Department of Business Systems

MANAGING OPERATIONS BSS601-6

TITLE: GROUP REPORT
GROUP NAME: GLOBAL LEADERS
TEAM MEMBERS:
ANNE FONSEKA

0821238

RAMANDEEP SINGH

1230222

SANDEEP KHURANA

1228217

AMAR KUNAM

1229948

Teaching Team:

Dr. USHA RAMANATHAN

Dr. YONGMEI BENTLEY

TABLE OF CONTENTS:
Mitsubishi Situation

SECTIO
N

TITLE

PG.NUMBE
R

EXECUTIVE SUMMARY

1.0

INTRODUCTION

2.0

SWOT ANALYSIS

3.0

MANAGEMENT & BUSINESS ISSUES

4.0

CRITICAL MANAGEMENT ISSUES

5.0

MANAGEMENT APPROACHES

6.0

DISCUSSIONS & RECOMMENDATIONS

10

CONCLUSION

11

APPENDIX:

A) Cause and Effect diagram for MMC.

B) Mitsubishi Global Plant Locations

REFERENCES

Mitsubishi Situation

Executive Summary

The creation and delivery of an organizations products and services is termed as

operations, which is a part of an organization. The global automobile industry was
said to be profoundly impacted in the late 2007 due to recession, yet, becoming an
entity deemed independent in 1970 and based in Tokyo, Japan as a publicly traded
company, Mitsubishi Motors Corporation is regarded as a multinational distributor
and manufacturer of not only automobiles but also powertrains and parts. In 1917,
the first automobile of Mitsubishi was produced.
The report helps to analyse the strategy undertaken by Mitsubishi through a SWOT
Analysis by which the organizational performance could be evaluated and improved.
Through the case study, management and business issues were identified and the
key issue that arises is the fact that full-scale coordination of Mitsubishi Motors
Corporation highly depends on a successful supply chain management strategy. On
section 4.0, the ten highly referred decisions of operations management are critically
analysed to help deal and associate with the issues mentioned in the previous
chapter. Finally, management approaches deemed appropriate for the highly
competitive business and operations for Mitsubishi are strategically analysed and
recommended.

i
1.0 Introduction

Mitsubishi Situation

For an organization existing in this 21 st century an operations strategy has to be

concocted with a global view. Organizations are well aware that fabrication of goods
and services locally or even from outsourcing will not guarantee any success without
any blueprint. Hence, a strategy must be globalised in order to efficiently and
effectively add value to the existing products and services since they are highly
spurred by global competitive standards such as variety, quality

convenience,

customization, cost and time.

For an organization a strategy can only be contrived through an effective mission
statement. The mission statement for Mitsubishi Motor Corporation is We will win by
growing our brand profitability through resourceful and inspired leadership, a result
driven and spirited workforce, and strengthened customer and dealer relationships.
(Source: 2013, Mitsubishi Motors North America, Inc.).
For Mitsubishi the above mission statement can be accomplished through
competitive advantages which are fulfilled by ten efficacious decision areas of
operation management service and product design, quality, capacity design and
process, location, job design, supply chain management, scheduling, inventory and
maintenance.
In todays globalised context the automobile industry is rapidly booming; split into the
commercial vehicles and car categories. A major obligation of any automobile dealer
globally would be to ensure product safety.
Incidents referred to a product-harm crisis occur when the product fails to adhere to
the standard safety measurement. This in turn could jeopardize organizations brand
equity, tarnish the organizations reputation and create a negative impact on the
customers perception about the quality of the vehicle as well as the organization.
Therefore the firms sustainability is said to be at risk.
The automobile industry is said to be the most globalised sector in the world.
Consequently, with the eminence and significance of this industry it will always
necessitate interminable attention from researchers of operation management.

