Introduction
For many years Toyota Company has enjoyed a market advantage across the world. The company has been credited for manufacturing quality vehicles with respect to efficiency and fuel consumption. With almost eighty percent of vehicles in every country coming from Toyota, its brand name has pervaded around the world saving the company the cost of having to conduct extensive marketing. For many decades, the company has been able to overcome competition from other vehicles manufacturing companies such as Ford and General Motors. Consumers have complained of these companies manufacturing faulty vehicles which Toyota Company has always ensured on the quality of vehicles it produces. Consumer loyalty has been one of the factors that have made Toyota Company expand its market share around the world. However, in the last two years, problems have been reported with some of the vehicles produced by Toyota Company. The poor braking system installed in the vehicles has resulted in fatalities in different countries. Some of the vehicles that have problems include Prius that have problem with its software and braking system. There are speculations that this recall will have adverse effects on the company which had for many years enjoyed a market advantage. This paper is aimed at compiling a report on the possible impacts of the recall on the company.
Effects on the brand name
Toyota’s brand name has been one of the most popular in the motor vehicle industry. For many years people have attributed every vehicle with Toyota as it was the most common brand. The company brand name has grown strong with time. This has been attributed to the quality and efficiency of its products. Other car manufacturing companies have reported cases of their cars causing accidents due to manufacturing errors or the inclusion of faulty components in the vehicle. It has seen companies like General motors recalling most of their cars after they have already been sold resulting in customers doubting its brand name. Toyota Company has been able to avoid this through its experienced employees. The recent recall of vehicles manufactured in the company has not been received well by its customers. Numerous fatality cases that have been reported due to the poor braking system of their cars have led to customers doubting the brand name they had trusted for a long time. Unless the company makes a quick effort to restore its customer loyalty, its brand name will start being weak in the market (Camp 1999, pp. 43-58).
Question of integrity in the company
Integrity within business operators goes too far in ensuring that customers become loyal to the company. In case of any problem resulting from operator errors, the operator is expected to respond with immediate effect and to assure his or her customers that the problem will be dealt with accordingly and will never reoccur again (Hill 1995, pp. 83-123). This helps in assuring customers of business operator’s integrity in delivering his or her services of producing his goods. There have been allegations that Toyota Company received complaints from customers but little effort was made by the management to respond to these complaints. The management also declined to address the media when it made an attempt to question the issue (Mizuno 2000, pp. 124-142). The management is seen to have taken that action only after the United States government decided to address the matter. This might lead to customers doubting the management’s integrity. It is the duty of every business operator to put the interests of his or her customers at heart. Failure to respond to customer complaints with immediate effect may lead to customers perceiving that Toyota Company is aimed at making increased sales regardless of ensuring that their products ensure the safety of their users. Doubting the company’s integrity may result in reduced sales.
Increase in Competition
It is normal for competing business organizations to take advantage of the weaknesses of their competitor to increase their market share. Whenever a dominating company experience problems with its consumers, it competitors take the advantage to lure its consumers to start making use of their products. In case the company does not make a quick effort to restore customer loyalty, its competitors take over the market. This makes it hard for the company to overcome competition in the market. Toyota Company has for many years dominated the world market with respect to sales of vehicles. Most of its competitors have reported cases of their vehicles being faulty. This has led to them not being able to establish themselves well in the market (Rupp 2004, pp. 67-89). For decades, Toyota has not reported complaints of faulty products from its customers. This has led to its brand name growing strong. The recent recall of a large number of vehicles from Toyota Company may result in its brand name becoming weaker (Bakker & Loui 1997, pp. 45-67). Competing companies such as General Motors and Ford have taken this advantage to lure customers from Toyota to start making use of their products. With most customers currently doubting the quality of cars produced by Toyota, competition in the world market is expected to rise.
Reduction in company sales
As the company continues recalling its cars around the world, more customers fear to buy its cars due to fear that they may also be faulty. Every person would like to buy a product that he or she is sure will not bring inconveniences in the future. The recall of Toyota cars has resulted in most customers being inconvenienced. For customers who require using cars in their daily activities, they have to bear with the inconveniencies of having to look for alternatives as they wait to be compensated. For those whose cars have not been returned to the company, it is difficult for them to use the car due to fear of accidents. All these inconveniences are deterring potential customers from buying vehicles from Toyota Company. The company sales are expected to go down significantly. With most people now doubting the quality and safety of the company vehicles, they are likely to opt on buying from other manufacturing companies (Rhee & Haunschild 2006, pp. 101-117).
Increase in operation cost
The success of every business operation depends on the ability of the business to reduce its operation cost and maximize its profit. This is attained by ensuring that the business offers quality products to its customers. Over the past, the quality of vehicles manufactured by Toyota Company has not only helped it in improving its brand name but has facilitated a reduction in operation costs. This is because the company has avoided cases of having to compensate its customers after selling them faulty products (Bates, Holweg, Lewis & Oliver 2007, 202-210). The company has been able to enjoy a good profit margin which has facilitated its expansion project. The recent recall of the company vehicles will lead to an increase in operating costs in the company. To restore customer loyalty, the company is expected to compensate all the customers who had purchased the faulty vehicle. This will be through issuing them with other vehicles or correcting problems in the vehicles. It will incur the company extra cost as it will earn nothing from the services it will lend to its customers. The time that the company will spend repairing these vehicles would have been used in producing more vehicles.
Reduction in profit margin coupled with reduced sales in the company is expected to hamper its rate of expansion. The company has in recent years embarked on expansion projects with company focusing on the development of vehicles with low fuel consumption rates. As the company will not be able to enjoy the competitive advantage it has enjoyed for many years, its profit is expected to go down thus making the company unable to continue with its expansion. Most of its profit is expected to be used in coming up with methods of restoring customer loyalty and improving the quality of its vehicles (McDermott 1996, pp. 6-10).
Conclusion
The recent recall of vehicles by Toyota Company will have adverse effects on the company. With most customers now doubting the quality of its products, the company is expected to experience a reduction in its sales rate. Competition in the market is expected to rise as its competitors are taking this advantage to lure customers from Toyota Company. The rate of growth in the company is expected to go down as the profit margin in the company will be low accompanied by an increase in operation cost. Not unless the management responds quickly, the company will lose most of the market share it has been enjoying in the world.
Reference
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