The Toyota production system is one of the most efficient production systems in the world. The efficiency of Toyota production system makes it one of the most studied production system in the world. Thousands of managers have attempted to replicate the production system in their own companies. One of the major characteristics of Toyota production system is that it empowers employees to be in control of their activities. Toyota ensures that improvements start at the lowest possible level within the company.
Toyota strives to ensure that it has an ideal production system. According to the company, an ideal system should have defect free products. Toyota ensures that its employees have skills that would enable them produce defect free products within a short time. Toyota retrains or replaces workers who fail to meet this condition.
In addition, Toyota strives to reduce the batch size of its production cycle. Smaller batches reduce wastage and increase the efficiency of the production . Toyota’s just-in-time production strategy helps the company minimize wastage of labor, energy and other resources (Spear & Bowen, 1999). Reducing the amount of inventory reduces the cost of managing the inventory. This increases the efficiency of the company (Ohno, 2002).
Continuous development of Toyota’s production system makes it difficult for companies to emulate the production system. Toyota uses the scientific method in formulating developments in its production systems. Developments in the production system begin with the formulation of a hypothesis. The hypothesis determines the objective of the improvements in the production system (Spear & Bowen, 1999).
Employees design an experiment on how to undertake the improvements. This enables them to simulate the improvements. Simulations usually take place in reality. Whenever possible, Toyota undertakes the simulations in the workplace. When it is impossible to test the ideas in the real world, the company recreates the work area to test the idea. Simulation enables operators and supervisors detect areas that need further improvements (Liker, 2011).
Toyota’s production system arranges all production processes in a single, smooth flow. Just-in-time production enables the company produce the right quantity of a product at the right time. This reduces wastage in the production system. Just-in-time production system ensures that Toyota has lean operations. In addition, employees of the company implement various improvements in their works. Proper implementation of changes in the production process is one of the key objectives of a lean production system (Ohno, 2002).
Ensuring that employees initiate various changes eases the implementation process. One of the key features of a lean production system is that it establishes a time frame for each process within the production cycle. Toyota links its pace of production with the demand (Ohno, 2002). This reduces the amount of inventory, and the time it takes for the customer to receive motor vehicles after placing an order.
Lean production systems have continuous flow processes. Toyota strives to reduce the batch sizes to create a continuous flow production process. The company ensures that it produces one vehicle at a time to create continuity in its production process (Ohno, 2002). This reduces the time lag of the production process.
In addition, continuous flow process makes optimum use of the available labor. This ultimately reduces the cost of production. Toyota’s production system enables the company to produce high quality vehicles in a cost effective manner. However, the efficiency of the production system is highly depedent on the ability of the employees to undertake their activities efficiently.
References
Liker, J. (2011). The Toyota way: Management principles and fieldbook. New York: McGraw-Hill Professional.
Ohno, T. (2002). The Toyota production system. London: Productivity Press.
Spear, S. & Bowen, H.K. (1999). Decoding the DNA of Toyota production system. Harvard Business Review, 77(5), 97-106.
The recall of Toyota vehicles in 2009 and 2010 attracted the attention of governmental agencies and journalists who criticized the company for its failure to ensure the safety of their cars (Bunkley, 2010, p. 4).
Many consumers are now aware of the car accidents that were primarily caused by the deficiencies of Toyota Camry and Toyota Corolla (Bunkley, 2010, p. 4). The negative publicity is probably the main reason why the financial performance of this organization declined significantly and its market share decrease relative to the major competitors. Currently, this corporation attempts to regain the trust of customers.
This paper is aimed at discussing current strategies that Toyota implements in order to overcome public relations difficulties. On the whole, the problems encountered by this company demonstrate that modern businesses should always remember about their corporate social responsibility; their profitability and reputation. Nevertheless, Toyota will manage to cope with this problem, if they adhere to their policy of quality improvement.
First of all, the annual report of Toyota emphasizes the importance of safety for this corporation. In particular, it is argued that the ultimate goal of this corporation is the zero casualties of their vehicles (Toyota Motor Corporation, 2011, p. 14).
In particular, this company will carry out investigations of various accidents in which their vehicles were involved (Toyota Motor Corporation, 2011, p. 14). Furthermore, they intend to carry out numerous simulations in order to detect possible limitations of their cars (Toyota Motor Corporation, 2011, p. 15).
The results of these tests can help this corporations create safer vehicles. This is the core strategy that they want to adopt. In this way they intend to eliminate the slightest deficiencies of their cars. Additionally, this company intends to introduce cars that pose a lesser threat to pedestrians and decrease the risk of injuries. Again, they want to achieve this objective through a series of tests and simulations.
Provided that the strategies advocated by Toyota succeed, this organization can indeed restore its reputation and gain the trust of their clients. This policy is consistent with the culture of Toyota because this corporation continuously stresses quality improvement of their products. However, it may take this company many years in order to achieve the goals. The problem is that the recall of vehicles has been wide discussed in various media, and these reports produced a long-lasting impression on many customers.
This problem is particularly important nowadays when the news about a specific event is spread via social networks very quickly. This is why Toyota will have to spend much time in order to change the opinions of clients and public organizations. Under these circumstances, even well-developed policies cannot bring immediate success.
Furthermore, this corporation implements other strategies in order to reestablish its positions in the market. First of all, this company has changed its sales program in order to attract new buyers. In particular, they offer such an option as no-interest financing to their customers (Bunkley, 2010, p. 4). Moreover, the buyers of Toyota vehicles in the United States are allowed to repay their loans within five years (Bunkley, 2010, p. 4). Additionally, the company enables clients to take three years of free maintenance (Bunkley, 2010, p. 4).
These policies are supposed to make the products of Toyota more appealing. Currently, these strategies do not yield the expected results and Toyota’s market share has decreased, especially in comparison with their major rival Ford Motor Company. There are several reasons why the activities of Toyota have not been quite successful. First of all, at this point, many customers are still too concerned about the safety deficiencies of Toyota vehicles.
It should be admitted that these concerns may be significantly exaggerated, but they strongly affect their purchasing decisions. This is one of the main arguments that can be made. Similar difficulties were once experienced by Ford when this company was strongly criticized for the release of Ford Pinto (Weiss, 2008). The impact of that scandal also produced a profound effect on the financial performance of Ford. This problem can be even more challenging at the time, when news is spread at a much faster rate.
This aspect should be considered by the senior management. Still, one can argue that Toyota can further implement this policy because they should offer certain incentives to their clients. However, they should not expect that they can quickly regain the loyalty of clients. This is the main issue that they need to take into account when developing new strategies or business initiatives.
Certainly, one has to admit that the recall of Toyota’s vehicles has adversely impacted the financial performance of this corporation. Moreover, their reputation was significantly compromised. Nevertheless, the effects of these events can be overcome if they can successfully implement their quality assurance programs. In the long term, this organization can regain their positions in the market. The policies that they currently pursue are consistent with the culture of this company and its production process.
Reference List
Bunkley, N. (2010, March 2). After Recalls, Toyota Offers Incentives to Win Back.
Today, the Toyota Company has the best supply chain management framework many companies in the world use as a model and benchmark to implement their supply chain management practices. The best practices are based on Toyota’s supply chain management‘s lean thinking techniques.
The rationale is efficiency and lean thinking to achieve effectiveness and customer satisfaction. The purpose of this paper is to discover how Toyota’s supply chain management approach is implemented, the significance, and negative impact of the supply chain management practices.
Toyota’s Supply chain management, Isn’t It Obvious
It is obvious that the study raises questions on the meaning of supply chain management and how Toyota implements its supply chain management practices to position the company in the market and be globally competitive. In answer to the questions, supply chain management, in the context of lean thinking, embodies techniques and strategies to improve the operational efficiency and effectiveness in the production, supply, and delivery of products and services to the customers (Ohno, 1988, p.3).
Toyota operates on a global scale based on the concept of lean thinking in the steady stream of activities that contribute to the company’s supply chain management processes to optimize the production and delivery of vehicles to the global market (Huntzinger, 2002, p.23).
In answer to “how” Toyota does the supply chain management, it is critical to note here that Toyota’s company executives have all the secrets about the lean thinking techniques the company employs in its supply chain management. The key words “lean thinking” underlies the efficiency that defines Toyota’s supply chain management framework.
Flow system
Flow is a concept underlying Toyota operational efficiency and success. Here, the company ensures that any point in the production and supply chain framework that hinders any process is removed from the entire system (Drogosz, 2002, p.4).
The underlying model is to ensure that the production of different models of vehicles, the supply of materials required for the production of vehicles and the components needed proceed uninterrupted. In this case, a one-piece-at-a-time production process is facilitated creating a lean manufacturing and supply chain environment (Liker, 2004, p.4).
