COMPARISON BETWEEN A WELL-MANAGED COMPANY & A POORLY-MANAGED COMPANY

Presented By GROUP #7

WELL-MANAGED COMPANY

TOYOTA MOTOR CORPORATION (or TMC)

INTRODUCTION
3

Founded in Japan by Kiichiro Toyoda in 1937. The second largest auto manufacturer by production & ninth largest company in the world by revenue. It has a total of 522 subsidies & is present in 23 countries. TMC started operation in US in 1957. It has invested USD 18 billion in the US market since its inception & has setup 10 manufacturing plants all across US. It has also created around 200,000 jobs for the US job market.
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MANAGEMENT PHILOSOPHY
4

14 Toyota Way Principles Section I Long-Term Philosophy

1.

Base your management decisions on a long-term philosophy, even at the expense of short-term financial goals.

Section II The Right Process Will Produce the Right Results

2. 3. 4.

5.

Create a continuous process flow to bring problems to the surface. Use pull systems to avoid overproduction. Level out the workload (heijunka). (Work like the tortoise, not the hare.) Build a culture of stopping to fix problems, to get quality right the first time.

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MANAGEMENT PHILOSOPHY
(contd.)
5 6.

7.
8.

Standardized tasks & processes are the foundation for continuous improvement & employee empowerment. Use visual control so no problems are hidden. Use only reliable, thoroughly tested technology that serves your people & processes.

Section III Add Value to the Organization by Developing Your People

9. 10.

11.

Grow leaders who thoroughly understand the work, live the philosophy, & teach it to others. Develop exceptional people & teams who follow your companys philosophy. Respect your extended network of partners & suppliers by challenging them & helping them improve.
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MANAGEMENT PHILOSOPHY
(contd.)
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Section IV Continuously Solving Root Problems Drives Organizational Learning

12.

Go & see for yourself to thoroughly understand the situation (genchi genbutsu). Make decisions slowly by consensus, thoroughly considering all options; implement decisions rapidly (nemawashi). Become a learning organization through relentless reflection (hansei) & continuous improvement (kaizen).

13.

14.

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SWOT ANALYSIS
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Strengths:

Long-term planning

Toyota has always planned ahead of time, launching Prius Hybrid vehicle in 1997 when other manufacturers were not paying heed to the growing concern for environment among customers.

Toyota production system

Toyotas award winning production system TPS organizes manufacturing & logistics including interaction with suppliers & customers. Toyota has greatly reduced lead time & cost using TPS, while improving quality. Due to the rigid & competent implementation of JIT system & economies of scale, Toyota has been able to greatly reduce their costs.
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Cost cutting measures

SWOT ANALYSIS
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Strengths (contd.):

An open mind

Since its inception Toyota studied the success stories of US giants such as Ford & emulated & improved upon their characteristics to adapt efficiently in the new & foreign market. All of the aforementioned points have collectively assisted Toyota in keeping its cost down & thus its profits high.

Strong financial position

Innovation

Toyota has always been lauded for giving the due importance to innovation & development, Toyota spends USD 1 million every hour for R&D in US to come up with new & improved products.
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SWOT ANALYSIS
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Weakness:

Seen as a foreign importer

Although a well established name in US, the US customers still consider Toyota as an importer from Japan & shy away from its products. Toyota produces most of its cars in US & Japan whereas competitors may be more strategically located worldwide to take advantage of global efficiency gains.

High transportation costs

Criticized due to large-scale re-call

In 2005, Toyota recalled more than 1 million cars (Corolla & Matrix) sold in United States for improperly manufactured Electronic Control Modules (ECMs).
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SWOT ANALYSIS
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Opportunities:

Expansion into new segments

Toyota should look into expanding more aggressively into new segments of the market such as the youth market of US. There is a visible shift in consumer preferences as they are opting for cars which are fuel efficient & eco-friendly, Toyota should cater to this need by producing more models such as Prius. Toyota has been doing very well in the emerging Asian markets e.g. China & India where population & demand is accelerating.
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Produce cars which are fuel efficient & eco-friendly

Continued global expansion

SWOT ANALYSIS
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Threats:

Economic slowdown Due to a downturn in the economy e.g. recession, tightening of household budgets will adversely affect new car purchases. Shifts in exchange rates Appreciating Japanese Yen against US dollars would affect profits & cost of raw materials. As the profits made in US market will depreciate if & when utilized in Japan. Changing demographics As the number of large families in US is declining, demand for big family cars will also go down eventually. Rising oil prices Increase in fuel prices & the costs of maintaining cars has lead to an increase in families who have chosen not to own a car, or decided to use their car less.
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INITIATIVES
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1.

