Toyota Way

Asian Institute of Technology School of Management SM71. 42 Cross-cultural Management How does Toyota operate its philosophies between Japan and Thailand? [pic] Tutor: Prof. Dr. Marie-Therese Claes Group 1: †¢ Ms. Phung Viet Ha †¢ Ms. Nguyen Le Hang †¢ Mr. Vu Quang Linh †¢ Mr. Nguyen Van Ha †¢ Mr. Nguyen Trung Thuc Date: September 7, 2012 Executive summary In the 21 century, the world we inhabit is coming â€Å"flat† where many political, social economic and cultural barriers have been being discharged. The development of global organizations means that clients, suppliers and business may be located across a range of countries and regions.The number of interactions between people of different cultural backgrounds in the workplace is growing exponentially in companies of all sizes. Understanding cultural differences and developing cross-cultural communication and coordination have become important than ever before for organizations. These skills help or ganizations to work more effectively across cultural barriers. This paper examines the cross border coordination between Toyota and its subsidiaries in Thailand. In this paper we will have a brief research about the intercultural problems of Toyota.How Toyota deals with cross-border business coordination problem to become the global No. 1 automaker in general and Thailand’s bestseller automobile in particular is analyzed on basic information and cross-culture management. The empirical case of Toyota in Thailand is selected to for study and lessons learnt as Thailand is the first country in the oversea expansion of Toyota’s manufacturing and where Toyota experienced good practices in coordination mechanism between mother Corporation and its regional and local subsidiaries. 1. INTRODUCTION 1. Background on cross-cultural business coordinationCross-cultural business coordination aims at dealing with the  interaction  of people from different  backgrounds in the busi ness world. Cross culture is a vital issue in international business, as the success of international trade  depends upon the smooth interaction of employees from different cultures and regions. A growing number of companies are consequently devoting substantial resources toward training their employees to interact effectively with those of companies in other cultures in an effort to foment a positive cross-cultural experience.Nowadays, firms, especially those from developed countries, increasingly expand their business overseas in the attempt of seeking for the competitive advantages of the new resources. This results in the more complex structure of multi-national corporations. Transnational corporations see cross-cultural business coordination very important in order to have smooth operation and balance control between headquarters and its subsidiaries toward production efficiency improvement. In this connection, the differences in languages, values and other dimensions should be studied and based on that find the ways to harmonize those for better coordination.Cross culture can be experienced by an employee who is transferred to a location in another country. The employee must learn the language and culture of those around him. This can be more difficult if this person is acting in a managerial capacity;  someone in this position who  cannot effectively communicate with or understand  their employees' actions can lose their credibility. In an  ever-expanding  global economy, cross culture and  adaptability will continue to be important factors in the business world. 2. Toyota and its philosophies 1. About ToyotaToyota Motor Corporation was founded on August 28, 1937 by Sakichi Toyoda. After 70 years of manufacturing and developing, at the end of March 2012, Toyota conducts its business worldwide with 50 overseas manufacturing companies in 27 countries and regions. Toyota's vehicles are sold in more than 160 countries and regions. The Toyotaâ €™s capital reached 397. 05 billion yen with 325,905 employees all around the world. Toyota is known as the World’s N01 automaker with its regional headquarters in the North America (03 headquarters), Europe (01 headquarter) and Asia (03 headquarters).Thailand was the first country where Toyota Motor Corporation started to expand its business overseas. Toyota Motor Thailand (TMT) was established in 1962 with the capital of 11 million Baht. Toyota Motor Thailand grows continuously and reached the capital of 7,520 million Baht with 13,500 employees and production capacity of 550,000 units per year in 2009 (Toyota, 2009). TMT becomes one of the key contributors to Toyota worldwide, and Thailand’s number one automobile manufacturer. 2. Toyota’s Vision and PhilosophiesTo manage subsidiaries around the world to achieve the same Toyota quality, Toyota created a corporate philosophy that’s has been passed down from generation to generation within company, whi ch is called â€Å"Guiding Principle at Toyota†. Toyota Code of conduct and Toyota Way are tools implementing to assist Toyota realize their goals. Toyota Code of Conduct was issued in 1998 providing a basic, detail explanation and examples of actions and issues that one must be aware of when carrying out business activities in and living in global society.The code of conduct is dispersed among management of subsidiaries in Japan and overseas for developing common awareness. Besides Toyota Code of conduct, Toyota Way was established in 2001 to simplify the values and methods that employees have to carry out to undertake the guiding principle throughout company activities. Toyota Way is functioning as the key standard of global Toyota organization and it presents Toyota’s philosophy to focus on long-term benefit while developing vehicles that exceed customer expectations and contribute to community and to the future of mobility.The Toyota Way consists of continuous impr ovements and respect for people. The key concept of Toyota Way is actively working and creating new ideas for the best with ongoing process to improve their business, never satisfied where they are, respect all the stakeholders and working with be believe in success by personal effort and good