Fit between Human Resource Policies and Business Strategies of Toyota

Running head: HUMAN RESOURCE MANAGEMENT
A Critical Analysis: Fit between Human Resource Policies and Business Strategies of Toyota
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Introduction
Human resource management (HRM) on a broader aspect creates employment solution
for a company and design best practices to influence its practices. HRM is popularly known for
recruiting the people and designing policies to govern their practices, and aligned to the
organisational goals and objectives (Noe et al. 2017). Indeed, this task is very challenging and
cannot be made to happen without a sufficient support from the management. The support will
obviously be needed to implement these practices, and establishing a fit between these policies
and the company’s business strategies. According to the “Best-fit Approach”, which is in line
with the “Contingency Theory”, HR strategies should be in-line with the context of the
organisation. ‘Best fit’ can be considered in terms of alignment or vertical integration between
the HR state and organisations’ business (Croonen, Grünhagen and Wollan 2016). Based on this
perspective, it can be said that a discussion on HR list of policies would not only be sufficient to
analyse a fit between HR policies and the company’s business strategies. Instead, this would also
require discussing about the organisations’ competitive position and its specific contexts.
Toyota Motor Corporation has been chosen for this essay with intend to analyse a fit
between the company’s HRM choice of policies and its business strategies. This essay also
investigates whether there is any gap between the HRM list of policies and business practices.
The study concludes a fit between the Toyota’s human resources choice of policy and its
business strategy. However, the company should know how to differentiate cultural diversity
from shared values.
The essay first discusses or gives the business overview followed by a business strategy
analysis of the company. It then follows a situation analysis of the Toyota Company. Human
resource strategy analysis then precedes it. It is being followed by discussing the fit between the
company’s HR list of policies and its business-level strategies. This study ends up with the
identification of any gaps and further implications, and the concluding section.
An overview of Toyota
Toyota as of 2018 is the sixth largest company in the world in terms of revenue
(Global.toyota 2019). As of 2017, Toyota is the world’s second largest automotive manufacturer
(Toyota-global.com 2019). Toyota leads the global list of automotive companies in terms of

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selling hybrid electric vehicles (Toyota-global.com 2019). There are few reasons behind the
company’s success. Toyota instead of responding to quarterly business reports and the trends
aims to attain sustainability. One of the best examples is Prius hybrid, which produced a good
response to the world’s growing concerns for fuel economy and gas prices (Toyota-global.com
2019). The speediness to produce cars faster than its competitors makes it an unmatchable
automotive company. However, the speediness never comes at the cost of poor market research
and stakeholders’ agreement on the product (Toyota-global.com 2019). An open-mind that helps
Toyota to adapt to the culture of the country wherever it operates. For an example, Toyota was
able to meet the American customers’ preferences of cars better than Detroit automakers
(Toyota-global.com 2019). Toyota’s “continuous improvement’ is remarkable. The automaker
follows a philosophy to eliminate the waste and be agile in terms of producing quality and
valuable cars (Global.toyota 2019). Toyota prefers teamwork over individual stars. The plant
manager has no separate parking zone in the company. The executive level officers are not
considered as bigger than the customers, the company and the product (Global.toyota 2019).
An Analysis of Toyota’s Business Strategy
According to Porter’s Generic Strategies, business strategy can be classified broadly into
three categories such as “Cost leadership”, “Differentiation” and “Focus” (Lotayif 2016).
Toyota’s generic strategy is to minimise the production cost and thereby attain cost leadership.
Hence, the business strategy of Toyota is “Cost leadership’. The company is able to do so with
the help of just-in-time (JIT) manufacturing method. This is also known as Toyota Production
System (TPS) (Monden 2018).
Toyota Production System (TPS) is a set of tools and principles, which are used to boost
the production efficiency and to continually work on reducing the time consumed to produce the
cars. These tools include but are not limited to understanding the process with value stream
mapping, BVA, CVA, NVA, KaiKaKu, Kaizen, Flow, Kanban, A3, 5S, just in time, 5 whys and
many others (Monden 2018). Such a huge set of tools and principles is followed under one
company. This is truly worth discussing whether the company is actually able to use all these
tools appropriately. Indeed, Toyota’s production system is hugely efficient. They know it well
how to use these tools and principles when needed. They are able to drive their production
system with a method popularly known as one-piece flow (Japan Management Association

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2018). This means avoiding tasks being in a state of “Work-in-Progress”. Indeed, only one item
is allowed to be on queue (Japan Management Association 2018). While there can be some pros
and cons of the one-piece flow approach; however, it still has many positivity to offer. Toyota
with this approach is able to complete the tasks on-time leading to reduced utilisation of
resources and enhanced efficiency to meet the market demands. The Toyota Production System
(TPS) was later on adopted by other companies as well. Boeing learnt about how to apply TPS to
take care of its airplane manufacturing process. ‘737’ probably presents the best example of such
a move from Boeing (Rüttimann and Stöckli 2016).
These pieces of information indicate that Toyota is able to implement these tools in
practice. Undoubtedly, the efficiency to use such a huge amount of tools is because of Toyota’s
people. Toyota appears to have the people who align their practices with the organisational goals
and objectives. Many credits go to the HR personnel of Toyota Company who have a good
understanding of the company’s culture and accordingly design their recruitment process. They
recruit people only those who are skilled and possess a working culture as preferred by the
company. Toyota’s human resources also have policies in place to safeguard its employees from
potential losses and exhaustion. Indeed, Toyota never blames an individual for performance
failure but the entire system. This helps them improve their system failure (Toyota-global.com
2019). Toyota with its effective business strategy and tools has have huge business success in the
United States of America (Hbr.org 2019). It has growing opportunities from economic growth in
developing nations as its customers mainly belong to the mid-scale market and also that wealth
gap in these nations is still on a higher side as compared to developed nations (Mahmoodi and
Mahmoodi 2016).
Situational analysis
In this section of the study, PESTEL and SWOT model have been selected. The findings
of these analysis will help to identify the business environment where Toyota operates.
Moreover, a relationship between the HRM choice of policy and the Toyota’s business strategy
could be established.
SWOT analysis
Strengths  Global supply chain