1
2.0 SWOT Analysis: Mitsubishi Case
Mitsubishi Situation

Mitsubishi is a huge conglomerate incorporating its manufacturing plants in Japan,

North America, Europe and Asia. As an integral element of the business every
company scrutinizes its strengths, weaknesses, opportunities & threats and the
success of a company depends on synchronization of its internal strength to external
opportunities & threats.
Strengths
As researched by Market Line (2013), total production of Mitsubishi in 2012 was
1,128,550 vehicles, which were marketed globally resulting in an increased revenue.
According to Mitsubishi-Motors.com, companys net profit for the year 2012 was
87m and operating profit of 530. In February 2013, overseas production of
Mitsubishi vehicles was 56,223, which is veering to high revenues. Currently, seven
car-manufacturing plants are operating in 5 countries including state of the art
research & development centres. From companys 2013 profile, a spike in
operational efficiency has resulted in a proportionate increase in profit margins.
Higher profit margins boost investors faith to invest in the company.
Weaknesses
Mitsubishis reputation has collapsed due to a high volume of recalls, approximately
620,000 since 2006. According to case study, four people had tough times with their
car named Diamante. The car used to jump unexpectedly in reverse, which was a
serious issue. Instead of replacing defective part in customers knowledge, the
company carried out the job secretly and put the blame of the whole matter on
customer. Consequently, the reputation suffered and sales in Japan declined by 3.9
percent. Because of these factors, Daimler Chrysler was also reluctant to acquire a
share with Mitsubishi. Complaints were filed with Tokyo police regarding companys
laxity and cover up of their defects, which tarnished the public image of Mitsubishi.
Product-harm crisis (unintended acceleration) is a phenomenon, which can transpire
unexpectedly, which Mitsubishi has to take into account as Toyota experienced in
2002.
2
Opportunities

Mitsubishi Situation

As Haunschild and Sullivan (2002); Miner et al. (1999) have aptly mentioned that
failures are often an opportunity for firms to learn. Accordingly, Mitsubishi should
have withdrawn defective products from the marketplace and repaired them. They
should have dug deep and learned through a root cause analysis by establishing an
understanding of the association between causes and effects of the product recall.
Liker (2004) has cited in his work an adoption of twin aims of edification from
mistakes and ensuing innovation, hence encompass dynamic competence that:
spurs the workers self-initiative, expedites cross-functional communication and
inculcate discipline into workers. Souiden and Pons (2009) have elucidated the
example of Chrysler, who in 1990s severed the odometers from its new vehicles
during trial testing. With this news becoming public, Chrysler apologized and
accepted the error, thus utilizing this crisis to its advantage and elevated its brand
capital by 20%.
Threats
MarketLine (2013) asserts that Mitsubishi is subject to the policies regarding smoke
generated by their plants, noise level, emissions, fuel economy and safety.
Manufacturing plant especially in Japan is in-danger to natural disasters like
earthquakes. However, the primary threat to the company is the stiff competition
posed by Toyota, Ford, Honda Motors and General Motors in relation to design,
quality, features, customer service and companys risk management. If the company
is not addressing the customers grievances, then overall sales & revenues will be
downsized.

3
3.0 MANAGEMENT AND BUSINESS ISSUES

Mitsubishi Situation

It is quite apparent that Mitsubishi has both management and business issues, which
were neglected and eventually jeopardized the whole organization. Nevertheless, it
was the defective gear system which contributed to Mitsubishis downfall and can be
categorized as a product-harm crisis. As defined by Dawar and Pillutla (2000),
product-harm crisis is an isolated, well-broadcasted incident wherein a product is
found to be defective or dangerous. There can be several reasons for this such as
manufacturers laxity, product misuse or sabotage. Kotzegger and Schlegelmilch
(2013) have discussed that past experiences have shown that no company is
impervious and a product-harm crisis can hit everyone, including high-profile
companies.
Managing and operations cannot single-handedly ensure product quality as
corroborated by Alfaro and Rabade (2008), who have proposed that a legitimate
traceability and recall plan should be in place for regulating supply chain risks, which
will also help in establishing trust and long-term relationships amid supply chain
partners

and

consumers.

