Social Trends, Social Responsibility and Ethics in Business: Toyota Motor Corporation - Term Paper Example

Social Trends, Social Responsibility and Ethics in Business Toyota Motor Corporation Toyota Motors Corporation (TMC) is one of corporate family-owned leading car manufacturing companies in the world. According to Ejaz, “Toyota’s compelling and unique value promise propelled Toyota to surpass GM as the world’s largest automobile manufacturer “ (Ejaz, 2011). Through the years, Toyota has built a sterling reputation on its safety and quality cars produced worldwide. So who would think that this highly regarded and multi-awarded car company would falter one day? The scenario, however, presented in this paper would cover the conditions prior to the March 11, 2011 earthquake and tsunami that devastated Japan. The article chosen for this purpose is entitled: “Toyota Motor Recalls 1.7 Million Cars for New Defects” dated January 26, 2011. It provides a glimpse of a scenario on how Toyota addresses one of the controversial issues related to its social responsibility. This paper seeks to present some facts on how TMC addresses the social trends, corporate ethical issues and social responsibility in the light of the legal cases it now confronts? The Company, A Brief Background “Toyota Motor Corporation domain is the automobile industry. It is engaged in the design, manufacture, assembly and sale of passenger cars, recreational and sport-utility vehicles (SUVs), minivans, trucks and related parts and accessories worldwide. Toyota provides retail and wholesale financing, retail leasing and certain other financial services to its dealers and their customers related to vehicles manufactured by the Company. The major portions of Toyota's operations on a worldwide basis are derived from the automotive and financial services business segments. The Company also has an all other segment, which includes its non-automotive business activities. Toyota's other operations are its information technology (IT)-related businesses and pre-fabricated housing. The Company operates through 554 consolidated subsidiaries and 228 affiliated companies.” (“Toyota Company Overview”, n.d) Toyota’s stakeholders include: customers, business partners (dealers and suppliers), investors, consumers, nongovernmental organisations government, community, stockholders. Toyota’s Social Trends “Social change may perhaps be the most difficult environmental factor for owners and managers to forecast, influence and integrate into business plans. This would also include “attitudes, values and lifestyles” (Althouse, et. al. 2008, image 089 ). Outside Toyota, TMC’s customers’ trends on preferences and satisfaction would definitely be the priority of the company. It would also consider the demographic typology as a point to consider since products to be produced will have to reckon from the demographic characteristics and demands of its customers or buyers. (Althouse, e.al. 2008-“Summary of Learning Goals) Of course, it will have a program that would direct its strategies and efforts towards its customers’ preferences. However, inside the company, TMC also has definitely unique social trends. What TMC has achieved through all these years and what it is now may be attributed to: one, its culture and to what they call the “Toyota Way and the Toyota Production System (TPS). Many companies have tried to emulate TMC’s the “Toyota Way”. General Motors was one of those companies that attempted to copy but it failed (Denning, 2008.). Still unfathomable to outsiders, they still could not match the way TMC implements its “Toyota Way”. What is this “Toyota Way”? What makes TMC’s organizational culture unique? Empowering its workers is the center piece of Toyota’s philosophy ( Kotelnikov, n.d.). The reason why Toyota workers behave differently from their contemporaries outside Toyota is that Toyota’s management style is deeply rooted to the Japanese culture and discipline. Toyota’s Social Ethics in its Organizational Culture “Business ethics reflect the behavior of a business firm with rest of the world. The dealing of a business with its consumers, rivals, associated firms and every other body defines its business ethics to be good or bad. … These ethics can help a business to grow and remain in healthy competition” (Ejaz, n.d.). Toyota has earned the confidence of the public as shown in its multimillion automobile sales every year that have jumped on the top of chart significantly. In fact, in 2007, it was reported to have surpassed the sales of General Motors (White, 2007). TMC practices the unique, real ‘Toyota Way' which is a culture of control," according to Masaki Saruta, a business professor at Japan's Chukyo University. (J. Shook, 2009). “It blends Toyota culture with its Toyota Production System. This progress is to be achieved "through the energy of people and technology” (“Toyota Global Vision 2020”, 2011). “ This integration of its corporate culture_ the “Toyota Way” with production technology which they call Toyota Production System (TPS) claims to be one of the cornerstone of competence as well as one of its secrets of its success in winning the confidence of the public worldwide. Through the years, since it started operating, TMC have continuously inculcated values to its