Toyota Motor Corporation, Japanese parent company of the Toyota Group. It became the largest automobile brand and manufacturer in the world for the first time in 2008, surpassing General Motors. Many of its about 1,000 subsidiary companies and affiliates are involved in the production of automobiles, automobile parts, and commercial and industrial vehicles. Headquarters are in Toyota City, an industrial city east of Nagoya, Japan.
In 1933 Toyoda Kiichiro founded what later became the Toyota Motor Corporation as a division of the Toyoda Automatic Loom Works, Ltd. (later Toyota Industries Corporation, now a subsidiary), a Japanese manufacturer founded by his father, Toyoda Sakichi. Its first production car, the Model AA sedan, was released in 1936. The following year the division was incorporated as the Toyota Motor Company, Ltd., headed by Kiichiro. (The company’s name was changed to Toyota, which has a more pleasing sound in Japanese.) Toyota subsequently established several related companies, including Toyoda Machine Works, Ltd. (1941), and Toyota Auto Body, Ltd. (1945). During World War II the company suspended production of passenger cars and concentrated on trucks. Faced with wrecked facilities and a chaotic economy in the aftermath of World War II, the company did not resume making passenger cars until 1947 with the introduction of the Model SA.
By the 1950s Toyota’s automobile production factories were back in full operation, and to gain competitiveness the company began a careful study of American automobile manufacturers, owing to perceived U.S. technical and economic superiority. Toyota executives toured the production facilities of corporations, including the Ford Motor Company, to observe the latest automobile manufacturing technology and in turn implemented it in their own facilities, yielding a nearly immediate increase in efficiency. In 1957 Toyota Motor Sales, U.S.A., Inc., was established, and the following year the company released the Toyopet sedan, its first model to be marketed in the United States; it was poorly received because of its high price and lack of horsepower. The Land Cruiser, a 4 × 4 utility vehicle released in 1958, was more successful. In 1965 the Toyopet, completely redesigned for American drivers, was re-released as the Toyota Corona, marking the company’s first major success in the United States.
During the 1960s and ’70s the company expanded at a rapid rate and began exporting large numbers of automobiles to foreign markets. Toyota acquired such companies as Hino Motors, Ltd. (1966), a manufacturer of buses and large trucks; Nippondenso Company, Ltd., a maker of electrical auto components; and Daihitsu Motor Company, Ltd. (1967). For several decades Toyota was Japan’s largest automobile manufacturer. The company continued to thrive in the American market as well, gaining a reputation for its low-cost, fuel-efficient, and reliable vehicles such as the Corolla, which was released in the United States in 1968.
The company took its present name in 1982, when Toyota Motor Company was merged with Toyota Motor Sales Company, Ltd. Two years later Toyota partnered with General Motors Corporation in the creation of New United Motor Manufacturing, Inc., a dual-brand manufacturing plant in California, where Toyota began U.S. production in 1986.
The company experienced significant growth well into the 21st century, with innovations such as its luxury brand, Lexus (1989), and the first mass-produced hybrid-powered vehicle in the world, the Prius (1997). In 1999 Toyota was listed on both the London Stock Exchange and the New York Stock Exchange. The company continued to expand to new markets—specifically targeting younger buyers with the launch of its Scion brand (2003) and unveiling the world’s first luxury hybrid vehicle, the Lexus RX 400h (2005).
Today Toyota has assembly plants and distributors in many countries. In addition to automotive products, its subsidiaries manufacture rubber and cork materials, steel, synthetic resins, automatic looms, and cotton and woolen goods. Others deal in real estate, prefabricated housing units, and the import and export of raw materials.
Ohno Taiichi Japanese businessman
Ohno Taiichi (born 1912, Manchuria, China—died May 28, 1990, Toyota City, Japan) was a Japanese production-control expert for the Toyota Motor Co. His just-in-time system (kanban) revolutionized manufacturing methods.
Ohno became executive vice president in 1975 and retired in 1978 but retained the role of consultant until 1982. He wrote the widely read books on manufacturing Toyota Production System (1978), Workplace Management (1984), and Just-in-Time for Today and Tomorrow (1988).
business organization
business organization, an entity formed to carry on commercial enterprise. Such an organization is predicated on systems of law governing contract and exchange, property rights, and incorporation.
This article deals primarily with the large private business organizations made up chiefly of partnerships and limited liability companies—called collective business associations. Some of the principles of operation included here also apply to large individually owned companies and to public enterprises.