Additionally,

Mitchell

and

Gruler

(2008)

have

recommended installation of testing procedures and inspection protocols for the

materials and other components being received from the suppliers, as it will help in
the detection of any sub-standard material and averting its introduction into the
consumer product.
According to Barber and Darrough (1996); Chao, Iravani and Savaskan (2009) a
product recall is a reflection of a lack of quality control or quality assurance in firm
operations. Instead of acknowledging this, Mitsubishi was disdainful about this
information and led the decision makers to be presumptuous about the competence
of their existing knowledge. They restrained from letting people know about failures
and defects and all the information was kept under wraps, but they failed to take into
account the effect of media as during a crisis, the information circulated by media is
more detrimental than that released by the manufacturer itself. There were a series
of other factors that contributed to this fiasco including poor processes for product
development, business relations problems, and generation of excessive load on the
unit operating under conditions of resource scarcity.
4
4.0 Critical Management Decisions in dealing with Mitsubishi Issues
Mitsubishi Situation

Quality Management of Mitsubishi:

Conventionally, operations management is elucidated in view of a firms adequacy of
production as a transformation process by which raw materials known as inputs are
converted into valuable outputs. Linderman (2008); cited in Foster Jr. et. al. (2011)
thereby states that most projects involving six sigma have pinpointed on cost
reduction and internal processes also emphasizing importance on customers and
suppliers which relates to one of the 14 Total Quality Management (TQM) points of
Deming, 1986, on purchasing and not focusing on cost alone.
MMC (Mitsubishi Motors Corporation) ensures quality through:
1) MMDS (Mitsubishi Motors Development System) According to MitsubishiMotors.com, the Development System introduced incorporates quality gates at each
stage and benchmarking performance from planning of development to sales and to
MMC service after-sales and advances to the next operations strategy only when
each quality benchmark is approved. Swift feedback of information through SQM-BC
(New Quality Information Management System), can help consolidate the service
system of after-sales. MMC introduced this system in 2006, to acknowledge qualitybased information from customers.
3) Human assets development ensuring quality of employees.
4) Transparent and timely service or product recall determination processes.
5) Structure of Quality Management and Mitsubishi Quality Awards.
1997 MMC acquired a certification of ISO 9002 plant-level.
2003 Certification of ISO 9001 for entire operation in Japan.
From the tools of TQM the cause and effect diagram is one of the equipment to aid
in inducing an idea and unearth possible issues of location and quality
systematically. Also known as the fish-bone chart or Ishikawa diagram, the causes
are represented by: materials, machinery (equipment), methods and manpower for
MMC. [Refer appendix figure. 1].
5
Process Design and Layout:
Mitsubishi Situation

The 4 dimensions of operations are Volume, Variety, Variation and Visibility (Four
Vs). Volume and Variety is said to be important when MMC contemplates issues in
its design, since it not only correlates with each other but also impacts the nature of
MMC services and products. This position for operations of volume-variety
influences quality, dependability, flexibility, speed and cost thereby enabling MMC
to sustain a Nature line of fit.
The type of manufacturing process for MMC could be categorized as Mass Line
processes, whereby the process task is not too much diverse or too repeats and the
process flow is almost continuous due to high volume and almost low variety. For
MMC the manufacturing process type is a mass processes therefore, the basic
layout type would be in-between a cell layout and product layout, whereas since
MMC focuses on providing quality after-sales services, the service process type
could be classified as professional services and service shops having a basic layout
of a fixed position for a process layout.
Location and Capacity:
Production capacity is being optimized by MMC worldwide, whilst in emerging
markets MMC is said to be boosting its production skill aiming to create a globalized
production structure for effective response to global demand. MMC in Japan has
boosted the operating rates and building supply systems in its factories. For averting
demand and capacity mismatch MMC needs to consider a chase demand plan since
it gives allowance to vary capacity at par with fluctuations of demand.
Supply-chain management of Mitsubishi:
Collaboration must exist across a supply chain or consequences could lead to the
bull-whip effect. Mitsubishi Motors is also said to have collaborated with its worldwide
dealers in order to reduce the lead-time of customers to two weeks.

