Toyota Recall Crisis: Strategic Intelligence and Possible Solutions

This report evaluates the specific business issue faced by Toyota due to the recall crisis and suggests possible solutions. It analyzes the impact of the recall crisis, initiatives taken by Toyota to overcome the issue, and reasons for recalling manufactured cars. The report also provides recommendations for Toyota to regain customer trust and strengthen its image.

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EXECUTIVE SUMMARY
Worldwide, Toyota Motors Corporation is seen as one of the largest automakers, but in the
mid of 2010, reputation of company was affected by recalling millions of cars after the
problems occur from the means of break, floor mats and acceleration pedals issues of the
cars. By considering this aspect, the present study aims to evaluate specific business issue
faced by Toyota by considering their possible solutions. Study shows that this issue had
significantly affected the overall image of the company. Further, to cope up with this,
company is required to comply with the recommended strategies.

TABLE OF CONTENTS
Introduction................................................................................................................................1
Strategic intelligence: Case study of Toyota..............................................................................1
Overview and fact on the recall crisis....................................................................................1
The issue of recall in different countries................................................................................2
Impact of the recall crisis.......................................................................................................2
Initiatives were taken by Toyota to overcome the recall crisis issue.....................................3
Reasons for recalling manufactured cars...............................................................................4
Conclusion..................................................................................................................................5
Recommendations......................................................................................................................5
References..................................................................................................................................8

INTRODUCTION
Toyota, a Japan-based automobile manufacturer and selling company are well known for it's
in brand name and quality in the automobile industry. At present, the company is facing
significant issues because of its speeding issues, and same is putting the lives of drivers at
threat (Camuffo and Wilhelm, 2016). Moreover, such recalls stopped the progress of the
company and direct Toyota towards the stoppage of sales and on the manufacturing of its
eight popular models. By considering this aspect, the present report aims at critically
analysing the specific business issue faced by Toyota, i.e. recall crises while clarifying
various aspects of strategic intelligence. The possible resolution of such issue is also quoted
at the end of the report.
STRATEGIC INTELLIGENCE: CASE STUDY OF TOYOTA
Overview and fact on the recall crisis
In the present era, Toyota is one of the largest automobile industry in terms of selling high-
quality products and creating modern and innovative products in the supply chain and in the
production process of the company. Therefore, the approach of Toyota is only winning
towards the supply chain management and manufacturing to another company; it includes
automotive industry to follow the philosophical and operational approaches towards
manufacturing and others in various types of industries (Greto, Schotter and Teagarden,
2010). Nevertheless, from the past few years, the company faces so many issues related to the
quality of the product, and in some incidents, it shows as results in a mass product recall. In
2010, the worst incident was at that time when the company ought to recall its 8.5 million
vehicles at a worldwide level; some major issues are causing for the company from damaging
the brand and PR perspective (Campbell, 2017).
By now, Toyota Company is affected by the recalls, and that is the major reason why
business profitability gets influenced. For example, On February 2, the corporation has built a
state in which a 16% decline in sales is reported which is 10-year low of 98,796 vehicles.
Furthermore, simultaneously, sales of General Motors’ increased by 14% and of Ford’s were
up 25% (Wharton, 2018).
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The issue of recall in different countries
Toyota nationally started Safety Recall action that is directly associated with the Driver's
dual-stage airbag inflators which were held in RAV4 vehicles of 2004 – 2005 models. This is
available only in the Toyota model inside the US and its territories in which it involves
driver’s airbag inflators. Around 2.4 million vehicles are recalled globally by the automaker
and the reason behind this is a problem wherein, there is a restriction in the entry of fail-safe
driving mode as according to their plan, and it may cause the loss of stall and influence of
vehicles. Approximately 807,000 out of 2.4 million vehicles are of United States. While the
speed of such vehicles is high, then it shows the results in a crash. Mainly 2010-2014 model
year Toyota Prius, as well as 2012-214 Prius v vehicles, are affected by the recall crisis
(Wral.com, 2018).
The 2018-2019 Sequoia and Tundra vehicles and 2019 Avalon vehicles are entails in the
second recall. In the US, approximately 168,000 vehicles are sold that are affected by recall
crisis, and this is because of the programming problem inside airbag ECU (electronic control
unit), for using detect crashes it might be put in use of one or more than one of sensors, it
may be caused the side and curtain sheltered airbags as well as knee and front airbags to do
not deploy as it proposed.
There was an earlier recall in 2014 and 2015, and this recall was also affected by the earlier
one, however, at that time, this problem was not addressed. The software will be updated by
Toyota in the direction of fixing the problem at charging without any cost to the customers.
