A Report for Toyota Motor Corporation
TABLE OF CONTENTS
1 Executive Summary 2
2 Introduction 2
3 Overview 3
4 Environmental Analysis and Commentary 4
5 Organisational Analysis and Commentary 5
6 Gap Analysis and Strategic Alternatives 7
7 Strategic Options and Choice of Strategies 8
8 Implementation Plan 10
9 Evaluation Plan 11
10 Recommendations 12
12 Conclusions 13
13 Reference List 14
Executive Summary
Toyota has become the leader in hybrid cars manufacturing. The Toyota Prius has long been credited as the car which started it all.
Toyota believed in hybrids because of the superiority of the technology to the internal combustion engine. Such technology allows all powertrain improvements in diesel, gas, electric or hydrogen to incorporate into car production. Thus, hybrid powertrain has the most ability to continuously improve (2005).
As an emerged technology, software bugs are not surprising the automotive sector and even in conventional vehicles, system glitches are becoming more common.
In lieu with this, this report aims at providing the Toyota Motor Corporation the strategic alternatives and options available in the market, the environmental and organisational analysis and proposed sample implementation and evaluation plans.
Introduction
A typical passenger car has 70 or more tiny but powerful computers on board that control audio systems, air conditioning, brakes, air bags and scores of other tasks. The software for an average car can have more than 35 million lines of code. Hybrid cars need to control separate gas and electric power sources and doses require a 100 times or more the code needed (2005).
Hybrid cars use multiple computers significantly compared to conventional automobiles. The Toyota hybrid cars, which have been in the global automotive industry since 1997 in Japan and 2000 in the US, are using MULTI IDE and C/C++ compiler to develop engine and transmission control software (2005).
However, many analysts and auto executives are continuously questioning the hybrid technology. Yet, still, why does Toyota continue?
Toyota believed in hybrid cars as well as continuous improvement or the kaizen. Things have changed because of competition and Toyota must always seek to improve in order to get better and thus, compete (2005).
Overview
Automakers spend billion to billion a year fixing software glitches (2005). In October 2005, Toyota recalled 75, 000 Priuses in the United States due to a number of reports that the cars were inexplicably stalling on the highway ( 2007). Thirty-two percent of auto warranty claims in the United States are because of software or electronic-related issues (2005).
The owners of the cars were asked to take their vehicles to their dealer in order to fix a potential software glitch. “If the gasoline engine stalls, the electric motor in the vehicles will have enough power to allow the driver to pull the vehicle over and away from the traffic”, according to Toyota.
A “programming error” was found in the computer systems of 23, 900 Prius cars sold. The Prius hybrid cars urge a software upgrade in order to fix a few lines of buggy code. Apparently, the computer system of the cars is needed to be reset. After the procedure, hybrid car drivers complained of the reduced mileage ( 2007).
The software update was provided free-of-charge. Such update is intended for 2004 and 2005 Prius models. The US National Highway Traffic safety Administration investigated the incident. There have been no injuries or accidents reported due to potential software problem. However, potential buyers for the Prius made leery of the car (2005).
Environmental Analysis and Commentary
The mission of Toyota is to attract customers for life. Their ambition – to become the most admired sales finance company for all stakeholders. The vision of the company is not to be no. 1 instead to become the most successful and respected car company in the world.
Externally, the Toyota belonged to the transportation equipment industry and its market is the public companies trading. There are a total of 26 competitors for Toyota. The top three are: Ford Motor, general Motors and Honda. These competitors are also offering a wide array of hybrid cars. By this, we can analyse the hybrid system and environment as below:
Remote Environment (factors that originated beyond Toyota company’s operating situation)
Hybrids have complicated technology that is difficult or expensive to fix
Every car today has packed with complicated electronics and computer chips. Working on a hybrid cars requires a specialized training for the mechanics. Dealership may only have one or two mechanics trained on hybrids
Expenses-wise, hybrid-specific components have extremely long warranties.
Hybrids have technical problems like stalling and sputtering
Such concern stems from the case of the recalled Priuses. The gasoline would sometimes shut-off at the most unexpected times. The problem was pointed as faulty program logic ( 2007).
