Sample Term Paper on Comparing Ford Company with Toyota Company

Comparing Ford Company with Toyota Company

Introduction

Regional differences have for a long period influenced the way global leaders run companies and the way they conduct businesses. While on one hand these differences have enhanced businesses, they have on the other hand undermined some business practices. In terms of business conduct, studies demonstrate that Americans differ from Asians. In particular, the Geography of thought and Hofstede’s cultures and organizations depict that Americans tend to be more individualistic while Asians tend to be more collective (Nisbett 2010, p. 31). As a result, U.S corporate governance tends to narrow its focus on ensuring that companies make profit for their shareholders without focusing much on other primary stakeholders. On the other hand, Asian based corporate governance tends to focus its attention on the welfare of all primary shareholders as it strives towards making profit for the shareholders. This essay compares and contrasts Toyota Company with Ford Company. Toyota Company is a Japanese company that was founded in 1937 while Ford Company is an American company that was founded in 1903. The two multinational companies manufacture different types of vehicles and they compete with each other in the global market.

Ownership and control

Ford Company

Henry Ford is the founder of the company. The company has its head offices in Michigan, USA. The current company’s chairperson is William Clay Ford, junior who has been a member of the board since 1988 (Hitt, Ireland & Hoskisson, p. 125). Previously, William Ford junior served as the company’s CEO between 2001 and 2006. During this period, the company made profits for three years before making losses for the other years. The company’s board of directors comprises of thirteen personalities with diverse career backgrounds. These board members are elected by shareholders based on the number of shares they have in the company except the company’s CEO. The current three board members come from the Ford family while six of the rest have been in the company for over ten years now. The board members coming from the Ford family are the current company’s chairperson Mr. William Clay Ford junior, Edsel B. Ford II and William Clay Ford. Other board members include John Bond, Kimberly Casino; Stephen Butler; Irvine Hockaday; Alan Mulally, Jorma Ollila; John Thornton; Homer Neal; Ellen Marram and Richard Manoogian.

Experience demonstrates that the Ford family has significant influence on the company. As a result, it was only at the time the company started making losses that the current company’s chairperson relinquished his CEO position (Hitt, Ireland & Hoskisson, p. 126). The duty of the board members in this company is to monitor the performance of the company’s CEO as well as monitor the company’s top management team with an aim of ensuring that the interests of shareholders are protected and served well.

As one of the pioneers in automotive industry, Ford Company has a long history of success even though this history is currently changing with the emergence of other automotive companies such as Toyota. The company was initially owned by Henry Ford and a few other investors. Consequently, the Ford family has significant influence on the company because the family still holds a significant share of the company. However, since the listing of the company on the NYSE, the company has become a publicly owned company even though the Ford family still has significant influence on the company. This notwithstanding, decision making processes are at the hands of the board members meaning that even if Ford family has influence on the company, its influence is somewhat limited. Ford Company’s current CEO is Alan Mulally. He is also the company’s president and he is an American with profound knowledge in science and management. As the company’s CEO, Alan is also a board member (Hitt, Ireland & Hoskisson, p. 126). The company’s chief operating officer is Mark Fields. This person served previously as the executive vice president for the company.

Toyota Company

The company’s head offices are in Japan while its production bases are in Europe, Asia, Japan and North America. The company specializes in designing and manufacturing motor vehicles even though it engages in other minor activities such as financials. The company sells its automotive products through dealers (UOIG 2014, p. 11). Accordingly, even if the company does not have manufacturing plants in all parts of the world, its presence is felt in almost every part of the world. In fact, although the company does not have its headquarters in USA, it has regional offices in New York, Kentucky and in other states (Ireland, Hoskisson & Hitt 2008, p. 242).

Toyota Company was established as a family company by Toyoda Sakichi. Accordingly, just like the Ford Company, Toyoda family has over the years been having significant influence on the company. Nonetheless, since the listing of the company on Japanese stock market, the company has become a publicly owned company just like the Ford Company. In relation to this fact, the board members are responsible for making critical decisions in the company even if Toyoda family still has significantly influence in the company (Haas-Kotzegger 2013, p. 8).

