Case Study

Toyato Organisation Structure

 Do you think Toyota’s organizational structure and norms are explicitly formalized in
rules, or do the norms seem to be more inherent in the culture of the organization?

• In my opinion, Toyota's organizational structure takes a look at the multiple aspects

while forming rules and regulations. ... The operations happen in a centralized manner
in the organization.
• Features
– Toyota has a divisional organizational structure. This structure underwent significant changes in 2013. This was seen as a
response to the safety issues and corresponding product recalls that started in 2009. In the old organizational structure,
Toyota had a strong centralized global hierarchy that was more like a spoke-and-wheel structure. The company’s
headquarters in Japan made all the major decisions. Individual business units did not communicate with each other, and all
communications had to go through the headquarters. However, this organizational structure was widely criticized for slow
response times to address safety issues. After the reorganization that was implemented in 2013, Toyota’s new organizational
structure now has the following main characteristics:
– Global hierarchy
• Toyota still maintains its global hierarchy despite its reorganization in 2013. However, in the current organizational structure, the
company has increased the decision-making power of regional heads and business unit heads.
– Geographic divisions
• Toyota’s new organizational structure has eight regional divisions (Japan, North America, Europe, East Asia and Oceania, China,
Asia and Middle East, Africa, and Latin America and Caribbean). Each regional head reports to the company’s headquarters.
– Product-based divisions
• Another feature of Toyota’s organizational structure is the set of product-based divisions. The company has four of these divisions:
(a) Lexus International, (b) Toyota No. 1 for op erations in North America, Europe and Japan, (c) Toyota No. 2 for operations
in all other regions, and (d) Unit Centre,
• These organisational structure does not affect culture of the organisation. It facilities the decision-
making process efficiently effectively.
 What are the pros and cons of Toyota’s structure?

• Pros
– It allows greater efficiency in management and well established chain of
command and decision making which reduces duplication and conflicts.
– TPS gives power to the employees on the front lines.
– Prevents other parts of the business from becoming too independent.
– Easier to co-ordinate and control from the centre – e.g. with budgets

• Cons
– it favours only effective leaders because poor leaders make poor
decisions which makes effect the whole.
– Local or junior managers are likely to much closer to customer needs.
– Lack of authority down the hierarchy may reduce manager motivation.
 What elements of business would you suggest remain the
same and what elements might need revising?

• I think that by decentralizing they are moving in the right

direction. I believe the company structure will be better
suited to handle a crisis. With individual regional CEOs the
company will be able to focus on issues in their region and
move forward accordingly.
• Link between strategy, culture, and structure.
• TPS gives power to the employees on the front lines.
• The organizational structure of Toyota may give us some
insight into the handling of this crisis and ideas for the most
effective way for Toyota to move forward.
 What are the most important elements of Toyota’s organizational
structure?

• Toyota needs to have a committed team and best

professional to make its products. Expansion strained
resources across the organization and slowed response
time.
• A system called 'TPS' in which employees have the power
to reject a product if there is a defect or reason to believe
there will be a defect.
• Toyota’s board of directors is composed of 29 Japanese
men, all of whom are Toyota insiders. Product-based
Divisions. The company has taken all the issues and
challenges related to core business processes and activities
while developing an effective and efficient Toyota
organizational structure.
 Will Toyota turn its recall into an opportunity for increased participation for its international
manufacturers? Will decentralization and increased transparency occur?

• Yes decentralised organisation structure helps the

international manufactures to increased their participation.
The primary reason behind Toyota's massive fall is the poor
performance of passenger vehicles in the U.S. Breaking down
the Japanese auto maker's performance by segment, this fact
is visible clearly. Passenger vehicle sales declined by 7.2% in
the month of February.
• Yes Toyota can follow the decentralised organisational
structure in order to increased transparency.