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Toyota Motor Corporation is a large Japanese automaker that has global market coverage. Kiichiro Toyoda started this firm in 1937, as an engine-manufacturing firm. During those years, this firm traded as an automobile company. The firm received a massive growth and extended its line of products to include various types of cars. The firm was able to grow rapidly because of the enabling environment in Japan. This firm entered the automobile market in 1930s.
The management had seen some of the benefits of operating in the automobile industry. Technology was becoming relevant and this firm realized that there were many opportunities in the industry. The management believed that the firm was able to realize its objectives, given the kind of labor it had and the resources. The company is a known multinational corporation, with branches all over the world. It was convinced that it could use its financial muscle to outmuscle other firms operating in the same industry.
The management was determined to ensure mass production, which would minimize the effect would arise due to any external factors that could have affected any of the industries. This firm embraced Total Quality Management as a management tool to ensure that there would be constant customer satisfaction. Since then, this firm has received a consistent growth in various sectors (Liker, 2004).
The firm has been in competition with major automobile firms around the world, especially the General Motors and Ford. The management of the firm has been keen on acquiring markets globally. One of the key success factors that have helped this firm in its growth is communication strategy it has employed, especially in crisis communication management. This research paper focuses on the communication strategy that Toyota Company uses in managing crisis communication.
The Crisis Toyota Motors Faced
Crisis management is one of the most challenging tasks in any organization. Most organizations would always make an effort to ensure that a crisis is avoided. Travis (2007) defines a crisis as an event or a situation that may lead to dangerous or unstable situations, which may affect an individual, organization or the entire society. In every organization, a crisis would probably crop up and the management team would be called upon to come up with mitigation measures.
As Martins (2008) observes, a crisis cannot be avoided, yet it can be predicted. The management cannot say for sure that the firm has eliminated all forms of crises because a simple insensible action from one of the employees may lead to a crisis, which would affect the entire firm. When such an incident arises, there would be need to ensure that measures, which would help mitigate the crisis, are developed so that the effect of such a crisis is made less devastating.
Toyota Motors faced a crisis when their cars had to be recalled due to their faulty brakes. It was reported that one of their cars (Lexus), had accelerated beyond control and crashed killing a family of four people in the United States. The cause of the accident was confirmed to be a faulty brake pedal, which accelerated the car when they were pressed.
Toyota Motors commissioned an investigation and it was confirmed that there was a technical error of the floor of the car that caused the problem on the breaks. This came at a time when the firm was making impressive profits in the world market, especially in the United States. The management had to act with speed in order to protect the market. The brand ‘Toyota’ had gained a lot of popularity to an extent that the firm could not let it be tainted by a small technical error on the breaks.
The management of the firm made a decision to recall all its Lexus cars that were already in the market. It ordered dealers all over the world to recall all cars of particular make that were suspected to have faulty brakes. There was a conspicuous weakness of the firm in the managing crisis. It was a dignified move for this firm to recall all its cars after realizing that some of them had faulty brakes. There was a need to protect its image in the market.
However, the way the firm passed information to the public raised some eyebrows among a section of the market. There was a created notion that using some of the brand new cars from the company required a lot of precaution. This would put off some of the potential customers. Despite the good intention that the company had, the firm was fined by the American government for violating the laws of operation in the land.
The firm earned the fine because it failed to follow the set regulatory policies. Although the firm was not fined in other countries around the world, the incident created some form of suspicion. This would translate to negative consequences to the firm. According to Travis (2007), a firm should always find a way of managing a crisis in a way that would convince the market that the problem at hand is a small issue that is being blown out of proportion. The strategy that Toyota took was however a clear indication that it really failed.
The apology given by the chief executive officer Akio Toyoda to the family of the victims of the accidents may sound sincere, but to the customer, it is a humble acceptance that its products lack security, which is mostly needed in a car. Customers are always concerned with the issue of security. In case a product delivered in the market does not guarantee customers of their security, they would tend to shy away from such a product. This would have a negative effect to the organizational product.
Analysis of the Underlying Causation
The main cause of the problem was the accident that was confirmed to have occurred due to faulty brakes. The investigation confirmed that the car involved in the accident had a problematic brake pedals. The firm moved with speed to recall all vehicles, which were suspected to have this problem. The move was splendid, but the problem was that the trust that customers had on this car was completely eroded.
Customers could no longer believe that this brand offered enough security. Although the main cause of this accident was detected to be a failed beak, there was more than what could meet the eye. The enthusiasm with which the American newspapers took this case and the manner in which it handled the case blew it out of proportion. Given the fact that the government of the United States rushed to fine this company, it was clear that the government was interested punishing the company.
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The Impact on Stakeholders
The impact that the crisis had on the stakeholders was massive. Toyota Motors was forced to recall over four million Toyota and Lexus cars from the market. This was done at a cost, which was a blow to the firm. It resulted to loss of millions. The problem was caused by the inability of the car manufacturer to sell its products in the market.