teamwork (Toyota, 2007). One of the main elements in Toyota Way is mutual respect by promoting safety among employees and employees have to be trained both for daily operation and behavioral role.Toyota’s Global Visions look toward to following goals: ? To lead the way to the future of mobility, enriching lives around the world with the safest and most responsible ways of moving people. ? To exceed the expectation and be rewarded with a smile through their commitment to quality, constant innovation and respect for the planet. ? To meet their challenging goals by engaging the talent and passion of people who believe there is always better way. Toyota Production System (TPS) aims at pursi ng the most efficient methods for all aspects of production the method of production.Toyota considers the objective of â€Å"making the vehicles ordered by customers in the quickest and most efficient way, in order to deliver the vehicles as quickly as possible† as an issue of great importance. TPS was built based on following concepts to achieve the best quality of product while minimizing waste through defective detection: ? The first concept is â€Å"Jidoka†, which stands for automation. Toyota set up the mechanization and links it with computerization so the production system immediately stops working when a problem arises in the process to avoid defective products. The first concept is â€Å"Just-in-Time†, which enables the company to minimize level of inventory. 3. Intercultural problem in the business coordination between Toyota and its subsidiaries in Thailand Toyota has set up its global strategies and goals for all Toyota’s subsidiaries. ? To ma intain Toyota’s position as market leader in automotive industry; ? Continuous growth; ? Boost profitability and return for the shareholders. In the process spreading its philosophies, strategies and goals to the subsidiaries, Toyota encountered certain difficulties on cross-border coordination, which are arisen from cultural differences.The Japanese management style was called â€Å"group capitalism† by Alfred Chandler – a business historian. The style was described as emphasized group behavior and values interpersonal harmony. The manager and corporation are put together in a very culturally dependent system, which is considered as a constraint for many companies when they expanded globally. The management system did not function well because subsidiaries operate separately by substantial time and distance barriers (Christopher A. Bartlett and Sumantra Ghoshal, 1999).Different ways of thinking also were difficulties for the integration of non-Japanese into the management process. Japanese corporations often retained decision-making and control at the center, i. e. the management was conducted by those who understood the subtleties of the existing system (Christopher A. Bartlett and Sumantra Ghoshal, 1999). In case of Toyota and its subsidiaries in Thailand, Japanese managing officers of Toyota Motor Corporation (TMC) served as the president of both Toyota Motor Asia Pacific Engineering and Manufacturing Co. Ltd (TMAP-EM) and Toyota Motor Thailand (TMT).Language and communication created barriers to the business coordination as people were speaking with different voices and sending out inconsistent messages. 2. DISCUSSION 1. Analysis of the intercultural problem The intercultural challenge faced by Toyota Motor Corporation in the cross-border coordination in Thailand originated in cultural differences. In general, from viewpoints of national level, putting Japan and Thailand in the value dimensions as in Hofstede’s Study, the ranki ngs received is shown in the table below (David C. Thomas p. 51-52) (David C. Thomas p. 51-52). Table 1. Cultural dimension rankings follow Hofstede’s Study Dimension |Japan |Thailand | |Power Distance |54 |64 | |Individualism |46 |20 | |Masculinity |95 |34 | |Uncertainty Avoidance |92 |64 | |Long-term orientation |80 |56 | Power distance Japan has lower power distance culture that Thailand does. Therefore, it is implied that in order to have smooth coordination from TMC to its subsidiaries in Thailand, Toyota should consider the followings: ? Give clear and explicit directions to Thai employees; ?Do not expect Thai subordinates to take initiative; ? Show deference to those with higher level through language, behavior, etc. ; ? Expect to encounter more bureaucracy behaviors. Individualism It is can be seen from Hofstede’s rankings that both Japan and Thailand has collectivist cultures. However, Thai is more collectivistic than Japanese. Therefore, some possible conside ration for Toyota in developing business with Thais is listed below: ? Promotions do not depend upon Thai employee’s performance and achievement, but seniority and experiences; ? Decision making may be a slow process as many individual across the system will need to be asked for advices; Praise should be addressed to a team rather than individuals. Masculinity In the research of Hofstede, Japan was the world’s most masculine country and Thailand was among the least one or most feminine culture. In the case that Toyota seeks for the sustainable manufacturing subsidiary development in Thailand, some notes should be taken into account such as: ? Personal questions are normal rather than assertive; ? Dealing with trust weights more than projected profit margins and other similar things; ? Thais openly show favoritism to close relations; ? Small talk at business functions will focus on Thai employees’ life and interest rather than just business. Uncertainty avoidance Japan has highly risk-averse culture, which can be seen through strict laws and regulations. Thailand has the uncertainty avoidance score just above medium, therefore much lower than that of Japan. Some attentions that Toyota should pay for developing its manufacturing in Thailand could be as follows: ? Try to be more flexible or open to new ideas; ? Allow Thai employees the autonomy and space to execute their task on their own; ? Recognized that Thai employees may take different approach to life and see their destiny; ? Agreed plans should be realized as soon as possible. Long-term