Toyota Human Touch - Case Study Example

Toyota Human Touch Introduction Founded in 1937 Japanese automobile manufacturing company Toyota needs no introduction in the international automobile market especially in the car market. Arguably the number one car maker in the world, Toyota is currently operating in most of the continents and regions in the world. According to the Toyota website, the capital of the company is around 397.05 billion and the number of employees in Toyota and its subsidiaries are 320808 as of March 31, 2009. Even though the company has produced 5,100,000 vehicles in Japan itself in 2007 and 5,160,000 in 2008, the production has come down to 4,255,000 in 2009 (Toyota, 2009). Competition in the car market is getting stiffened day by day and all the car manufacturers are formulating new strategies to gain upper hand. Environment friendly cars may most probably conquer the car market in near future because of the concerns of environmental problems normal car are causing to the nature. Electric cars were already tested by many car manufacturers like Mitsubishi and Nissan; but Toyota has still concerns about the success of electric cars and they are currently engaged in giving their cars more human touch. The advertising video 'Toyota Human Touch' recently released by Toyota explains Toyota’s visions in giving more human friendly cars. In this video, Toyota portrayed a car in which the driver get all the required assistance like, seat adjustments, seat belt fastening, front mirror cleaning, opening the boot etc with the help of some humans located at different parts of the car ('Toyota Human Touch', n. d). Instead of machines, all the actions performed by humans in this video. Even though Toyota’s supremacy in car market is still unquestionable, some of the recent issues in which Toyota forced to recall some of its cars because of technical problems, have spoiled the image of the company drastically. This paper briefly analyses such problems faced by Toyota recently, its effect and the counter measures taken by Toyota to tackle these problems. An overview of the recall problems faced by Toyota recently The prominent news agency, Reuters on January 10, 2010 has mentioned that Toyota was forced to extend its safety recalls to millions of its most popular cars to Europe and China because of the suspected safety problems. Reuters also pointed out that the Toyota Company may loose millions of dollars in extra costs per month fro fixing the potentially dangerous accelerator pedals. In China alone Toyota forced to recall 75000 RAV 4 vehicles according to Reuters (Reuters, 2010). Toyota’s image as a word of quality and reliability has damaged severely because of the widespread recall of vehicles from the Asian, European and American markets. Toyota has so far recalled around 8 million vehicles globally to modify the controversial floor mats and gas pedals blamed for unintended acceleration. Toyota engineers are currently working overtime to investigate the reasons for the reported problems as well as other problems. Even though Toyota has every resource to bounce back from this crisis, it is not easy for them to remove the black marks put on their reputation because of this serious crisis. It is difficult to estimate the financial damages caused by this problem to Toyota at present; all depends on how long Toyota shut down their plants and how badly their reputation affected among customers. “A new Kelley Blue Book survey says 27 percent of car shoppers who had been considering Toyota now won’t buy one, due to the recalls” (Edgerton, 2010). . Changes to the brand position of Toyota Toyota was the number one brand in the global market as far as the car manufacturing was concerned. The current problems in Toyota vehicles opened the doors of opportunities widely for the competitors. General Motors in America was facing stiff challenges from Toyota even in American market. Moreover, recent recession has destroyed the backbone of GM and they were waiting for an opportunity to bounce back. Toyota provided them such an opportunity now and they have already started to capitalize on it. Edgerton, (2010) has mentioned that Ford and General Motors have been quietly offering rebates of up to $1,000 to buyers who trade in their Toyotas (or Lexuses, which are also made by Toyota). A variation on this incentive offers drivers who are leasing Toyotas sweeteners to get out of their deals (Edgerton, 2010). Daily news on 7 May 2010 reported that Toyota already lost its number one spot o Ford in its automotive brand indicators in America (Daily News, 2010). They are currently placed