Toyota’s Crisis Communication Strategy and Corporate Social Responsibility

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Table of Contents

Toyota Company Background and Crisis Situation
Toyota Crisis and Key Issues
Internal Analysis of Toyota Company
External Analysis of Toyota Company
Approaches to Monitoring the Issues
Focusing on CSR as the Prevention Strategy
PR Crisis Communication Strategy
Importance of Addressing the Issue for Toyota
Conclusion
References

In 2009, Toyota faced a problem of addressing the customers’ expectations and guaranteeing their safety through focusing on manufacturing the high-quality cars and following the ethical practices. The purpose of this report is to provide the critical analysis of the ethical situation and its consequences for Toyota. Much attention should be paid to the strategies used by the company to address the problem and to the critical discussion of these approaches in terms of their effectiveness.

Toyota Company Background and Crisis Situation

Toyota Company was founded as a manufacturer in the automotive industry in Japan in 1937. Today, Toyota remains to be one of the leaders in the global automotive market (Vartabedian & Bensinger, 2009).

The company’s brand reputation and competitive advantage are traditionally based on the high quality, the excellence in the design and engineering, the focus on the innovation and constant improvement, and the customer loyalty. However, in 2009, Toyota faced a challenge of developing an unethical practice while responding to the safety issue (Gorman, 2010, para. 2). This situation needs to be analyzed in detail in order to discuss the variants of addressing the similar problems in the future.

In autumn of 2009, the public and internal stakeholders were informed about the car accident involving a Toyota automobile in the United States that was caused by the car’s uncontrollable acceleration (Gorman, 2010, para. 3). In order to respond to the crisis, Toyota had to recall more than 3.5 million vehicles in the United States to investigate the accelerator problem (Vartabedian & Bensinger, 2009, para. 5).

The National Highway Transportation Safety Administration (NHTSA) also contributed to the analysis of the situation and held a series of investigations (Gorman, 2010). The reported findings indicated that the first accidents associated with the accelerator problem and other technical problems were fixed in 2001 (Gorman, 2010; Vartabedian & Bensinger, 2009).

The company’s reputation based on the ideas of quality and safety was affected significantly leading to decreases in sales by more than 10% in 2010 (Toyota, 2015, para. 18). However, the problem is in the fact that the changes in the customers’ perceptions of the brand were most affected by the inadequate communication strategy chosen by Toyota rather than by the presence of technical faults in cars.

Toyota Crisis and Key Issues

The main issues that affected the brand reputation and customers’ reactions are the inadequate Toyota’s response to the problem in 2009 and 2010; the impossibility to accept the responsibility for accidents; and the concealment of the information on previous accidents. Toyota selected the ineffective strategy to respond to the car accident in 2009 and to the further public and officials’ accusations in 2010 (Gorman, 2010, para. 4).

While rejecting the possibility of the uncontrollable acceleration and technical faults in cars, the company did not ensure the customers that any additional investigation could be held, as well as safety measures improved (Vartabedian & Bensinger, 2009). The issue has the most negative effect on the corporate image because it directly decreases the customer loyalty (Grappi, Romani, & Bagozzi, 2013).

In addition, Toyota rejected to take responsibility for the technical faults, and additional NHTSA investigations were necessary. The problem is in the fact that the NHTSA reported the technical problems in the floor mat installations and pedals’ operations causing the uncontrollable acceleration, but it was a delay in taking the responsibility for technical faults by Toyota (Gorman, 2010, para. 5).

This delay resulted in significant decreases in car sales in the United States and globally (Toyota, 2015, para. 18). The company failed to accept the responsibility for manufacturing mistakes because of the fear of decreases in the customer loyalty. However, the inability of the company to communicate the problems openly and develop the action plan to address them resulted in the most significant decreases in the customers’ trust.

Thus, Toyota violated the ethical principles of integrity, trust, respect for the customer, transparency, and accountability (Kim, 2015; Romani, Grappi, & Bagozzi, 2013, p. 194). Customers develop their visions of companies referring to their corporate social responsibility statements and visions, in which the responsibility for producing the high-quality goods is discussed in detail (Browne & Nuttall, 2013, p. 3). From this point, this issue is significant to be addressed by Toyota to regain the customer’s trust.

