Issues facing Toyota and steps to solve them

As of late Toyota has come under massive criticism for the flaws in its vehicle’s acceleration system which have led to economic grievances, the deaths of a few of its customers, and as such claims from all over the globe that Toyota was aware of this defect. These claims indicated a severe lack of faith from customers in Toyota and thus a major degradation of the organization’s brand image. As a result many current and potential customers have shied away from Toyota products and have in its stead purchased those of rival organizations. As a result during fiscal year ’09 the company experienced led to a severe drop in Toyota’s stock’s trading performance as prices plummeted due to the allegations(MSN, 2010).

Moreover, a severe drop in revenues was experiences as it dropped from 72,344.2 million to 44,652.0 million. This decrease was experienced in all positive performance indicators such as Return on Equity and Profitability. The decline in all positive financial indicators approximately coincided with the first and second recalls from Toyota. This indicates that the recalls cast doubt on the quality of the organization’s products and drove many current and potential customers away due to the situation at that time.

However, thankfully the organization has finally made some concrete efforts at preventing further degradation of its image and attempted to pursue the revival of its image. These efforts have apparently paid off to some extent as the trading performance of Toyota rebounded during the end of fiscal year ’09. At this time though Toyota’s initial attempts were disastrous from a marketing perspective, the fact that Toyota had given some response to the incident, by downplaying the situation, it was enough to convince a substantial amount of current and potential customers that the entire episode was over, Toyota’s quality was superior and the problem was not widespread, and as such it was safe to purchase Toyota products. Unfortunately, due to a second wave of recalls by Toyota the masses panicked and once again drove down Toyota’s trading performance, which has yet to show any clear cut resurgence. This is due to the fact that the second recall convinced many that the first recall was not limited and that the situation was far graver than had been perceived. As such until Toyota shows a significant response to the situation and offers a reliable temporary solution, resurgence in Toyota’s trading performance is quite dubious(Guide, 2010).

Its current poor trading performance is somewhat evident on paper as its consolidated financial reports on the first half of the current fiscal year showed that in comparison to last year’s first fiscal report, the net revenues had experienced a decrease of 31.3 percent.Furthermore, the trends in sales and revenues were similar to Toyota’s trading performance trend as decreases after the recalls was experienced and a slight increase was experienced during the latter half of the tenure during the first and second recalls. Profits are expected to be even more meager as Toyota currently has plans to undergo campaigns to restore goodwill to its image and is also embroiled in various law suits. As such not only is their revenue declining but its expenses are increasing as its marketing expense has increased enormously, as has its legal expenses, and the miscellaneous expenses regarding the recalls(MSN, 2010).

So far Toyota has suffered a significant loss to its image and relationships,due to its mishandling of the acceleration system flaw with its clients, which can be broken into two specific aspects (Berger, 2010):

Firstly, the recalls have significantly damaged Toyota’s credibility

Toyota’s position as a brand leader and its reputation for quality have been tarnished

Firstly, the recalls have severely damaged the credibility. Had there been only one recall contained to one geographical region then Toyota’s credibility would not have been called into question as many would have assumed a fault had occurred at the local manufacturing plant and would have used the continued function-ability of Toyota vehicles located at other parts of the world as reference that all was still right. However, this was not the case as Toyota had to initiate a global recall not once, but twice revealing the extent of which the flaw remained undetected and that it could not possibly be related to manufacturing but rather the design which Toyota as a whole is responsible for. Thus, the first recall cast significant doubt on Toyota’s credibility and the second recall ended up reinforcing the belief. What is even more troubling is that many have come to the belief that Toyota was aware of the defect and, instead of solving it before approving the designs, chose to mislead the populace and sold its vehicles under false pretenses (Buzz, 2010).

This widely held belief has led to the second marketing concern of Toyota which is that its dedication and reputation for quality have been designated as nothing more than elaborate hoax and front under which the organization sold its products. Analysts globally are uniformly agreeing that when limelight was cast onto the acceleration problems, rather than taking the situation into stride by acknowledging that there was a problem and opening up a proper inquiry into the matter, Toyota laid blame on sticky floor mats and flustered drivers, ignored the situation, and hence paid no significant heed to it. Thus backing the consensus among the average customer that Toyota hid its problems, and passed on defective goods to its customers (Buzz, 2010).

This in turn called into question Toyota’s position as a brand leader and its dedication to quality. Toyota is no longer as dominant a brand leader as with was before which is backed by empirical data that Toyota has experienced a significant decrease in its market share while all of its competitors have experienced an increase in market share, and as a result in sales and revenues as well. Such was the loss of market share of Toyota and the gains of market share to its competitors that for the first time since 2007 its weakest competitor, Chrysler, experienced profits. Moreover, the fact that Toyota tried to hide and blanket the situation has led many of its customers to perceive that Toyota is not at all dedicated to quality as it has depicted itself, for had such been the case it would have immediately investigated the matter and resolved it which would have been in line with the dedication to quality consumers had initially believed Toyota had. Now that that belief has been given serious doubt many customers now doubt the degree of quality Toyota products have and are critically looking at the products as they have all become doubtful regarding this aspect to Toyota’s brand image (Berger, 2010).

