Toyota Motor Corporation - Case Study Example

Toyota Motor Corporation: Corporate Communication and its Corporate Social Responsibility I. Corporate Background Toyota Motor Corporation is a Japanese-owned company engaged in the manufacture and sale of motor vehicle. It is a global company with numerous manufacturing plants located not only in its home country but world-wide. It started operations in 1937 and as of March 2009, it employed almost 321,000 women and men from around the world. It is a highly acclaimed company, with excellent products manufactured and distributed globally. Its corporate headquarters is located in Tokyo, Japan, with regional offices in North America, Europe, Latin America, Australia, and Southeast Asia. Toyota is a company steeped in values, traditions, and a revered work ethic in its corporate culture among its officials and employees. It is guided by a code of conduct that seeks to create a “harmonious and lively work environment” in all its corporate offices, manufacturing sites, and affiliate companies. Japanese management style is a firm believer of the workplace being an extension of family life, hence, Toyota promotes a working environment where harmonious, friendly, and long-term relationships exist among its workers. Toyota manufactured vehicles have a reputation of high-quality and excellent workmanship. This reputation, however, was put on the line, when safety issues led to a massive recall of vehicles unprecedented in the entire auto industry of the world. The situation became worse when crisis management communications failed to shore up confidence of the general public on the way management has responded to the controversy. II. Recall crisis: Toyota’s crisis communications problems How did Toyota’s corporate communication activities handle the recall crisis of 2010? As compiled and narrated by MacKenzie and Evans (Motor Trends, 2010), Toyota’s recall crisis began in August 2009 with a fatal car crash reportedly caused by involuntary acceleration, originally presumed to be caused by the car’s floor matting system, which interfered with the car’s gas pedal. After investigation by the National Highway Traffic Safety Administration (NHTSA), and after being lambasted by several media outfit, particularly the Los Angeles Times, and exposing unreported incidents of car crash of Toyota vehicles in the past, Toyota began sending letters to owners, sometime in October or two months after the fatal car crash in August, indicating a recall of the Toyota vehicles to deal with the “unintentional acceleration issues”, but without admitting any factory defects on its products. MacKenzie and Evans reported, thus,  “The results of an investigation by local authorities and the National Highway Traffic Safety Administration (NHTSA) reveal a set of rubber floor mats designed for the Lexus RX 400 SUV had been placed over the top of the ES 350s stock carpeted floor mats and that the accelerator pedal had become jammed against them, causing the car to accelerate out of control. NHTSA notes brakes were nearly destroyed on the car and that the accelerator pedal was "bonded" to the floor mat. NHTSA also points out the gas pedal on the car was solidly mounted to its stalk, whereas other vehicles use hinged pedals.” On January 21, 2010, another recall was made by Toyota, affecting 2.3 million Toyota-brand vehicles, this time openly admitting that the recall was due to a problem with gas pedal. Five days later, on January 26, it ordered a stop in the selling of such units of Toyota vehicles. On that same day, it was reported that Toyota was contemplating on the same recall for units sold in Europe. Finally, on January 27, Toyota decided to include another batch of Toyota vehicles, numbering to about 1.1 million units, in the number of vehicles to be recalled due to unintentional acceleration issues. The crisis was a huge public relations nightmare. As demands for investigations became deafening, Toyota reacted in a rather slower pace than what would have been ideal. There was some sort of crisis communications failure, as Toyota failed to respond swiftly to what was a developing crisis then. According to several brand experts, as cited by Wallop, a Consumer Affairs analyst, “Billions of pounds could be knocked off the value of Toyotas brand because of the slow way the company has dealt with the crisis of faulty accelerator pedals in its cars.” Brand experts, such as Jonathan Gabay of Brand Forensics, remarked that Toyota’s reputation will be largely affected by how it would deal with the crisis. Given the pace of its response to the crisis, Gabay predicted that it would take Toyota a couple of months more to recover from the crisis. In the few weeks after the recall was made in January 2010, share prices of Toyota in the British stock market fell for over twenty two billion pounds. Toyota, being a leading brand in the world, was even compared to similar situations involving large, multi-national corporations that implemented product recall in recent years, but whose swift and effective crisis management allowed them to recover sooner that expected. Such brands, enumerated by Wallop, included controversial cases of Tylenol by Johnson and Johnson, Cadbury chocolates bars, and Mattel’s Barbie dolls. Wallop remarked that those products suffered the same “catastrophic scandals but have gone on to flourish”. Another criticism on the way Toyota handled its crisis communications plan was its failure to take advantage of the digital communication tools that were readily available at its disposal, such as social networking platforms through the internet. Lyon, in his article entitled “Toyota’s Recall and Crisis Management 2.0”, described crisis management as “not just about contacting news outlets or writing an apologetic press release”. He further add that, “in the digital age, crisis management requires swift, sweeping action on all digital fronts: social media, blogs and company websites”. Lyon’s analysis of Toyota’s action during and right after the crisis suggests that Toyota failed to act swiftly and pro-actively in the branding crisis, by not being able to fully utilize social media platforms such as Facebook and Twitter, where a connection with consumers would have been better established. Lyon compared the way Mattel handled its own recall crisis, with Toyota’s, and pointed out how Matell has recognized early on that consumer expectations have changed with the advent of digital tools and social networking platforms. A successful crisis management was thus effected, combining efficient tools to connect with the audience, plus the elements of good timing, responsiveness, and sincerity, according to Lyons. III. Corporate social responsibility reporting Toyota places great importance in achieving lasting relationships among its stakeholders, among them are, first and foremost, their customers, followed by their