Toyota Recall Analysis: Problem Solving and Strategic Approaches

This report analyzes the Toyota recall crisis, examining the problems faced by the company, the approaches used to solve them, and the impact on stakeholders. The report begins with an introduction to the Toyota Motor Corporation, outlining the nature of the recall, which involved faulty acceleration pedals and floor mats leading to accidents and fatalities. It then discusses the approaches Toyota implemented, including timing and preparation, communication strategies, and leadership decisions, to address the crisis. A critical analysis of these approaches is provided, highlighting both strengths and weaknesses. The report also suggests alternative approaches for improvement, such as cause-mapping and non-rational decision-making models, to enhance crisis management. Finally, the report includes a stock market analysis, examining the reactions of investments and share price trends during the crisis, and concludes with recommendations for future crisis management strategies.

Toyota Recalls 1
TOYOTA RECALLS
By (Student’s Name)
Professor’s Name
College
Course
Date

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TOYOTA RECALLS
Table of Contents
1.0 Introduction................................................................................................................................3
1.1. Purpose of Report..................................................................................................................3
2.0. Problem Solving by the Company............................................................................................7
2.1 Approaches and Methods Implemented to Solve the Problem..............................................7
2.2 Critical Analysis of Approaches Used by Toyota to Solve the Problem...............................8
3.0 Suggestions on Other Approaches for Improvement...............................................................10
3.1 Improvements Suggested in the Approach Used.................................................................10
3.2 Other Available Approaches................................................................................................14
3.3. The Best Approach..............................................................................................................15
4.0 Stock Market Analysis.............................................................................................................16
4.1 Reactions of Investments to Problem and Solution.............................................................16
4.2 Trend Analysis of Share Price during the Period.................................................................16
5.0 Conclusion...............................................................................................................................18
6.0 Recommendations....................................................................................................................19
7.0 References................................................................................................................................20

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1.0 Introduction
1.1. Purpose of Report
The major purpose of the report is to analyze the main problem (Toyota Recall) that
Toyota has faced and how the Company solved it in the recent past. This report further critically
examines the approach that Toyota used to solve its recall problem and give alternative best
recommendations. The report shall comprise of the following sections:
 Analyze Toyota recall issue
 Discussing approaches employed by Toyota to tackle this issue
 Critically analyzing methods utilized by Toyota
 Proposing alternate approaches that Toyota might utilize
 Applying recommended alternatives to Toyota recall problem and inspecting its
reliabilities
 Provide additional desirable recommendations
1.2 Summary of Company, Problem & Approach Used to Solve
1.2.1 The Company
Toyota Motor Corporation (TM) was established in year 1937 by Toyoda Kiichiro and
exported its 1st Japanese passenger vehicle “Crown” to the US. TM remains worldwide principal
automaker by volume alongside the pioneer of the Japanese auto industry. The name of the
Company originated from the family name of the initiator called Toyoda Kiichiro. In respect to
TM major operations, it is headquartered in Toyota City located in Aichi Prefecture, Japan. TM
has encountered several challenges in its almost eighty-year history. In 1957, TM entered the US
marketplace with the 1st export of Japanese passenger vehicle to US. TM produces and sells
vehicles alongside spare parts internationally. The firm presently operates the business globally

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with 53 overseas manufacturing companies in 28 nations and regions. The TM cars get solved in
over 170 nations alongside regions. In terms of stocks and ADR information, TM was ranked
eleventh on Forbe’s list of the global biggest companies in the year 2015. Such ranking stood
premised on a composite score of market value, assets, profits and revenues of a range of firms.
TM is listed on various Japanese stock exchanges including the Tokyo Stock Exchange being the
most remarkable one. In the United States, TM’s ADR (American Depository Receipts) trades
on the NY Stock Exchange. The figure below (from Toyota website) gives an overview of
Toyota Motors Corporation.
1.2.2 The Problem
The main problem focused in this paper is the Toyota recall that occurred in the year
2009. Toyota had encountered fault in its automobiles manufacture that had certain vehicles
having an erroneous acceleration peddle positioning with the front side floor mat of the driver.
The 1st recall stood made in 02/11/2009 the assist of several traffic enforcement bodies. This