The way Toyota implements its supply chain management strategies is by facilitating the behavior and principles which facilitate production focused on long term results and not on short term gains (Drogosz, 2002, p.5). From the perspective of Toyota’s supply management framework, the flow concept forms the basis for the company’s success and enables the company to eliminate losses from the large inventory of unused equipment, products, and labor (Huntzinger, 2002, p.21).
In addition, the company’s cost per piece production system works by assigning specialized tasks to qualified employees and provides a separation of duties and responsibilities within the company framework, which contributes to the success of the company.
In this case, the products are made in quantities that are in demand. The benefits include short lead times and the making of specific products to address specific needs of the customer. To be lean, Toyota uses a tool that requires each employee’s commitment in eliminating wastes that leads to errors, injuries, and defects.
In addition, the necessary training, knowledge, and motivation are provided to workers by improving the workplace environment (Drogosz, 2002, p.4). The key elements in this approach are management commitment, appropriate training and development, and inculcation of organizational culture that supports the top management commitment and involvement to continuous improvements. In each case, problems could are brought to the surface and solutions to address the problems formulated on time.
Pulling from the customer
On the other hand, the concept of pulling from the back of the customer is a crucial component in Toyota’s supply chain management strategy. All the lean activities are integrated into the system where products are supplied according to the current need and use. Typically, the products are delivered in the right quantities and at the right time to the right destination. The logistics is crucial because it reduces the lead time and costs (Drogosz, 2002, p.4).
A question on the strategy the company uses to implement the pull from the back approach occurs. The answer is obvious. The underlying principle is the just-in-time (JIT). The principle provides the basis for material replenishment, minimal effort and warehousing inventory, based on what is taken by the customer to make small replenishments and ensuring responsibility in the day-to-day changes in the demand for products.
The solution is to integrate computerized information systems for inventory processing purposes (Huntzinger, 2002, p.22). The pull concept is crucial in the entire supply chain management process because the entire workforce uses stable and repeatable methods to ensure regular output, predictability, and timing which form the foundation of the pull and flow concept (Drogosz, 2002, p.5).
The question arises then, how is the lean concept realized in the supply chain of the company in the context of the pull and flow approaches? The answer is that the lean concept becomes a success by ensuring that wastes are eliminated in each phase of the supply chain cycle.
The company ensures that employees and the entire supply chain system is not overburdened (Huntzinger, 2002, p.17). All production and supply chain schedules are evenly distributed to minimize unnecessary burden on the system so that the work is evenly leveled.
Talk time
Talk time is one of the concepts that are the foundation of Toyota’s lean concept in the supply chain management exemplified in the way the management talk about the need to eliminate waste. The management ensures non-value adding activities are avoided to eliminate wastes to reduce lead time, excess inventory, and other delays.
It enables the company to avoid overburdening people and machinery which leads to quality and safety problems. The people are encouraged to talk with qualified and trained group leaders on the problems and challenges encountered and possible solutions to the problems.
Significance of supply chain management
One can learn the significance of supply chain management from the above discussion and the way Toyota undertakes the supply chain management process embedded in the lean thinking strategy. Supply chain is critical in the total management of each of the phases involved in the supply chain to eliminate wastes and ensure effectiveness and efficiency (Huntzinger, 2002, p.12).
In addition, supply chain is important because the management is able to identify and align effective inventory management, inbound transportation, material handling, warehousing, and transportation service procurement based on Toyota’s supply management lean thinking strategy (Huntzinger, 2002, p.5).
Toyota, through an effective supply chain strategy embedded in the company’s lean thinking concept has made the company grow in its revenue base (Bolles, 2003, p.3).
In addition, the company has experienced effective asset utilization, effective cost management and controls, and enhance customer product and service delivery. As discussed above, Toyota’s growth is strongly correlated to its supply chain management because perfect orders are given for the right market, with after sales services easily within reach of the customer (Huntzinger, 2002, p.7).
In addition, reduced inventory as stated above leads to working capital reductions where delays in the delivery of products and services are minimal or lacking completely. Investigations show that Toyota’s supply chain management strategy leads to fixed capital efficiency by optimizing the supply network leading to a global tax minimization and cost minimization. However, the negative side of supply chain management exists (Huntzinger, 2002, p.5).
Negative impact
Studies show the negative impacts include the risks resulting from the macro economic trends which have the possibility of magnifying the problems that arise because of the complex nature of the supply chain methods (Bolles, 2003, p.3). In addition, other problems include margin erosion and changes in consumer behavior and sudden changes in demand, which makes the supply chain management worse, and the lack of new technologies to absorb the sudden changes (Bolles, 2003, p.3).
Conclusion
In conclusion, Toyota’s supply chain management is embodied in the lean manufacturing concept developed by the company for efficiency and effective delivery of products to the market. The significance of Toyota’s supply chain management is valuable and acts as a tool for efficiency and effectiveness in product and service delivery. The key pillar of the effectiveness of Toyota’s supply chain management is the lean thinking concept which has many benefits despite the negative impact of the supply chain management.
References
Bolles, R. N. (2003). What Color Is Your Parachute? A Practical Manual for Job – Hunters and Career-Changers. Revised edition. Berkeley, CA: Ten Speed Press.
Drogosz, J. D. (2002). Applying Lean above the Factory Floor. Journal of Ship Production, 18 (3), 159-166.
Huntzinger, J. (2002). The Roots of Lean: Training Within Industry: The Origin of Kaizen. Target, 18 (1), 1-20.
Liker, J. K. (2004). The Toyota Way: 14 Management Principles from the World’s Greatest Manufacturer. New York: McGraw-Hill
Ohno, T. (1988). Toyota Production System: Beyond Large-Scale Production. Portland, OR: Productivity Press.
Strategic management refers to the methodical examination of the factors related with clients and competitors and the firm to come up with the ground for maintaining maximum management practices. Simply put, it is the process of examining the internal and external environments of an organization (BusinessDictionary.com, Web). Strategic management involves examination, decisions, and actions that a firm carries out to create and maintain competitive advantages (Dess, 2005).
Competitive Strategy refers to continual plan of action designed to enable an organization achieve a competitive advantage in a certain market segment or over its competitors (BusinessDictionary.com, Web). Deriving from this, strategic competitiveness is the advantage that one firm has over its competitors. This essay seeks to examine Toyota Corporation on various aspects.
Impact of Globalization and Technology on Toyota Corporation
There exist different definitions for globalization but for the sake of this essay, globalization is the evident identifiable organization of firms and regulations that enable taking of advantage of communities and states and their resources by international companies (Vogel, 2008). Globalization happens not only in the developing world but also in the developed world. For instance, Toyota has 13 operational manufacturing units in North America (Vogel, 2008).
The Toyota Corporation laid claim to the fact that its revenues went up due to ‘lean manufacturing’ but looked at closely, that translates to a myth. Globalization has enabled Toyota Corporation to venture out into regions that have cheap labor.
This is what the company has taken advantage of, as well as the drastic slashing of operational costs to boost its revenues (Vogel, 2008). Where technology is concerned, Toyota has engaged in hybrid technology, an idea that saves on fuel consumption. This has lead to a high demand for such cars and more revenues for the company (Vogel, 2008).
Industrial Organization Model
Industrial organization Model of above Average Returns looks that the external environment influences the strategic plans of an organization. According to the model, the production field that an organization opts to compete in has a greater impact on performance than the options that the management comes up with in the company (Adner & Helfat, 2003).
The organizational performance is seen to be influenced by such industry features like economies of scale, penetration barriers, differentiation of products and services, diversifying, and the level of concentration of organizations in the industry (Adner & Helfat, 2003).
The model operates on four assumptions. First, external environment exerts force and constraints that will influence the strategies that will lead to above-average returns (Adner & Helfat, 2003). Secondly, majority of the rivals take charge alike strategically relevant inputs and such inputs dictate the companies’ strategies (Adner & Helfat, 2003).
The third assumption intimates that inputs used to realize strategies are highly movable across organizations and as such, input gaps between various cannot last long (Adner & Helfat, 2003). Lastly, a company’s management is rational and acts in the best interest of the organization as indicated by their desire to maximize profits (Adner & Helfat, 2003).
The model decrees that firms must identify the most appealing industry in which to compete. This is informed by the fact that firms in any industry have similar valuable inputs that are transferrable from one firm to the other and that for firms must therefore compete in the industry with the greatest profit potential (Adner & Helfat, 2003).
In addition, firms must learn ways of utilizing their inputs to execute strategy required by the field’s structure features (Adner & Helfat, 2003). Toyota could earn above average returns if it embarks on the technological innovativeness that has driven it throughout the years. More research should be carried out on hybrid models of vehicles.
