Balanced Scorecard and Key Performance Indicators (KPIs) for Toyota Company
According to Cooper, Ezzamel and Qu (2017) in the Journal “Contemporary Accounting Research”, is that Balanced Score Card was developed by Robert Kaplan and David Norton in 1986 as tool to be used by managers in business daily operation and management. Chung (2018) describes Balanced Score Card as a predominantly and influential tool of management that has remains enduringly and prevalent within all organizations around the globe. Thus, at a basic level BSC assists companies to clarify their plans and communicate their firm’s key strategic priorities and goals. In addition, BSC can be fundamentally being divided into a strategic framework sections known has perspectives, the perspectives are essential for the success of the business has suggested by (Arimoto & Kurata, 2017). According to Gonzalez-Aleu et al. (2018) in the journal “The TQM Journal” is that main Balanced Score Card or BSC perspectives include the following; financial perspective, the customer’s perspective, interior process perspectives and, learning and development perspective deduced by Toyota in it management system.
- Financial perspective: The financial perspective of the Balanced Score Card is being described as the primary perspective in all profit based organization like Toyota (Arimoto & Kurata, 2017). According to Bergeron (2017) is that financial perspectives deals with all forms of Toyota Company financial objectives that has led to it successfulness in the automobile industry. In addition the key performance indicators normally make it necessary for the Toyota to perform a comparative analysis of various department. The Toyota has been obtaining outcome from the analyses of the company financials aspects that are contrasted with the result acquired on the first analysis of the firm financial aspects.
The two recommended KPIs (Key Performance Indicators) for the financial perspective in the context to Toyota Company include the total profitability of investment KPI and profitability for the net sales KPI (Hunk, 2018; Shan, Ahmad & Nor, 2016).
KPI 1; Total profitability of investment:At Toyota Company Total profitability of investment indicates how the Toyota profit has been able to generate profit over the years. It also clarify from which group and type of Toyota key consumer is bring more profit to the firm (Gibbons & Kaplan, 2015). While, the more the profit generate by Toyota form either the groups and key firm consumers the higher the profitability, and the higher the investment of Toyota. On the other hand, the low the profit generation by Toyota the lower the investment and profitability. Toyota has understand the long-term philosophy that has made it to be of greatest value. The profitability investment KPI has enable the Toyota to know how much to incur to delivering its initial car, and all requirements the company needs in striving to maximize and increase profitability (Gibbons & Kaplan, 2015). Thus, Toyota Company is thriving towards generating more profits which is one of its key long-term philosophical objectives through the help of total investment profitability KPI.
KPI 2; Profitability for net sales:indicates the effectively of how Toyota Motor Co., Ltd is creating revenues on each dollar that it is obtaining from its car sales. The profitability for net sales KPI measured the profit that Toyota Motor Co., Ltd made in both long term and in short financial decisions that reflecting the core mission of Toyota Company (Gibbons & Kaplan, 2015). The higher the profit obtained from the investment of from profit earned from Toyota net sales the greater the firms profitability in the net sales. The Toyota Company profitability for net sales has given the firm an advantage of responding to the pricing war of its vehicles in contrast to the other competitors in the same marketplace (Hunk, 2018).
The Seven Dimensions of Quality and Their Importance to Toyota Company
Consumer perspective: The consumer perspectives mainly focuses on the Toyota performance goals linked to consumers and the marketplace has deduced by (Hunk, 2018). If Toyota wants to attain its financial objectives and long term philosophy then it have to be aware of what exactly should be delivered to consumers and the specific deliveries required by the consumers. The Toyota consumer perspective objectives include, customer satisfaction and services and brand awareness. Toyota have increase its new car brand awareness through social media platform in order to gain customers satisfaction. The two recommended KPIs in context to Toyota consumer perspective include consumer’s loyalty KPI and consumer satisfaction KPI (Shan, Ahmad & Nor, 2016).
KPI 1; Consumer loyalty:indicates the Toyota client retentions. The Toyota consumers’ loyalty is the numbers of customers who normally buy Toyota cars more than once in a specified period. The Toyota consumers’ loyalty KPIs has played the main role towards the success of the company. Whereas, the greater the consumers trustworthiness in Toyota vehicles the highest the perception the firm is committed to attain its long-term philosophy (Arimoto & Kurata, 2017).
