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Toyota in Crisis: Denial and Mismanagement

Introduction

At present, Toyota faces challenges caused by production globalization, market development, and increasing product complexity. In 2009 due to a pedal problem, Toyota recalled millions of automobiles because of unintentional acceleration and inability to manage the crisis. A quality problem for a brand that has been renowned for its reliability resulted in enormous litigation. For continued success, corporate leaders need to react the way that can maintain the company’s profitability. An example of Toyota’s mismanagement is essential for analyzing the measures, manager’s actions, or their absence. Ineffective communications can significantly deepen the crisis and increase the threat to the organization. This analysis is useful in terms of identifying administration errors and preventing a recurrence of the issue by correcting and improving crisis management methods.

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Background

Toyota is one of the most successful multinational automotive manufacturers. Nevertheless, successful organizations and their leaders can face severe crises. The rapid growth of Toyota’s business outstripped management capabilities, and the organization could not avert the issue in time (Choi & Lee, 2017). Even though Toyota became aware of the problem that led to the recall of 7.4 million vehicles back in 2007, it has not responded initially (Heller & Darling, 2011). The first signs of the crisis were unusual odors in some cars around the driver’s door reported by customers (Choi & Lee, 2017). This evidence has not been discovered; this failure was not eliminated as soon as possible during the pre-crisis stage, which has led to an acute crisis.

A large number of both internal and external factors have formed a complex crisis disorder. These include the company’s mismanagement, arrogance in matters of quality, and the continually increasing complexity of cars’ design (Choi & Lee, 2017). It was also caused by the increase in production volumes, the globalization of production, and, consequently, the explosive growth of related problems (Choi & Lee, 2017). As a result, the volume of luxury cars exported to the United States grew exponentially, enabling the company to generate unprecedented profits. The service campaign for 7.4 million vehicles was the largest one-time recall of the company, whose reputation suffered from the global quality crisis (Heller & Darling, 2011). Therefore, currently, company management must be vigilant to uphold the practices and values that ensure a high-quality manufacturing system, adapting to emerging challenges.

Pertinent Course Topics

Crisis management includes a set of methods used in different functional management fields. Social technologies, economic analysis methods, forecasting, and plans for restructuring and reorganization are used in combination with timely prevention and overcoming crises. The crisis phases include preliminary, acute, chronic, and crisis resolution stages (Heller & Darling, 2011). The technology of crisis management consists of several successive steps to implement a mechanism for influencing the system to prevent, mitigate, and overcome crises of different types.

It is essential for corporate leadership to have a systemic vision, to be able to fully cover many interrelated problems, which can lead an organization to failure. It is important to evaluate the timely resolution of conflicts and choose the optimal personnel policy, reorganization at a difficult stage of bankruptcy. This depends on the measures in terms of organizational culture, values, communication effectiveness, leadership style, management skills, business strategy execution, employee engagement, and empowerment.

Evaluation and Detailed Discussion

Organizational Structure and Culture

In investigating the causes of Toyota’s recent quality problems, the role of a centralized organizational structure and culture should be considered. As a result, top management was less attentive to cultural, political expectations of regulators in foreign markets. For example, in October 2004, Toyota recalled pickups and SUVs in Japan due to steering defects, but they were not identified in the US until September 2005 (Zakaria & Lasrado, 2019). Consequently, the response to local problems was not timely as Toyota’s decision-making processes are collectivist.

Values, Ethics, and Communication Effectiveness

The principal value of the company is the concept of kaizen. It means continuous improvement, thus, the company acknowledged that it needs to improve its responsiveness to consumer reports of problems with its vehicles (Choi & Lee, 2017). During the year, Toyota agreed with the accident victims’ relatives to pay compensation (Choi & Lee, 2017). Safety is of supreme importance, therefore, all company’s actions aim to ensure that every client feels in complete confidence and security at any time.

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Leadership Style and Decision-Making

One of the reasons for the expanding crisis was the misconduct of the corporate leadership. Toyota’s management worsened the situation due to ineffectively proceeding with the acute issue stage and dealt with the adverse outcomes that this stage should have attracted attention (Heller & Darling, 2011). The Toyota Motor Corporation president’s first official apology for car malfunctions came only a few months after the first 4 million cars were recalled (Choi & Lee, 2017). These facts could not solve the problem and directed the crisis to aggravation.

