A Case Study of Toyota: HRM Challenges and Recommendations

This case study explores the HRM challenges faced by Toyota and provides recommendations to improve organizational performance. It analyzes Toyota's internal and external environment, nature of the industry, level of competitiveness, key external stakeholders, current trends, and more.

HUMAN RESOURCE MANAGEMENT
A case study of Toyota
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Table of Contents
Table of Contents............................................................................................................................................................2
Introduction.....................................................................................................................................................................2
External Environment Analysis.......................................................................................................................................2
Nature of the Industry.................................................................................................................................................2
Level of competitiveness.............................................................................................................................................4
Key external stakeholders...........................................................................................................................................4
Current trends in the industry.....................................................................................................................................4
Internal Analysis.............................................................................................................................................................5
Describe the organization...........................................................................................................................................5
Nature of the work undertaken...................................................................................................................................5
Products and services created....................................................................................................................................5
The current strategy being pursued............................................................................................................................6
The current level of organizational performance.......................................................................................................6
HRM Challenges at Toyota.............................................................................................................................................7
Five key problems facing the practice of HRM in the organization...........................................................................7
HRM challenges and the link between HRM performance.........................................................................................8
Recommendation to improve the effect of HRM on organizational performance......................................................9
Conclusion....................................................................................................................................................................10
References.....................................................................................................................................................................10
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Introduction
Incorporated in August 1937, Toyota Motor Corporation has been conducting business in the
automotive industry for over eighty years. Toyota distributes its vehicles in over two hundred
countries and regions. In the recent past, Toyota faced financial loss and criticism from its
customers because of poor quality vehicles and unprofessional services. This report is an attempt
to study Toyota’s internal and external environment and to understand HRM practices and
challenges within the company. The last section will recommend strategies for HRM issues at
Toyota.
External Environment Analysis
Nature of the Industry
Toyota Motor Corporation functions under the automotive industry. Past ten years have
been very tumultuous for manufactures of automobile products, given the growing
environmental concerns and skyrocketing fuel prices, saysBratton and Gold (2017). Both
of these factors have changed customer’s preferences and now there is an increasing
demand for fuel-efficient vehicles. Where some automobile manufacturers embraced this
change by diversifying their products into the manufacturing of hybrid electric motor
cars, some others are expanding their portfolio of fuel-efficient cars. Other automakers
are more reluctant about shifting their focus from big to small sized cards, hoping that the
fuel prices will eventually drop, and customers will start opting for the big cars again,
saysBratton and Gold (2017).
Level of competitiveness
Market share concentration of automobile industry is very low. There is a low level of
concentration, and the top four manufacturers account for one-third of the international
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revenue. Toyota has a 10.2% share, General Motors has 6.9%, Volkswagen and Ford
stand for 9.6% and 5.6%. While other companies score under 67%. As per Ferell and
Speh (2017) The key players in this 67% segment are Hyundai, Kia, Opel, and Renault.
Key external stakeholders
Onkvisit and Shaw (2004) introduced that as a global company, companies in the
automotive industry have several external stakeholders with disparate demands and
needs. Though the following are the significant groups of external stakeholders, written
according to their significance in affecting the company:
1. Employees: Most significant stakeholder
2. Customers: second-priority stakeholders
3. Investors: Third major stakeholder group
4. Environment: Major stakeholder group
5. Communities: Major stakeholder group
Current trends in the industry
Globally, automobile demand depends upon per capita disposable income, vehicle prices,
product innovation, fuel prices, vehicle material and equipment cost, the supply end, and
retail prices. Since it’s the period of high fuel prices, the fuel-efficient cars are in demand,
and the hybrid models are the favourite. That’s why the Japanese carmakers producing fuel-
efficient vehicles replaced market share from the large vehicle manufacturers
(Wheelen,Hunger, & Bamford, 2017).
For the next five years, the automobile industry will witness demand for fuel-efficient motor
vehicles in the Western world and the emerging economies will grow. Automobile industry
revenue is forecasted to grow with an average of 3.5%. Another factor is product innovation
which can spur the demand, especially if it also offers fuel-saving benefits (Onkvisit and
Shaw2004 pp. 70-72).
Internal Analysis
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Describe the organization
Incorporated in August 1937, Toyota Motor Corporation has been conducting business in
the automotive industry for over eighty years. Toyotas distributes its vehicles in over two
hundred countries and regions. Toyota’s main European markets are France, Germany,
Italy, Spain, the United Kingdom, and Russia. Toyota’s main Asian markets are India,
Thailand, Taiwan, and Indonesia. The main markets in other regions are Australia in
Oceania, Brazil in America, South Africa in Africa, and Saudia Arabia in Arab.