The Toyota Company intended to inform the affected customers at that time when the update
is completed. The Toyota Australia contacts the owners of affected vehicles to give the
information about this recall campaign (Castlemaine Toyota, 2018).
Impact of the recall crisis
As the recalls were kept growing, sales fall and which results in negatively affected
company’s reputation in the worldwide automotive industry. Market analyst started to put the
question on Toyota’s renowned quality and a further sense that due to recalls a major failure
has been faced by the company. As Toyota keep on struggling with the production and
marketing issues that are associated with the recall, and on in spite this also dealing with legal
and political issues (Fan, Geddes and Flory, 2013). Besides lawsuits filed by persons who
claim the damages that has been occurred through Toyota merchandise, the corporation also
faces some class-action suits connected to the unexpected increase of rate. Moreover, public
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relation expertise of Toyota’s does not match its strengths as a producer. Even though there
were various slippages in its quality performance, besides that Toyota carries on to win
additional top quality positions than some other automaker, as well as its past performance on
recalls is as well strong. The company will suffer more damage to its reputation if the
corporation discloses additional problems connected with acceleration. To deal with the
recent crisis, the major problem from a PR perspective is an extreme obsession through
quality. By providing products, Toyota increased its brand in the market and such products
are of best quality as compare to the competitor products (MacKenzie and Evans, 2010). On
the other hand the obsession with quality in the organization which increases towards culture
at where the poor quality connects with shame inside the organizational culture. By the
argument on such events, that shows the requirement of recall that affects the product of
organizational culture, that are not included the junior members towards flag problems that
are beginning in the process. This argument increases towards a Toyota’s PR problem, so the
company is currently seen inside a reactive position relatively then proactive (Choi and Lee,
2018).
Initiatives were taken by Toyota to overcome the recall crisis issue
Just after the recalls phase, Toyota has directed towards the crisis management mode and
decided to solve the accelerator problem. Different steps towards the crisis management have
been taken by the company to get back to the trust of clientele and re-establish its image as an
excellence automaker and provider. In the process of crises management, Toyota positioned
ads in print and television media, concerned executives and utilised social media platforms to
deal with their consumers (Bowen and Zheng, 2015). At the time of transforming its
company culture in the process, Toyota came up with the creative internal communications
ways out. In the current years, almost 30,000 or more workers of Toyota Company have
mutually made efforts to Reconstruct shaky morale, promote camaraderie and done what is
essential for assured profitability. Toyota is well-known for its supportive relations with
dealers that not just only take into consideration cost, on the other hand, is as well encourage
both sides to work mutually to make a innovate better motor vehicle (Bowen and Zheng,
2015). The dealer of the gas pedals to facilitate the focus of the recall, CTS Corp. of Elkhart,
Indiana, is adamant their parts, which were produced in Canada, have contributed for
Toyota’s design specifications.
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In current years, the growth of the company is exceeding, and moreover, it had begun a
program with the objective to make a reduction in cost by associating with the suppliers,
which is known as Construction of Cost Competitiveness in the 21st Century, or CCC21.
They further made people understand that Toyota and all important producers were gradually
moving in the direction of utilising more practical or digital prototype, instead of physical
ones, to match with the developing phase. The mixture of an abbreviated product expansion
cycle, downsizing cost initiatives have determined on component design and digital because
it was divergent to physical testing which could have been an issue in the acceleration
difficulty (Liker and Ogden, 2011).
Reasons for recalling manufactured cars
The company had two major reasons for recalling manufactured cars. Initial, is producers of
the car are using the identical mechanism and raised area across various diverse models with
the intention of gaining scale and cost benefits (Andrews, Simon, Tian and Zhao, 2011). They
declared, if one part is bad, then the number of motor vehicle pretentious will be much bigger
than in the earlier period. The top cause of recalls in Japan was Fujimoto added the parts
commonality. As per the analysis of the government “Carryover parts are quality-proven as
individual components,” they announced, but in case if they are utilised in a wide range of the
dissimilar motor vehicle, they might turn out to be the reason of quality problems. And it can
be proved as a double-edged sword (Hsu and Lawrence, 2016).
The second major issue that contributes towards the large recalls in the future as an
increasing level of complexity in cars. Automobiles used to be mainly automatic devices, but
at present, they are too ruled by several complicated electronics overlay on top of traditional
technicalities. It was further observed that it is not always a happy relation among electronics
as well as mechanical systems. Moreover, it is said that security and dependability might
eventually be enhanced with the expansion of an electric car, as the level of incorporation
among electronic systems and mechanical will be compact (Austen-Smith, Diermeier, Zemel,
Diermeier and Merkley, 2017).
