Toyota Company: Crises and Media’ Influence on Business

The paper is devoted to the notions of crisis management and media relationships. The Toyota crisis study is used to illustrate the theories relevant to the topic. Conclusions regarding the Toyota strategies are drawn in order to provide a better understanding of the concepts described.

Definitions

The Definition of Crisis Management

The definition of crisis management is connected to that of crisis. A crisis can be defined as “a significant issue affecting a firm or its stakeholders that, if unattended, can lead to severe negative outcomes” (Penuel, Statler, and Hagen 196). Despite the obvious fact that crises endanger the future of businesses, they have also been often described as opportunities for change (Penuel, Statler, and Hagen 187). Indeed, while struggling to overcome crises, companies tend to change, develop and improve their strategies, implement innovations, and improve their policies (Dahles and Susilowati 37). However, crises mismanagement may lead to the most disastrous consequences. Therefore, it goes without saying that crisis management is a part of business studies that deserves exceptional attention (Antoniadis, Tsiakiris, and Tsopogloy 299-302).

The stages of a crisis include four steps: the pre-crisis stage, the acute crisis stage, the chronic crisis stage, and that of recovery (Heller and Darling ‘Toyota In Crisis’ 5). The frame of crisis management corresponds to these stages. According to different researchers, the stages of crisis management may include those of signs detection, preparation (planning) and prevention, response (damage containment and control), recovery, as well as revision (Veil 119; Penuel, Statler, and Hagen 197; Heller and Darling ‘Toyota In Crisis’ 5).

A particularly important part of crisis management is its forecasting and identifying. Forecasting a crisis is the only way to prevent it or weaken its impact on the company’s performance (Groh 51). Apart from that, it is obvious that the sooner the crisis is discovered, the easier it is to resolve it. However, crises are difficult to predict, and it is a common practice that their signs are only analysed after the recovery stage (Veil 116; Antoniadis, Tsiakiris, and Tsopogloy 299-302). It is obvious that learning from a crisis is important; however, it is more common for managers to regard the crisis analysis as the last stage of crisis management. At the same time, it appears logical that researching the process would be appreciated at each of its stages (Veil 118).

Crises tend to affect the reputation of a company in a negative way, but the damage to a business’s reputation depends very much on the type of the crisis (Dutta and Pullig 1282; Claeys, Cauberghe, and Vyncke 256).

Crises can be caused by external reasons: natural disasters, global economic recessions, political changes, and terrorist activities (Dahles and Susilowati 34). For example, the earthquake was the main cause of the Fukushima disaster that, therefore, belongs to the first category. At the same time, there may be internal causes of a crisis. According to Groh, such reasons usually stem from the misunderstandings that are the results of the deviation of the actual company performance from the expected one (50). For example, the contrast between the quality of production and the market demand or that between the required amount of resources and their availability may lead to a crisis. The causes of crises determine their public evaluation: depending on the level of responsibility, the reputation of a company may or may not be damaged.

The Definition of Media Influence on Business

In order to minimize the damage inflicted on a company’s image by a crisis or to recover from it, the public relations of the business must be taken into account. Mass media of all sorts may become an asset in this process as it offers businesses the opportunity of boosting and preserving their reputation when it is used as a public relations instrument (Ragas, Uysal, and Culp 378; Paniagua and Sapena 720).

One of the most important elements of business and media relationships is the presence of the CEO in the media. A proper CEO’s image may improve the company’s reputation, its customers’ trust and, therefore, boost its performance (Terek et al. 370). At the same time, it is obvious that if a company implements an improper public relations strategy, mass media is going to accelerate the process of customers’ trust decreasing. Besides, one should take into account that many kinds of mass media tend to distort the information they provide. While occasionally it may redound to a company’s advantage, during a crisis mass media emphasises its most unpleasant details and exaggerates its severity in order to make the news more shocking (Penuel, Statler, and Hagen 603).

Nowadays, mass media facilitates information exchange, making news travel especially fast (Penuel, Statler, and Hagen 318). As mass media responds to all the possible changes (social, political, economical), it is an extremely useful source of information, and monitoring mass media has become a priority for modern businesses (Penuel, Statler, and Hagen 318; Paniagua and Sapena 720). Besides, media has invaded the lives of modern people in such a way that managing it nowadays is not an option but a necessity. The fact that mismanagement of this asset may lead to reputation decrease only emphasizes the importance of paying proper attention to mass media relationships.