at number 2 behind Ford during the first quarter of 2010. Honda and Chevrolet are trying hard to displace Toyota from even the number 2 spot. In Japanese market also, Toyota facing stiff challenges from arch rival Honda. Lexus (Another car manufactured by Toyota) was one of the favorite cars of the Europeans. Lexus took years in creating its brand value by winning consumer emotions in Europe because of superior performances. In fact Lexus delivered more than it promised to the customers which made Lexus the number one brand in Europe. But the current accelerator problem affected Lexus also and Toyota forced to recall Lexus vehicles also from Europe. In other words, the brand value of Lexus and Toyota has seriously damaged in Europe also. The chart given below explains the damage caused to Toyota’s brand value because of the recall incidents. (Mora, 2010) It evident from the above chart that both owners and non-owners of Toyota vehicles equally agreed that the brand value of Toyota was seriously damaged because of the current recall incidents. Effect of recent problems to Toyota The recent problems affected Toyota severely. As mentioned earlier, competitors and rivals are exploiting the current situations very well. Some of the rivals even modified their advertisement campaign in order to make maximum out of it. For example, Edgerton, (2010) has mentioned that Nissan’s TV ads are all about “safety” and “quality at present” (Edgerton, 2010). Nissan is trying to prove two points through these ads. First, they want to spread the Nissan brand as a reliable brand with respect to safety and quality. At the same time they were trying to remind the customers indirectly that some of the other brands lack safety and quality. Toyota was spreading the message of safety and quality earlier and their claims are severely affected by the recent incidents which are reflected in the Nissan ads now. Messenger (2010) has mentioned that the direct cost to Toyota for the initial recalls may be of the order of around $US2 billion for the 3.8 million cars initially recalled. Moreover, Toyota has already slashed more than 6,000 jobs at its Japanese plants because of the global economic crisis (Messenger, 2010). The current problems served as a double blow to Toyota. Because of global financial crisis, most of the companies including Toyota were struggling to stay in the market because of less demand for the vehicles in American and European markets. The current recall problems doubled their problems and it came quiet at an unexpected time and unfavourable time. If the recession was not there, Toyota could have handled this issue more effectively. But the recession and recall added to the injuries caused to Toyota. Another important impact of Toyota’s recall of vehicles is caused in the employment sector. Thousands of people lost their jobs in Toyota plants. Moreover, the associate industries of Toyota like the spare parts division also faced severe shortage of business and loss of jobs. Toyota is such a big company that any problems occurred to it may affect many other associated companies. The financial loss incurred by the recent incidents was huge and the exact volume of the damage is still unknown. The problem is not yet over and the exact damage will be known to Toyota and the public later only. Toyota can definitely bounce back from the current crisis, but many people have concerns about the lost brand image. Toyota was such a trusted brand all over the world that the customers purchased Toyota cars with blind eyes. It is difficult for Toyota to regain its lost customer confidence easily. Apart from the financial loss and image loss, Toyota is currently facing several law suits also in many regions of the world. At least 30 lawsuits have been filed against Toyota over the accelerator pedals in US itself over complaints of faulty braking in its Prius model. Prius was the latest environment friendly car from Toyota family and in America; many people witnessed it as the car of the future. This car met most of the standards put forward by the Obama administration in its automotive policy. The emissions were less and the fuel efficiency and safety were more and many Americans started to accept this car with both hands. But the recent reports about the safety and quality of this car and the subsequent recall were unbelievable to the American public. Lexus was the favorite car of the Europeans before the crisis started. The current crisis resulted in severe damages to the growth prospects of Lexus/Toyota in Europe. Creamer (2010) has mentioned that Toyota’s car sales in Germany, Europe’s biggest, may shrink by 1 million vehicles in 2010 whereas Volkswagen AG’s sales may go up to 2.9 million during the same period (Creamer 2010). The following incident reported by Ansari, (2010) sums up the whole effect of the Toyota recall of vehicles. Clarence Jackson, an American, decided to purchase a 2010 Toyota Camry.  