Toyota Recalls 5
incursion triggered various vehicles to encounter unanticipated acceleration as a result of the
fault in mechanical sticking of acceleration pedal (Austen-Smith et al. 2017). The enforcement
was performed utilizing such organization as the US national highway traffic safety
administration. The Company recalls were due to surged production of defective vehicles which
posed threats to the buyers’ safety and desired vehicle standards.
Looking back to the years leading up to recall the vehicles sold by Toyota had to suffer a
serious blow for manufacturing faulty acceleration system to millions of cars. This crisis was
one of the most significant event face by Toyota within the organizations history. They were
liable to pay a huge sum of federal fine to the US. The tragedy can be explained below:
 Toyota recalls in 2010, it was one of the largest cars recall globally.
 the Cause for the recall was ‘the trapped accelerator pedal’
 Unexpectedly accelerating vehicles without control causig many accidents to take place
 Local authorities and Toyota reports showcased the Company might have installed
incorrect floor mats hence meddling the acceleration pedal
 This affected the Toyota brand name and the image Japanese made world wide
 Faced financial problems and economic downturn
 Shares plummeted 20 percent coupled with various job loss
 The company sales decreased and had to shut down 6 production units.
 Toyota never considered complains of customer and acted extremely slowly despite
safety complaints making people suspicious that Company knew about the defective cars
as early as 2009 Sept and deliberately waited up to 2010 to act.
Table 1 – Toyota crisis events

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1.2.3 Impacted Stakeholders of Toyota Recalls
impact on
stakeholders
employee
Customer
Shareholders
community
Government
Toyota
Dealers

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 Community: The community was negatively imapcted by the accidents and deaths of the
people due to the defective vehicles.
 Customers- Life fatalities, loss of investments on vechile, brand trust
 Employee – loss of jobs, Downturn of saleries, Trust breakdown of management relations
 Government – The government was negatively impacted as a result of the lost taxation
revenue arising from the loss of sales and reduced share prices.
 Shareholders-The shareholders were negatively affected due to the lowest prices of
shares which meant least dividend payout
 Toyota dealers /distrib-The dealers and distributors were significnatly negatively affected
by the recalls as a result of low sales and increased expenses following the recalls as they
lost not only revenue but also income.
2.0. Problem Solving by the Company
2.1 Approaches and Methods Implemented to Solve the Problem
Timing and preparation: The issues of recalls due to defective cars have a potential of
being a widespread concern in case of no urgent address from the start. Evading and expecting
business crises needs various steps including threat recognition, and prioritizing, resource
mobilization. Toyota must adhere to such three main phases to effective management of crises.
Toyota never tackled the recall problem at the start in the year 2007 and hence missed the
opportunity for damage reduction. Tackling the challenge at the beginning remains efficient and
moral. Toyota only emphasized on clients without addressing the needs of all stakeholders. The
management of stakeholders and communication lacked the desired preferences. The Company
ushered a novel process of handling crises through SMART business framework to rapidly speak

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to client needs. The implementation of the novel process stood extremely efficient though its
introduction delayed.
Communication: Whereas such activities in the Company trigger a difference in the
globe when dealing with dynamics alongside restricting long and short term crisis costs, the
hardly contribute to explanation of the causes and nature of crises. The manager for
environmental, quality and safety communication called Brian Lyons in Toyota was delegated to
respond to media queries. Toyota further beefed up the virtual newsroom that logged nearly one-
fifty thousand new visits a day at climax of crisis. Toyota further tapped roster agencies
including Powel GolinHarris Tate, Robison Lerer along with Montgomergy for crisis navigation.
Toyota hired Glove Park Group alongside Quinn Gillespie Sc Association when it encountered
queries from Congress Managing as well as distributing info, upholding the image of the
organization, media messages and image control as well as strategically speaking to relations
with extrinsic and intrinsic stakeholders.
Leadership: Certain individuals even took to calling Akio Toyoda “no-show” and it
remained to be observed how adversely such a move would hurt the standing of Toyota.
Nonetheless, Toyoda’s obvious reluctance to act showed a poor leadership example. Jim Lentz,
an American sales executive of Toyota, became the public face of the Company in the course of
recall. Toyota family played a fundamental role in the past in maintaining the image of the
company’s quality as well as reliability that make their silence increasingly ironical.
2.2 Critical Analysis of Approaches Used by Toyota to Solve the Problem
Toyota management of pre-crisis Phase:
The Toyota CSR and crisis history