Toyota Company Case Study

This section is devoted to information about the ongoing Toyota company crisis and its preliminary analysis.

Toyota: General Information

Since its launch in 1937, the Toyota Motor company has been an extremely successful business (Neufeld 231). It took it seven years to enter the US market; in the 1960s it possessed overseas factories in South Africa, Brazil, Thailand, Malaysia, and the USA (Heller and Darling ‘Toyota In Crisis’ 7). In 2002, with the help of particularly successful resource management and cost-saving strategies, Toyota managed to become the “world’s largest and most profitable automaker which enjoyed a rock-solid reputation for quality and dependability” (Andrews et al. 1064). Its customer satisfaction level was proven to be incredibly high by the studies of public opinion in 2005 (Neufeld 231).

The company has always claimed that quality and customers’ satisfaction were its primary concern. The philosophy of Toyota’s management style, the Toyota Way, includes 14 principles, most of which highlight the importance of reliability and safety of their product (Andrews et al. 1068). The chairman of the company, Akio Toyoda, is regarded as the “father” of the company and his image is promoted both within the enterprise and in the media (Steers and Shim 219).

However, in 2007 the company was hit with a major crisis. The crisis management skills that Toyota has demonstrated were admitted to be poor by numerous researchers (Heller and Darling ‘Toyota In Crisis’ 11-12; Andrews et al. 1075). It appears that Toyota has always been “risk-averse”, and this characteristic of the company’s management did not help it in the process of crisis resolving but aggravated the damage it received (Steers and Shim 220).

Toyota and Crisis Management

As we have mentioned, since the beginning of the century, Toyota grew rapidly due to its sound cost-saving programs until it became the world’s largest auto company. The growth, however, resulted in the increasing need for resources that forced the company to expand its chain of suppliers. In its haste to develop, Toyota did not pay enough attention to the control and supervision of its new partners which lead to a decrease in the products’ quality (Andrews et al. 1069). The quality problem was admitted to the public in 2006, and in 2007 the new products of Toyota (Camry V6 and Tundra pickup) were not very well received (Andrews et al. 1070).

This was the preliminary stage of the crisis when major problems could have been solved if properly addressed. Instead, Toyota did not seem to be interested in restoring the quality of its cars. Since 2007 gas pedal problems were reported by Toyota cars owners more and more often. It is obvious that the problem of acceleration control in cars is particularly dangerous and may result in grave accidents. The displeasure of customers grew, and in 2007 Toyota recalled 55,000 automobiles because of the persisting problems with the gas pedal (Heller and Darling ‘Toyota In Crisis’ 8).

Admittedly, Toyota is not the only car manufacturer to ever recall its product: for example, Ford recalled 9.6 million vehicles in 2008 (Neufeld 238). Still, this was obviously the beginning of the acute stage of the crisis, the duration of which was determined by the reluctance of the company to admit its responsibility and address the problem in any way. The recall has cost Toyota over 2 billion dollars; besides, there were legal challenges and fines imposed on the company (Heller and Darling ‘Toyota In Crisis’ 13; Andrews et al. 1065).

In order to rectify the situation, Toyota has made some changes: for example, the Automotive Center of Quality Excellence was created in 2010 in order to promote the products’ safety (Heller and Darling ‘Toyota In Crisis’ 13). However, it was too slow response since it has taken the company three years to realise the fact that it is responsible for the quality problems that its consumers report.

Slow responses to crises are obviously bound to increase their duration and the damage dealt by them. However, another important flaw of the company’s crisis management was in its persistent denial of responsibility which was reflected in Toyota’s relationship with media.

Toyota and Media

Toyota was obviously too intent on expanding and geographically dominating the market by selling its products in 170 countries and regions and owning 52 overseas plants (Andrews et al. 1072). It appears that its leaders have forgotten about their promises to preserve and improve the quality and safety of their products. Besides, they seemed to disregard the fact that customers’ satisfaction is one of the decisive factors of a company’s development. Their promise to be customer-focused and sincere hasn’t been carried out as in the period between 2007 and 2010 the company’s representatives denied Toyota’s responsibility for the persisting quality problems (Andrews et al. 1073).

This served to discredit the company and, as a result, there has been a significant decrease in the customers’ trust. The Toyota crisis management has been widely criticised in Japan and all over the world (Andrews et al. 1073). As the pressure of public disapproval and customer dissatisfaction increased, Toyota leaders realised that they had to take action in order to preserve their position and recover from the crisis.