At the time when Jackson was supposed to pick up his new car, he heard about the massive recalls of Toyota vehicles due to accelerator problems and had a change of heart and he forced Toyota to cancel the deal (Ansari, 2010). The above story is not a one of that kind. There are plenty of order cancellation incidents coming different parts of the world for Toyota. Nobody wants to risk their lives in a vehicle even if it is from a trusted source like Toyota. People always pay more attention to their safety rather than the reputation of a brand. Campaigns launched by Toyota to combat the problem Toyota has launched a massive campaign for regaining its lost customer confidence in different markets. In fact the decision to recall the 8 million vehicles from the market itself shows Toyota’s commitment towards the customer safety. Moreover, the article, Toyota issues global Prius recall (2010) has mentioned that Toyota has already announced that they have corrected the software problems in Prius vehicles. Moreover, the chairman of the Toyota Company, Toyoda assured the public that they will redouble their commitment to quality as the lifeline of our company (Toyota issues global Prius recall, 2010). When Toyota says some thing, public know that it will materialise. Toyota never cheated the public with false offers in the past. Lexus was another model of Toyota vehicles which was seriously affected by the recall problems. The article, 2010 Lexus GX 460 Passes Consumer Reports’ Retest – “Don’t Buy” Label Lifted, (2010) has mentioned that Lexus dealers started to contact the customers in order to inform them that an update is available for their vehicle. 75% of the vehicles were already updated and the process is still going on. Moreover, Toyota is providing courtesy vehicles, free loaner vehicles, remote repairs, pick-up and delivery service, and fuelling and washing customer cars; all free of cost (2010 Lexus GX 460 Passes Consumer Reports’ Retest – “Don’t Buy” Label Lifted, 2010). Toyota is providing a courtesy vehicle to the customers who faced problems in their Lexus brand in Europe. The above strategy Toyota worked out in order to solve the current problem without causing many problems to the customers. It is a fact that if the customers send their vehicles for repairmen for longer period, their travelling needs will be affected. In order to avoid such things Toyota decided to give a substitute vehicle to such customers till their vehicles being repaired and returned. Toyota has already arranged the pick up and delivery of the defective vehicles free of cost to the customers even though it is a massive expenditure for them. Effectiveness of the campaign Toyota was definitely successful in rectifying the current problem up tot certain extent through their massive campaign of recalling defective vehicles. At the same time their campaign is not succeeded fully because of the problems in contacting all the Toyota customers with defective cars. Sinha (2010) has mentioned that Toyota has already started mailing letters to owners of recalled vehicles to let them know when to bring their vehicles into a dealership for repair. He also mentioned that Toyota’s efforts to contact the customers using postal service was seriously affected because of the frequent changes of addresses of the customers. He has pointed out that 17% of Americans change addresses annually; 43 million people move each year and One out of every six families move each year (Sinha, 2010). Toyota collects addresses of the customers while they purchase the vehicles and they don’t have any option to update the address database when the customers change their addresses. In normal circumstances customers won’t bother to inform Toyota about their address changes which served as a serious problem for Toyota in locating all of its customers with defective vehicles. American have the tendency to move within the country frequently and they are not much worried about such things and its consequences. It is evident from the above fact that Toyota’s efforts may not succeed completely. Toyota needs to find other options also along with the current mailing options, in order to locate the customers with defective Toyota cars. Toyota has no option to contact customers who have changed their addresses after the