8/11/2019 Assignment 2.Operations Strategy

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OPERATIONS STRATEGY

8/11/2019 Assignment 2.Operations Strategy

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1. Post 1995, Toyota pursued an aggressive globalization and cost reduction strategy. Whileat it, did Toyota also implement well, the fourteen principles of the Toyota Way? Chooseany four principles and explain in detail (with appropriate examples), whether they were orwere 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 harmoniousgrowth through a global master plan and global profit management. At its core it consistedof a strong global manufacturing network that targeted the local markets from Argentina toThailand to the U.S.This vision 2005 was the foundation for other principles. This understood the companys placein 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 improveEliminating waste was one of their strategies to cut cost due to criticality of speed of productdevelopment cycles. This yielded a program CCC21, Construction of Cost Competitiveness for21 st century. There was pressure to cut cost at every stage which was possible only byeliminating wastes. Their goal was to cut the number of component parts by 50% which were notvery 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 thesuppliers, 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 andteach it to others.Toyota had exceptional Leaders throughout from within the organization including some werenonfamily leaders. Leaders like Akio Toyoda, grandson of the founder Kiichiro Toyoda. AkioToyoda, in 2010 when Toyotas leadership was widely criticized for slow response in addressingthe 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 economyand increasing trade friction with U.S nonfamily member Hiroshi Okuda took over the situationand revived the company financially and gained mar ket share quickly. He also launched Toyota2005 Vision based on the strong Toyotas philosophy.

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

8/11/2019 Assignment 2.Operations Strategy

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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 differentTCS ad Competition. What conclusions can you draw on the kind of competitive strategythat TCS was pursuing with respect to its competitors?

TCS Infosys Cognizant IBM AccentureRevenue ( in $B) 4.3 3.1 1.4 48.2 21.5Operating Margin (%) 24.9 27.9 18 10.5 11.6Operating Cost (in $B) 3.44 2.42 1.19 43.62 19.27Total Staff (Starting, 000s) 66 53 24 190 140Total Staff (Ending, 000s) 89 72 39 207 170Average 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 Indiancompetitors. At TCS, their business is generating more revenues per employees with higheroperating cost per employees compared to Indian competitors.

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

TCS was known for its delivery excellence that is on time and within the budget and withconsistent superior quality. This was necessary because of growing completion, ruthlesscustomers and based on their operational excellence they wanted to differentiate themselves fromtheir competitors. They reviewed their strengths and weakness to do. A study was conducted todo understand this better. They this had few advantages like 96.6% on time completion ofdeliverables.98.8% deliverables had no severity 1 or 2 defects. 89% delivery met customers 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 ofquality was estimated at 16% for TCSs maintenance projects and 25% for i ts development

projects versus general cost of quality estimated to vary from 62% at CMM level 1 to 22% atlevel 5. From this above data it can be understood that TCS had the operational capabilities todeliver on the promise compared to its competitors.