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    Siddharth Sachdeva 17pgp142 Indian Institute of Management Raipur ° Campus, Old Dhamtari Road, Sejbahar, Rapur- 492015, India PGP - 2017-19 OPERATIONS MANAGEMENT-I D TERM EXAMINATION September 2017 Max, Marks : 35 ‘Time: 3 Hours Instructions to Students: a) End Term Examination is a Closed book Exam b) All questions are compulsory ©) Any kind of eleetronic devices are not allowed (vi Calculator ete.) 4) Usage of internet is not allowed ©) All justifications should be linked to theory, case analyses and discussions in the class iPAD, Mobile phone, Laptop and |. Read the attached Case titled “Toyota: The Accelerator Crisis ." carefully and answer the following questions: i, Discuss in detail the downsides of “Lean Manufacturing” strategy of Toyota that led to accelerator crisis. _ — 12 Marks Was Toyota is successful in implementing “Toyota Way”? Justify your answer. TT — 12 Marks |. What lessons can other firms take from the present crisis of Toyota? 11 Marks seeee SiDdhowrth Sachdeva 17pgp142 rors Micnaet Greto Axpreas ScHorren Many Teacanpen Tovora: THe ACCELERATOR Crisis The root cause oftheir problems is that th J. lems is that the company was hacked, some years ago, by anf financially oriented pirates. mn tached 2 re, vant fami, sim Press, former President & Chief Operating Officer (COO) ‘Toyota Motor Sales, U-S.A., Ine On February 24, 2010, Akio Toyoda, the grand : ‘ 1 . Foyoda, the grandson of Toyota Motor Corporations founder, Kichiro Toyoda, endured a grueling question-and-answersesion before the U.S. House of Representatives Committee on Over- sight and Government Reform. The committe represented just one of three Congressional panels investigating, the 2009-2010 recall of Toyota vehicles related to problems of sudden acceleration and the company’s delay in responding to the criss Signs of the coming recall crisis began as catly as 2006 when che National Highway Traffic Safery Ad- ministration (NHTSA) opened an investigation into driver reports ‘of “surging” in Toyotas,Camry models. The NHTSA investigation was closed the next yeat, citing no defects. Over the ncat four yeah. Toyota, known in the industry for its quality and reliability, would quicly recall nearly nine million Toyota and Lexus models due to sudden acceleration problems, Toyota's leadership, widely criticized for its slow response in addressing the problems, now had to move quickly to identify a solution that would ensure the safety of is vehicles, restore Consumer confidence, protect the valuable Toyota brand, and recoup a plummeting shate price. Akio Toyoda testified: Lfear the pace at which we have grown may have been too quick. I would like to point out here that Toyota's priority has traditionally been the following: Firs. Safety: Second, Quality: and Third._$ Volume, These priorities became confused. and we Ee mink ond mae improve Fronts as much as we were able to before, and our basie stance fo listen to customers voices to make better products has weakened somewhat ‘ie pursued growth over the speed at which we were able to develop our people and our organi- ation, and we should sincerely be mindful ofthat. I regret that this has resulted inthe safety issues Furibed in the recalls we face today, and | am deeply sorry for any aceidents that Toyota drivers ‘have experienced.’ sausted from his testimony, Mr. Toyoda’s mind surely reeled as he wondered what challenges led to the nee sel sinc pnp. ay pei thin i Pts 2 Pied Toyous sacrificed quality a the expense of extreme cot reductions? Were nonfamily managers te blame for king Toyota? Was Toyota simply subject tothe latest media witch huntin the wake ofthe global economic ease Cleary, Me. Toyoda had much to do addres the problems of the recent past and restore confidence in his company and the brand moving forward. shaded Shoo of lobal Management. All Nihal G bird School of Cabal Management. Allright reserved. This cave was prepared by Michael Greto pri © 2010 Therein eo ren May Teagan fot po ofan dco vind not wo indicate citherefecive or ineffective management ” se eunocun recy Pel PI Sarma OM FPA Est 7017 cu at aan ath raat Rap, a Sart 07 oO 17 0 document | SiDdharth Sachdeva 17pgp142 The Global Automobile Industry 4m 2008, the global automobile industey was estimated to be a US$1.9 trillion business. This represened « 19% decrease from 4 high of US$2.2 trillion in 2007, just before the globul financial crisis. Global industry values are shown in Exhibit 1. The Asia-Pacific region accounted for the largest industry segment, with slightly more than US$644 billion in sales, 36% of the global market; followed by the Americas with a 31% share, or US$548 Dillion in sales. ‘The European market held a 27% share, or US$480 billion, in sales. Despite the global automo- tive industry's fluctuating growth rates during the 2004-2007 period, the industry was expected to experience a fast recovery during the following years. Industry experts forecasted that the compounded annual growth rate (CAGR) would be at or above 4.5% during the 2008-2013 period. ‘The global automotive market is highly concentrated. The top four manufacturers—including Toyota Motor Corporation with 12.8% market share, General Motors Corporation with 8.9%, Chrysler 8.19, and tmens bart ae global level and at the country level. The