CASE ANALYSIS
CRISIS MANAGEMENT AT TOYOTA
CASELET

Toyota Motors Corporation, one of the largest automakers in the world. In January 2010, Toyota was forced to recall millions of cars after problems with braking, floor mats and acceleration pedals in its vehicles. The recalls even led Toyota to halt sales and production of eight of its most popular models. Due to growing number of recalls, sales plummeted thereby affecting the company's position in the global automotive industry. Analysts began to question Toyota's legendary quality and felt that the recalls represented a major failure on part of the company. After the recalls, Toyota went into crisis management mode and announced a fix for the accelerator problem. Various crisis management initiatives undertaken by the company to regain the trust of customers and restore its image as a quality automaker. As part of its crisis management process, Toyota placed ads in print and television media, involved executives and used social media platforms to address its customers. However, some analysts felt that the crisis communication team of Toyota was weak which led to a delay in identifying and addressing the situation. Crisis management experts were of the view that the image of Toyota would depend on how quickly it can fix the problems and how well it communicates with its customers.

ISSUES:

1. Understand the importance of crisis management and various issues and challenges related to it.

2. Analyze whether Toyota's response to the crisis was adequate.

3. Explore the PR and crisis management strategies that Toyota should adopt to contain the impact of the crisis and retain its brand reputation.

INTRODUCTION:

The case is about the poor crisis management of Japan based Toyota motor corporation. It took Toyota around 77 years to build an enviable reputation for producing high quality products - automobiles and rugged commercial/leisure vehicles; and about 7 months to cause the world to question its validity. The consequences of poor crisis management could severely damage the reputation of a company; hence every company must be prepared for crisis. This case explains the importance of crisis management and the crisis management strategies Toyota should adopt in future.

CRISIS MANAGEMENT:

Crisis management is the process by which an organization deals with a major event that threatens to harm the organization, its stakeholders, or the general public. Three elements are common to most definitions of crisis: (a) a threat to the organization,(b) the element of surprise, and(c) a short decision time. Venette argues that "crisis is a process of transformation where the old system can no longer be maintained." Therefore the fourth defining quality is the need for change. If change is not needed, the event could more accurately be described as a failure or incident. In contrast to risk management, which involves assessing potential threats and finding the best ways to avoid those threats, crisis management involves dealing with threats after they have occurred. It is a discipline within the broader context of management consisting of skills and techniques required to identify, assess, understand, and cope with a serious situation, especially from the moment it first occurs to the point that recovery procedures start.

IMPORTANCE OF CRISIS MANAGEMENT:

* Efficient Crisis management practices, * Prepare the company to face contingent or emergency situations effectively and efficiently * Ensures responsibility of the organisation to its stakeholders * Helps the management and the employees to face any kind of crisis without any panic or controversies.

* It improves the public relations of the company with the environment.

ISSUES AND CHALLENGES: The issues and challenges faced in crisis management includes the following: * Inefficient crisis management team in the company which is a disadvantageous factor. * Proper forecast of the potential problems that would occur is difficult. * Crisis management plan should be formulated prior by the company. * The PR must be efficient enough to tackle the media which otherwise will result in bad reputation. * Improper crisis management tarnishes the brand image of the company. * Defining the actual problem in a short notice is difficult.

* Identifying and planning for worse case scenarios.

TOYOTA’S RESPONSE TO CRISIS:

The Toyota’s response to the crisis are listed as follows: * It recalled 8-10 million of its Toyota and Lexus vehicles sold worldwide. * Toyoda promised to beef up quality control and said he would head a special committee to review quality checks, go over consumer complaints and listen to outside experts to develop a fix. * Set up customer relations handling complaints and delivering service for faulty brakes. The response given by Toyota however didn’t satisfy its customers. It was a shock to Toyota’s customers who were so assured about the quality and reliability of Toyota vehicles.

Some of the reactions from public: "Toyota needs to be more assertive in terms of providing consumers comfort that the immediate problem is being addressed and that it can deal with these crises," said Sherman Abe, a business professor at Hitotsubashi University in Tokyo. The PR should be dealing with the media convincingly which is very important in critical situations´.

FAILURE IN CRISIS MANAGEMENT:

In April 2010, Toyota Motor Corporation (Toyota) agreed to pay a whopping US$16.4million fine imposed on it by the National Highway Traffic Safety Administration (NHTSA)in the US

The fine related to sticky accelerator pedal defects in its vehicles, which resulted inthe company recalling approximately 2.3 million vehicles in the US in late January 2010. According to industry observers, the fine was the largest civil penalty ever levied on an automaker by the NHTSA. Regulators said that Toyota had been penalized as it had failed to notify the NHTSA for at least four months after learning about the problems in its vehicles. As per US federal law, automakers were required to disclose defects within five business days. However, Toyota refuted the allegations that it had violated safety regulations and maintained that it had agreed to pay the fine in order to avoid a dispute.

PR AND CRISIS MANAGEMENT STRATEGIES:
The PR and Crisis management strategies includes the following * Vulnerability audits should be conducted periodically. * Establishment of the crisis response team, a notification system and definition of when such a team would be mobilized. * Development of a step-by-step action plan and checklists. * Guidance regarding where to locate and how to outfit a crisis communicationscenter. * Simulated crisis training. * Media and speaker i.e PR training. * Stakeholder research and analysis. * Legislative and regulatory response planning; and

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Expert’s advice for Toyota:
Toyota should increase its planned spending on Super Bowl ads and offer commercials that promote the brand "as being safe, secure and reliable.''Mr. Doyle proposes that the Toyota president issue a statement or give a news conference stating, "We are now prepared to manage this. We know where the problem is.'' CRISIS MANAGEMENT INITIATIVES:

As part of its crisis management strategy, on January 31, 2010, Toyota * Launched a major PR campaign to promote the safety and reliability of its vehicles. * It used print and television media for public apologies, explanations, and press releases. * Toyota sent apology letters to its customers informing them about the recall. * Help line for handling customer complaints and repairing the defaults.

IMAGE IMPLICATIONS:

Industry experts considered the spate of recalls as a major crisis for the company as it not only led to financial loss but also became a significant threat to the reputation of the company. The suspension of the sales of eight of its popular models cost the company sales of 20,000cars and light trucks, accounting for over US$500 million in lost revenue in the last week of January 2010.

CONCLUSION:

Toyota being one of the world’s largest automaker should ensure efficient crisis management and Public relations in order to protect their reputation and retain their customers in the market. Effective steps should be taken in order to reinstall their quality and reliability of their products. The defects in their product design have to be corrected and safety of the customer should be ensured. It should formulate and plan for crisis and respond to the public immediately without delay and ensure trust among the customers.