6
Inventory and Logistics Management:
Mitsubishi Situation

The Mitsubishi Logistics Corporation founded in 1887 entails the International

transportation, harbour operations, warehousing and real estates. MMC is
outsourcing inventory management within its factory also including product
manufactured inventory control and cargo loading and unloading. The Mitsubishi
Logistics handles inventory management within customers production plants for
auto parts along with inventory control service. The Mitsubishi Logistics boasts of
dedicated on-site space where manufactured products are contained and then
shipped out according to the order from the factory.
In-factory inventory control workflow

(Source: Mitsubishi Logistics, 2013)

JIT (Just-In Time), Lean Operations and MMC Production Systems and
Scheduling:
JIT delivery for business partners and customers is dispensed and supplementary
services such as storage (warehousing), before delivery inspections and packing is
also provided. According to Heizer and Render (2011), MMC should focus on
forward scheduling where the schedule starts only as soon as the job requirements
are knownyet breakdowns and quality problems further confound scheduling.
JIT deliver workflow

(Source: Mitsubishi Logistics, 2013).

5.0: Management Approaches
Mitsubishi Situation

As mentioned earlier, Mitsubishi has quite a few management and business issues
which need to be amended. The first and foremost approach deals with the product
design. There might be a problem in the design criteria of Mitsubishi Diamante.
There are several techniques that can be followed in the design of a product. Heizer
and Render (2011) have alluded two different designs, modular design and the
virtual reality technology. In the modular design, the parts or components of a
product can be altered or displaced, whereas the virtual reality technology allows the
user to interact directly with the concerned technical expertise.
Second area concerns with the service design. Mitsubishi should have a pool of
competent technicians well-versed with dealing any kind of product failure. It is in the
hard times that the relationship with the customers is under scrutiny and a company
has to reciprocate with an excellent customer service. As exemplified by Heizer and
Render (2011) the technicians should have been sincerely concerned and apologetic
about the problem. They should be flexible and value the time of the customer and
most importantly make the consumers acquainted about the prevailing problems and
ways to avoid them in future.
Quality as delineated by American Society of Quality (ASQ), is The totality of
features and characteristics of a product or service that bears on its ability to satisfy
stated or implied needs. It is very imperative for a company to sustain the quality of
their product as quality augments profitability. Quality is foremost and is unified
around a single quality standard with international recognition, ISO 9000. Mitsubishi
should have undergone a 9 to 18 month process that entails documentation of
quality procedures, on site assessment and series audits of their products, services,
suppliers, retailers and dealers. Mitsubishi experienced a severe product-harm crisis
as defined by Dawar and Pillutla (2000). Consequently, there was a need of risk
management to cease these erroneous things to happen. Slack, Chambers and
Johnston (2010) have proposed risk management as, The process which aims to
help organizations understand, evaluate and take action on all their risks with a view
to enhance the probability of their success and abate the likelihood of failure.
8

Mitsubishi Situation

Hence, the prime business is to minimize the negative consequences of failure (also
called as risk mitigation). Finally, last but not the least endeavour is to materialize
the blueprints elaborated to recover from failure.

ASSESS THE POTENTIAL CAUSES OF AND RISKS FROM FAILURE

PREVENT
FAILURE
OCCURIN
G

FAILURE

MINIMIZI
NG
FAILURE
EFFECTS

RECOVER
FROM
EFFECTS
OF
FAILURE

NEGATIVE
CONSEQUENCE
S OF FAILURE

Source: Slack, et.al (2010) figure 19.2: Risk management involves failure
prevention, mitigating the negative consequences of failure and failure
recovery. Pp.573

Mitsubishi Situation

6.0 Discussion and Recommendations:

Areas of Recommendation
Innovative Product

Before cars internal breakdown, automatic data

transfer via sensors is crucial. This will support the

Management
Companys

Explanation

reason for the failure of that part.

Internal Consumers apprehend a crisis situation in a more

Management

positive way if they hear bad news from the

company itself rather than from external sources
(Media).

Maintenance Management

Engineering teams should meet with customers;

senior managers visit dealers and end users to a
greater extent than before.

Supplier Management

Adopting a strict approach in the audits and end

relationships with suppliers not conforming to the
quality standards.

