The Presidentof Toyota–Akio Toyoda–yesterday suggested that the company’s current quality problems stem from an excessive focus on gaining market share and increasing profits (WSJ). This is ironical, given that increasing market share and reducing costs (thereby increasing profits) has always been a goal of Toyota. In fact, this has been a dominant strategy of Japan, Inc. for quite some time. A brief review of history will be instructive.
Having been devastated by the effects of WWII, Japan Inc. embarked upon a mission to grow market share globally. As a result, in the 1950′s inexpensive products–for example, “cheap” transistor radios– flooded US retail stores. Japan, Inc.’s strategy was to grow market share by producing low cost products. However, due to the inferior quality of products that were being produced at the time, Japan, Inc.’s expansionist aspirations hit a brick wall. The “cheap” transistor radios became the butt of comedians’ jokes.
So, the country in general—and Toyota in particular—regrouped. Producing products right the first time actually lowers costs, in effect, better quality results in lower costs. Quality, then, became the means to lower costs, which in turn results in greater market share.
A Lexus 2-seater Sports Car from Toyota
The Japanese Scientists and Engineers (JUCE) disseminated twenty tools of quality in the 1960′s and 1970’s. These tools became part of a complete philosophy of management known as Total Quality Management (TQM). TQM is Japan’s significant contribution to the philosophy of management.
An executive at Toyota, Taiichi Ohno, further refined the TQM philosophy into The Toyota Production System. Using this system, Toyota produced automobiles that were second-to-none in terms of quality and cost. It is what made brand-Toyota synonymous with quality. It is the means by which Toyota surpassed GM in market share in 2008.
Violating the tenets of TQM and the Toyota Production System caused Toyota’s quality problems. Ako Toyoda’s comments yesterday about the evils of gaining market share made for good public relations; but they did little in furthering our understanding of the real reasons that led to the Fall of the Toyota brand.
I’ve owned both a Toyota Corolla and a Camry in the past. Both were very reliable. It’s a shame to think that the Toyota cars will no longer be associated with quality and reliability. What would the founder of Toyota think?
This is just a pothole, not a sinkhole. Toyota will be fine because they continue to make good cars. Toyota has taught the American manufacturers and the European manufacturers that quality is good business.
The hype has as much to do with the UAW stake in GM as it does with Toyota.
Thanks for your comments. You could be right. It is possible that Toyota will recover from its current public relations nightmare, but only if its management re-embraces the TQM philosophy which begins with the notion that the “voice of the customer” should be heard. Instead, Toyota has stonewalled the NHTSA for 6 years even though the agency presented data that defective Toyota cars are causing accidents, some of which are leading to fatalities. To date, according to the Los Angeles Times, “at least 56 people have died in U.S. traffic accidents in which sudden unintended acceleration of Toyota Motor Corp. vehicles has been alleged..” (Los Angeles Times, February 28, 2010)
Contrast Toyota’s obstructionist tactics with the reaction of Perrier in 1990 when several bottles of their water were discovered in North Carolina with benzene—a carcinogenic cleaning agent—in them. Apparently, when the water was produced in France, someone failed to flush out the production equipment, so that benzene got into bottles of Perrier. Unlike Toyota, which stonewalled the NHTSA, Perrier offered to recall their entire retail inventory even though the FDA indicated that it was unnecessary.Perier recalled 72 million bottles of water, and ended up losing market share. Perrier clearly put customer safety–and water quality–ahead of profits.
I agree that politics has already entered into the process. It’s unfortunate, but it’s partly due to Toyota’s response. When initially confronted with the sudden acceleration problems, Akio Toyoda, the CEO grandson of the founder of the company, defensively stated: “Believe me, Toyota’s car is safety. But we will try to make our product better.” The Wall Street Journal characterized this response as being “weird.” Unless Toyota puts quality and safety ahead of profits, its brand will remain tarnished.
Perhaps an even better contrast to Toyota is how Tylenol managed the poisoned medications problem years ago when the problem had not even been caused by them. This stands in marked contrast to how Toyota has managed the quality issues and public perception.
Good point!