Understanding Business

Organizations

Toyota

Candidate name- Abdul

Rahman Fazmi
Class- 12 B
Task 1 – 20 Marks

a) Multinational Companies (MNCs) tend to have a centralized organizational structure where

major strategic decisions are taken at the headquarters in the home country. Discuss the
advantages and disadvantages of this type of structure, giving at least THREE (3) of each.

A centralized organizational structure, where major strategic decisions are taken at the
headquarters in the home country, offers both advantages and disadvantages for multinational
companies (MNCs) like Toyota. Here are three advantages and three disadvantages of this type
of structure:

Advantages of Centralized Organizational Structure:

Clear Decision-Making: In a centralized structure, top-level managers retain decision-

making authority. This clarity ensures that strategic decisions align with the company’s
overall vision. Centralized decision-making can lead to faster and more efficient
decisions, as fewer individuals are involved in the process. This is particularly beneficial
for strategic decisions that require a cohesive approach. For Toyota, this can result in
quicker implementation of company-wide initiatives and innovations.

Consistency and Coordination: Centralization minimizes inconsistencies and conflicts

between different managerial levels. Decisions made at the top are more coordinated
and aligned, reducing the risk of conflicting strategies. A centralized structure ensures
that all subsidiaries and operations align with the overall company strategy and policies
set by headquarters. This uniformity is critical for maintaining the brand's identity and
standards globally. For Toyota, this means consistent quality and customer service across
all markets.

Economies of scale: Centralizing decisions can help MNCs achieve economies of scale,
particularly in areas like marketing, procurement, and production. Toyota can leverage
its global presence to negotiate better deals with suppliers and streamline operations,
 reducing costs and increasing profitability. Centralized decision-making allows better
resource allocation. The headquarters can allocate resources (such as capital,
technology, and talent) strategically across different subsidiaries or divisions.

Disadvantages of Centralized Organizational Structure:

Limited Autonomy: Local managers and employees might feel disempowered and less
motivated to innovate if they perceive that all significant decisions are made centrally.
This can stifle creativity and reduce the sense of ownership among local teams. For
Toyota, this could limit innovative solutions that might emerge from diverse markets and
cultural contexts. Lower-level managers have little autonomy in decision-making. This
lack of empowerment can hinder creativity and responsiveness to local market
conditions.

Slow Response Time: A centralized structure can make it difficult for the company to
respond quickly and effectively to local market conditions and customer needs. For
Toyota, this might result in missed opportunities or delayed responses to market
changes in different regions, potentially reducing competitiveness. Centralized decision-
making can lead to delays in responding to market changes or emerging opportunities.
Information must flow through multiple layers, slowing down the decision process.

Risk of Disconnect: Centralizing all strategic decisions at headquarters can lead to an

overwhelming workload for the central management team. This can slow down the
decision-making process and lead to bottlenecks. For Toyota, this could mean delays in
addressing critical issues or implementing new strategies. The headquarters may not
fully understand local nuances or cultural differences in various markets. This lack of
awareness can result in decisions that are disconnected from ground realities
While a centralized organizational structure can offer significant advantages in terms of
consistency, efficiency, and economies of scale, it also poses challenges related to local
responsiveness, managerial workload, and innovation. For Toyota, balancing central control with
some degree of local autonomy might be crucial to harnessing the benefits while mitigating the
downsides.

b) Examine whether your chosen organization operates a functional or divisional structure

and the extent to which this contributes to organizational efficiency. If there is evidence of the
contribution of a matrix structure, ensure that you include this in your discussion.

Toyota’s organizational structure appears to be a mix of both functional and divisional elements.
The hierarchy and clear lines of authority suggest a functional structure, while the
decentralization and role-based organization hint at divisional characteristics. This hybrid
approach allows Toyota to leverage the strengths of both structures, contributing to its
organizational efficiency by facilitating specialization within functions and responsiveness within
divisions.

