Toyota's problems: An outsider's perspective

Toyota, one of the most respected companies in the world is in a mess, which, to some extent, is its own creation. The problem that Toyota is in, is a deadly combination of Japanese corporate culture and outsourcing. A lot has been talked about the former while not many have tried to look at the latter. In my view, a good assessment of the issues related to outsourcing has a lot of lessons for other auto-makers across the world. I will try to focus my discussion on outsourcing while touching upon the effect of the Japanese culture.

Firstly, Japanese have a very strict corporate hierarchy with a fierce sense of loyalty which is greatly appreciated. In most of the Japanese companies operating in India, all the key positions are held by Japanese. Most of the people who operate on the field being Indians, they have better insight into what customers want, what problems they are facing with the products, etc. With the hierarchy that the Japanese are used to, bad news will seldom reach the top till the last minute and by the it is too late anyway.

Secondly, most of the car-makers work with a lot of component suppliers, which is a good strategy. But they also push their suppliers to cut-costs every time their contracts come up for renewal. I firmly believe that it is this strategy that could have cost Toyota very badly. We all know that beyond a point, you can't cut costs even if you bring in efficiencies. Japanese take a very long time to develop a trust relationship with a new partner / supplier. But once the trust is established, it is very difficult to break that relationship. These kind of relationships could potentially lead to a blind trust and this mixed with the typical outsourcing strategies of car-makers, makes it a deadly combination leading to the mess that Toyota is in now.

Finally, when a Japanese company is operating in US, which is their biggest market, they are bound to be watched. Whatever be their reputation, they should have been more careful while handling customer complaints. When they claim to produce the most reliable cars, if they don't care to address serious customer complaints, it is a PR disaster waiting to happen. Of-course, the current situation is much worse than a mere PR disaster.

To conclude, bad outsourcing strategy, closed nature of Japanese corporate culture and bad customer handling, in my view, are the primary reasons for the mess that Toyota has got itself in.