda A charismatic leader and a visionary leader have a lot in common as they share a number of similar qualities.

Firstly, they both have a clear vision of the future. They both also rely heavily on persistence and personal sacrifice in order to get things done (Charismatic Leaders 2007). Besides that, charismatic and visionary leaders are good with actions as well as words. Furthermore, they are also effective in manifesting their vision of the future by creating achievable goals, initiating necessary actions and enlisting the participation of employees (McLaughlin 2007). Okuda shows a very charismatic and visionary leadership style.

An article from Charismatic Leaders (2007) states that charismatic leaders are often thought of as heroes that are able to use their personal magic such as their personality and charm to lead others. Visionary leaders, similar to charismatic leaders are also able to work their magic in achieving goals. They have visions of the future and articulate them with great inspiration (McLaughlin 2001). An example of a charismatic and visionary leader as stated by the author of Charismatic Leaders (2007) is John F. Kennedy. He is debatably the most charismatic President of the United States.

In this case study, Okuda shows some prominent charismatic and visionary leadership styles by being aware of his environment. Okuda understood the crisis that Toyota was encountering when he became president. Toyota was losing market share in Japan to both Mitsubishi and Honda. He also realised that Toyota was losing touch with their customers due to several factors such as product deficiency with the whole Toyota Corolla blunder and the market demand for Toyota cars were decreasing appallingly. Okuda then carefully analysed the situation and his initial actions towards solving the problem was to implement some drastic changes.

An example of the drastic changes he made was employing and promoting workers based on their merit and not on seniority. Besides that, Okuda also worked with the company’s vehicle designers to decrease the time taken to assemble a particular custom car. Furthermore, Okuda also realised that location factors may offer an International competitive advantage. Okuda therefore invested in Canada where natural resources are abundant with a much lower cost. Canada is also known for their skilled workforce in the motor vehicle industry (McFarlin & Sweeney 2006, p. 262). The consequences of his actions were not all a bucket of roses.

Although he brought Toyota much success, he got himself removed from the president’s position as some of his followers felt that he overstepped the boundary at times. This could be due to the fact that he was one of the reasons that led Japan to an economy crisis in the late 1990s. In my opinion, although some of Okuda’s actions may have backfired at times, he still managed to do more good than damage to the company. He never had any malicious intend to cause harm to the company or his country. Some may think of Okuda as an overly aggressive leader, but I and surely many others will remember him as the man who made a difference.

Is Okuda’s Leadership Style Culturally Consistent with Japanese Practices? Okuda’s leadership style was not exactly consistent with the Japanese culture. On the contrary, it was rather unique. Mind Tools (2009) states that leaders must learn to shape culture so that it is positive, and aligned with the direction the organisation or company is taking. To do any less means that they will fail to get the best from the individuals with whom they work. I do not completely agree with the author of this article because being consistent all the time will not take the company a step further.

For instance, Okuda started giving promotions to his employees based on merit and no longer on seniority. This started motivating his employees to work more efficiently in order to get promoted. Conclusion In conclusion, based on my argument above, I would describe Hiroshi Okuda’s leadership style as charismatic and visionary. However, his leadership style was not consistent with Japanese practices. CONCLUSION Based on the report of this case study, we can safely conclude that not only did Okuda exhibit a unique leadership style; he was also a rather powerful one.

He basically led Toyota on being a household name, came up with new innovations and managed Toyota according to his liking by employing foreign workers and younger executives. During his time as the president, Okuda was known as a transformational leader as he brought many changes to the company. When Toyota was facing a crisis, Okuda stepped up and brought some fundamental changes to the company in order to combat the hurdle they were encountering. Although his leadership style was not consistent with the Japanese practises, he was still looked up upon as a charismatic and visionary leader. (3198 words)

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Frederick, J 2004, Toyota’s tenacious twosome, Time Magazine, viewed on 13 May 2009, < http://www. time. com/time/subscriber/2004/time100/builders/100okuda. html> Lagorce, A 2004, Okuda: Toyota Marketing Is ‘Moving Forward’, Forbes, viewed on 14 May 2009, http://www. forbes. com/2004/09/28/0928autofacescan02. html? partner=whiteglove_google McFarlin, D & Sweeney, P 2006, International management, 3rd edn, Charles Hartford, U. S. A. McLaughlin, C 2001, Visionary Leadership, American University, viewed 14 May 2009, Minds. org 2009, Charismatic Leadership, Syque, viewed 14 May 2009, http://www. hangingminds. org/disciplines/leadership/styles/charismatic_leadership. htm Mind Tools 2009, Leadership skills, Mind Tools Ltd, viewed 14 May 2009, Money-Zine. com 2007, Charismatic Leaders, Money-Zine. com, viewed 14 May 2009, Morgan, J & Liker, J 2006, The Toyota product development system, The Wall Street Journal, Journal of Productivity Press, vol. 23, p. 44, viewed 14 May 2009, Schermerborn, J 1993, Management for productivity, 4th edn, John Wiley & Sons, New York. The New York Times 1998, Five Questions with Hiroshi Okuda , viewed on 15 May 2009,

Cite this Toyota

Toyota. (2019, May 01). Retrieved from https://graduateway.com/toyota/

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