Toyota Motor Corporation has a hierarchical organizational structure with some elements of
decentralization. The hierarchy is characterized by clear lines of authority and decision-making,
with the President at the top setting the strategic direction. Recent changes to Toyota’s
executive structure and senior management positions, effective from January 1, 2024, indicate a
restructuring aimed at creating a more flexible role-based organization to enhance business
expansion plans. CORPORATION, T.M. (n.d.).

There is no explicit mention of a matrix structure in the search results, but the emphasis on
flexibility and role-based organization could suggest elements of a matrix structure are present
or being introduced. This restructuring could contribute to organizational efficiency by allowing
Toyota to be more responsive to market demands and streamline decision-making processes.
Toyota operates with a divisional organizational structure. (www.toyotabharat.com, n.d.). This
means that their business operations are centered around market, product, and geographic
groups. Here is how this structure contributes to organizational efficiency:

Clear Focus: Divisional structure allows Toyota to focus on specific markets, products, or
regions, leading to better understanding and responsiveness to customer needs.

Efficient Decision-Making: Each division can make decisions independently, which can
lead to quicker responses to market changes and opportunities.

Specialization: Divisions can specialize in their respective areas, leading to expertise and
efficiency in operations.

Accountability: Each division has its own set of responsibilities, promoting accountability
and performance monitoring.

While there is no specific mention of a matrix structure, Toyota's hierarchical structure is

complemented by a culture of decentralization, employee empowerment, and cross-functional
collaboration. This collaborative approach likely enhances communication and coordination
across different divisions, further contributing to organizational efficiency.
Task 2 – 20 Marks

a) Discuss the extent to which your chosen organization’s employer brand increases its ability
to recruit talented employees. You might discuss the perceptions of working for a large
organization contrasted with the reality, or the way in which these organizations present
themselves as a good place to work. Ensure that you draw on examples from their
recruitment advertising, website, social media channels as well and websites such as
www.glassdoor.com.

Toyota's strong employer brand plays a crucial role in recruiting talented employees. This brand
is shaped by the company's reputation, culture, values, and recruitment strategies, making it
appear as an attractive place to work. To assess Toyota’s employer brand, you can examine their
recruitment advertising on their website and social media, where they post job openings,
employee stories, and company culture highlights. Employee reviews on platforms like
Glassdoor offer additional insights into the actual employee experience. (US | Glassdoor for
Employers, n.d.)

Many candidates perceive large organizations like Toyota as offering greater job security and
stability, which can be a significant draw for those seeking long-term career opportunities.
Toyota provides a stable employment environment, bolstered by its strong market position and
global presence. The company also offers extensive training programs, leadership development
initiatives, and numerous opportunities for career progression through the Toyota Institute.

Despite some associations with corporate bureaucracy, Toyota's divisional and matrix structures
help mitigate these issues by enabling localized and faster decision-making processes. Toyota
employs several strategies to enhance its employer brand, including innovative recruitment
campaigns, a comprehensive career website, active social media engagement, and
responsiveness to employee reviews.

Toyota’s "Careers" website showcases job opportunities, company culture, benefits, and
employee testimonials, highlighting diverse career paths and the company’s core values like
respect for people, continuous improvement, and sustainability. Social media channels like
LinkedIn, Twitter, and Facebook are used to engage with potential candidates by sharing insights
into the company culture, employee stories, and project highlights. Regular posts on employee
achievements, diversity initiatives, and community involvement reinforce Toyota’s commitment
to a supportive and inclusive work environment.

Glassdoor reviews generally praise Toyota's strong culture, supportive environment, and growth
opportunities, though some mention challenges like high workload and bureaucracy. Toyota’s
proactive response to reviews demonstrates its dedication to addressing employee concerns
and improving the workplace.

In summary, Toyota's employer brand significantly enhances its recruitment efforts by

emphasizing stability, career development, innovation, and an inclusive culture. Through
strategic use of recruitment advertising, social media, and employee review platforms, Toyota
effectively presents itself as a desirable place to work, attracting skilled candidates aligned with
its values and vision.

b) Identify at least THREE (3) components of the organization’s culture and evaluate how
these could help or hinder cultural change.

