Operations Management Strategies and Analysis: The Toyota Case Study

This report provides an in-depth analysis of Toyota's operations management, examining its strategies, internal and external factors influencing its success, and future recommendations. It begins with an executive summary highlighting the critical role of operations management in Toyota's success, emphasizing efficiency and competitiveness in the car manufacturing industry. The report then delves into Toyota's operational strategies, including design of goods and services, quality management, process and capacity design, location strategy, layout design, human resource management, and supply chain management. It also analyzes the internal and external factors affecting Toyota's operations, such as political and economic environments. Finally, the report discusses the five performance objectives and provides recommendations for future strategies, including the development of fully automated cars. The report highlights how Toyota’s operational strategies ensure quality, sustainability, and competitiveness in the global market, providing a comprehensive overview of Toyota's approach to operations management and its impact on the company’s overall success. The report also includes the assignment brief and instructions for submission.

OPERATION
MANAGEMENT

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Executive Summary
Operations management has a significant role in the success of the organisation. This makes
it extremely important for the organisation of the scale of Toyota to regularly improve on
their operations management. This report is going to illustrate about different operational
management strategies used by this firm and their implications on the organisational success,
quality and also ensure their sustainability in the long term (Brown and Bessant, 2013).
Operations management brings efficiency in their work process hence streamlining the
overall work process. The external environment for the company seem to be volatile
especially in terms of economic environment which is not so good in Japan as it was used to
be. The internal analysis showed that this company has its strengths in the form of quality,
production system, supply chain and weakness include not as big image as other competitors.
They have opportunities in the emerging market and they face threats in the form of declining
health of the world’s economy. In the last segment of the report it is recommended that this
car company should also move towards developing fully automated cars.
Content

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s
INTRODUCTION.................................................................................................................................2
Operations management........................................................................................................................3
Toyota’s operations strategy..................................................................................................................4
Internal and external factors impacting the operations management success.........................................7
Five performance objectives...............................................................................................................10
Current position and recommendation to improve, future strategies................................................11
Conclusion...........................................................................................................................................13
References...........................................................................................................................................14
INTRODUCTION
Operations management plays a critical role in the success of the organisation especially
when it comes to management of resources and gaining competitive advantage over the
rivals. In the car manufacturing industry there is a competitive in the market, and due to this

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it has become critical for the company to look for the operational efficiencies that can
enhance their strength and at the same time ensure that they overcome the challenges that
they are facing. Toyota is a big car manufacturing company which is known for its quality
products and for this operations management plays a highly critical role in its success. Toyota
Motor Corporation is a Japanese multinational company that is having its headquarters in
Aichi Japan. In terms of revenue it is the sixth largest company in the world and has approx.
364,445 workers all across the globe (Chiarini and Vagnoni, 2015). Till 2017, it is the largest
automotive manufacturer in the whole world. This report will discuss the operational
strategies of Toyota. It also analyses the internal and external factors that is having impact on
the operation’s management of Toyota. At last it also explains the impact of the five
performance objectives which has impact on the operations of Toyota.
Operations management
Operations management is area of management that is related to the controlling and
designing of the production and redesign of the business operations in the manufacturing of
goods and services. There are different types of operations within any firm where it becomes
critical for the company to manage the operations in such a manner that they have
competitive advantage over the firm. In this regards it is critical for the company to manage
their resources in such a manner that they gain competitive advantage over the rivals (Jones
and Robinson, 2012).
Operations management plays a significant role in the competitiveness of the firm as it allows
the company to streamline all the operations and find out the challenges that they might face
in the market and also allow the company to make full utilisation of their resources. Effective
operations management allows the company to reduce its cost related to the operations hence
they can improve their profit margin even when they set the prices to the lowest levels
(Karlsson, 2010). This is critical for attracting more numbers of people, increasing sales
count and improving the standards of the products and services they are delivering to their
consumers. In the long run it is going to have impact on the way organisation is organisation
is creating image for itself in the market. Operations management also allows the company in
their organising, planning and supervising of operations. It helps in managing the entire
production system hence improving the quality of products they are offering to their
consumers hence they create a unique image for itself.

