Toyota to Rebuild Its Reputation - Research Proposal Example

Toyota to rebuild its reputation Introduction Japanese car maker Toyota needs no introduction among global automotive industry. They are the leadersor the number one car maker in the automotive industry for last few decades. Toyota Corporation was founded in Japan in 1937. They are operating in most parts of the world at present. As per the statistics revealed in 2009, the working capital of Toyota is around 397.05 billion yen and more than 320,808 employees are working at present in Toyota and its affiliated companies all over the world. The company has produced 5,100,000 vehicles in Japan itself in 2007 and 5,160,000 in 2008. But the production has come down to 4,255,000 in 2009 (Toyota, 2009). Toyota faced huge setbacks to its reputation in 2009-2010, when they forced to recall millions of cars from roads all over the world because of the sticking accelerator pedal problems. “It had not yet determined how many vehicles in Europe would be recalled, but media and analysts believe 2 million may be affected on top of some 6 million in North America. In China, the worlds biggest auto market in 2009, the carmaker said it had submitted an application to recall over 75,000 RAV4 vehicles” (Kubo, 2010). Toyota has suffered a lot from the recall issues. It negatively affected the company’s reputation as well as its sales growth in overseas countries. Creamer (2010) 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). Toyota is still in the recovery mode after series of recall problems over the last THREE years. Problem Statement Even though the exact figure of recalled Toyota vehicles is unknown, it is believed that more than 8 million Toyota vehicles have been recalled so far. Competitors of Toyota are utilizing this situation very well. Edgerton, (2010) pointed out that Ford and General Motors have been quietly offering rebates of up to $1,000 to buyers who trade in their Toyotas (Edgerton, 2010). In short, Toyota’s claims with respect to quality and reliability of its vehicles are in jeopardy at present. It should be noted that initially Toyota was little bit hesitant in attending the brake pedal problems of its vehicles reported from different parts of the world. This reluctance caused more damages to the company’s reputation. Brian Ross (2010) pointed out that Toyota is still not succeeded in correcting this problem completely. “Safety expert Sean Kane tells ABC News that since last fall, when Toyota said it had solved the acceleration problem with proposed changes to gas pedals and a recall of 4.2 million cars with suspect floor mats, more than 60 new cases of runaway Toyotas have been reported”(Ross, 2010). Moreover “The Japanese carmaker said Wednesday (January 30, 2013) it was recalling more than 1 million vehicles sold in the United States over faulty airbags and windshield wipers”(Thompson 2013). In short, Toyota’s recall problems are still persisting and hence it is logical to research it further. Purpose Statement As stated earlier, Toyota’s recall problems as a result of the defective brake pedal, airbags and wiper are still causing concerns in the minds of millions of Toyota vehicle owners all over the world. Toyota’s reputation as a reliable automaker has been seriously damaged over the last couple of years. Economists and scholars are keen in knowing how Toyota is going to tackle this problem and come out successful. It is going to be extremely difficult for Toyota to regain the customer confidence in the heavily competitive automobile market. The purpose of this research is to investigate the dimensions of the recall problem facing by Toyota at present. Literature Review Advocates of Management by Means (MBM) have invoked Toyota’s recent struggles in the global recession and recall crisis as evidence of the dangers of Management by Objectives (MBO) and the virtues of MBM. The advocates claim that Toyota’s troubles can be traced to the corporation’s 2002 decision to aim for a 15 percent global market share, as part of its “Global Vision 2010 (Liker & Ogden, 2011). Toyota tried to achieve its marketing objectives by compromising the quality of its vehicles. In other words, they gave more importance to marketing objectives rather than the quality of the vehicles produced. The increased shifting of focus from quality to quantity has caused the current problems in Toyota. They tried to increase their market share at any cost and neglected the needs of the consumers. “Toyotas recent efforts to become the top selling automaker in the global market place might have led to some unfavorable changes in its supply chain management practices, as well as tarnishing some of the core values of the "Toyota Way", which were partially responsible for the massive recall” (Andrews et al., 2011, p.1064) Messenger (2010) pointed out that the direct cost to Toyota of its initial recalls of 3.8 million cars has been put at $US2 billion. Moreover Toyota has already slashed more than 6,000 jobs at its Japanese plants because of the current crisis (Messenger, 2010). Toyota’s brand value and reputations were affected seriously by the ongoing recall incidents. The chart given in the next page reveals the extent of damage caused to Toyota’s reputation by the recall problems. (Mora, 2010) From the above chart, it is evident that the reputation of Toyota has been damaged seriously after the recall incident. Competitors are utilizing this opportunity very well. They are making advertisements to ridicule or mock Toyota. Edgerton, (2010) mentioned that Nissan’s TV ads are all about “safety” and “quality at present” (Edgerton, 2010). Nissan is indirectly trying to prove that the claims of its competitors were fake and it is better to think about Nissan in future rather than going after Toyota. 