Another significant issue is the violation of the customers’ safety and the concealment of the information about previous technical problems. The lack and inadequateness of investigations to predict, address, and solve the technical problems in Toyota automobiles led to manipulating the public’s trust and brand recognition.

When the company hides the information that is important to address the health and safety risks for customers, it violates the ethical principles of transparency and openness (Keys, Malnight, & Graaf, 2009).

The issue had the dramatic effects in the case of Toyota because the owners of cars and potential consumers saw themselves as deceived and unprotected in spite of Toyota’s proclamations to guarantee the customers’ safety, contribute to their well-being, and respect their needs and interests. In this context, much attention should be paid to the development of the effective strategy for the Public Relations (PR) department in the company to address the identified problems in the communication with stakeholders.

Internal Analysis of Toyota Company

In spite of having the effectively formulated cultural DNA with the focus on ethical values and principles, Toyota failed to realize these principles in practice while addressing the 2009-2010 crisis. The problem is in the fact that the company ignored the principles that formed the core of the DNA: the high safety and quality of products (Toyota, 2015).

In addition, the ethical faults became known to the public. As a result, the media contributed to spreading the negative image of Toyota (Kim, 2015, p. 59). The internal analysis demonstrates that in spite of grounding the identity of the company on the principles of openness, integrity, responsiveness, quality, accountability, transparency, and respect for customers, Toyota experienced challenges in handling the situation and addressing the problem ethically.

External Analysis of Toyota Company

The stakeholders of Toyota are numerous, and the crisis of 2009-2010 demonstrated that the company has problems in following the ethical principles, addressing the stakeholders’ needs, and contributing to the public. Toyota’s unethical decisions influence owners of Toyota automobiles, their family members, communities, potential consumers, suppliers, and partners (Kim, 2015, p. 60).

It seems that the previous strategy used by PR professionals to address Toyota stakeholders was not effective because their basic needs in safety and information were ignored. Therefore, it is important to conduct the detailed stakeholder analysis in order to identify the main categories of individuals and groups influencing the strategies of Toyota. The messages to the stakeholders should be formulated by the PR professionals differently, depending on the audience’s expectations.

Approaches to Monitoring the Issues

The identified issues should be monitored in Toyota with the focus on improving the approach to the corporate social responsibility (CSR) to enhance the relations with stakeholders and with the emphasis on revising the crisis communication strategy. It is important for leaders in Toyota to pay more attention to expanding the current CSR strategy.

It is also significant for the PR department to review and improve the communication strategy, concentrating on timely crisis messages targeted the different audience. Therefore, the monitoring will be realized when the professionals correlate the CSR objectives with the ethical problems and when the communication strategy is assessed in relation to its effectiveness to respond to the issue.

Focusing on CSR as the Prevention Strategy

Toyota violated the basic principles of CSR when the company ignored ensuring the product safety, did not demonstrate the ethical behavior, and was dishonest discussing the critical situation.

Nevertheless, in Toyota, the CSR principles are stated clearly, and the main emphasis is on proposing high-quality and safe cars to serve the customers’ needs; improving the lives of community members through enhancing the economic progress of the community; reducing the negative environmental effects; guaranteeing the sustainable business development (Toyota, 2015, para. 3).

However, the problem is in the fact that Toyota did not use the CSR options to prevent the crisis. The CSR idea is based on balancing the process of gaining benefits for both business and community (Browne & Nuttall, 2013, p. 4). In the case of Toyota, the principle of balancing benefits was neglected when the company leaders decided to save costs necessary for the investigation, testing, and re-launching cars with faults. When pursuing of benefits is balanced, it is possible to prevent such critical situations.

Therefore, the issues of the neglected safety and the concealment of the information important to protect consumers should be solved with the focus on improving the company’s approach to CSR and re-formulating ethical principles. The reason to pay more attention to the CSR is based on the idea that this strategy helps not only attract customers to become aware of the brand but also to protect the brand reputation when there are risks of crises (Keys et al., 2009).

In this context, like any other company selecting CSR for addressing the customers’ needs and increasing their loyalty, Toyota needs to demonstrate how the company contributes to the society and what real projects and initiatives are realized in the community. The company needs to put an emphasis on her real activities to guarantee the consumers’ safety, to improve their life, income, and provide them with the additional jobs.