Resource Based Model
This model is based on the uniqueness of an organization’s internal inputs and abilities. A five-stage system explains the interconnections between input identification and method selection that will afford the company over average profitability (Open Learning World.com, n.d.). Therefore, the model emphasizes that an organization’s inputs and skills are more crucial to realization of profitability than the external resources or strategic decisions (Open Learning World.com, n.d.).
The five stages include inputs, skills, competitive edge, an appealing industry and strategy formulation and execution as explained hereafter. Primarily, organizations must identify their internal inputs, and gauge their strengths and weaknesses against rivals’ strengths and weaknesses (Open Learning World.com, n.d.). Secondly, organizations must know what set of inputs grant the organization capabilities that are special to the organization compared to their rivals (Open Learning World.com, n.d.).
The company should then gauge the potential for their special group of inputs and skills to outdo their competitors regarding profitability. In other words, the organization should prognosticate how the inputs can grant them competitive edge in the industry (Open Learning World.com, n.d.).
The fourth stage involves detecting and competing in an appealing industry (Open Learning World.com, n.d.). Lastly, if companies must realize above average profits, they must come up and execute strategies that enable them to utilize their inputs in a better way to exploit chances in the external environment (Open Learning World.com, n.d.).
Toyota is currently the world’s greatest car manufacturer. This implies enough internal resources and all that they need to do is to come up with strategies to allow them exploit the external environment where they have a niche too in selling hybrid cars (Vogel, 2008).
Toyota’s Vision and Mission Statement and Their Impact
The company’s global vision as it is called influences the company’s overall success in that, it encompasses all stakeholders and gives a very special place to the global environment.
In addition, the global vision takes keen interest on current and future innovations, which the company expects to be the best. In other words, the mission and vision statement adopts both industrial organization model – focus on external environment- and resource-based model – focus on the internal resources and capabilities (Vogel, 2008).
Lastly, the company utilizes both internal and external stakeholders to reach great heights in the industry. The company engages the best employees possible and trains them accordingly. In addition, due to its superior innovations and eco-friendly products, the company is in tandem with its actual and potential customers (Vogel, 2008).
Conclusion
For any company to succeed in an industry, several factors must be at play. The company must understand the whole concept of globalization. In addition, they must be aware how globalization can affect the company. It must take advantage of such incentives like cheap labor force and local government subsidies.
In addition, the company must focus closely on its internal resources as well as its external resources or opportunities therein. Unique internal resources enable a company to go out and exploit opportunities in the external environment. Lastly, the mission and vision statement must encompass all that a company intends to do.
References
Adner, R., & Helfat, C. E. (2003). Corporate Effects and Dyanamic Managerial Capabilities. Strategic Management Journal , 1011-1025. Web.
Toyota Motor Corporation is a Japanese company that was started by a man called Sakichi Toyoda in 1924. Toyota Foundation was established in the year 1974 after which the prefabricated housing business was begun in the year 1975. In the year 1988, Toyota Motor Manufacturing, USA, Inc. was established and began its production. The years that followed were characterized by the company undertaking massive expansion programs that enhanced its policy of globalization.
In the year 2008, Toyota maximized its sales amounting to the 1 million mark. In the year 2010, Toyota hit the 2 million mark of its sold products (Toyota 2011). This report reviews how the company manages its operations, the culture, marketing strategies and financial practices. The success of Toyota is therefore a paradigm to many companies that intend to capitalize on matters of globalization.
Trade Risk and Management
Managing trade risk is an essential part of any business organization, whether it is dealing with local products or dealing with international products. Trade risk management has helped business organizations expand and remain in the market for a long period. This means that without trade risk management, it is difficult for a business to expand.
The management of Toyota Motor Corporation (TMC), has ensured that it manages trade risks to enable it expand more and spread its roots in globalizing its operations. This is actually because trade risk management is an important aspect of globalization. Trade risk management predicts by indicating where or when the risk is lowest (Reuvid 2006).
Thus, it helps TMC to have the opportunity of making more money. To summarize this, trade risk management is actually practiced by smart business organizations like TMC. It is not necessarily important for one to feel lucky, or for a business organization to fancy its chances of flying blind into the market. In fact, the business organization should actually feel the opposite. It is very important for the organization to conduct a serious market research and analysis before venturing into a business operation.
TMC ensures that this research is conducted extensively through a considerable amount of time. The good part of making money in business is that a business organization need not have gurus and the smartest mathematicians in order for it to make money in the market. The organization only needs smart people who would let trade risk management give the business a winning edge (Trade Risk management 2010). This is actually what TMC is made up of.
The expectation of TMC is that the demand for hybrid vehicles will increase in the near future. It is therefore beneficial for the company to offer this kind of technology for an affordable price. In order to guarantee high quality at lower prices, the company is contemplating the implementation of more cost reduction. This is one of the reasons why the company is planning an efficient use of unemployed and idle facilities.
Cultural sensitivity
The most important aspect in a large and successful organization like TMC is the communication within the organization, as well as the communication between the customers and business partners (Liker et al. 2008). Cultural interests and sensitivity, self-awareness, and global mind-set act as solid foundations of any international business operation.
The leadership of TMC has developed a kind of cultural sensitivity that accommodates diverse cultures and remains competitive in the global market. The development of these competencies has been initiated through foundation courses that focus on cross cultural management issues and skills (Doh & Stumpf 393). In addition to the above, the leaders have been exposed to a variety of experiential assignments that address not only cross cultural sensitivity but also self awareness.
TMC ensures that it recruits its workforce from highly competitive people who have the necessary minimum requirements for the jobs. The company also trains its staff on relevant courses in order to stay abreast with globalization issues. Such courses serve to expose the employees to different countries and cultures at the same time so that they are better equipped in the competitive global market (Doh & Stamp 393).
Globalization
Globalization has enhanced greater mobility in international capital and labor markets, which creates a global marketplace that offers more opportunities due to the availability of more customers. The increased competition between local and foreign companies improves the quality of the products and services offered to consumers.
TMC has ensured that it continues to globalize its operations with minimum conflicts between the stakeholders in the automobile industry. The company has also ensured that it remains in the market by maintaining the high level of competition. Thus, the company has avoided the conflict caused when technology for manufactured goods becomes synchronized internationally.
This is because multinational companies with different sets of norms and other characteristics compete in the markets for goods that are similar. This creates tension in trade especially when it releases forces, which tend to overshadow those policies that are set in place in local workplace operations. TMC has tackled this problem by enacting a new philosophy that came into action in 1992. The philosophy encompasses guiding principles of its domestic and international operations.
Marketing Strategies
Toyota is the most valuable car brand in the world with a brand value of USD 58 billion. The company is not only focused on general advertisements such as TV, Radio, and internet. The company also focuses on charity activities, motor sports, movies and many others.
The brand name is actually a representative of eco-friendly, beloved, efficient and dynamic cars. The logo of the company consists of three bonded ellipses that symbolize Toyota’s philosophy: the ambition for customer satisfaction, innovation and fusion of quality and creativity (Borowski 2010).
Financial Practices
TMC has been successful in managing its inventory. The table below shows a comparison of Toyota’s inventory turnover ratio and days’ inventory on hand in 2007 and 2006. Dollar amounts are in millions: inventory in 2005 is $12,568.
Source: Needles & Powers
From the above table, it can be deduced that Toyota experienced a small improvement in its inventory turnover, as well as a mall reduction in the number of days it had inventory on hand. This is actually a good performance, especially in light of the decline in the housing market and economy later on in the year 2007.
The company uses supply-chain management and a just in time operating environment to manage its inventory. By doing so, the company reduces its operation costs. A note in Toyota’s annual report discloses how the company uses the average costing method and applies the lower-cost-or-market rule to its inventories. This means that Toyota’s approach to valuation adheres to the conservatism convention because it may recognize losers in value before the products are sold if their value decreases.
Branding
Different brands of TMC have different effects on the customer’s image. For instance, some customers may recognize high quality brand names for their automobiles. It is thus very important to display such names so that the purchasing decisions of customer are made easier. TMC does exactly that to all of its brands.
The operators of the company’s products have a positive experience with the company’s brand. Customers also feel more positive about Toyota’s brands. This is because they have developed that confidence in the company’s products (Feinstein & Stefanelli 2008).
Brand position is clearly a strategy for competitive advantage. Developing a brand statement should occur after an extensive research of the market has been done. This statement must be easily understood by the target audience. Its context must be properly presented to demonstrate its relevancy in the market. Brand positioning must promise the customers that which it has to offer. If the existing customers get what the brand promises, they will help in marketing the brand. This will help to increase the market share and thus increase the volume of the product.
