Strategic Transformation in Automotive and Airline Industries

Assignment Part 1

Toyota

After the second World War, Toyota, the Japanese automotive manufacturer, was trailing in its market. The reason for this was due to intense competition from American companies such as General Motors and Ford. Acknowledging that something was needed to be done so as to compete with organizations in the West, the company’s engineer, Taiichi Ohno managed to persuade the managers to implement the Just-In-Time system for manufacturing and delivery. This meant that, rather than ordering a large amount of machinery and equipment, it was deemed more rational to order materials and have them supplied as soon as they were going to be used. This change became beneficial to the company as little time was wasted in the production processes. In addition, inventory levels would be kept extremely low and more money would be available to be spent on other activities. This change was effective in restoring Toyota back to its top spot in the global automotive manufacture industry.

British Airways

In 1974, the British Airways began its operations with 50,000 employees, along with a total of 215 aircraft. The staff number, at that time, was thought to be unreasonably high. Over the 1970s, the oil crises resulted in the customer base of the organization declining and together with its high number of staff, the Airline began experiencing massive losses. Eventually, the Airline acquired a reputation of having poor services. By 1981, a new chairperson was brought in, his name, Lord King. The new chairperson observed that the airline was operating at an inefficiency and valuable resources were being wasted in the company. With a bid to reverse the loss-making, King took to restructure the airline, resulting in a lay-off of close to 20, 000 employees, fleet modernization and unprofitable routes were eliminated. This change was crucial towards the success of the airline because, ten years down, the organization ended reaping $284 million in terms of profits.

Political Drivers

Following the 1945 American bombing, the Japanese industries ran into turmoil five years later. This was followed by Toyota’s labour union unrests by 1949 due to the many layoffs which were taking place (Son, 2017). The strikes grew rampant and emotional to the extent that Toyota was approaching bankruptcy.

For British Airways, took a toll on its operations practically because of the Arab oil refiners placing embargos on the Western nations. The embargoes were being used as a way of punishing the West for their support of Israel against Egypt in the Yom Kippur war (Macalister, 2011). The price of oil increased fourfold as a result.

Economic Drivers

After the end of the second world war, the auto market in Japan was at the edge of destruction. This was in part due to the wrecked state of the nation’s infrastructure and very low demand for vehicles in the nation. Toyota company was nearly declared bankrupt in the year 1949, and in 1950, it had a limitation of producing 300 vehicles at a go (Cheney, 2015).

In the case for British Airways, the price of oil had increased from $3 to $12 per barrel in the year 1974. With increased oil prices, every other mode of transport, including flight was expensive. In addition, the government was facing more expenses due to increased food prices, caused by shortages in the world (Macalister, 2011).

Social Drivers

Toyota had the need for continuous improvement in order to beat its low state. Continuous improvement required that every employee to take initiative by analysing the existing procedures and in turn providing suggestions of ways that improvements can be made (Kanbanize, 2019). This system was widely known in Japan as the ‘Kaizen.’

The British Airways, on the other hand, the staff sized was considered as being precariously oversized. There was also a dire need for changing the organization culture, and this was made possible with the appointing of the new CEO Lord King (Grugulla & Wilkinson, 2002).

Technological Drivers

Toyota required change from having to order equipment and machinery which are heavy and in huge numbers. To add, the company needed to do away with inefficiency, save time and reduce wastage. A pull system of production processes was required, so that only work that was to be done had to be done to suit the just-in-time technique (Kanbanize, 2019).

The British Airways also required to modernize its fleet on the account of doing away with poor services. A modern fleet would guarantee that the company’s passengers would benefit from better services and the organization would be best position to counter competition with planes that are more fuel efficient (Jones, 2013).

Environmental Drivers

The Just-in-Time method of production guaranteed environmental benefits on the account of Toyota. The JIT system ensured that Toyota pursued a more eco-efficient and rational use of resources, aligning with the value chain concept that is associated with sustainability and environmental protection (Simboli, et al., 2014).

The British Airways was concerned about improving both its internal and external environment by enhancing its services. The outcome for the change adopted was partly meant to improve the image of the airline in the face of its flourishing competitors and wastage pf valuable resources (Troyani, 2019).

Legal Drivers

During the period after the World War II, the Zaibatsu system of corporate governance was replaced by Japan’s government policies (Twomey, 2018). Therefore, the JIT technique could be suggested and be implemented by Toyota with ease, away from the undemocratic and monopolistic nature of the zaibatsu.

In the British Airways, transparency in the on-goings of the organization made it possible for the changes to be incorporated (Troyani, 2019). King ensured that he communicated in an open and honest way concerning the need for layoffs in the organization in pursuit of restructuring and incorporating change.

