The increased competition in the market has pushed many organizations to produce qualitative goods and services to ensure that they attain a wide customer base. The two major factors that have been denoted to determine the success of an enterprise are the customer base and the nature of the competition in the market. A company that possesses a huge customer base and able to compete effectively in the market is termed to be successful. Thus, to maintain their success, threshold organizations must produce products, which meet the specific demands of the customers, and, most importantly, exceed these demands. Further, increased competition means that businesses have to produce goods of high quality in order to compete with the similar products in the market. Thus, there is a need to inculcate effective management strategies, which could contribute to enhancing the quality of products that gives a competitive advantage to the businesses.
The headquarters of Toyota are situated in Toyota City, Aichi. In order to expand its operations’ area, Toyota established a financial service channel that focusses on construing assistance to its customers in this sphere (Toyota Motor Corporation, 2016a). The aim of the introduced measure was to ensure that the company expands its operations while enabling its customers’ easy access to financial resources. The enterprise was ranked first in terms of sold units of vehicles according to 2015 statistics. At the same time, the economists depict the company as the one having a market share of about 11%, which its major rivals (General Motors and Volkswagen) closely follow. The success of the company can be attributed to its quality management process. Toyota is one of the major enterprises that have correlated their processes to the Total Quality Management approach.
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Toyota seeks to lead the way to the adoption of reliable and effective mobility approaches and to enrich the lives of people across the world by introducing and enhancing the safety as well as the most responsible ways of moving from place to place. The company is essentially committed to the ideas of continuous innovative process, quality management, and respect for the global eco-system. Further, the enterprise is committed to surpass the expectations of the customers and reward them with a smile continuously. The incorporation of talented and skilled as well as passionate employees who believe that there is always a better way will attain all the mentioned aspirations (Toyota Motor Corporation, 2016b).
The company seeks to attract and attain customers who value high-qualitative products and services and ensure that their satisfaction is always surpassed.
- To enhance customer’s satisfaction providing high-qualitative services and products, which meet the value of customer’s money.
- To inculcate an aggressive customer’s satisfaction program in order to foster client’s relationship management.
- To maintain the existing market base and increase the global market share.
- To improve the social well-being of people in the whole world.
- To ensure that ethical approaches are followed towards customer’s management and the defining of his needs.
Quality Management of Toyota
Quality management denotes the act of supervising activities and those tasks that are needed for enhancing and maintaining the desired quality levels (Figure 2). It takes into perspective the creation and implementation of quality planning and assurance. In addition, it must address quality control and quality improvement. Every business tries to devise enhanced ways of improving customer’s satisfaction, and one of the most successful approaches in this area is the concept of total quality management (TQM). The underlying principles of TQM focus on reduction of product defects by improving the manufacturing process and ensuring that customers are happy with the end products. It is crucial to note that TQM is a company-wide approach, and it is not limited to a single department. TQM ensures that companies are able to save their money and improve customer’s satisfaction (Kakuro, 2004).
Toyota Motors Company has adopted and aligned to the principles of TQM for the past 75 years, and this has built its success foundation. Based on the customer-first and quality-first philosophy, Toyota Motors has been able to win multiple awards in the quality management and customer management areas. Some of the most prestigious awards include the Deming Application Prize of 1965 and the Japan Quality Control Award of 1970. After the introduction of Statistical Quality Control (SQC) in 1949, Toyota has been able to integrate the concepts of TQM based on the unchanging principles of customer-first and quality-first. The concept of continuous improvement is particularly important to the company as it strives to meet the changing needs of the customers (Kakuro, 2004). Toyota has adopted creative innovations in order to spur tremendous modifications across its manufacturing plants. The figure below illustrates TQM processes at Toyota Company.
Emphasizing the quality management process at Toyota, Figure 3 shows the emerging problems per 100 units for the top-10 vehicles. The graph illustrates that those models have the fewest problems per 100 vehicles. Out of the top-10 names reported, Lexus, a Toyota brand, was termed to have 73 defects, which is a lower figure as opposed to the GMC top-brand with 103 problems. The graph shows that the quality management framework in Toyota works and takes a major transition to ascertain high-standard products.
