Corporate Communication Strategy- Case of Toyota - Essay Example

?Part 1. Introduction Toyota is one of the best Japanese car manufacturers with high credibility in America. It is also the largest manufacturer ofautomobiles with production units in 28 countries across the globe (Toyota, 2011). Its brand reputation fundamentally relies on the quality, safety, reliability and customer focus that continuously strives for excellence in design and improvement (Quelch, Knoop & Johnson, 2010; Stewart & Raman, 2007). In the past decade and especially in 2009-2010, the company had faced serious crisis situation with its quality problems regarding sticking gas pedal and uncontrollable acceleration that had led to human casualties and severe dent to its market reputation. The unintended acceleration was attributed to floor mat issues, brakes and sticky gas pedal. The company has since recalled nearly 8 million cars of different models that were deemed to have potential problems with gas pedal mechanism which could lead to unintended acceleration (McKenzie & Scott, 2010). 2. Environmental scanning of the company Toyota has enjoyed an unblemished reputation within the auto industry. In the fast transforming business dynamics, the various environmental factors become crucial paradigms to maintain competitive advantage within the industry. PESTLE and SWOT analysis become vital tools for firms to identify and evaluate elements that can help them compete and succeed in the highly competitive business environment (Burnes, 2009). They promote the wider understanding of socio-political environment within which the firms operate. They were conducted to understand Toyota’s market position prior to the crisis and how it was impacted in post crisis period. (Refer to Appendix A) 2a. PESTLE analysis for America In the current environment of rapid globalization, practice of international businesses is considerably impacted by the different political, economic and legal systems of nations (Hills, 2004). The businesses therefore need to become more flexible and adapt to the changing technologies and work environments. PESTLE analysis of Toyota has been conducted for America because the case focuses on the Toyota’s American market and the performance and quality of its various models in America. PESTLE has emerged as critical issues that need to be incorporated within the business strategy when firms expand across globe. 2a.1 Political environment America is one of the largest democratic states of the world. The public is hugely empowered with information and the socio-political environment promotes proactive participation of people in issues which affect them. Thus, businesses need to be more accountable in their actions and take into account the expectations of the people at large. The sticky pedal case of Toyota had drawn more public attention towards the firm undermining it’s hitherto brand reputation of quality, dependability and value. 2a.2 Economic It is a very important factor because the market is driven by the demand and supply that is mainly dependent on the buying capacity of the consumers. It has big market in America. Despite the current environment of recession, the networking solutions have become the critical part of industrial success and therefore, an intrinsic part of business strategy. Toyota therefore has huge economic stake in the American market and needed to restore public trust by responding favourably to the crisis situation. 2a.3 Socio-cultural paradigm There is huge socio-cultural diversity amongst the masses. With multi-cultural society, the demographic factors are vital ingredients that have huge cascading effect on the market. The demographic changes vis-a-vis population size, age distribution, gender ratio, income group etc. have immense influence on the changing consumer preferences and consequently on the profitability of the firm. Kotler et al (2007) emphasize that in the fast changing global business, demographic compulsions have significant impact on market position and therefore, they need to become intrinsic part of the market strategy of the industry. The crisis had adversely impacted its market. 2a.4 Technology The advancing technology is important facilitator that impacts the business dynamics. Toyota was a highly technology driven firm that had used technology to advance its business and offered state of the art automobiles that had met the changing demands of the people. The crisis had threatened its niche market position. 2a.5 Legal The government regulations, employment laws, competition, health and safety and other imperatives are essential factors which need to be conformed as per the specific country. Toyota is aware of the legal framework as well as the laws that directly impact its operation in the country. The American legal system regarding corporate laws, safety etc. is important aspect which the firm must adhere. 2a.6 New Environmental compulsions Environmental issues have increasingly become vital factors that significantly influence public opinion. Sustainable business practices therefore have become intrinsic part of corporate strategy. Toyota must constantly evolve new environmental imperatives within their business strategies to promote sustainable development. It was the first company to launch hybrid car to promote environment conservation. Part 2 3. Sticky gas pedal: An issue or a crisis? Sticky accelerator pedal case was a major concern that had damaging consequences for the firm. It was not merely an issue that could wait a decision. Heath & Coomb (2006) assert that issues within an organization are gaps or inconsistencies that may create differences of opinion and require decision-making. They do not tend to threaten the reputation or survival of organizations. Regester & Larkin (2005) emphasize that issues are specific in their content and addressing them helps to benefit the firms and various stakeholders as it reduces risks, preserves market and creates better opportunities of growth and higher performance. The issues are therefore concerns which need to be identified for their relevance to the organization and appropriately addressed early. Crisis, on the other hand, are issues that require immediate attention and which have huge potential to damage firm’s credibility. Cornelissen (2008) strongly contends that crises are issues that have potential to damage organization’s reputation and adversely impact its relationship with its various stakeholders and shareholders. The crisis therefore requires urgent actions followed by intensive corporate communication campaign to maintain its market credibility and stakeholders’ trust. An effective crisis management strategy helps to exert control over the damaging events and organizational activities that safeguards the interests of the stakeholders and reassures them. The sticky accelerator pedal in Toyota cars was a crisis call for the firm that had serious potential repercussions and far reaching adverse impact on the performance of the organization. The sticky pedal was a safety hazard that had claimed several lives of the drivers who had driven Toyota cars with faulty gas pedal and put at risk the lives of others. Thus, it required urgent and intentional actions from the firm. The transgressions of the firm in the case were critical aspects that needed careful damage control public relation exercise. Part 3. 