mature U.S. market was especially contested, with While the U.S. auto industry hist (GM), Chiryster, and Ford were ree reduce skyrocketing debt, Chrysle ultimately took a majority stake i 2010, GM repaid US$B.1 billion lly dominated the global marke, the the Unived States, had reported profit erosion since 2005. Unable ro rid GM sought bankruptey protection in early 2009, The U.S. government GM in order to help the company out of bankruptcy protection. In April loans received from the U.S. and Canadian governments Three,” as General Motors Meanwhile, the Japan-based automakers operating in the U.S. (Toyota, Honda, and Nissan) fared better than the Big Three during the global economic criss. Industry analysts believed that the reason forthe dispar- ity berween the American and Japanese automakers could be atributed to the fact thatthe Japanese were not burdened by legacy costs such as expensive pension funds, unionized workers, and the insistence that consumers would always demand big vehicles. At the same time, however, Japanese automakers produced smaller, more environmentally friendly compact cars forthe U.S. market. iro) In 2008, Toyota took the number one spot in terms of new car sales, selling vehicles in more than 170 ‘countries.’ GM had been the historic global sales leader for more than 80 years. Exhibit 3illustates the U.S. automobile industry's market share distribution. Both Toyota and GM downplayed the significance of this achievement. According to ‘Toyota spokesman Steve Curtis, “Being No. 1 in volume has never been our goal. D Being No.1 in quality and customer experience has-been our goal."* Despite the global siles volume gain, Toyota repored revenues of US8211 billion for 2009, a dcreseat 199% (rom the pevnus yeas This decree was largely caused by the impact of fluctuations in foreign currency rates and decreased parts sales? By 2010, China had overtaken the U.S. to become the world’ largest automotive market. GM's China President, Kevin Wale, concluded, “Iris nota blip..."* Toyota Motor Corporation Headquartered in Japan, Toyota Motor Corporation was established in 1933 as a division of Toyoda Automatic Loom Works under the direction of Kiichiro Toyoda. In 1934, the company produced its first Type A engine at the encouragement of the Japanese government, and two years later the company produced its first passenger ‘ear, the Toyota AA. In 1937, The Toyota Motor Corporation was established as an independent company. During World Wat 1, the company focused solely on truck production for the Imperial Japanese Army. Only aftr the war, in 1947, did Toyota resume production of passenger cars. By the carly 1950s, Toyota was on the verge of bankruptcy until ‘an order of more than 5,000 vehicles from the U.S. military for its war efforts in Korea revived the company.” Recognizing a growing market in the United States, in 1957 Toyota established its first sales, marketing, and distuion subsidiary in the U.S. called Toyota Motor Sale Ine. (TMS). Tn the ealy 1960s the US, 2 ‘TB0243 hm curate asters or se only Pro PRS Sarma OM EFPM Exam 2017 couse al dn nsec! Managemant- Rar Kam Seplenber 2017 fo December 2017 SiDdhowrth Sachdeva 17pgp142 turing plan A tors, called NUMMI lotors plant in Fremoy Plant closed two years eat ‘Toyota Motor Manoir brands for this marker i 1g. U.S.A. (TMM) began production in the U.S. in 1988 and established new throughout the 50 aeeer-7002: TMM employed more than 8,900 people and superviaed IA regional ethane hhad the capacity oats, Toyota produced 5.2 millon cars in 58 production sites m 2000, and by 2009 they Fe aeproduce 10 million cars and had added 17 production sites. Basialy. Toyota had added the arta Chsersied company: Over the year, Toyo diversi including aerospace, higher education, robories, nance, and “Toyo plabaaton vil od into several nonauicamotive businesses, icultural biotechnology. Exhibit 4 illustrates, In the spring of 2009, Toyota named 52-year-old, U.S.-educated Akio Toyoda, family as new president, In announcing Mr. Toyodss appointment the company said it needed someone wih 8 youthful perspective who could carry out changes and reverse the company’s decline. Inthe company’ recent past, Mr. Toyoda would have been scen by senior management, known for its conservatism, a too young ard inexperienced to take the helm. This unprecedented move happened as the company faced what it theught as its biggest crisis in decades—sales were dropping around the world, Mr. Toyoda, a crite of the company's management, believed that they had allowed Toyota to overextend itself in relentless pursuit of unseating GM. as the world’s biggest automaker. a member of its founding, When Mr. Toyoda took over, the company was on the cusp of being the world’s largest automaker. Industry analysts assert that this vietory came at an enormous price. Aggressive plant and model rollouts in new markevs \ J front tndia and China othe US and Bra hadoesgeed at ‘company's resources, led the company to mistead the market, to produce faulty products, and to build underutilized plants. Toyotas problems paled by comparison to other autospakers that were all facing crippling challenges caused by the world economies ad ther wn ncicencied nthe ae of dining sce Renate epeay in crisis mode and undertook penny-pinching measures, ike turning down thermostats, curbing