Organizational Structure of Toyota - Term Paper Example

? Organizational Structure Organizational Structure Introduction Organizational structure is a technical term that encompasses activities such as task allocation, coordination, and management that are directed toward the accomplishment of long term organizational objectives. Scott defines organizational structure as “the set of features that arises as a result of the efforts within the organization to differentiate the labor; and coordinate and control the work” (as cited in Johnson, 1995, p.11). Evidently, organizational structure can greatly influence the way an organization operates and its market success. Therefore, top managements give particular importance to their organizational structures while planning and implementing business strategies. This paper will analyze the organizational structure of Toyota Motor Corporation (TMC) with specific attention given to its organizational functions and organizational design. Toyota: Organizational Structure Toyota has a unique organizational structure that has assisted the company to dominate the automobile industry throughout its corporate life. As Borowski (2010) points out, the General Meeting of Shareholders is the governing body of Toyota and the shareholders have a voting right in the General Meeting if they hold a minimum amount of shares. Toyota’s executive body is its Board of directors consisting of 26 members. The company’s Board of Directors comprises of the chairman, the vice chairman, the president, 8 executive vice presidents, 13 senior managing directors, an honorary chairman, and a senior advisor. In addition, there are four committees that belong to the director board, including the Labor-Management Council, the Corporate Philanthropy Committee, the Stock Option Committee, and the Toyota Environmental Committee. The Toyota headquarters manages and coordinates 229 divisions (pp.3-4). Market analysts indicate that Toyota’s organizational structure greatly assists the company to facilitate effective strategic implementation. Referring to the views of Moore (2011), long term-thinking is central to the company’s organizational philosophy. The company management promotes the long-term thinking sometimes even at the expense of short-term financial gains. The author opines that this strategy has significantly benefited the organization to make potential management decisions and to enhance organizational learning (pp.141-143). Toyota’s strong organizational structure aided the company to earn $16.7 billion in profits and 6% sales growth in 2009 in spite of global financial crisis 2008-09 that had severely hit the global automaking industry. Recently, the TMC has announced some noticeable changes to its organizational structure. As Bloomberg (March 6, 2011) reports, appointment of outside board members is one of the major changes declared by the company. Business unit organization is another change announced. Through this structural change, the company’s automotive business will be split into four distinct units namely Lexus International, Toyota No. 1, Toyota No. 2, and Unit Center. The company believes that this change would well define operations and earning responsibility and would fasten decision making. The TMC has also announced the reorganization of region groups in order to improve its products and services in growing markets. While comparing the organizational structure of General Motors to that of TMC, it seems that GM’s organizational structure is very weak and this issue ended up in the bankruptcy of the GM, the world’s second largest automaker. The company delivers its products and services through the seven divisions including Buick, Chevrolet, Cadillac, GMC, Opel, Holden, and Vauxhall. It is identified that the company’s operations are not well coordinated and there is no proper communication mechanism to facilitate up and down information flow across various management levels. As a result of a weaker organizational structure, the GM failed to address operational flaws in a timely manner and this situation in turn resulted in the collapse of the company. While comparing the organizational structures of Toyota with that of Apple, it is evident that Apple has simpler organizational structure. As management professionals point out, simplicity is a key feature of Apple’s organizational structure. According to an opinion, Apple’s “organizational chart is deceptively straightforward, with none of the dotted-line or matrixed responsibilities popular elsewhere in the corporate world” (Lashinksy, 2011). It is interesting to note that Apple does not maintain any committee. Apple does not support the concept of general management and only the chief financial officer has a responsibility for costs and expenses that may be converted into profits or losses (Lashinksy). Influence of Organizational Functions It seems that Toyota’s organizational functions significantly influence and determine its organizational structure. Evidently, marketing is practiced to boost sales and to improve the revenues of the organization. It is clear that Toyota has its subsidiaries across the globe and hence it needs to design specific marketing strategies for different global regions. Similarly, the company needs to employ different marketing channels for different markets with respect to their customs and cultures. Recently, the company has planned to attract youth with personalized content and to create regional business alliances. Therefore, it would be a difficult task for the company to market its products and services effectively unless it divides market segments thoughtfully. Similarly, management of finance is also a cumbersome task for Toyota because the company needs to deal with huge volume of finance in its everyday operations. Hence, the management of marketing and financial activities is the major element that influenced the company to enhance business unit organization. In addition, the organization has a huge and culturally diverse workforce and therefore Toyota cannot run its operations effectively unless human capital management is planned well. Finally, the company has to deal with a wide range of operations across different parts of the globe and it forces the company to plan the reorganization of regional groups. Hence, human resource management and other management operations have also notably influenced the organizational structure of Toyota. Influence of Organizational Design It is identified that elements of organizational design including products, services, marketing channels, geography, customer relationship, and departmentalization are very helpful to determine the organizational structure that best suits the firm’s needs. Respect for people and persistent improvement are central to Toyota’s organizational culture. Therefore, the organization strives to improve the quality of products and services delivered on a continuous basis in order to promote customer loyalty. Toyota has segmented its markets based on their geographical features, because geographic segmentation is identified to be a potential strategy that would promote sales growth. In order to achieve a greater level of operational efficiency, the firm has implemented departmentalization. Toyota’s management believes that this strategy would meet customer needs properly and in a timely manner. Hence, geographic segmentation and departmentalization play a vital role in determining the organizational structure of TMC. It seems that the firm gives particular importance to product quality so as to maintain its brand reputation. During the 2009-10 periods, the company made three related recalls of automobiles as a result of some technical defects. Evidently, this issue negatively affected the brand reputation of the company and hence Toyota pays particular attention to quality assurance today. It is observed that Toyota employs a variety of marketing channels such as TV ads, YouTube videos, and other social networking sites to promote its products and services. Finally, customer relationship management is of great significance in Toyata’s organizational environment and the company has designed extensive programs for keeping better customer relations. Conclusion In total, it is clear that Toyota’s organizational structure is vertical and is divided into four levels namely chairman, president, executive vice presidents, and senior managing directors. While compared to the organizational structure of companies like General Motors and Apple, it seems that Toyota has a relatively stronger and comprehensive organizational structure. In addition, different organizational functions and organizational design can have a great role in influencing the firm’s organizational structure. References Borowski, A. (2010). Report on the Toyota Company. GRIN Verlag. Bloomberg. (March 6, 2011). Toyota Announces New Organizational Structure and Executive Chan. Retrieved from http://www.bloomberg.com/article/2013-03-06/aAdLV7iTfAas.html Johnson, B. L. “Organization fopr collaboration: A reconsideration of some basic organizing principles”. In G. Pounder (Ed.). (1995). Restructuring Schools for Collaboration: Promises and Pitfalls. SUNY Press. Lashinksy, A. (2011). How Apple works: Inside the world's biggest startup. CNN Money, Aug 25. Retrieved from http://tech.fortune.cnn.com/2011/08/25/how-apple-works-inside-the-worlds-biggest-startup/ Moore, R. (2011). Selecting the Right Manufacturing Improvement Tools: What Tool? When?. Butterworth-Heinemann. Read More