KPI 2; Consumer satisfaction:is the Toyota KPI that indicates the number of consumers’ who firm cars and after sales services satisfied. The higher the numbers of satisfied consumer’s satisfied by Toyota the higher the profit being generated, whereas, the lower the consumers’ satisfied the lower the profit Toyota is making, but the is loss higher when consumers are not satisfied (Goya et al., 2018). Hence, Toyota consumer’s satisfaction is the key performance indictors that Toyota Company has improve every year in order to attainment its mission (Arimoto & Kurata, 2017).
Satisfaction KPI Figure 4: (Cooper, Ezzamel & Qu, 2017).
- Internal perspective: Internal perspective answers the questions on how Toyota Motor Co., Ltd delivers to its consumer’s related objectives and the financial related goals in a specified period. Under this perspective Toyota has to set its interior operational goals and, what the business requires to have. Toyota has also ensure the availability of all resources needed in order to increase its performance (Arimoto & Kurata, 2017). The Toyota internal process perspectives include capacity deployment and quality optimization (Goya et al., 2018).
The two recommended KPIs on internal perspective in context to Toyota include labour productivity growth KPI and administrative expenses per employee KPI.
- KPI 1; Labour productivity growth: Toyota Company labour productivity growth show the output of the Toyota in the economy. The labour productivity of the Toyota Company has been grouped into three aspects. The aspects are investment and saving at the Toyota capital, technological advancement and human workforce. Thus, the lower the Toyota output in the economy the lower the productivity it is in the economy. Whereas, the higher the productivity the higher the output and growth of the Toyota in the economy. The Toyota has achieved its main goals and long term philosophy based on the labour productivity growth has the firm increased its investment in labour market.
Toyota Growth KPI Figure 5: (Cooper, Ezzamel & Qu, 2017).
- KPI 2; Administrative expenses per employee:the Toyota Company cost of employing each worker including wages and benefits of employees are addressed under administrative KPI. The lower the Toyota administrative expenses per worker the higher the profit and lower the business operation cost, whereas, the Toyota administrative cost is too high the higher the operational cost and hence low profit generation. Toyota has been paying its workers based on and according to their job performance statistics (Goya et al., 2018). Hence, long-term philosophy of Toyota has been attained through the reduction of administrative expenses (Arimoto & Kurata, 2017).
Administrative KPI Figure 6: (Bergeron, 2017).
- Learning and development perspective: The learning and growth perspective is the final components of Balanced Score Card addressed by Goya et al. (2018) in the journal “Transactions on Intelligent Transportation Systems”. The main components of the perspective at Toyota include the human capital, information investment, and administrative capital. Human investment or capital at Toyota are skills and performance management. Whereas, information investment or capital include information system and technology set-up and organizational capital involves workers alignment and teamwork in the company. In addition, Toyota organization management regularly focuses on the use of indicators that are characterized by uncompleted procedures dissimilar to final KPIs (Goya et al., 2018). The workers in various department at Toyota has been trained in order for them to complete a big numbers of successful innovation in the company.
The two KPIs recommended for the learning and growth perspectives in the context to Toyota include non-production expenses per consumer KPI and marketing expenses per consumers KPI.
- KPI 1; Non-production expenses per customer:Toyota Motor Co., Ltd does not subsidize directly to the manufacturing cost linked to production of its vehicle, but either it subsidize them indirectly as being indicated by non-production per consumer KPI. The KPI enabled Toyota to produce more cars since the manufacturing cost has been allowed. The higher the cost of production the lower the car being produced by Toyota, while the lower the cost of production the more cars being produced by Toyota. Hence, Toyota long-term philosophy is achieved, because low cost of production being incur by Toyota and more the products produced will be of high quality and reliable, the higher the profit.
Non-production KPI (Arimoto & Kurata, 2017).
- KPI 2; Marketing expenses per consumers:indicates the amount of money spend by a Toyota on every consumer during the marketing period (Hladchenko, 2015). The higher the money spend in marketing per consumer by Toyota the lesser the profit Toyota Motor Company Ltd makes. Thus, Toyota has been strive to reduce money spend on marketing in order to make more profit. Hunks (2018), clarify that if the cost of marketing or advertisement per individual is low the profit then the company will be create higher profit, hence it long-term philosophy of thriving into corporate world will continue.
