Toyota's Business Strategy - Essay Example

Organizational strategy Introduction Toyota Motor Corporation has recently been under scrutiny for the recall strategy of its automobiles which occurred between the end of the year 2009 and the start of 2010. The reason for these re-calls was a reported “unintended acceleration” experienced by a number of Corolla and Lexus vehicles that had in some instances resulted in the death of the occupants of the car and of those who were subsequently involved in the collisions. At first, these instances had been far and few in between and were considered to sole occurrences , but with the magnitude of the problem escalating rapidly and due a number of lawsuits filed against the manufacturers, the company was pushed to take action. On the 2nd of November 2009, the corporation sent letters to 3.8 million car owners asking them to remove the floor mat on the drivers side and asking them not to replace them with any other type of floor mats. According to these letters, these floor mats had been the singular cause of the unintended acceleration that had occurred in the many instances and by taking them out, drivers would be potentially safe from any such hazard in the future.(Toyota Pressroom, 2010) However the National Highway Traffic Safety Administration criticized the car manufacturing giant for this step and eventually on the 25th of November, Toyota had to issue a recall for the same 3.8 million vehicles which had been sold in the North America. The company issued a remedial strategy that included the re configuration of the accelerator pedal, the installation of a brake over-ride system that would prevent any further instances of unwanted acceleration and the provision of thinner floor mats to replace the all-weather floor mats that had previously been assumed to be the sole cause of the accidents (Toyota Pressroom, 2010). The strategy, initially at least, that was employed by the car manufacturing giant had not been a strategically correct move. The company, as a brand name has always commanded great respect in the automobile industry and has been associated with quality and reliability. However, the manufacturers came under great criticism for the delay that was shown in recalling the faulty vehicles. The first recall was followed by another one on 21st January, known as the “sticky pedal recall” and was a result of complaints that identified incidents where the accelerator pedal became harder to press and became stuck in a partially depresses position. The company promised a repair in the recall announcement to counteract this problem and promised the customers a replacement on the faulty accelerator pedals. This recall was initially issued for 2.3 million U.S vehicles but was later followed by recalls issued for 1.8 million European vehicles and 75,000 Chinese vehicles( bbc.co.uk, 2010) . Although many critics were vocal about the strategy that Toyota took up in regard to these recalls, once the initial recall had been carried out, the manufacturers did try to prevent any more of the same happening by going as far as suspending the sale of new vehicles of the models that had been reportedly associated with the faulty mechanisms. Mintzberg (1992), has defined Strategy as having facets that are varying under different situations. The strategy that Toyota motors used in this scenario was taking a position and trying to overcome the situation created in its external environment in a manner by which things could be resolved so as to align the scattered elements together. In a statement issued during a press briefing, the Group Vice President , Bob Carter said that “Helping ensure the safety of our customers and restoring confidence in Toyota are very important to our company,” said Group Vice President and Toyota Division General Manager Bob Carter. “This action is necessary until a remedy is finalized. We’re making every effort to address this situation for our customers as quickly as possible” (Toyota recall: hit or miss?, 2010). Although there had been a delay in the initial recall due to the unwanted acceleration, the company tried to implement a strategy which showed concern for the consumer’s safety above everything else and by instructing Toyota dealers to temporarily suspend the sales of eight models that had been reportedly underperforming. The corporation took up a position in this regard and their strategy was clear cut. No blames were cast upon anyone, including the suppliers of these faulty acceleration pedals. When asked for a statement in this regard, representatives from Toyota Corporation maintained that CTS (the suppliers) had been closely working with the Toyota Motor Engineering & Manufacturing North America (TEMA) in order to revise the problematic designs and trying to test the modifications that can be used on the existing pedals. Chris Nielsen, TEMA’s Vice President for Purchasing commented that CTS was valued supplier and would remain so (Toyota recall: hit or miss?, 2010). Although Toyota Corporation tried to make do with swift damage control strategies, the issue had been so blown up in the media and by the regulatory authorities that it caused a negative stir up and was damaging to the company’s brand name. The biggest issue in this regard was the fact that the company did in fact try to delay the recall and even if that matter is put aside, the fact there arose a need for such a mass recall; the largest in fact in the firms history, throws light on the differences that have arisen in the organizations business strategy which is focusing on two things at once, both creating and maintaining a pristine brand image and gaining the maximum share in the market. Findings: Toyota Motors, as an organization has always focused on the maintenance of the standard of quality that is generally associated with the name. although the manufacturing giant embarrassedly went through this ordeal with its head held high, there were a number of questions that have stubbornly reared their heads in the minds of the consumers again and again. Most people who own a Toyota and who have experienced similar problems have found that their trusty has gone down in the manufacturers to some degree. Although the recall strategy that was employed by the Toyota corporation was found satisfactory by the Obama administration, what most