How Change Affected the Organizations Leadership and Behaviours

Toyota

To reiterate, the JIT system of production was greatly valuable to Toyota. It allowed the organization to overcome the challenge existing in its internal and external environment. Instead of relying on the conventional way of ordering and storing a large amount of heavy inventor, which would always take up operational space and increase lead time, the JIT ensured lean operation by doing away with all the problems that would be faced. The observable changes that were experienced by the organization was that little time, energy and money was spent in having to deal with suppliers. The organization was left with more cash in hand, enough to handle miscellaneous value-adding activities, instead of managing tied up inventory.

In deed it was difficult taking up Mr Ohno’s suggestion for the just-in-time production technique as the organization required time to implement the changes and checks needed to be made to ensure that the system was functioning perfectly, especially with every other involved stakeholder. Mr Ohno’s recommendation turned the organization around for the better and this resulted in his eventual appointment as the company’s chief executive officer (Son, 2017).

British Airways

The change that was adopted in the British Airways during this period already followed a change in leadership. With Lord King as the flight company’s new chairperson, many errors in staffing had to be corrected, especially with the looming internal and external pressures. With the staff number being unreasonably high, King announced that layoffs would be done. In addition, the organization had to undergo changes of modernizing its fleet and having routes which are unprofitable routed out. A new marketing expert was introduced to the organization with the goal of improving the organization’s public image.

Prior to actualizing the layoffs, the new chairperson announced his intentions so that employees would be aware of the impending changes. The advantage of announcing upfront is that he was able to counter backlash due to the changes, thus giving him a good opportunity to restructure the whole company. The number of employees declined from 59,000 to 39,000 (Troyani, 2019). Another risk which was avoided by prior announcements was negative press. The chairperson ensured that his communication were frequent and honest as possible – a perfect way of managing change.

Critical Evaluation of Long-Term Implications of Drivers of Change

Toyota

During the initiation of the Just-in-time production system, Japanese automakers were having problems with low market share, as they were being outshined by organizations in the same industry but in different countries, such as the U.S. and Germany (Son, 2017). However, with time and increased precision in the application of the system, Toyota ended up being the most productive automaker, beating many of its competitors to attain leadership in its industry (Spear, 2002).

The consumer reports which followed had Toyota’s models being rated first, four times in a total of ten product categories. In 2001, J.D Power and Associates conducted a study of initial quality of vehicles, and Toyota ended up acquiring the first spot in seven out of sixteen product categories. Toyota’s car plant in Kyushu was rated as the best in the whole world, and its car plant in Tahara was rated as the second best in Asia. Even though Toyota has been through several difficulties in the industry, its capitalization and market share have never ceased to grow (Spear, 2002).

British Airways

The massive laying off of employees by Lord King turned the airline from a pit falling company into an attractive and profitable company. When it was prised six years later, the organization’s attractiveness brought along many investors from the public. Operational costs were greatly reduced and the quality of service of the airline surged. The route structures became more fine-tuned and the airline was in a better position to make marketing agreements with foreign airline companies. To further improve the image of the company, King hired an advertisement firm known as Saatchi & Saatchi, which developed a catchy slogan, that is “The World’s Favourite Airline” (Martin, 2005). King’s changes were very much profound to the extent that when the firm publicized its stock in 1987, its demand overtook supply more than 10 times.

Conclusions and Recommendations

To conclude, from both case scenarios presented above, although received with great difficulties, the changes resulted in further prosperity to Toyota and the British Airways. Toyota needed to beat its competitors and increase its production with a high degree of efficiency while the British Airways needed to increase efficiency and reduce operational costs by laying off some of its staff. Therefore, as a recommendation, in order to plan effectively for change, from Toyota’s perspective, there is need to consider the need to enhance operational efficiency and think ahead of the competitors in the market. From the perspective of the British Airways, change can be planned for effectively by using the right and prompt communication so as to avoid any form of backlash.

Assignment Part 2

Brief Introduction

The British Airways prides itself as the largest airline placed internationally and based in the UK. The Airline is one of the leading premium careers in the world. The airline operates on one of the airline networks routes that is broadly scheduled. It operates in over 70 different nations, together with its franchise partners, codeshare and joint business agreements. The company carries close to 40 million passengers every year with its fleet of more than 280 aircraft. The organization is the founder of oneworld, which is an association for airlines located all over the world, thus, it serves 1000 destinations in the whole world (British Airways, 2019). The British Airways is aware that the global airline sector is extremely competitive, sufficiently regulated, and highly prone to changes in consumer confidence and customer behaviour. The existing economic environment poses as a challenge for the organization to focus all of its efforts in seizing long-term opportunities for its development.

The British Airways made an effort to implement the kind of change which required to reduce the number of employees which was deemed to be unreasonably high, and together with the oil crisis that was looming during the period, resulted in high financial losses.

