The Toyota Recall Incident - Case Study Example

The Toyota Recall Incident (Name) (Institution Affiliation) (Date) Introduction The manner in which a firm reacts and responds to a crisis or incident is very important as far as the management and success of the business is concerned. As the Agenda-setting theory holds, prominent news headlines often lead the public to prioritize these topics as top public agendas (McCombs and Maxwell, 2004). This is because the mass media often only conduit for authoritative as well as persuasive information. This information is considered effective as it is rapid and extensive enough to persuade considerable proportions of the population within a short period of time. Thus, firms often suffer a great damage with regard to their overall reputation and performance in case of a crisis as the firm in dilemma is often portrayed on the headlines often from a negative perspective. Therefore, communication management is very important in addressing any incident that is associated with the company. The management needs to develop proper communication strategies that can control the damage as well as salvage the company’s reputation thereafter. Importantly, when companies behave negligently or products fail, patrons’ perceptions as well as their purchasing decisions can be negatively affected. Although the management or the executive is often aware of such harms, they are usually caught off guard as a result of the degree of the aftershocks related to the scandalous situations. As such, this paper aims at discussing the Toyota Recall Crisis that happened in 2009; the response and management of the crisis will be analyzed. Various theories related to management communication will be used to explain the occurrences. Background of Toyota Motor Corporation Headquartered in Aichi, Toyota Motor Corporation is a renowned Japanese multibillion firm engaged in the automotive industry. The company is built on a world-class corporate brand status that rides on the ideology of ‘customer focus’, ‘excellence in design’ and ‘manufacturing, quality’, ‘reliability’ and ‘continuous improvement.’ Founded in 1937 by Kiichiro Toyota, the Toyota cooperation started off as a spinoff from the Toyota Industries to manufacture automobiles. In 1934 the company while still under Toyota industries created the first engine called Type A engine and thereafter manufacturing the first passenger car called Toyota AA in 1936. Currently, Toyota manufactures vehicles along five main brands: Lexus, Hino, Ranz and Voltz. The company commands a fifty one percent stake in Daihatsu, 0.28% of Telsa shares, 16.65% of Fuji Heavy Industries ‘s and 5.5% stake in Isuzu (Nishiguchi & Beaudet, 2008). The Toyota Corporation is also part of the Toyota Group, which is considered as one of the largest conglomerates globally. The Toyota Motor Corporation’s great reputation has come along with many benefits including customers loyalty, market share, as well as financial strength. As Quelch and Steinmetz (2010) posits, Toyota’s long success and rapid growth has been due to its investment in innovation quality on both design and engineering of its automotive. The Crisis In September 2009, Toyota was hit by a major crisis associated with the vehicles that were manufactured and released that year. The company was forced to recall millions of cars that had already been sold as there was a major outcry concerning default on the acceleration pedals, brakes as well as the floor mats. The recall affected the company adversely as the production of its most popular models and sales were halted. The company faced a considerable negative publicity during this incident as several accidents resulting from the defected acceleration pedals and brakes (Nishiguchi & Beaudet, 2011). For instance, in September, 2009 an officer attached to the California highway patrol office was unable to apply the brakes of his Toyota car thus crashing into a bump. The fatal accident resulted in the death of the officer as well his family. According to official reports from the experts, the investigations conducted after the accident indicated that the crush was due to uncontrollable acceleration. According to a report filled by Quelch, Knoop and Johnson (2011), a total of 3.9 million vehicles were recalled in the U.S. The grim nature of the Toyota issues attracted national attention all through the beginning of January to early February of 2010. As the diffusion theory puts it, any idea or information can be adopted in the social system within a short period. Once the information has gained momentum it diffuses across a specific population like “bush fire.” In light of this, the information about the faulty acceleration pedals and brakes diffused across the globe through the mass media. As a result, an additional 2.4 million vehicles were recalled for having bad accelerator pedals. Consequently, the Toyota