orientation At the score of 80 Japan is considered as one of the long term oriented societies.This is reflected that Japanese see their life as a very short moment in a long history of mankind. In Japanese corporations, the possible observations are long term orientation in the constantly high rate of investment in R&D even in economically difficult times, higher own capital rate, priority to steady grow th of market share rather than to a quarterly profit, and so on. With a score of 56 Thailand is a mild term oriented culture. Amongst the values that are admired, working hard and having a sense of moderation are dominant for Thais. Timescales and deadline in Thailand are fluid. Therefore, Toyota should consider the followings in working with Thais: Reliability, responsiveness and empathy as very important element. ? Building up close relationships with Thai subsidiaries is of importance. ? Building relationship takes time. 2. Solutions for Toyota in Thailand There are some solutions were found out by Toyota to achieve the same objective and target among the subsidiaries all around the world, especially in Thailand – the first country where Toyota Motor Corporation started to expand its business overseas. 1. Global Production Center Toyota has established Global Production center (GPC) in 2003 as Toyota’s global human resource training center. Toyota operation comprise of 53 production sites in 27 countries around the world.In managing its operation, Toyota encounter a diversity of people therefore Toyota consider human resource development as an important mechanism in maintaining its global business. GPC is the place where employees are trained about the Toyota’s culture and values and make them understand the Toyota way and to provide the skills which are needed for employees to carry out the task. In the past, human development was carried out in Japan only. However, with rapid growth of Toyota’s overseas operations leads to the transition of GPC to the regional. Technical skills from Japanese trainers are spread to local trainers and from the local trainers to local employees and also to employees from the other countries in the region.The objective of the GPC is to inculcate employees that Toyota’s products should have the same quality regardless of which origin it as produced (Toyota Annual Report, 2008). GPC, human res ources development is implementing by developing supervisors and trainers in subsidiaries with assistance from headquarter. Another function of GPC is helping the subsidiary plants to prepare for redesign of production when newly developed model is launched so that the plant can efficiently switch over to produce them. Visual manual videos were studied and make used in GPC for representing the best demonstration. This practice takes advantages over the traditional manuals, by which only written words or still illustration are shown.Toyota can reduce time for staff training and avoid misunderstanding through the adaptation of visual manual videos. Within 5 years, 13000 employees both from Japan and abroad were trained by GPC and distribute knowledge they learn to their team members. The Asia Pacific Global Production Centre (AP-GPC) was established in Samutprakarn, Thailand in 2005 to serve as the regional training centre. AP-GPC provides trainings for TMT’s employees and also supporting to other Toyota’s Asian manufacturing affiliates. 2. Restructuring of organizational structure Toyota Motor Corporation spread out its organization around the world and set up regional headquarters in North America, Europe and Asia.In Asia, there are two headquarters in Singapore and Thailand that are responsible for different business entities. In the past, subsidiaries in each country had to report directly to headquarters in Japan. The restructuring to regional headquarters believes that it could allow subsidiaries to work more efficiently and regional headquarter assist to each country in the region in time. The close coordination between the regional headquarters can support each other through corporation in engineering, manufacturing and marketing. The regional headquarters also facilitate and response in time to customer’s demands throughout the region and provide flexible react to market changes.With the establishment of Asian regional headquarter i n Thailand; Toyota Motor Thailand became a main center to provide support for manufacturing and also research and development in Asia – Pacific region. 3. Thainization Toyota Motor Thailand launched the localization policy, which is called Thainization. Thainization was the philosophy that drives Toyota Motor Thailand before Toyota way was introduced. Thainization is to promote the local employees to take part in management level in 20 years (Amano, 2008). In the 1960, at the beginning of Toyota in Thailand, the management was carried on by Japanese and strictly followed the policies and guidelines set by its mother company Toyota Motor Corporation. Around 1980’s, very few Thai’s were positioned as managers but the final decisions were still made by Japanese expatriates.Since 1987, Toyota Motor Thailand decided to transform the organization from management only by Japanese to only by Thai, which is called Thainization. The Japanese expatriates were converted fro m managers to coordinators. In every department have some Japanese staffs work together with Thai staffs mainly in the coordinator role as an adviser for technical information and making connection network among Toyota group to help communication flow smoothly. At present, only the president, executive Vice president and Treasurer are Japanese and the other high-level management officers are Thais (http://www. toyota. co. th/en/about. php? Page= management).Thainization in Toyota Motor Thailand was implemented as the necessity to adopt of globalization in the world while considering localization (Imai, 2006). 