Toyota Marketing KPI Figure 8; (Gonzalez-Aleu et al., 2018)
Identify and Explain seven dimension of quality and explain how the dimensions are important to Toyota Company.
The managers from US know that it is mandatory for them to improve the quality of their products and services, because most of the US based customers have informed them. According to the study conducted in 1981, it was reported that more than 50 percent of the United State customers believed that the quality of the United State commodities have reduced over the past five years (Kerai & Saleh, 2017). In addition, most current survey indicates that more than a quarter of the United State consumers are not confident on the US manufacturing on whether the industry can deliver reliable commodities (Xiaoping & Xuan, 2017). Various company have decided to adjust to the by upgrading their quality by adopting plans that have been indispensable of the quality movement for the creation of quality cost calculations, dependability in engineering and controlling of statistical quality. However, the problem made Japanese and Europe competition to intensify because not many of the firms were seriously trying to make use of the quality programs work even as they executed the programs. It also being suggested that if the companies would have intensify the quality control programs implementation, consumers from United State would not be complaining of the low quality commodities (Xiaoping & Xuan, 2017). In addition David Garvin proposes the essential quality of dimensions or group of quality which acts has the framework for planning analysis (Hladchenko, 2015).
Quality Improvement Methods Used by Toyota Company
Therefore, it is significant to understand the quality that are linked to the continuous improvements in an organization (TOYOTA). The seven dimension of quality mentioned by David A Garvin in 1986 include durability, performance, features, conformance, serviceability, aesthetics and the perceived quality (Xiaoping & Xuan, 2017). In the context to Garvin seven quality of dimension 2014 FJ Cruiser a brand of Toyota can be used to outlined all the seven quality as follows:
- Performance: Performance is a key dimension of quality that can be referred as the cars crucial operational characteristics or traits. In the instance, 2014 FJ Cruiser basic performance traits include acceleration, cruising, coziness, speed and comfort. The performance of the 2014 FJ Cruiser Toyota brand most can be contingent on the efficiency of its fuel consumption, competence of the braking system and its acceleration time. The performance of FJ Cruiser has been verified and rated by the Toyota. 2014 FJ Cruiser Toyota brand is a Sports Utility Vehicle or SUV, being powered on a 4.0 liter of fuel, V6 engine that produces 260 horsepower. The car is an automatic transmission in standard and its offers both rear and part-time 4 wheel drive. The can is packed with a 6 speed manual exclusive with all-time 4 wheel drive with power of more than 220 kw at 3500rpm. 2014 FJ Cruiser is a highly performing vehicle, that is suitable for extreme conditions, but it can directly compete directly with Jeep Wrangler and Nissan Xterra. Because it 2014 FJ Cruiser Toyota brands has been ranked by EPA base on the specific performance aspects (Xiaoping & Xuan, 2017). Conversely, the general performance ranking of the 2014 FJ Cruiser is challenging to develop particularly when it involves the benefits that are not required by every buyer.
- Features: It is the second aspects of dimension of quality based on the performance in context to 2014 FJ Cruiser Toyota brand. The features can be from basic or more advanced depending with the type of the car price. Feature of the FJ Cruiser is specific based on its principal performance and secondary performance characteristics. The high-end cars like FJ Cruiser comprises of the maximum traits because of its price (Xiaoping & Xuan, 2017). The 2014 FJ Cruiser is a kind of high-end car that have traits like short wheelbase that allows the car to maintain its pace while taking breaking, the anti-lock braking system together with the short wheelbase play the same role in the car. The 2014 FJ Cruiser comprises of standards traits including the 17 inch steel wheel, air conditions, power windows with locks, the Bluetooth phone and audio. It also has various off-road oriented traits including heavy duty suspension elements, tires and themed packages which usually comprised particular styling details. FJ Cruiser got emergency stop signal that indicates to the driver where there is a danger, has it gives a signal. This features make FJ Cruiser to have an exclusive image that improves it quality (Xiaoping & Xuan, 2017); (Kazandjian, 2017).