Nature of the work undertaken
Work undertaken mainly consists of the manufacturing, designing, assembly, and the sale of
passenger vehicles, commercial vehicles, minivans, trucks, related parts, and accessories.
Toyota also provides finance and insurance services.
Products and services created
Toyota Motor’s subsidiaries include the Daihatsu motor, which manufactures and sells
compact cars and mini-vehicles, and Hino Motors Limited, which manufactures and sells
commercial vehicles like buses and trucks. Apart from this, DeCenzo, Robbins, and
Verhulst (2016) reported thatToyota also manufactures automotive components, parts,
and accessories.
The current strategy being pursued
1. A strong focus of Research and Development
2. Focus towards environment compatible products
3. Extensive distribution network and production
4. Partnership with global brands like BMW
The current level of organizational performance
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Toyota has outperformed the Automotive industry with continuous development and
ever-growing revenues. Hibino, Noguchi and Plenert (2017) reported that the total assets
increased from 586.8 billion yen in 2017 to 3,243.7 billion in 2018. Liabilities amount
has also increased by 3%. Net asset amounted to 1,524 billion yen and the net cash flow
also had an increase. The cash flow from financing services resulted in an increase in
cash of 7.0 billion.
Even with these great statistics, Toyota vehicles get recalled very often. There have been
complaining about poor quality and unsatisfactory service from the managers at Toyota
stores. Toyota witnessed financial loss due to poorly designed HRM practices and weak
execution of human resources.
HRM Challenges at Toyota
Five key problems facing the practice of HRM in the organization
Wrong reward system
As per Qumer and Purkayastha (2015), Toyota has had product recalls due to
manufacturing defects in its vehicles. The management bonus structure is one of the
reasons behind management failures. Because of this system the human resource
managers, instead of improving services, try to cover the problem with their
mechanics, for that will earn them reward for containment. Wrong reward system
encourages the managers to focus more on cost-cutting measures, instead of quality
service.
Corporate Culture at Toyota
As per Qumer and Purkayastha (2015), Another key problem facing the practice of
HRM in Toyota is the overall corporate culture. Toyota practices a system where the
lower management level is ignored by upper management level. Even though the
lower management level has had serious concerns, but upper-level management never
takes them seriously, even though they are closer to production.
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Poor training to new employees
Toyota has had massive expansion globally but the company fails to keep up with
adequate training requirements for their staff. No supervision or training is done to
make sure that new employees working for the company have adequate knowledge
and proper skills to perform their job functions.
Poor Supervision to existing employees
As per Luthra, Garg, and Haleem (2015), In addition to not being training new
employees properly, Toyota also finds it difficult to supervise the existing employees
as a result of rapid growth. The expansion at Toyota is causing harm to its human
resources.
Poor risk management
Toyota’s HRM fails to make the proper risk assessment by not having enough
employees with the right skills and adequate training. Poor risk management is one
the reasons behind Toyota vehicles getting recalled after the purchase, resulting in
both reputation damage and financial loss.
HRM challenges and the link between HRM performance
According to Bratton and Gold (2017), One of the HRM challenges is adequate training to the
employees through strategically designed recruitment programs. Another HRM challenge for
Toyota is poor performance management process, which can help the company periodically
monitor and appraise the performance, and identify the problem before they go out of hand.
According to Cascio (2015), Leadership development and succession is another challenge which
ensures that a sufficient number of leaders with decision-making abilities and right skills are
placed into key leadership roles. Right now, the leadership process at Toyota Motors is outdated
and it produces wrong leaders with outdated competencies who cannot operate in the rapidly
evolving automotive industry. Another challenge is to identify and retain top performers with
mission-critical skills.
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Harvard framework of HRM helps understand the link between HRM challenges and HRM
performance. This model mainly comprises of five components. It starts with stakeholder interest
(from the left) to situational factors, then HRM polices, followed by HRM outcomes, and long-
term consequences.
(PC: Digitalhrtech.com)
This HR model can be applied in Toyota’s case to understand how disparity and negligence at
lower levels can impact the organization in the long run. It helps us see how stakeholder interest
influences situational factors, which influences both the HRM policies and outcomes, and leads
to long-term consequences.
Recommendation to improve the effect of HRM on organizational performance
Toyota must set quality as one of the defined objectives for the corporation. The next
recommendation would be to improve the HRM issues which led to a deterioration in the Toyota
production quality by rethinking of their reward structure. Instead of reward cost-cutting
measures, Toyota should reward managers who ensure the quality of vehicles through proper
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assessment during sales. The reward system at Toyota should be designed in a way that the
managers or employees dedicated towards improving customer experience get rewarded.