Industry Environment (factors that affect Toyota company’s prospect)
Hybrids do not pay for themselves to justify their premium cost
According to Consumer Reports, it would be difficult to justify the process of purchasing a hybrid car for economic reasons. As the report states, for a five-year ownership period, only the Honda Civic Hybrid and Toyota Prius could save the money.
The higher initial cost and fast depreciation were the reasons that hybrid cars don’t save owners money. However, some vehicles will save enough to pay for extra cost as indicated by the new tax incentives.
Through simply accelerating and braking more gently drivers can save more.
Hybrids do not offer the driving performance needed
Compared to non-hybrid cars, hybrid powertrains are more fuel-efficient. Such efficiency could mean getting more power out of the same amount of fuel or using a same-sized engine more efficiently while also gaining extra power and quickness.
This can be provided by Honda Accord Hybrid and Toyota Highlander Hybrid only the latter offer more responsive acceleration.
In contrast, the Toyota Highlander Hybrid cannot save as much fuel as they could with smaller gasoline engines unlike Ford Escape Hybrid and Honda Civic Hybrid. These two models offer power that is more adequately for daily use.
Hybrids will not hold a resale value
Toyota Priuses have high resale value but are not sold on near-new prices as stories claimed. The factors which affect the high value are the unique, hybrid-only vehicle with eye-catching design and Priuses are produced and sold in low volumes. As a used car, the Prius has more in common with the Mini Cooper than a Ford Escape Hybrid SUV in terms of holding such value ( 2007).
Operating Environment (factors that influence Toyota company’s competitive situation)
Hybrids have limited battery pack life
Hybrid batteries function without ever being fully charged or discharged. A regular gasoline-powered engine assisted by an electric motor run the hybrid vehicles. During braking and idling, the battery is charged by the gas engine.
Toyota and Ford claim fleet use of hybrid vehicles lasting over 100, 000 miles — Toyota claims over 200, 000 miles for a few vehicles.
Besides, hybrid components including batteries have extremely long warranties. Toyota guarantees 10 years or 100, 000 miles for all hybrid-specific components on their vehicles. Ford and Honda both guarantees hybrid user with 8 years with 800, 000 – 100, 000 miles.
Hybrids do not get the level of mileage promised
All vehicles could have 15 % fewer miles per gallon than the EPA estimate. At any rate, calculating gas spending based on EPA estimates actually underestimating a wide margin
( 2007).
Organisational Analysis and Commentary
The Toyota company is a public company with 2, 864 million 2007 total sales and 299, 394 employees. Toyota is below industry average in both sales satisfaction and customer satisfaction. There is a need to focus on plant quality and flexibility. This reflects the unusually high number of product recalls over the past couple of years.
Toyota Motor outsold General Motors in the first quarter of this year. Toyota sold almost eight million cars in the world. Toyota’s stock market value is roughly 30% of the value of all global carmakers combined (2007). The target of selling by 2010 is 10.3 million. The Japanese carmaker is currently expanding production throughout Asia, Europe and US (2006). The Toyota’s organisational ethos had helped in penetrating the #1 position:
Strengths
High level of research and development
Firmly committed to hybrid powertrains
Committed in launching new products and to lean manufacturing and quality
Kaizen, jidoka, muda, munuzukuri and genchi genbutsu as key principles
A culture of teamwork, respect, challenge and just-in-time
Competitive service price-wise to dealers
Very focused segmentation, targeting and positioning
Diversified product range
Consensus management style
Constantly re-engineering and redesigning models (2006)
Weaknesses
Retail operations
Ø Selling approach
Dealerships ( 2006)
Ø Poorly-designed showrooms
· Expensive costs investments on car plants
· High costs of training and retaining labour
· Time to accommodate
· Faulty front suspension systems
· Software/programming glitches
· Tend to not wanting to admit a problem publicly
· Stretched management resources or training new hires to understand Toyota Production System (TSP)
· Difficult defect-tracking procedures
Opportunities
Emphasis on the importance of quality over cost-cutting or pure design
Improve customers’ buying experience
Utilize the Internet in making attractive offers
Explore to be a one-stop shop for customers’ financial requirements
Investment in hybrid R&D ( 2006)
Revisit quality measures
Threats
Cars can be replicated by competitors almost immediately
Heavy competitions from traditional banks
Fluctuating economic and political conditions
Exchange rates movements narrow margins
Exposure to any movement of raw materials
Product recalls
Economic disturbances
Gap Analysis and Strategic Alternatives
The global automotive sector has a deepened, growing concern regarding the inadequacy of developing and implementing software models. It is necessary for every automaker to produce efficient softwares for hybrid vehicles’ mission-critical systems. However, the industry has no solid means of blending the disciplines of car manufacturing and software development (2005).