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) According to Piotrowski & Guyette (2010), recent problems in Toyota have raised question marks over three things; (a) Leadership issues, (b) Brand loyalty, and (c) Ethics and leadership (p.89). Until the beginning of this crisis, nobody questioned the authority of Toyota in terms of Leadership, Brand loyalty, and Ethics. However, these problems have caused huge question marks over the business practices and philosophies of Toyota. Choi & Chung, (2013) explored the interactive relationship between apology, as a crisis-response strategy used in the current Toyota recall crisis, and product involvement in influencing the restoration of the organization’s reputation and customers’ future purchase intentions. Their results showed that an apology was an effective strategy for repairing the organization’s reputation for those participants who were highly involved and perceived the strategy as highly sincere, but it did not increase their purchase intentions (p.3). Loyal customers may show some mercy towards their brand; however, ordinary customers may not show such mercy towards a brand when the brand works against their expectations. It should be noted that people all over the world had blind faith in Toyota brand. Even the patriotic Americans and Europeans were running after Toyota vehicles, mainly because of the quality and reliability offered by these vehicles. However, the recent recall incidents have created a suspicion in the minds of consumers. Current consumers are thinking twice before they opt for Toyota brands. Many people were ready to pardon Toyota for the 2009-2010 brake pedal problems. In fact Toyota was in the recovery mode in 2012. According to the YouGov/BrandIndex survey of American consumers, Toyota Motor Corp. has regained its reputation in the country. It states that the company stood third after Ford Motor Co. and Honda Motor Co. Ltd. in the survey. It mentions that Toyota has appeared for the first time in the top five ranking of the survey since the 2010 recall crisis (Brand survey: Toyota rebounds from recall crisis 2012, p.38). Moreover, Toyota has already started mailing letters to owners of recalled vehicles to let them know when to bring their vehicles into a dealership. “According to the US Postal Service website:- 17% of Americans change addresses annually; 43 million people move each year and One out of every six families move each year” (Toyota Recall Notification Letters Could Miss Over 500,000 Owners, 2010). Therefore Toyota’s effort to help its defective vehicle owners may not be fully successful. Moreover the 2013 recall of Toyota vehicles because of the air bag and wiper problems again created more doubts in the minds of consumers. “The airbag control issue affects about 752,000 Corolla and Corolla Matrix cars sold in 2003 and 2004. And the windshield wiper issue affects some 270,000 Lexus IS models sold between 2006 and early 2012” (Thompson, 2013). Toyota should keep more transparency in its dealings with the recall problem to regain the lost customer confidence. Philips & Hosenball (2010) mentioned that “Toyota Motor Corp. should make publicly available the information measured on event data recorders contained within its automobiles. It is stated that the data could contribute to an understanding of the problems that necessitated a mass recall of Toyota vehicles in 2010” (p12) . Toyota is not the only automobile company which forced to recall vehicles because of defective parts. Honda, Benz and Volkswagen are some of the prominent vehicle manufacturers which forced to recall their vehicles from market due to defective performances in recent times. In 2010, “Daimler recalled more than 100,000 Mercedes-Benz vehicles in the United States and Britain because of a problem that could lead to a loss of power steering fluid (Mercedes-Benz Recall Announced, 2010, p11). However, all these companies succeeded in solving this crisis without causing further damage to their company’s reputation. In other words, these companies recalled all the defective vehicles quickly and rectified the issue in as quickly as possible so that the public attention has not been gathered around this issue very much. Moreover, these companies did everything possible to regain the customer confidence. For example, in December 2011, “Honda has issued a stop sale on all used cars that are part of the airbag recall. That means Honda dealerships are being told not to sell any used Hondas, certified or not, until they have been inspected and fixed if necessary” (A History of Honda Airbag Problems, 2012). Toyota should take such drastic steps to regain its reputation in the automobile industry. Context of the case Global auto market is currently going through a bad patch because of the recent financial crisis. People all over the world have reduced their expenditure on unnecessary things and automobile industry suffered a lot because of this changing consumer behavior. Moreover, globalization