Toyota Production System

Its chief aim is the complete elimination of all waste & to identify the most efficient methods. TPS was established based on two concepts: i. Jidoka ii. Just-in-Time
2.

Quality Management

To reduce waste, improve quality & safety & reduce lead time & Costs, Toyota introduced a 5S system: i. Seiri sort (Housekeeping) ii. Seiton set in order (Workplace organization) iii. Seiso shine (Cleanup) iv. Seiketsu standardize (Cleanliness) v. Shitsuke sustain (Discipline)
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INITIATIVES (contd.)
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3.

Systems approach towards innovation

These are key actions taken by Toyota in order to structure their innovation management and organization for fast improvement:
i. ii. iii. iv.

Delegation of decisions to innovation teams Integration of R&D into business units Central innovation teams & funds External interface through open innovations

4.

Lean Thinking

It puts emphasis on creating organizational wealth by focusing on customers, people & processes & personal & group learning.

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POORLY-MANAGED COMPANY

GENERAL MOTORS COMPANY (or GMC)

INTRODUCTION
16

Founded in USA by William C. Durant in 1908. The largest auto manufacturer by global unit sales. It currently has four major divisions Chevrolet, Buick, Cadillac & GMC. It has a total of 158 facilities, is present in six continents & has 200,000 employees. GM has 12 subsidiaries present in over 150 countries. At one point, no other single company contributed more to Americas GDP than GM did.
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THE DOWNFALL
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In 2008, General Motors was on the verge of bankruptcy when the US government aided them with USD 13 billion. After fighting to avoid the inevitable for months, On 1st June, 2009: General Motors Company finally gave in & filed for bankruptcy. In its filing, GM listed USD 82 billion worth of assets against USD 170 billion as liabilities. This left over 150,000 employees in jeopardy & many others who had invested in the company. The filing of chapter 11 affected the already down US economy adversely.
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THE DOWNFALL (contd.)

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What led to the downfall?

1. 2. 3. 4. 5.

Bad financial policies Uncompetitive vehicles Failure to innovate Ignoring competition Staggering legacy costs

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SWOT ANALYSIS
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Strengths:

Strong brand portfolio

Since its inception in 1910 GM has produced a stable of automobiles such as Chevrolet, Cadillac, Saturn & several others which cut across multiple segments. GM has been rapidly expanding its operations in Asia & Latin America & has received a very positive feedback from the consumers for its prudently modeled & priced products.

Growing operations in Asia Pacific & Latin American regions

Large scale operations

The amount of cars produced by GM is more than any other automobile manufacturer & using this high production capacity GM has introduced economies of scale & brought down the cost of production.
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SWOT ANALYSIS
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Weakness:

Product recalls

From 1997-03, GM recalled about 1.5 millions cars from a number of its brands, which exhibited unreliability & also diminished customers faith in the company. GM started relying extensively on its financial arm which dealt with auto financing, etc. but this venture didnt yield the kind of results that GM had hoped for.

Declining financial performance

Diminishing dealer network

GM announced that it will not renew its franchise agreements with nearly one quarter of its U.S. dealerships citing low profits.

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SWOT ANALYSIS
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Weakness (contd.):

Bureaucratic culture

GM had been suffering from authoritative customs long before its operations went sour, it is this bureaucratic culture that has not let innovation & creativity foster. The major reason for GMs losses is the amount of inputs wasted including over production because of the lack of an efficient production process.