 

Differences

In terms of ownership and control, the two companies do not differ significantly. However, the manners in which the two companies operate indicate that there is significant difference between the way Americans conduct businesses with the way Japanese conduct businesses. Current literature particular the Geography of thought together with Hofstede’s cultures and organizations supports this claim. On one hand, the Geography of thought indicates that Americans differ from Asians in terms of thought. On the other hand, Hofstede’s cultures and organizations indicate that cultural practices influence the way global leaders run companies.

According to Hofstede, Americans corporate leaders are concerned with ensuring that they create wealth for shareholders no matter what because Americans are relatively individualistic (2003, p. 89). On the contrary, Japanese corporate leaders are concerned with the welfare of all primary stakeholders even if they strive towards creating wealth for shareholders. This means that Japanese corporate leaders do not downplay the interests of customers, employees and suppliers as they strive towards creating wealth for shareholders. However, this does not mean that American leaders downplay the interests of suppliers, customers and employees as they strive towards making profits for shareholders, but it means that they put more emphasizes on profit that they put on other primary stakeholders. As a result, in USA, a non-performing individual is likely to lose his/her job in Ford Company because of the critical emphasis put on shareholders’ interests. On the contrary, Asian leaders are likely to condone such an individual even when companies are performing poorly (Ireland, Hoskisson & Hitt 2008, p. 240). This means that Toyota Company is likely to condone non-performing individuals even when the company is not making profits.

Effects of institutional contexts on resources and capabilities

In terms of locating the head offices, the two companies seem to handle this issue the same way. On one hand, the Ford Company has its head offices in USA because its origins are in Michigan. On the other hand, Toyota Company has its head offices in Tokyo because its origins are in Japan (Toyota 2015). The same influence is also seen in the distribution of companies’ resources across the various parts of the world even if other factors seem to play some role on the distribution of those resources.

With regard to Toyota Company, the company has regional manufacturing facilities in different parts of the world. As at the end of last year, the company had 54 manufacturing facilities in 27 countries (Liker 2004, p. 6). Asia had 24 of these manufacturing facilities. North America had two manufacturing facilities in Canada and nine such facilities in USA (Toyota 2015).

The Latin America had four such manufacturing facilities. Africa had three such facilities while Europe has ten of those facilities. Middle East had only one manufacturing facility. Australia also had one manufacturing facility. In terms of regional headquarters, the company has these offices in USA, Europe and in Asia. Once again, majority of these offices are based in Asia. Indeed, while USA and Europe have one office each, Asia has three of these offices (Toyota 2015). Based on this finding, it is clear that the location of the company’s head office as well as its origins influence the way the company distributes its resources to various parts of the world. Evidence shows that Toyota Company has more regional offices and manufacturing facilities in Asia than in any other part of the world.

Ford Company, on the other hand, has regional offices and marketing outlets in different parts of the world. In addition, it has manufacturing facilities at different parts of the world as well. The company has 28 manufacturing facilities in North America. In Europe, it has 25 manufacturing facilities. In Asia, the company has 14 manufacturing facilities. In Latin America, the company has 12 manufacturing facilities. In Africa, the company has two manufacturing facilities based in South Africa. In Australia, the company has five manufacturing facilities (Ford 2015). Looking at the concentration of these manufacturing facilities, it is also clear that majority of them are in USA and in Europe as well as in Asia and Latin America. This demonstrates that the company’s resources are located near the company’s head offices even if Asia appears to be a significant market for the company. In comparison to Toyota Company, the two companies have adopted the same strategy in distributing their resources to different parts of the world.