4. Lateral communication Lateral communication is of importance because it is the way that all organizational units are connected throughout the system of resource exchange and organizational set of transnational corporation in different locations. Toyota Technical Center Asia Pacific –Thailand (TTCAP-TH), which was established serving as Research and Development unit fo r Asia Pacific region, can be seen as a network platform for exchange knowledge and skills between different functions and with counterpart in Japan to support local needs.This kind of lateral communications between business units through the collaboration between each geographically specialized division contributes to widespread of Toyota Way that focuses on sharing the same Toyota values and cultures. Another step toward the relocation of support division from Japan to Asian region is the setting up of TMAP Thailand, which represents the network platform providing production assistance to TMC’s affiliates in the region. 5. Informal communication Nohria and Ghoshal (1994, p. 494) asserted that extensive socialization and communication builds trust among the managers and creates foundation for reciprocity and easier negotiation and resolution of potential conflicts.Informal communication exits in Toyota organization so that it brings bout informal exchange idea between Toyota Japan and Toyota Thailand. In Thailand, TMT made use of job rotation of employee as a tool for developing people because of the consideration that working in the same job for long time could make people stick with the old habit and, therefore, reluctant to change. This practice has enhanced the informal communication and made information widely shared throughout in the organization. Employees and departments in rotation process accumulate working experiences and knowledge as well as share their own values for adapting to the same organization culture. 3. CONCLUSIONIn summary, Toyota has successfully applied many strategies in order to improve communication across border while keeping many existing core values. Also, due to the scale of the Toyota Company, there has been no particular method or formula that is best fit for achieving the existing success in Toyota. Toyota had to apply a few methods to efficiently achieve localization while remaining competitive in globalization. Firs tly, The Thai’s characteristics are different than the Japanese so the GPC was introduced to help Toyota’s employees to think in the same way – The Toyota way in term of values and cultures. Also it trained employees many certain skills to be capable of finishing given tasks.Secondly, In Thailand, the structural mechanism obviously takes part as the fundamental formation of the organizational structure. Toyota remarkably use of departmentalization as the structure to manage the business entity according to function and responsibility. The critical scrutinize regarding centralization or decentralization of decision making is become blurred since Toyota to some extent delegate the decision authority to its subsidiaries while the final exclusive decision remain at the headquarters. In addition, the formal written policies together with standard production system considerably utilize in Toyota subsidiaries so that its affiliates follow the same principle and maintai n the same Toyota standard.To achieve the same goal, planning in the form of the strategic planning, regional target goal as well as reward is used as guideline to accomplish the goal. To control the performance of the company, output control is one of the tools that Toyota use to motivate the performance of their employee as well as subsidiaries. However, the hierarchical or behavioral control is coexisting to ensure the employee act in order to fulfill the best performance. The optimum control is to mix between output and behavioral control so that the finest advantage is achieved. Thirdly, Toyota has introduced â€Å"Thainization† which allowed Thai people to get into managerial positions as the top position before was only for the Japanese sent from headquarter.Last but not least, the informal or subtle mechanisms are broadly promoted within the Toyota organization. The lateral or cross department communication visibly seen by the messy organization that employee have to communicate or coordinate with other departments or the same department in the region among functional and geographical line simultaneously to undertake the work. The establishment of regional headquarters in Thailand (TMAP-EM) is one of the cases that put forward lateral communication, as the network of exchange in the region required the lateral communication among the concern departments. Besides, the informal communication plays as vital mechanism in the organization.The present of Japanese as employees and also coordinators make possible the informal exchange of idea between Toyota Thailand and Japan that finally facilitate the subsidiaries action and decision in line with those of headquarters. In short, the achievement of Toyota when applied with all the methods, mechanism was very fruitful as Toyota Motor Thailand (TMT) operated more efficiently resulting in time and cost savings, better communication, better understanding in the organization and better employees involvement . So the most obvious example was that the second factory was opened in 1989. And this result showed that Toyota has successfully managed all the operation across border, retaining local flexibility and while achieving global integration.Moreover, with the rapid development of many other Multi-National Companies (MNCs) and trying to recruit more and more talents, Toyota has also exploited the local population in order to get a broader pool of talents (combining not only from Japanese and Thai in this case, but also from other nationalities). Furthermore, with the matrix of subsidiaries and one headquarter, Toyota tries to make the organization stable with core visions and beliefs from the Headquarter but also loot the host of new ideas from all around the globe as they need to keep up with the quickly-changing characteristic of technology with new ideas. With all the cross-cultural issues above, Toyota would have more experience and solution for future encounters. REFERENCES †¢ Bartlett, Christopher A. and Ghoshal, Sumantra (1999). 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