- Reliability: It reflects the probability and possibility of a car malfunctioning or when the car will fail to work within a given time. Or the trust of how reliable the vehicle can be. When spending a lot of money on repairing the can be as a result of the manufactures fault brings the questions of how reliable a car is. The 2014 FJ Cruiser Toyota brand has never happened to be down because of the manufacturer fault. The fault can only appear when it is in the market (Kazandjian, 2017). FJ Cruiser has never faced any technical challenges that can result to it being recalled but it has remains still (Kazandjian, 2017). Due to lack of causalities the vehicle has been more reliable to consumers. The reliability of the car has been because of its verification and fully testing done by Toyota Company technicians before FJ Cruiser is realized in the market. Finally if anything happens to FJ Cruiser the owner can take it to correction and Toyota Company will provides the replacement (Kazandjian, 2017).
- Conformance: The degree in which the car is design and it operational traits meeting it establishment is referred has the conformance. Two common measures that are taken by FJ Cruiser Toyota brand is the defect rate of the car. The defect of the FJ Cruiser is checked and verified before the reach it user. The car service demands depends with the user has some user may prefer to service the vehicle daily, weekly or monthly. The design of FJ Cruiser and its operational framework are very strong hence no much service is being required by the user (Shan, Ahmad & Nor, 2016).
- Durability: Durability of a car is the measurable of its life and long it can last in its driving lifespan. Durability dimension car is both economic and technical. The technical durability is being described as the amount of usage in which one obtain from the commodity before the end of its life spans or it deteriorates (Shan, Ahmad & Nor, 2016). The car 2014 FJ Cruiser is functioning fully, highly performing mid-SUV which is suitable for all conditions like when the car is climbing a hill and in off road environments.FJ Cruiser has been tested in all kind of extreme conditions as a process of testing its durability. The vehicle is made using a high and tensile steel that make it to have a very strong framework. The car constitute shock absorbers that make it easy and smooth to drive. Shan, Ahmad and Nor (2016) suggested that the lifespan of FJ Cruiser can only be decided by the consumer, when it is used in an appropriate way. FJ Cruiser performance range from 400k to 600k that fit it as a mid-SUV vehicle. According to Shan, Ahmad and Nor (2016) the vehicle is more durable because of its strong framework.
- Serviceability: according to North and Walsh (2016), serviceability is what is offered by the company after sales. Serviceability may include having genuine spare for the car users, specialized trained mechanics and technicians as well as the diagnostics software. For 2014 FJ Cruiser Toyota brand the service centers are numerous all over the words, for instance some services centers are found in city centers and environs. The technicians and mechanics are normally trained by the company and accredited as well, they are trained specifically for 2014 FJ Cruiser. The software being used detects the car recent problems and the problem that may result in the future. The procedures of using the software is very easy and faster. In addition, the genuine parts used by the dealers indicates the availability of all parts of FJ Cruiser from the suppliers. The owners of the vehicles are provided with often reminders that they need to take the car to service and how to keep it right. Hence, after sales of 2014 FJ Cruiser add up its quality (Rouf et al., 2017).
- Perceived Quality:Perceived quality of a car is the superior reliability of the quality. For instance, the durability of 2014 FJ Cruiser Toyota brand is occasionally observed and perceived has it superior quality, the car does not start despite of how satisfying ability of the car (Rouf et al., 2017). The perceived quality of the FJ Cruiser is based on the tangibility and intangibility factors of the car. The two aspect make 2014 FJ Cruiser to be perceived has superior even after 90 days of use because it is still perceived as the quality vehicle. However, the quality in the FJ Cruiser in the market is very high has most user prefer it (Shan, Ahmad & Nor, 2016).
Question 3. The Two Quality Improvement Methods used by Toyota Company
A). Kaizen is a Japanese derived word that mean improvement, enhancement or moving for better. The word Kaizen is made from the combination of two words “Kai” and “Zen”. The word “Kai” means change while “Zen” means good or which is good as deduced by (Xiaoping & Xuan, 2017). The Kaizen idea was inferred on Toyota Company after the visit of the company Chief Executive Officer Taiichi Ohono from the United States on the production system matter linked to the company. Kaizen process at Toyota is being practiced by each members of the aim of making improvement of the production system (Pinceti, Vanti & Giannettoni, 2017). The procedure involves each member at each phase in suggesting changes, followed by team pulling and the brainstorming session is being done in the implementation of the production system plan. Kaizen process basically involves five phases of quality management that are discussed below;
- (SEIRI) Sort Out: This is the first phase out of the five phases in the Kaizen process. When the Toyota CEOs Taiichi came from Henry Ford line assembly he found that a lot of waste in the process of production, that reduced the product quality in general. The phase involved sorting out of the waste in the production process, for it to be more efficient (Xiaoping & Xuan, 2017). The sorting out is done by elimination of unnecessary items at the place of work. The eradication started with detecting of waste and then, followed by the detection of useful item. The useful items detected were re-cycled but the definitive waste was through way or dumped. Through this procedure reduced the most waste and improved the general quality of the product.
