What helped Toyota survive multiple recessions?
The majority of blogs, articles, and news nowadays want to highlight the upcoming recession. I know I am late to the party and the narrative is slowing down now. But people still keep adding to the topic of the negative market sentiments that would soon follow.
While everyone else is trying to predict “how bad it would be?”, I thought to conduct a strategic review of technology giants to see what they did in troubled times?
Since I am a mechanical engineer, the review was done on leading automotive manufacturers such as Volkswagen Group and Toyota, who have not only survived but thrived as well. There is a long history to analyze and identify their strategies.
What are troubled times?
The recessions, political turmoils, public backlash, negative market sentiments, and other such issues that impact the global sales of a player are considered troubled times.
What are the different kinds of strategies for the players?
A successful business relies on a lot of things such as:
- Core Operations
- R&D and Innovation
- Workforce Strategy
- Public Reach
- Financial Strategies
- Company Vision & Top Leadership
Assumption: I did not analyze the financial & company vision strategies (the last two of the above list) and only focused on the first four parts.
Strategies to survive & thrive adopted by the two giants
Core Operations
There are multiple operations by a company comprising of core operations, advertisements, workforce training, asset acquisition, etc. A company focuses on various parameters in different periods. But when it comes to the troubling times, it is a clear trend indicating that both groups focused on their core operations in troubled times.
When it comes to troubling times, always keep working on your strength. That’s what saves you.
In troubled times, the groups doubled their efforts on their strengths and squeezed the resources of other segments. There was a drastic reduction in production volumes of experimental products. Both groups not only focused on the best-selling/consumer-demanded products but continuously raised the product qualities.
The groups made sure to leave a personal touch with their consumers by introducing the small features that were required by them without charging for them. That’s how they retained their customers.
Workforce Strategies
Both these groups strategically cut jobs in the troubled times but it was their hiring strategies that were instrumental. The majority of jobs that were cut were the employees who were hired via third-party vendors and these people were not on the payroll of these companies. Thus, it was easy to let them go without hurting the reputation of these two groups.
Also, the companies have retained their best-performing resources at various levels despite the issues due to strong connections with employees. The majority of employees who remained employed in these companies cited reasons:
- They were aware about the management vision
- They had team connect and felt they were valued in their teams
- They had awareness of bad market conditions and understood why the company couldn’t offer them high benefits
Interestingly, the employees did not remain with the company due to benefits or finances but due to their connection with the company vision and the transparency that these companies had maintained in those rough times. A lot of employees also shared that they feared being laid-off but were not asked to leave by the company and that’s why they never left the company when they were offered competitive offers by other firms in the good times.
An easy-to-digest conclusion would be to retain your good employees. The way to retain them is to value them and create a transparent atmosphere where they feel connected to the vision of the company.
Public Reach
Public reach is the area that witnessed major disruptions during any disturbance. The companies curtailed their finances in advertisements during the tough times but did not restrict their customer-centric approach. They launched various models of customer benefits programs in these times.
During the prosperous times, the focus was to acquire more customers, and thus the companies launched various marketing campaigns. They used different platforms and spent good money on their marketing. But as soon as these firms entered into recession and troubled times, they squeezed their budget and started focusing on core operations. Their customer-centric approach became more evident and the campaigns were tweaked to be launched from their dealerships and service centers. The focus shifted from acquiring new customers to maintaining their preferences with existing customers.
The companies launched various programs and spent money on servicing, providing benefits to customers, and retaining their dealerships.
While the focus has been to acquire new customers in good times, the bad times clearly focus on retaining the existing customers and that is done by introducing various beneficial schemes to engage the existing customers.
R&D And Innovations
Last, is my favorite part. The R&D strategies of companies help them a lot. Both these players spend a lot of money to innovate and disrupt the existing domain. Most of the research doesn’t always yield benefits and the companies need years to reap the benefits. There is no certainty about when the research would pay off and what technology would eventually lead.
So how do they decide which technology would be researched in tough times?
To understand it, let us divide the technologies into two types ().
- Matured & Already in use
- Disruptive (that can change the entire industry)
The companies understand that their revenues grow due to matured and already in use technologies. The troubled times use this knowledge. The companies spent the majority of their R&D budget on improving the technologies that are already in use but didn’t protect most of the inventions. They relied on introducing these changes in their products and continuously updating their products with the latest developments.
At the same time, these companies also spent money on disruptive technologies that can change the landscape in the future. They didn’t spend much money on producing or testing these ideas but rather tried protecting these innovative ideas for any future applications. The majority of such protections were in form of defensive patent publications. These publications helped these companies build their inventions whenever the market got ready and that’s how these companies stayed ahead of their competitors.
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