production, ) slashing management bonuses, and laying off thousands of temporary worker The company anipsted hag alter the financial crisis, they would be positioned to assert glabal leadership in the automotive indctry. NA, Toyoda was expected to make swift changes, including « management shakeup, and committed to lead Toyotss) comeback by putting customers first. I wil go back to che basics ofthe foundation ofthe companys sud Me “Toyoda. “I intend to exercise 35 much boldness as possible in pushing ahead with therefore.” The Toyota Way From its humble family business origins, Toyota had revolutionized management, manufacturing, and production philosophies. Many business scholars praised its values and business methods and, asa result the Teyova Way was adopted by many other businesses in a wide variety of industries (The Tayora Way mandates planning for the long term; highlighting problems instead of hiding ther; encouraging team work with colleagues and suppliers; andy perhaps most importantly instilling a self-critical culate that fosters continuous and uneclenting improvement. From the assembly line othe boardroom, Toyo principles push employes to sive for perfection) oy In 2001, che company officially launched the "Zoyora Wy 2001” that included 14 management principles in four broad categories, shown in Exhibit 5. In light of Toyotas global expansion, Koki Konishi, a'company general manager, alluding to the difficulty Toyota could face, told the New York Times in 2007. There is a sense of danger. We must prevent the Toyota Way from getting more and more diluted as Toyota grows overseas." 780243 3 ‘as dcr nuendo sn ony Prk PRS Sarma OM EFPM Exam 2017 course a aBan sie of Management Rap, kom Seplemb 2017 ¥6 December 2017 rated in the Tayota Way isthe ‘Toyota Production System (LPS) 11, Developed by Tayous and incor i on Spe (TS) 1 “! 1g” principles, was origanally called “Just-an-1 nd eundergded bythe philowphy that "Good Thinking Means Good Pro mpany documents describe TPS: 4 secs th egupment stops immediatly. preventing define prods rom being prodiced. the tn ones, the sem ws deg vo ove all nnecsry waste (mua rom the production and mmanatitring proce, Mor tan ft wae on smed to cena snyexcesnerapon mai ime, unnccety wok on edondanccin th podicon proce tha sno la cocuomery Spec DS added ssc hn of sae erp apertor maton, wang. eomeance, ef proesing iment and conevon (eer nd wasp) Though FPS Taos ea ees i te spun ela el tne nde TPS evolved into a world-renowned production system, effectively injecting a new vocabulary and modus Peerandi into industries beyond automobile manufacturing. For example, companies in the construction and Halth care ndusties adopted and adapted the prineples of the TPS for their own operations, The efficcrcy lmprovements caused by better logistics systems and a quality focus, resulting in signtheant cost savings, became standard practices in many Japanese and non-Japanese companies, Wiliam G. Hunter a professor and qual expert, visit Toyota ad othr led Japanese rms in the 198010 uly what shan cllel the Japnee Made Is condosos nla pee a was absolutely commited to quay; Japanese view Amricis predominant managemr sole peer oe slates to qualny and productivity asbeing “pathese, misguided, ad somewhat comeal bees eae tan the inspection proces For more than 20 peat }spanciecompanis had underoad tae ualipnad ose fequired a system. It had to be embedded inthe corporate cute was not dened how racces ete inspection alone! Hunter emphasized thatthe qual foncson was venta an finance ie oo sealing pa tion, Hunters diagram ofthe ety management stactte at Toyotas shown Fab Pedal to the Metal Beginning in 1995, on the heels of 68-year-old Tatsuro Toyoda stroke, series of nonfamily members took the hhelm at Toyota. At the stat of this ransiion, the company’s health paralleled that of Me Toyoda Toyoee we losing. marketshare and risked posting its frst loss since 1950 duc to weak Japanese economy, xsttong yea toe dampened exports, and increasing trade friction with the United States, In the following 15 yeas, the nonfamily management was determined to accelerate Toyotds growth with an aggressive globalization strategy. As part of this stacey, the company began building factories’ the Us Europe, and other markets, effectively doubling the number of overseas manufacturing facilites to more than to 100. Under nonfamily leadership, Toyota revived financially and guined matket share at "a ind of speed no other carmaker has ever experienced in the past," according to Koji Endo, an analyst with Advanced ieeach, Japan in Tokyo. In 1996, Toyota's then-CEO Hiroshi Okuda offically nched the “Toyota 2005 Vision” which, a its core, encompassed a strong global manufacturing network that targeted local markets from Argentina to Thailand the U.S. The 2005 Vision followed the slogun *hasnonious growth’ through a“labal maser plan” and “global profit management.” Okuda believed strongly in hatinony bcoween th global environment, the world economy, local communities, and other stakeholders, and that Toyotas growth can be encicial to the world." ‘ TRO243 ‘a ocean materi a nt Pk PR Sars EFA Ea 01cm el ol rape Rap Sant 701 Oacente 217 SiDdhowrth Sachdeva 17pgp142 innova innovations emerged. Those in 1999, ted. After taking the helm ality of speed in product development cycles. Cho's ‘anstruction of Cost Competitiveness for the 2ist Century ng to extreme levels. According to’Takashi Araki, a project manager at partsmaker the number of aa sit Seiki, “The pressure [as] on to cur costs at every stage” The explicn goal was to cat of components in a car by 50% Designens ach ample invaled the grip handles mounted above the dor inside mos of Toyota vehicles. so Serutinized these parts and, working closely with supplier, reduced the number of parts sequited by 8206 from 34 to 5. Inittive lke this enabled oyoa vo ut procurement costsby 0% and the msallion tng ‘of many components by up to 75% Never complacent, Toyota strong growth and significant cost saving ollowing the implementation of ‘he "2005 Vision” led leaders o revs th plan in 2003 aking thir con lender stetey oe sep farther bp adopting the “Global Vision 2010.” Even more ambitious. his ew plan targeted s 139% bal are shoe satly 2010. By Apail 2010, the company had yet o reach se 19% mar, although the new wton had pk an impressive string of achievements, inluing industry-leading operating marin of 8.6% global les omth of up 0 600,000 additional vehicles per year and the duplcement of Gencral Motors ay the worlds biggest automaker by unit sales." When Katsuabi Watanabe took the helm as president in 2005, he did not hesitate to share the results of CCC21 with New York’ financial community: "Under CCC21 activities, which I led, Toyora realized cost re ductions of more than 200 billion yen (USS2.2 billion) a basis”) Despite the savings of more than US$10 billion over the sx years since CCC21's inception, Watanabe set out to achieve even more cost savings through the new "VI" (Valu Innovation) strategy. Dubbed an “aggressive version of CCC21,” Value Innovation promised greater svings by making the entire development process cheapet_— and faster, further timming parts, production costs, and time to market." According to company documents, the goal of Toyotas new vision was “to work hard towards making every dealer, plan, regional headquarters design center, and supplier around the world, including TMC, the ‘best company in town. In other words, 2 ‘company that is respected and admired by the communities we operate in and creates and shates a desirable Furuse forall! "” Many industry insiders, including Takaki Nakanishi, an auto analyst at JPMorgan Securities in Toky. expressed reservations about Toyota rapid growth. “Toyota is growing more quickly than the company’s ability to transplant its culture to foreign markets,” Nakanishi said. “This ia huge issue for Toyota, one of the biggest i will face in coming years.” Engine Oil Sludge: A Harbinger of Things to Come? Even as Toyota pursued growth at breakneck speed, and at the same time vigilantly cut costs in order to reduce crete, wc were een a the gold stndard fr elabliy and quality mong conmumers aod earioheary analysts. Two separate surveys conducted between 2000 and 2010 by J.D. Power & Associates (a global marketing information firm chat conducts independent surveys of customer satisfaction, product quality, and buyer behavior in the automotive industry) revealed that Toyota's perceived brand image improved based on the declining rate ‘of owner complaints.” Toyotas advertising and marketing strategy only bolstered the high-quality image. Unlike its domestic competitors, Toyotas marketing campaigns remained remarkably steady over the years, weavings its hallmark values of quality, safety, and reliability into its messages. During its meteoric rise to the top of the global automobile industry, cracks in Toyota's 1 10 appear. In 1999, the company faced a setback that threatened to tarnish is stellar reputation for quality in the United States. As many a5 3.3 million vehicles were affected when certain four- and six-cylinder engines in ‘Camrys, Corollas, and other models became prone to oil gelling, or “sudging,” This problem manifested itself by T0243 5 a) "Tr eocumaet matonad ruse ery Pre PR Sara's OM EFPM Exam 2017 cores a Indan Ist ol Management: Raipur, kom September 217 to December 2017 — SiDdhowrth Sachdeva 17pgp142 ees rssages, ultimate a eimedied by replacing i scize—a problem only remedied by rep qfereng the internal ol pasags, ukimatly causing the engine seize problem ony renei yang Ug Cult engine, which could cost more than USS8,000. Some of the engines that failed st me ‘ld and soll under factary warancy: er ert0r, es ‘pairs and denied warranty claims, claiming xc was the result of that the sludge was the ta tefused to cover the repairs and deni 8! in dg was he suk ally accusing vehicle owners of not changing their oil in a timely fashi aving the 2 The company’s response to a Gilchanged ata dealership, oF using the wrong blend of ei, or an tnferior filter, The companys sponte {Re cnuine sludge problem was not well ecened by ts customers Though the Internet i in sin 8 Jot customers, annoyed over the company’s “maintenance isue” claim, mobilized a3 y Wish the desire for conflict avoidance that important issues failed to get full attention. Managers who disagreed with a certain proposal would sometimes remain silent rather than upset the relationships that they had so «carefully developed. Therefore, it was highly unusual when Toyotas nonfamily managers publically stated that Toyotas troubles were less a quality crisis and more a management and