Lack of knowledge regarding lean production process

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SWOT ANALYSIS
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Opportunities:

Increasing demand for Hybrid Vehicles

The demand for hybrid electric vehicles is expected to rise 4.5 million by 2013. As GM, currently produces six hybrid models, a positive outlook for HEV market would boost the demand for GMs products. There are positive prospects for GM in China & India. The automobile industries of China & India have been growing at rate of about 14% & 15.5% respectively; a sign that India will play an even bigger is the projected increase to 2.5 million units by the end of 2013.
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Growth potential in emerging markets

SWOT ANALYSIS
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Opportunities (contd.):

Voluntary employees' beneficiary association (VEBA)

Voluntary employees' beneficiary association or VEBA can help GM save up to $2.5 to $2.8 billion a year in cash if the process is implemented strictly by bringing down its legacy costs. New car models & designs need to be introduced keeping in mind the customer preferences, as in the automobile industry, the needs of the customer are the key points that provide profitability if dealt with dexterously.

New & innovative segment specific products

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SWOT ANALYSIS
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Threats:

Declining market share

GM once controlled about 50% of the automobile market of US but in 2008 the figure plummeted to 19%. The economic decline has adversely affected demand for GMs most profitable products viz. full size pick-up trucks & SUVs. Also, it has resulted in tighter credit criterion. Competitors have responded to the fiscal crises by adding vehicle enhancements, providing subsidized financing or leasing programs to boost sales.

Continuing recession

Intense competition

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SWOT ANALYSIS
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Threats (contd.):

Rising oil prices

Increase in fuel prices & the costs of maintaining cars has lead to an increase in families who have chosen not to own a car, or to use their car less & opt for public transport. GM specializes in making big cars such as SUVs & trucks, & as the US car owners are getting more eco friendly & families are going smaller the need for small car has risen.

Increasing demand for light vehicles in US

Stringent emission standards

GM is known for its SUVs which while being big are also gas guzzlers but the flexing of emissions standards will lead to GMs being imposed with many restrictions.
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THE REVIVAL
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After 45 days of deliberations, the US Bankruptcy Court of New York approved the Government bailout of GM in view of absence of alternatives. The new GM buys the good parts of old GM & the bad parts are liquidated. In the new ownership the majority equity (60%) is held by the US Government for contributing USD 30 billion, other major owner is the Canadian Government for putting up USD 9.5 billion. New GM received about USD 40 billion to start over.

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THE REVIVAL (contd.)

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Five principles of the new GM:

1. 2. 3. 4. 5.

Safety & quality first Create lifelong customers Innovate Deliver long-term investment value Make a positive difference

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INITIATIVES
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1.

Energy Efficiency:

In order to reduce emissions as well as dependence on petroleum, GM has reduced 30% use of energy & emission of CO2 by using energy efficient lighting, shutting down equipment & technology to track hourly energy consumption.
2.

Waste Reduction: Out of all the global automakers, GM reuses & recycles the most waste coming from manufacturing facilities. In 2010, GM recycled or reused approximately 92 percent of all its worldwide waste, which translates into around 2.5 million tons.
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INITIATIVES (contd.)
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3.

EcoCAR Challenge:
GM organized a challenge for different universities to find a way to reduce the overall environmental impact of vehicles by decreasing its fuel consumption & emissions while still retaining the performance of the vehicle, as well as consumer appeal & safety.

4.

General Motors & LG Group JV:

GM & LG will jointly design & engineer electric vehicles. The agreement will help GM expand the number & types of electric vehicles it makes & sells by using LGs proven expertise in batteries & other systems.

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TOYOTA MOTOR COMPANY

VS.
GENERAL MOTOR COMPANY

COMPARISON
32

Characteristic 1. Management culture 2. Range of brands

Toyota Motor Company Nurturing Opted for a few brands to focus on core operations

General Motor Company Miasmic Believed a wide portfolio of brands will aid in growth Weak customer relations as it is only concerned with one time transaction
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Believes in 3. Customer service maximization of customer value

COMPARISON (contd.)
33

Characteristic

Toyota Motor Company

General Motor Company Mass layoff of workers especially when economy was bad Could not predict the evolving requirements of customers in time
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4. Workforce management

Considers employees as its greatest investments & assets

Forecasted the need of the market well ahead of time & adapted accordingly

5. Innovation

COMPARISON (contd.)
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Characteristic

Toyota Motor Company Sold Prius in its initial years at a loss as it anticipated the increasing need of a eco-friendly vehicle Altered its philosophy & product line before entering in new markets

General Motor Company Passed up on electric cars because of low margin of profits

6. Long term v/s short term goals

7. Adaptation

Tried to use a rule of thumb for all markets

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ANY QUESTIONS?

THANK YOU