Toyota

CHANGE MANAGEMENT IN TOYOTA
Abstract : This case is developed in order to understand the changing process during the crisis in
the Toyota Company. To understand the problem and analyze it the theory of Adaptive Cycle will be
used.
Keywords: Toyota, change management, adaptive cycle.
Introduction
This case devotes to the crisis Toyota company overcame in 2009-2010. During this time the company,
known for its excellent quality, had to recall millions of its cars because of engineering mistakes, which
would lead to accidents and even deaths. Why these mistakes occurred, what happened in the
company, what was the solution to existing problems and the stages of implementation of changes will
be discussed in this paper.
1. ABOUT TOYOTA :Toyota nowadays is the world’s leading car producer, originated in
1937 in Japan. After a lot of difficulties and problems during the whole history of the company,
it finally became the leader of car production market. Net revenues of the company in fiscal year
2013 totaled 22,064,192 million yen (the growth comparing to the previous year was 18.7%),
net income – 962,163 million yen (growth +239.3%) [4]. In 2009- 2010, the company
experienced a great crisis, during which it had to recall over 6 million cars worldwide, and this
led to reputation damage, loss of clients and income (see Fig.1). However, the company
successfully survived through the crisis, and nowadays it continues its growth and development.
Toyota revenue from 2010 to 2022. Revenue can be defined as the amount of
money a company receives from its customers in exchange for the sales of goods
or services. Revenue is the top line item on an income statement from which all
costs and expenses are subtracted to arrive at net income.
ADAPTIVE CYCLE : The change management and implementation of new solutions to existing
problems of Toyota in 2009-2010 can be described using the adaptive cycle – the theory that clearly
describes the steps every organization takes in order to implement changes and continue to grow and to
develop. This model defines four stages of process of change of the company: 1) equilibrium, 2) crisis, 3)
new combinations and 4) entrepreneurship [1]. These stages can be defined within can/want context. In
other words, depending on the level of uncertainty of the objectives of the company and the means of
achieving them, the company “moves” among different stages (see Fig. 1). The goal of this paper is to
show that with the help of this model it is possible to describe and analyze changes in any organization,
because the theory of these changes is the same.
2.1 Equilibrium The first stage of the model is equilibrium. In this stage, the company clearly views its
goals and the ways to achieve them. Thus, the “can” attitude and the “want” attitude are certain. This
stage represents Toyota’s growth from 1980th until the year of 2009. The company experienced fast
growth all over the world during these years; the customers were fully satisfied, and there was no
reason to change anything or to make new choices. The main goal of the company was increasing sales,
revenue and market share
2.2 Crisis However, fast growth badly affected the effectiveness of internal management. Expansion
strained resources across the organization and slowed response time, and Japanese corporate culture
did not work well in the USA. This resulted in a crisis in 2009-2010. From September 2009 to January
2010, the company had to recall more than 6 million vehicles because of the problems with seatbelts,
exhaust systems and accelerator pedals that could be trapped in floor mats. This was a disaster for the
company, its reputation and all the stakeholders. Toyota had to pay $1.2 billion to the Justice
Department and three fines totaling nearly $50 million from the National Highway Traffic Safety
Administration [3]. Moreover, the sales have shrunk, and this led to the income loss. During this stage,
top management of the company realized the need of changes. However, nobody understood what path
the company should take. Thinking in terms of Adaptive Cycle, this was the stage with uncertain “can”
and uncertain “want”
2.3 New combinations In order to overcome crisis and to prevent such cases in the future, the company
has to analyze its strengths and opportunities, which may help to implement certain changes (in other
words, it has to make certain the means of overcoming the crisis – the “can” of Adaptive Cycle model).
The revealed problems of the company, which led to the crisis, were connected with quality
management (lack of quality monitoring committee), human resource management (particularly
problems with corporate culture), and organizational structure of the company (centralized power
structure, which leads to slow decision-making process and reaction on problems) [2]. After the
company had revealed the reasons of the crisis, it moved to the third quadrant “New combinations”,
where the “can” is certain, but “want” is uncertain (what are the solutions of these problems?).
2.4 Entrepreneurship The next stage of the Adaptive Cycle model is the fourth quadrant named
“Entrepreneurship”, where the organization is certain about the goals (“want”), but it is not ready yet
for arranging to large-scale implementation (“can”). Moreover, the results of the changes are also
uncertain. The board of directors and top-management of Toyota came up with some ideas, which can
prevent the future problems like the ones in 2009-2010. These solutions were as following:
 Set up a committee to monitor the quality issues at a later stage

 Form a crisis management team and preparing crisis management plan
 Split TMC's automotive business into four units so that each unit can apply the most appropriate
business model.
 Consolidation of sales, marketing, manufacturing and engineering executive
 Operations at one location in order to speed interdepartmental communication. Reorganization
of region groups.
 Change human resource management
 . Modify partner relationships and communications among stakeholders
 Change organizational structure
 After implementation of these changes, the possible path of the company development is clear,
and Toyota moves to the stage of Equilibrium, where both “can” and “want” aspects of the
strategy are certain. Thus, Toyota passed through all the stages of the cycle, closed it and began
the new one.
3. CONCLUSION:
With this paper, the process of change implementation and crisis management of Toyota Company was
described. This process was analyzed with the help of Adaptive Cycle model, and it proved that this
model could be used for description and analysis of any changes in any company, as the process of
change implementation is clearly the same in any organization. Nowadays Toyota is still one of the
leading car producers in the world, and recent changes helped her to overcome crisis. The company is
now in the stage of equilibrium, which means that the new loop will definitely take place in the future.

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CHANGE MANAGEMENT IN TOYOTA

Keywords: Toyota, change management, adaptive cycle.

 Set up a committee to monitor the quality issues at a later stage

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