Assignment: Global Crisis Management—A Case Study
Product recalls have become increasingly commonplace. In fact, American media reports often contain information concerning product recalls of everything from food products to toys and cars. These recalls are also increasing in global frequency in recent years. A product-harm crisis, which often necessitates a product recall, can have tremendous human and financial costs. No industry or
and—no matter how large or well known—is immune to the impact of such a crisis, as proven by Toyota. Toyota’s leadership team dealt with a massive recall effort. This recall, among other recalls, is indicative of the importance of company safety strategies (Rajasekera, XXXXXXXXXXEven though many leaders hope to eliminate or at least minimize product-harm crises, given recent trends and the high-stakes consequences, business leaders are interested in knowing what to expect in case of a product-harm crisis—particularly in consumer and stock market reactions. Researchers continue to study what factors influence those reactions and hope to use their findings to build viable product-harm crisis response strategies.
Despite Toyota’s historic
and reputation of quality and the trust consumers had in the Toyota products, the recall caused many to question how the company will remain competitive. Toyota’s leaders faced challenges because over 6 million vehicles were recalled for safety defects, requiring Toyota to rethink their strategies to regain their position in the automobile industry and avoid destroying their customers’ loyalty and stakeholders’ confidence in their products and return on investments.
You will examine Toyota’s real-life case and develop recommendations that would help Toyota’s global leaders recover their
and loyalty.
To prepare for this Assignment, read the case, “Challenges to Toyota Caused by Recall Problems, Social Networks, and Digitisation.”
By Day 7
Submit a 3- to 5-page scholarly analysis in which you do the following:
· Evaluate the definition of product-harm crisis within the context of the Toyota case study.
· Identify the problems the Toyota leaders must solve.
· Analyze the organizational changes that were successful and unsuccessful.
· Synthesize your analysis of the literature to develop one or more recommendations for strategies Toyota might used to manage this product-harm crisis and recover
and loyalty in the global market.
· Support your work with a minimum of two specific citations per page from this week’s Learning Resources and/or additional scholarly sources.
Be sure to use the APA Course Paper Template (6th Ed.) to complete this Assignment. Also, refer to the Week 3 Assignment Ru
ic for specific grading elements and criteria. Your Instructor will use this ru
ic to assess your work. Please Note: For each page of your paper, you must include a minimum of two APA-formatted scholarly citations.
Submission and Grading Information
Asian Academy of Management Journal, Vol. 18, No. 1, 1 –17, 2013
© Asian Academy of Management and Pene
it Universiti Sains Malaysia, 2013
CHALLENGES TO TOYOTA CAUSED BY RECALL
PROBLEMS, SOCIAL NETWORKS AND DIGITISATION
Jay Rajasekera
International University of Japan
Graduate School of International Management
Minamiuonuma City, Niigata, Japan XXXXXXXXXX
E-mail: j
@iuj.ac.jp
ABSTRACT
The recent recall problems that shook Toyota raised questions about the company's
openness with the public. Media attention and the intervention by governments in
Toyota's largest markets in North America, Europe, China, and Japan kept Toyota's
management in the spotlight. The crisis also exposed the power of social media. Although
authoritarian regimes can control social media, public companies cannot. They have to
live with it by either countering effectively when a crisis begins to
ew or suffering the
consequences when it grows out of proportion. If Toyota manages social media
strategically, can it overcome the recall debacle and protect the reputation it has built
over decades as the top-quality automaker in the world? What challenges does the
increasingly digitalised auto industry present to Toyota? These are the main subjects of
this paper.
Keywords: social media, crisis management, Toyota, recall, social networks, Facebook,
Twitter, digitisation
INTRODUCTION
Social media, including social networking sites (SNS) such as Facebook and
Twitter, have added new meaning to the spread of news and information.
Whereas traditional information channels, such as newspapers, radios and TV, are
one-way mediums, the dawn of the Internet and social media has made
communication a two-way medium. The lack of official control, supervision and
egulation has fuelled a social media frenzy, which has proven to be an effective
method of rallying crowds for any significant (or even insignificant) issue.
The recent bans on Facebook and other types of social media by certain
governments are proof that social media cannot be ignored. Although
authoritarian governments can resort to such drastic methods, public corporations
cannot afford to do so. Corporations have no other option than to live with social
media phenomena, either countering them effectively when a crisis begins to
ew or suffering the consequences when it grows out of proportion.