Majority of issues are arrived because of the fault of third-party dealers, for instance, because
of the fault of Takata airbag, the cars of Toyota have been recalled for the subsequent time.
This has been sent with a letter to the customers that previous corrections were not done in
proper manner. For context, there are mainly two brands that are affected by the global
Takata recall issue, and such brands are Toyota and Lexus (Choi and Chung, 2013). From
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those numbers, Toyota approximately replaced 416,000 airbags (i.e. approximately 71% of
their affected cars). However, from 48,000 out of these 416,000 customers get the notice of
second recall (i.e. approximately 11%). The second recall is associated with the chances that
wrongly formfitting passenger front airbags and risk has been imposed to drivers if it
deployed, because of the chances that the airbags are not completely blow up. Through
original Takata airbag recall, influences across more than 4 million Australian cars across a
number of brands, then it is edifying to plan that what the real experience of recalling so
many times (Evans and MacKenzie, 2010).
CONCLUSION
In summary, it can be concluded that Toyota’s PR movement has, on the whole, is one of
later achievements, although, primarily they have experienced a slow response and
breakdown to act in reply straight away to the matter. Afterwards, management of the
campaign might seem as successful, the campaign on the whole move violently work towards
getting over the company’s initially slow response. Important experience from the Toyota
company crisis management will definitely be the value of a set reply, previous to a crisis
happens. In the process, the importance of quick initial response and the improved
coordination of response on a worldwide scale can be the deciding element. Besides that, one
might believe that for Toyota Company, one of the important knowledge is the value of the
meeting of outside agencies as it is different to trying to handle all PR performance “in-
house”.
RECOMMENDATIONS
During the recall, the Toyota must design a system or a way in which dealers and associates
can answer customer questions with expedite information that would further help in sharing
details in a public way and gaining their support and trust (Christopher, 2016). The new step
can be creating channel have with two to three stories through irritable headlines and with
that, there must be three to four important points for trader and associates to converse with
friends, family, and Toyota customers regarding the issues that are connected to Toyota .
The other actual option is that Toyota will obtain this chance to show its well-known skill to
concentrate intensively on exposed trouble, to find to its root cause, and to resolve it
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enduringly. Thus, this step will strengthen its image because a corporation that is competent
of nonstop learning so as to meet consumer desires.
The recall disaster can be determined by making sure that consumers’ safety was at risk,
therefore, Toyota and team must well know that they have to converse quickly with a
speedy approval procedure. Moreover, Recall will not direct the company towards change of
its well-known lean manufacture system, for the reason that it “runs so deep in the culture of
Toyota and will be to be very victorious and also efficient.” even though Toyota is in the
middle of a “public relations catastrophe,” therefore, it is probable to get well more rapidly
than any other automakers in the similar circumstances might seem to foresee. However, it
could be predictable that Toyota has to obtain throughout this with a damaged status. But as
the company have provided great cars for an immense price for 50 years, therefore they have
proved themselves a much better platform for re-establish the lustre of their status because
the platform is very strong to commence with.
Apart from the manufacturing and mechanical issues, Toyota is also dealing with the major
marketing challenges. For balancing the position in the market, Toyota needs to make a grand
gesture. It is recommended that the company must contact proprietor personally for getting
them within dealerships for maintenance, and after that recompense the damaged once, in
some way. It can be possible by offering a refund for one more free service or any facility
(Mena, Humphries and Choi, 2013). Providing direct cash for a new purchase can be seen as
too self-serving, and instantly cash return would move towards across as “cold,” he remarks.
They should do a little warmer, and something that shows helpful which will be recovered as
they believe, other than that window is closing. Therefore it is important for them to do
something large and quick.”
Toyota must concentrate on the fewer brands rather than producing all models till the
problem of recall process gets resolved. In the next upcoming year, Company can launch the
limited version by slim down the manufacturing (Ross, 2016). Till the company acquire the
same positions, it can cut back the production line and concentrate more on its selling brands.
Rather than trading some brands in this kind of circumstances it can slim down the offshore
process and concentrate more on the good going marketplace.
To manage the recall process for problematic models, Corporation must produce adequate
quantity of brake pedal element and Floor mat accessories (Wisner, Tan and Leong, 2014).
They have to deal out in manner that business could retrieve the replaced part and they might
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mend and use them again to decrease the cost, extra attention must be made by the company
on quality control, letter should be sent to the cardholders and provide them appointment to
check their cars at the service centre of Toyota. It should employ trained workers in some
sectors they can make the procedure quick.
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