Brand positioning should also have the ability to deliver the unexpected because an engaging and unique message to the customers always attracts them to the brand. Customers will expect the organization to offer good services or standard products. This means that if an organization has to increase its market share, it must offer quality services or products that are above the standards of other similar products to enhance competitive advantage (Bloise, 2011).
Brand positioning is therefore not about running more ads because this does not actually increase the number of customers of the brand. The most important thing that branding should be able to demonstrate is to differentiate itself from other competing products in the market (Sengupta 2007). This is exactly what TMC has managed to do.
Foreign Direct Investments
Toyota Motor Corporation has invested in many foreign countries everywhere. It has foreign investments in Europe, Asia, Africa and the American continent. Its direct investment includes factories that manufacture automobiles under supervision from the head quarters (Stonehouse & Campbell 2004). For instance, the total investment for the expansion of Toyota’s operations in Europe would amount approximately USD 2 billion.
The main reason for the selection of France was that the French small-sized car market was one of the largest in Europe. Toyota Motor Corporation also expanded its operations through Poland taking into considerations factors such as geographic position that is close to carmakers, high unemployment rate in the region and the availability of abundant subterranean water needed for industrial production.
Thus, during the year 1999, Toyota announced an investment of around 10 billion Japanese yen for an initial employment of 300 workers. The transmissions produced in Poland would be exported to France, the UK, and Turkey for Toyota car production in the three countries (Marinova & Marinov 2003). This is just one of the major direct investments of this noble multinational corporation.
Conclusion
The most important aspect in a large and successful organization like TMC is the communication within the organization, as well as the communication between the customers and business partners. Toyota is the most valuable car brand in the world with a brand value of USD 58 billion.
The company is not only focused on general advertisements such as TV, Radio, and internet. The company also focuses on charity activities, motor sports, movies and many others. The success of Toyota is therefore a paradigm to many companies that intend to capitalize on matters of globalization.
Reference List
Borowski, A. (2010). Report on the Toyota Company. Norderstedt: Grin Verlag.
Sobek, II, D.K., Liker, J.K. & Ward, A.C. (1998). Another look at how Toyota integrates product development. Harvard Business Review, 76(4), 36-49.
The present article deals with peculiarities of product development in Toyota. Sobek et al. (1998) also compares Toyota’s strategies with strategies used at US companies. The authors reveal the most effective strategies that can be used to improve the process of product development.
Sobek et al. (1998) claim that Toyota combines functional and project-based structures. At that, Toyota manages to create the necessary balance which is beneficial for the process of product development. Thus, the authors argue that engineers in Toyota work in certain groups on different projects without ignoring their primary functions.
Sobek et al. (1998) state that the secret of their success lies in proper communication. Thus, the groups use written and oral communication. Again, Toyota has created the balance between two forms of communication. The authors also note that one of the advantages of strategies used by Toyota is precise supervision.
One of the greatest achievements of the company, in the author’s opinion, is a specific type of supervision. Thus, chief engineers encourage engineers to find solutions rather than simply provide their strict instructions. Importantly, chief engineers at Toyota do not have much control over engineers, i.e. they cannot simply reject this or that solution, though they have a great authority so their opinion matters.
This leads to effective communication between supervisors and engineers. Moreover, chief engineers do not stop developing their technical expertise, so their authority is sound. Another advantage of strategies used in Toyota is the use of flexible standards. Thus, the company has particular standards which enable every engineer to check whether everything is done right.
However, the checklists are often up-dated which makes the standards always up-to-date. Besides, Sobek et al. (1998) note that the company pays much attention to consumer’s needs. Thus, the company’s employees have to sell cars for some time to acknowledge what consumers may need.
Finally, the authors also conclude that the strategies used at Toyota can be effective for this company only, in other words, these strategies can be inapplicable for other settings. Nonetheless, the researchers also note that some techniques can be effectively used by US car manufacturers.
Key points
One of the major findings of the article is that many of strategies used at Toyota can be used at US companies. The researchers compare Toyota’ strategies and techniques used at American companies. The authors reveal advantages of strategies used at Toyota.
For instance, the authors point out that communication between project groups is essential in the process of product development. The authors note that Toyota incorporates written and oral communication really effectively. Thus, engineers work out really precise reports where major issues and recommendations are highlighted.
The reports are distributed among people involved. If the issue is two complex, a meeting is arranged, where the issue is discussed in detail. Admittedly, this is very effective as engineers do not waste their time during long meetings.
They come prepared for an effective discussion as they have learnt major points from the reports. Notably, the reports designed are highly standardized and really brief, so engineers do not spend much time over these reports as well, but these reports highlight the most meaningful information.
One more point discussed is supervision at Toyota. The authors portray a very interesting approach. Thus, supervisors do not simply control, as the “chief engineer has no formal authority over them [his subordinates], so he must “persuade” them to help him realize his vision for the vehicle” (Sobek et al., 1998, p. 42).
Thus, the supervisors do not restrict creativity of their subordinates, but encourages them to work out new solutions. Admittedly, this approach enables the engineers come up with lots of fresh solutions. More importantly, supervisors at Toyota never stop self-developing.
Unlike US colleagues, who stop developing their technical expertise when they occupy managerial position, supervisors at Toyota do not stop acquiring knowledge in the field of technological development.
Finally, now many American companies do not have particular standards as they claim that technology develops too fast, so standards become outdated soon. However, at Toyota there are checklists which enable the engineers make sure they do not miss anything.
Of course, these checklists highlight the most important points. These checklists are updated all the time so they are never out-of-date. Admittedly, this strategy helps engineers to ensure high quality of their products.
Follow-on research
It is necessary to point out that successful techniques and strategies used at Toyota have inspired many companies to change their ways. Many researchers also paid much attention to the development of particular strategies that can be applicable at American companies.
For example, Emiliani (2008) focuses on the concept of “standardized work” which can help executives improve their leadership (p. 24). Thus, the researcher highlights the most typical errors made by leaders. The author also suggests ways to eliminate these errors.
Just like Sobek et al. (1998), Emiliany (2008) claims that standardized work can help companies improve the process of product development if the standards are always up-to-date. Another interesting work dwells upon Lean Product Development (Radeka & Sutton, 2007).
Thus, Radeka and Sutton (2007) point out that when developing new products, it is essential to pay attention to communication between the groups involved, expertise of executives and consumers’ needs. These three areas are essential for effective product development.
It is possible to state that the three articles reveal effective strategies to use when developing new products. The articles also highlight successful experience of Toyota which uses strategies which have already become applicable for many companies in different settings.
Applications
The present article provides valuable insights into the process of product development. Thus, companies can improve this process incorporating successful experience of Toyota. Thus, communication is one of the major problems that companies face. The article verifies that it is possible to balance oral and written communication.
Thus, the companies can use Toyota’s successful experience to reduce the number of face-to-face meetings (and reduce the meetings’ duration) to more effectively manage their time. Brief reports can improve effectiveness of meetings as participants will be prepared and will remain focused on the major issues.
Another important issue to take into account is proper supervision. Thus, it is essential to make sure supervisors are experts in their fields. This will enable executives of the companies to make the right decisions as they will be sure that supervisors are able to see the complete picture.
In fact, the article highlights several major points to pay attention to while developing new products. Every executive can work out specific strategy for his/her company to improve the process of product development on the basis of the information provided in the article.
Reference List
Emiliani, M.L. (2008). Standardized work for executive leadership. Leadership & Organization Development Journal, 29(1), 24-46.
Radeka, K. & Sutton, T. (2007). What is “lean” about product development? PDMA Visions Magazine, 31(2), 11-15.
Sobek, II, D.K., Liker, J.K. & Ward, A.C. (1998). Another look at how Toyota integrates product development. Harvard Business Review, 76(4), 36-49.
TMC’s ability to create change is evident in the established principles that guide management as well as, production. Their key principles are based on respect for others and the need to improve incessantly. It is noteworthy that TMC has improved significantly over the years through the establishment of a long-term goals and continuous innovation.
This is possible due to TMC’s ability to deal with challenges, further increasing its ability to initiate and maintain change. The entity has also developed a culture of exploring the causal concepts of problems that arise rather than merely eliminating them. This eventually aids in countering the obstacles to change. Respect for authority and change is crucial since it enables people to work as a coherent team. It entails the ability to understand each other thus fostering trust (TOYOTA, N.D).
The culture of TMC
Evidently, TMC has implemented change productively by carefully following its inherent principles. These principles are divisible into four categories. First, an organization should establish a long-term goal even if this could affect the short-term fiscal targets. A long-term target provides stimulus towards accomplishing what initially seemed difficult to attain (Liker, 2004).
Secondly, following the correct procedure leads to the acquisition of the desired outcomes. This entails the creation of a process that is continuous thus getting to the core of problems that arise. It is crucial to follow the correct processes in order to reduce overproduction. It also creates a leveled out workload for employees and machines.