The ripple effect of this incident had even a greater impact on the firm. Customers of Toyota, who had been loyal to the brand for several years, lost their trust. This meant that they were considering other brands other than Toyota. This was a negative consequence. The government of the United States fined the company millions of dollars because of selling products that do not meet the set standards. This move hurt investors of this firm, as the fined had to be paid for the firm to continue operating in the attractive market.
Dealers of Toyota cars and spare parts were also hit hard by this incident. The sales were reduced considerably to the levels where some of the dealers were left without any profit. Some of them were forced out of the market because they were operating at higher costs that outweighed their incomes. Loyal customers were also affected because they could not access a brand they trusted in the market. All of these consequences were majorly due to poor communication by the concerned authorities in the market.
Response of the Organization to the Crisis
When a crisis emerges, an initial response is very important. According to Lu (2008) when there is a conflict between organisations and customers, the public will start to make an issue out of the problem, which can get out of control.
Therefore, Lu (2008) stated that the initial response should be quick, accurate, and consistent. The scholar argued that if an organisation does not take the first step, people who want to attack the organisation could comment on the situation inaccurately and the organisation could be threatened. With the help of initial quick response, the organisation can gain control over the problem.
Hino (2006) supported this notion as well by arguing that being passive may not have any help on crisis management and the organisation can fully lose its control. As this process would be like a question and answer session, which askers are customers and answerers are people from organisations, two-way symmetrical communication would play a key role.
Toyota responded to this crisis by acting other than offering verbal communication to customers and the public in general. The management ordered its dealers to return all Lexus cars that were already sold in the market and some new models of Toyota.
The company committed itself to addressing this issue by checking whether other cars that were already released for sale had a similar problem. The management then communicated to the customers and its loyal customers by apologizing for the inconvenience caused by recalling the cars.
The management tried to explain to the customers that the issue was an error that affected only that car, which was very strange to the management, and that other cars in the market were safe. The management was keen to ensure that the market was convinced of the fact that the incident that happened was unique, and that this firm was still committed to delivering quality products in the market always.
Evaluation of the Response in Terms of Effectiveness
The response by the management of Toyota Motors to the incident might be considered effective in a number of ways. The decision to move with speed and recall other cars that were in the market ready for sale passed a message to the market that this firm was not only concerned with profits.
The move showed that the firm is concerned with the safety of its customers. Despite the losses that were incurred, the focus of this firm was on how to ensure its customers were safe. After confirming that other cars in the market were safe, the management then communicated to the market.
The chief executive apologized to the market over the crisis and assured it that the company would continue offering products of high quality. It is worth noting however, that the management failed to wipe off the negative image that some ill-intentioned media stations had developed towards the company. A section of the market was convinced that this firm was reckless and only determined to get self gains at the expense of its loyal customers.
Suggested Possible Alternative Responses
Toyota Company should have taken a different response strategy to the crisis. Following the tragic accident involving one of their cars, the management should not have recalled all its cars already in the market. The recall was a sign that Toyota was unsure of the safety of its products in the market. It was like telling the market that the products did not pass through quality assurance team. It would be more appropriate if this firm commissioned some of its employees to confirm the safety of the products in the market.
This would have convinced the market that Toyota was sure of the quality of their products and only wanted reassurance from this activity. The communication to the market should have focused on informing customers that the incident was unique and that this firm was determined to confirm if there were any other issues related to the accidents other than the claim of failed brakes.
Communication is a very important tool in an organization. When there is a crisis, it is always important to ensure that information flows in a way that is expected. Toyota Motors faced a crisis when it was realized that some of its cars had faulty brakes.
The management of the firm responded to this crisis by recalling all new model cars in the market to recheck the issue. The management then communicated to the market. The market has become very hostile and Toyota Motors Corporation must ensure that it develops competitive strategies regularly to counter the threats posed by competitors.
This can be achieved through structuring the communication strategy, especially during cases of crisis such as this. The trends shown above are a clear indication that Toyota Motors Corporation should consider adjusting its strategy in the market in order to survive the new market competition. It should develop better communication strategies that can help it handle crisis. This will help in eliminating cases where the firm is fined or is subjected to a negative public image in the market.
Hino, S. (2006). Inside the Mind of Toyota: Management Principles for Enduring Growth. New York: Productivity Press.
Liker, J. (2004). The Toyota Way: 14 Management Principles from the World’s Greatest Manufacturer. New York: McGraw-Hill.
Lu, D. (2008). Kanban Just-in-Time at Toyota: Management Begins at the Workplace. Cambridge: Productivity Press.
Martins, J. (2008). Global Business Etiquette: A Guide to International Communication and Customs. Westport: Praeger.
Travis, T. (2007). Doing Business Anywhere: The Essential Guide to Going Global. Hoboken: John Wiley & Sons.