toyota-organizational-structure

What is Toyota’s Organizational Structure? Toyota Organizational Structure In A Nutshell

Toyota has a divisional organizational structure where business operations are centered around the market, product, and geographic groups. Therefore, Toyota organizes its corporate structure around global hierarchies (most strategic decisions come from Japan’s headquarter), product-based divisions (where the organization is broken down, based on each product line), and geographical divisions (according to the geographical areas under management).

Understanding Toyota’s organizational structure

For decades, Toyota’s organizational structure was based on a traditional Japanese business hierarchy where only the most senior executives held decision-making power. This structure, which we know today as hierarchical, is characterized by the one-way flow of information from top to bottom and very little subordinate autonomy. However, this structure transformed in 2013 in response to safety issues, product recalls, and a broader strategy to make Toyota more competitive and responsive in the global market. 

Efforts were made to streamline the board of directors and scale down the system that allowed executives to make decisions. The company also afforded overseas affiliates more decision-making power, with power until that time concentrated in Toyota’s Japanese headquarters. Finally, Toyota made significant changes to its organizational structure to ensure that outside or external opinions were considered in earnest and, where feasible, incorporated into new management practices.

Today, Toyota has a divisional organizational structure. It retains aspects of its traditional hierarchical structure, but the initiatives mentioned above have decentralized decision-making power to some extent.

Key components of Toyota’s organizational structure

Toyota’s revised organizational structure now consists of the following three components.

Global hierarchy

While Toyota headquarters in Japan is responsible for making most decisions, some power was also given to business unit and regional heads. The company’s processes are now more decentralized, but these leaders are nevertheless required to report to headquarters.

Product-based divisions

In 2016, Toyota made further structural changes to streamline decision-making and increase production efficiency. In essence, the company moved from a function-based strategy to a product-based strategy

Seven product divisions were created, with each able to collaborate with other divisions while reporting to head office. These divisions, which Toyota calls companies, include:

  1. Innovative R&D and Engineering Company.
  2. Toyota Compact Car Company.
  3. Mid-size Vehicle Company.
  4. CV Company. 
  5. Lexus International Co.
  6. Power Train Company.
  7. Connected Company.

Full responsibility and authority rest with the president of each company.

Geographic divisions

As part of the changes made in 2016, Toyota created two more divisions that help it carry out its strategy across nine international regions. These include:

  1. Business Unit Toyota No. 1 – North America, Europe, Africa, and Japan.
  2. Business Unit Toyota No. 2 – China, Asia, Middle East & North Africa, East Asia & Oceania, Latin America & Caribbean.

Each is run by a divisional head who makes decisions for their respective region while remaining accountable to headquarters.

Key takeaways:

  • Toyota has a divisional organizational structure where business operations are centered around market, product, and geographic groups. For many years, Toyota’s processes were based on a traditional Japanese business hierarchy where only the most senior executives held decision-making power
  • While Toyota headquarters in Japan is responsible for making most decisions, some power now rests with business unit and regional heads. Toyota introduced seven, product-based divisions to increase production efficiency and streamline decision-making.
  • There are also two additional divisions, or business units, which are responsible for managing operations in nine geographic regions around the world.

Read Next: Organizational Structure.

Read Also: Toyota Business Model, Toyota Production System, Gemba Walk, Poka-yoke.

Organizational Structure Case Studies

Airbnb Organizational Structure

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Airbnb follows a holacracy model, or a sort of flat organizational structure, where teams are organized for projects, to move quickly and iterate fast, thus keeping a lean and flexible approach. Airbnb also moved to a hybrid model where employees can work from anywhere and meet on a quarterly basis to plan ahead, and connect to each other.

eBay Organizational Structure

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eBay was until recently a multi-divisional (M-form) organization with semi-autonomous units grouped according to the services they provided. Today, eBay has a single division called Marketplace, which includes eBay and its international iterations.

IBM Organizational Structure

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IBM has an organizational structure characterized by product-based divisions, enabling its strategy to develop innovative and competitive products in multiple markets. IBM is also characterized by function-based segments that support product development and innovation for each product-based division, which include Global Markets, Integrated Supply Chain, Research, Development, and Intellectual Property.

Sony Organizational Structure

sony-organizational-structure
Sony has a matrix organizational structure primarily based on function-based groups and product/business divisions. The structure also incorporates geographical divisions. In 2021, Sony announced the overhauling of its organizational structure, changing its name from Sony Corporation to Sony Group Corporation to better identify itself as the headquarters of the Sony group of companies skewing the company toward product divisions.

Facebook Organizational Structure

facebook-organizational-structure
Facebook is characterized by a multi-faceted matrix organizational structure. The company utilizes a flat organizational structure in combination with corporate function-based teams and product-based or geographic divisions. The flat organization structure is organized around the leadership of Mark Zuckerberg, and the key executives around him. On the other hand, the function-based teams based on the main corporate functions (like HR, product management, investor relations, and so on).

Google Organizational Structure

google-organizational-structure
Google (Alphabet) has a cross-functional (team-based) organizational structure known as a matrix structure with some degree of flatness. Over the years, as the company scaled and it became a tech giant, its organizational structure is morphing more into a centralized organization.

Tesla Organizational Structure

tesla-organizational-structure
Tesla is characterized by a functional organizational structure with aspects of a hierarchical structure. Tesla does employ functional centers that cover all business activities, including finance, sales, marketing, technology, engineering, design, and the offices of the CEO and chairperson. Tesla’s headquarters in Austin, Texas, decide the strategic direction of the company, with international operations given little autonomy.

McDonald’s Organizational Structure

mcdonald-organizational-structure
McDonald’s has a divisional organizational structure where each division – based on geographical location – is assigned operational responsibilities and strategic objectives. The main geographical divisions are the US, internationally operated markets, and international developmental licensed markets. And on the other hand, the hierarchical leadership structure is organized around regional and functional divisions.

Walmart Organizational Structure

walmart-organizational-structure
Walmart has a hybrid hierarchical-functional organizational structure, otherwise referred to as a matrix structure that combines multiple approaches. On the one hand, Walmart follows a hierarchical structure, where the current CEO Doug McMillon is the only employee without a direct superior, and directives are sent from top-level management. On the other hand, the function-based structure of Walmart is used to categorize employees according to their particular skills and experience.

Microsoft Organizational Structure

microsoft-organizational-structure
Microsoft has a product-type divisional organizational structure based on functions and engineering groups. As the company scaled over time it also became more hierarchical, however still keeping its hybrid approach between functions, engineering groups, and management.

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