employees, shareholders, business partners, and the communities where they operate. Guided by the Nippon Kaidanren (Charter of Corporate Behavior), Toyota puts emphasis in maintaining and enhancing good relationships among its stakeholders for mutual benefits and mutual success. While shareholders’ wealth is a top priority, achieving it in an honest, fair, and competitive way is the path taken by Toyota in all its corporate strategies and business dealings. Recently, however, Toyota suffered major setback in its operations when several accidents were reported and was found to be caused by certain “defects” in its vehicle products. Toyota’s public relations skills were tested as it necessitated to order a recall of its products already sold from or are still being sold in the market, in order to avoid further damage to a growingly suspicious public, and to the company’s image as the “largest and most profitable automaker” in the world. Toyota’s responsibility to the public who have long patronized Toyota-manufactured vehicles should have been the paramount concern when its management began to receive questions about the safety features of some of its latest auto models. It indeed has an obligation to the public to immediately respond to questions of safety and reliability on the use of its vehicles. The problem seemed to have been highlighted by the fact that Toyota delayed its reaction to a brewing problem. According to Hemus, “central to Toyota’s problem is its perceived delay in identifying and addressing the situation…”. There was a perception in the American public that Toyota ignored the problem when it occurred, and was forced to take action only when the problem has already grown out of control. Hemus attributed this to the Japanese style of management wherein the zeal for product quality and excellence has turned them blind to possible glitches in its manufacturing operations. This has brought the management into denial stage, until when the problem could no longer be ignored as it has already explored right in front of them. Further aggravating the crisis management failure is the way Toyota executives have explained the crisis to the American public through the US Congressional hearings. One of them was quoted as saying “the parts we are installing may not be fixing the acceleration problem”. And to make matters worse, its Chief Executive, Akio Toyoda, after sending apologies to victims, testified before a Congressional hearing, that “some priorities became confused, and we were not able to stop, think, and make improvements” on the plan that were set in 2001. Such statements further eroded the public’s confidence, and as Roemer noted, those statements “literally destroyed any further credibility the company had with the customers and regulators”. Too late and too little would be the way to describe Toyota’s recall action by January 2010, after the car crash accident happened in August 2009. Too little was it that it five days after its first announcement of recall, it has to announce a second batch of products to be recalled. But nonetheless, it behooves the Japanese company to recall, as many as possible, the units of Toyota-manufactured vehicles suspected of defective parts, to protect the public from further harm. It will surely cost a lot to the company, not only on its profit bottom line, but also on its image and reputation, which it has cultivated and protected for so many years. And yet it must do so the things that it has done, in order to regain the public’s trust and confidence on its products, by ensuring that no more life is put in danger by driving a Toyota. IV. Recommendations for improvement of Toyota’s communication plan There are several lessons to be learned on the way crisis communication has been handled by several companies who suffered or experienced the same product recall episodes in their corporate life. Toyota’s communication plan could be improved further, if it were to follow the formula of Lyons, who suggested that “successful crisis management requires timing, response, and sincerity’. If only Toyota acted swiftly the moment it recognized the problem, if only it was able to send out communication experts to explain to the public what was the problem and how it planned to solve the problem, and if it were only able to express in a timely manner its apologies and given out its promises for safer products to an increasingly doubting public, then it would have easily plucked itself out in a shorter period of time, from the crisis it is currently in. Another lesson to be learned is the usefulness of a communication plan to respond to a crisis. It can be observed that Toyota did not plan well its crisis communications strategy to deal with the crisis. Instead of instilling confidence to customers, it further aggravated the crisis with the cacophony of voices pointing to an uncontrolled and uncontrollable situation. A communication plan should have been drawn up, outlining the things that should have been said to the public, in a comprehensive, well-thought out strategies to address the crisis situation. References ______. Toyota ceo emerges from silence; outlines current woes and plans. 2010. Available at: http://theweeklydriver.com/2010/02/05/toyota-ceo-emerges-from-silence-outlines-current-woes-and-plans/ [Accessed 27 April 2010] Bliss, W. Excerpts from How to Communicate During a Crisis. 2006. Available at: http://www.shrm.org/Publications/Books/corpcomm/Pages/ExCorpCommPR.aspx [Accessed 27 April 2010] Hemus, J. Accelerating towards crisis: a pr view of toyota’s recall crisis. 2010. Available at: http://www.guardian.co.uk/business/2010/feb/09/pr-view-toyota-reputation-management [Accessed 27 April 2010] Lyon. E. Toyota’s recall and crisis management. 2010. Available at: http://sparxoo.com/2010/01/29/toyotas-recall-and-crisis-management-2-0/ [Accessed 27 April 2010] MacKenzie, A. and Evans, S. The toyota recall crisis. 2010. Available at: http://www.motortrend.com/features/auto_news/2010/112_1001_toyota_recall_crisis/index.html [Accessed 27 April 2010] Roemer, B. Crisis management lessons from the Toyota crisis. Available at: http://www.scribd.com/doc/28149731/Crisis-Management-Lessons-From-the-Toyota-Crisis [Accessed 29 April 2010] Toyota. Design, r&d/manufacturing. 1995-2010.[Online] Available at: http://www2.toyota.co.jp/en/facilities/manufacturing/worldwide.html [Accessed 27 April 2010] Toyota. Company profile. 1995-2010. [Online] Available at: http://www2.toyota.co.jp/en/about_toyota/overview/index.html [Accessed 27 April 2010] Toyota. Vision and philosophy. 1995-2010. Available at: http://www2.toyota.co.jp/en/vision/code_of_conduct/ [Accessed 27 April 2010] Wallop, H. Slow response dents toyota’s reputation. 2010. [Online] Available at: http://www.telegraph.co.uk/finance/newsbysector/transport/7158523/Slow-response-dents-Toyotas-reputation.html [Accessed 27 April 2010] Read More