The Toyota Global Recall Crisis - Case Study Example

Business: Name: Institution: Date: Case Study: The Toyota Global Recall Crisis Contents References 9 1. Introduction Discussion of concepts and theories used to analyze the case Car accidents are incidents that happen on a day to day life, the majority of these accidents are however caused by negligence on the part of the drivers. Despite the reasons for the accidents, the guarantee of the various vehicles to ensure the safety of its users during and without accidents. Accounting scientists utilize two fundamental theories to analyze this case, first, is the legitimacy theory that depicts that for a given corporation or organization to continue existing, it needs to respect and take into consideration the values of the society, its norms and also recognizing the aspect of humanity. Secondly is the Stakeholder theory that can be articulated in different ways, regardless of the ways, stakeholders are a representative of a broader constituency for any corporate responsibility. A stakeholder is any group or individual who can affect or is affected by an organization. The aspect of the legitimacy theory that has been investigated in this research is that for an organization or corporation to continue existing, it needs to ensure that its products accord safety to the users by meeting the required safety standards. This study is majorly based on how a failure on the part of the company to ensure that the product was secure enough for the users led to the loss of life and also the relationship between the public and the company during and after the occurrence. The social perception of an organization’s activities needs to be according to the expectation of the society; this study takes into account an instance where organizational activities do not observe the social and moral values and hence having a severe impact on the organization (Anon, 2015). Stakeholder theory analyzes the relationship between the organization and others or between its internal and external environments. In this case, Toyota Global as an organization relates to its customers or partners as stakeholders, an action by one stakeholder affects the other; this connection, therefore, tends to influence how business conducts its activities. We look at the impact it created both to the company and the customers (Zhong, 2013). 2. The Case 2.1 Context Background information about the case Toyota company is a global institution that majors its operation in the manufacture of automobiles; its business is majorly on vehicle production and sales. The company has been operational for the last 76 years, and it attained tremendous progress over the years. This case study about Toyota Global regards the recall crisis the company faced in the year 2010 which were brought about by complications that dated back to 2009. To analyze this case, the study employed a variety of theories and concepts to create a clear understanding of the topic of study (Toyota-global.com, 2015). In the year 2009 on 28th August, a horrifying car crash happened in southern California where three family members traveling using a Toyota vehicle 2009 Lexus ES350 engaged in a car accident after the vehicle suddenly accelerated out of control and hit another car, this led to the death of four people. Reports from the company indicated that the cause of the acceleration could be wrong floor mats that had been installed. September same year saw the company recalling 4.2 million vehicles of the Toyota and Lexus models(Heath and Palenchar, 2009). In the year 2010, the company had to first recall 2.3 million of its vehicles all around the world due to the problem with the gas pedal. The aim of the recall was to address a safety issue that had been detected in its already assembled groups of cars. The issue threatened to tarnish the good reputation that the company had established for producing highly qualified and reliable products. 2.2 Data Description of corporate disclosure vehicles chosen for analysis Toyota global utilized various press releases to communicate to its customers on the progress of the company and update them about the challenges faced by the company including measures put in place to counter such challenges. Table 1 Data Toyota Company made the first communication through a press release on 2ndOct 2009 which was an apology to the victims of the car accident and the customers who had been affected by the recall. This was followed by several communication from the company about the informing them of the upcoming recalls. The company also through a press release in 4th Oct 2009 denied the allegations made by the media about the defects on the gas pedals. Another communication was made on 3th Feb 2010 informing the public on the upcoming recall and the types of vehicles that would be affected by the recall. 2.3 Methodology Discussion of the categories of analysis used to analyze the corporate texts This study took into account different impression management strategy that brings into perspective the crisis a company is facing and the measures that have been put in place to bring the situation under control. Communication is a vital aspect of handling any given crisis; Toyota Global took it to their websites and publication including press releases in an attempt to explain their take on the crisis and what could be the cause including the measures being put in place. To some extend the company was not clear about the source of the problem thus raising more tension and confusion to the customers; such situations tend to worsen the situation rather than bringing it under control. Despite the public apology made, the company did not take responsibility for the cause of the accident and instead laid blame on other factors that were not well received by the public. Toyota global, however, tried to manage the crisis using press releases. These were done through the company website, publications in the magazines and also direct address from the CEO, the company management explained the reason for the recall and assured its customers that every effort is being put in place to correct the matter. 3. Findings Summary of results of the analysis Following the accident that occurred on August 2009, Toyota Company reached an out of court settlement with the relatives of the victims. Two months after the crash, Toyota began a recall that totaled to 5.4 million vehicles globally. A total of 4.5 million vehicles that had been claimed to have defective pedals were recalled. October 2009 saw the Toyota spokesman admitting that the company did not have in place a program in its system of disabling the complications concerning the pedal whenever the brake is pressed but promised that they are working on the matter. The information released by the company through its press releases indicate that Toyota recalled 6.5million vehicles as a result of the faulty airbags that send shrapnel into passengers, according to an e-mail from the company; it had found airbag inflators that were susceptible to abnormal deployment in a crash. The company said that it aimed at replacing the affected driver side air bad with new spare parts that had been produced by Daniel Corp. The latest recalls were as a result of the uncertainties the company had about the scale of the airbag problem. This uncertainty led to the total number vehicles recalled reaching 14 million. According to the results of the studies, the recall affected the public attitude towards Toyota; its top management has been negatively impacted about how they managed the crisis. Some complaints on self-acceleration were reported to the Toyota Company, at that moment, the company did not know how to handle (Burke, Martin, and Cooper, 2011). The response the company gave as about the complaint led to more confusion in the market, at first they suggested the error came from the operators, they later claimed that the problem was floor mats that trapped gas pedal, lastly they suggested that faulty electronics caused unintended acceleration. The manner in which Toyota responded to the crisis created more fear among the users, instead of giving reassurance to the owners, the company made them fear for their lives. 8 million cars then had to be recalled to address the issue of acceleration (Dietz and Gillespie, 2012). Toyota turned Benenson Strategy Group for help in navigating its recall crisis; BSG responded by first conducting a risk assessment and messaging study to develop a recovery plan. After the restoration measures put in place, Toyota has since regained its position as world’s best-selling car manufacturer. BSG, on the other hand, has been serving as a top strategic partner for Toyota since then. A report released by the company on 20th May 2010 concerning the progress made since the recall crisis indicated that in the effort to fix the recalled vehicles, 3.5 million had been completed. The cars and trucks had been equipped with advanced safety technologies and will be completed by the end of the year. Major scientific efforts were being made to validate further vehicle safety. The company also promised that measures were being put in place so as to act swiftly on safety issues in future whenever they are raised. 4. Conclusion Discussion of findings in context of theory and prior literature Stakeholder theory proves that the relationship between a company and its stakeholders is vital to the success of the company. There are several valuable lessons that can be learned by the business fraternity about Toyota’s case; among these is the fact that aggressive growth may be dangerous to an organization since it can cause uncontrollable risks. Toyota focused more on conquering the General Motors Company to become the number one carmaker and ended up compromising their quality control. Companies should also learn to obtain the facts of any emergent issues faster and respond aggressively in managing the risk. Toyota didn’t take the time to absorb the facts about the cause of several defects, rushing to respond led them into more complicated situations since they were not sure on the issue they were addressing. 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