Company had to suspend most of its operations in North America and later on recalls were further made to China and Europe thus shutting down the respective manufacturing plants. As part of the company’s public relations strategy to manage the crisis, the Company President and Chief Executive Officer, Akio Toyoda came out in the media and made a public statement apologizing for the inconvenience caused by the company more so on the sudden recalls. As the Agenda-setting theory holds, the mass media often comes up with majority of topics that are to be discussed in the public: the media sets the public Agenda. Accordingly, the Toyota incident became the the talk of the business industry across the globe for over a month thus scaring customers who had purchased their vehicle long before the incident was anticipated. Consequently, the recalls became the order of the day as the third recall involving the Toyota’s bestseller; the Prius Hybrid was further made. The recalls from the Prius Hybrid was related to braking problems as well as sticky car mats, which made it difficult for the driver to apply brakes as well as control the accelerator peddles. In the end, approximately eight million four hundred vehicles were recalled from different countries around the globe between 2009 and 2010 (Jones, 2010). Although the decision to recall the vehicles was a good idea, the publicity that came along with these recalls was equally damaging. As Stewart (2010) argues, the recall was not necessary as the accidents involving the Toyota were not alarming. He further posits that the aftermath investigation done on the vehicles involved in accidents were not sufficient enough to call for such a costing decision. Stewart maintains the eight million recalls worsened Toyota’s reputation as it made news considering there had never been such a recall incident in the history of automobile industry in the world. The large number of recall made many potential customers to change their minds as they believed that the company was not competent in its manufacturing activities. Equally, this argument is strongly buttressed by Thomas (2010) who posits that Toyota Company contributed greatly to the crisis as the best thing it could have done was to call a press conference and apologize for the few incidents that had been report and further assure its customers that everything was okay. Thomas further argues that the few incidents that had been reported could have been due to the negligence of some workers in their manufacturing plants in America thus, the company could have promised to look into the matter and encourage customers to report any weird incident they could experience associated with their new vehicles. According to Jones (2010) the recalling of the vehicles led to the subsequent scrutiny of the Toyota Company by the National Highway Transportation Safety Board as well as the Department of Transportation. Accordingly, the media which was following the issue closely reported the same suggesting that the faultiness associated with the brake and accelerator pedals could be worse off that it had been thought. The misrepresentation of facts by the media worsened the situation and the Company did very little to control the damage that was being caused by the mass media. As Thomas (2010) argues Toyota Company could have taken the initiative to bar the media from reporting about the issue until the matter was settled amicably. Due to the improper handling of the matter, Toyota’s renowned as well as strong corporate brand suffered from bad reputation. Toyota’s responses to the crisis were inadequate thus striating the public’s trust, government officials, regulators and car buyers. As MSNBC.COM (2010) report indicates the sales for Toyota’s vehicles in the U.S dropped by 16% in by the end of January 2010 and 8.8% in the following month compared to the previous months in 2009. Furthermore, Toyota also lost approximately 16% between January and December, 2010(Steinmetz & Katy, 2010). This crisis led various brand professionals to use the Ideodynamics model analyze the role of the mass media coverage in shaping a firm’s corporate reputation. How the organization handles the communication during crisis is very crucial as the media is always at the standby to report what they think has happened or happening. As notes (Weaver, Bimber & Bruce, 2008) if the media is not fed with information on a constant basis during the crisis, the always information-thirsted media agencies will often have something to report about the company whether it is true or false. As the Agenda-setting theory posits, the media knows very well that it commands its audience attention and the public often regard the media as the public’s third eye and whistleblower. As such, anything that the media feeds the public goes down well with them. As such, any delay to confront the crisis with regard to proper