Toyota Crisis Management Case Study: Innovation and Sustainable Business Development

Toyota Motor Corporation
A Case Study on Crisis Management
Innovation and Sustainable Business Development
Name
Institution
Date
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Content
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Part 1: Problem....................................................................................................................3
1.1. Background 3
1.2. Problem Definition 3
1.3. Evidence of the Problem 3
Part 2: Benefits....................................................................................................................5
2.1. Benefits to be delivered 5
2.2. Significance of the Benefits 6
Part 3: Strategic Response...................................................................................................7
3.1. Method and Criteria 7
3.2. Strategic Options 7
3.3. Recommended Strategy 8
Part 4: Options Analysis....................................................................................................10
4.1. Options Considered 10
4.2. Stakeholder Identification and Consultation 10
4.3. Social Impact 11
4.4. Environmental Impact 11
4.5. Economic Impact 11
4.6. Overall Evaluation of Socio-economic and Environmental Impacts 11
4.7. Financial Analysis 12
4.8. Risks 12
4.9. Integrated Analysis and option Ranking 12
Part 5: Deliverability of Recommended Solution..............................................................14
5.1. Details of Recommended Solution 14
5.2. Commercial and Financial 14
5.3. Management 14
5.4. Delivery 14
References..........................................................................................................................16
Appendix............................................................................................................................17
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1. Part 1: Problem
1.1. Background
The rate at which technology is changing and advancing has forced many firms around the world
to continuously innovate in order to remain competitive and relevant in the market. The
advancement of technology has been coupled with the changing consumers needs. The consumer
needs have also become dynamic which force company to also offer products that address the
ever-changing needs of the consumers. Currently, consumers prefer brands that make a positive
impact in the world and change people’s lives for the better. The rapid advancement in
technology creates the need for business innovation and brand differentiation (Mainwaring,
2018). Toyota is an example of an organization that combines technology with purpose and
design. The proliferation of hybrid cars has forced many companies to adopt this technology
which is aimed at reducing carbon emission.
1.2. Problem Definition
Toyota Motor Corporation hit headlines in 2009 when a fatal crash was reported to have
happened in the United States. The off-duty highway patrolman while driving a Lexus ES350
with his family were involved in a crush when the car breaks failed due to uncontrollable
acceleration (Mail Foreign Service, 2010). They all died instantly. The most disturbing fact is that
it was not the first time for such an incident to be reported.
1.3. Evidence of the Problem
Brand reputation is an important aspect which companies need to protect at all costs. Any
scandal that may arise can have an adverse impact on the company’s financial performance. The
incident that happened and how the Toyota management responded damaged the company’s
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reputation and this made the company to undergo an economic turmoil during this time. Believed
to be among the top companies with the safest cars, Toyota Corporation faced scrutiny from
different governments, especially from the United States. In response, the company recalled
millions of cars from the United States, UK, and other parts around the world in order to repair
the fault that had been identified. As a result, the company’s stock fall by 15% by January 2010
and by March, the stock valuation fall even further when the company made a worldwide recalls
(McCurry, 2010). As reported by McCurry (2010), the company recorded a loss of $2 billion due
to the recalls and a further $21 billion loss in market share. To add more to the problem, Toyota
faced law suits ad was compelled to compensate the families of the victims. The settlement was
estimated to be about $3.1 billion (Kalb, 2012). The massive recall and the losses incurred is a
clear evidence that Toyota had serious flaw in their manufacturing processes, communication
efficiency and crisis management. The crisis made stakeholders to lose trust and many people
became hesitant to be associated with it. Toyota Corporation recalled several products which
were suspected to have defectives after many years of investigations and concerns from
customers. Considering the fact that the recalls were made after malfunctions and deaths had
been reported, Toyota Corporation seemed to be failing in its mission to attract and retain
customers with high quality products and services and to satisfy their needs in a sustainable
manner. Apart from the losses incurred, the crisis had a potential to drive away potential
investors dur to the unpredictable future of the company. Because of the recalls due to
technology failure and management handling of crisis, Toyota Corporation lost trust which
affected stock price and investor relations.
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2. Part 2: Benefits
2.1. Benefits to be delivered
The Toyota crisis is mainly attributed to management ignorance. Toyota Corporation is believed
to have the most complicated manufacturing systems with quality systems installed. However,
one can just ask himself why such a problem could not be detected early enough to avoid deaths
that were reported. The most hurting part is that the management was too slow to respond to the
crisis. When many customers complained about the issue, the company ignored for many years
until the United States decided to conduct investigation on the problem. That’s when the
company decided to respond.
The company needs a crisis management plan that will enable them to effectively handle crisis to
avoid damage of the brand reputation. An effective crisis management plan will enable the
company to protect its brand image and avoid unpredicted losses and loss of market share. The
company will also need an effective quality auditing plan that will enable the technical team to
identify problems before the cars reach the consumers.
It is imperative to note that corporate reputation is the key factor of corporate branding.
Maintaining corporate reputation is essential to the organisation and its stakeholders. The value
of a brand is determined not only by its financial performance but also the intangible assets such
as brand image and reputation. A positive reputation can influence potential customers and
investors to the product or service and can also attract customers from competitors. This will, in
turn, improve financial performance and enable the company to gain a competitive edge against
its rivals. Improving the quality check systems will also prevent accidents and loss of innocent
lives. The crisis management strategy will, therefore, enable the company to maintain its
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