Elements of Quality at Toyota
A product is depicted to be qualitative if it integrates the desired features and capabilities. The latter aspects must be positively aligned to the needs of the customers and compete favorably with the other competitors’ brands. Quality management approaches enable businesses to spur value creation strategies and allow establishing of sustainable operations of the company. An efficient quality management process ensures that an organization always provides the required services and products, which are able to meet the needs of the customers and avoid wastages of resources (Mukherjee, 2010). These are the factors that Toyota has strived to take into consideration. Customer relationship management, the team that is mainly at the center of policy development, and continuous innovations-making process are the three key quality elements, which Toyota adopted. They can be termed as the epicenter of the company’s operations in a bid towards meeting the needs of the customers, protecting the environment, and correlating to the industry standards.
Customers are the stakeholders are people who receive products or services from a seller in exchange for money. A customer is also referred to as a purchaser of a good or service. There are two main types of customers: an intermediate and an ultimate one. The intermediate customers are the ones that purchase products or services with the aim of reselling them and are often called trade customers while the ultimate customers are those who are the end-users of the particular products and are not involved in reselling them. Toyota Motors has put more efforts and emphasis on its clients. The continued focus on customer needs has plummeted the success of the company. The argument that if customers were not buying the company’s products and services, Toyota would have collapsed, support this fact. In order to focus on the needs of the customers, Toyota emphasizes the clients’ satisfaction level and their needs as well as collects the feedbacks from them. Further, the company has delved into the production of different goods segments to address the wide range of needs of the customers. Focus on quality assurance and control policies also suffice as additional measures targeting customer needs fulfillment and product development enhancement (Naidu et al., 2006).
The company knows that success can also originate from the fulfillment of customer needs. Thus, in order to ensure that the specific demands of the clients are met, Toyota has spent millions of dollars on researches and development to guarantee that the vehicles released to the market address the needs of the buyers. Similarly, customers’ satisfaction is the center of all operations at Toyota. The company states that in order to meet it, all the members of the stuff are converged towards quality control processes. All the departments ranging from the research and development ones to the retailing division constantly involve in quality control process in order to ensure that the needs of the customers are met. Through its marketing team, the company collects a wide range of feedbacks from the clients as a measure of coincidence with the needs of the customers and their demands from the future products. Different buyers have unique needs, and it is crucial for companies to customize the products so that they could meet those specific needs (Naidu et al., 2006).
Toyota strives to be the first in this sphere. The company engages in the manufacturing of the various models that appeal to the different customer segments. The development of hybrid ones comes in the wake of climate change, and these products are meant for the environmentally conscious customers.
Institution of proper quality policies is another segment that Toyota has vehemently focused on in the past 75 years. According to the company’s core strategies and policies, its every member or employee is involved in the manufacturing process and is required to take into perspective the total quality control principles. The company adopts a standardized approach that takes into perspective the visual control that helps to pinpoint any problem or unusual situation that may occur during the this process. Rigorous scrutiny follows after the manufacture of a vehicle. This is to affirm the key features and elements and ensure that they work as they are required to. To cement on the provision of quality management, it is important to notice that Toyota offers warranty periods for new vehicles (Naidu et al., 2006).
Employees are the central stakeholders that make sure that the operations of the company are successfully undertaken. Toyota offers different opportunities and incentives to guarantee that the employees show excellent results in the work environment. This is a strategy curved to weed the skills and knowledges of the employees and drive the high level of production. Thus, the company adopts continuous trainings in order to empower the employees with the right skills in lieu of the changing of the market forces. Every worker in the company is responsible for the provision of quality products and services. This is to imply that every member of the company is involved in the quality control process.
Innovation is one of the key parameters that have spearheaded success of Toyota. Through its research and development processes, the company has fostered the advancement of its vehicles. R&D programs of the enterprise connote the review of the product life-cycle regarding to the client needs that as a rule lead to the presentation of new models and eliminating of more seasoned ones. The necessary components of value that Toyota should embrace and conceptualize incorporate client contribution, supplier inclusion, appropriate workforce administration, product design, process administration, leadership management, and nature of the information systems.
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Advantages and Disadvantages
Quality management at Toyota has led to constant innovation, improvement, and change in the overall product development process in line with the modifying market needs. Toyota has initiated a cycle of continuous improvement owing to the concepts of TQM, and this is reflected in the way management and every employee of the company assume a role in driving the organization’s operations towards meeting customer needs, which is essential in for the process of changes-making. Employees are tasked with varying mandates to ensure that costs are cut and high-quality products are attained. Further, the quality management approach at Toyota has led to continuous cost reduction in the entire manufacturing process (Yang & Yang, 2012). There are two main categories of the latter, which management combats: good quality costs and the poor quality costs. In order to produce high-quality products, prevention and appraisal costs must be taken into consideration.
