Mazda Case Study

Entry: The situation in the world autoindustry under the pressure of the last economic crisis was not quite easy: banks reprimanded the issuance of loans for the purchase of cars, sales liabilities began to fall sharply, and the car giants talked about bankruptcy. In that circumstances Mazda had to avoid staff as well as to reorient to internal market. At the same time company faced additional wikliks, such as: the tightening of the environment norms and the need of the fuel consumption reduction; the shortage in financial resources; increase of quantity of hybrid and electric cars in the market of Japan because of stimulating tax policy; reduction of the Ford investment in the capital of Mazda; reduction of internal demand after the earthquake; increase in the price of the national currency yen.

The choice: The company faced a difficult dilemma. Schematically, Mazda's dilemma at that time can be represented as follows.

There is a goal: the company should still be loved and trusted in Japan. There are two prerequisites for this: to continue to produce good vehicles in their own style and to maintain employment in the region. To implement the first condition, it is necessary to invest in development, focus on innovation and technology, strive to provide the best technology in the world. At the same time, there are risks: increased development costs; lack of confidence that customers will appreciate the update; the company's development team will be exhausted. To implementation of the second condition requires a focus on reducing costs and staff patience, even with lower wages. Risks: it will not be possible to create a company that will be able to adapt to exchange rate fluctuations; staff motivation will decrease; innovation will be lost.

How do companies or people usually find a way out of a situation in the face of such a dilemma? Most of them are trying to find a compromise, and some choose one of the polar options or adopt a strategy to "wait out the storm" in the same place.

But what would had happen if Mazda didn't change anything in that situation? They would not be able to maintain employment at the required level. Its development resource would reach the level of depletion, which could lead to a loss of competitiveness. They would not continue to make cars in the style of Mazda. And at the end, all this would lead to a loss of customers.

Simplification: To find a way out of this situation, top management turned to the theory of constraints (TOC). Using "mental processes" (a set of tools based on the rules of logical construction and analysis of causation), Mazda designers from the standpoint of the motorist explored the advantages and disadvantages of a hybrid engine and concluded that for the owner a hybrid car is a source of constant conflict. On the one hand, low fuel consumption and environmentally friendly car, and on the other - high cost and compromise in driving pleasure. Mazda engineers saw this conflict as a chance for a technological breakthrough. They wanted to create a car with low fuel consumption, environmentally friendly, yet affordable, which gives the pleasure of driving. And everything had to be done very quickly (because competitors do not sleep!) - twice as fast as they did before.

First of all, it was decided to improve the internal combustion engine. But when the focus on technological breakthrough was chosen, the company faced serious limitations in its operating processes. While its competitors had dozens of technology-specific development teams, there were only 30 people in Mazda's development department. The second serious limitation: no one thought about the future, the product development team was very busy with individual projects that do not have a long-term strategy. Therefore, a technological breakthrough was impossible without operational changes in the company.

Because complex, time-consuming and expensive technological research was impossible, the team began to think differently and went downhill. Yes, fuel economy is nothing else but the elimination of four factors of losses: wear, friction, losses due to cooling and in the pump system. Their elimination is achieved by introducing seven control factors: compression ratio, heat capacity ratio, combustion period, combustion time, heat transfer, pressure difference, mechanical friction. Thus, the movement to the ideal is a focus on the main thing, or rather, the definition of what not to do.

Once team members decided what they should strive for (control factors and eliminate the causes of losses), they no longer had any doubts about whether they would be able to make a technological breakthrough with a small staff.

TOC-CCPM (Critical Chain Project Management) is a constraint theory approach to project management by the "critical chain" method. This name was chosen to emphasize the difference between the TOC approach and the traditional "critical path" method. The TOC solution focuses on the timely implementation of the entire project. It is holistic, because it considers the project as a whole, not each individual task in isolation; logical, because it is possible to provide a conceptual basis for the solution, using the "mental processes" TOC; mutually beneficial (win-win), as it takes into account and supports the important needs of key production processes.

The uniqueness of the "critical chain" method is how uncertainty is viewed and managed. While the "critical path" method tries to work with uncertainty by estimating the duration of each task and fixing this duration, planning and monitoring the implementation of projects as if everything in the future is certain. In contrast, the "critical chain" method recognizes the impossibility of accurately predicting the duration of a particular task and provides a mechanism for planning and monitoring the implementation of the project plan in an environment of high uncertainty.

The Mazda team became acquainted with the SSRM approach in mid-2007, but then only partially tried to implement it. In 2009, the "critical chain" method was applied to short-term development projects and successfully completed within a year (instead of two years). This made it clear that this approach works well. In mid-2010, SSRM was applied to all the company's projects. Its implementation did not take place according to the directive scheme (from top to bottom), but thanks to volunteers from among middle managers: up to 150 people gathered on a voluntary basis at the first TOC seminars. TOC-CCPM has now become the official approach to project management throughout the company.

Results: The results of the introduction of TOC-SSRM in the production process of Mazda are:

the duration of innovation in the production process has halved;

increased productivity and development potential of the company's employees (38% faster they began to develop new models);

improved internal communications between departments;

achieved focus on the key task, there is a clear understanding of the steps to address it, which deprived the project teams of spraying;

the general acceleration of operational processes allowed to make decisions faster;

the motivation of the company's employees has changed - from "need to do" to "want to do".

Using a new approach to project management, the latest generations of Mazda 2, 3, 6, as well as the CX-5 crossover have been created. These cars have received more than 70 different awards. In 2012, the CX-5 sold the most in Japan. Mazda diesel last year in the country was sold three times more than all other diesel models combined. And most importantly: after four years of losses in 2013 the company received a good net profit.

Question:

Analyze the functional level of Mazda using:

- Porter's Theory of Configuration / Coordination

- Prahalad's and Doze Integration / Responsibility Theory

- Bartlett's and Goshal's Theory of Globalization / Localization.