Toyota Company objective
In its operation, Toyota is committed to its mission of becoming the market leader with regard to production of cars. The resultant effect is that the shareholders’ returns will be enhanced. The firm appreciates that this can only be achieved if its customers are satisfied. Additionally, the firm also intends to ensure that it contributes to the society. The firm intends to achieve this through integration of corporate social responsibility. The firm also appreciates the fact that consumers are price conscious; as a result, the firm is committed at ensuring that its products are affordable (Annual Report, 2009, p.1).
Despite formulation of its mission, the recent recall of its automobiles from the market illustrates that the firm is not committed towards ensuring that its customers who are one of its core stakeholders acquire high quality and safe cars. During 2010, the firm recalled more than 2.3 million vehicles within the United States. The reason for the recall was that the accelerator pedals were faulty. Additionally, the firm’s decision to suspend the sale of its popular car models which include Highlander, Camry and Corolla was motivated by faulty gas pedals. Toyota also suspended the sale of spare parts for these models. The firm also announced that it was in the process of recalling 1.09 million vehicles the reason being that they had floor mat problems. Additionally, the firms’ management team said that it would recall 270,000 Prius models due to faulty brakes.
By recalling the vehicles from the market, the probability of the firm maximizing its profitability is declined significantly. This arises from the fact that there is a high probability of consumers shifting to competing firms. According to Cariaga (2010, para. 3), the recall presents a challenge to the firm with regard to losing its customers. Competing firms such as Chrysler and General Motors will take advantage of Toyota’s problems and exploit the market. In the long term the, firm’s shareholders wealth maximization objective will not be achieved.
In its operation, the firm is charged with the responsibility of ensuring that the diverse stakeholders are satisfied. The firm has a wide range of stakeholders who include employees, customers, shareholders, the society, suppliers, financiers and the government. These stakeholders have varying needs in the operation of the firm.
In their decision to purchase vehicles, consumers consider a number of factors. The two main factors that the firm put into consideration relate to quality and safety (Patton & Estep, 2010, para. 3). In its operation, the firm’s management team has realized the importance of producing high quality and safe vehicles in order to survive in the long term as a going concern entity. Decision to consider quality and safety in their purchasing process arises from the need to attain a unique experience through consumption of the firm’s products. By ensuring that these two elements are integrated, consumers attain a high level of utility in their consumption. Consumers are also price conscious in their consumption patterns. In its operation, Toyota is committed at ensuring that its cars are affordable.
On the other hand, the shareholders objective is to maximize their wealth. Toyota has a large number of investors who have committed their finances to the firm’s operation. One of their investment objectives is to attain a high financial return in the future. To attain this, shareholders as the principals appoint managers who act as their agents. Shareholders expect the managers to make optimal decisions which are in the interest of the firm.
The analysis illustrates that Toyota does not take into account the needs of the stakeholders especially the customers and shareholders. In their consumption patterns, consumers are conscious with regard to product safety. For example, by producing faulty vehicles, the firm presents its customers with a risk. Currently, the firm has managed to develop a strong market globally. Therefore, selling faulty vehicles present a life threatening situation to consumers. For example, faulty accelerator pedals can result into severe accidents. This indicates that the firm does not take the needs, goals and objectives of the customers into account.
Additionally, producing faulty vehicles will result into the firm losing its market share. Consumers may consider shifting to competing firms. The resultant effect is that the firm will lose its customer base. Toyota will also experience a reduction in its market share as its competitors capitalize on the firm’s faults. In the long run, the firm’s profitability will be negatively affected. According to Bartlett (2010, para. 7), the firm’s failure in its production processes presents a challenge to the firm in its future performance. Production of faulty vehicles will also result into a decline in the firm’s reputation hence affecting its share price in the stock market negatively. For example, the recall led to a decline in the firm’s share price to $73.49 in Februally 3, 2010 from $91.78 in January 19, 2010 (Ceniceros, 2010, para. 9). This means that Toyota shareholders may not be able to achieve their wealth maximization objective if the firm does not rectify the problem.
Annual Report. (2009). the right way forward. Web.
Cariaga, V. (2010). Toyota’s pain will be rivals’ gain with little net economic impact. Web.
Ceniceros, R. (2010). As Toyota saga continues, shareholders ready cases. Web.
Patton, J. & Estep, B. (2010). Toyota debacle could be largest consumer fraud case ever, expert says. Web.