Management Skills, Employee Engagement, and Empowerment

According to the company’s principles, even senior management of the company and department heads should see the problem with their own eyes. This enhances the understanding of the situation that will be genuine and not superficial (Heller & Darling, 2011). However, due to this factor, leaders could not make an unambiguous decision about the course of action until they consider all the alternatives. Hence, the delay resulted in the acute crisis stage and postponed the possible solutions.

Business Strategy Execution

Since corporate leadership proclaimed that customer care remained a top priority for Toyota, preventive measures were taken. The vehicle recall was aimed at guaranteeing the highest quality standards for clients (Kovoor-Misra, 2019). The company announced the ending sales of dysfunctional car models and stopped production at several US factories for troubleshooting (Kovoor-Misra, 2019). Toyota acknowledged the problem’s existence; the main task implied to eliminate this possible malfunction as soon as possible.

Alternatives

In the absence of timely action, the essence of crisis management can be adverse. According to Liu et al. (2017), three primary crisis management strategies, such as advertising, recall initiation, and post recall remedy strategies, correspond to the crucial components of crisis management. These elements are communication with the stakeholders, responsibility, and repair damage (Liu et al., 2017). In this case, it will be impossible to foresee future crises. These actions prevent or extinguish the negative impact of problematic situations for a company (Liu et al., 2017). If these concepts are not used, they would have changed the outcome, affecting its reputation and managers’ and staff’s perception in society (Liu et al., 2017). Moreover, it can lead to the organization’s bankruptcy without the possibility of recovery in the market.

Proposed Solutions

For mitigating a problem that might occur in the future, the possible solution is to prolong the product development process. It is needed to create a new team of quality specialists, significantly increasing the initial response teams to quality problems worldwide. Negative quality perceptions can persist long after objective quality problems are corrected (Liu et al., 2017). While many auto industry analysts predicted that in early 2010, Toyota would be quick to tackle the problem, Ford’s experience suggests that this view may be optimistic (Choi & Lee, 2017). Consumers’ perception of cars’ quality is based on limited information and personal experience (Liu et al., 2017). Consequently, corporate leadership needs to focus on PR strategy and communication with stakeholders.

Recommendation

Several actions can be performed to prevent the negative consequences of a crisis. The first is to determine the organization’s communication strategy with its employees, shareholders, clients, and the media (Nizamidou et al., 2019). Moreover, it is necessary to monitor and assess crisis indications, the flexibility of measures to resist the challenge (Nizamidou et al., 2019). In addition, it is useful to isolate organizations’ areas of activity from those that have not been affected by the crisis (Nizamidou et al., 2019). A successful business should always intend to maintain maximum loyalty, trust, and respect for itself from customers, employees, dealers, media, and government agencies.

Personal Conclusion

In the face of a crisis, Toyota’s corporate leadership should set some initial guidelines for obvious solutions at various organization levels that need to be implemented without delay. The most significant contributor to the company’s failure was the lack of a cooperative proposal to plan crisis management and behavior during its appliance. Consequently, it is necessary to develop a system for collecting information, diagnose the pre-crisis state, identify threats and build a hierarchy of crisis management goals.

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Case Conclusion

In conclusion, Toyota faced a crisis and its mismanagement as corporate leadership focused on expanding the company, which reduced quality. The variety of competitors’ products has developed, and the media profoundly affect Toyota’s public perception. The crisis management system is based on the early diagnosis; Toyota was aware of possible gas pedal malfunctions but took no actions to prevent this issue. Each emerging crisis phenomenon tends to become acute; therefore, the sooner the anti-crisis mechanisms are applied, the more opportunities for recovery the enterprise will obtain. Nevertheless, the company might overcome the crisis faced in recent years by improving its crisis management system.

References

Choi, J., & Lee, S. (2017). Lessons from a crisis: An analysis of Toyota’s handling of the recall crisis. Journal of Public Affairs, 18(2), 1−8. Web.

Heller, V. L., & Darling, J. R. (2011). Toyota in crisis: Denial and mismanagement. Journal of Business Strategy, 32(5), 4−13. Web.

Kovoor-Misra, S. (2019). Crisis management: Resilience and change. SAGE Publications.

Liu, Y., Shankar, V., & Yun, W. (2017). Crisis management strategies and the long-term effects of product recalls on firm value. Journal of Marketing, 81(5), 30−48. Web.

Nizamidou, C., Vouzas, F., & Gotzamani, K. (2019). Exploring the interrelationship between quality, safety and HR within crisis management framework. The TQM Journal, 31(4), 541−562. Web.

Zakaria, N., & Lasrado, F. (Eds.). (2019). Embedding culture and quality for high performing organizations. CRC Press.

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