4. Crisis management analysis of Toyota’s sticking pedal case 4.1. Situation analysis and Toyota’s pre-crisis phase The company was the largest automobile manufacturers with nearly 16% of American market share, selling 75% of all hybrid cars in America (Abilla, 2010; Toyota, 2010). Its corporate philosophy was based on quality, safety and volume. But the rapid growth of its market imposed considerable strain on its design, engineering and manufacturing processes that adversely impacted the quality (Quelch et al., 2010; Steinmetz, 2010). These had led to quality issues and recall of its 8379 vehicles in 2000 (US Congress, 2010). At the time, the issue of unintended acceleration was not highlighted as it was concluded in 1989 NHTSA study that most of the incidents were due to drivers’ error. But matter was raised again when the issue came into the limelight in August 2009 when a Toyota car crashed due to sticky pedal (channel 10 news, 2010). The crash of Toyota Lexus ES350 on 28 August 2009 had killed four people and the cause reported was that there was no brake. The incident started in-depth enquiry that revealed that floor mats and sticky gas pedal could have been responsible for the crash. The issue of sticky gas pedal was not seen as crisis issue by the company but regarded as minor fault of floor matting. Moreover, though company announced recall of its floor mats in more than 4.2 million Toyota and Lexus vehicles, it still did not accept any mechanical fault in the gas pedal. As a result, it reported 16% decrease in its sales as compared to last year. Indeed, each crisis is unique and carries unexpected elements of uncertainties and ambiguities that affect wide spectrum of stakeholders (Coombs, 1999; Pearson & Clair, 1998). Moreover, the uncertainties surrounding the crisis put significant constrain on firm’s financial and physical structure, thereby interrupting normal business transactions and having negative outcome on the organization in general. The impact of crisis on its various stakeholders has been tremendous as shown through stakeholder matrix (Appendix B). The uncertainty in the cause of the accidents in Toyota cars had affected performance, leading to decrease in sale. The crisis continued to plague the company because it was followed by poor information and knowledge about the situation (Coombs, 2007; Davies et al., 2003). The firm refused to investigate the myriad perspectives and mechanisms that could have led to the accidents and acceleration of gas pedal. The slipping market share also provided its rivals, Ford and Hyundai Motors with opportunities to penetrate its market which helped them to increase their sale by nearly 24% increase (Bailey & Krolicki, 2010). Most importantly, Toyota’s response and its communication strategy indicated that it is hiding information regarding accelerator glitches which had compromised quality and safety of the owners (Hyde, 2010). This was crucial factor that significantly contributed to its declining market reputation. 4.2. Toyota’s crisis response Toyota’s crisis response was tardy and slow that had significantly impacted its market credibility. The 3.9 million cars were recalled in September 2009 because of faulty floor mats. The company continued to deny faulty mechanism of gas pedal but recalled more than 8 million cars by February 2010. The company was also rebuked by NHTSA for giving inaccurate and misleading statements (Heller & Darling, 2012). In October 2009, Toyota sent letters to its car owners, denying any defect. After more than 1200 complaints and crash of Toyota Avalon on 26 December, 2009, company acceded to the mechanical defect and recalled the cars. It was also asked to stop selling the recalled models. Toyota President Akio Toyoda made public apology on 24 February 2010 and did not contest fine of $16.4 million fine for hiding dangerous defects and for being too slow in its response to the crisis that had endangered the lives of innocent people. Crisis situations are linked to set of issues which form chain of causality, leading to considerable damage to the firm’s credibility and its market performance (Coombs, 2007; Dilenschneider 2000). The slow response of Toyota could be contributed to its lack of strategic plans for crisis situation and effective crisis management strategy. Indeed, crisis can also be never anticipated per se and therefore necessitate contingency plans that can address wide-ranging issues at short notice. It is hugely important to recognize issues and problems that can escalate into serious crisis. Despite facing earlier problems of unintended acceleration pedal, Toyota failed to identify and address the problem mainly because it did not recognize it as such. The framework of situational crisis communication theory or SCCT becomes highly relevant because if crisis is not managed properly and timely, it may escalate problems and severely damage the reputation of the company. Cornelissen (2008) further explains that corporate communication strategy needs to play pivotal role in the overall strategy of the organization that must focus on planned communication that is consistent with corporate mission and vision. It strengthens organization’s relationship with its various stakeholders and helps project credible image that corroborates with its wider aims and objectives. The situational theory of communication promotes effective linkages between knowledge, attitude and behaviour which is contingent based on the level of recognition of the problem, its constraints and level of involvement (Steyn & Niemann 2010). Toyota management had not recognized the seriousness of the problem