Assignment 2.Operations Strategy

OPERATIONS STRATEGY



















1. Post 1995, Toyota pursued an aggressive globalization and cost reduction strategy. While
at it, did Toyota also implement well, the fourteen principles of the “Toyota Way”? Choose
any four principles and explain in detail (with appropriate examples), whether they were or
were not implemented well, in the run up leading to “The Accelerator Crisis”.

Principle 1: At Toyota they based their management decision on a long term philosophy,
even at the expense of short term financial goals.
Based on their philosophy they launched “Toyota 2005 Vision” with slogan “harmonious
growth” through a “global master plan” and “global profit management”. At its core it consisted
of a strong global manufacturing network that targeted the local markets from Argentina to
Thailand to the U.S.
This “vision 2005” was the foundation for other principles. This understood the company‟s place
in the history and worked to bring the company to the next level.

Principle 4: Level out the workload by eliminating waste (heijunka)
Principle 11: Respect your extended network of partners by challenging them and helping
them improve
Eliminating waste was one of their strategies to cut cost due to criticality of speed of product
development cycles. This yielded a program CCC21, Construction of Cost Competitiveness for
21
st
century. There was pressure to cut cost at every stage which was possible only by
eliminating wastes. Their goal was to cut the number of component parts by 50% which were not
very essential example grip handles mounted above the door inside most Toyota vehicle. These
parts were eliminated by extensive scrutinization by designers and working closely with the
suppliers, they were able to reduce the parts required by 85% from 34 to 5.

Principle 9: Grow leaders who thoroughly understand the work, live the philosophy and
teach it to others.
Toyota had exceptional Leaders throughout from within the organization including some were
nonfamily leaders. Leaders like Akio Toyoda, grandson of the founder Kiichiro Toyoda. Akio
Toyoda, in 2010 when Toyota‟s leadership was widely criticized for slow response in addressing
the problems went ahead and testified about the recent accelerator crisis.
When Toyota was losing market share and risk of having losses due to weak Japanese economy
and increasing trade friction with U.S nonfamily member Hiroshi Okuda took over the situation
and revived the company financially and gained market share quickly. He also launched “Toyota
2005 Vision” based on the strong Toyotas philosophy.

Though Toyota since 1995 did not follow most of their principles instead they most of the time
they did completely opposite of what they preached in their principles, which lead to most of the
crisis situations like the case of accelerator crisis or the case of oil sludge.






2. For the case on Tata Consultancy Services: Selling Certainty go through Exhibit 16.
Please work out the Revenue per Employee and Operating Cost per Employee for different
TCS ad Competition. What conclusions can you draw on the kind of competitive strategy
that TCS was pursuing with respect to its competitors?

TCS Infosys Cognizant IBM Accenture
Revenue ( in $B) 4.3 3.1 1.4 48.2 21.5
Operating Margin (%) 24.9 27.9 18 10.5 11.6
Operating Cost (in $B) 3.44 2.42 1.19 43.62 19.27
Total Staff (Starting, 000s) 66 53 24 190 140
Total Staff (Ending, 000s) 89 72 39 207 170
Average Staff ( 000s) 77.5 62.5 31.5 198.5 155
Revenue per Employee ($) 55484 49600 44444 242821 138710
Operating Cost per employee($) 44423 38780 37665 219748 124292

The revenue per employee was much lower than its global leader but much higher than its Indian
competitors. At TCS, their business is generating more revenues per employees with higher
operating cost per employees compared to Indian competitors.

3. What is being promised by this launch advertisement? Why was it necessary to launch
this campaign at that particular point of time? Does TCS have the operational capabilities
to deliver on this promise, vis-à-vis its competitors? Explain with data mentioned in the
case. (Refer Exhibit 23 of the case on TCS.)

TCS was known for its delivery excellence that is on time and within the budget and with
consistent superior quality. This was necessary because of growing completion, ruthless
customers and based on their operational excellence they wanted to differentiate themselves from
their competitors. They reviewed their strengths and weakness to do. A study was conducted to
do understand this better. They this had few advantages like 96.6% on time completion of
deliverables.98.8% deliverables had no severity 1 or 2 defects. 89% delivery met customer‟s
expectations. Their defects rate was very low compared to industry benchmark i.e. 1.4 defects
per 1000 function points. Only 3.3% variation in the budget for fixed price projects. Cost of
quality was estimated at 16% for TCS„s maintenance projects and 25% for its development
projects versus general cost of quality estimated to vary from 62% at CMM level 1 to 22% at
level 5. From this above data it can be understood that TCS had the operational capabilities to
deliver on the promise compared to its competitors.