The repetitive process of recalling Toyota hybrid cars with software glitches is an indication that there might be something wrong with the quality control of the products company-wide. Toyota did their own software development in-house and thus, having control over upgrades as a clear advantage ( 2005). Further, the prevailing business operation can be described:
In lieu with the consistent recalls, the Toyota must: a) focus on software quality, b) have an in-house software assessment task force/department, c) facilitate a specialized training for hybrid cars mechanics, d) maximize control over upgrades, e) if necessary, conduct routinely quarter or mid-year software assessment of newly-installed softwares and f) initiate an industry-wide higher-level software standards.
Toyota hybrid vehicles recalls set a basis for building software standards and elevating software quality through the use of off-the-shell requirements and standardized software implementations as a commodity (2005).
Strategic Options and Choice of Strategies
Since the recalls are identified as software glitches, then the solution must focus on developing software programs that are powertrain-specific. The systems affected are engine control and transmission, body chassis and safety systems and infotainments. For hybrid cars, applications include: 1) engine management software – to coordinate fuel, spark and other subsystems, to meet the legislative exhaust emissions regulations and to provide greater fuel economy; 2) electronic transmission control software – to monitor engine and car speed and to change engine ratios for an easier and smoother driving experience and 3) diagnostics software – to enable carmakers and engineers to test and correct engine management and transmission systems (2005).
The Toyota Motor Corporation, in order to cope up with the costs of recalls, instead of doing all the researches regarding software development in-house, the company could:
- have an in-house automotive software developers, implementers and assessors,
- came up with a driver-friendly do-it-yourself manual on automotive software upgrading, if possible,
- outsource/hire a company specializing in embedding automotive software and/or even
- divert in a partnership with an automotive software developing companies that can: overcome severe memory limits, ensure fastest execution and build bug-free applications:
A) Processors in powertrain application experienced severe memory constraints. The automakers, including Toyota, must avoid buying bigger and more expensive memory parts. The software must add more features with less memory, thus, gaining a competitive advantage in complying with heavy emission requirements. Such software must have small code sizes to allow advanced compilers to shrink an application’s code size.
B) To ensure a faster execution, the software developers must increase complex software algorithms which require more processor speed. The requirements include stringent emissions regulations, advanced cruise control, better fuel-efficiency and anti-knock algorithms among others.
C) Bug-free applications include run-time error detection, mature compilers, MISRA support and automated module testing ( 2005)
Implementation Plan
Most Japanese automakers, including Toyota, do their own software development. Japanese always tended to do things on their own. Other automakers like BMW, Mercedes Benz and General Motors do some in-house software development and portion-out the rest of the work (2005).
In effect, the Toyota must admit that the company faces difficulty in addressing recalls. Car manufacturing is the company’s specialty and not software development. So, it is best to have an IT company to do development task and focus on quality of the cars produced.
This could mean an extra cost for the Toyota company since they have to pay rights to use the software ( 2005). More practically, the company would benefit if highly-developed, high-performance automotive softwares will be available. The partnership will be of mutual benefit because softwares can be tested and retested on the hybrid cars. Thus, avoiding the reoccurrence of car recalls due to software breakdowns and the capability of embedded automotive softwares could be maximized since the development is accompanied by actual testing on reliable cars.