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1) The Toyota cars customers might effortlessly be acknowledges alongside its
characteristic features (“fuel efficiency” and “economical” and “innovative”) setting it
unique from remaining American and European brands.
2) This impression stays aligned to Toyota value-offering which the firm has tried
delivering via its brand-image established over the periods.
3) The consumer remained attracted to those features leading to the main drivers of
choosing Toyota models over others brands.
Crisis prevention
1) The company had no prevention plan as they did not accept the fact faulty accelerator
 After a Lexus accident Toyota was blamed as a reason for fatality
 NHTSA stated investigation and gave warning
2) Toyota did not want to accept the customer feedback
3) Several legal calls were made upon Toyota
4) Neglected and continued with same brake pedals
Preparation for the Crisis
1. The Company has been recalling vehicles for the three years in a row besides other
extensive recall series
2. The president of Toyota flew to the US Japan to give testimony before Congress
3. They were not sure how to handle this problem exactly
Toyota management on the response Phase
The initial response
1) The company did not follow the classic apologia route, it exhibited element of strategies

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2) Toyota was not reacting and was ignoring initial reports which mentioned the problems
associated with its other brands
3) After two weeks of delay without Toyotas inaction was pilloried in international media
4) Toyota CEO AKIO TOYADO, in a press conference and subsequently in testimony in
congress apologised for and acknowledged four precious lives had been lost
Reputational repair and Behavioural intentions
1) Dealerships remain operational for extended hours, TV campaigns reiterated firm quality
performance record of Toyota, and outright apologies blended with devotion to fixing
things remain certain damage control approaches undertaken.
2) The Company employed the use of every form of media for communicating the actions
and restored audience trusts.
3) Utilized ads for Toyota advantages alongside humanized organization emphasizing on
the value of present consumer and effective utilization of a range of cars to show side of
Toyota stories
Toyota management of the post crisis management
1) At the macro-cadre, Toyota is anticipated to suffer certain loses in reputational capital for
these recalls.
2) Enables its staff members to directly communicate with its stakeholders.
3.0 Suggestions on Other Approaches for Improvement
3.1 Improvements Suggested in the Approach Used
Overall Approach (Non-Rational Method): The acknowledgment that non-rational
decision-making makes it increasingly difficult for individuals to arrive at informed choices via

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assumption that decision-making process lacks relevant satisfactory data and that decision-
making is never certain. Another essential lesson is that the need for considering participants,
problems, solutions and choice opportunities at all times when making a decision. This is based
on the realization that incomplete information culminates in misleading decision-making
process. Consequently, for Toyota to make right and informed decisions and the need of
sufficient info, cause-mapping method of root causes analysis remain increasingly helpful in the
identification of the crisis. The Toyota should thus use the cause-mapping as shown below:

