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Toyota The Accelerator Crisis Case Solution
Toyota is among the largest foreign automobile companies operating in the United States, employing more than 8,900 US workers and having over 1500 dealerships in the 50 states of the country. These impressive numbers are a result of the aggressive expansion and growth strategy taken by the top non-family management of the company that is originally based in Japan. This growth, however, has come at the cost of the loss of the values, culture, and framework of Toyota Way in the foreign subsidiaries of the company as a result of which Toyota in the U.S is facing the giant recall crisis. Toyota, with its centralized decision-making process with most decisions taken by Japanese executives, was not able to timely respond to the crisis in the U.S which further escalated the matters worse. The company now has to not only deal with the crisis at hand but has also sorted out internal issues to prevent a similar situation in the future.
Following questions are answered in this case study solution
Who were the promoters of the Toyota accelerator crisis? Why was Toyota facing a recall crisis?
What were the promoters of the Toyota accelerator crisis?
Has Toyota successfully enacted the principles adopted in the Toyota way? What did they do well, and where is there room for improvement?
As it pursues its aggressive global expansion, what tradeoffs does Toyota make? How effectively did they handle the tension between global standardization and local responsiveness? Did they manage their value chain activities effectively?
How well are Toyota's management, employees, and external stakeholders prepared to support your corporate brand?
Case Analysis for Toyota The Accelerator Crisis
1. Why was Toyota facing a recall crisis?
Toyota was facing a recall crisis due to faults in its products mainly acceleration issues. This was mainly because of the company deviating from its core value of providing quality and focusing on an aggressive and rapid expansion of the business instead. The company grew so fast that Toyota lost control over quality which ultimately led to the crisis.
The crisis was highlighted when a fatal accident of a Toyota Lexus happened that killed an off-duty Californian policeman and his family. The cause behind this crash was an uncontrolled acceleration of the vehicle that wasn't the driver's fault. This accident led to an investigation by the National Highway Traffic Safety Administration (NHTSA) which led to uncovering more Toyota acceleration issues dating back to up to 2002. However, Toyota brushed it off citing floor mats might have obstructed the gas pedals which led to unexpected accelerator issues.
However, the situation got more critical when despite removing the floor mats the company still received 1200 complaints regarding the acceleration issue. It is then around the same time that the Los Angeles Times started publishing a series examining the safety and quality methods and practices of Toyota.
It was then that Toyota finally took action amid the media and news coverage. Despite taking action and the right measures, the failure of Toyota to respond actively and timely to the matter was perceived in a bad taste. To rectify the company’s mistakes and prevent any further accidents, Toyota announced a series of recalls. This decision, however, was seen as an act to save reputation and under the insistence of the National Highway Traffic Safety Administration (NHTSA) after their harsh warning to the company. Thus, the increasing media attention, articles, consumer complaints, and the delay in response by the Toyota management further added fuel to the already burning fire of the crisis.
2. What were the promoters of the Toyota accelerator crisis?
Several promoters led to the Toyota accelerator crisis. These drivers are listed below:
i. Aggressive growth and expansion strategy of management:
In 1995 the company started following an aggressive globalization strategy which helped Toyota gain significant market share, revive its financial numbers as well as expand its global footprint. However, due to the rapid establishment of plants and subsidiaries, the corporate resources of Toyota became strained. The insufficient understanding of the overall company culture, failure to completely follow the Toyota Production System (TPS), rushing the production process, underutilization of plants and not understanding the market completely resulted in the manufacturing of faulty Toyota products.
ii. Focus on short-term profit:
Historically, the Toyota management always followed a long-term beneficial decision-making process as also evident by the 14 principles of the Toyota Way framework. However, the inclusion of non-family members in the management meant that they were focusing on short goals to retain their position. To increase profits and reduce costs, the company took several such as turning down thermostats, laying off temporary employees, not giving bonuses, and reducing costs related to procurement which ultimately led to the compromised quality of Toyota products.
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