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Introduction & Problem identification
This case study is about the crisis of Toyota that the company had to face from last few years. This case study explains the failure of Toyota cars in the market and reasons for its failure. This failure was in term of decreased sale level as automobiles of this company have many safety and security concerns regarding its breaks and accelerator. There was a bad crash of a car Lexus ES 350 that was due to the technical fault of the car and car was gone out of control from the driver. As this was not the only problem that occurred but after that there was a long list of accidents and an investigation by the company revealed that these accidents were due to a technical fault in the cars. The quality of the cars was not so good there were some manufacturing faults in the cars that cause serious problems in the cars. This thing builds a negative image in the eyes of society and goodwill puff the company also affected. The sale of Toyota automobiles declined due to this crisis.
This report is based on the fact; this Toyota crisis was due to a management issue. The main problem that was due to the failure of management planning in crisis. There are many management defaults in proper planning to cope with the crisis (Feng, 2010).
For every business, there will be a proper plan to meet the unexpected crisis in near future. Through proper management, planning of crisis with a good implication, any organization can be prepared in a better way to cope with any sudden or serious issue (Feng, 2010). The crisis of any type can be very harmful in term of profit and reputation of the organization (De Blasio and Veale, 2009). As in this case of Toyota, in 2009 when there was a shock of a sudden accident of a car due to the technical fault in the automobile. This thing badly affects the reputation of Toyota. After that, many components came regarding this issue. After some time, there was again a problem is found in another model of the Toyota cars. It was the duty of management that they properly manage this crisis by giving more focus on the manufacturing process. After 6 month of the first crash, CEO of the company came and apologizes from the public. This was a good way but in a very short term. The company made a good decision about recalling of all cars and giving them repairing services freely. However, that was not the solution to the problem. Toyota Company made a decision by taking into account the traditional way of solving the problem when that company was small. Now they should consider that Toyota now has become a public company and stake of many people is involved in this company. Any negative rumor about the company causes a loss to the company.
Crisis management researchers say that the essence of every crisis and appropriate planning and management about the crisis can minimize the after effects of any crisis in the organization. (deBlasio and vaele,2009) there were many stakeholders that heard this news of Toyota crisis from the media. A public is always very concerned about the corporate scandal news. Toyota Company was very famous due to their reliable manufacturing and these rumors about the company cause a serious threat to the company reputation. Because of sequential problems in the automobiles, there was a decline of Toyota sales in the market. Toyota company management fails to cope with the failure .after a long period of this crisis they stopped the manufacturing of new cars. This step should be taken earlier. As time passed, the number of recalls was increased and a very negative image about the company was spread in the market (Coombs, 2007).
Communication of the corporate is also very important in the case of crisis management. For repairing of reputation and overcoming, any crisis in the organization there should be proper corporate communication. Communication is considered as a very important factor in the crisis management. . There were also many outside forces that drag Toyota towards the crisis and one of the most important factors was the media. Many journalists took this discussion as the hot topic for discussion and this cause more negative views in the eyes of customers.
Theory of image restoration is very important in the perspective of corporate communication. According to a research, there are five different types of strategies that help in restoring the reputation and image of the organization (Coombs and Holladay, 2002).
• Evasion of responsibility
• Reducing the offensiveness of the crisis
• Corrective strategy
• Mortification strategy
According to this strategy, any organization tries to communicate the fact that there is no crisis is found in the organization. This strategy actually reveals the fact that there is no connection between the crisis and organization. Organizations try to hide the crisis from the public. This strategy can work in the short term but cannot go beneficial for a long term. Toyota did not use this strategy for the overall period of its crisis (Coombs, 2007).
Evasion of responsibility:
In a strategy, any organization tries to reveal a fact that the crisis was not due to the negligence of organization, but it was due to any other culprit. Alternatively, the organization tries to envies from its responsibility. Toyota did not take this strategy, they further investigated about the reason for the crash, and they revealed in front of public that this was due to a technical fault in car manufacturing.