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Cause Map for recall
The above cause-map technique does not employ any specific terminology only
premised on “root” as a system of causes and never a singular causes of the Toyota recalls
problem. As seen in the above causes map figure, it helps identify root cause to recalls as a result
of Toyota’s failure which helps the firm to identify the best strategies to solve the problem.
Toyota’s Leadership: Toyota requires an improvement in its crisis leadership such that
it has a leader who not solely merely saying correct messages to correct stakeholders, but further
Customer
Service Goal
Impacted
Replacement of
accelerator
pedals, floor mats
At least 100
NHTSA
complaints
At least 5
fatalities
At least 17
vehicle
crashes
Recall of
4.26
million
vehicles
Loss of
control of
vehicle
No
instruct
Brake
ineffect
Sudde
n burst
Requir
es
Malfun
ction in
Accele
rator
Preven
t
Floor
mat
Unable
to
quickly
turn off
ignition
(some
models
)
Safety Goal
Impacted
Safety Goal
Impacted
Property Goal
Impacted
Production
Goal Impacted

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carries organization’s repute at the highest level in the course of the crisis. This will help the
Toyota crisis leadership to know the essential values to carry while responding to thought-
provoking scenario because it will be driven by values whereby response to crisis expands to its
public relations. Therefore, it might been effective for Toyota to embrace a transformational
leadership style to benefit from its immense pros to stakeholders and organizations (Taneja,
Pryor and Sewell 2012). This would have made Toyota develop desirable change in its staff with
the main aim of transforming supporters to desirable leaders who carry four major behavioral
constituents which include idealized impact, inspirational motivation, intellectual stimulation as
well as individualized considerations. Such leaders would have empowered followers through
the delegation of responsibilities, promotion of independent thoughts as well as self-awareness
alongside challenge of status (Piotrowski and Guyette Jr 2010). Thus, Toyota would have had
increasingly effective workforce, enhanced innovativeness as well as committed workers. These
leaders would have ensured effective guidance for followers to adhere logic construction process
in the case of crises achieved via proper development of convincing vision emphasizing the
surpassing self-interest for benefit of the entire company.
Crisis Communication: The Toyota needed to have improved its communication to
encompass trustworthiness, frankness and sincerity in the course of this recall crisis. This
because a strategy to evade responsibility acceptance can effortlessly be influenced by regulatory
measured enforced by governmental agencies and hence tainting the reputation alongside image
of the organization. Toyota needs to designate one person to act as its primary spokesperson in
terms of making official statements and response to media questions in the entire crisis period.
Besides, Toyota needed to have had a backup spokesperson alongside crisis communication
specialist endowed with comfort in before the camera and with news reporters. Such a person

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needs to remain skillful in handling media as well as fluently speak to guarantee the public
capability of understanding and interpreting the messages conveyed correctly. The spokesperson
must also be knowledgeable regarding Toyota and equipped with crisis it is addressing to
develop trustworthiness with media whereas remaining self-confident with readers and staying
calm even in stressful scenarios (Liu, Shankar and Yunm 2017).
3.2 Other Available Approaches
A range techniques and methods remain available for problem-solving and decision-
making and their choice is anchored on how elaborate the problem impact remains. Toyota could
consider 5-Why Model and Six Sigma models in dealing with this crisis.
Other Available Approach Suggestion Outcome
5-Why Model remains a
popular method utilized in
identifying the root causes
analysis of a specific problem
or in case of unclear problem
cause. It has an easy principle
when problem ensures,
recurrently ask WHY at least
five times to hit the root
cause
It remains extremely flexible
and simple method and never
entails segmentation of data,
testing of hypothesis,
regression or even additional
advance statistical tools that
could complicate a case
The implementation of a 5-
Why in Toyota recall issue
might have been opt solution
to its problem. Recurrent
WHY’s would have
culminated in team to
establish the root cause
Six Sigma- This approach
helps improve product,
processes and service of an
In case Toyota had adopted
Six Sigma approach, it would
have identified the
It will result in desired
changes to management as
well as make them