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Operations management also enhances the competitiveness as it ensures that all the concerns
related to the management of activities are fulfilled. Maximum utilisation of resources is
possible when the operational management strategies are implemented within the
organisation in an effective manner (Stevenson and Sum, 2014).
Toyota’s operations strategy
For the company like Toyota which is leader in the car manufacturing numbers both in terms
of quality and quality, it becomes highly critical for them to manage their operations. This
must be done with the help of the operational management strategies which needs to be
designed according to the challenges that companies are facing in their operations along with
the threats that are confronting their business process (Wu, Melnyk and Flynn, 2010).
Construction of strategies must be on the basis of the strategies of the requirements of the
firm, its capabilities and the skills they have for their future. In this time it is also essential
that the firm looks at bringing effectiveness in the context of the firm’s business success,
quality management and sustainability.
Toyota has designed their strategies according to the challenges they are facing in the market
and the competition they are facing. Some of the operational strategy of Toyota includes:
 Design of goods and services: With the help of technological advancements and
quality, they are able to improve the overall design of their products. This firm utilises
its Research and Development unit to ensure that they make regular improvements in
their products. They have dealership personnel to fulfil their need of designing
aftersales services.
 Quality management: To enhance the quality, this firm utilises its Toyota Production
System where quality is one of the major elements in its TPS. With the help of its
approach of continuous improvement, they are able to improve the quality of the
products on the regular basis. Implementation of the Kaizan’s theory helps them in
staying ahead of their competitors as innovations are done on regular basis.
 Process and capacity design: In order to achieve efficiency in the process and capacity
design, Toyota utilises lean manufacturing theory. In this they focus on reducing the
waste and at the same time maximising the profits by maximum utilisation of
resources.

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 Location strategy: Toyota follows local, regional and global location strategies. For
instance Toyota has a localised manufacturing plant in the China, Thailand and
United States. They also have official dealership strategies in every market except
some nations of Africa, Middle East and also in Mongolia. Due to this, Toyota
addresses this strategic decision area of the operations management with the help of
hybrid strategies (Towill, 2010).
 Layout design and strategy: This is also done with the help of lean manufacturing
principle. In this, company aims to maximise its workflow efficiency. For making
decisions regarding this, they also indulge their other dealers.
 Human resource and job design: This firm applies TPS for management of their
resources and make strategies in this area. Toyota emphasises on respect for all
personnel and integrates all the policies and programs that can help them in managing
their human resource in an effective manner. They have a skill development program
that ensures that they have a skilled workforce that is capable of implementing their
lean manufacturing objectives in an appropriate manner.
 Supply chain management: They apply lean manufacturing in their supply chain
management so as to achieve success in their business (Gao and Low, 2014). By
applying lean manufacturing they are able to safeguard their products from any kinds
of damage or spoilage. This company utilises automation systems for making real-
time adjustments in their supply chain activities according to the requirement of the
firm. In their supply chain management, this company reduces the bullwhip effect in
its supply chain. They do capacity planning as a part of their supply-chain
management so as to reduce their inventory. It is their supply chain that adds value to
their overall production as it ensures that production is done only when required and
in specific quantity. This has a direct impact on the quality of the products as they get
enough time to plan their productions and ensure that everything is as per the quality
that this organisation aims to achieve.
 Inventory management: In this strategic management concept, this company applies
the theory of Just-in-Time inventory management. Toyota’s objective is to reduce
inventory size and its corresponding costs. It is also covered in the Toyota Production
System.
 Scheduling: In scheduling Toyota follows lean manufacturing principles in order to
minimise their cost of operations. Minimisation of cost is also managed through

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resource and HR scheduling which changes as per the conditions in the market (Parry,
Mills and Turner, 2010).
 Maintenance: This is the area where this company has been working for years
especially at different locations so as to support its global business. This firm also has
a global HR network that supports business resilience and flexibility. In order to make
strategies in this area, this firm utilises its goal business reach so as to find stable and
optimal productivity.
All the strategies that are used in these areas help the organisation in streamlining its business
process hence giving them success in their business operations. The success is ensured by the
fact that their operations management reduces the chances of failure of their strategies and
also brings efficiency in their work process. Since these above mentioned strategies helps in
removing the flaws in their business process as well as the challenges that confronts their
business operations hence they are able to deliver the quality in their overall operations
(Monden, 2011). By applying all these strategies they are able to make their products and
services of the international standards which ensure that they are meeting the norms related to
quality management. All these strategies related to operations management allow the
company to look at the skill development initiatives which boosts their overall human
resource. In the time when resource scarcity is the major problem that companies are facing,
effective utilisation of resources is very much critical which can be ensured when the
employee strength present within the firm is of high quality and are highly skilled. It ensures
quality at the same time it also ensures that sustainability is present within the organisation
(Jayamaha, et al. 2014).
Supply Chain Management of this company has a most critical role in contributing to the
operations management. As supply chain management allows the company to meet the global
demand and supply management which is critical for increasing the sales and also allows the
company to improve their profit margin. The overall success of business can be ensured with
the supply chain management as with the help of SCM they are able to predict the
requirements of the market and fulfil them on time (Mahadevan, 2015). For example when
any particular product is launched in the market, the demand remains on the higher side and
if company fails to meet this demand they will never be able to achieve that they aimed for.