and cross cultural business have intensified the competition in global automobile industry. Reputation is the key factor which helps automobile companies to remain competitive in global market. Toyota’s reputation and brand value suffered a lot because of the ongoing problems and hence it is extremely difficult for Toyota to bounce back unless its takes serious efforts to regain consumer confidence. Moreover, recent tsunami attacks have caused huge damages to Toyota’s manufacturing plants in Japan. In short, recession and tsunami coupled with quality problems is causing huge problems to Toyota at present. Critical Thinking of Literature Review The disadvantages of globalization and commercialization have once again proved by the Toyota case. It should be noted that until recent times, Toyota was world’s favorite car maker. Nobody had any questions or doubts about the credibility of Toyota as an automobile manufacturer. Toyota never tried to implement unethical business practices until recent times. However, increased competition as a result of globalization and increase in international business forced Toyota to expand its market share as much as possible. Instead of canvasing the market with the help of quality, Toyota tried to canvass it with the help of quantity. Since Toyota plants had capacity problems to meet Toyota’s selling objectives, they tried to rely on third party parts makers in an effort to boost the production. It is believed that the defective accelerator and brake pedals were manufactured by some other companies even though Toyota used it in their vehicles. It should be noted that selfish motives will never help a company to reach heights in the modern business world. 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. Sustainable business practices are encouraged in the current market. Companies which show less respect towards sustainability, ethics and corporate social responsibility may struggle to excel in the market. This fact is further underlined by the Toyota case. Conclusion It is extremely difficult to make an impression in the market; however, it is easy to spoil the impression. Toyota’s case clearly underlines this principle. It should be noted that Toyota became a reputed company in the world after the efforts of many decades. However, they took only few years to spoil it. Toyota has sacrificed its huge brand value and reputation when they decided to compromise quality with quantity. Toyota’s competitors are using the opportunity very well. They are using this opportunity to ridicule Toyota and to push far behind in the international automobile market. Current consumers are keen in opting for socially committed companies while they take any purchasing decisions. The recent problems will definitely remain as a black mark on Toyota’s image and reputation. It may take many decades for Toyota to regain nits lost customer confidence. References 1. Andrews, A P.; Simon, J; Tian, F & Zhao, J. (2011). The Toyota crisis: an economic, operational and strategic analysis of the massive recall. Management Research Review. 2011, Vol. 34 Issue 10, p1064-1077 2. A History of Honda Airbag Problems (2012). Retrieved from http://www.hondaproblems.com/problems/airbags.shtml 3. Brand survey: Toyota rebounds from recall crisis. Automotive News. 7/23/2012, Vol. 86 Issue 6526, p38. 4. Choi, J & Chung, W. (2013). Analysis of the Interactive Relationship Between Apology and Product Involvement in Crisis Communication: An Experimental Study on the Toyota Recall Crisis. Journal of Business & Technical Communication. Jan2013, Vol. 27 Issue 1, p3-31.  5. Cremer A (2010), Toyota Faces ‘Very Tough’ German Market After Recall, CEO Says, BusinessWeek, March, 05, 2010. 6. Edgerton J. (2010), Safest Alternatives for Toyota Buyers, Retrieved from http://moneywatch.bnet.com/saving-money/article/toyota-recall-how-to-find-a-safe-car/395371/ 7. Kubo N. (2010). Toyota safety recall spreads to Europe, China. Reuters (Jan10, 2010), 8. Liker, J.K. & Ogden, T.N. (2011). The Toyota recall: missing the forest for the trees. Retrieved from http://www.iveybusinessjournal.com/topics/marketing/the-toyota-recall-missing-the-forest-for-the-trees#.URIbFEW3Sdp 9. Messenger A (2010), Toyota recall highlights crisis in global auto industry, Retrieved from http://www.wsws.org/articles/2010/feb2010/toyo-f12.shtml 10. Mora M (2010), Brand Tracking Studies – How To Design Them, Retrieved from http://www.relevantinsights.com/tag/brand-tracking-studies 11. Mercedes-Benz Recall Announced (2010). New York Times. 10/12/2010. 12. Philips M & Hosenball M (2010). TOYOTAS MURKY DATA. Newsweek. 2/22/2010, Vol. 155 Issue 8, p12-12. 13. Piotrowski, C & Guyette, R. W. (2010). Toyota Recall Crisis: Public Attitudes on Leadership and Ethics. Organization Development Journal, Vol. 28, No. 2 p.89-97 14. Ross, B. (2010). TOYOTA RECALL: Reports of Runaway Cars Retrieved from http://abcnews.go.com/Blotter/RunawayToyotas/runaway-toyotas-problem-persists-recall/story?id=9618735 15. Toyota Recall Notification Letters Could Miss Over 500,000 Owners”. (2010). Retrieved from http://news.pluggd.in/toyota-recall-notification-letters-could-miss-over-500000-owners-221/ 16. Toyota, (2009), Retrieved from http://www2.toyota.co.jp/en/about_toyota/overview/ 17. Thompson M. (2013). Toyota recalls 1 million cars in the U.S. Retrieved from http://money.cnn.com/2013/01/30/autos/toyota-recall/ Read More