The Toyota Phenomenon
How come the world's second largest automobile manufacturer grows continuously and makes large profits whilst its biggest competitors fight for survival?
After the Second World War, the distribution of World economic power was totally rearranged. Before the war, Europe and the USA ruled the world market. The management of Westerncompanies was based on the "Scientific Management" by Frederick Winslow Taylor (1856-1915) and on "Modern Sociology" by Max Weber (18641920). This intellectual basis characterizes the begin of industrialization, led to mass production and to tremendous productivity increases. Yet after the war, new players appeared on the playground, whose work was based on a philosophy, on methods and rules unknownbefore. Whilst Western managers turned to short-term thinking to satisfy shareholders and to endless restructuring, the new actors concentrated on continual improvement in the quality of products, uniformity of processes and qualification of employees. Toyota is one of these new players, which despite the fierce competition due to excess production capacity in the automobile industry of around 25 %outperforms Western competition in every aspect, in technological innovation, in customer satisfaction, in continuous growth and in profit. In 2004 Toyota passed Ford to become the second largest automobile producer. Before long, Toyota will overtake General Motors becoming the biggest car company in the world probably having no less than 15% of the world market. Toyota will prevail. Most otherswill have the choice between shrinking or sinking. This paper tries to shed light on the root causes of the Toyota Phenomenon, which for some reason or another Western companies find so hard to understand and much less on how to apply, despite their struggle for survival. in technological innovation, in customer satisfaction, in continuous growth and in profit. In 2004 Toyota passed Ford to becomethe second largest automobile producer. Before long, Toyota will overtake General Motors becoming the biggest car company in the world probably having no less than 15% of the world market. Toyota will prevail. Most others will have the choice between shrinking or sinking. Toyota will continue to focus on patient execution of sensible, but ambitious plans to expand their sales. They will continueto develop a steady stream of new models and make them with remarkable efficiency: there are no takeovers, no dramas or miracle cures, just relentless, grinding professionalism with, increasingly, an enticing dash of design flair to boot. And when they hit one target, they immediately set another. However, there is one extra ingredient that is somewhat mystical, if not exactly magical. There issuch a strong corporate culture that every employee knows the “Toyota way” of doing things. Put it down on paper and it sounds as flaky as a typical mission statement. But Toyota preaches to the converted and it works. Since the fifties, an uncountable number of Western automobile production specialists visited Toyota to find out the secret behind the success. Since they did not have a method,they did not know what questions to ask. They copied what they believed essential but were unable to advance to the core of Toyota’s truly extraordinary company culture even after Toyota started to produce automobiles in the American backyard in December 1984 in a joint venture with General Motors (New United Motor Manufacturing NUMMI). Even though Western Automobile producers turned out betterproducts, they are still far behind Toyota and the gap widens. The intellectual foundation for Toyota’s success was laid from 1950 onward by W. Edwards Deming. In June 1950, Deming presented to the very top managers of the Japanese industry his view on what must happen to make Japan successful in the world market. Kiichiro Toyoda, the founder of Toyota Motor Company, was among
Ernst C. Glauser...