Practically, the plan must include the history of partnership, composition and linkages, legal framework and working processes and the process of limited partnership will begin by sourcing and choosing potential business partners, securing partnership requirements/documents, complying with partnership regulations and laying financial concerns including taxes. The key indicators are risk management, output, funding and workforce for both companies. The actual process of development will culminate after the partnership materializes, to illustrate:
TOYOTA MOTOR CORPORATION PARTNERSHIP WITH XXX EMBEDDED AUTOMOTIVE SOFTWARE COMPANY
What
Who
When
Adopting industry-wide standards
Toyota and Company XXX
Week 1
Model-based Software development
-do-
Weeks 2-8
Code-generation Tools and Techniques
-do-
Weeks 9-16
Automotive Software Architecturing
-do-
Weeks 16-20
Automotive Software Designing
-do-
Weeks 21-24
Automotive Software Engineering
-do-
Weeks 25-28
Quality Assurance, test Strategies, Verification and Compatibility
-do-
Weeks 29-35
Provisions for Re-testing
-do-
Following weeks
Evaluation Plan
We can practically say that there will be two evaluation plans: for the partnership and automotive software development. The partnership can be evaluated through needs, outcomes, processes and frameworks:
Evaluation Indicator
How the Indicator is met
Assessment Score
Needs (the basis of entering a partnership)
ü Identified gaps
ü Workforce initiatives/demand
ü Specific outcomes that can be delivered
ü The partner is the best placed organisation to deliver the service
ü Service level Agreement
Framework (for working in partnership)
ü A signed SLA
ü Clarity in expectation/outcomes, length of contract/agreed review schedule, where responsibility lies and monitoring requirement
ü A clear work plan
ü Outcomes of the work plan
ü Development of partnerships
Partnership Process (effective maintenance of partnership)
ü Clear demonstration through regular reviews
ü Clear guidance in place
ü Meeting the agreed outcomes and performance
ü Adequate financial management systems in place
ü Meeting the agreed requirements as expressed in code of practice on funding and procurement
Assessing the Internal and External Impact & Outcomes
ü The original partnership objectives are being met
ü Quality of service being delivered as evidence of effective partnership
ü Meeting the wider corporate priorities and community aspirations
ü The cost and resource does not outweigh the benefits
ü Outcomes are promoted and demonstrated to the local community
(Based on: The Partnership Evaluation Tool)
The program should be assessed based on the objectives of adopting industry-wide standards, coding techniques and tools, software architecture, design and engineer and quality control, testing and verifications. The automotive software development program can be evaluated through:
Recommendations
The abovementioned alternatives, solutions and options are automotive software-specific. Company-wide, the Toyota must also develop clear customer service standards, sustainability strategies and policies-targeted at core products or services. In addition, the preparation of a target-based timeline where performance can be judged and held accountable must be a priority (.).
There should be a progress on external reporting. The company leadership must be vocal and committed. The Toyota can also purport on stakeholder consultations and publication of results. Stakeholders must participate to meet environmental and societal needs related to core business (rady, n.d.).
Conclusions
As automobiles become more technologically-advanced, an issue of interest would be the tolerance for the new technology. The hybrid cars performance has been remarkable and predicted by analysts as ‘here to stay’. Currently, the hybrid system was dubbed as the technology of the millennium.
First, the Toyota has to admit that something went really wrong along the process. Software glitches are not a problem solely for the company. It is an industry-wide dilemma that is needed to address immediately. Somehow, it had open opportunities of exploiting the hybrid technology. , Chairman of Embedded Software Standards, believes glitches are of similar features and software quality must be ensured industry-wide (2005).
Second, the Toyota hybrid cars have a pre-existing reputation. Its presence on the global automotive sector is building intangible brand value. The company has strategized in a long term focus and the Prius is making money for Toyota.
Third, the Toyota has an image that can be easily maintained. Technology can be replicated quickly. General Motors or DaimlerChrysler cal always attempt at counter launching a competing product. The Toyota knows have a counter-relaunch of a more advanced versions and sell more (2005).
Finally, the Toyota company acknowledges shortcomings and work on it privately as much as possible. Such shortcomings are identified and analysed quickly and then communicated with the customers on the basis of time quality.
Quite simply, the Toyota company fosters responsibility and accountability or sustainability aspects in a holistic and principled-approaches ( 2006).
Credit:ivythesis.typepad.com
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