Toyota Motor Corporation
Strategic Information systems (SIS) are information systems developed to respond a corporate initiative of a business or organization. SIS are mainly developed and implemented by the business to give a competitive advantage over other businesses or organizations. There are different reasons for using a SIS in an organization which can range from improving the production process thus reducing the production costs to improving the distribution or sale of the products. This is achieved by application of analytical tools and metrics on the data warehouses to allow the organization to identify unseen opportunities for growth or ways to improve operational efficiency. This paper provides an in depth analysis of strategic information systems using Toyota Motor Corporation (TMC) as the case study (Columbus, 2013). The paper identifies current processes and operations in use by TMC and the gaps existing in various operations. It then explains how a strategic information system will fix the gaps identified and typical problems that might the organization might face while acquiring the SIS or using it.
Toyota Motor Corporation is a multinational corporation with its headquarters in Japan. TMC is the world’s largest maker of cars with an approximate of 316,000 employees all over the world. Since its inception TMC has constantly strived to build better products at reduced costs. For this reason Toyota developed their own unique production method which differentiates it from other automobile companies in the industry. The production system is based an idea of producing the required amount of parts when they are needed as envisioned by the founder Kiichiro Toyoda. The system also aims to significantly reduce any sort of waste so as to reduce the cost of production. The company also values every employee by allowing every individual working in the organization to maximize on his abilities by participating in productive management and improvement of their role and the environment they work in. TMC adopted a motto of “Good Thinking, Good Products” to help every employee understand that their effort is essential to ensuring that every customer gets the highest quality product. Though this principle, TMC was firmly established as the world’s lowest cost producer and most efficient producer of automobiles. Other automobile producers in the U.S and Europe became aware of the principles of lean production and invested to catch up with TMC. This lead to an expansion in the global scale for improved design and efficient manufacturers thus resulting to a lot of competition for TMC.
Challenges faced by TMC
The competition experienced by TC raised several important strategic issues that needed to be addressed for TMC to stay dominant in the market in the highly dynamic market. TMC came up with a global strategy to respond to the changing market. The global strategy has a lot of elements but the two main aspects that stand out are use of Information Technology to enhance lean design and lean production making the company to evolve to a new age of smart design strategy and smart production. The second aspect is design and development of smart cars (Cooper, 2009).
To design cars TMC formed a production engineering group that is involved in the design of the cars from the beginning. The design is based on a market segment which is segmented on the basis of style and price. The production engineering group needs to communicate with other entities involved in the manufacturing process like the suppliers and the project team. Constant communication in the progress of the design including any changes and developments need to be efficiently communicated through all the participating entities.
To conduct market segmentation, TMC relies on its dealers and sales information to acquire crucial information that helps them how to segment the market. Each geographical area has its own market needs for example in Europe and U.S there is high demand for Sport Utility Vehicles (SUV) as compared to sedan while in other areas like Asia and Africa there is high demand for long lasting cheap cars. The automobile market is very dynamic and TMC needs to implement better market segmentation strategies in order to stay ahead of their competition.
Since TMC is a multinational company, collects a lot of data on daily basis that could be analyzed strategically in order to provide information necessary for market segmentation. To analyze the data, there in need for an intelligent data analysis system that will be able to perform data analysis on the large data warehouses to help the company to know the current market segments and to predict future segments.
To assess the proposed system, TMC will have to take a risk and rely on the information generated by the proposed system. The risk will basically involve making a few units based on the information produced by the information system and distributing them to the respective markets to see how the market responds. Positive response will mean that the information generated by the system is accurate and the company can continue to rely on the information. Negative response in the market will mean that the information generated by the information system is not very accurate and thus the developing team will have to go to the drawing board to identify possible reasons as to why the information is not helpful.
Information Systems Strategy
If the proposed system is fully implemented the company can do comparisons of sales with the previous years to establish whether the proposed system meets the threshold in the long run to know its viability.
To understand what constitutes an information strategy, you have to know what it is. Information system strategy is a plan or pattern that is formulated to integrate major policies, actions and goals of an organization into one cohesive whole. Strategic information systems are implemented as a result of a strategic decision which determines the direction, limits, goals and use of resources in the organization. (Chen, Mocker, Preston and Teubner, 2010) A strategy is formulated by a company to set a direction within its own environment and to focus the effort of the employees working in the organization so as to provide consistency in its activities. An information system strategy is made of the following tasks;
- Task 1- Develop a strategic vision and mission
A strategic vision is the roadmap of the company’s future that defines the direction that the company is headed, its business position, the capabilities it plans to develop and the customer needs it wants to serve.
- Task 2- Set objectives
- Task 3- Formulate a strategy to achieve the set objectives
- Task 4- Execute and implement the strategy
- Task 5- Evaluate and make corrections
There are different levels of a strategy that a company can take. These levels are;
- Corporate level strategy
For corporate level strategies decisions made on this level are concerned with overall scope and purpose of the company while focusing on addition of value to the investment by shareholders. This level also deals with allocation of resources and the control and structures of the company.
- Business unit strategy
This level of strategy is concerned with the competitive strategy for the company and developing of new and existing market opportunities. It’s also concerned with development of new products or services.
- Operational strategy
This level of strategy is concerned with the integration of processes, resources and skills to implement the strategy.