public relations crisis. Mr. Okuda, nonfamily member and Toyota's president from 1995 to 1999, putan even finer point on this argument in 2000 when he told the Wall iret Journal, referencing family managers such as now-president Akio “Toyoda, “Nepotism just doesn’ belong in our future.” Other nonfamily managers argued that Mr. Toyoda was too focused on top-line growth and profits in order to overtake GM as the world’s leading automaker, instead ‘of making sure that the company’s reputation asa quality manufacturer remained intact. In Toyoda's Congressional testimony on February 24, 2010, he alluded to a return to these principles: perspective. One cannot rely on reports or data in a meeting room 1 will ensure that members of the management team actually drive the cars, and that they check for themselves where the problem ies, as well as its severity ~ 1 believe shat only by examining the problems on site can one make decisions from the customer 1 Moving Forward We need not be concerned We need only continue as always, making our improvements. ichiro Toyoda, Founder Toyoda Automatic Loom Works Could Akio’ Toyoda simply follow his grandfathers advice to focus on continuous improvement, especially given plummeting margins? Mr. Toyoda had to sore out whar combination of structural, cultural, or strategic challenges led to the current recall criss. Had the company lost sight of its long. teem philosophy, a key principle behind the Tayota Way? Had Toyota sactiticed quality at the expense of extteme cost reductions? Were nonfamily managers truly to blame for “hijacking” Toyota? 10 TBO243 ‘hn oenmar eis fr vse ory Pol. PRS Sarma's OM EFPM Exam 2017 course al dan ti of Management - aur om September 2017s Decent 2017 What tole had Toyotas supply chain anel keds strc woes to the hal industry, did Harvard Michael Porter have rately have strate e played in the recalls? Thinking, beyond layout iyaa in mind when he said that Japanese Be ies because operational excellence alone is not strategy? Was Toyota simply subject to the latest media witch hunt in the wake of the ga conan crise oul Consumer Reports, which traditionally praised Toyota vehicles, really have issued a “Dorit Buy" on the 108 withour presures ef the economic cist and a med mpaign for Buy American? Ford and GM had both had more and larger recalls than Toyota (see Exhibit 11). . fi st, and restore confidence in his Clearly, Mr Toyoda had much to do co fix the problems of the recent past or conics i company and the brand moving forward. More importantly. Mr, Toyoda had siren his person i cama in his testimony to the U.S. House Committee on Oversight and Government Reform: ly MME og cat. You have my personal commitment that Toyota will work vigorously ‘and unceasingly t our customers.” “7p0243 1 rate of Management: Ragu om ‘SOM EFPM Exam 2017 course at Inn est or ia onty iPro, PRS Sam rm cua 9 marin Siddharth Sachdeva 17pgp142 u September 2017 19 0 Siddharth Sachdeva 17pgp142 Exhibie Exhibit 1. Global Automobiles Industry Value: $ Billion, 2004-2008 SSoiter 4 Grown 200% 180% 10.0% 50% oo oO me] [50% [a] | soon & C | f -50% [¥) | 200% Balt -as.0% 2004 2005 2006 20072008 Exhibit 2, Global Automobiles Industry Share: % Share, by Value, 2008 Company 9% Share Tovuta Motor Corporation 12.80 General Motors Corporation 890 Diener AG 810 Ford Motor Company 780 Other 62.40 Toul 100.00 Source: Datamonitor Exhibit 3. U.S. Automobiles Industry Share: % Share, by Value, 2009 Company % Share “Toyota Motor Corporation 17.80 Ford Motor Company 1750 General Motors Corporation 1450 Honda Motor Company, Limired 11.80 Chrysler Group LLC 750 Other 30.90 : Source: 1BISWerld. 780243 3 rus document i authorized for ve ony in Pro. PRS Sara's OM EFPM Exam 2017 course a nan Insite of Management - Raipur, tom September 2017 to December 2017. SiDdhouth Sachdev ov L7pgp142 Exhibit 4: Toyora G The Americas OceamialAsial Middle East/C) Emopel Aiea 1977: Toyota Technical Center U S.A, Inc established | 1984: Toyors-GNT joint venta ‘New United Motor 1988. Toyota Motor Manufacturing, Kentucky, Inc (TMM) starts production 1989, Lexus dealerships established in the U.S. PSR TMME Technical 19503)1957 Fist Crown export 1957 Toyota Motor Sls, US.A. Inc eablished 1958: Toyora do Brasil S.A. starts operations woe Voy Monay'Phi 1960; {963 Toyora Moror Thailand Co Lad esblshed [19703 1973" Calky Design Research, Ine esablshed —} | Center established 1990: 1998: Toyota Motor Manulactaring Indiana, Inc. (TMMI) and Tayota Motor Manufactu West Virginia, Ine, (MMW) state operations 990 Toyota Motor Futope} Marketing & Engineering SA. (TMME) esublished 1992: Toyota Motor Manufacturing (UK), Led (TMUK) starts production 1998; Construction of new plant in France anounced Engine Co., Ld (TM operations 1999: Toyota Kirloskar dial 1998; Taagin Toyota Movor | ‘Motor, Led. starts operations E) 2005 0004 3001Tayora Morar Manutseraring, ARbama, Inc. (TMMAL) established 2002: Toyota Moror Manufacturing de Baja (California S. de RL. de C. V. (TMMBC) established (Mexico) O01 “Toyota Moror Manufactuning France SAS. (TMMP) st production 2002: Toyota Peugeot Citroen Aucomobile Czech (IPCA) established 2002 Toyota Motor Manufacturing Poland (SCTM) stars hina) Parts Private Le established (India) Sales Co., Lud (FTMS) established (China) Industries Poland Sp 20.0 (TMIP) established 