Application of correct procedures has enabled TMC to build a culture of recognizing problems as they arise and solving the problem in order to attain the right quality during the initial stages thus avoiding redundancy. Every employee at TMC has the mandate to interrupt production whenever a problem arises. TMC only uses the finest know-how available to serve its people as well as, production (Morgan & Liker, 2006).
Thirdly, value can be added to an organization by developing its employees. This can be achieved through building and maintaining an erudition culture. The leaders of TMC strive to understand their work through paying constant attention to the organization’s philosophy.
They realize the importance of infusing outlined principles by regular enlightening and training of employees (Liker, 2004). This way, exemplary teams that follow the organization’s philosophy emerge. Toyota extends the same actions to their suppliers by challenging them to constantly improve.
Finally, analysis of the core problems ensures an organization’s growth in terms of learning. At TMC, managers have to visit operations in order to understand these operations and establish ways of improving them. These mangers also follow the principle of making decisions inn a concerted manner thus exploring possible options. The final decision is then implemented within the stipulated duration. An organization best develops a learning culture by criticizing each aspect of employee action (Liker, 2004).
Potential strategic changes for the future
Competition in the automobile industry has increased tremendously over the years. In order to remain successful in this industry, Toyota has put in place various measures. It has built substantial capabilities within the organization as well as, a network of suppliers that is effective.
TMC intends to focus on establishing an effective way of managing transformations. It entails developing a clear comprehension of the current state, having a clear perception of the future and guiding the company through the change process (Ireland, Hoskisson & Hitt, 2008). Toyota envisions ways through which they can optimize their investments by consulting various relevant firms as well as establishing influential links with consumers.
References
Douglas, A. (2009) Partnership Working: New York: Routledge
Ireland, D., Hoskisson, R. & Hitt, M. (2008) Understanding Business Strategy: Concepts and Cases: Ohio: Cengage Learning
Liker, J. (2004) The Toyota Way: 14 management principles for the world’s greatest manufacturer: New York: McGraw-Hill Professional
Morgan, J.M. & Liker, J.K. (2006) The Toyota production development system: integrating people, process and technology: New York: Productivity Press
TOYOTA. (N.D). Vision and Philosophy. Toyota Retrieved from www2.toyota.co.jp/en/vision/index.
Crisis is a symbol of an important business interruption that motivates the widespread coverage of mass-media news. The administration of crisis should be put in place to guarantee the well-being of an organization. This ought to be done by the Public Relations department whose starring role in crisis management must be clearly elaborated (Regester & Larkin, 2008). Crisis has some effects on the organization.
Initially, competence in communication will make certain and reflect the manner in which an organization PR manager handles the crisis. The role of PR, how these roles are efficiently implemented, along with how the PR communicates and engages with the media in dealing with crisis management is explained.
How the PR specialists manage crisis using key rules and 5Cs effective models of communication in dealing with the media is discussed. The paper also analyzes ways in which the PR exercises 3Ps of Jefkins in managing crisis.
The definition and effects of crisis in an organization
Crisis may possibly denote a significant business distraction that motivates widespread coverage of the mass-media news. This may mean dissimilar labels are being granted to the crisis contingent based on the likelihood of the incidence and level of risk involved (Ralhp & Yeomans, 2009). The concepts of issue and crisis management may well delineate a possible crisis that is, likely and unlikely crises.
The administration of crisis is depicted as an imprecise and extensive concept largely relating to the possible unlikely events that reduce the organizational functions. The likely crisis has an elevated risk of incidence including loss of company reputation, properties, or even death. However, the concept of crisis is considered as more focused in varied organizations (Seeger, Sellnow & Ulmer 1998).
Effective implementation of PRs role
Provision
The department of PR should ensure that there is the improvement of an even provision at the crisis management stage. The practitioners must put more emphasis on the communication amongst organizational group members. The strategy empowers the factions to reach an agreement and be reliable on what ways to divulge into the mass media (Seitel, 2011).
Uniformity in various organizations appears to be an actual pitfall. Therefore, it is significant to employ effective communication from the PR to stabilize this bottleneck and put it right. It is similarly essential to initiate an effective administration of information during the crisis moment. Hence, the PR puts media provision in place to curb an austere impairment to organization’s operation.
Preparation
The PR must make certain an arrangement of permanent lineup for crisis supervision. The management crews of certain organizations should consist of a combination of different individuals (Seitel, 2011). Certainly, this incorporates other departmental managers, communications, and Brands executives from Public Affairs department, and the managing directors.
Indeed, this will help the PR manager to manage the organizational crisis through adequate preparation (Cutlip, & Broom, 2006). However, lack of regular contact by way of correspondence or conference possibly emerges as a defect in preparation. The PR practitioners organize crisis management preparations regularly for efficiency and efficacy management.
Prevention
According to Coombs (1999), the PR should source the process of prevention through forestalling whatever might not go well in an organization (Millar (2002). The PR should implement apt crisis management strategies and classically administer crisis management plans.
Really, the Public Relations should look various loopholes in the crisis management plan that could ascend over a particular period. The PR experts make sure they prevent the happening rather than to deal with the catastrophe, which might come about.
The 5Cs communication models
The PR must not panic, doubt, or fail to address the matter because it could create suspicion. In fact, communication made by the PR manager should be done without arrogance and with confidence to initiate oneness in the corporation (Barton, 2007). Third, during the occurrence of a crisis, it is essential for the PR to communicate in a controlled way and demonstrate that the condition is under control.
For example, from the start until the culmination of an affair of crisis, clarity is actually important for effecting the role of the PR (Mitroff, 2003). Whoever is communicating the crisis ought to use clear correspondences and communicate it with clarity to augment ease during the process of management.
Throughout the duration of crisis, the PR manager through recurrent messages to repute good public relation should lay notice. Finally, PR necessitates showing their concerns for everything or everybody involved in the event of crisis, the clienteles, workers, and the condition of crisis itself.
Hence, concerning the key rules dealing with the media in a crisis it is important for the PR to engage media through concern communication (Lerbinger, 1997).
The PRs engagement and correspondence with media
Due to energy, finance, and costs of time, many organizational PRs do not prioritize preparedness. Hitherto, it is today significant for an organization to engage rules and communicate with media in readiness for the crisis. However, communication directors frequently outlay a number of motives for failure to communicate properly.
Among these motives is illuminating repetitive or proprietary info that might give the corporation fresh competitive disadvantages (Coombs, 2007). Secondly, unless the PR fabricates the issue of how to solve the crisis then communication will remain poor.
Furthermore, communication fails if the company faces recent bottlenecks and is unable to comment on it since the problem will influence the entire corporate reputation. In addition, lack of a skilled communication personnel or spokesperson causes communication barrier thus, the situation should be reversed through proper recruitment of competent personnel (Ulmer et al, 2006).
Finally, crave to evade panic and the company requirements to collect all facts before it is conversed make the department of PR not to communicate crisis information properly (Lecture, n.d.).
In the course of crisis, media is the utmost frequently used channel of communiqué by the PR in several organizations. Nonetheless, to communicate to the mass media is repeatedly critical. Bearing in mind, communication of crisis becomes a problem in the absence of trained spokesperson.
Therefore, the Public Relation in an organization should put in place the crisis managers to communicate with the media fraternity. For this to be effective, then these employed organizational spokesmen should engage and follow the 5Cs rule of media communication (Venette, 2003).
The function of Public Relation in the management of crisis
Successful Crisis management: The 2010 BP oil spill
The BP oil group is one of the examples of organizations that successfully dealt with crises. BP Corp properly managed the April 2010 oil spillage catastrophe. The corporation managed the crisis via its strategies built on the courage of doing the right thing, consistency, admiration, and good media communication.
Besides, the department of Public Relations found at BP ensures the improvement of the even provision at the crisis management stage. For instance, the practitioners put more emphasis on the communication amongst organizational group members.
The provisions empower the factions to reach an agreement and be reliable on what ways to divulge information to the mass media (Seitel, 2011). Hence, the PR manager at BP Oil Group puts media provision in place to curb an austere impairment to the organization’s operation.
With the comprehensive PR powers to audit and administer the corporation’s operations around the globe, BP Corporation was adequately prepared and able to publicize the formation on fresh safety divisions few months after the spillage.
BP succeeded to manage this crisis successfully through its preparation strategies intended to streamline the upstream departments into Production, Development, as well as Exploration divisions from a single business (Regester & Larkin, 2008).
Further, in respects to preparations, the BP Public Relations manager makes certain the arrangement of permanent lineup for crisis supervision. Indeed, the crisis management preparations reveal that the BP Public Relations manager maneuvers to manage the organizational crisis through adequate preparation (Cutlip, & Broom, 2006).
