Possible Remedy to Toyotas CSR Dilemma - Case Study Example

Toyota Case Study Introduction and Problem Identification Consumers are evidently the most significant of stakeholders that any company would struggle to engage closely. The trust and loyalty that they have towards a particular brand will determine if they will purchase their products or not. Companies that are not trusted in the market, especially in the international contexts evidentially record low sales volume. Provision of high-quality products is a major way that attracts consumer loyalty to a brand. Toyota has enjoyed great trust from its customers over the years due to its commitment to produce high quality vehicles. This has been achieved through its alignment to corporate social responsibility that enables it to consistently produce high-value products that meet the standards threshold. From the article, Toyota potential problem lies in the corporate social responsibility that it has towards safeguarding its stakeholders. This is the reason it has taken a bold measure to recall its supposedly inferior vehicles that had inefficient pedals. This is a point of concern because the company is in a dilemma between meeting its social responsibilities and at the same time maintaining the good reputation it has always had over a long period. This report seeks to explore the two sides of the argument; those in support of corporate social responsibilities and those opposed to it based on existing literature. In the end, a workable solution and recommendation will be provided that can assist the organisation in moving forward. The issue of corporate social responsibility has featured in numerous debates. Some scholars passionately support it and believe that companies should reciprocate and gift the society/ community in which they operate in by taking up their social roles. However, there are many other theorists and scholars who object this issue stating a number of reasons. According to Campbell (2007: 945), corporate social responsibility is defined as self-regulatory mechanism that informs an organisation about the necessity to comply with the social rule, values, legal framework as well as ethics during its operations within the social context. The corporate social responsibility reminds the company that it needs to improve the well-being of its stakeholders. For example, with the understanding of corporate social responsibility principles, Toyota is obliged to produce only products that meets the standard threshold. This bound to deliver the best products to consumers, handle employees with utmost ethical consideration, conserve the environment and engage in charity programs among other are what constitute corporate social responsibility. Discussion/Literature Arguments Supporters of the position that companies should carry out their social responsibilities in improving the state of the societies where they work have had several propositions to support their arguments. According to Hanlon and Fleming (2009: 943), companies that engage actively in corporate social responsibility directly participate in supporting human well-being sustainability. By offering to contribute to charity programs and philanthropic projects, they are fulfilling the universal responsibility of every mankind that is to offer. This argument is based on the utilitarian theory of ethics that defines a good action as that which result in benefits that brings happiness to a larger populace. To Deegan and Shelly (2013: 506), a company, in its operations should seek to extend its benefits to a larger number in the society. For example, once an organisation realises it has gained some increased profit, it should donate some funds to charity projects. Similarly, the organisation should not indulge in activities pollution and others that cause distress the society. Organisations that are conscious to their social demands are operating in accordance with the utilitarian theoretical framework. The position that CSR works towards environmental protection and community development has further been supported by several other scholars. Hanlon and Fleming (2009: 944), highlight that the natural environment seen today is safe because of the deliberate decision most companies made to adhere to the principles of corporate social responsibility. Lyon and Maxwell (2008: 255) claim that the recognition that financial and environmental performance can combine to bring out both economic development and social repute. Corporate social responsibility brings a closer connection between the community and the cooperate world. Deegan and Shelly (2013: 512) bases their arguments on deontological ethics theory that focuses on actions and not necessarily the outcome. Every entity in the society is obliged to act in a responsible manner that synchronizes with the social values. Toyota, as a multinational organization, is compelled to ensure their undertakings are in line with the social standards. For instance, in engaging in recalling of products that they doubt their qualities, they are adhering with deontological theory principles. On the other hand, critics and those opposed to CSR have a contrary outlook of the issue. According to Campbell (2007: 948) corporate social responsibility is a major impediment to the business’s primary aim of generating profit. The reason businesses are formed is to make profits that can sustain its development. Campbell (2007: 949) asserts that any other reason other than making profit should be ignored by serious