Toyota’s organizational culture is deeply rooted in specific values, beliefs, and taken-for-granted
assumptions that guide its operations and employee behavior. These cultural elements
significantly influence how the company adapts to and implements cultural change.

Values are the core principles and standards that guide behavior within an organization. At
Toyota, values like continuous improvement (Kaizen), respect for people, and teamwork are
central.
Continuous Improvement (Kaizen): This value emphasizes the importance of constantly seeking
ways to improve processes, products, and services. It instills a mindset geared towards
innovation and efficiency. As a value, Kaizen can facilitate cultural change by encouraging
employees to embrace new methods and improvements. However, it may also hinder rapid,
large-scale transformations as the emphasis tends to be on small, incremental changes rather
than sweeping reforms.

Respect for People: This value highlights the importance of valuing employees, fostering
teamwork, and creating a supportive and inclusive environment. It can greatly facilitate cultural
change by ensuring that employees feel respected and valued, which can increase their
willingness to engage with and support new initiatives. On the other hand, it might also slow
down decision-making processes since maintaining respect and harmony often requires
extensive consultation and consensus-building.

Beliefs are the shared convictions and understandings about how the world works within an
organization. At Toyota, several key beliefs shape its operations:

Belief in Lean Manufacturing: Toyota firmly believes in the principles of lean manufacturing,
which focus on reducing waste and maximizing efficiency. This belief is embedded in the Toyota
Production System (TPS). While this belief can drive efficient and high-quality production
processes, it might also create resistance to changes that are perceived to disrupt established
lean practices.

Belief in Employee Empowerment: Toyota believes that empowering employees at all levels is
crucial for organizational success. This belief supports a culture where employees are
encouraged to take initiative and contribute ideas for improvement. It can facilitate cultural
change by ensuring that employees are engaged and invested in the organization’s success.

However, it can also lead to challenges if employees are so empowered that they resist top-
down changes or innovations that they do not perceive as beneficial.
Taken-for-granted assumptions are the unconscious, underlying beliefs that influence behavior
within an organization. These are often deeply embedded and can be the most challenging to
change.

Assumption of Stability and Standardization: Within Toyota, there is an implicit assumption

that stability and standardization are crucial for maintaining quality and efficiency. This
assumption underpins many of Toyota’s operational practices and can create significant
resistance to change. Employees might unconsciously resist changes that they perceive as
threatening the stability and standardization that have historically contributed to Toyota’s
success.

Assumption of Long-Term Perspective: Another taken-for-granted assumption at Toyota is the

emphasis on long-term thinking. This perspective influences decision-making processes,
prioritizing sustainable success over short-term gains. While this assumption can facilitate
sustainable and thoughtful cultural changes, it might also slow down the adoption of necessary
short-term changes that could be crucial in rapidly changing market conditions.

Toyota's culture, defined by its values of continuous improvement and respect for people,
beliefs in lean manufacturing and employee empowerment, and assumptions of stability and
long-term thinking, significantly influences its ability to handle cultural change. These elements
can both support and impede change. The key for Toyota is to balance these deeply ingrained
cultural aspects while fostering adaptability and responsiveness to new opportunities and
challenges. Understanding and managing these cultural components is crucial for successfully
implementing cultural changes within the organization.
Task 3 – 20 Marks

a) Analyze at least FIVE (5) components of the organization’s culture in relation to the way in
which it communicates internally and externally with staff, shareholders, and customers

Communication Channels: The channels that are chosen to communicate with internal and
external stakeholders are influenced by the culture of the firm. A more collaborative culture
might promote open communication through unofficial channels like chat platforms or social
media, but a hierarchical culture might rely on top-down channels like memos and meetings.

Communication Style: The culture of the organization influences the way people communicate
with each other. A culture that places a high priority on assertiveness and directness, for
example, can have a direct and concise communication style. A culture that prioritizes harmony
and consensus, on the other hand, can have a more polite and inclusive communication style.

Language and Symbols: How language and symbols are used in communication depends on the
culture of the business. The group may have its own terminologies, acronyms, or words that
express its identity or ideals. Symbols can also transmit messages about the culture and brand
of the company, such as logos or visual representations.