Mitsubishi should have taken a progressive approach to this issue by administering

an effective crisis leadership. Crisis management should refrain from not admitting
defects in their products since this approach could negatively influence their image,
as well as customer loyalty and purchase intentions.
Product failure can result because of a myriad of modes such as contamination,
mishandling and mislabelling, package defects and defective components. So,
proactive recall should have been established based on an internal testing system
and announced even before any reports of injuries or accidents.
The whole supply chain should have plans in place to guarantee that defective
products are expeditiously evacuated from the marketplace and distribution chain in
order to curtail the risks.

10
CONCLUSION:
Mitsubishi Situation

Product safety is a major social, political and economic concern. As cited by

Souiden and Pons (2009) product recalls have continued to rise over the last two
decades, particularly in the automobile industry. Consequently, hundreds of millions
of dollars are spent for the cost of logistics, repairs and readjustment to the assembly
line. According to The Wall Street Journal 1983, p2 there have been reports
mentioning that firms are sceptical about recalling their products.
The concept of customer satisfaction has transformed over a period of time. It is
no longer equated with the concept of quality. It has become more critical for the
firms to prevent dis-satisfaction, which is an internal target for fixing what has gone
wrong. This provides an impetus for developing what will go right. The automotive
industry is a fitting example as it is one of the chief industries concerned with
customer satisfaction. Therefore, Mitsubishi should follow a comprehensive
approach which resonates with the above quotation.
The cut-throat competition as well as advances in technology has driven
automobile manufacturers to expedite and launch new models. Nevertheless the
vehicles put on the market in such a haste stand a very high risk of being recalled.
Therefore, it is essential for the manufacturers to be well equipped in advance.
Mitsubishi should have been proactive and executed a risk assessment done before
so that in case of a recall, it was in a better position to react quickly and diminish the
negative effect on their reputation and finances. Similarly, they should have avoided
refusal to admit defects in their products since this approach drastically influenced
their customer loyalty and purchase decisions.
Yet, with its vibrant existing sense of corporate social responsibility, integrity and
trade understanding, Mitsubishi Motors Corporation despite its downturns, remains a
strong competitor till date in the automobile industry.

11
Appendix: Figure 1: Cause and Effect Diagram for MMC.

Mitsubishi Situation

Material (Automobile)

Method (Process)
Technical centres
Secret repairs and
replacements
Reversing unexpectedly

Car model: Diamante

Poor after-sales service

1998/ 1999 Year of car

make.
Defects in Japanese cars

Training
Skills and Knowledge
Motivation

Accelerator
Engine

Dissatisfi
ed
customer
s of
Mitsubish

Computers (Primary, Backup)

Source: Heizer and Render, (2011).

Mitsubishi Situation

Unexpected
acceleration

Brakes

Manpower (Engineer)

Appendix B:

Sudden veering

Gear Box

Expertise
Concentration

Serious car defects

Machinery (Internal
Systems)

Mitsubishi Global Production Plant Location

Mitsubishi Motor Corporation has a global presence in 160 countries globally, with
manufacturing facilities in countries such as Japan, Thailand, Philippians, Brazil and
United States along with 12 co-owned partnership plants.

North
East Asia
America

Latin
Oceania

Africa

Europe

Middle

America

Source: Mitsubishi Motors (2013).

Mitsubishi

Motors Corporation

has

consolidated

subsidiaries and

affiliates

incorporated in Japan, U.S.A, Canada, Puerto Rico, Netherlands, Germany, France,

Belgium, Australia, Thailand, U.A.E, Philippians, Portugal, and Vietnam.

References

Mitsubishi Situation

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Mitsubishi Situation

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http://www.mitsubishimotors.com/publish/pressrelease_en/ir/2013/news/detail
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17. 2013

Mitsubishi

Motors

North

America

[WWW].

Available

from:

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[Accessed: 25 April 2013].
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Motors

Homepage

(2013)

Global

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Available

http://www.mitsubishi-motors.com/en/index.html [Accessed: 24 April 2013].

Mitsubishi Situation

at:

Mitsubishi Situation