In 2010, the leaders of Toyota acquiesced to addressing the problem by making a public statement that their first priority from then on was going to be safe. It was only then that they finally admitted their responsibility for the quality of the cars and the crisis (Heller and Darling ‘Toyota In Crisis’ 11). This step cannot restore the reputation of a company immediately, but it means that the situation is being directed towards improvement.

Due to the fact that the crisis wasn’t paid enough attention from the very beginning, it caused severe damage to the company’s image and performance during the acute stage. Because of the improper crisis management and inadequate media relationships strategies, Toyota has failed to prevent or alleviate the severity of the crisis; in fact, the actions of the company seem to have aggravated the damage to its reputation. Toyota is still recovering as it strives to gain back the stakeholders’ trust. The current stage of crisis can be described as the chronic one (Heller and Darling ‘Toyota In Crisis’ 8-11).

Discussion: Theories and the Case Study

In order to provide a better understanding of the Toyota crisis anatomy, a number of theories and suggestions existing in the crisis management and media relationship studies are going to be applied to the situation described.

The Pre-Crisis Stage

According to Tennant, a crisis is almost always preceded by warning signs, the detection of which is bound to help a company deal with the acute and chronic stages (474). From then on the company may strive to prevent the crisis or merely prepare for it and attempt to decrease the potential damage. However, it is not unheard of that a company’s managers get paralysed, panicked and refuses to implement any kind of strategy (Tennant 476). This appears to be the case with Toyota crisis: even though the company had understood and admitted the fact that the quality of its products was decreasing, it either failed or did not intend to rectify the situation at the early stages of crisis and lost the opportunity of preventing or alleviating the damage that the crisis was to inflict.

The Type of Crisis

As it has been mentioned, crises types do not only affect their development but also determine its public evaluation. Claeys, Cauberghe, and Vyncke provide a classification of crisis types based on the level of responsibility that a company bears. The classification includes the victim type of crisis along with the accidental and the preventable one, and the latter presupposes the highest degree of responsibility which results in the greatest damage to a company image (257). Since the quality of a product depends entirely on the company, the Toyota crisis belongs to the preventable crises group, which explains the negative attitude of the customers and publicity.

The Brand Crisis

Since the crisis management carried out by Toyota leaders did result in damaging the company’s reputation, a brand crisis is another issue that the company has to deal with. One may say that it was caused by the problems with product quality and the company’s disregard of its customers’ interests. These problems (quality and company ethics policy) are highlighted by Dutta and Pullig as the most common causes of brand crises (1282).

The Type of the Company’s Response

It is necessary to point out that there is no universal “recipe” for crisis management, even though some recommendations regarding different crisis types do exist. Most typical responses to crises tend to be determined by scientists with the help of the following terminology: denial, evasion of responsibility, reducing (diminishing) the offensiveness of event, corrective action and modification (Dutta and Pullig 1282; Claeys, Cauberghe, and Vyncke 256). During the pre-crisis and the acute crisis stage, Toyota attempted to deny the responsibility, which aggravated the negative impact on the company’s reputation. As the public pressure and dissatisfaction were increasing, the company changed its strategy, this time attempting to implement corrective measures that included more careful quality control.

It is important to point out that the type of crisis defines the choice of strategy (Dutta and Pullig 1286). For example, the performance-based type of crisis calls for corrective actions that Toyota has taken as soon as it admitted the fact that it experienced a crisis (which was, however, too late). The ethical issues were long ignored and denied, as Toyota kept disregarding the needs of its customers until it became evident that the damage inflicted on its reputation can only be alleviated with the help of active correction.

Media and Crisis Solving

As it has been pointed out before, the damage dealt with a company’s reputation can be alleviated with the help of proper public relations strategy. According to Claeys and Cauberghe, in case the threat caused by the crisis that the company is responsible for is not particularly grave, it may be enough to provide accurate information regarding the problem because sincerity is always appreciated by customers (87). However, in case the crisis could cause severe damage, it could be advised to direct earnest efforts at building a company reputation restoring strategy through mass media. Such a strategy may include expressing apologies or sympathy, providing compensation or denying the responsibility, and its choice should be defined by the specific features of every crisis (Claeys and Cauberghe 87).