- (SEITION) Set In Order: this the second phase, which involves setting up of the Inventory in a right way (Parmenter, 2015). At Toyota Company inventory of all tools and elements used in the car assembly are being recorded in the inventories. In addition, each Toyota workplace has its specific inventory that minimizes to be used when assembling the car, and also maximized the cars to be assembled in a particular period of time (Shan, Ahmad & Nor, 2016).
III. (SEISO) Shine: The third step of Kaizen requires workplace to be clean and safe for the company workers. By keeping the workplace clean is not the only way of improving the quality of the car. But things like reducing the accidents similar to slipping will improve the quality of the car. By reducing such accidents the workstations will be safe from any hazards occurrence. Thus, Toyota Company is mostly concerned with its workers safety at workplace (Shan, Ahmad & Nor, 2016).
- (SEIKETSU) Standardize: the fourth step is the standardizing the process of assembling and in the production of the product (Rouf et al., 2017). In case of Toyota, standardize is the process in which the cost of production is being reduced as well as the reduction for the cost of training workers.
- (SHITSUKE) Sustain: This step involves the existing workers and the current employees at Toyota. The sustain step suggest that the Toyota workers has to undergo a regularly training sessions. Consequently, this five phases of Kaizen will be successfully executed by Toyota on its production system that will result to production of better and improved general quality for the products (Rouf et al., 2017).
B). TQM or Total Quality Management is another techniques being used by Toyota to produced better-quality and improved overall products. The Total Quality Management has allowed Toyota to uphold a quality type of management from all its departments including from top offices to bottom offices, inside and outside of the company. For instance, Toyota only can accredit quality through Total Quality Management in each of its department because the purveyors are also accredited by the Total Quality Management (Pinceti, Vanti & Giannettoni, 2017). This means that purveyors that Toyota are outsourcing materials from are very efficient and more responsible and are able to provide quality materials with the mark of Total Quality Management Certification. The second phase of the first step of quality check includes checking of the quality of the Toyota production has it is fully working and quality is doped. Another step involves the suppliers who are providing quality products to the consumer service to the purchasers. On the other hand, to maintain Total Quality Management is too any expensive aspect to most companies and this is the main reason why globally established companies are the one which can afford to maintain TQMs. It also take a lot of time to check the product quality and accredits the Total Quality Management has its expenditure is very high. Despite of the expensive nature of the TQM, the consumers satisfaction toward Toyota product is being increased because of the fully verification of its products quality. The quality improvement checks by the Total Quality Management is at the scope being improved more, if the reduction is realized at the product sales capacity (Pinceti, Vanti & Giannettoni, 2017). The reduction of sales can easy be outlined by TQM because each department of Toyota is being quality managed that provides an ease of tracking the problem or mistake. The problem can also be solved easily after its being detected at Toyota (Pinceti, Vanti & Giannettoni, 2017).
References
Arimoto, Y., & Kurata, M. (2017). Adoption of Management Practices in the Public Sector of Bangladesh.
Bergeron, B. P. (2017). Performance management in healthcare: from key performance indicators to balanced scorecard. Productivity Press.
Chung, C. H. (2018). The Kaizen Wheel–an integrated philosophical foundation for total continuous improvement. The TQM Journal.
Cooper, D. J., Ezzamel, M., & Qu, S. Q. (2017). Popularizing a management accounting idea: The case of the balanced scorecard. Contemporary Accounting Research, 34(2), 991-1025.
Gibbons, R., & Kaplan, R. S. (2015). Formal Measures in Informal Management: Can a Balanced Scorecard Change a Culture? American Economic Review, 105(5), 447-51.