Reducing the offensiveness of the crisis
This strategy is taken by the Toyota Company. According to this strategy, any organization tries to minimize the damage that was due to the crisis. Toyota offered for recalling and there were many recalling from the clients that were repaired without any cost from the clients. This strategy was adopted by the Toyota Company to produce a good image in the eyes of customers (Coombs and Holladay, 2002).
Organization tries to solve the identified problem that causes such crisis. Toyota implied this strategy after a delay but at last they made a corrective action by stopping the further manufacturing of the cars and they focus on reaping the already defaulted cars (Coombs, 2007).
According to this strategy any organization takes responsibility for the entire crisis and makes apologize from its stakeholder. Toyota also act upon this strategy and they publically apposite in front of public and they revealed the fact before the world that there was a mistake in the macerator and foot carpet in the cars that cause serious accidents (Dolphin, 2004).
Although all the actions that were taken by the Toyota company was right and they fully try to make the good image in the eyes of society and try to prove them self as a good social corporate responsible entity. However, the major fault was within the whole process of crisis management planning. It is the responsibility of management that after the first crash they stopped the manufacturing of more cars and try to solve the problem in the cars and after that neither move towards nor production. They kept starting of new manufacturing and at the same time they gave recalling for repairing purposes. In the few next years the sale of Toyota Company falls and company has to bear a huge loss.
Recommendations for Toyota
It is highly recommended for the Toyota that they should focus on the quality control. As technology advancement has increased the overall production rate but for an automobile company, the most important factor that catches the attention and reliability of the customer is quality control. After this crisis, management of Toyota must consider all the flaws that caused such a bad crisis and they must focus on problem identification and solution in the early stages. It is very important for an automobile company that if they see that a problem is occurred in only a one article, they should consider this fault seriously. Toyota should focus on the quality of their cars then the number of new models in every year (Coombs and Holladay, 2006).
A prior good reputation can cause any organization to catch the attention of customers rapidly if once there were any mistake. However, if the same thing happens for many times such as manufacturing default then, the trust of the customers will go with the passage of time. This time many customers ignore the crisis rumor and they have a good image about the Toyota automobiles but now, if again this will happen this will be more dangerous for the sake of company then before.
There should be good management of crisis before the crisis happens. There should be pre-planning about any such event in the future. Toyota should give attention to its management training and must take the lesson from these crises (Coombs and Holladay, 2006).
After analyzing the case study of Toyota crisis, it is concluded that the crisis was gone bad due to inefficient management of Toyota Company. Although the entire crisis are unpredictable, but there should be such preparation for any sudden crisis that it can easily be handled prior to getting worse. Toyota Company made a good strategy to cope with the crisis, but the initiative was not very good. These corrective strategies should be taken at the very first stage when there was a beginning of the crisis. This crisis affects the goodwill of the company as well as the financial strength of the company. Toyota Company has to face loss in term of its sale and have to bear the maintained cost for the cars that came after the recalling. Repairing ad maintained cost was high then the manufacturing cost. This affects the financial position of the company
Feng, Y. (2010). Toyota Crisis: Management Ignorance?: A Swedish Case of Consumers Perceptions.
De Blasio, A., & Veale, R. (2009). Why say sorry? Influencing consumer perceptions post organizational crises. Australasian Marketing Journal (AMJ),17(2), 75-83.
Coombs, W. T. (2007). Protecting organization reputations during a crisis: The development and application of situational crisis communication theory.Corporate reputation review, 10(3), 163-176.
Coombs, W. T., & Holladay, S. J. (2002). Helping crisis managers protect reputational assets initial tests of the Situational Crisis Communication Theory.Management Communication Quarterly, 16(2), 165-186.
Dolphin, R. R. (2004). Corporate reputation-a value creating strategy. Corporate Governance: The international journal of business in society, 4(3), 77-92.
Coombs, W., & Holladay, S. J. (2006). Unpacking the halo effect: reputation and crisis management. Journal of Communication Management,10(2), 123-137.
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