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organization through
comprehension of
fundamental features,
barriers, and limitations and
enables the organization stay
focus towards strategic
direction. It entails growing
need for training and
mentoring
fundamental problem in
incapability of its car
manufacturers to detect
defects in the cars.
comprehend the need for
building strategies and action
on their plan for success.
3.3. The Best Approach
The best method would remain scenario-Based Analysis as it captures a wide area and
can bring lasting solution instead of implementation of provisional solutions that could result in
additional crisis after a short while. This will help the Toyota design given strategy for every
stakeholder. It is also effective approach as it describes multiple features from a specific crisis
and exposes mind to formerly indescribable opportunities and shortcomings that stood long-held
organizational internal beliefs. It further assist in “weak signal” recognition and integrate them
into long-range planning and hence Toyota becomes better prepared to address novel crisis as it
emerges and promote proactive initiatives of leadership. This approach also enhances
communication because it opens a strategic deliberation within Toyota and improve coordination
of functions in the course of scenario process whereby the aims, risks, strategies and
opportunities get shared between stakeholders hence improving decision-making and
organizational learning processes (Johar, Birk and Einwiller 2010). Coming with particular

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strategies for every stakeholder makes Toyota not solely build its reputation but also elevate the
trust amongst the economies and market it serves (Byrd 2012).
4.0 Stock Market Analysis
4.1 Reactions of Investments to Problem and Solution
Initially, investors appears to remain normal as well as never reacted to the crisis much as
they underrated the consequence of the defects and depth of their magnitudes. Following their
recognition of the substance of the defects, the investor started to respond rationally by
tremendously selling shares. Such a rational conduct and actions ensured resulting in the plunge
in share prices that remained persistent for a month. As the recalls and the aftermaths influences
the prices of shares significantly, it enlightens the shareholders and the companies with
awareness for strategy for action regulation in case of another crisis (Kehr and Proctor 2017).
4.2 Trend Analysis of Share Price during the Period
The damage was significant for Toyota in terms of plunge in share prices and sales. The
share prices plunged twenty percent in a month and the global sales dropped nearly twenty
percent. Even though share prices and financial performance of Toyota have since been restored,
it took various years (Chikudate 2019). In the year 2010, the shares of Toyota on the Tokyo
Stock Exchange dropped following the recall of eight million vehicles with alleged defective
accelerator pedals. The analyst indicated the lost sales as well as repairs would cost the Company
two billion dollars. In 2011 January, the Company recalled another 1.70 million vehicles in the
United States, Japan and Europe over the potential fuel systems alongside additional defects. The
share price plunged two percent following the announcement. Another recall in the year 2013,

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October of less than one million vehicles globally with a fault in their air-conditioning cleanser
culminated in a 0.4 percent fall in share price the day following the announcement (Camuffo and
Wilhelm 2016).
The recalls have remained an issue for the Company since 2009. In the year 2013, it was
ruled that no electronic faults in Toyota cars existed and drivers’ errors stood impugned for
acceleration matters. However, the price of share of Toyota had plunged in a month while sales
were also hit by identical percentage which took many years for Toyota to recover (Bowen and
Zheng 2015).
The US’ triggered the plummeting shares of Toyota making the price to hit its lowest
level for ten months on the Tokyo Exchange with ongoing concerns regarding the safety of the
Toyota vehicles (Gao et al. 2015). The global largest carmaker recalled eight million cars
worldwide due to problems with defective accelerator pedals on 7 models (Choi and Chung