Despite the merits associated with the TQM approach, which Toyota adopted, the quality management method encompasses a number of demerits. TQM demands a lot of planning, time, and other additional resources. A good TQM takes years to be implemented appropriately and reap the accrued benefits. The approach requires long-term resource allocations and unwavering commitment from management (Yang & Yang, 2012). There is no doubt that lack of proper planning will lead to the collapse of the program and ultimately impair the performance of the entire company. TQM is quite expensive. It requires additional training and team development costs. Further, an organization that adopts the strategy would have to rebuild its infrastructure in order to align to cost-reduction processes. Refresher trainings and machine inspections contribute to the overall costs of the strategy.
Success and Challenges
Toyota Company has successfully integrated the quality management strategy to all its manufacturing units across the world. Through the program above, it has been able to shorten its overall operating costs while focusing on development of products, which meet the needs of the customers. Following the client segmentation strategies, Toyota Company has been able to achieve a big success in the area of producing specific products that target the market segments. Fuel efficiency, maintenance costs, and environmental conservation are the factors that the company has consciously adopted in the process of developing its products and services. The maintenance costs of Toyota vehicles and fuel consumption have been lower as opposed to those, which the competitor companies, like General Motors, produced (Yang & Yang, 2012). The result of such development can be accrued to the years of implementation of the quality management process in the company. The success of Toyota’s quality management program can be linked to its continued rise in revenue from the increased sales, continued vehicle production and its low costs as well as to enhanced customer management. Figure 4 shows the continued increase in revenue over the past five years as Toyota reports.
The continued increase in the revenue margin in the company can be associated with the 75 year quality management program that has been integrated. Despite the occasional recalls of default vehicles, the company has constantly strived to attain excellence. Further, the high demand of products owing to the cost effectiveness, fuel efficiency, and their high quality has vehemently grown over the past five years. Figure 5 depicts the increasing production of vehicles by Toyota Company as an illustration of the level of its customers’ satisfaction.
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Toyota has continuously increased its research and development campaigns. For the past five years, the company has enhanced its operations following an approach of R&D. Figure 6shows the expenses that the company has accrued for the past five years in line with research and development.
Another illustration of the success of the quality management process at Toyota is the increasing number of sales, which the company attained since the inception of the quality management strategies (Figure 7). Its sales have been increasing with an average of 8% on an annual basis. Good sales are accredited to the high demand for quality products and the approach that Toyota takes in ensuring that it meets the needs of the customers. At the same time, the return on equity and the net income have been exceptional with the company registering an average of 9-10% annually (Figure 8).
The quality management process at Toyota has spurred technological innovations bound to bring together all the company’s customers. In fact, Toyota introduced connective instruments early this year (2016). This method is termed as the world’s greatest platform for obtaining information that relates to technology. The company seeks to take advantage of the big data concepts and artificial intelligence in a bid to spur productivity to realize its vision and mission. The Toyota FCV and FCV Plus are the fruits of the continuous improvement process pegged on quality management and evolve fuel cell.
Toyota has been able to inculcate a quality culture that has effectively enhanced its processes in the market. Toyota’s organizational culture characterizes the worker’s responses with respect to the difficulties that the organization faces in the business sector. As a global pioneer in the automotive sector, Toyota incorporates its organizational culture in the specter of maximization of the human capabilities and enhancement of innovation processes. At the same time, the company is able to benefit from it in terms of continued support and problem-solving techniques. Following the reorganization of its corporate culture, the 2013 framework emphasizes the teamwork, continuous improvement, secrecy, and quality. The company uses teams in most operations. One of the major principles of the teamwork synergy in the corporation is a need to create success. To guarantee that cooperation is improved in the organization, each employee is required to experience a team-building process. Toyota’s hierarchical structure concentrates on continued learning as a methodology of creating answers on critical issues. Along these lines, the organization can enhance its procedures consistently.