Types of Business Associations
Business associations have three distinct characteristics: (1) they have more than one member (at least when they are formed); (2) they have assets that are legally distinct from the private assets of the members; and (3) they have a formal system of management, which may or may not include members of the association.
The second feature, the possession of distinct assets (or a distinct patrimony), is required for two purposes: (1) to delimit the assets to which creditors of the association can resort to satisfy their claims (though in the case of some associations, such as the partnership, they can also compel the members to make good any deficiency) and (2) to make clear what assets the managers of the association may use to carry on business. The assets of an association are contributed directly or indirectly by its members—directly if a member transfers a personally owned business or property or investments to the association in return for a share in its capital, indirectly if a member’s share of capital is paid in cash and the association then uses that contribution and like contributions in cash made by other members to purchase a business, property, or investments.
The third essential feature, a system of management, varies greatly. In a simple form of business association the members who provide the assets are entitled to participate in the management unless otherwise agreed. In the more complex form of association, such as the company or corporation of the Anglo-American common-law countries, members have no immediate right to participate in the management of the association’s affairs; they are, however, legally entitled to appoint and dismiss the managers (known also as directors, presidents, or administrators), and their consent is legally required (if only pro forma) for major changes in the company’s structure or activities, such as reorganizations of its capital and mergers with other associations. The role of a member of a company or corporation is basically passive; a member is known as a shareholder or stockholder, the emphasis being placed on the individual’s investment function. The managers of a business association, however, do not in law comprise all of the persons who exercise discretion or make decisions.
Limited-liability companies, or corporations
The company or corporation, unlike the partnership, is formed not simply by an agreement entered into between its first members; it must also be registered at a public office or court designated by law or otherwise obtain official acknowledgment of its existence. Under English and American law the company or corporation is incorporated by filing the company’s constitution (memorandum and articles of association, articles or certificate of incorporation) signed by its first members at the Companies Registry in London or, in the United States, at the office of the state secretary of state or corporation commissioner. In France, Germany, and Italy and the other countries subject to a civil-law system, a notarized copy of the constitution is filed at the local commercial tribunal, and proof is tendered that the first members of the company have subscribed the whole or a prescribed fraction of the company’s capital and that assets transferred to the company in return for an allotment of its shares have been officially valued and found to be worth at least the amount of capital allotted for them.
History of the limited-liability company
The limited-liability company, or corporation, is a relatively recent innovation. Only since the mid-19th century have incorporated businesses risen to ascendancy over other modes of ownership. Thus, any attempt to trace the forerunners of the modern corporation should be distinguished from a general history of business or a chronicle of associated activity. People have embarked on enterprises for profit and have joined together for collective purposes since the dawn of recorded history, but these early enterprises were forerunners of the contemporary corporation in terms of their functions and activities, not in terms of their mode of incorporation. When a group of Athenian or Phoenician merchants pooled their savings to build or charter a trading vessel, their organization was not a corporation but a partnership; ancient societies did not have laws of incorporation that delimited the scope and standards of business activity.
The corporate form itself developed in the early Middle Ages with the growth and codification of civil and canon law. Several centuries passed, however, before business ownership was subsumed under this arrangement. The first corporations were towns, universities, and ecclesiastical orders. These differed from partnerships in that the corporation existed independently of any particular membership. Unlike modern business corporations, they were not the “property” of their participants. The holdings of a monastery, for example, belonged to the order itself; no individual owned shares in its assets. The same was true of the medieval guilds, which dominated many trades and occupations. As corporate bodies, they were chartered by government, and their business practices were regulated by public statutes; each guild member, however, was an individual proprietor who ran his own establishment, and, while many guilds had substantial properties, these were the historic accruals of the associations themselves. By the 15th century, the courts of England had agreed on the principle of “limited liability”: Si quid universitati debetur, singulis non debetur, nec quod debet universitas, singuli debent (“If something is owed to the group, it is not owed to the individuals nor do the individuals owe what the group owes”). Originally applied to guilds and municipalities, this principle set limits on how much an alderman of the Liverpool Corporation, for example, might be called upon to pay if the city ran into debt or bankruptcy. Applied later to stockholders in business corporations, it served to encourage investment because the most an individual could lose in the event of the firm’s failure would be the actual amount originally paid for the shares.
Much of North America’s settlement was initially underwritten as a business venture. But, while British investors accepted the regulations inhering in their charters, American entrepreneurs came to regard such rules as repressive and unrealistic. The U.S. War of Independence can be interpreted as a movement against the tenets of this mercantile system, raising serious questions about a direct tie between business enterprise and public policy. One result of that war, therefore, was to establish the premise that a corporation need not show that its activities advance a specific public purpose. Alexander Hamilton, the first secretary of the treasury and an admirer of Adam Smith, took the view that businessmen should be encouraged to explore their own avenues of enterprise. “To cherish and stimulate the activity of the human mind, by multiplying the objects of enterprise, is not among the least considerable of the expedients by which the wealth of a nation may be promoted,” he wrote in 1791.
