Toyota’s Organizational Structure: An Analysis

Toyota Motor Corporation organizational structure characteristics case study and analysis
The Toyota Pod 2001 concept car. Toyota Motor Corporation’s organizational structure has changed to ensure faster decisions and higher quality of output. (Photo: Public Domain)

Toyota Motor Corporation’s organizational structure is based on the varied business operations of the company around the world. As one of the world’s leading automobile manufacturers, Toyota employs its organizational structure to support business goals and strategic direction. This structure is also linked to the traditional organizational structures used in Japanese businesses. The effectiveness of Toyota in maintaining a strong global presence shows its ability to use its organizational structure to maximize efficiency and capacity utilization. In essence, this organizational structure is a contributor to Toyota’s success in the global market.

Toyota Motor Corporation’s organizational structure defines the patterns or arrangements in the firm’s resources and processes. This corporate structure facilitates the company’s effective and efficient business management.

Features of Toyota’s Organizational Structure

Toyota has a divisional organizational structure. This structure underwent significant changes in 2013. This was seen as a response to the safety issues and corresponding product recalls that started in 2009. In the old organizational structure, Toyota had a strong centralized global hierarchy that was more like a spoke-and-wheel structure. The company’s headquarters in Japan made all the major decisions. Individual business units did not communicate with each other, and all communications had to go through the headquarters. However, this organizational structure was widely criticized for slow response times to address safety issues. After the reorganization that was implemented in 2013, Toyota’s new organizational structure now has the following main characteristics:

  1. Global hierarchy
  2. Geographic divisions
  3. Product-based divisions

Global Hierarchy. Toyota still maintains its global hierarchy despite its reorganization in 2013. However, in the current organizational structure, the company has increased the decision-making power of regional heads and business unit heads. In essence, Toyota’s decision-making processes became less centralized. Nonetheless, all business unit heads report to the firm’s global headquarters in Japan.

Geographic Divisions. Toyota’s new organizational structure has eight regional divisions (Japan, North America, Europe, East Asia and Oceania, China, Asia and Middle East, Africa, and Latin America and Caribbean). Each regional head reports to the company’s headquarters. Through these regional divisions, the organizational structure enables Toyota to improve products and services according to regional market conditions.

Product-based Divisions. Another feature of Toyota’s organizational structure is the set of product-based divisions. The company has four of these divisions: (a) Lexus International, (b) Toyota No. 1 for operations in North America, Europe and Japan, (c) Toyota No. 2 for operations in all other regions, and (d) Unit Center, which is responsible for engine, transmission and other related operations. This feature of Toyota’s organizational structure supports development of brands and product lines.

Implications of Toyota’s Organizational Structure

Toyota’s new organizational structure provides a greater degree of flexibility compared to the old centralized hierarchical organizational structure. With this new structure, the company is now more capable of responding to regional market conditions. This flexibility empowers Toyota to speedily respond to issues and to provide higher quality products. However, the increased decision-making power of regional heads has reduced headquarters’ control over the global organization. Still, this organizational structure facilitates business resilience and continued growth.