The inbound CEO initially brought these three units into being with the aim of reconstituting trust in BP. Thus, the spillage and fire that engulfed BP was seized successfully.
BP oil group also implemented some crisis prevention strategies. As Coombs (1999) claims, the BP Oil Group PR sources the process of prevention through forestalling whatever might not go well in the organization.
In fact, the BP Oil Group employed this better safe than sorry strategy while adopting the classical crisis administration plan. The Public Relations looked after the watershed matters that could ascend over a particular period.
When the BP 2010 oil crisis occurred, the PR showed competence in communication by keeping contact by parties involved, made certain and reflected the manner through which BP PR manager handled the crisis. The PR hardly panicked, doubted, or failed to address the matter relating to the incident.
In fact, communication made by the BP PR manager lacked arrogance and were with confidence to initiate oneness in the BP Corporation. During the BP crisis occurrence, the PR communicated in a controlled way and confirmed that the condition is under control. There was clarity when articulating the crisis information. The BP Corp PR manager showed concerns for everything involved in the event of crisis.
Poor crisis management: Toyota Corporation
Poor crisis management strategy at Toyota in the fiscal 2010 caused the company its cars long-term reliability and quality reputation. Toyota emerged as the global dominant and entrenched car manufacturer in the fiscal 2007. Nevertheless, the image and dominant position of Toyota began to dwindle in the financial year 2007 as the company faced jeopardy.
Indeed, Toyota cars were criticized from 2009 when various United States road accidents pointed at the unreliability and poor quality of Toyota vehicles.
Initially, Toyota Corporation blamed the clients asserting that it was not the company’s fault. Later, the corporation claimed that most Toyota road accidents might have materialized from particular problems encountered when using different models to create the cars floor mats (Ira, 2008).
In 2010 January, there were additional road carnages and reports that made the company to recollect approximately 2.30 million vehicles, which had gas knob setbacks. Toyota hardly assumed the right communication strategies. In the awake of the crisis, the information articulated was not clear since it hardly addressed the subject matter or the concerns being raised.
The respondent, Toyota management, appeared non-confident when addressing issues relating to the crisis. Lack of confidence emerged from doubts they showed when managing the crisis together with late response to the complaints. The company crisis management team appeared incompetent given that they took longer time prior to appearing before the public to address their concerns.
The incapability resulted from the fact that the crisis management team wanted the issues to be addressed by the lawyers, thus raising further doubts (Ira, 2008). Lack of control and agency when handling crisis meant that Toyota Corporation failed to retain its long-standing reputation.
Conversely, non-uniformity in Toyota provisions appeared to be an actual pitfall. The company failed to employ effective communication provisions from the PR to stabilize this bottleneck and put it right. Besides, Toyota hardly initiated an effective administration of information during the crisis moment.
Hence, appointment of the new communications head and PR manager should put media provision in place to curb an austere impairment to organization’s operation. These impairments may result from any institution establishment of spoiled goodwill and damage to the repute of Toyota (Erika, 2008).
To manage properly crisis, it is advisable that an organization should be adequately prepared. However, this was not the case with Toyota. The company lacked regular contact with the parties concerned and clients for example there was no correspondence or conference held with such stakeholders after, and before the crisis occurred.
The PR manager circumvented this to provide the lowdown and empower the crisis strategy (Ira, 2008). Crisis management preparations at Toyota were only reviewed after the incidence had taken place. Hence, it is advisable that the Public Relation practitioners should organize crisis management preparations regularly for efficiency and efficacy management.
Coombs (1999) asserted that PR experts must make sure they prevent the happening rather than to deal with the catastrophe. At Toyota Corp, the blame was shifted from the company to the clients.
Measures were hardly put in place to prevent the occurrences and reoccurrences of the crises. The communication title of apt subjects and implausible concerns namely, the concerns and disaster administration did not take care of the crisis deterrence phase (Ira, 2008).
Conclusion
Crisis should be properly managed by the organizational PR to ensure success. The administration of crisis is depicted as an imprecise and extensive concept largely relating to the possible unlikely events that reduce organizational functions. It is therefore important to employ and make certain the role of PR openly in the organization.
The engagement of an administrative crisis plan visualizes the safety of organization reputation in any case there is repute hindrance. Hence, to deal with crisis management the PR general practitioners should play an important role in ensuring the application of 3Ps of crisis.
Conversely, the PR should communicate and engage with the media group. This could be by initiating the rules of communication and dealing with the media, including the 5Cs communication models. In fact, the mode of dealing with the issue and crisis management would determine whether an organization would have poor or successful crisis management.
References
Barton, L 2007, Crisis leadership now: a real-world guide to preparing for threats, disaster, sabotage, and scandal, McGraw-Hill, New York, NY.
Coombs, W T 1999, Ongoing crisis communication: planning, managing, and responding, Sage Publishers, Thousand Oaks, CA.
Coombs, W T 2007, Ongoing crisis communication: planning, managing, and responding, Sage Publishers, Thousand Oaks, CA.
Cutlip, AH & Broom, GM 2006, Effectively public relations, Prentice Hall international, New York, NY.
Erika, J 2008, “Linking crisis management and leadership competencies: the role of human resource development,” Advances in Developing Human Resources, vol.10 no. 3, pp. 352.
Ira, K 2008, How Toyota’s crisis management failures added to the billion-dollar settlement, Marshall School of Business, USC.
Lecture N n.d. “Business school: pr concepts and campaigns, crisis management,” Harvard Business Review.
Lerbinger, O 1997, The crisis manager: facing risk and responsibility, Erlbaum, Mahwah, NJ.
Mitroff, I 2003, Crisis leadership: planning for the unthinkable, John Wiley, New York, NY.
Ralhp, T & Yeomans, L 2009, Exploring public relation, Prentice Hall, New York, NY.
Regester, M & Larkin, J 2008, Risk issues and crisis management in public relations: a casebook of best practice, Kogan Page Publishers, London, UK.
Seeger, M, Sellnow, T, & Ulmer, R 1998, “Communication, organization, and crisis,” Communication Yearbook, vol.21 no.2, pp.231–275.
Seitel, FP 2011, The practice of public relations, Prentice Hall, New York, NY.
Smith, L, & Millar, D 2002, Crisis management and communication: how to gain and maintain control, International Association of Business Communicators, San Francisco, CA.
Ulmer, RR, Sellnow, TL & Seeger, MW 2006, Effective crisis communication: moving from crisis to opportunity, Sage Publications, Thousand Oaks, CA.
Venette, SJ 2003, Risk communication in a high reliability organization: APHIS PPQ’s inclusion of risk in decision-making, UMI ProQuest Information and Learning, Ann Arbor, MI.
Toyota Corporation is a Japanese automobile manufacturer that is involved in robotics, biotechnology and financial services. The corporation has been in the industry since 1937, and has had a stain-free history and experienced an unprecedented growth in its operation, currently with over 500 subsidiaries and a labor force of more than 300,000 globally; however over the recent times, the corporation has been facing nightmares of all sorts.
The company has been encountered by a number of crises ranging from leadership crisis, public relations, diminishing returns, and the global economic meltdown to the most recent crisis, the accelerator pedal defaults. In counter to these unanticipated situations threatening its continuity and in an attempt to recover from these crises, the corporation’s public relations department was necessitated to formulate an issue management plan.
In developing the issue management plan, the corporation has identified the important aspects that need consideration: the crisis management methods to be adopted, the Toyota communication plan, and the corporation’s management team. It consists of ways of response to the crisis in reality and perception and metrics to define what scenarios are to be handled as crisis (Gottschalk 2002).
Issues Identification
The company’s issues identification approach takes into consideration the entire process of ascertaining the financial, political, legal, government and communication problems associated with the crisis at hand. It all started with the financial warning that was issued by the corporation anticipating its first ever loss since its operations commenced close to seventy years ago.
A financial forecast that revealed the first ever operating loss was attributed largely to the slump in sales of the manufactured automobiles and robotics and the fact that that the value of the Yen was continuously becoming inferior to the dollar and other major world currencies.
Toyota problems was compounded by stiff competition from other automobile manufacturers notably Honda and the slump in the global economy occasioned by the events in Wall Street. Manufacturers of automobile around the world were faced with a tough challenge due to a shake in the operating environment that caused a sharp shift in demand because of the deepened financial crisis that spread over consumers in worldwide.
According to The Economist (2010), “the entity had reduced its operating estimate to a loss of 150 Billion Yen in its fiscal year that ended March 2010; the reduced estimate was subsequent to surprising the international economic markets by decreasing its group working earnings predictions by an unparalleled 1 trillion Yen.”