Jay Rajasekera
2
In this context, it is interesting to explore how recall-troubled Toyota has handled
social media and what options are available for Toyota to prevent the situation
from going out of control and harming the worldwide reputation as a top-quality
automaker that the company has worked for decades to develop.
Toyota's recall exposed some "digitisation" in the automobile industry as well.
Digital technology in the music and video industries and its exploitation by Apple
in the Internet and social media essentially pushed Sony, an old industry
heavyweight, to the sidelines (Rajasekera, 2010; Chang, XXXXXXXXXXCould the same
thing happen to Toyota? Could a newcomer exploit digitisation in automobiles, in
conjunction with the Internet and social media, to dethrone an established giant
such as Toyota?
The Recall Crisis at Toyota: Rise and Fall
Since its founding in 1937, Toyota Motor Corporation has strived to build quality
automobiles. Capitalising on the Japanese concept of Kaizen, or continuous
improvement, and Just in Time (JIT), the company has built a worldwide
eputation for manufacturing affordable quality automobiles. Considered a
conservative company, Toyota capitalised on quality and competed directly with
established and well-known
ands in Europe, the U.S. and elsewhere (Morgan &
Liker, 2006; Magee, 2007).
Figure 1. In the last decade, Toyota rapidly increased its market share
(Source: WardsAuto, 2010)
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
XXXXXXXXXX XXXXXXXXXX
%
S
ha
e
o
f U
.S
. M
a
ke
t
Year
Toyota's Market Share Growth in U.S.
Challenges to Toyota Caused by Recall Problems
3
After its entry to the U.S. market in 1957, it took Toyota more than 40 years to
take a 10% share of its most important U.S. market. Toyota has seemed more
focused on rapid growth since the beginning of the last decade (Figure 1). Almost
50 years after entering the U.S. market, the Japanese company surpassed Ford
and Chrysler in 2007 to become the second most popular automotive
and in
America. The year 2007 was also a landmark year for Toyota because the
company earned US$15.1 billion in profits, the largest amount in the company's
history and the largest ever for a Japanese company.
The next year, 2008, was a recession year worldwide, and automobile sales
dropped everywhere. However, Toyota managed to increase its global market
share and became the largest automaker in the world, a record held by GM for 77
years (Time Magazine, 2010a).
Although Toyota became the world's largest automaker, the No. 1 spot did not
ing much solace to the company. After reporting a record profit the year before,
the global recession of 2008
ought bad news to Toyota: the company reported
the first loss, US$1.5 billion, in its corporate history.
Financial loss aside, the larger shock for Toyota was the seemingly unstoppable
stream of recalls that accompanied a streak of emotionally charged accidents,
including 52 deaths allegedly attributed to a sudden acceleration problem (CBS
News, 2010).
Recalls are nothing new for the automotive industry, especially in the U.S., where
the first recall law went into effect in 1966. Over a span of approximately 40
years, 400 million motor vehicles, including cars, buses and motorcycles, were
ecalled in the U.S. alone, according to U.S. government data (National Highway
Traffic Safety Administration [NHTSA], XXXXXXXXXXThus, approximately 10 million
vehicles, on average, are recalled every year for various reasons. What made the
Toyota case different was the significance of the image that the company had
produced for itself over the years and the damage to the perceived notion that the
name Toyota meant quality.
It was almost 50 years ago, in 1961, that Toyota addressed the importance of
product quality in its adoption of "Total Quality Control" as a way to compete
against well-established car manufacturers (Toyota Motors Corporation, 1961;
Ohno, XXXXXXXXXXDamage to the reputation that Toyota had built since that time
stunned the general public; especially the Japanese, for whom Toyota is the
commercial face that proudly represents the country to the outside world.
Jay Rajasekera
4
Figure 2. Sudden jump in Toyota's safety-related recalls
(Source: Minto, 2010; author's research)
The vehicle recall law divides recalls into two categories depending on the type
of defect: a defect related to safety (one that can cause injury or death) and a
defect not related to safety (such as a defective radio or air-conditioning system).
The defects in Toyota vehicles that allegedly caused a number of deaths were
elated to safety and thus are considered serious (Figure 2). The unprecedented
media coverage around the world was due to Toyota's
and name, its newly
acquired title as the "No. 1 automaker in the world," and its rather lethargic
esponse time to the incidents, some of which reportedly happened several years
earlier.