PR Crisis Communication Strategy

The company’s effective CSR plays an important role in allowing the increase of the global competitive advantage. However, more attention should also be paid to the crisis communication strategies used by companies to address the ethical issues. Toyota is a Japanese company that operates and distributes its automobiles globally; therefore, the communication strategy used by the PR professionals influences the success of the business’s global competition.

In 2009-2010, the company demonstrated the lack of the successful crisis communication strategy to address the issues in the most timely and effective manner. The PR representatives in the United States did not demonstrate the understanding of the public’s needs to receive the most timely comments on the problem (Gorman, 2010; Vartabedian & Bensinger, 2009).

The delays in commenting on the ethical issues and the use of the ineffective communication strategy based on hiding important facts and non-acceptance of the company’s responsibility led to decreases in the customer loyalty (Kim, 2015). The reason is that the communication used by the company is one of the basic factors to influence the consumer perceptions and loyalty.

In order to achieve the success in communicating the message related to the ethical issue, it is necessary to react to the crisis immediately and provide the comments in a timely manner. The leaders and PR representatives should be ready to address the different needs of consumers depending on their cultural and social backgrounds, as it is in the case of addressing the US consumers of Toyota cars (Grappi et al., 2013).

In addition, the approaches to communicating messages to different groups of stakeholders are also various with references to their expectations and interests (Kim, 2015, p. 58). In order to reduce the negative effect of the crisis, PR professionals should work effectively to collect and analyze the data and to present them to stakeholders while ensuring that necessary actions are taken.

The goal of the crisis communication in this case is to reduce the crisis’s negative outcomes and to influence the consumers’ perceptions. Toyota needs to revise its crisis communication strategy to prevent the decreases in the customer loyalty in the future.

Importance of Addressing the Issue for Toyota

Toyota needs to revise the approaches to CSR and the crisis communication in the company because the situation of ignoring the necessity of reacting to the crisis, inadequate responses to stakeholders’ inquiries; the impossibility to accept the responsibility for the crisis; and the concealment of the important information lead to decreasing the customer loyalty (Keys et al., 2009; Romani et al., 2013).

The corporate reputation is at risk of being damaged by ineffective strategies followed in the company (Browne & Nuttall, 2013). Therefore, more attention should be paid to forming the brand value; focusing on the customers’ interest and satisfaction; developing the corporate citizenship; improving the CSR policies; revising the organizational culture according to newly formulated ethical principles; developing core competencies in relation to the crisis communication.

Conclusion

Toyota faced a significant ethical dilemma in 2009-2010 that was related to the problem of producing cars with faults and hiding the information regarding the issue from stakeholders during a long period of time. The critical situation affected the development of the company and its operations significantly, leading to the necessity of revising the approaches followed in the company regarding the CSR and crisis communication.

The analysis of the case from the perspective of the PR indicates that Toyota should adopt new strategies to communicate problems and respond to the critical situations. Moreover, it is important to concentrate on the fact that the effective or ineffective crisis communication is only a consequence of the particular CSR strategy followed in the company. The problem is in the fact that the company needs to restate the priorities for the CSR in order to become able to address the stakeholders’ needs and contribute to the environment directly.

References

Browne, J., & Nuttall, R. (2013). Beyond corporate social responsibility: Integrated external engagement. Web.

Gorman, S. (2010, August 2). Lawsuit claims Toyota ignored safety issues. Reuters. Web.

Grappi, S., Romani, S., & Bagozzi, R. P. (2013). Consumer response to corporate irresponsible behavior: Moral emotions and virtues. Journal of Business Research, 66(10), 1814-1821.

Keys, T., Malnight, T. W., & Graaf, K. (2009). Making the most of corporate social responsibility. McKinsey Quarterly, 36(1), 38-44.

Kim, Y. (2015). Toward an ethical model of effective crisis communication. Business and Society Review, 120(1), 57-81.

Romani, S., Grappi, S., & Bagozzi, R. P. (2013). Explaining consumer reactions to corporate social responsibility: The role of gratitude and altruistic values. Journal of Business Ethics, 114(2), 193-206.

Toyota. (2015). Sustainability: Corporate social responsibility. Web.

Vartabedian, R., & Bensinger, K. (2009, November 8). Runaway Toyota cases ignored. The Los Angeles Times. Web.

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