Toyota’s situation was further aggreviated by the recall crisis of its recently manufactured automobiles with supposedly faulty braking systems. This all started on 28th August, 2009 when a Californian highway patrol officer was travelling on Highway 125 in Santee California with members of his family when the Lexus ES350 they were travelling in unceremoniously accelerated out of control hitting other vehicles and rolling over an embankment bursting flames, killing all the four occupants.
The incident was said to have been caused by a stuck accelerator that made the vehicle speed uncontrollably. This was followed by a series of similar accidents and complaints from customers over the issue, which led to the recall of over 8.1 million with US reporting 5.5 million cases and also led to suspension of sales of about eight of its best selling brands costing the corporation at least $54 million every day on lost sales.
These crises coupled together have rely had a negative impact on the company’s operations in terms of moneys spend in rectifying the faulty pedals, lost sales, reduced profitability, decreased production and also its public relations. Notably the devastating impacts of these crises are evident on the company’s share, which has hit a new low of $71.80 in the New York stock and the corporation has reduced its networth by about $25 million.
Issues Analysis
Due to the proneness of the corporation to variations in the industry, the corporation has adopted a crisis contingency plan to cover uncertainties occurring, unlike in earlier times the corporation operated without a contingency plan that left the corporation at the risk of bad reputation, public scrutiny, even compromising its continuity in case where a crisis erupts.
The recall crisis took the American market by storm because of the negative publicity and anxiety caused to other customers with the latest Toyota models, the public went into a frenzy with many fearing to use our automobiles and discussions on social networks, televisions and print media reaching fever pitch.
The management of the corporation in the US market went into a crisis meeting to evaluate the accuracy of the allegations and possibly do some damage control. The mangled wreck of the vehicle was collected and taken to the Toyota laboratories for investigations. However, preliminary reports on the crash from both the corporation and independent local authorities indeed showed that the Lexus ES 350 was acquired on a loan from Bob Baker Lexus Showroom of San Diego where the personal car of the victim was being held for repair in return. It was also clear that the Lexus may have been fitted with the wrong floor mats thereby interfering with its gas pedal.
From these investigations, management learnt of the inherent risk in the latest automobiles from the American plant supplied into the market. In October 2010, an article in The Economist highlighted the level of hazard caused by the company’s automobiles.
Those affected were mainly individuals who had purchased their latest automobiles from the American plant. It was also reported that nine other separate incidents where local authority investigations on other accidents involving Toyota vehicles were done.
Majority of the accidents were a consequence of wrong bottom mats and a number of others due to the spruce pieces on the Sienna models. Investigations reported also revealed that the other fatality accidents were as a result of unintended acceleration of the vehicles.
“In depth investigations and analysis by the National Highway Traffic Safety Administration (NHTSA) further revealed that the mats used on the floor of these automobiles were specifically meant for the RX 400 SUV Toyota Lexus but these were erroneously used on the ES 350 model.” This manufacturing error resulted in the accelerator gearshift to wedge against the rubber mats causing the vehicles to speed up abruptly.
Strategy Options
The issues management plan shall incorporate specific management strategy options to be taken during crisis, depending on the nature and extent of the crisis, to minimize the impact of a looming crisis and provide a response mechanism that will mitigate any crisis occurring.
The strategic options should address diverse scenarios of crises ranging from environmental crisis, natural calamities, and technological mishaps; confrontational crisis such as industrial action or crisis arising from management goofs and skewed management values.
For effective strategic positioning in anticipation of crisis, the corporation should provide for crisis planning. Since most crises occur within the predictability of a corporation, for the anticipated crisis, it should identify the dangers or risks involved in its market and come up with an issues management plan, which shows the measures to be put in place when crises strike.
Crisis planning is aimed at minimizing the impact of the crisis and provides a response system and also aims at putting the organization at the best possible position to counteract and recover from crises. However, when planning, the crisis team should be inclusive and not limited to specific disasters, although it can lay more emphasis on the anticipated crisis. A more effective way for the organization to take is creating a crisis management function within its operations.
This operates as a division in the organization and its functions includes; predicting any occurrence of a crisis, planning to curb crisis, communicating and advising the management about the vulnerability of the organization. Issues planning will address matters like crisis management methods, communication plan, management team and the evacuation team.
Another option is creation of a crisis team that is well prepared to combat any crisis. The management should identify the main players to take positions in the team, based on their specialty, character and ability to work.
The crisis team responsibilities include: restoring information networks, control and commands in times of a crisis while acquiring information, so as to provide the senior staff with adequate information on the situation. To enable teamwork and to solve the crisis, the crisis team needs to adopt crisis management, for example performing drills or scenarios to create an imaginary crisis, to evaluate how the team would respond in times of a real disaster.
At the post-crisis stage, the management should put in place a crisis recovery plan. This involves steps that are necessary to bring back the organization to its functioning position. This involves: existing backup of important information, logs, staff and other lists; conducting an insurance review to make sure that it can adequately compensate all risks incurred; exploring legal elements of recovery with the legal department; and reviewing all current service agreements and check for post-crisis provisions and recovery support.
In a case where the company has experienced enduring crisis, which hinder the company’s operation, it could consider discontinuing the business segment, brand or subsidiary affected by the crisis for sometime or forever; or engaging a strategic business combination, such as merger, takeover or amalgamations.
Although this may seem unwise in the short-term, in the long-term it makes sense to the company in terms of; the crisis may spread to other segments, savings in future losses, company reputation and improve on the company’s return on investment (Reid 2000).
Action Plan
For the organization to successfully implement the strategic options at hand, it needs to adopt an action plan. More importantly the action plan should incorporate an elaborate and well-structures communication plan. The communication plan involves coordinating, directing and communicating and providing the levels of command and channels of communication among the crisis team, the stakeholders and media when handling a crisis.
Crisis communication can transform the unexpected into the anticipated and save the company’s credibility and reputation. More importantly is the media management strategy. Media centre is set up that will be headed a chief spokesperson or a senior communications and public relations officer.
From this centre, the Chief Executive Officer and the Managing Director will be personally available to give media updates on the state of affairs. The chief spokesman is supposed handle the media while the rest of the staff are advised to keep off not to communicate with the media personally or give any information that could interrupt the process.
However, the adopted action plan should not be static rather flexible and adaptable with pertinent inclusion of issues and specifics that have come up. The action should ensure inclusion of a clear hierarchy of command that mentions by name and authority assigned to a given position in the case of an emergency. The contact of such personnel both physical addresses, postal addresses and cell phone contacts shall be part of the list to ensure information is conveyed expeditiously.
Evaluation of Results
This will entail establishing a mechanism for setting an agenda for evaluation and review. In evaluation of results, feedback is an important pointer. In the midst or after a crisis, the company should institute a corporation feedback mechanism where affected parties will forward their responses and feedback on how they think the situation was handled and ought to have been done or not.
On the corporation’s official website, the management should place a commentary or feedback portal that is interactive and offers necessary information. Also the corporation should design a facility level stakeholders’ scorecards” managed by the corporation’s CSO (The Economist 2009).
Reference list
Gottschalk, E. (2002). Crisis Management. Melbourne: John & Sons.
Reid, L. (2000). Crisis management: planning and media relations for the design and construction. New York, NY: John Wiley and Sons.
The Economist (2009). Losing its shine: Toyota. The Economist, vol. 393, pp. 75-83.
Crisis management is a crucial managerial task which calls for continuous preparedness because of the uncertainty of occurrence of a crisis which could be disastrous or form a platform for catapulting the organization to another echelon. Crisis management is a widely used terminology which applies to diverse occurrences which disrupt the normalcy of organization’s operations.
The term is unique in various companies or organizations; however, irrespective of the name given, the mannerism of dealing with the situation still remains unanimous across the organizations. The environmental factors are both potentially beneficial and potentially destructive to the running of an organization and therefore the management should be on a high alert in order to detect any possible occurrences of interruption.
Crisis is subject to a domain of several variables particularly in international business which include; the features of the event, the significance to both parties, the magnitude of the impact on both parties and the extent to which the event is influential to the neighbouring community (Chemical Engineers, 2005).
Crisis has affected most organizations though this is only clear to the external environment when the effects that come with it are allowed to spill to the surrounding. In some instances the effects are positive hence instrumental promoting the image of the company however in some instances it smears the otherwise good image with mad.
The main focus here will be on two companies which have been greatly affected by crisis leaving behind outstanding effects. In order to clearly demystify the two sides of this phenomenon Toyota Company’s accelerator pedal and toy security crisis whose effects have negatively impacted on the exemplary image of the company will be subject of analysis. Parallel to this, the European Union banking crisis that caused tension among the financial institution is a case in point for successful quenching of a crisis.