2005; Production of the “Toyota Aygo starts ac TPCA| "eel Republic) 2005: Toyota Motor Manufacturing Russia Led (TMMR) established 2004: Toyota FAW Ld. (FICE) established (China) 2004: IMV scties Hilux launched (Thailand) established (China) an Tayora Novor (TRAP) 2003: FAW Toyota Motor Spir00(TMMP) starts |2004: Toyora FAW (Tianjin) production Dies Co. Led. (TFTD) 2002; Toyota Motor established (China) (Changehun) Engine Co., 2004: Guangzhou Toyora Motor Co., Lid. (GTMC) Vigo| [2006 1b Opening of the NAPST March: Agreement reached to subcontract production o Subaru of Indiana Automotive, Ine. (SIA) (production to statin spring 2007) April Establishment of the TEMA ‘May: TMMK, TMMI, and TMMNWV celebrate 20th anniversary Sep.: Toyota Motor Manufacturing Canada Inc (IMMC) celebrates 20th anniversary [Ocx: TMMK starts production of the Camry Hybrid Fee gota Motor Manufacturing Teas, In (TMMTX) starts production of the Tundra Aug. Establishment of GPC Tan: Expansion of TME-TC| May. Production ofthe Mar: Opening of the | amy sears in Guangehou, EGC China Training Course atthe AP- le 4 “Tin document authnized fr use cnty Prk PRS Tota TBO ‘Sarma's OM EFPM Exam 2017 couse a Indian Insitute of Manegement- Raipur, kom September 201719 Dacember 2017 Eahibie 5.14 Pinciptes ot ae O01 Long neiple 1th Hoyts Way” 0 Ptonophy TV Mase your mn. " ro ‘wt decisions on a long tern philasuphy: even at the expense of shore tera nancial TM. a phitennplig slut onguneua eet utp: dha pts ay sone as deine abn so lags th tah gaat mal anni pape tater inte, Undetstanel your place he hist alae oes paps tt Ht mpuny w he nes Fev Yor pip He foundation for + Gene alle forthe custannet, society, and she econaany it ye ny in teams of is silty wr achiewe + Mesespanah rit yeaa comp vit, Evaluate every fiction an the Sttive toile yout ens H conduct, and maine exw clam ain oro alae Aesop eany ro anne esl sh ee yon pie el he Right Pres Wal Pe sh ig Re -iple 2. Create 1a ‘ee wen that problem to the surface eve igh vale ale, stints fh St idle or waiting, fr su stort re ct back zeta the amount of tine rive to etl a it Last as well 6 4 ik proweses and penple together so that 1 shroughont your on ng people ~pull” ystems to avoid overproduction. iin anesthe pny wh a ey ats ha hy a a he Minitive your wrk n process and warcansingolinvewory by stock x away takes ay. ive the day-by-day shifts cite ev the workload (hejunka). (Werk like the tortoise, not the hare) wast is ust one third ofthe equation for making ea succesful Ein ais atempting to implement ean principles + Work to level out the workload of all anufacering tf working on projects in batches that yp Principle 5. Build cu + Quy fr the casconerdiivea yout tale proposition, © thealfhe moaern quality awurance meth svailable 1 ltd sate yonrcqupmene dhe capability of detecting problems and stoping self Develop a visual system team or proc leaders that a foundation fr “building in” qual ion support systems to quickly solve problems and putin place countermeasures. In pllanaphy of stopping oF slowing down to et quality right the fast dine to enhance cate, His the Key ciple 3. Us ile your veess and restocking based on what the custo ‘mall amounts of each product and frequently her thaw relying on computer schedules and systers to Principle 4. Level + Elimin ing overbs yet gen den to peaple and ally not understood equipment sctvice processes as an akernative to the stop/start approach iypieal at most companies. rc of stopping tw fix problems, co get quality righ fe oF process needs assistance, Jidoka (machines with human intelligence) is the + Build into your cul he predictability, regular timing, and regular output of your processe + Capeute Pri + Use from it. + Avoid using + Design simple visual systonns at che ph ‘ciple 7. Use visual control so no problems are hidden. indicators ta help people determine hediately whether they are ina standard condition or deviating, 1 computer screen when it moves the worker’ focus away fro the workplace ‘ewhere the work is lone, to support flow and pull F Reduce your teports to one piece of paper wheneser posible, even for your stost important financial decisions Principle 8. Use only reliable, thoroughly tested technology that serves your people and processes. «Use technology to support people. not t replace people. Often its best to work out a process manually before adding, technology to support the process Then document mao tor ute ont ‘To02ts St@Ddhouwth Sachdev 17pqp142 sn Prk PRS Sam's OM EFPM Exam 2017 court a naan Insitute of Managoment- Rap, tom September 2017 fo Dacemter 2017 i reams, 0 prodicts raacantang systems eee ny. reliability, av : dhe dseupe stabil works general takes precedence amet mew an tested te + Conlice actual tests Bete aang ness tec figs : catliawe or thar am tes¥ a andy eel predictability + Nevertheless, encou logics ha swe wit ches to work Haw in ye new app Mis and ca Improve fousider new technologies when Too ge Yo iy fit has hech proven 19 Quickly unplemene a thorn processes, cope ‘consiered teu Section III: Add Value to the Organization by Developing Your People le 9. Grow leaders who thoroughly understand the work, live the philosophy, leaders from within, rather than buying them fom outside the organization + Do not view the leader’ job as simply accomplishing tasks and having good people skills ‘of the