Transparency and Trust: The degree of communication transparency and trust is determined by
the culture of the organization. Transparency-focused cultures promote candid and open
communication as well as unrestricted information exchange with stakeholders. Reliable and
regular communication is the foundation of trust and fosters strong connections with
customers, shareholders, and employees.

Feedback and Listening: The significance of feedback and listening in communication is

influenced by the culture of the organization. A culture that prioritizes learning and ongoing
development welcomes input from all parties involved and pays attention to different points of
view. This increases the efficacy of communication by fostering a culture of engagement and
collaboration.

We can learn more about an organization's internal and external communications with its
employees, shareholders, and clients by examining these aspects of organizational culture.
Comprehending these factors can aid in pinpointing opportunities for enhancement and
coordinating communication strategies with the objectives and ethos of the company.

b) Critically analyze how your chosen organization communicates its brand, and to what
extent this may impact its financial performance. You should compare and contrast its
approach and performance with a different MNC in the same sector and use Porter's Five
Forces model to structure your analysis.

Firstly, what is the porters 5 forces analysis? It is a strategic management tool that helps
organizations assess the competitive environment of their industry. The model identifies and
analyzes 5 competitive forces that shape every industry and helps determine an industry’s
weaknesses and strengths. The 5 forces are (Ferguson, 2015): -

Threat of new entrants: This Force refers to the ease with which new competitors can enter the
market. High barriers to entry, such as high capital requirements or economies of scale, make it
difficult for new competitors to enter the market. The automotive industry has high barriers to
enter, due to the high capital requirements and economies of scale. Therefore, the threat of
new entrants is low. This means that there is upward pressure on profitability.

Bargaining power of suppliers: This force refers to the bargaining power of buyers over the
price and quality of inputs. Suppliers with strong bargaining power can charge higher prices or
reduce the quality of inputs. The bargaining power of suppliers is weak because Toyota has
many suppliers and can easily switch between them. Positive factor for Toyotas profitability.

Bargaining power of buyers: This refers to the bargaining power of buyers over the price and
quality of outputs. Buyers with strong bargaining power can demand lower prices or higher
quality outputs. The bargaining power of buyers is strong because there are many competitors
in the automotive industry, and buyers have many options to choose from. Therefore, while the
strong bargaining power of buyers is a negative factor Toyotas profitability, it is not the only
factor that determines its profitability.

Threats from substitute products: This force refers to the availability of substitute products or
services that can replace the industry’s products or services. The availability of substitutes can
limit the industry’s profitability. The threat of substitutes is moderate because there are
alternative modes of transportation such as public transport, bicycle, and walking. However,
these alternatives are not always practical or convenient. There aren’t many strong substitutes
that can replace auto mobiles. Meaning that there is upward pressure on profitability.

Competitive rivalry: With consideration to the last of the porters five forces. This force refers to
the intensity of competition among existing competitors in the industry. High levels of
competition can limit the industry’s profitability. There is high competition in the automobile
industry. The intense rivalry means that there is downwards pressure on profitability. There are
multiple firms in the automobile industry who constantly try to overtake each other, and they
compete on price, quality, innovation, and brand image. However, Toyota has a strong brand
image and reputation for quality that gives it a competitive advantage.

Overall, the automotive industry is highly competitive, but Toyota has been able to maintain its
profitability due to its strong brand image and reputation for quality. However, Toyota must
continue to innovate and differentiate itself from its competitors to maintain its market share
and profitability.

When comparing Toyota and Honda in the automotive sector, Toyota's brand communication
strategy focuses on reliability, quality, and innovation through a mix of traditional and digital
advertising, customer experience, and sponsorships. This approach has led to increased brand
loyalty and trust, driving revenue growth and market share.

In contrast, Honda's innovative marketing strategies center on engaging diverse stakeholders

through a communication cycle and managing the marketing mix to offer high-quality products.
By focusing on demographic and psychographic factors, Honda adapts its communication
strategies based on stakeholder dialogues, contributing to revenue growth and market
expansion.