For TMC the proposed strategy level is business unit strategy level which focuses on developing of new and existing market opportunities by coming up with a market segmentation information system that will help to understand and predict the market.
Strategy Information Systems can be effectively utilized in different approaches to bring a competitive advantage to a company through;
- Utilization of information technology to bring innovation- IT can be used effectively and uniquely to improve services or products delivered by a company where by availability of large sets of information can be used to facilitate corporate innovation and strengthen then their planning. The large sets of data can be analyzed to study the market the company is operating in (Thakur, 2006).
- Using information technology to lower costs strategically- Utilizing information technology in a business can help reduce the cost of business processes for all stakeholders including suppliers and the customers.
- Utilizing information technology to strategically promote growth- A company needs to be strategic in using information technology to address future business needs thus promoting growth of the company.
- Using information technology for strategic differentiation- for any market competitive advantage can be achieved by differentiation. Doing things in a different way from all the similar companies or businesses in competition with the company helps create a unique brand while focusing on adding value to the customer through the products or services. This strategy has been used by TMC where by instead of fully automating their production lines like other competitors in the U.S. and Europe TMC chose to automate their production lines while still using their employees. This helped them to create more quality cars for a cheaper price thus sticking to their original business model (Hong, 2008).
- Utilizing information technology to cut costs and develop alliances- Strategic use of information technology by organizations to create alliances has enabled organizations to gain a competitive advantage in the market over their competitors. Alliances can involve creating information systems and linking them to the internet or intranets that support strategic business relationships with customers and suppliers. TMC adopted this strategy by linking their information systems with the steel suppliers to help them make orders based on the demand. Use of e-commerce to get to more customers as in the case of Toyota Australia gave them a competitive advantage in the market.
- Utilizing information technology to increase production- Information technology can be used by companies to increase production by implementing Just In Time Systems like the case of TMC. Just In Time systems was first introduced by TMC before other companies adopted it (Rapp, 2000).
Many businesses or organizations experience problems while implementing strategic information systems. These challenges include;
- Lack of experts to develop the information system- A company or organization can identify a strategic information system that can help them gain a competitive advantage in the market but can lack experts within the organization that can develop the system internally within the organization. This would mean that the company will have to outsource from other companies who have the capability of doing that.
- Cost- the cost of developing a strategic information system is another issue that faces companies willing to take the step but lack the funds to allocate to such a progress. The lack of funds can also be attributed to the risk factor involved in the system as it is not guaranteed that the system will work as projected.
- Organizational politics- This happens in bigger organizations where all corporate strategic decisions are made by a boar of members. Internal politics within the board can derail such projects.
For TMC the proposed information system is intended to help the company with market segmentation. One typical problem that might occur is the excessively large sets of data stored in the company’s warehouses. For the system to work effectively, the company should make sure that all the data is analyzed by the system in order to show previous and current trends that will help predict future trends. Analyzing such data will require a lot of processing power which might require the company to build large data centers from scratch. This problem can be solved by outsourcing the work to industry experts like IBM who are capable of building a data centers. Alternatively they can deploy the application in external data centers but this would raise the issue of security as amounts of data should not be accessed by the wrong people thus if TMC opted for this solution they would have to make sure the data centers are safe from internal and external threats.
References
Chen, D., Mocker, M., Preston,S and Teubner, A. 2010. “Information Systems Strategy: Reconceptualization, Measurement, and Implications,” MIS Quarterly, (34: 2) pp.233-259.
Columbus, L., 2013. 21 Most Admired Companies Making IT A Competitive Advantage. Forbes. Available at: https://www.forbes.com/sites/louiscolumbus/2013/04/01/21-most-admired-companies-making-it-a-competitive-advantage/#6d848c2333cb [Accessed January 12, 2018].
Cooper, B., 2009. Toyota’s IT Transformation. strategy-business. Available at: https://www.strategy-business.com/article/09213?gko=f88d9 [Accessed January 12, 2018].
Hong, Y., 2008. Competitive Advantages of Toyota. Scribd. Available at: https://www.scribd.com/document/109722554/Competitive-Advantages-of-Toyota [Accessed January 12, 2018].
Rapp, W.V., 2000. AUTOMOBILES: TOYOTA MOTOR CORPORATIO. SOFTWARE AS A TOOL OF COMPETITIVE ADVANTAGE: AUTOMOBILE INDUSTRY, 1, pp.1–96. Available at: https://academiccommons.columbia.edu/download/fedora_content/download/ac:111611/CONTENT/WP_177.pdf [Accessed January 12, 2018].
Thakur, D., 2006. How do the organizations use their strategic information systems for gaining competitive advantage . Ecomputer notes. Available at: https://ecomputernotes.com/mis/information-system-planning/how-do-the-organizations-use-their-strategic-information-systems-for-gaining-competitive-advantage [Accessed January 12, 2018].
Falconer, D.J. & Hodget, R.A., Strategic information systems plainning in large companies in australia. strategic information systes. Available at: https://www.pacis-net.org/file/1995/51.pdf [Accessed January 12, 2018].
Galliers, R.D. & Leidner, D.E., 2003. Challenges and strategies in managing information systems. Strategic Information Management, Third edition. Available at: https://www2.slhs.tp.edu.tw/~619/Strategic_Information_Management.pdf [Accessed January 12, 2018].
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