DBA Strategic Management Assignment:

10 Questions total 100 Marks

Section 1 Case study: Toyota Strategy (30 marks)

Introduction

Toyota from the early 1960s alongside their supplier network consolidated the way in which they were able to refine their production system through the introduction of specific quality improvement methodologies. the Toyota Production System (TPS). The TPS changed the way the automotive industry produced vehicles. the industry had moved from a craft model to mass production and with TPS there was a move from the principles of mass to lean production. The TPS change in focus reduced the time required to produce a unit and increased the control over quality at each stage. This change of focus was complemented by empowering the employees to make certain decisions as well building up strategic partnerships with suppliers

These specific methodologies paved the way for the development of a total quality system that provided the foundation for the Six Sigma methodology. Additionally, the clear correlation between quality, customer satisfaction and profit led Toyota, over time, to make quality a key business driver and therefore an integral part of their strategy, their organizational design and their production system.

Nonetheless, from September 2009, Toyota began to recall millions of vehicles over an extended period due to a series of issues. These recalls began in the US after a fatal accident caused by a design flaw in a Toyota vehicle which subsequently received widespread negative media coverage. As a result, the reputation of Toyota vehicles, as the best in class in terms of quality, was negatively affected with public perception showing a drop from first to 20^th out of 28 brands in the space of six months after the fatal crash

Toyota Fourteen Business Principles (BPTs)

It is important to understand the fourteen Business Principles of Toyota (BPTs) .The fourteen BPTs are 1) adopt a long-term philosophy, 2) have a continuous process flow, 3) create a system that pulls work to avoid too much inventory, 4) create an environment where the workload is manageable and consistent (Heijunka), 5) implement a quality first system, 6) standardize tasks, 7) make sure all controls are visible, 8) only use tried and tested systems and technology, 9) invest in your people to grow leaders, 10) develop those people into exceptional leaders, 11) respect partners and help them to grow, 12) experience situations to understand them (Genchi Genbutsu), 13) foster a culture of calculated and negotiated decision-making with fast implementation, and finally 14) learn as an organization through reflection (Hansei) and continuous improvement (Kaizen).

Toyota growth strategy

The aggressive growth strategy adopted by Toyota from 1995 up until the crisis in 2009 was not in line with several of the 14 BPTs. The growth strategy in terms of capturing market share was successful insomuch that in the year before the recall crisis, Toyota had captured 13% of the market share but at a cost.

Despite the impressive growth achieved with this strategy, there was not a comparable increase in Toyotas capacity to deliver the increased volumes to the level of quality that was expected BPTs. The Toyota Board made a conscious decision to focus on profit without considering all of the reputational risks that this approach could cause the brand i.e. customer dissatisfaction, changes in customer perceptions, loss of loyal customers, etc. in the short and long-term.

Nevertheless, attempts were made by Toyota to address the capacity issue by hiring additional staff, contracting engineers as well as contracting the services of new non-Japanese suppliers to work at the increased number of manufacturing facilities. Further complicating this panorama, was the way that suppliers were onboarded in terms of speed during this time of expansion. Nevertheless, during this period of rapid unprecedented growth, suppliers were chosen without the necessary lead-in time to evaluate their understanding and coping with 14 BPT while the key strategic decisions were still being made at head office in Japan without a full appraisal of the situation.

The effect of product complexity

The automotive industry is a highly consumer driven and competitive market which is constantly evolving and becoming more and more complex in terms of design, aerodynamics, engine design, fuel efficiency, electronics, etc. Under normal circumstances without market pressures, the process within Toyota from design to car-on-the-road was a smooth, tried, tested and efficient process that had quality at its heart. Nonetheless, the added complexity of the cars designs coupled with the aggressive growth strategy add more pressure and the process from design to sale was compressed to 20 months in order to meet the demands of the market.

References:

Andrews, A.P., Simon, J., Tian, F. and Zhao, J. (2011) The Toyota crisis: an economic, operational and strategic analysis of the massive recall, Management Research Review, 34 (10), pp. 1064-1077.

Section 1 Questions (30 marks)

Discuss what growth strategy does Toyota appear to be using? What corresponding advantage and disadvantages do you think Toyota has? (10 marks)

How might a SWOT analysis be useful to Toyota? (10 marks)

Visit the Toyota website https://www.toyota.com. What information could you get about the Corporate strategic direction? (10 marks)

Question 2: Essay questions (40 marks)

In the central role of strategic planning, only a handful of companies standouts such as Procter & Gamble, Nike, Disney, and McDonald's. From your perspective, critically discuss why they stand out (their competitive advantages)? (10 marks)

Discuss by using example how the remote environment can affect the performance of a firm. (10 marks)

Explain by using examples why innovation is becoming increasingly important in today's business world. (10 marks)

UBER is a transportation company that specializes in running transportation through application. How UBER creates its sustainable competitive advantage to stand apart from its competitors? (10 marks)

Section 3: Mini scenario (30 Marks)

In recent years, the airline industry becomes increasingly competitive. Since being deregulated during the 1970s in the United States, long established airlines such as Pan American and Eastern have gone out of business as new upstarts like Midwest Express and Southwest have successfully entered the market. It appeared that almost anyone could buy a few used planes to serve the smaller cities that the larger airlines no longer wanted to serve. These low-cost small-capacity commuter planes were able to make healthy profits in these markets where it was too expensive to land large jets. Rail and bus transportation either did not exist or was undesirable in many locations. Eventually the low-cost local commuter airlines expanded services to major cities and grabbed market share from the majors by offering cheaper fares with no frills services. In order to be competitive with these lower cost upstarts, United Airlines and Northwest Airlines offered stock in the company and seats on the Board of Directors to their unionized employees in exchange for wages and benefits reductions. Delta and American Airlines, among other major carriers, reduced their costs by instituting a cap on travel agent commissions. Travel agencies were livid at this cut in their livelihood, but they needed the airlines business in order to offer customers a total travel package.

Globally it seemed as though every nation had to have its own airline for national prestige. These state-owned airlines were expensive, but the governments subsidized them with money and supporting regulations. For example, a foreign airline was normally allowed to fly only into one of a countrys airports, forcing travelers to switch to the national airline to go to other cities. During the 1990s and 2000s, many countries began privatizing their national airlines as governments tried to improve their budgets, to be viable in an alliance and even purchase an airline in another country or region. For example, the Dutch KLM Airline acquired half interest in the U.S Northwest Airlines in order to obtain not only U.S destinations, but also Northwests Asian travel routes, thus making it one of the few global airlines.

Costs were still relatively high of the worlds major airlines because of the high cost of new airlines, just a one new jet plane costs anywhere from $50 million to $200million and more. By 2011, only two airplane manufacturers provided almost all of the large commercial airliners: Boeing and Airbus. Major airlines were forced to purchase new planes because they were more fuel efficient, safer, and easier to maintain. Airlines that choose to stay with an older fleet of planes had to deal with higher fuel and maintenance costs, factors that often made it cheaper to buy new planes.

Company X (Foreign large airline company) is planning to launch a new market in USA, for doing so, CEO assign an urgent task to your department, using Porters approach to industry analysis answer the following questions:

According to the above information, evaluate the threat of rivalry in the Airline industry, is it high, low, or moderate and why? (10 marks)

Analyze the threat of suppliers in the Airline industry, is it high, low or moderate and why? (10 marks)

If Company X were to open its own business in the small cities in USA, discuss which type of strategy will be adopted by the company and the reasons for choosing this strategy? (10 marks)

Wish you all the best of success