The HRM at Toyota should assess the hiring needs of the company and design a robust screening
process while recruiting employees. The HRM department must develop a recruitment plan to
ensure an appropriate number of skilled employees. In addition, HRM should identify key skills
and job functions to look out for in each candidate. The HRM should also set up training and
development programs for employees at regular intervals to make sure everybody performs their
jobs effectively. Toyota should then concentrate on creating an effective risk management plan
(Chelladurai & Kerwin, 2018).
Customer-Centric HRM practice is need of the Hour for Toyota
Customer Centric practice will help Toyota segment and prioritize the needs of customer.
Customer understanding helps learn what customers want. As long as Toyota knows its customer
segment and what drives them towards their products, the company can prioritize the accurate
ways of investing time, money, and energy (Brewster, Chung& Sparrow, 2016). They can target
the elements which matter the most to customer. In Toyota’s case, the buyers want to get quality
vehicle that lasts long and delivers what it promises. The HRM practices should be designed
after seeking answers to these questions:
 What do the customer want the most?
 How can HRM practices effectively support the buyers at different price points?
 What are the organization’s goals for each customer segment?
Customer Centric Practice can give Toyota a competitive advantage. As long as HRM practices
are customer-centric, Toyota will be able to make generate and refine priorities that helps create
an emotional connection with their customers.
Toyota’s products are classified into three main categories (where each product serves different
customer segment): hybrid vehicles, fuel cell vehicles, and conventional engine vehicles. The
product line-up includes compact car, subcompact cars, mid-size vehicles, mini vehicles,
specialty and sports cars, luxury cars, sport-utility vehicles, recreational vehicles, minivans,
trucks, pickup trucks, and buses. Since the company has both diversified product range which
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cover all customer segment, now the focus should be to satisfy each segment with quality
product and satisfactory services. It should follow the ‘snatch and grab’ strategy for every
customer segment by learning their needs.
Use of Key Performance Indicators for HRM
Many National and Global corporations used KPI technique to assess the performance of
employees and to further strengthen their human resource pool. Toyota can employ the same
procedure alongside training the employees, which will help the company to assess how an
individual is performing in his respective role. By setting KPI for HRM practices, Toyota will be
able measure how effectively all employers are achieving the business objectives. Some of the
important KPI are Customer Lifetime value, lead-to-customer ratio, and customer feedback.
Conclusion
This report has thus focused on the current strategies and the HRM practices that are being
followed by Toyota and the key challenges that are being faced by the brand in its operations in
its implementation of the HRM practices. A set of recommendations have also been suggested to
bring about improvements in the HRM practices so that the overall organizational performance
of the global brand can be enhanced manifold.
Self-Reflection
The report helped me learn that the root cause of the problem at Toyota Motors is poor HRM
practices. I made an understanding that for any organization to excel in the long run, it’s crucial
to have a robust plan for managing human resources. I have also learnt that employees are an
asset to Toyota, and a lot is on stake if they are untrained or poorly managed. Weak employee
management can cause any company to crash, no matter how long they’ve been in the industry. I
also learnt that for any organization to succeed in a competitive industry like automotive
industry, the HRM practices should always me customer-centric, and not cost-cutting, resource-
saving.
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References
Bratton, J. and Gold, J., (2017). Human resource management: theory and practice. Palgrave.
Brewster, C., Chung, C., & Sparrow, P. (2016). Globalizing human resource management.
Routledge.
Chelladurai, P., & Kerwin, S. (2018). Human resource management in recreation. Human
Kinetics.
Cascio, W.F., (2015). Managing human resources. McGraw-Hill.
Calabrese, G. ed., (2016). The greening of the automotive industry. Springer.
DeCenzo, D.A., Robbins, S.P. and Verhulst, S.L., (2016). Fundamentals of Human Resource
Management, Binder Ready Version. John Wiley & Sons.
Ferrell, O.C. and Speh, T.W., (2017). Marketing Strategy, Loose-Leaf Version. Cengage
Learning.
Hibino, S., Noguchi, K. and Plenert, G., (2017). Toyota’s Global Marketing Strategy: Innovation
through Breakthrough Thinking and Kaizen. Productivity Press.
Luthra, S., Garg, D. and Haleem, A., (2015). Critical success factors of green supply chain
management for achieving sustainability in automobile industry. Production Planning &
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Mendes, L. and Machado, J., (2015). Employees’ skills, manufacturing flexibility and
performance: a structural equation modelling applied to the automotive industry. International
Journal of Production Research, 53(13), pp.4087-4101.
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Monden, Y., (2018). Toyota management system: Linking the seven key functional areas.
Routledge.
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Onkvisit, S. and Shaw, J.J., (2014). International marketing: Analysis and strategy. Psychology
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