company’s philosophy and way of daing busines. and teach it to others. Leaders must be role models be the best teacher of your company’s + A good leader must understand the dasly work in gteat detail, s0 he or she philosophy. . " Principle 10. Develop exceptional people and ums who Follow your company’s philosophy. fy shared and lived out aver a period of + "Create song tbl cre hich company sles and Ble are wil + Train exceptional nsdn and yams 0 wok ein the corporate plflosophyroachiee exceptional rests, Work very hard to reinforce the culture continually " ance ow by selenite ples Use cross-functional teams so umprave quality and proxluctvity and Empowerment occurs when peaple use the company’s tools to improve the company In individuals how to work together as teams toward common goals. Teamwork 15 + Make an ongoing effort (0 « thing that has to be learned, Principle 11. Respect your extended network of partners and suppliers by challenging them and helping them improve. + Have respect for your partners and supplier, and treat them as an extension of your business + Challenge your outside business partners to grow and develop. It shows that you value them, Set challenging targets and assist your partners in achieving them Section IV: Continuously Solving Root Problems Drives Organizational Learning, inciple 12. Go and see for yourself to thoroughly understand the situation (genchi genbutsu). + Solve problems and improve processes by going tothe source and petsonally observing and verifying data rather than theorizing on the basis of what other people oF the computer screen telly ‘+ ‘Think and speak based on personally verified data h-level managers andl executives should go and see things for themselves, so they will have more than a superficial understanding of the situation. ic 13. Make decisions slowly by consensus, thoroughly considering all options; implement decisions rapidly (nemawashi). «Do not pick a single dection and go down that one path until you have thoroughly considered alternatives, When you have picked, move quickly and continuously down the path «+ Nemawashi isthe process of discussing problems and potential solutions with al of those affected, o collect their ideas dnd get ageeement on a path forward. This consensus process, though time-consuming, helps broaden the search for Solutions, and once a decision is made, the stage is set for rapid implementation, ng organization through relentless reflection (hansei) and continuous improvement Principle 14. Become a lear (haizen) + Once you have established a stable process, use continuous improvement tools to determine the root cause of pply effective countermeasures y This will outs amprovement process (kaizen) to eliminate i nd very cateful succession inefficiencies, a # Design processes that ‘waste is exposed, have employecs use a co + Protect the organizational knowledge base by developing stable personnel, slow promotion, nake wasted time and resources visible for alto see. Once quirealn systems. Source: Liker, 2008. The 14 Primaples ofthe Tota Way An Executive Summary ofthe Culture Behind TPS, 9. 37. Ann Arbor, MU University of Michigan. 16 TROIS hes dzcunart mthed or ne ety Prk PRS Sarma's OM EFPH Exam 2017 course at Ina nso of Management: Rap, om September 2017 to Decemtet 2007 ibit 6. Toy [wii eee | ‘to's Management Structure as dep ced by Corporate Planning — Siddharth Sachdeva 17pgp142 William Hunter Research [wii eee | Development Product Management Product Planning Safety & Health— Environmental Control Ps [Eales ence Cost Control Prompt Supply ‘on Demand Manufacturing (including inspection) Transportation, Delivery External Relations Product Design Quality Control Purchasing Product, Preparation Public Affairs Personnel and Administration ‘THOUS he docmars m adores Wr We oy Pro. PRS Sarma’ OM EFPM Exam 2017 course a rcan Insite of Management Rag, rom September 2017 ¥9 December 20 v StDdhartl Sachdevo-t 7pgp142 _____— 5 2009) —— — ws, March 2005-March 2 Exhibit >, Toyots Motor Corporation's Annual Income St arch 209° Toyata Motor Corporation - Primary Industey: Auto Ranulacuning fear End: March NYSE: Tht (ADA|Tokyo: 72020 Fiscal Year B Annual Income Statement (All dollar amounts in millions except pet share amounts) 1a 05 mac08 maros——Mar07 Mar 06 a Revenue 2110225 -263,028.2203.2187 © 9.TRLB TRAY costs of Goods Sold 1897072 215,314.2 163,167.84, 77L.G = 198-1284 cross Pratt 21,216. a77iso «400509 «3860.2 MASKS ‘Gross Profit Margin 10.10% 1ai0% 18.70% 19.50% 19.80% SORA Exense 26.055.0 24ss¢3 72.0537 1882.3 18.6624 Depreciation S Amortization —_15,368.9 yas0 nas 10,348.4 9.2679 Operating income 47387 mse 189972, 16.087. 18,522 Operating Margin 2.60% 9.30% 8.90% 9.00% Nonoperating income 19a42 BAT 22970 25713 1stlo Nonoperating Expenses sua - - - - income Before Taxes 9,760.2 253648 20,2173 1733.4 26.2983 Income Taxes 380.2 91200 76223 6.7935 61107 Net income After Taxes 5,180.0 15.2668 125950 1,039.9 «10,187.6 Continuing Operations “as. asa 3959133108798 Discontinued Operations - : - Total Operations “asa qasr4 38913 ,733 08S Total Nex Income “44913 qe7s 139513 7238.3— 108738 Net Profit Margin ~ 6.50% 6.0% 6.50% 8.30% Diluted £25 from Total Net Income (5) 29 109 87 22 65 Dividends per share ($) 2a 28 1s a ct) 6 Two24s tin decorart msenens ov ye ty Pro PRS Sarma's OM EFPM Exam 2017 cure kan iste ot Management Rap, tom Septet 201719 Oscar 2017 8. 