Force Field Analysis

Forces Driving Change

Eliminating Routes which are unprofitable

Some routes which were being used to carry passengers were not yielding any significant profit for British Airways. There was need for the routes to be revised so that those which are not bringing in any monetary value are eliminated. Since routes are unprofitable, it would be necessary to reduce the number of employees so as to save on costs incurred in certain flights.

Oil Crisis Resulting in High Costs

The oil prices had increased due to embargoes being placed by the Middle East to the West as a form of punishment for American support for Israel in war against Egypt. With increased oil costs, and diminishing quality of services, the organization needs to cut down on operation costs allocated in paying employee salaries.

Reduced Customer Base

The British Airways had a decreasing number of customers particularly because its services were declining in quality. This is a driving force for change because it would be unnecessary to have many employees with a decreasing number of clients. The resulting impact would be a net loss for the airline.

Forces Resisting Change

Employee Backlash

The drive to instil change in an organization by cutting down the number of employees will always involve a lot of emotion and tension emanating from employees. This is because some employees depend on the job and would have a difficult time finding other employment positions. In isolated cases, employees may choose to engage in strikes with the support of labour unions. This will have an effect of resistance towards the change aimed at by British Airways.

Negative Press Concerning Layoffs

The British Airways intended to make major changes which would attract attention from the press. There is likelihood that the press would exaggerate reasons for the proposed changes to the public and this would have an overall effect of ruining the image of the airline (Troyani, 2019). Generally, negative press concerning layoffs is a factor that resist change.

Bloated Bureaucracy

Making changes in an organization requires a systematic process, which would require change proposals being approved by certain department heads in the airlines. High bureaucracy can take long in cases where employees are not in agreement with the proposed changes. This has an overall effect of resisting change in the airline.

Recommended Course of Action

The recommended course of action that will allow the airline to meet its objectives would be to take control of communication. Communication needs to be done to the airline’s employees so that they can understand the goals which are being pursued by the intended changes (Troyani, 2019). In addition, communication would be necessary so that the nation, which consists of the main customers of the airline, would remain updated on the firm’s reason to undergo changes. The communication would be necessary so that clients can also be aware of flight routes which are eliminated due to their unprofitability.

Critical Evaluation of Different leadership Approaches

Transformational Leadership

In the face of implementing change in an organization, transformative leadership would be necessary. This is because of the aspect of transformation, whereby the conventions of the company are being altered for improvement. This would require that employees are assigned a specified set of tasks to complete, and the leader, in this case the chairperson for British Airways pushes them beyond their comfort zone (Becker, 2019). For example, if there are reports needed to be completed before implementing the change, the chairperson would have the role of pushing the employees of doing so. A change committee can be developed but would still remain under the thrall of the airline’s chairperson.

Strategic Leadership

This is also another form of leadership which fits in well in the face of implementing change to an organization. As a strategic leader the chairperson would have to place themselves between the main change operations of the organization and the growth opportunities to be taken advantage of (Becker, 2019). This type of leadership is necessary because many employee needs will be supported and fairness will be observed when getting down with the layoffs.

Models of Change Management

Lewin’s Change Management Model

According to Kurt Lewin, there are three steps to be followed in managing change. These include; a) unfreezing, b) changing, c) refreezing. These steps are very simple to the extent that Kurt Lewin has amass a certain degree of criticism. However, its applicability still remains standing (Cummings, et al., 2016).

Unfreeze

In this initial stage, the airline needs to recognize that change is indeed necessary. This would require the breaking down of the organizational status quo prior to coming up with a new mode of operation. The most important part of this stage is coming up with the message that the current way of operation needs to be discontinued. The airlines can point out its declining quality of services and operating in routes which are no longer profitable.

Change

In this stage, the staff members acknowledge that change is about to be made and this prompts them to find new ways of doing things (Cummings, et al., 2016). Most of the airline employees will have accepted the changes coming up and begin acting in ways that are in support for the new course of action, which is laying off certain employees. The transition from unfreeze to change takes a certain amount of time because situations such as employee backlash are likely to occur.

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Refreeze

This occurs when changes have taken place, the employees are reduced in number and the organization restructured (Mind Tools Content Team, 2019). Refreezing can be seen where new organization relationship charts are created and job descriptions are made more consistent.

References

Cummings, S., Bridgman, T. & Brown, K., 2016. Unfreezing change as three steps: Rethinking Kurt Lewin's Legacy for Change Management. Human Relations, 69(1), pp. 33-60.

Grugulla, I. & Wilkinson, A., 2002. Managing Culture at British Airways: Hype, Hope and Reality. Long Range Planning, 35(2).

Simboli, A., Taddeo, R. & Morgante, A., 2014. Value and Wastes in Manufacturing. An Overview and a New. Administrative Sciences, Volume 4, pp. 173-191.

Spear, S., 2002. Just-in-Time in practice at Toyota: Rules-in-Use for building self-diagnostic, adaptive work-systems.