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2013). A day following share prices falling 5.7 percent, the prices dropped further 3.50 percent
on the Tokyo Stock Exchange hence hitting lowermost level for ten months (Choi and Lee
2018). The United listed shares ended Wednesday trading downwards six percent or 4.690 cents
to 73.490 cents, and continuing the drops of recent days (Maiorescu 2016). TSE shares lost
nearly 22.0 percent of their value or certain thirty billion dollars, since January 21, when Toyota
declared the recall of about 2.3m cars in United States amid the worries that accelerator pedals
might be jammed. Toyota further called 1.80 million vehicles crossway Europe which included
180865 vehicles in the United States. The 7 models recalled in Europe included iQ,Aygo, Yaris,
Corolla, Auris, Avensis, Verso as well as cover dates of manufacturing dating back to Feb 2005.
In the United States, the recalled models included RAV4, Matrix, Corollas, Avalons, Highlander,
Camrys, Sequoia, Tundra as well as covering dates tracing back to Oct 2005 (Fan, Geddes and
Flory 2013).
5.0 Conclusion
The increased production of cars alongside the risky decisions and negligence of Toyota
has culminated in recall crisis due to defective cars. Even though various stakeholders are
engaged, however, because of the lack of contingency planning along with crisis management,
Toyota stood struggling double crises simultaneously, loss of reputation and recalls. From this
report, it is observed that the lack of crisis management plan existed (Liker and Ogden 2011).
Moreover, in the course of the recall crisis, initial reactions played a key impact on the reputation
of Toyota. Also, Toyota needs to incorporate its stakeholders in key decisions regarding the
management of crisis and the Company must pick up from the crisis to deter and remain
prepared for crisis at all time.

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6.0 Recommendations
Going forward, it remains imperative for Toyota to have a Crisis Management framework
as its management and organization responsibility to deal with every recall crisis to avoid
unnecessary injuries and deaths due to defective cars (Andrews et al. 2011).

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7.0 References
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operational and strategic analysis of the massive recall. Management Research Review, 34(10),
pp.1064-1077.
Austen-Smith, D., Diermeier, D., Zemel, E., Diermeier, D. and Merkley, G., 2017. Unintended
acceleration: Toyota’s recall crisis. Kellogg School of Management Cases, pp.1-16.
Bowen, S.A. and Zheng, Y., 2015. Auto recall crisis, framing, and ethical response: Toyota's
missteps. Public Relations Review, 41(1), pp.40-49.
Byrd, S., 2012. Hi fans! Tell us your story! Incorporating a stewardship-based social media
strategy to maintain brand reputation during a crisis. Corporate Communications: An
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Camuffo, A. and Wilhelm, M., 2016. Complementarities and organizational (Mis) fit: a
retrospective analysis of the Toyota recall crisis. Journal of Organization Design, 5(1), p.4.
Chikudate, N., 2019. Corporate Wrongdoing and Reputational Risk: A Genealogical Analysis of
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product involvement in crisis communication: An experimental study on the Toyota recall
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Choi, J. and Lee, S., 2018. Lessons from a crisis: An analysis of Toyota's handling of the recall
crisis. Journal of Public Affairs, 18(2), p.e1688.
Fan, D., Geddes, D. and Flory, F., 2013. The Toyota recall crisis: Media impact on Toyota's
corporate brand reputation. Corporate Reputation Review, 16(2), pp.99-117.

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Gao, H., Xie, J., Wang, Q. and Wilbur, K.C., 2015. Should ad spending increase or decrease
before a recall announcement? The marketing–finance interface in product-harm crisis
management. Journal of Marketing, 79(5), pp.80-99.
Johar, G.V., Birk, M.M. and Einwiller, S.A., 2010. How to save your brand in the face of
crisis. MIT Sloan Management Review, 51(4), p.57.
Kehr, T.W. and Proctor, M.D., 2017. People Pillars: Re‐structuring the Toyota Production
System (TPS) House Based on Inadequacies Revealed During the Automotive Recall
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Liker, J.K. and Ogden, T., 2011. Toyota under fire. McGraw-Hill Professional.
Liu, Y., Shankar, V. and Yun, W., 2017. Crisis management strategies and the long-term effects
of product recalls on firm value. Journal of Marketing, 81(5), pp.30-48.
Maiorescu, R.D., 2016. Crisis management at General Motors and Toyota: An analysis of
gender-specific communication and media coverage. Public Relations Review, 42(4), pp.556-
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Piotrowski, C. and Guyette Jr, R.W., 2010. Toyota Recall Crisis: Public Attitudes on Leadership
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Taneja, S., Pryor, M. and Sewell, S.M., 2012. „Toyota Recalls: A Strategic Leadership
Perspective‟. International Journal of Business & Public Administration, 9(2), pp.125-140.