The growth of independent corporations did not occur overnight. For a long time, both in Europe and in the United States, the corporate form was regarded as a creature of government, providing a form of monopoly. In the United States the new state legislatures granted charters principally to public-service companies intending to build or operate docks, bridges, turnpikes, canals, and waterworks, as well as to banks and insurance companies. Of the 335 companies receiving charters prior to 1800, only 13 were firms engaging in commerce or manufacturing. By 1811, however, New York had adopted a general act of incorporation, setting the precedent that businesspeople had only to provide a summary description of their intentions for permission to launch an enterprise. By the 1840s and ’50s the rest of the states had followed suit. In Great Britain after 1825 the statutes were gradually liberalized so that the former privilege of incorporating joint-stock companies became the right of any group complying with certain minimum conditions, and the principle of limited liability was extended to them. A similar development occurred in France and parts of what is now Germany.
By the late 20th century, in terms of size, influence, and visibility, the corporation had become the dominant business form in industrial nations. While corporations may be large or small, ranging from firms having hundreds of thousands of employees to neighbourhood businesses of very modest proportions, public attention increasingly focused on the several hundred giant companies that play a preponderant economic role in the United States, Japan, South Korea, the nations of western Europe, Canada, Australia, New Zealand, South Africa, and several other countries. These firms not only occupy important positions in the economy but have great social, political, and cultural influence as well. Both at home and abroad they affect the operations of national and local governments, give shape to local communities, and influence the values of ordinary individuals. Therefore, while in fact and in law corporate businesses are private enterprises, their activities have consequences that are public in character and as pervasive as those of many governments.
Other forms of business association
Besides the partnership and the company or corporation, there are a number of other forms of business association, of which some are developments or adaptations of the partnership or company, some are based on contract between the members or on a trust created for their benefit, and others are statutory creations.
The establishment and management of cooperatives is treated in most countries under laws distinct from those governing other business associations. The cooperative is a legal entity but typically is owned and controlled by those who use it or work in it, though there may be various degrees of participation and profit sharing. The essential point is that the directors and managers are accountable ultimately to the enterprise members, not to the outside owners of capital. This form is rooted in a strong sense of social purpose; it was devised in the 19th century as an idealistic alternative to the conventional capitalist business association. It has been particularly associated with credit, retailing, agricultural marketing, and crafts.
The second class comprises the English unit trust and the European fonds d’investissements or Investmentfonds, which fulfill the same functions as American mutual funds; the Massachusetts business trust (now little used but providing a means of limiting the liability of participants in a business activity like the limited partnership); the foundation (fondation, Stiftung), a European organization that has social or charitable objects and often carries on a business whose profits are devoted to those objects; and, finally, the cartel, or trade association, which regulates the business activities of its individual members and is itself extensively regulated by antitrust and antimonopoly legislation.
The third class of associations, those wholly created by statute, comprises corporations formed to carry on nationalized business undertakings (such as the Bank of England and the German Railway) or to coexist with other businesses in the same field (such as the Italian Istituto per la Ricostruzione Industriale) or to fulfill a particular governmental function (such as the Tennessee Valley Authority). Such statutory associations usually have no share capital, though they may raise loans from the public.
Management and control of companies
The simplest form of management is the partnership. In Anglo-American common-law and European civil-law countries, every partner (other than a limited partner) is entitled to take part in the management of the firm’s business; however, a partnership agreement may provide that ordinary partners shall not participate in management, in which case they are dormant partners but are still personally liable for the debts and obligations incurred by the other managing partners.
Executive management
The markets that corporations serve reflect the great variety of humanity and human wants; accordingly, firms that serve different markets exhibit great differences in technology, structure, beliefs, and practice. Because the essence of competition and innovation lies in differentiation and change, corporations are in general under degrees of competitive pressure to modify or change their existing offerings and to introduce new products or services. Similarly, as markets decline or become less profitable, they are under pressure to invent or discover new wants and markets. Resistance to this pressure for change and variety is among the benefits derived from regulated manufacturing, from standardization of machines and tools, and from labour specialization. Every firm has to arrive at a mode of balancing change and stability, a conflict often expressed in distinctions drawn between capital and revenue and long- and short-term operations and strategy. Many corporations have achieved relatively stable product-market relationships, providing further opportunity for growth within particular markets and expansion into new areas. Such relative market control endows corporate executives and officers with considerable discretion over resources and, in turn, with considerable corporate powers. In theory these men and women are hired to manage someone else’s property; in practice, however, many management officers have come increasingly to regard the stockholders as simply one of several constituencies to which they must report at periodic intervals through the year.