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Internal and external factors impacting the operations management success
It is critical for any organisation to understand the internal and external environment that
exists around their business. This is essential for ensuring that what possible threats and
opportunities are available with the firm. Proper understanding of the internal and external
factors allows the company to understand the influencers that is forcing any company to
choose any specific strategy. By understanding the internal and external environment of the
company, they will be able to make sure that what exactly they will have to change to achieve
success. For understanding the external factors in Japan that is having impact on their
operations can be understood with the use of PESTLE analysis.
 Political: Japan is having good relations with all the countries but in recent years their
tensions with China had an impact on their business in these countries. With the
strategic alliance between the countries like Japan, Unite States and India, it gives a
very big market for the company to not only achieve higher sales but also for
achieving new set of competencies. With new supply chain routes opening between
different countries of Asia, there is a very big market which this company can target.
At the same time Japanese government has also reduced the taxes on the companies
that invest huge amount of money on the research and development (Kato and
Smalley, 2012).
 Economic: The economic environment of the whole world is noticing a downfall.
This downfall in the economic environment also created a problem for the company
in terms of investing in the development of new production units. In order to mitigate
the challenges produced by the volatility in the economic environment this company
needs to invest on the research and development as well as supply chain management
so as to reduce the overall cost of operations. This helps them in improving their
profit margin which is very critical in today’s time. Japan’s economy is also not
growing the speed as expected (Marksberry, 2012). This is a problem as people’s
expenditure power in the country. But at the same they have access to many emerging
economies in the world such as China and India which is highly suitable for economic
cars this company manufactures. It is these economy cars that have raised their sales
to highest levels.
 Social: Japan is an ageing society and hence there is reduction in the growth of the
sales hence this company will have to look towards other markets. Since in most parts
of the Asia there is enhancement in the numbers of people who have come out of the

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poverty level hence they can easily achieve higher sales. At the same time there is
also increase in the talent pool in these countries which can boost their employee’s
base knowledge. It is also to be understood that there is continuous fluctuation in the
demand hence it becomes critical for the company to manage its supply chain
management and productions in such a manner that they are able to fulfil this
fluctuation in the demand of the company without wasting much resources (Rutledge,
Xu and Simpson, 2010).
 Technological: The technology all across the globe is changing and there is significant
enhancement in the production technology that is used within the firm. At the same
time people’s demand for advanced cars is also increasing. This increment in the
technological demands has forced the company to work towards customer satisfaction
by adding technology features in their products. They understand that for achieving
the operational efficiency it is critical for the firm to make innovations in the
technology they are using in their operations (Wilhelm and Kohlbacher, 2011). This is
highly critical in the case of supply chain management as technology not only helps
the firm in predicting the nature of demand but also reduces the failure due to human
mistakes.
 Legal: This factor has a huge impact on the operations of the firm. This is because due
to fast changing legal environment company has to change their operations
accordingly. However in Japan, government is making legal aspects that suit the
business especially the manufacturing sector.
 Environment: Japanese government has become very much strict on the
environmental concerns and hence this company also need to improve their
operational strategies in such a way that they follow all the legal guidelines. This is
necessary for avoiding any kind of legal compliances. The major concern is about the
pollution emission for which this company will have to make investments in their
research and development initiatives.
For understanding the internal environment, use of SWOT analysis can be highly beneficial.
Strengths
 Skilled human resource: This Company has a huge employee strength that is highly
skilled and knowledgeable. This allowed the company to enhance the productivity and

