Existence Of An Organization: Toyota Company Crisis (Case Study Sample)

Toyota Company Crisis
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Toyota Company Crisis
The main goal for the existence of any business organization is to make profits and to stand out in its operating environment as noted by Malihi and Aghdasi (2014). Every business manager focuses on ensuring that they stand out to direct their businesses in the right direction and that they dominate the local, national as well as the international markets. Key organizational behaviours and people factors have been determined to be the major cause of organization failures. Ethical issues, competency issues, organizational culture among other issues have been considered to be some of the significant factors that determines the success and failure of business organizations. As much as there are much efforts being directed to ensuring that organizations get out the best in their operations, there are some significant factors that have come into play that have led to the collapse of giant multi-corporations in history. This report presents the analysis of a real case of organization failure, using the Toyota Company as the case study for the analysis. A description of what happened, the context, and the consequences of the failure for the organization’s stakeholders will be presented.
Problem discussion
For a long time, the Toyota Company has been known to be one of the best automobile companies globally. According to "How Toyota Became #1: Leadership Lessons From The World's Greatest Car Company" (2008), its Japanese creativity and innovation of has been known to facilitate the production of vehicles that are economic, reliable and efficient to its users. Its continuous improvement of its automobile products coupled with the much creativity that it incorporated stood out to be the envy in the business world and an important factor that provided the company with the competitive advantage in its operating environment. With the increasing car brands in the market, Toyota brand remained to be the dominating brand. Even in the face of financial crisis and the great depression, majority of the automobile companies experienced a reduction in its sales but the situation was contrary for the Toyota Company. According to Takeuchi (2008), in the year 2008, Toyota Company stood out to be leading car manufacturing company when it exceeded the General Motors company both in the production and the sale of vehicles (46). Being known to be among the leading motor vehicle companies, Toyota enjoyed market domination for approximately two short years before it was faced with a fatal crash as a result of mechanical failures that were experienced amongst some of its vehicles. This marked the time that the giant automobile company failed and as much as there have been considerable efforts to restore its original corporate image, this has proved to be a difficult thing since this major failure occurred.
Toyota’s quality failure-what happened
Hyunchul notes that Toyota’s challenges are related to cases of incompetence in terms of the human resources that were involves in the manufacturing process as well as incompetence in effective communication with its clients (394). The automobile industry today and especially the production of cars is faced with major and significant developments that are facilitating a transformation of the functionality and features of cars. In this case, as these major developments in hi-tech systems are being made, there is need for improved quality testing system to be put in place to ensure that the manufactured products are in good condition for use by customers and their safety is assured. This is mainly due to the fact that any electronic flaw no matter how small it is as well as environmental factors may lead to the failure of the car. This was the exact situation that the Toyota Company found itself in. At the peak of its dominance in the industry in 2008, the company introduced various new car brands and equally increased its human and capital resources to ensure that it remains at the top of the industry. It is at this point that eight of Toyota’s brands were found out to be faulty. First, complaints of self-acceleration of the cars were reported. Heller and Darling (2011) noted that major complaints were reported and filed by the customers and they were eager to know what were the major cause of the self-acceleration among the Toyota cars that they owned. This was a major concern among the customers as it was a significant safety issue to them since once the car accelerated it, it was bound to loss control. As much as there were numerous complaints and concerns, Toyota Company did not still take the issue seriously as they did not invest time and resources to handling the situation.
Context of the problem
According to Lee and Jo (2007), it is at this time that the company was at the peak of production and sales making and standing at the pinnacle of the automobile car industry, the Toyota management mainly focused on retaining their production and sales volume. When the customers presented their concerns on the self-acceleration behavior of the vehicles, the Toyota Company management did not take the situation serious. Their response to their customers was that they are investigating the issue and they will offer a full report. However, instead of making in-depth investigations that would have established the real cause of the problem, they made general conclusions. The reaction of the Toyota Company representatives that they presented to the public confounded the crisis management and marketing experts. Various causes of the self-accelerations of the cars were provided and this led even to further confusion. First, they attributed the fault to operator error which is considered as the causal factor of self-acceleration in automobiles. Even before this issue was looked at, they came up with another causal factor this time round attributing the fault to the floor mats which they said trapped the gas pedals. The next contradictory explanation of the car fault was said to be unintended acceleration caused by faulty electronics. It is at this point that the car owners with the various Toyota brands were concerned of their safety since no tangible explanation was being provided to them and there seemed to be no specific efforts to solve this challenge.
It is at this point that high level of incompetence on the part of the human resources engaged in the development of these brands was established. This is because, if no tangible explanation on the cause of the fault could be established and a direct permanent solution provided, it meant that there was a high level of incompetency. Incompetence in the communication process by the company also proved to exist since there was no effective communication to its customer on the cause of the problem or the appropriate way for handling the fault in the car. In this state, majority of the customers were left wondering what their fate was in terms of their level of security while driving these cars. It is in this response that majority of the customers sought to go for alternative brands. This was a significant blow that resulted to the Toyota Company recalling approximately 9 million vehicles within a period of six months. This resulted to the company experiencing major losses due to the significant repairing costs that the company had to cater for the faulty brands. The Toyota Company also realized major production suspension of the brands and also there was significant market loss. All these factors led to the company losing a significant share of its profits and much more the good corporate image that it once held in the automobile industry. The shattered corporate image that the company experienced globally was a significant impact since it exposed its high level of incompetence in the management as well as in the operations of its activities.
Consequence of the failure to the organization stakeholders
Every section of Toyota’s stakeholders was significantly impacted by this major occurrence of the faulty cars as noted by Hyunchul (2013). Beginning from the management, employees, shareholders, investors and customers were affected in one way or another. However, as much as the company management and the employees were affected, they are the ones held responsible for the failure due to their incompetence in service delivery. In this case they are considered to be the causal factors to the problem rather than the victims of it. The shareholders, investors and the customers are the ones that were significantly impacted. First, due to the major losses that the company experienced due to the reduced sales and the costs of repair, the investors and shareholders could not get a return for their investment values. In this case, whatever they had invested went as a loss and could not be recovered in any particular way. This is a significant impact that would affect the future of the company in terms of attracting investment. The customer segment is another significant section of the stakeholders that was significantly affected. Due to the trust, confidence and reliability of the Toyota Company products, the customers were assured that they would get the best out of what they had paid for. The faulty cars did not only worry them concerning their safety but also they considered it a loss to have invested in a machine that was unreliable. The customer confidence and loyalty that individuals had globally was lost thus there was need to seek for alternative solutions that would effectively meet their needs.
Organizational behavior factors that contributed to the failure
The failure of the Toyota Company is attributed to the failure of the human actors within the organization beginning from the management to the employees. According to Sergey (2016), an analysis to the situation and the problem conte...