and had therefore not taken as crisis issue that needed to be addressed urgently. It was imminent that issue was recognized as a serious problem and responded quickly which the firm had failed to do. Christensen et al, (2008) promotes the theory of stakeholders that increasingly demand transparency in actions and integrated communication that reflects collective vision of the stakeholders. Despite the death of several people in the accident where Toyota automobile was involved, the company had delayed in responding to the crisis. Even after the firm had publicly recognized the accident, it had refused to accept that it was due to manufacturing defect and continued to misled the public with false statement. There was distinct lack of transparency in its work ethics which had corroded the public trust. It inculcates trust amongst the various stakeholders including shareholders, customers, suppliers, publics etc. The attribution theory of corporate communication highlights the importance of organizational reputation and the need for regular and effective communication across its various stakeholders and public (Coombs, 2007). Prior to the accident and the case of sticky gas pedal, Toyota had enjoyed tremendous public support and trust because of its superb quality and integrity. The sticky gas pedal was a major mechanical defect that compromised the safety of its drivers and people in general. The lack of effective communication and public relation exercise after the accidents that had led to the loss of many lives, the company suffered loss of reputation and market credibility, leading to significant loss of market share. Public relation is crucial activity that disseminates important information about the organizations and helps to establish constructive relationship with its various stakeholders. Most importantly, it not only helps to earn public approval but also promotes confidence building during crisis and helps maintain market credibility. It provides the emotional and physical structure for corporate communication that can handle crisis and help organization to overcome crisis situation with relative ease. Consequently, the delayed response to the crisis situation greatly contributed to its declining popularity and decreasing sales. 4.3. Post crisis phase Toyota established a new SMART (Swift Market Analysis Response Team) business process that can immediately address the problems and avert crisis situations. It also adopted more transparent strategy and used regular PR exercises to inform public about its work. The appearance of the President of Toyota on national television and his article on the national daily was designed to influence public opinion. The acceptance of their fault and transparency in their actions was important factor helped to restore its image. 5. Recommendation and alternative approach As per SCCT theory, the delay in response to the crisis was major factor that had escalated the crisis issue. The management therefore needs to evolve strong crisis management strategy and planned communication that can identify and anticipate issues with wider ramifications on the organizational performance. Toyota had lacked proper planning and communication strategy to deal with crisis situations. It therefore needs to develop crisis management strategy with well-defined communication plan that can assuage public sentiments at the time of crisis. Most pertinently, there must be strong internal communication and well developed external communication linkages that can immediately disseminate crucial information to the public at large. The company also had centralized power system and major decisions were made by its corporate head office in Japan which had further delayed timely communication. Its various offshore offices therefore must be empowered to make crucial decisions. The organization must also adopt accommodation strategy and transgression communication strategy that promote acceptance of the problems and accountability in their actions. This facilitates transparency and promotes an environment of confidence building across its various stakeholders. Moreover, the social networking has emerged has highly effective PR strategy that Toyota must exploit to disseminate information and garner support for its products. As suchr, regular public relation exercises using myriad media become crucial elements of corporate communication that help maintain credible image of the firm and restore stakeholders’ confidence in the time of the crisis. 6. Learning points Always be truthful Never lie and mislead public Make efforts to look at the issues from different perspectives and evaluate its potential ramifications. Communicate regularly with the stakeholders through public forums and alleviate their doubts. Accept problems and respond quickly to the crisis with the available facts. 7. Conclusion Crisis management and crisis communication therefore have emerged as vital streams that prepare organizations to cope with extraordinary situations and respond timely to prevent loss of any kind. Fearn-Bank (2001: 480) has defined CM as strategic planning that ‘removes some of the risk and uncertainty and allows the organization to be in greater control of its destiny’. The timely and efficient decision-making based on available facts minimize the damage and expedite recovery. Indeed, crisis can escalate into communication-crisis when communication processes fail to address the crisis issues effectively and timely. They believe that the dynamic nature of crises needs to be handled judiciously through effective communication that can restore stakeholders’ confidence and help maintain its market credibility. Toyota’s sticky pedal case is prime example of inadequate response to crisis which had adverse impact on its market reputation. Well-planned crisis management strategy and developing effective plans for corporate communication therefore becomes essential part of corporate strategy to address its crisis early. (words: 2860) Reference 1. Abilla, Pete. (2007) Toyota Motor Corporation: Company History, Available: http://www.shmula.com/toyota-motor-corporation-company-history/291/ [1 June, 2013]. 2. Bailey, David and Kevin Krolicki, Kevin (2010) Toyota US Sales Reel from Crisis; GM, Ford Surge, Available: http://www.reuters.com/article/idUSTRE6114BW20100203 [1 June, 2013]. 3. Burnes, B. (2009). Managing Change, 5th edition, London: Prentice Hall. 4. Channel 10 News, “4 Killed in Fiery Santee Crash Believed Identified,” Available: Read More