Global Crisis Management at Toyota

Global Crisis Management: Product Recalls at Toyota
Product recalls are a public relations nightmare for companies of all sizes and types. In the minds of the public, product recalls mean that companies failed to perform their due diligence in research and development, engineering, production or distribution – or a combination of all of these factors – but the actual causes of product recalls are far less important than the adverse effects these incident have on brand image. Once these opinions are forged in the minds of consumers, they are exceedingly difficult to reverse so it is clear that when product recalls are required that they are managed in the most effective fashion possible. One major company, Toyota, provides a valuable lesson in what to do and what no to do when confronted with unavoidable product recalls. The purpose of this essay is to provide an examination of Toyota’s real-life case and develop recommendations that would help Toyota’s global leaders recover their brand loyalty. To this end, an evaluation of the definition of product-harm crisis within the context of the Toyota case study is followed by the identification of the problems the Toyota leaders must solve. In addition, an analysis of the organizational changes that were successful and unsuccessful and a Synthesis of the analysis of the literature to develop one or more recommendations for strategies Toyota might use to manage this product-harm crisis and recover brand loyalty in the global market are followed by a summary of the research and major findings concerning the management of product recalls in the conclusion.
Evaluation of the definition of product-harm crisis within the context of the Toyota case study
In his case study of Toyota’s response to the recall of tens of millions of its most popular vehicles, Rajasekera (2013) provides a systematic examination concerning Toyota’s response to the product recall problems experienced by this company in recent years. Although Rajasekera (2013) does not provide a specific definition of product-harm crisis, he repeatedly alludes to the profoundly negative effects such events can have on a major brand image. These negative effects are based on the perception of the brand in the minds of consumers with respect to the quality, safety, integrity and ability of companies to deliver on their promises to provide the best possible products for the prices they charge. For example, according to one definition, a product-harm crisis is “a highly publicized event caused by a product being found to be defective, contaminated or even harmful to consumers [which] could affect the entire product category. In many cases, [it triggers a voluntary product recall] or [it is] forced upon the affected company by government regulators” (Product-harm crisis, 2018, para. 2). Although government regulators did not force Toyota’s hand in the product recalls, it was only a matter of time before they did had the company not acted when it did. Indeed, Rajasekera (2013) notes that “the intervention by governments in Toyota's largest markets in North America, Europe, China, and Japan kept Toyota's management in the spotlight” (p. 1).
While Toyota (hereinafter alternatively “the company”) would ordinarily relish being in the media spotlight, it would be for far different reasons. After all, the company enjoys a large following of loyal consumers based on its well-known reputation for high quality products. In this regard, Piotrowski and Guyette (2010) report that, “Toyota Motor Corp. has not only been the envy of the automotive industry but also been held in high esteem as a symbol of manufacturing and leadership excellence in the business world” (p. 89). Over the past several decades, the company’s high-quality brand was further reinforced by receiving numerous awards for excellence and stellar reviews from rating agencies such as Consumer Reports as well as industry consultants (Piotrowski & Guyette, 2010). It was against this enviable backdrop that the series of product rccalls that would severely erode the confidence of the public in the company’s products began, and these issues are discussed further below with respect to the problems that the company’s leadership was forced to solve in response
Identification of the problems the Toyota leaders must solve
In sum, the company was faced with a crisis of confidence in the minds of its global consumer base as a result of a seemingly relentless series of product recalls that began in 2007. In this regard, Piotrowski and Guyette (2010) advise that, “Since 2007, Toyota has experienced a series of car model recalls that have escalated into a major crisis where several of their top-selling models (e.g., Camry, Prius, Corolla) have been flagged with serious potential defects” (p. 90). In fact, these “serious potential defects” were all safety-related problems that could contribute to accident injuries and fatalities, including bugs in the vehicles’ software, braking systems, steering mechanisms, and unexpected acceleration (Piotrowski & Guyette, 2010).
Certainly, no consumer wants or expects their car to take off on its own and then fail to brake properly, but this is exactly what happened to hundreds of consumers when they took the wheel of their Toyota. Since that time, the company has been faced with billions of dollars in costs that are associated with these product recalls, but the costs could have been far more severe if the company’s leadership had not responded in a timely and transparent fashion to these problems when it finally became fully aware of them. Notwithstanding the overall effective manner in which the company’s leadership responded to this product-harm crisis, though, the company was the focus of a number of criticisms, especially on social media platforms, and these issues are discussed further below.
Analysis of the organizational changes that were successful and unsuccessful
On the one hand, Rajasekera (2013) notes that the company failed to either evaluate the data it collected concerning issues that could contribute to product recall or did not collect this data in the first place. In this regard, Rajasekera (2013) reports that, “Either the company did not create a system to accumulate data into such a database or the company did not pay attention to the data gathered in this database in a timely manner” (p. 14). This point is also made by Piotrowski and Guyette (2010) who report that although the company had received some “warning signs” about manufacturing problems as early as 2007, the company’s leadership only took substantive action in January 2010 in response to increasing numbers of high-profile media reports concerning safety issues with Toyota brand vehicles. Nevertheless, the company’s actions thereafter have been widely regarded as transparent and appropriate under the circumstances (Song & Yoon, 2015).
Synthesis of the analysis of the literature to develop one or more recommendations for strategies Toyota might use to manage this product-harm crisis and recover brand loyalty in the global market
Multinational corporations such as Toyota are faced with the need to balance their marketing mix to include social media platforms with traditional media resources. To its credit, the company was highly effective in leveraging social media networks to help manage the product-harm crisis related to its product recalls. Indeed, Rajasekera (2013) points out that, “Based on the data collected on Facebook, Toyota did well; even during the crisis, Toyota managed to add fans to its Facebook site” (p. 15). Therefore, given the highly cost-effective nature of social media resources, it is reasonable to recommend that other companies faced with managing major public relations incidents including most especially product recalls, reach out to consumers directly through Twitter, Facebook and other popular sites to raise public awareness concerning the steps they are taking to address the problem and to prevent its recurrence in the future.
Conclusion
The fact that Toyota is still a going global concern is firm testament to the effectiveness of the company’s leadership in response to the product recalls caused by manufacturing problems beginning in 2007. The research showed that although the company spent billions of dollars to resolve these problems, Toyota’s leadership succeeded in managing this product-harm crisis in ways that provide some valuable lessons learned for similarly situated multinational corporations. In the final analysis, the power of social media can be leveraged to achieve highly positive results if these resources are used properly and transparently.



References
Piotrowski, C. & Guyette, R. W. (2010, Summer). Toyota recall crisis: Public attitudes on leadership and ethics. Organization Development Journal, 28(2), 89-93.
Product-harm crisis. (2018). Financial Times Lexicon. Retrieved from http://lexicon.ft.com/ Term?term=product_harm-crisis.
Rajasekera, J. (2013). Challenges to Toyota caused by recall problems, social networks and digitization. Asian Academy of Management Journal, 18(1), 1 –17.
Song, S. & Yoon, S. (2016, January 1). Effects of product failure severity and locus of causality on consumers' brand evaluation. Social Behavior and Personality: an international journal, 44(7), 1209-1221.