Gonzalez-Aleu, F., Van Aken, E. M., Cross, J., & Glover, W. J. (2018). Continuous improvement project within Kaizen: critical success factors in hospitals. The TQM Journal.
Goya, J., De Miguel, G., Arrizabalaga, S., Zamora-Cadenas, L., Adin, I., & Mendizabal, J. (2018). Methodology and Key Performance Indicators (KPIs) for Railway On-Board Positioning Systems. IEEE Transactions on Intelligent Transportation Systems.
Hladchenko, M. (2015). Balanced Scorecard–a strategic management system of the higher education institution. International Journal of Educational Management, 29(2), 167-176.
Hong, S. S., Lee, C. O., Lee, J. Y., & Kim, Y. S. (2015). Evaluation of the Quality of the Underground Dimension Stones-The Example of the Granite Quarry in the Geochang Area. The Journal of the Petrological Society of Korea, 24(3), 233-252.
Hoque, Z. (2014). 20 years of studies on the balanced scorecard: trends, accomplishments, gaps and opportunities for future research. The British accounting review, 46(1), 33-59.
Hunk, S. C. (2018). TQM and Kaizen Wheel–an integrated philosophical foundation for total continuous improvement. The TQM and Kaizen Journal.
Kazandjian, V. A. (2017). Uncertainty in Clinical Knowledge: A Critical Dimension of Quality Evaluation. International Journal of User-Driven Healthcare (IJUDH), 7(2), 17-28.
Kerai, S., & Saleh, A. (2017). Applying the Balanced Scorecard to Improve Student Satisfaction, Market Share and Profitability. AMR, 27.
Kerzner, H. (2017). Project management metrics, KPIs, and dashboards: a guide to measuring and monitoring project performance. John Wiley & Sons.
Khoja, S. S., Prajapati, A. M., Khoja, S. S., Panjwani, K. R., & Ray, J. (2017). A REVIEW ON QUALITY ASPECTS, EVOLUTION OF QUALITY, DIMENSION OF QUALITY AND ACTION PLAN FOR ENHANCING QUALITY CULTURE. Pharma Science Monitor, 8(4).
Kimura, C. A., Guilhem, D. B., Kamada, I., Abreu, B. S. D., & Fortes, R. C. (2017). Oncology ostomized patients’ perception regarding sexual relationship as an important dimension in quality of life. Journal of Coloproctology (Rio de Janeiro), 37(3), 199-204.
Mendez, J., & Vila-Alonso, M. (2018). Three-dimensional sustainability of Kaizen. The TQM Journal.
Musa, A., Odili, S., & Osiah, P. C. (2018). ASSESSMENT OF THE INPUT DIMENSION FOR QUALITY ASSURANCE IN BUSINESS TEACHER EDUCATION AT THE NCE LEVEL IN NIGERIA. Nigerian Journal of Business Education (NIGJBED), 1(2), 373-386.
North, S. A., & Walsh, J. (2016). Mum’s story–refocusing on the human dimension of quality healthcare. Future Hospital Journal, 3(3), 195-196.
Parmenter, D. (2015). Key performance indicators: developing, implementing, and using winning KPIs. John Wiley & Sons.
Pinceti, P., Vanti, M., & Giannettoni, M. (2017). Technical KPIs for microgrids. In Systems Engineering Symposium (ISSE), 2017 IEEE International (pp. 1-7). IEEE.
Rouf, M. A., Debnath, S. C., Haque, M. E., Chowdhury, Z. M. R., Hasan, D. M. M., Zannat, T., & Rabby, M. F. (2017). Quality of hospital services in 5S-KAIZEN-TQM implemented secondary level hospital: a cross-sectional study. Asian Journal of Medical and Biological Research, 3(3), 335-340.
Shan, A. W., Ahmad, M. F., & Nor, N. H. M. (2016). The Mediating Effect of Kaizen between Total Quality Management (TQM) and Business Performance. In IOP Conference Series: Materials Science and Engineering (Vol. 160, No. 1, p. 012012). IOP Publishing.
Xiaoping, J., & Xuan, Z. (2017). Research on the Key Questions of Wisdom Community: Connotation, Dimension and Quality Standard. The Journal of Shanghai Administration Institute, 6, 001.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