Toyota motor Company is a renowned motor vehicle manufacture company for the “Toyota” brand of vehicles. It was established in 1933 as a branch of Toyoda and become an independent company in 1937.
The company has improved its business territories across the world and become one of the major car manufacturing companies in the world, making massive profits as well as upholding a high profile in the international business community. As a result of this the company opened branches in most countries across the world and concurrently increased the production of the motor vehicles.
The company’s production has also widened its base introducing several other products and attracting the world market. The company became outstanding among the lead competitors such as Chrysler and General Motors among others. The company was flourishing with a very outstanding reputation for genuine quality products which gave them economic mileage over their counterparts. Despite this attributes the company was not insulated from the impending crisis.
Owing to the financial crisis of 2007-2010, the company suffered a huge loss reporting immense loss of US $4.2 in 2009. This was due to reduced sales and increased production. The company was caught unaware by this world wide crisis and therefore was not ready at the moment to counter the eventuality. Further the company was forced to recall the Toyota toys in 2007 due to security problems, incurring losses and losing customers trust.
This should have been a perfect lesson for the company and act as a warning for any upcoming hazards. However the company suffered a great setback this year not only incurring losses but also damaging the reputation of the company name further when the company was fined by the National Highway Traffic Safety Administration for their tardy response to the faulty accelerator pedals of the vehicles that they had released to the market.
These crises have negatively impacted the operations of the company and therefore the crisis management was not of positive consequences to the company. The consequences of this are the long term degradation of the image of the company at the same time creating a strong hold for their competitors to take the advantage of this loophole (Hemus, 2010).
The great challenge of any crisis irrespective of the company is the timely detection of the chances of its occurrence. This is important in determining the possible causes of action to avert the crisis since prevention is better than cure. The effects in such cases are mild and in many cases not noticeable by the external environment. It is also of essence in order to have the knowledge of the effects of the crisis to all the concerned individuals.
Toyota Company had a weakness in detecting the signs and symptoms of the creeping crisis. The company also had a weakness rooted in their culture of high quality production of motor vehicle as a result slight deviation in quality became very outstanding. The hierarchical communication system of the company hindered the individualistic nature of crisis resolution where individual’s voluntary deals with the problem at individual level (Littlejohn, 1983).
Prodromal crisis stage is the initial and most important stage in crisis management where the management preplans for the actions for any anticipated crisis. This is the stage where a company focuses on the possible crisis, effects on the operations of the company and what can be done to deal with the situation. At this level the crisis can be averted upon effective execution of appropriate antidotes.
Toyota Company despite early symptomatic signals did not plan effectively to curb the crisis. The response to the security problems of 2007 by recalling the toys did not form a perfect platform for crisis preparedness in the company and therefore when the case of fault accelerators cropped up the company was also caught unaware and a repeat of the earlier eventuality occurred. This unpreparedness caused the crisis to move to the next phase (Erika, 2008).
Acute crisis phase management is the level at which a crisis cannot be averted and thus the future of the company greatly depends on how the company deals with the situation. Toyota Company had the opportunity to deal with the crisis as soon as it occurred but instead they allowed their products with fault accelerator to spread across the market before intercepting it.
The company further incurred losses by sluggish response hence causing them to be fined. At this very stage the integrity, quality and the welfare of the company’s workers is very colossal though this was not the case for Toyota. It is evident therefore that the company did not satisfactorily deal with the crisis at this level (Marr, 2009).
The chronic phase also known as clean up stage is an important stage in protecting the self image of the company. This stage calls for the managerial skills of the company’s leadership to respond to the crisis by using the available tools to clear all the consequences of the crisis such as auditing.
Toyota company were not keen enough at this stage to clear their name off the mess in time and therefore the crisis eroded their image across the world at the same time causing the company to lose enormous finances through the reclamation of their products (Darling, 1994).
Crisis resolution is the final and important phase in crisis management where the crisis is resolved through the application of the planned actions during the prodromal stage. It is this very stage which can act as the prodromal stage of the next crisis because crises are always uncertain and thus requires preparedness.
Toyota Company faced security problems in Toys which was a clear indication of what was standing a head of the company, the fault accelerators. The fact that the crisis still made immense disaster to the company points to the ineffective resolution of the previous crisis and therefore did not act as a prodromal phase to the preceding crisis as is the case in the crisis management theory (Coombs, 2007).
On the other hand successful crisis management can be exemplified by the winning of the confidence of financial institutions to invest in the European banking systems.
The European banking system is a financial institutional that labours to harmonize financial institutions across the territorial boundaries through introduction of transnational institutions and financial stability provisions which would alleviate the tension and thus create a favorable atmosphere for financial transactions across the countries. This saw the introduction of one market and a single passport applicable across the divide ( Fonteyne, et al. 2010).
The crisis that faced European Union was that of fear against financial freedom. The crisis management by the union was very successful in that they were very effective at each phase of the crisis development. The prodromal stage of the crisis saw the union identify the potential occurrence of a tension that would curtail financial transactions across the institutions and therefore they preplanned to effectively solve the situation. The identification being the major task of crisis management was therefore a success.
The next phase of the management being the acute phase was when the tension was at its peak and therefore financial transactions were very expensive forcing individual to restrict themselves within their financial institutions. It is during this phase that saw introduction of single passport and one banking market. The development of tension could not be reverted at this stage but contained.
The European Union was quick in ensuring that the tension did not exceed beyond controllable limits through timely interventions such tax reduction. This phase saw the protection of the welfare of the parties involved at the same time upholding the integrity and the impartiality of the financial institutions. Consequently this led to the offset of the failing cross-border banking and intelligibility of financial institutions and overhaul of the attitude towards increased costs.
During the chronic stage the European Union was successful in clearing the tension through the effective strategies that were put in place which included the assurance of the participants of cost effectiveness of the implementation of the action plans through reduced collateral destruction to the economy as well as lack of costs in the government budgets.
This was efficient in clearing the tension and restoring the confidence of the two parties who were shying off from financial investment in the European Union banking system. The timely response and the application of managerial tools at the disposal of the European Union leadership were instrumental in the effective management of the looming tension among the financial institution.
The actual crisis resolution is the final phase which was authentically approached by European Union through the various action plans which aided in effective financial freedom. This has sufficiently served as a prodromal phase for an impending crisis keeping the union on its toes.
Some of the crisis resolution actions undertaken included; formation of European Resolution Authority (ERA) which was taxed with the role of resolving cross border cost-effectiveness, development of European Deposit Insurance and Resolution Fund (EDIRF) which derived its funds from the industry, systemic levies as well as premiums emanating from deposit insurance and the establishment of legal structure throughout the involved parties (Aghion, Oliver and John, 1992).
Crisis management therefore is a critical and inevitable phenomenon which applies to all organizations irrespective of the nature of the organization and can occur at any time (Fink, 1986). The manner in which the crises are managed is imperative for the future of the company.
It is important therefore to invest in training the management to be ready to deal with crisis because of its uncertainty nature. The crisis of the Toyota has been a very big lesson to many of the world’s large organizations to be prepared for any crisis irrespective of its status or size since crisis does not discriminate.
The organizations’ integrity and prosperity is greatly dependent on the manner in which the crises are solved and the ability of the company to learn from the past crises. The European Union crisis management parallels the Toyota companies approach and act as a blueprint for successful and effective crisis management.
In conclusion planning is a very effective tool for effective running of an organization. It is important therefore to forecast success and keep an eye on the eventualities that might unfold during service execution of individual and organizational duties. Crisis management is as important as it is disastrous depending on what actions are done prior and after the crisis (Darling, 1994).
List of References
Aghion, P., Oliver, H. and John, M.,1992. The Economics of Bankruptcy Reform. Journal of Law, Economics and Organization, 8 (3), pp. 523-546.
Chemical Engineers, 2005. American Institute of. Corporate Crisis Management. New York: CCPS.
Coombs, W.T., 2007. Crisis Management and Communications. Illinois: Institute for Public Relations.
Darling, J.R., 1994. Leadership & Organization Development. MCB University Press Limited, 15 (8), pp. 3-8.
Erika, H.J., 2008. Toward an Understanding of When Executives See Crisis as Opportunity. Applied Behavioral Science, 39 (2), pp.2-7.
Fink, S., 1986. Crisis Management: Planning for the Inevitable. New York: AMACOM
Fonteyne, et al., 2010. Crisis Management and Resolution for a European Banking System. International Monetary Fund, 3 (4), pp. 7-33.
Hemus, J., 2010. Accelerating towards crisis. a PR view towards Toyotas recall. UK: guardian.co.uk.
Littlejohn, R.F., 1983. Crisis Management. New York: American Management Association.
Marr, K., 2009. Toyota Passes GM as World’s Largest Automaker. The Washington Post, 1 (22), pp. 1-22.