people cannot understand is the fact that how a reputed name in the business could effectively mis communicate a recall strategy like the way Toyota did. The first recall that informed the vehicle owners to remove their floor mats on the drivers side of the car are seen by many as a hoax, something to put off and delay accountability in the matter. That the manufacturers could risk the lives of so many people this way is something that has seriously brought people to fling criticism at the organizations strategy during this time. Although the case if examined closely has a lot of different implications that are two-faced and which can pose serious doubt towards the criticism that Toyota was intentionally lazy with its recall strategy. While some critics openly bashed the car manufacturers, there were others who found that Toyota was taking unnecessary criticism. The editor of a major automobile magazine notes that the issue was being blown out of proportions by the media. He also pointed out that only 1 in about 200,000 of the recalled Toyota’s had an alleged fatality risk, making it a lesser evil of two ,as there was an alleged fatality risk of 1 in 8000 associated with driving any car period (Dushane, 2010). The same point was raised by a number of other writers, including Paul Fischbeck ( n.d, cited in Cameron & Watson, 2010), who was of the opinion that “walking a mile is 19 or 1,900% more dangerous than driving a mile in a recalled Toyota“. If a SWOT analysis is carried out on the recall strategy that Toyota employed during this time, the following things can be clearly deduced from the results: Strengths: The biggest strength of this recall strategy was the fact that once the organization decided that it no longer safe to let their manufacturing error go unchecked, they went ahead full gear and not only replaced and fixed this problem for all the buyers of the faulty cars, their manufacturing was also stopped during the time that a new pedal design was produced and was available in stock. Ernie Boch Jr., a Boston-area Toyota dealer, when interviewed for a USA today story, was asked about Toyota’s recall strategy, he commented the company made a bold move. He further noted “they stopped production to handle the problem, they isolated it, and they fixed it. What more can you ask?”(Cited in Carty, 2010) Weaknesses: As discussed before, the weakest part of the recall strategy was its timing. Although it was carried out with swiftness once it was underway, the first recall that instructed vehicle owners to remove their floor mats was probably the weakest decision of them all. Opportunities: The biggest opportunity that comes through these troubling times is that Toyota, as per the words of some people, has been humbled by the situation. Due to this, there will very likely be steps carried out and stringent measures taken so that any such faults are minimized in the future. This has been according to many, a rude awakening for the car manufacturers who know that they will have to be careful that any such embarrassing situation does not arise again. Threats: The recall of course, brought with it a hefty bill that is rumored to set back the company a staggering $4 Billion. The company also received a massive blow when its stock price fell 22% and landed on US$ 71.78 down from US$ 91.78. Apart from this monetary set-back, the automakers also suffered a very slight downturn in popularity however, even though the media tried its level best, Toyota is still the largest and most popular car manufacturer in the world. Conclusions This detailed analysis of the strategy employed by Toyota Motors in regards to the recalling of its vehicles has proved that although there were some initial flaws in the way that things were handled, the company was mindful of the safety of its customers and acted in a satisfactory, if not altogether admirable way. Although the odds of driving a recalled Toyota and having a fatal accident in it were entirely slim, the automakers did its job and provided replacements wherever necessary. However at the same time, the fact remains that the recall crisis brought to light the discrepancies that exist in the automaker’s business strategies and plans. Recommendations: The single most important recommendation that I would like to make is that Toyota Motor Corporation should pay more attention on maintaining and retaining its business strategy that has focused on developing the company’s brand name through consistent quality. The fact the automakers are constantly aiming towards capturing the largest numbers and the largest market shares the world over is slightly unsightly as they are seemingly doing so at the ost of their quality. References Cameron, L., Watson, T., 2010. The Truth about Toyota. Canadian Business Magazine. April 26th,2010. Available at: http://www.canadianbusiness.com/managing/strategy/article.jsp?content=20100426_10018_10018&page=2 Retrieved on 20th May,2010. Carty, S., S., 2010. Toyota opens about pedal recall, shares strategy for fix. USA Today. Available at http://www.usatoday.com/money/autos/2010-02-01-toyota-fix_N.htm, retrived on 21st May, 2010. … Dushane, M., 2010. Toyota Recall: Scandal, Media Circus and Stupid drivers. Car and Driver. Available at: http://www.caranddriver.com/news/car/10q1/toyota_recall_scandal_media_circus_and_stupid_drivers-editorial Retrieved on 21st may,2010. Henry Mintzberg, "Five Ps for Strategy" in The Strategy Process, pp 12-19, H Mintzberg and JB Quinn eds., 1992, Prentice-Hall International Editions, Englewood Cliffs NJ Toyota Recall: Hit or Miss?. 2010. PR Strategy and Applications Blog. Available at :http://prstrategyandapplication.wordpress.com/2010/01/31/toyota-recall-hit-or-miss/. Retrieved on 20th May, 2010. . Toyota begins Interim Notification to Owners regarding Future Voluntary Safety Recall Related to Floor Mats. Toyota USA Newsroom. 2009-11-02. http://pressroom.toyota.com/pr/tms/toyota/toyota-begins-interim-notification-112088.aspx. Retrieved 21st May, 2010. Toyota Vehicles: Toyota Recalls January 2010: Gas pedal Recall. Pressroom.toyota.com. http://pressroom.toyota.com/pr/tms/toyota/toyota-consumer-safety-advisory-102572.aspx. Retrieved 22nd May, 2010. Toyota recalls up to 1.8m cars. bbc.co.uk. Available at http://news.bbc.co.uk/2/hi/business/8487984.stm retrieved on 21st May, 2010. Read More