Quality is at the center of Toyota’s organizational culture. The accomplishment of the company has been credited to its capacity to deliver astounding products and services. With a specific end goal to encourage the quality administration method, the organization utilizes Principle 5 of the Toyota’s way that delineates that the organization ought to stop or build a society of stopping to fix issues and get quality right the first time. The Toyota way indicates an arrangement of standards that are used to define the business approaches of the company. Figure 9 illustrates the Toyota way.
Total quality management has played an integral role in the production processes of Toyota. However, the benefits have not come without equal challenges, which the company faced during the implementation process. The existence of competitive markets has hampered the TQM adoption. Lower quality standards can be termed as an aftermath of high-cost quality processes that most companies try to adopt in a bid to lower the production costs. The side-effect is that quality is compromised. The misunderstanding the latter is equal to high cost is a wrong misconception that many companies has adopted and which essentially misleads the entire production process. It is important to note that a positive approach has to be cultivated before the employees and management fully embrace the idea of quality and low costs. For the past 75 years, Toyota has tried to illustrate that with low costs, quality products can be attained, hence, the essence of TQM.
Lack of positive attitudes towards the practice can be described as another factor that hampers the adoption of the quality management approaches. Poor management practices along with competitive environment create a non-productive surrounding. Further, there are negative attitudes that arise from the precept of quality management. At the same time, lethargy is likely to rise through the failure of management to train the employees on the concepts of TQM and enhance the creation of an environment that leads to an emergence of positive attitudes. Employees training can act as the transformation basis for their development and problem-solving. It is not often easy to create an environment of continuous learning without dedication and commitment from management (Collins, Muthusamy & Carr, 2014).
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Lack of proper leadership in quality management hampers the effective transition of an organization from the traditional operating approaches. Duplication of duties arises from the confusion on quality management. This means that often times, lower-level employees tend to leave the quality implementation process to the top-managers. Furthermore, quality is not effectively taken as a joint activity between the administrators and workers. Along with the statute that managers are constantly trustworthy, workers have constantly taken quality administration process as peripheral, and this hampers the whole operations of an organization. Therefore, lower-level employees need to be involved in production process are left demotivated and fail to integrate the quality issues required (Gao & Low, 2014). Furthermore, it is very hard to find top-managers committed to quality management in organizations.
The latter is not often incorporated in strategic plans. Initially, Toyota focused much of its resources towards increasing profits with little regards to meeting the quality standards in the market. The limiting budgetary allocations double the problem. To limit expenses, management would focus on core processes in the company and giving little priority to employee training and development in relation to TQM. Employee training in respect to TQM is viewed as an unnecessary cost that cuts on the overall profit margins. There is no doubt that the primary objective of Toyota is to maximize profits and cut costs, and this makes it possible to neglect TQM (Collins et al., 2014).
There is no specific set measure of quality. What one customer may term quality may be termed as substandard by other customers. Grappling with such problem, Toyota has devised many avenues of trying to measure quality. TQM is focused on observing employee and organizational procedures and formation of objectives that are intended to foresee the necessities of the customers so that the clients like the end products. This has represented an extensive challenge to numerous organizations including Toyota. The issues that relate to poor planning, lack of resources and specific measurement for human-system processes make it hard to measure quality. Other challenges include poor planning, lack of commitment, resistance of the employees, and lack of their training (Collins et al., 2014).
Over the past 75 years, Toyota Company has focused on quality management pegged on continuous improvement processes. There is no doubt that despite the numerous challenges, which the company faced in the implementation process, Toyota has been able to reap multiple benefits from the quality management approach. Focus on customer needs is an integral strategy in harnessing product development and meeting the sales targets. High profitability is likely to arise from those companies that put the interests of the customers first and also focus on quality management. Changes in customer needs and market factors call for the institution of a solidified quality management process. Through it, research and development metrics will ensure that a company addresses the specific needs of customers and other relevant stakeholders.
Creation of the quality culture and management process inclined that quality improvement will occur, and it is always crucial for management to adopt an essential planning strategy that takes into consideration the key factors. Further, the programs need to be reflected on the budgetary process to ensure that organizational resources are directed to spearhead performance based on customer satisfaction and quality improvement. Lastly, the challenges of management and employee acknowledgment of the quality improvement process ought to be stated as a solid foundation towards all the activities in a company. There is no doubt that quality management leads to customer satisfaction, which provides higher profits. The continued high performance of Toyota Company and the adoption of the same strategies by companies like Ford clearly illustrate that fact.