Introduction

The Roots of Toyota’s Global Business Leadership

Senior management is simply a flag bearer when a business decision is made. It is of no use unless others follow the flag.

—Eiji Toyoda, former chairman of Toyota

From its humble beginnings in the Japanese rice-growing district of Aichi prefecture almost 80 years ago, Toyota Motor Company developed into the world’s leading automobile manufacturer. Toyota’s story is remarkable by any measure, but it is particularly remarkable given the volatility that has shaken global manufacturing, and the auto industry in particular, over the last 30 years, plus the daunting challenges of the Great Recession, the recall crisis, and the East Japan earthquake.

Perhaps the most telling statistic is the simplest: Toyota was profitable every year from 1950 until 2008, with the record being broken only when the company was hit by the combination of the global recession and the oil price spike of 2008. Then, after one year, in the wake of the recall crisis, Toyota was again profitable. Such consistent profitability is unheard of at the top ranks of the global automotive industry, where cyclical profits and losses, with major layoffs that are followed later by massive new hiring, are the accepted norm. If you dig a little deeper, the data just get more impressive. For instance, Toyota’s per-vehicle profit in 2007 was more than 80 percent higher than that of second-place Honda, and negative per-vehicle....