Effective Crisis Management - Toyota - Case Study Example

Toyota 2017 Vehicle Recall Name Institution Course Date Toyota 2017 Vehicle Recall Introduction Effective crisis management is important for the success of a company. Today’s businesses are exposes to many forms of crisis both natural and man-made and these calls for effective crisis management (Bernstein 2011, p. 6). Indeed, the last few years have been characterized by many business incidents which have hard adverse impacts on companies across industries. Product recalls, in particular, have become a big problem for businesses and manufacturers. Whenever a company makers a product recall, this can have an adverse effect not only on the company reputation, but also on the bottom line. Toyota Motor corporate is one of the automakers that have made several vehicle recalls in recent years, the most recent just witnessed in March 2017 (Atiyeh & Blackwell 2017). Toyota is a Japanese multinational automaker incorporated in 1937 by Kiichiro Toyoda. In 2016, Toyota was the world’s second largest automaker after Volkswagen. This essay will analyze the 2017 Toyota vehicle recall with a focus on how the automaker handled the issue. What Happened Toyota has had many incidences of vehicle recalls and the latest just happened in March 2017 after the automaker recalled about 2.9 million vehicles that had been released to the market (Reuters 2017). The recall was triggered by the fact that the recalled vehicles had been fitted with faulty airbag inflators manufactured by Takata. It is alleged that the airbag inflators have the potential of exploding when exposed to hot conditions for a long period. The recall by Toyota was prompted by information that at least 16 people have died in the United States with all the deaths linked to explosion of Takata airbag inflators. The airbag inflators are believed to contain ammonium nitrate chemical compound that if not used with a drying agent can result in deadly explosion. For this reason, the global transport authorizes ordered that more than 100 million vehicles that had this airbag inflator from Takata be withdrawn from the market. As for Toyota, about 1.16 million cars were recalled from the Middle East, Occania and other small markets, which approximately 750,000 vehicles were recalled in Japan (Reuters 2017). Nonetheless, North America, which is the automaker’s biggest market, was exempted from the recall. Analysis of the Recall Toyota has had to recall its cars several times and this raises a lot of questions as pertain to how well it is prepared to handle crisis. Although Toyota’s current recall of its vehicles was done after the global transport authority ordered that all vehicles fitted with Takata airbag inflator be recalled, Reuters (2017) indicates that the automaker has managed to respond effectively to the current crisis. First, Toyota’s spokespersons have filled the media with information and massages of assurance that everything is under control and that all vehicles that are affected will be removed from the market to avoid exposing customers to risk of injuries and even death should the inflators explore. The automaker’s public relations (PR) has also been working round the clock tweeting and blogging its customers in order to fill the information vacuum by ensuring that all its customers from across the globe to understand the vehicle models that were affected by the Takata airbag inflator so that they can release these cars back to Toyota to avoiding exposing themselves to risk (Tajitsu 2017). Moreover, Toyota has responded effectively to the recall by flooding its website with a barrage of information about the recall that stakeholders might want to know while its call center has also been busy round the clock handling customer inquiries about the recall. The recall of the affected vehicles indicates that Toyota is an ethical company that is concerned about the welfare and good of its stakeholders. Ethics has become an area of increased attention because of the rising cases of unethical conducts by companies (Mill 2017, p. 14). However, analysis of how Toyota has responded to this recent crisis demonstrate that the company was concerned about its customers by ensuring that the recall is effectively communicated to all to avoid causing harm. The automakers response is in tandem with utilitarianism theory that emphasizes on the need to do the greatest good for the greatest number (Mill 2017, p. 19). Effectively communicating the flaws to the close to 3 million customers who had bout its affected cars ensured that no customer become exposed to the risk of explosion and death that could have occurred if it failed to recall the vehicles as directed in pursuit of profits. Despite the successfully communicating the recall to its stakeholders since it occurred, a critical analysis of the incident indicates that Toyota is not likely to come out of this crisis in the long-term not unless it enhances its approach to risk management. Indeed, the key to Toyota’s latest recall lies in what occurred before the crisis happened and not how it has responded to the crisis (Tajitsu 2017). The fundamental problem of Toyota lies in its perceived delay in spotting and