Toyota Product Recall Crisis

Global Crisis Management – A Case Study

Toyota Motor Corporation is a company that was established in 1937 with the goal of developing quality automobiles. Toyota’s growth and success in the global automotive sector is attributable to various factors including a suitable business concept and model. Toyota’s global reputation as a manufacturer of affordable quality automobiles is linked to its use of continuous improvement and just in time (JIT) concepts. However, the company recently experienced a product-harm crisis that affected its loyalty in the global market, which is characterized by intense competition. The product-harm crisis was characterized by recall issues that generated concerns regarding the firm’s openness to its customers and the public. In addition to these concerns, the recall also exposed some “digitization” in the global automotive industry (Rajasekera, 2013). This paper examines this case and provides recommendations that could help the firm’s global leaders recapture their brand loyalty.

Product-harm Crisis

Rajasekera (2013) notes Toyota has developed a reputation as a manufacturer of affordable quality automobiles partly because of its focus on continuous improvement and use of the JIT business concept. These concepts have played a critical role in Toyota’s business model and its global success in the automotive industry. The company has also remained committed to enhancing the quality of its products following the recent unending stream of product recalls. The firm adopted Total Quality Control as part of its efforts to enhance product quality and increase its competitiveness against well-established brands in the automobile industry. Despite efforts to enhance product quality, the firm recalled 3.9 and 2.9 million vehicles in 2009 and 2010 respectively. These recalls came at a time when the global automotive industry has become more competitive, especially with the emergence of new low-cost automobile manufacturers.

The recent recall issues facing Toyota represented a product-harm crisis that generated concerns regarding product quality and the firm’s openness with the public (Rajasekera, 2013). Despite being an established giant, the company faced concerns regarding the quality of its products and its engagement with the public because of the product recalls. As evident in Toyota’s case, a product-harm crisis is one of the major threats to a company’s reputation. According to Van Heerde, Helsen & Dekimpe (2007), a product harm crisis is defined as a well-publicized event in which a firm’s products are found to be defective or dangerous. Such events can damage the long-standing reputation of a company and contribute to losses in revenue and market share.

Based on the case of Toyota, a product-harm crisis is a well-publicized incident in which the firm’s automobiles were found to be dangerous or defective. In this context, Toyota announced its issues with a product that was found to be defective or dangerous. The company considered defects in its vehicles dangerous as they caused a number of deaths and were the subject of unprecedented media coverage. In relation to the vehicle recall law, Toyota’s product-harm crisis was brought by a defect relating to safety since the issue with some of its vehicles caused injury or death (Rajasekera, 2013).

Problems for Toyota’s Leaders

The product-harm crisis in Toyota’s case generated numerous issues for the company’s leaders. Toyota’s leaders needed to address various issues brought by the product recall, digitization in the automotive industry, and social networks. One of the issues that these leaders needed to address is defects in some of the vehicles. The defect was a major issue that needed to be addressed urgently since it was allegedly the cause of a number of deaths relating to safety throughout the globe. These events were considered serious and attracted the attention of the media across the globe. Therefore, Toyota’s leaders needed to address the issue since it was the core of the crisis (Fan, Geddes & Flory, 2011).

Secondly, Toyota’s leaders needed to address the damaged reputation because the defect in some of its vehicles had been the subject of unprecedented media coverage worldwide. The damaged reputation was characterized by the seemingly lethargic response time to incidents. While Toyota was renowned as the number automaker across the globe, it response time to incidents was seemingly lethargic and damaged its reputation. These leaders needed to protect the reputation Toyota has developed over decades. Finally, Toyota’s leaders needed to find ways to manage social media strategically as part of improving its openness with the public. The growth of social networking sites provided numerous opportunities and generated new demands for the firm’s engagement with the public. Therefore, finding measures to manage social media strategically was critical to rebuild its reputation and maintain its market share.

Successful and Unsuccessful Organizational Changes

The establishment of a social media strategy team and an “Online Newsroom” is a successful organizational change adopted by Toyota. These changes were made following the firm’s realization of the significance of social networking sites following the emergence of social media. The company established these measures in efforts to harmonize all the media releases from its various departments including customer services and public relations (Rajasekera, 2013). This change was geared toward preventing public confusion by coordinating all messages released to the public. It was a successful organizational change since the product recall had raised concerns about the firm’s engagement with the public. The success of this change is evident in the firm’s improved gathering of real-time information regarding customers’ feelings and complaints. Additionally, this organizational change enabled the company to strategically manage its social media in relation to the current product recall.

An unsuccessful organizational change that partly contributed to the product-harm crisis is the establishment of the defect-reporting database. The company adopted this initiative as a way of monitoring vehicle-related complaints from customers in real-time. This ended up being an unsuccessful organizational change since it did not prevent the current recall and product-harm crisis. This was an indicator that the firm did not utilize data collected in the database in a timely manner to prevent future product recall problems (Rajasekera, 2013).

Recommendations

The product-harm crisis had significant impacts on the firm’s reputation and market share. Toyota could address this crisis through various strategies that would help rebuild its brand loyalty in the global market. One of the strategies that could have helped address the crisis and rebuild brand loyalty is a strong social media campaign. Mandelli & Mari (2012) state that social media is a place where organizations can either develop or destroy their reputation. A strong social media campaign would have involved providing a stronger and more positive voice. Such a campaign would represent a proactive approach through which the company combats negative messages and conversations regarding its products and operations.