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also add value to their services. This has also allowed the company to improve its
Research and Development process.
 Organisational culture: The culture of the organisation supports innovation. This can
be understood by the fact that there are continuous improvements in their offerings.
This is necessary for achieving the success in today’s time. There is also culture of
team that has impact on the management of operations (Basu and Wright, 2010).
 Strong brand image: This Company has strong brand image in the market especially
in terms of quality they deliver. Due to this also they have to invest in the operations
management so as to maintain their brand image.
 Advanced technology: This Company is using the latest technologies in their
operations and hence they have been able to achieve operational efficiency.
 Diversification: Toyota has large varieties of products available with them and now
they are working on the technologies like automatic cars.
 Supply chain: Their supply is very fast which gives pace to the way in which they are
delivering their products to their customers. Use of technologies has improved their
supply chain to another level.
 High production capacity: They are the first company to achieve production of 10
million cars in a year which indicates the strengths of their high production capacity
(Charron, et al 2014).
Weaknesses
 Dependence on suppliers: Their suppliers are not so effective hence making their
operations big slow.
 Not grabbing markets: This firm has developed green vehicle technology but they
were not able to grab the demand in the market.
 Higher recall: The rate of recall is higher in Toyota which is doing negative publicity
for the company.
Opportunities
 Emerging nations: This Company has opportunities in the developing nations in the
South-East Asia and the African countries where the middle income people are
increasing in numbers.

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 Green technologies: This Company also has opportunity in the green technology. This
can be understood in terms of the fact that environment related concerns are
enhancing all across the globe.
 Luxury car segment: They also have opportunities in the luxury car segments
especially in the markets such as Middle-East. This is because the per capita incomes
of the people in these countries are very high (Stentoft Arlbjørn, Vagn Freytag and de
Haas, 2011).
Threats
 Higher competition: There are large numbers of competitors available in the market
and some of them have the capacity to change the trends in the market. Their major
international competitors include Hyundai, Volkswagen, Ford etc. and at the same
time their local competitors include Mitsubishi.
 Higher-priced raw materials: As a cost of raw materials in Japan is increasing day by
hence generating higher profit generation capacity is difficult for the company.
 Downfall in the economic environment: Economic environment of the world is
performing poorly and there is fluctuation in the economy which is not letting the firm
to improve their expansion speed. In the time when generating higher profits is a
problem for the company, this is a much bigger threat when expected (Pheng and
Meng, 2018).
Five performance objectives
 Quality: For Toyota quality remains as a key to success. This company improves their
organisational operations so as to attain highest quality standards. All their operation
strategy helps in bring efficiency to the work process which ensures that the quality
that is delivered by the company is at the highest of levels. It is this quality that
ensures the sales of the company and distinct their products from their rivals. In the
time when customer satisfaction is the base to success it is this quality that helps them
in staying ahead of their rivals. For instance they improve their technology in their
production as well as do heavy research for bringing any new product that can provide
highest quality to their customers (Hitt, Xu and Carnes, 2016).
 Cost: The ultimate aim of any company remains to be highly profitable. By doing
operations management any company aims to improve on the cost related aspect so
that they can enhance their profit margin. For instance, if they develop their

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production system in such a way that they are able to produce large numbers of
products with minimum wastage of resource then they will be able to gain maximum
profits from them. For this Toyota has already implemented lean manufacturing in
many of their operation. This will promote sustainability within the firm and hence
will ensure the success of the business operations in the long term (Magnier-
Watanabe, 2011).
 Speed: In the competitive environment, it is critical for the firms to make sure that
their operations are delivered with the speed that is unmatchable that too not
compromising with quality. Operations management strategies are always influenced
by the fact that what speed it will give to the firm. For example what Toyota
production system does is that it ensures that its conveyer belt never stays empty or is
overloaded. For this are using the card system which is known by the name Kanban
system (Mansour and Clodic, 2012).
 Reliability: For the company like Toyota which has a bigger brand name in terms of
the quality they are delivering hence it becomes essential for them to improve the
quality as per the standards of the company. For example they implement quality
improvement process such as TQM to ensure that all the operations add value to the
products and hence they hence reliability enforces the company to make changes in
their business process (Barney, 2012).
 Flexibility: This is another aspect that has adds value to the product and success of the
firm. It is defined by the approach that is taken by the firm in regards to doing their
operations. Toyota like other companies wants to bring flexibility in their operations.
This is critical for the company as they will have to ensure that they adapt themselves
as per the environment that is present. For instance product demands changes
significantly and has a graph that is very uncertain. This enhances the need of the
company to make their operational strategy in such manner they can mould their
operations as per the requirements of the firm (Stewart, 2018).
Current position and recommendation to improve, future strategies
This company is the good position to lead the international market. They have already gained
the position to have the best production system. It is one of best car manufacturers of Japan
and at the same time they also have gained the position to become the world’s largest
automaker. They are one of the largest producers of the Hybrid cars (Slack, 2018).