businesses that are oriented to development and success. The company’s shareholders are the most important persons, and the business should be driven towards generating revenues for them and not pleasing the community. CSR limits the business from extensively exploiting all corners of the economy to meet its primary goal of making the highest profit possible. In the process, the company continues to lose out on the potential opportunities that would have brought to it a lot of fortunes. Jones, Bowd, and Tench (2009: 308) support this stance by stating that the funds donated to charity organisations and resources used to improve the social wellbeing of the community might be a significant downside if not well planned for making the company stagnate in its development pursuit. The concept of corporate social responsibility is a manipulation strategy meant to coerce companies into taking up responsibilities that are not rightly theirs. He argues that the best way to go about helping the society is through first granting the business owners their profits and then letting them decide if they want to donate them the many aid projects (Martin, Petty and Wallace, 2008: 116-117). Possible Remedy to Toyota’s CSR Dilemma The problem Toyota is currently facing is purely based on its commitment to Corporate Social Responsibility (CSR) this manifestly conflicting with its need to maintain its reputation in the social contexts in which it operates. Visibly, having realised a mess that is probably centred in its production department, it has sought to rectify it by recalling the sub-standards products it had1 released into the market. As much as this is indeed a genuine measure it has taken to protect its consumers from inferior products, it has met several criticisms. Many questions are being raised as to why it produced those kinds of vehicles in the first place. Very few can identify and recognise that the company had the options not to recall the vehicles and just be silent (of which would be unethical) but it chose otherwise. For this matter, it is on the verge of completely denting its image on the public eye. To possibly solve this, the company has to evaluate first why the problem is happening consistently and find ways to resolve it completely such that no case is reported again. Moreover, it should also utilise its public relations department in reaching out to the customers through media and other platforms to explain what has been happening and express its commitment to safeguarding its stakeholders. Finally, the company has to rebuild the trust between it and its customers through various ways such as price reduction and high-quality production that is reliable among others. As described by the proponents of CSR, Toyota has a responsibility of providing quality products to its customers and whenever a potential danger is detected, it is justified to recall them back no matter what impact that will have on reputation. Conclusion and Recommendations The issue of CSR is a critical concern that has been debated on for a long time now. Companies in an attempt to comply with CSR sometimes find themselves in dilemmas that significantly challenge them as seen in the case of Toyota. There are different positions that support this self-regulatory concept. The major rationale for their arguments lies in the utilitarian theory that demands every action be aimed at generating benefits to the larger portion of the society. On the other hand, those opposed to this view it as a tool of manipulation whose aim is to influence corporations into shouldering burdens that are not theirs. Strong arguments are based on the fact that companies should be seeking to make profits in whichever way possible; something that CSR seem to minimise or hinder. Having considered both arguments, it is recommended that the company should focus on ethical operation (deontological consideration) with little attention to the economic implications this may have. Consequently, it should engage in various benevolent activities that seek to promote the socioeconomic well of the society. In line with the utilitarian theory, initiating programs and projects that escalates the economic conditions of the stakeholders would be a noble idea and a prudent strategy to redeem its reputation. Starting up some project like ‘Toyota Charity Foundation’ would restore the trust and loyalty that its customers lost on it. References Campbell, J. (2007). Why would corporations behave in socially responsible ways? An institutional theory of corporate social responsibility, Academy of Management Review, vol. 32 no. 3, pp. 946-967. Deegan, C. & Shelly, M. (2013). Corporate Social Responsibilities: Alternative Perspectives About the Need to Legislate, Journal of Business Ethics, vol. 121, no. 4, pp. 499-526. Hanlon, G. & Fleming, P. (2009). Updating the Critical Perspective on Corporate Social Responsibility, Sociology Compass, vol. 3, no. 6, pp. 937-948. Jones, B., Bowd, R. & Tench, R. (2009). Corporate irresponsibility and corporate social responsibility: competing realities, Social Responsibility Journal, vol. 5, no. 3, pp. 300-310. Lyon, T. & Maxwell, J. (2008). Corporate Social Responsibility and the Environment: A Theoretical Perspective, Revthe estiew of Environmental Economics and Policy, vol. 2, no. 2, pp. 240-260. Martin, J., Petty, W. & Wallace, J. (2009). Shareholder Value Maximisation-Is There a Role for Corporate Social Responsibility? Journal of Applied Corporate Finance, vol. 21, no. 2, pp. 110-118. Read More