communication is often deadly to the firm. Corporate leaders must put in place processes for learning of managing a crisis in order to be always objective whenever an incident crops up. The corporate must always a systematic response and size control in time. According to (Bruce, 2008) crisis management is closely associated with communication management and is often a stress test for the chief executive officers as well as the other top leaders in the company. Unlike in the Toyotas case, the mantra for all the management teams during a crisis should be “this is our problem.” Thus, the moment a crisis crops up “we will be judged according to the instant steps will take in addressing the issue” (Raman, 2010). The Toyota’s crisis capture the world’s top media headlines and the news focus was mainly on the enforcement and regulatory investigation on the company. However, the ultimate question that remained unanswered was why did Toyota fail to address the issue forcefully when the accidents began streaming in the newsrooms? According to (Stewart et al., 2010) the company agreed to compensate the Department of Justice $1.2 billion in what I know as ‘deferred prosecution agreement.’ The company further agreed to accept a safety monitor to be conducted by the government as it had failed to disclose to the regulators and more so misleading them about the accelerator pedals which often stuck to various kinds of car mats. Looking at the report tabled in the Department of Justice, the issue regarding uncontrollable speeds as well as crushes started to appear in 2007. However, it took the company over two years for the Company to disclose earlier understandings associated with tissue and even gave out deceptive statements and later on recalling the vehicles. Further, the company responded on the cases reported based on the social class. Much of the vehicles that were recalled were expensive and luxurious while the typical vehicles were ignored (Stewart et al., 2010). For the crisis to be handled, the chief executive officer must appoint a head of rapid as well as well safety response team (Nishiguchi & Beaudet, 2011). According to Nishiguchi and Beaudet (2011), the teams should brief the management in order to be in line with what is happening on the ground. Moreover, both the CEO and the top management officer must ensure that all communications to various channels and departments are accurate during strategy formulation. Various exerts posit that it was improper for Toyota to furnish the public with deceptive statements as it tarnished its reputation even more. It is better for the firm to say nothing and develop further the actual facts before they release them to the public. Once the strategy has been laid down, it is important for the chief executive officer to oversee its proper implementation thus making sure that it is appropriate as well as well meticulously carried. Further, the systems should be changed whenever necessary in order to fit the specific issues. Conclusion The paper has successfully analyzed a major incident that happened in the business world, in this case Toyota Motors Corporation. The paper has highlighted the crisis that hit Toyota as well as how it handled the situation. Furthermore, the paper delineated the various theories and concepts that can be associated with the Toyota’s crisis. The paper has identified the Agenda-setting theory as the most relevant concept when dealing with a brand reputation management. As highlighted in the paper, a firm needs to ensure that it responds instantly and appropriately in order to control what the media might feed the public. References Jones, Jeffrey M. (2010). Americans, Toyota Owners Still Confident in Toyota Vehicles. USA Today/Gallup poll. Retrieved from http://www.gallup.com/poll/126236/americanstoyota owners-confident-toyota-vehicles.aspx. Accessed July 23, 2015. McCombs, Maxwell. (2004). Setting the Agenda — The Mass Media and Public Opinion. Malden, MA: Blackwell. MSNBC.COM. (2010). Toyota recall timeline. Retrieved from http://www.msnbc.msn.com/id/35240466/ns/business-autos/. Accessed May 23, 2015. Nishiguchi, T., & Beaudet, A. (2011). The Toyota group and the Aisin fire. MIT Sloan Management Review, 40(1), 49. Quelch, J., Knoop, C.-I., & Johnson, R. (2011). Toyota Recalls (A): Hitting the Skids. HBS Case 9-511 016. Boston: Harvard Business School Publishing. Steinmetz, Katy. (2010). Toyota's Safety Problems: A Checkered History. Time, February 10, 2010. Retrieved from http://www.time.com/time/business/article/0,8599,1962218,00.html?xid=rss-topstories. Accessed April 23, 2015. Stewart, Thomas A. & Raman, Anand. (2010). Lessons from Toyota's long drive. Harvard Business Review 85 (7), 74-76. Weaver, D.A. & Bimber, Bruce. (2008). Finding news stories: a comparison of searches using Lexis Nexis and Google News. Journalism and Mass Communications Quarterly 85(3), 517-532. Read More