workers, that is, “for them not to be content with status quo but to create a path to a new world and to work steadily towards the realization of society's dreams. This progress is to be achieved "through the energy of people and technology” (“Toyota Global Vision 2020”, 2011). Based on the criteria provided by Althouse,et. al. , TMC ethics may well be categorized under the post-conventional ethics characterized by ethics from mature people. (Althouse, et. al., 2008) Ethical Issues Hurled Against TMC TPS, according to Kotelnikov,V., is covered by a manta covering the key values practiced: challenges, kaizen, genchi, genbutsu, respect and teamwork guided by two Management Traditional principles: "Continuous Improvement" and "Respect for People"( Kotelnikov, n.d.). Despite this, Toyota is phased with a couple of ethical issues. One is the Total Recall and the alleged unethical behavior of Toyota (Ejaz, 2011) What is the Total Recall issue? This is the “unintended acceleration” problem discovered by the National Highway Traffic Safety Administration. Morgan O’ Rourke wrote that “It was in 2007 that the issue on Toyota surfaced after that tragic incident in August when four people driving a Lexus met a collision accident in California and died. This incident prompted investigators to pursue the investigation which revealed that the used car sped out of control when the floor mat stuck underneath the gas pedal. Subsequent investigations revealed that Toyota was again caught with another issue that recalled more than two million vehicles to fix the faulty pedal assembly. Unintended acceleration was not the only problem facing Toyota owners, however. In the weeks to follow, Toyota issued recalls for faulty anti-lock brake systems in Prius and Lexus hybrids, brake line defects in selected Camrys and front driveshaft issues in Tacoma trucks“ (O’ Rourke, n.d.). Impact of the Total Recall to TMC In all, “Toyota was forced to recall more than 12 million vehicles globally-more than its entire worldwide sales last year” (Welch, 2011). “Company officials estimated that the recalls could cost the automaker $2 billion in expenses and lost sales. And that was without factoring in the possibly larger cost of the lawsuits that the company will likely face and the reputation it has to recover” (O’ Rourke, 2011). “The automaker TMC, based in Toyota City, Japan, is struggling to recover its reputation for reliability after record recalls, mainly for problems relating to unintended acceleration” (Kitamura & Masatsugu,2011) The second unethical issue hurled at TMC’s is its too much formalities and rigidness or strictness in the corporate norms, rules and policies of the company which is pointed out by some to become a probable cause for generating organizational dysfunctions. In fact, Ejaz elaborates on this further, as he relates: “There have been many academic studies on Toyota’s manufacturing plants in Japan and findings show that they represent one of the worst sweat shops in the world. Their operations have been described as “showy” and “human trafficking”. There have been thousands of “karoshi” claims each year. This term means “over worked to death”. Their plants have high suicidal rate … Essentially, TMC uses the cheapest materials and poorest workers to manufacture them.” (Ejaz, 2011) TMC’s Social Responsibility (SR) “Social responsibility as defined is the concern of business for the welfare of society as a whole. It consists of obligations beyond just making a profit but must go beyond what is required by law or union contract.” (Althouse, et.al., image088). Recalling damaged automobiles worldwide leading to company loss is already a sign that TMC is complying with its social responsibility. Answering damaged cost for the victims, customers, legal suits, the affected community covers Toyota’s SR. The 5 pillars of corporate social responsibility include: community investment, safety and environment, success factors, employee reactions and maintaining harmonious relationships with suppliers and customers. (Althouse, et.al. image 099) Does TMC address all these areas? In fairness, TMC released a Sustainability Report which discloses to the public what “ the initiatives of the company are towards achieving the development of sustainable vehicles, making manufacturing plants sustainable to vehicle recycling, implementing "eco-driving" educational programs and reforestation, initiating measures to help the reduction of CO2 emission, producing electric or eco driving vehicles, community support services and a wide variety of programs to improve the environment, global warming prevention, not to forget to mention its future contribution to all its stakeholders including the global community “ (Toyota, Sustainable Report, 2011). On the other hand, after all accusations, it might be worthy to note that despite the recall and damaged reputation, TMC’s CEO and President Akio Toyoda has bravely faced everyone, accepted full responsibility and told reporters Jan. 10 in Detroit that the recalls inflicted "big damage" on Toyota. “Toyota cars are safe,” he said. "I’d like you to expect more good things to come from us.’’ (Kitamura & Masatsugu, 2011) Conclusion Ejaz described that “Toyota is the World-class manufacturing quality expert recalling millions of cars across its product lines. Three generations after its founder created Toyota on a philosophy that imposed to build quality on every step, it turns out that Toyota’s quality has been steadily eroding. Toyota’s quality issues may run deep and systemic.” (Ejaz, 2011). But this paper is not intended for the latter rather it is to relate how Toyota became responsive to the social climate which includes social trends, social ethics and most especially its social responsibility particularly on the total recall issue. Considering the above and relating the insights and learnings from Althouse, et. al., TMC may have implemented “empowerment of the employees, needless to say, but it has to qualify the rigidity of the corporate code of ethics, rules and regulations it imposes on its workers because if it goes beyond its limits, it undermines the dignity of man which violates the Rules Nos. 6-9 of unethical behavior mentioned in the book of Althouse, et. al. (Althouse, et.al 2008) John Shook shares the following: “One particular issue concerns the tension between respecting individuals while simultaneously being extremely tough on them. Critics charge that Toyota workers must sacrifice individuality for the good of the group, following rigid rules that dictate nearly every facet of their working lives. A recent article delving into this issue ('Toyota Man's' conformist ways come under fire (John M. Glionna, March 22, 2010) http://www.latimes.com/business/la-fi-toyota-man23-2010mar23,0,7100881.story?page=1) …The article goes on to say, "... guidelines dictate nearly every facet of employees' day -- how they turn corners while walking on company property, where they eat their lunch and even how they conduct themselves at home. At the Toyota plant here, workers cannot put their hands in their pockets. Hall monitors report scofflaws. Commuters who drive to work must report their routes to bosses. Those taking trips on days off must file such details as where they stopped for breaks..." (John Shook, 2010) Finally, “hiding or divulging information” is also part of unethical behavior, (Althouse,et.al on unethical behavior, image100). A perfect example is Mr. Beasley Allen’s report from his Toyota Recall Timeline article saying that: “On April 8, an internal e-mail was uncovered, in which from Irv Miller to a Japanese colleague, dated Jan. 16 of this year. At the time, Miller was Group Vice President, Environmental and Public Affairs, one of the company’s top spokespeople. In the email, Miller says, “I hate to break this to you but WE HAVE A tendency for MECHANICAL failure in accelerator pedals of a certain manufacturer on certain models.” (These words were capitalized in the email.) He goes on to say, “We are not protecting our customers by keeping this quiet. The time to hide on this one is over” and says, “we need to come clean.” (Beasley, 2010) Considering the above, TMC might just have violated evidently the following Rules: Rule No. 7: Committing Improper Behavior; Rule No. 9: Permitting organizational abuse and Rule No. 10: Violating Rules, areas which need to forge further research undertakings. WORKS CITED Beasley, Allen .”Toyota Recall Timeline” lawsuit.com . toyota-lawsuit.com. 2010 Web March 21, 2011. Althouse, N., Rose, S., Allan, L., Gitman, L., and McDaniel, C. The Future of Business (Second Canadian Edition). Toronto: Thomson Nelson. 2008 Print Denning, Steve. “Why Is Toyota So Hard To Copy?” stevedenning.com., stevedenning. 2008 .Web. March 03, 2011. Ejaz, M. Rahim.“Learn How to Conduct Business Ethically: What is the importance of business ethics?” Scribd.com., 2011 Scribd Online. Web Mar 21, 2011 Kitamura, Makiko & Horie, Masatsugu. “Toyota Motor Recalls 1.7 Million Cars for New Defects” Bloomberg Businessweek. n.p. January 26, 2011.Web. March 21, 2011 Kotelnikov, Vadim . “A case study Toyota: Toyota Production System as a Sustainable Competitive Advantage” 1000 venures.com. 1000 ventures, n.d. Web. Mar 21, 2011 O’ Rourke, Morgan.. “Toyota’s Recall” . rmmag.com. rmmag, 2010. Web. Mar 12, 2011 Seetharaman, Deepa & Crawley, John. “Toyota Motor Corp recalled nearly 2.2 million vehicles, citing a defect that could cause gas pedals to stick, in an extension of the safety crisis that has hounded the world's top automaker for more than a year”. Reuters. 25 Feb. 2011. Web. Mar. 21, 2011 Shook, J. Toyota “The Bad Guy. 2009”. lean org. Lean Enterprise Institute, Inc. 12 April 2010 Web. Mar. 22, 2011 “Toyota’s Global Vision 2020: The Ideal Being Pursued for People, Society and the Global Environment” toyota-global.com.company/vision philosophy/Toyota global vision 2020. Toyota global. 2011 Web. March 22, 2011 “Toyota Motor Corp.: Company Overview”. lognet.com. psn/pestrategico2. n.d. Web. PDF file. “Toyota: Sustainability Report” Toyota-global.com., 2011 Web. March 21, 2011 Welch, David. “Toyota Recalls Another 2 Million Cars. Apology Needed “. Businessweek. Autobeat. February 24, 2011. Web. Mar 21, 2011. White, Jerry . “Toyota surpasses GM in global auto sales”, wsws.org. World Socialist Web Site Online, 26 Apr. 2007. Web Mar 21, 2011 REFERENCES Gitman, Lawrence J. & Daniel, Carl McDaniel. The Future of Business: The Essentials. South-Western Cengage Learning, 2008. Web. 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