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.
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.