resolving the situation before it occurred. Regardless of the information that Toyota is currently providing about the recall, analysis of the incident indicates that the automaker like the majority in the market ignored the problem until it was forced by the global transport authorizes to recall the affected vehicles (Reuters 2017). In this respect, it emerges that corporate denial has been prevalent at Toyota that appeared to have followed the famous Japanese proverb that goes “If it stinks, put a lid on it.” Goel (2009, p. 31) argues that effective crisis management requires that an organization acts before the problem blow out of control. According to the Institute for Public Relations, effective crisis management of a crisis requires putting in place a proper crisis management plan to prevent crisis from happening and ensures faster and accurate response in the event that an unforeseen event happens (Coombs 2014). Indeed, there are many big potential crises that have been spotted and addressed before they got out of hand in what Bernstein (2011, p. 62) call crisis management at its best. However, for this to happen, a company needs to have an organizational culture that is keen on potential crises, having open communication channels from employees to management and the willingness to resolve distasteful truths (Goel 2009, p. 77). Unfortunately, looking at how Toyota handles the recall, it can be seen that the automaker had a culture that is ill-equipped to identify and address crisis early enough. This is because this is not the first recall that Toyota made resulting from the use of Takata airbag inflators. Instead, Toyota had made such recalls over the use of these inflators. Unfortunately, the company continued to use Takata airbag inflators knowing all the risks involved (Reuters 2017). Accordingly, the incident indicates that Toyota has a culture of obsession with quality. This implies that, Toyota is quiet obsessed with quality to the extent that anything less than perfection is considered a shame and embarrassment (Atiyeh &Blackwell 2017). For this reason, problems with quality are considered inconceivable by Toyota, resulting in denial. The other cultural aspect that emerges from the way Toyota has been handling the recall is the hierarchical management approach adopted by the automaker and lack of open communication. In a hierarchical management structure, employees at the bottom of the hierarchy who are best placed to spot problems at their incubation stage are not able to single out flaws (Atiyeh &Blackwell 2017). For this reason, any problems or flows goes unresolved and only get recognized when a crisis has already occurred. This is indicated by the fact that despite the employees being aware that the airbags used in the vehicle production are from Takata, which exposes customers to risk, being that such recalls had been made in the past, the employees could not raise their concern over the use of Takata inflators because of the hierarchical nature of Toyota’s organizational structure where information is expected to flow from the top to bottom. In other words, at Toyota, employees have no much say as far as decision making is concerned. Conclusion Toyota’s March 2017 recall of its over 2.9 million cars affected by Takata airbag inflators is one among the major product recalls that Toyota has made in recent years. The recall affected vehicles it had sold in China, Japan, and Oceania among other markets. From the analysis of the crisis, it emerges that Toyota managed to effectively communicate the crisis by ensuring that all the customers and its stakeholders are informed of the recall, and the affected vehicles. Nonetheless, to avoid a repeat of such recalls that have become synonymous with the automaker, Toyota needs to change its culture towards risk and quality, and ensure that proper and effective crisis management plans are in place to prevent crisis or repost quickly should a crisis occur. References Atiyeh, C., &Blackwell, R 2017, Massive Takata airbag recall: Everything you need to know, including full list of affected vehicles. July 11, viewed 15 July http://blog.caranddriver.com/massive-takata-airbag-recall-everything-you-need-to-know-including-full-list-of-affected-vehicles/ Bernstein, J 2011, Manager's guide to crisis management. McGraw Hill Professional, New York, NY. Coombs, W. T 2014, Crisis management and communications (Updated September 2014), The Institute for Public Relations, viewed 12 July 2017 http://www.instituteforpr.org/crisis-management-communications/ Goel, S 2009, Crisis management: Master the skills to prevent disasters. Global India Publications, Delhi. Reuters 2017, Toyota recalls 2.9 million vehicles globally over airbags. CNBC March 30, viewed 12 July 2017 http://www.cnbc.com/2017/03/30/toyota-recalls-vehicles-globally-over-airbags.html Stuart Mill, J 2017, Utilitarianism. Coventry House Publishing, Coventry. Tajitsu, N 2017, Toyota recalls three million cars worldwide after exploding Takata airbags linked to 16 deaths. Independent March 30, viewed 12 July 2017 http://www.independent.co.uk/news/business/news/toyota-recall-3-million-cars-types-worldwide-airbags-explode-16-people-killed-a7657386.html Read More