200 2010 2006 Seprember 14 2007 March, April September 26 2008 January 31 ‘August 27 2009 April 21 August 28 September 29) November 4 November 25 December 26 2010 January 12 January 21 January 26 January 27 January 29 February 1 February 2 February 3 February 4 February 5 Siddharth Sachdeva 17pgp142 NHTSA op ‘opens an investigation into diver tep I of surging” in Camry model, yota receives reports about accelerator pedal issues in Tanda mode NHTSA states that no def SA states that no defect was found in 2006 Camty investigation. It loses probe nto 'surge” problems in Camry model “mens ' Hoyora and Lexus modes calle to secute fo cause the car to accelerate out of contro, pand NHTSA opens investigation of Tacoma truck models experiencing sudden acceler ete ga k models experiencing [NHTSA closes investigation of Ticoma tracks stating they found no evidence vo suggest vehicle defect. ™ ene “ In response to sudden acceleration repon under so mich stress right now, they have so mach on theit mit phones and IM. people are just so busy with kids, families, boy you ate driving slong and the next thing you know you are 0 Jing about 0 a Tayona spokesperson states that, “People are ‘With pagers and eel you don't remember driving because you ate A fanily of fo ga Lexus ES $50 is killed, Moments before the crash the driver called 911 to report that his accelerator was stuck 3.8 million vehicles due to the crash risk posed by the gas ter the Hor mat, NIFTSA calls for the reall of the 5.8 milion ivi NHTSA accuses Tayora of providing owners with “inaccurate and misleading information” abou its oor mat recall “Toyota recalls 4 es 0 reconfigure gas pedals and relsign floor mats due to the rick of floor mat enteapment Four people die near Dallas when their Toyota Avalon accelerates off of the road. Toyota announces that it will jasall a brake override system in addition tothe brake pedal redesign and loor mat reconfigueation. Toyota recalls 2.3 million vehicles to correcta separate problem that could cause the gas pedal to stick. “Toyota suspends sales and halts production of 8 car models due o accclerator pedal problems. jencral Motors “Toyota increases its loor mat recall to an additional 1.1 million cats. announces incentives for Toyota owners who want to swap their car fora GM model “Toyota expands its recall to models sold in Europe. “Toyota says ic has developed a fx for the new parts to dealers. US. Transportation Sectetary LaHood critcines Toyotas response tothe problems with the as pedals. “Transportation Secretary LaHood warns consumers not to drive recalled cars, then claims this was a misstatement and consumers should contact their dealers. NHTSA claims to have received more than 100 complaints about braking system problems in the Prius. “Toyota says the recalls for gas pedal-related issues could end up costing the company USS2 billion. Tayora also confirms on this date tha the recall total 8.1 million vehieles. The automaker blames a software glitch for braking problems in its 2010 Prius. The NHTSA ‘opens a formal investigation into the braking system of the Prius hybrid model Toyota president and CEO Akio Toyoda apologizes for the ca recalls ata news conference in Japan and promises to beef up quality control: “I apologize from the bottom of my heart forall ofthe concern that we have given to so many of our customers.” icking gas pedal istuc and has begun shipping the 70243 9 “Thm document ahorizd or se nti Pro PRS Sara's OM EFPM Exam 2017 course a nan Insite of Management - Raipur, rom September 2017 ¥o December 201 Siddharth Sachdeva 17pgqp142 ringing the roral nurnber Febuary 9 “Toyota wcll 437,000 hybrids worldwide over brake prob eas recalled #5 mon cia for poe she 000 Taam chs Now A lve shalt of certain 2010 models omi isa sales slow following cs plans ounpcr prucion a wo US. plane asses 0h the company's maine reall, NHTSA ours Toyo to provide docs and how a learned of the defects affecting about 6 million U-S. vei ‘ US. lawmakers, and that che Toya president Akio Toyo say he wl not apeat efre U «company wal take teps to Bx problems with its cars. The US. goves an investigation to probe posable stering ses on about 500,000 Toyo February 18 Toyota president Akio Toyoda accepts 3 "formal invitation” co appear before 2 Congtssional commute investigating unintended acceleration in Toyota cas. einal presentation, Tayors staffers say the company saved US$100 million by al defects February 13 February 16 February 17 government plans co oper xa Corolla. February 21. tan negotiating an “equipment” eecall rather than “vehicle” recall, February 22 ‘Toyota says it has received a federal grand jury subpoena for documents relating co Pius braking problems February 23 Consumer Reports drops two ofthe four Toyotas that would have made its annual list of Top Pick cars because ofa "stop sle” order February 24 “Toyota president Akio Tovoda apologizes during a prepared testimony before the US House of Representatives Commutece on Oversight and Government Reform. “I'm deeply sorry for any accident that Toyota drivers have experienced,” and pledges full cooperation as the investigation continues Apal 5 ‘The NHTSA sent a lewer to Toyota demanding that the company pay a USS16.4 million

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