purchase of Toyota vehicles. Some of the customers may repair their vehicles at their own expenses in local repairing shops. Toyota can also establish a toll free number to contact them b y the customers who have problems with their Toyota vehicle. My suggestions as a marketing director of Toyota to counter the problems If I was the marketing director of Toyota, definitely I will put forward few suggestions to improve the management of current crisis scenario. In my opinion, Toyota should investigate the root cause or the exact cause of the problem and should reveal it to the public. Such tactics will avoid unnecessary rumours about the current problem. In my opinion, the current problem was a minor mistake which could be solved with some minor adjustments. According to Toyota website, the current problems of the accelerator pedal can be rectified within 30 minutes by installing a precision-cut steel reinforcement bar into the accelerator pedal assembly, thereby eliminating the excess friction that has caused pedals to stick in rare instances (Toyota Pedal recall, 2010). In other words, the accelerator pedal defect is a minor one which is exaggerated by the media and rivals. By revealing the actual cause and repairing solutions to the public, Toyota can avoid the spreading of rumours. Instead of sending mails to the customers, it is better to publish ads in news papers or televisions about the free inspection of the defective Toyota vehicles. Such a move will ensure that the customers who missed the Toyota mails may also get the advantage of Toyota massive campaign of correcting the defective vehicles. Moreover, Toyota can ask the customers to visit their websites to know more information about the chances of repairing a defective Toyota vehicle. Conclusions The current recall problems have spoiled the image of Toyota’s number one reliable automaker brand image in the world. Even though Toyota is desperately trying to solve the problems by recalling all the defective vehicles, rivals and competitors are exploiting this opportunity to push Toyota on the defensive as much as possible. In America, General Motors, Honda and Nissan like competitors are exploiting this situation well to boost their sales. Toyota has suffered huge financial loss apart from the lost brand image. Many people lost their jobs because of the shut down of many Toyota plants till another notice. With the immense financial abilities and brand value, Toyota can definitely bounce back from the current crisis situation, but it might be difficult for Toyota to regain its brand image completely in near future. References 1. 2010 Lexus GX 460 Passes Consumer Reports’ Retest – “Don’t Buy” Label Lifted, (2010), Retrieved on 15 May 2010 from http://pressroom.toyota.com/pr/tms/toyota/toyota-consumer-safety-advisory-102572.aspx 2. Ansari Maria (2010), Effects of Toyota recall widespread, Retrieved on 15 May 2010 from http://www.wave3.com/Global/story.asp?S=11890793 3. Daily News, (2010), Taxi, Retrieved on 15 May 2010 from http://www.designtaxi.com/news.php?id=31711 4. Cremer Andreas (2010), Toyota Faces ‘Very Tough’ German Market After Recall, CEO Says, BusinessWeek, Retrieved on 15 May 2010 from http://www.businessweek.com/news/2010-03-05/toyota-faces-very-tough-german-market-after-recall-ceo-says.html 5. Edgerton Jerry (2010), Safest Alternatives for Toyota Buyers, Retrieved on 15 May 2010 from http://moneywatch.bnet.com/saving-money/article/toyota-recall-how-to-find-a-safe-car/395371/ 6. Messenger Alex (2010), Toyota recall highlights crisis in global auto industry, Retrieved on 15 May 2010 from http://www.wsws.org/articles/2010/feb2010/toyo-f12.shtml 7. Mora Michaela (2010), Brand Tracking Studies – How To Design Them, Retrieved on 15 May 2010 from http://www.relevantinsights.com/tag/brand-tracking-studies 8. Reuters (Jan10, 2010), Toyota safety recall spreads to Europe, China Retrieved on 15 May 2010 from http://www.reuters.com/article/idUSTRE60P6OW20100128 9. Sinha, (2010), Toyota Recall Notification Letters Could Miss Over 500,000 Owners Retrieved on 15 May 2010 from http://news.pluggd.in/toyota-recall-notification-letters-could-miss-over-500000-owners-221/ 10. Toyota issues global Prius recall, (2010), Retrieved on 15 May 2010 from http://english.aljazeera.net/business/2010/02/20102925552174955.html 11. Toyota, (2009), Retrieved on 15 May 2010 from http://www2.toyota.co.jp/en/about_toyota/overview/ 12. 'Toyota Human Touch' Retrieved on 15 May 2010 from http://www.youtube.com/watch?v=cgOIvmM1-U0 13. Toyota Pedal recall, (2010), Retrieved on 15 May 2010 from http://www.toyota.com/recall/pedal.html Read More