Managerial decision making
The guidelines governing management decisions cannot be reduced to a simple formula. Traditionally, economists have assumed that the goal of a business enterprise was to maximize its profits. There are, however, problems of interpretation with this simple assertion. First, over time the notion of “profit” is itself unclear in operational terms. Today’s profits can be increased at the expense of profits years away, by cutting maintenance, deferring investment, and exploiting staff. Second, there are questions over whether expenditure on offices, cars, staff expenses, and other trappings of status reduces shareholders’ wealth or whether these are part of necessary performance incentives for executives. Some proponents of such expenditures believe that they serve to enhance contacts, breed confidence, improve the flow of information, and stimulate business. Third, if management asserts primacy of profits, this may in itself provide negative signals to employees about systems of corporate values. Where long-term success requires goodwill, commitment, and cooperation, focus on short-term profit may alienate or drive away those very employees upon whom long-term success depends.
The modern executive
Much has been written about business executives as “organization men.” According to this view, typical company managers no longer display the individualism of earlier generations of entrepreneurs. They seek protection in committee-made decisions and tailor their personalities to please their superiors; they aim to be good “team” members, adopting the firm’s values as their own. The view is commonly held that there are companies—and entire industries—that have discouraged innovative ideas. The real question now is whether companies will develop policies to encourage autonomy and adventuresomeness among managers.
Modern trends
The sheer size of the largest limited-liability companies, or corporations—especially “multinationals,” with holdings across the world—has been a subject of discussion and public concern since the end of the 19th century, for with this rise has come market and political power. While some large firms have declined, been taken over, or gone out of business, others have grown to replace them. The giant firms continue to increase their sales and assets by expanding their markets, by diversifying, and by absorbing smaller companies. Diversification carried to the extreme has brought into being the conglomerate company, which acquires and operates subsidiaries that are often in unrelated fields.
Toyota Production System
A production system based on the philosophy of achieving the complete elimination of waste in pursuit of the most efficient methods
Toyota Motor Corporation’s Toyota Production System (TPS) is a way of making things that have become known and studied worldwide.
It is based on the premise of making work easier for workers. The objective is to thoroughly eliminate waste and shorten lead times to deliver vehicles to customers quickly, at a low cost, and with high quality. This production system is pursued in all areas of Toyota Motor Corporation, including vehicles and services, and all employees implement daily incremental kaizen.
The Two Pillars of TPS
The basic philosophy of the Toyota Production System is based on two pillars. The first pillar is jidoka―which can be loosely translated as “automation with a human touch”―based on the concepts of stopping immediately when abnormalities are detected to prevent defective products from being produced and improving productivity to eliminate the need for people to be simply watching over machines. The second pillar is Just-in-Time, based on the concept of synchronizing production processes―linking all plants and their production processes in a continuous flow―by making only what is needed, when it is needed, and in the amount needed.
These two pillars enable the production of vehicles that satisfy customer requirements quickly, at a low cost, and with high quality.
Jidoka
Jidoka in the TPS is “automation with a human touch,” where human wisdom is added to automation. Human wisdom means that when an abnormality occurs, such as a machine or equipment abnormality, quality abnormality, or a work delay, the machine or equipment can detect the abnormality and stop automatically, or the operator can stop the line by pulling the stop cord themselves. This eliminates the outflow of defective products while also making it possible to build quality into processes by clearly detecting abnormalities and preventing them from recurring. Furthermore, having the ability to stop when an abnormality is detected means that machines and equipment no longer need to be watched over, saving labor by reducing working hours.
This implementation of kaizen on work is the bedrock of jidoka. It doesn’t matter how much machines, robots, or IT excel; they can’t evolve any further on their own. Only humans can implement kaizen for the sake of evolution. In other words, craftsmanship is achieved by discovering the basic principles of manufacturing through manual work and then applying them on the production line to steadily implement kaizen. This cycle of kaizen in both human skills and technologies is critical for taking on the challenge of new technologies and construction methods. Human wisdom and ingenuity are indispensable to delivering ever-better cars to customers. Going forward, we will maintain our steadfast dedication to constantly developing human resources who can think independently and implement kaizen.
