“I fear the pace at which we have grown may have been too quick,” said Akio Toyoda, the grandson of Toyota Motor’s founder, in 2010 testimony before a U.S. congressional committee looking into sudden acceleration problems. “Priorities became confused, and we were not able to stop, think, and make improvements as much as we were able to before.”35 Toyota’s U.S. sales fell 9% that month because of safety-related recalls of millions of vehicles, and by late 2010 journalists were writing that the company had lost its edge.36 By the end of 2011, Toyota Motor, formerly the world’s largest automaker, had slipped to third place in production behind General Motors and Volkswagen.
Page 170Toyota’s new young president, Akio Toyoda, whose motto is “be fast, be flexible,” energetically took on the automaker’s problems, traveling to the United States to fire up dealers, personally taking charge of the sagging Lexus brand, and redesigning the firm’s reporting system and flattening the management hierarchy.37 In late 2013, profits were up 70%, close to their previous record high, and the company had displaced General Motors as the world’s largest automaker; by the following year, net profit was up more than fivefold.38
Still, the challenges have kept on coming. If you were a top Toyota manager, what would be the kinds of things you would identify in a SWOT analysis?
The Internal Strengths. Originally the “Toyota Way,” as practiced from assembly line to boardroom, stressed the values of continuous improvement (“kaizen”) and eliminating waste (“muda”). The Toyota Way, says one report, “mandates planning for the long term; highlighting problems instead of hiding them; encouraging teamwork with colleagues and suppliers; and, perhaps most important, instilling a self-critical culture that fosters continuous and unrelenting improvement.”39 Developed in the 1950s, these precepts later became the basis for such concepts as lean manufacturing and just-in-time inventory management (discussed in Chapter 2).
“At their core,” says one analysis, “was an attention to detail and a noble frugality that shunned waste of every kind.”40 Said its top engineer, “Basically, Toyota’s growth has been underpinned by QDR [quality, dependability, reliability] that was very high compared with competitors’.”41 As of 2014, Toyota continues to lead most other car companies in quality rankings: All three of its 2011 brands appeared in the top 10 J.D. Power 2014 rankings for reliability, with 15 Toyota, Lexus, and Scion models winning or tied for first place in their vehicle categories.42
The Internal Weaknesses. In the 1990s, Toyota launched an effort to become the world’s largest automaker, embarking on aggressive overseas expansion and doubling its plants in North America, Asia, and Europe. During this time, the focus on cost reduction intensified to the point that the virtue became a vice. Suppliers were continually pushed to design parts that were 10% cheaper and 10% lighter. Common parts were used in most Toyota models, acquired from outside companies instead of trusted traditional suppliers.43 Toyota also began to treat its cars like “transportation appliances,” causing it to fall behind in design leadership, making buyers feel less of an emotional connection with Toyota products. The company was said to have succumbed to “big-company disease,” becoming ponderous and bureaucratic, with every decision tightly controlled in Japan, to the detriment of its managers in the United States.44
Then suddenly, from 2000 to 2010, driver complaints to the National Highway Traffic and Safety Administration about “vehicle speed control” issues soared, with 11.7% of faulty vehicle components identified as Toyota’s.45 Next came widely publicized problems with sticking accelerators, prompting two huge recalls of 10 million vehicles and suspension of the sales and production of eight models in the American market.46 Later it developed that the “unintended acceleration” was probably caused by sticky pedals or floor mats rather than Toyota electronics (although some critics thought it traced to driver error).47 By then, however, the damage to Toyota’s vaunted reputation for quality was severe. “When your whole deal was quality, every mistake is a big deal,” said a manufacturing expert.48
In 2014, Toyota agreed to a $1.2 billion penalty to end a U.S. criminal probe into the sudden-acceleration problems.49 No sooner had it done so, however, than the company’s reputation for reliability and assembly-line mastery took another massive hit, when Toyota was forced to recall 6.4 million vehicles for five potential hazards, including faulty power-window switches, possibly unstable steering column brackets, and potential hindrances to deployment of driver’s-side airbags.50
The External Opportunities. Although slow to awaken to its quality problems in 2009–2010, the company went into full PR battle mode, moving to discredit critics who blamed accelerator problems on faulty electronics and stressing its commitment to its millions of U.S. customers.51 Today, under the new president’s direction, the 1950s-style traditional organization has been modernized, with layers of management removed and with Akio meeting weekly with five top advisors to make on-the-spot decisions. The company has also reorganized its vehicle-development system to speed decision making, cut costs, and generate more world-wide appeal.52
In addition, Toyota moved to give its cars more exciting designs, taking initiatives to “improve upon the emotion of cars” with better styling and high-quality interiors.53 It joined forces with Ford to develop a gas-electric hybrid fuel system for trucks and sport utility vehicles and has continued to push green technology, as with the plug-in Prius and a new concept car powered by hydrogen fuel cells.54 It launched the sporty $375,000 Lexus LFA, a carbon fiber supercar.
Toyota. How fast, how flexible?
Page 171General Motors’s fatal ignition switch mistakes, described by GM’s own CEO, Mary Barra, as representing “a pattern of incompetence and neglect,” and the recall of 2.6 million 2000–2011 small cars worldwide (for a total of 11.2 million vehicles in 2014) presents Toyota with an unprecedented opportunity to grab its rival’s customers.55 Will Toyota benefit from this development—especially in light of its own 2014 recall announcement?
The External Threats. Toyota was able to work past its accelerator-sticking troubles of 2009–2010, which presented its American and European rivals with a chance to cut into the Japanese automaker’s market share.56 Toyota also faced the worldwide Great Recession, which damaged auto spending. In addition, Toyota had to face setbacks brought about by the 2011 deadly earthquake and tsunami, which devastated plants in the north of Japan and disrupted the supply of over 500 parts; flooding in Thailand, which led to new supply difficulties; and currency problems of a strong yen against a weak U.S. dollar, which further reduced revenues.57 Finally, Toyota competitors began to close the quality gap, with the Ford Fusion, Hyundai Sonata, Volkswagen Passat, and other midsize vehicles severely impacting sales of the Toyota Camry.58
By 2011, Toyota’s market share in the United States had fallen all the way from 18.3% to 12.9%, recovering to 14.3% in 2013, putting it in third place behind General Motors at 17.9% and Ford at 15.9% (Chrysler had 11.5%).59 According to one source, Toyota was predicted to achieve an American market share of 14.6% in 2015.60
“Comfortably preoccupied with rooting out internal weakness,” said one writer in 2010, “the Toyota Way is lost when it comes to contending with outside threats. . . . If a flaw does get through, the company as a whole is loath to admit that the system broke down.”61 Do you agree? How well do you think Akio Toyoda is doing in dealing with Toyota’s threats and opportunities, both internal and external?
Forecasting: Predicting the Future
Once they’ve analyzed their organization’s Strengths, Weaknesses, Opportunities, and Threats, planners need to do forecasting for making long-term strategy. A forecast is a vision or projection of the future.
Lots of people make predictions, of course—and often they are wrong. In the 1950s, the head of IBM, Thomas J. Watson, estimated that the demand for computers would never exceed more than five for the entire world. In the late 1990s, many computer experts predicted power outages, water problems, transportation disruptions, bank shutdowns, and far worse because of computer glitches (the “Y2K bug”) associated with the change from year 1999 to 2000.
Of course, the farther into the future one makes a prediction, the more difficult it is to be accurate, especially in matters of technology. Yet forecasting is a necessary part of planning.