Toyota's emphasis on reliability and customer experience differs from Honda's focus on
innovation and stakeholder engagement, impacting their financial performance in terms of
brand loyalty, revenue growth, and market share within the automotive industry.
Task 4 – 20 Marks

a) Discuss THREE (3) advantages and THREE (3) disadvantages of the reliance of
shareholders on funding within MNCs.

One major advantage of shareholders' funding for multinational corporations (MNCs) like
Toyota is access to large capital pools. This capital supports substantial investments, research
and development, and market expansion. For instance, Toyota can invest in technologies such as
electric and hybrid vehicles, maintaining its competitive edge in the automotive industry.

Another benefit is the distribution of financial risk among a broad base of investors. By relying
on shareholder funding, Toyota can undertake significant projects, like developing autonomous
driving technology, without bearing the entire financial burden alone.

Additionally, having a strong base of shareholders enhances Toyota’s credibility and market
confidence. This can improve the company’s credit rating and reduce borrowing costs, allowing
for more cost-effective financing of operations and projects.

However, reliance on shareholder funding also presents several disadvantages. One significant
drawback is the pressure for short-term results. Shareholders often expect quick returns, which
can compel Toyota to prioritize short-term performance over long-term strategic goals,
potentially stifling innovation and growth.

Another disadvantage is the dilution of ownership. Issuing new shares to raise capital can
reduce the ownership stakes of existing shareholders, leading to dissatisfaction and reduced
influence over company decisions.

Moreover, significant shareholder funding often obligates companies to pay dividends, reducing
the amount of capital available for reinvestment. For Toyota, this can limit resources for
innovation, expanding production capabilities, or pursuing other growth initiatives.

In conclusion, while shareholder funding provides Toyota with essential capital, risk-sharing
benefits, and enhanced market credibility, it also brings challenges such as pressure for short-
term results, dilution of ownership, and dividend obligations. Balancing these advantages and
disadvantages is critical for Toyota to maintain its competitive position and achieve sustainable
growth.

b) Examine the organization’s approach to information security, identifying at least FIVE (5)
ways that it is currently attempting or should implement, to keep its staff and customers’
details safe.

Toyota employs a comprehensive approach to information security to protect its staff and
customers' details. Data encryption is a key strategy, making sensitive information unreadable to
unauthorized users. Toyota likely uses advanced encryption standards (AES) to protect personal
and financial data during transmission and storage.

Access control is another crucial aspect. Toyota probably implements role-based access control
(RBAC) to ensure employees can only access relevant information. Regular updates to access
control policies and the incorporation of multi-factor authentication (MFA) further secure access
to sensitive systems.

Regular security audits and vulnerability assessments are conducted to identify and address
potential weaknesses. Increasing the frequency of these audits and using automated tools and
third-party expertise helps Toyota swiftly mitigate vulnerabilities.

Employee training and awareness programs are essential for educating employees about
information security best practices, such as recognizing phishing attempts and proper data
handling. Regular updates and simulated phishing exercises reinforce learning and help
employees adapt to evolving threats.

Toyota also has a well-defined incident response plan to quickly address security breaches and
minimize damage. Regular testing and updating of this plan ensure its effectiveness, while drills
and simulations prepare the response team for real-world scenarios.

Data minimization and anonymization strategies are employed to limit the amount of personal
data collected and stored, reducing the risk of exposure. Regularly reviewing data collection
practices to ensure compliance with privacy regulations and minimizing data retention further
protect sensitive information.

In summary, Toyota's approach to information security includes data encryption, access control,
regular audits, employee training, incident response planning, and data minimization. These
strategies help Toyota effectively protect its staff and customers' details while continuously
improving its security framework.
Reference

https://panmore.com/toyota-five-forces-analysis-porters-model

https://www.glassdoor.com/employers/resources/employer-branding-101-why-how-and-proven-roi/.

https://global.toyota/en/newsroom/corporate/40177762.html.

https://www.toyotabharat.com/news/2024/tkm-announces-organizational-change.html.