Toyota’s Response to Catastrophic Vehicle Recall

Regardless of industry, every organization will have a crisis at one point in their lifespan; it is inevitable. For Toyota, that crisis hit as they had matured and were at the peak of their sales and market share in the United States. The product-harm crisis they encountered crippled their business. In this paper, I will discuss the definition of product-harm, set the stage for Toyota’s recall and make a recommendation regarding how the firm could have responded differently to the product-harm crisis.

 

Defining Product-Harm

Product-harm is defined as product that is found to be defective, harmful or dangerous (Ma et al. 2014). Most often, we consumers learn of product-harm situations because a brand has come forward and announced that they have an issue with a product, and it is now being recalled. Brands typically learn of these issues as their customers begin notifying them of potential defects; if the defect causes bodily harm to the consumer, there will likely be some form of legality or legislation involved which heightens the awareness of the issue with the brand’s product (Cleeren et al. 2013).

To bring our definition of product-harm to life, we will evaluate the case study of Toyota and their recall of over eight million vehicles.

 

Toyota Introduction

Toyota’s reputation for quality automobile manufacturing was widely known throughout the world. Toyota, and its subsidiary brands, produced vehicles that were made with the utmost thought and precision; they made vehicles that would last the test of time. To accomplish this goal of manufacturing great automobiles, Toyota employed a process known as Kaizen; this is defined as “the daily and ongoing process of continuous improvement through the elimination of waste in the workplace” (Flaim, 2007).

Because of this glowing reputation for producing great automobiles, Toyota began to take-hold of the US automobile market share. While it did take them about forty years to gain a substantial share of the market, they began growing that share rapidly in the early 2000’s, peaking at just over 14% of US automobile market share. At this point in history, Toyota was well positioned amongst its competition with a great brand, high-quality products, and strong financial performance.

 

Toyota’s Recall

As Toyota was in full stride, hitting the top of their company performance, crisis fell hard on their company. This crisis was nothing short of catastrophic for the brand as they were forced to recall over eight million vehicles worldwide. The primary issue stated in the recall was the accelerator pedal sticking, causing the vehicle to continue to accelerate out of the ability for the pilot to control. This recall put their organization into a tailspin; they began suspending sales on eight vehicle models, production factories were closed, and lawsuits poured in. (Rajasekera, 2013).

While this was not the first recall that Toyota had been through, it was certainly the first of this magnitude. Not only was it great in magnitude because of the number of vehicles impacted, this recall experienced the largest reach in terms of existing and potential customers due to the technology of social media. Never before had an automobile manufacture dealt with a large recall with the looming media reach that social media platforms provide (Facebook, Twitter, etc.). Because there was so much media focused on the Toyota recall, the current president of Toyota, Akio Toyoda, took to the public forum by apologizing for the quality issues the brand was having; in his prepared remarks, he focuses on three points: safety, quality, and volume (Associated Press, 2010). The reactions began flooding in as consumers began to question the sincerity of President Toyoda’s comments.

 

Recommendation

Knowing how highly public the recall was, Toyota should have taken a different approach with their announcement. Understanding that President Toyoda was a highly educated and capable individual, that does not qualify him as a great communicator. After having watched the video of him addressing Congress, you can clearly see why the brand had such a negative response in the social channels.

Looking at the scenario in hind-sight, my recommendation would be to have a trained public speaker from within the Toyota organization (likely in the Public Relations department) speak on behalf of their president. This would have been a proactive approach and would have been done prior to the congressional hearing in an attempt to set the tone of the message in a more apologetic and sincere framework. In addition to broadcasting that message across the various media outlets to pick up, Toyota should have created a strong social media campaign that combatted those negative conversations happening throughout the various networks. This tactic would not have stopped the chatter from occurring but rather allowed Toyota to have a stronger and more positive voice in the conversation. Chen, Ganesan & Liu (2009) argue that firms with a better reputation are less likely to utilize a proactive approach, but in the case of Toyota’s recall and in light of the congressional hearings, it would have been in their best interest to take a strong and proactive approach to this crisis.

 

Conclusion

Toyota faced a crisis that had the magnitude of bankrupting the organization; it was truly catastrophic in nature: more than eight million vehicles recalled. Toyota’s response to the community was appropriate in that they took responsibility and ownership of the faulty product. In addition to taking ownership, the firm took the necessary steps to rectify the issue: stopping production, correcting the product issue for the customer and communicating with the community. However, because this crisis was so large and impacted so many consumers, Toyota should have been more strategic with a proactive communication approach that informed the community of what was happening and what actions were being taken to resolve the issue. Toyota took steps in the right direction but failed to fully execute the proactive strategy.

Toyota and the rest of the manufacturing world have learned a great deal from this crisis. Toyota has recovered and is now a better automobile manufacture because of this crisis.

 

References

[Associated Press]. (2010, February 24). Toyota CEO apologizes for recall, accidents. [Video File]. Available from https://www.youtube.com/watch?v=OIHgB6GHTwQ.

Chen, Y., Ganesan, S., & Liu, Y. (2009). Does a firm’s product-recall strategy affect its financial value? An examination of strategic alternatives during product-harm crises. Journal of Marketing, 73(6), 214–226. doi:10.1509/jmkg.73.6.214

Cleeren, K., van Heerde, H., & Dekimpe, M. (2013). Rising from the ashes: How brand and categories can overcome product-harm crises. Journal of Marketing, 77(2), 58-77. Retrieved from http://www.ama.org/

Flaim, K. B. (2007). How Toyota became #1: Leadership lessons from the world’s greatest car company. Fast Company, 12, 41-41.

Ma, B., Zhang, L., Wang, G., & Fei, L. (2014). The impact of a product-harm crisis on customer perceived value. International Journal of Market Research, 56(3), 341-366. doi: 10.2501/ijmr-2014-023

Rajasekera, J. (2013). Challenges to Toyota caused by recall problems, social networks and digitization. Asian Academy of Management Journal, 18(1), 1-17. Retrieved from http://web.usm.my/aamj/