The damage that Toyota’s low-quality cars could (and did) inflict was enormous since a car with acceleration problems may cause accidents, injuries and deaths. It appears, however, that Toyota intended to stick to the denial strategy. Still, once it became apparent that due to its nature, this crisis could not be resolved in such a way, the company offered compensations, apologies and promised to keep improving its product. The incorrect choice of the initial media relationship strategy, however, has already aggravated the damage to the company’s reputation. This means that despite correcting the strategy, restoring customers’ trust is going to be more difficult for Toyota.

Learning from the Crisis: Possible Benefits

As it has been noted, even though a crisis is obviously an obstacle to be overcome, companies may benefit from this stressful situation as in the process of managing the corresponding issues they solve the existing problems, create new more competitive strategies, implement innovations and generally improve their performance. Despite the fact that Toyota had undoubtedly mismanaged the current crisis, in the beginning, the fact that its leaders have learned from their mistakes is obvious. It is reflected in the way the company has changed its strategies, paying attention to quality and safety, and admitted the responsibility and faulty decisions. The crisis appears to have encouraged the company to research crisis management (Andrews et al.). At the same time, the experience the company gained, negative as it may be, it unprecedented for Toyota. It has not faced a crisis this severe in the past, but the problems it has learnt to detect, admit and work to overcome may help the company to avoid similar issues in future (Heller and Darling 151).

Conclusions

It appears that the success of Toyota company has caused its leaders to forget about the possible difficulties that even the most famous company may have to face. Toyota may have become the leader in the market, but it does not mean that it has eliminated its rivals. The competition requires sound management, and this is what the company has been denied for a period of three years. The negligence that Toyota managers have exhibited during the crisis could have destroyed a lesser company. Let us review the major points of this crisis and draw conclusions regarding Toyota’s crisis management and media relationships.

The crisis arose as a performance-based one since the quality of the company’s products failed to meet the expectations. It was further aggravated when the Toyota leaders managed to discredit themselves further by denying the obvious flaws of their production. The crisis belongs to the predictable type, which means that only the company is to blame for not preventing or preparing for it.

After failing to prevent the crisis, Toyota failed to respond in time to its acute stage. Whether this was due to the panic or overconfidence of the company’s leaders is unclear, but either way, this aggravated the damage inflicted on Toyota’s performance and reputation.

While mass media could have been used to maintain the company’s reputation, Toyota’s public relation strategy, which was mostly based on denying and shifting the responsibility, initially kept bringing negative results. In 2010, however, Toyota decided to admit its flaws officially and promised to improve the quality of its products, which was the first step on the company’s way out of the crisis.

It took Toyota three years to admit its responsibility and begin to implement strategies aimed at resolving the crisis. The current stage of the crisis may be described as chronic: while the quality of the product may be relatively easy to raise, regaining the customers’ trust is a much more complicated issue.

It is also important to point out that Toyota’s quality crisis endangered its customers, which makes the initial behaviour of the company’s managers particularly unacceptable. It was also one of the reasons for the particularly strong disapproval of the company’s denial strategy that was expressed in Japan as well as all over the world. Fortunately, Toyota’s attitude has changed, and nowadays, the company strives to improve the quality and safety of its products as it struggles to regain its customers’ trust.

One may say that Toyota’s crisis has been particularly poorly managed in the beginning. The situation could have been largely improved if the company had not refused to pay proper attention to the relevant issues during the first two stages of the crisis. It appears, though, that this crisis experience has taught Toyota managers to respond to possible problems in an adequate way and to value crisis management planning. Apart from that, this experience has become widely known and almost notorious, which means that other companies can also learn from Toyota’s example.

It is possible to predict that in future Toyota’s crisis is going to be resolved, its quality problems will be eliminated and its reputation restored. It is apparent, however, that only a gigantic company like Toyota could have survived a crisis this long and severe. Similar crisis mismanagement for a smaller company would mean its end. While it is believed that crises open up new opportunities and help companies to eliminate their flaws and problems, leaving them unattended will most certainly lead to disastrous consequences.

One may say, therefore, that the management strategies exhibited by Toyota are an example of how a crisis is not to be addressed. It proves the importance of preventing and preparing for a crisis and highlights the necessity of quickly responding to the arising issues. It also demonstrates that denial strategy may result in serious reputation damage and that media relationships are not to be taken carelessly.

The example of Toyota’s learning from its flaws, however, proves that the analysis and research of a crisis do not have to occur only after the crisis is resolved. As the company has shown, continuous analysis of crisis process may prove to be an effective way of dealing with it.

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