As it had been highlighted earlier on, while the two companies put emphasizes on making wealth for shareholders, the Ford Company puts more emphasizes on this issue than Toyota Company does. Accordingly, the Ford Company has in the recent past been closing some of its regional outlets that have been running at losses. The company has also indicated that it is likely to do the same to other regional outlets that are non-performing. Although one might argue that Toyota Company has not closed any of its outlets because it has not been experiencing losses as Ford Company has been experiencing, evidence demonstrates that Toyota Company has been maintaining all its outlets no matter the challenges in new markets. For example, the company withstood the challenges in North America until its sales improved. Once again, the institutional backgrounds for the two companies have significant influence on this issue. On one hand, the Ford Company is concerned more with making wealth for its shareholders at the expense of non-performing employees. On the other hand, Toyota Company caters for the welfare of all its stakeholders.

Effects of institutional differences on firms’ internationalization

From Toyota Company’s website, it is evident that majority of the senior people in the company have their origins in Asia particularly in Japan (Abe & Fitzgerald 2014, p. 114). On the other hand, looking at Ford Company’s board members, it is also evident that majority of these people come from USA. This means that Ford Company does not differ significantly from Toyota Company in terms of the people at the company’s top management. Perhaps, the location of the companies’ head offices plays a critical role on this issue. However, this is only a speculation that needs further investigation. This notwithstanding, the board members for the two companies influence significantly the way both companies run and operate at different parts of the world.

On one hand, Ford Company being established before Toyota Company was the first one to expand to other parts of the world. In fact, Toyoda Sikachi’s son Toyoda Kiichiro was hesitant to venture into automotive industry because he feared to compete with the Ford Company that was already in Japan at the time he was starting Toyota Company (Hino 2006, p. 96). A closer look at this issue demonstrates that Ford Company’s board members have all along been interested in expanding the company to other parts of the world. However, stiff competition has recently forced the company to close some of its manufacturing facilities that have been running at loss.

In terms of global operations, Ford Company has four main segments namely Ford South America, Ford Asia Pacific and Africa, Ford Europe and Ford North America. These segments operate slightly independent of the head office for the sake of making profit. Accordingly, each segment files its financial report at the end of every year (UOIG 2014, p. 2). However, this does not mean that regional offices do not report directly to the company’s CEO who oversees the overall performance of the company. It only means that the company’s CEO gives these offices some independence as American leaders usually conduct businesses. Based on this practice, regional offices in the four different geographical locations have control over the business ventures that take place in their regions. In particular, Ford’s regional offices have control over product development, product pricing and communication guidelines (Haas-Kotzegger 2013, p. 11).

Apart from the four regional segments, there is a fifth segment in Ford Company that manages the company’s luxury vehicles namely Land Rover, Jaguar and Volvo. As a business strategy, this segment is based in Europe and it operates as an independent European business venture. However, the segment reports to the company’s Ford Europe based in the U.K (Bonin & Goey 2009, p. 467). This is an interesting business strategy because one would expect it to report to the head office based in the US. On the other hand, even though Toyota Company allows regional offices to operate somewhat independent of the head office, regional offices do not have control over majority of the company’s business ventures. Indeed, regional offices do not have control on product development and pricing. All these things are centralized at the company’s head offices. As it can be seen, Ford Company’s subsidiaries have more powers than those of Toyota Company. Ford Company tries to maximize profit at regional levels using this strategy.

In terms of manufacturing, a third of the Ford Company’s manufacturing facilities are based in Europe because Europe has a good history of manufacturing vehicles (Martel 2011, p. 110). The company’s board members understand this and utilize it in their business strategy. In relation to this fact and the various regulations that complicate the management of automotive company from head offices that are far away, Ford Company has a strong regional office in Europe. Of all the other regional offices, Ford Europe with its headquarters in U.K operates as an autonomous business entity (Haas-Kotzegger 2013, p. 9). This business practices influences the way Ford Company manufactures and distributes its vehicles throughout the world. In particular, the company manufactures vehicles based on customers’ financial capabilities. Consequently, unlike Toyota Company that manufactures and sells the same vehicle models throughout the world, Ford Company’s regional offices specialize in vehicles that fit customers living in their regions. To a great extent, this practice dictates the types of vehicles that Ford Company manufactures at its regional manufacturing facilities. Toyota Company utilizes a different penetration strategy that is dictated by the company’s head office.

The institutional differences also affect the way the two companies establish research and development facilities. For the Ford Company, the company has two similar research and development facilities in Europe. One facility is based in Germany while the other facility is based in U.K. Other than developing one facility like Toyota Company often does, Ford Company aims at differentiating the two facilities based on their roles (Haas-Kotzegger 2013, p. 10). This has enabled the Ford Company to manufacture different types of vehicles while Toyota Company has remained with few car models.

One notable thing with the two companies is that regional offices give their respective financial reports at the end of every year. Apart from giving financial reports, regional offices also give other reports that relate to sustainability and CSR. Another thing is that the two companies have the codes of conduct for their employees. However, these codes of conduct differ based on what the companies prioritize. The Ford Company has a strategic plan under the name one Ford. This plan was adopted by Alan Mulally, the company’s CEO, back in 2006. The plan aims at enabling the company overcome the challenges in the market. On the other hand, Toyota Company has a corporate creed that inspires employees towards contributing to the development of the company.

Conclusion

In the effort of trying to show how regional differences and geography of thought influence the way multinational organizations are organized and managed, this term paper focused its attention on Ford Company and Toyota Company. The Ford Company is an American company with its head office in Michigan while Toyota Company is a Japanese company with its head office in Tokyo, Japan. Both companies are in the automotive industry and they compete globally. The term paper established that although the two companies do not differ significantly in some areas, the top management teams for the two companies run the two organizations differently. On one hand, in an effort of ensuring that Ford Company makes profit for the shareholders, the company’s board members allow regional offices to operate as independent business entity. Accordingly, these offices have their own research and development facilities. On the other hand, Toyota Company does not give its regional offices such autonomy, but it controls all manufacturing practices from its head office. As a result, the company does not have many vehicle models like Ford Company does.

References

Abe, E. & Fitzgerald, R., 2014. The origins of Japanese industrial power: strategy, institutions and the development of organizational capability. New York: Routledge.

Bonin, H. & Goey, F., 2009. American firms in Europe: strategy, identity, perception and performance (1880-1980). Geneve, Librairie Droz.

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Haas-Kotzegger, U., 2013. Ford motor company: learning from the automotive industry. London: Palgrave Macmillan.

Hino, S., 2006. Inside the mind of Toyota: management principles for enduring growth. New York, Productivity Press.

Hitt, M., Ireland, R. & Hoskisson, R., 2008. Strategic management: competitiveness and globalization. Mason, Ohio, South-Western.

Hofstede, G., 2003. Cultures and organizations: software of the mind; intercultural cooperation and its importance for survival. London, Profile Books.

Ireland, R., Hoskisson, R. & Hitt, M., 2008. Understanding business strategy: concepts and cases. Mason, OH., South-Western Cengage Learning.

Liker, J., 2004. The Toyota way 14 management principles from the world’s greatest manufacturer. New York, McGraw-Hill.

Martel, G., 2011. A Companion to Europe 1900-1945. Hoboken, John Wiley & Sons.

Nisbett, R., 2010. The geography of thought: how Asians and westerners think differently. New York: Simon and Schuster.

Toyota. 2015. Toyota global newsroom. [online] (6 March, 2015) available at <http://newsroom.toyota.co.jp/en/corporate/companyinformation/worldwide> (accessed on 24 April, 2015).

Toyota. 2015. Directors, corporate auditors and managing officers. [online] (2015) available at <http://www.toyota-industries.com/corporateinfo/corpdata/index2.html> (accessed on 24 April 2015).

University of Oregon Investment Group [UOIG]. 2014. Ford Motor Company. [Online] (2014) available at < http://uoinvestmentgroup.org/wp-content/uploads/2014/03/UOIG-Ford-Final-PDF.pdf> [accessed on 24, April 2015].