Another marketing blunder that cost Toyota goodwill was when it first ventured in social media by holding a competition for the best advertisement for its Yaris model. Despite statements on the website stating that inappropriate language, connotations, and actions would not be tolerated or accepted the winning ad largely comprised of inappropriate innuendos which obviously made the advertisement offensive and customers globally became concerned with the morality and ethical aspects of the organization. Such a blunder should not have occurred as the offensive nature of the advertisement was not subtle in any way or form and as such should not have in any situation gotten by the notice of the marketing team in charge of the competition. The fact that it did should have been a huge red flag for the CEO and the situation should have been investigated concerning who was responsible and the situation which led to enabling such a video being posted as the winner. In this instance as well Toyota did not make fully apparent to its consumers that it was troubled by the event and would be looking into the chain of events that led to it(Ochman, 2010).

Task 2

Given the primary crux of the problem, which is that the global recalls had called Toyota’s brand image and reputation of quality into question, Toyota needs to make significant strides towards restoring public opinion as maintaining its market position.As stated before, as a market leader Toyota is losing considerable ground to its competitors mainly due to customer switching as many became disenchanted with the organization. Studies have shown that it is five times more costly to persuade and gain new customers than it is to retain the current clientele. As such, significant steps need to be taken as, though Toyota was quick to react, earlier attempts at resolving the situation amicably and without tarnishing its image were met with disdain and seen as half hearted gestures which in turn caused initial tactics to backfire and cause further damage. The initial indications concerning the acceleration problems came on Aug 28, 2009 via the 911 call which depicted the deaths of 4 people due to sudden acceleration. Though Toyota did respond quickly it did so in a disastrous manner as it suggested that sticky floor mats and easily flustered drivers were the causes of the acceleration issues rather than acknowledging that this was an area for concern and that Toyota was investigating the matter most thoroughly. Given how global customers and society as a whole responded to Toyota’s earlier attempts, Toyota needs to realize that it cannot, and should not, run from this situation and instead should use the situation not only as an opportunity to display its dedication to quality that it is known for by focusing on the flaw, and fixing it but also as an opportunity to display its concern for its loyal customers. Thus, reinforcing pervious perceptions and re-establishing the firms brand identity. Given how greatly Toyota mishandled the situation initially, it will be most difficult to achieve the aforementioned goal, hence further driving home the fact that Toyota cannot afford to be stingy and must implement generous over the top tactics in order to preserve whatever remaining goodwill it has (Buzz, 2010).

Firstly, before congregating relevant personnel and discussing what future strategy and tactics Toyota should implement given the current scenario it is imperative that Toyota looks back at its mishandling of the accelerator flaw, enquire the scenario which led to its social media blunder, reflect, and based on those reflections determine and implement strategies and tactics that would help it get through the “dark times” it has found itself it. Given how Toyota handled its faulty acceleration system incident I believe that the following steps should be taken in order to resolve the crisis at hand (Keegan, 2001).

Acknowledgement: Toyota needs to face the fact that rather than laying blame elsewhere, which was the matt floors and the drivers, it should have acknowledged the problem straight up and made it clear to the global community that it would be investigating the matter closely and would try to bring a viable solution to the problem as soon as possible so as to cause minimal inconvenience to its clients.

Crisis Team:Secondly, apparently the delay in apologizing to the public was that the Chairman Mr. Toyoda attempted to handle the issue himself and resolve the matter solely by himself. He should understand that Toyota is a major corporation and needs a speedy credible response to the situation. Thus, in order to get a good handle on the situation he should have formed a crisis management team in order to understand the roots of the problem and the factors surrounding it which led to the faulty acceleration system.

Technical Team:Thirdly, in order to fully assess ground zero concerning the faulty acceleration system Mr. Toyoda should have created another task group solely comprised of Toyota’s notable engineers in order to understand the technical fault and the possible solutions to it. The assessments of the engineer task team would help the crisis management team present a more detailed relevant investigation and conclusion to the world which would show that Toyota is pursuing the matter closely as it values the concerns of its users and is truly dedicated to excellence.

Fixes:In order to alleviate immediate concerns and show progress in resolving the matter Toyota needs to come up with a viable temporary solution so that current users can use their Toyota products without fear of the faulty acceleration systems. However, this is not the means to an end, rather merely buying time so that Toyota can fully investigate the concerns, understand all the faults, and hence resolve them concretely for it would backfire on Toyota to issue a statement that the crisis has been resolved only for it to re-emerge in the near future. As such Toyota needs to expend a lot of finances on correcting the problem and in restoring good faith.

Opportunity:Moreover, Toyota may currently be in the limelight in a negative manner, but by properly managing the situation here on out, Mr. Toyoda has a unique opportunity to restore faith in Toyota’s quality and restore its image. However, blundering now would merely convolute the corrective process and make said process ever more expensive.

Compensation:Lastly, Toyota must offer generous non-monetary compensations for its affected customers and in the near future come up with products that are even more advanced or of superior quality than before in order to regain its customers. Hence, its needs to defend currently while opting for aggressive strategies and tactics for its future products. To be timid now would be to allow its competitors to solidify their gains and allow them to take further market share away from Toyota.

Now the accelerator incident was caused by a technical fault and it was Toyota’s initial response to the situation that led to the marketing challenges that it faces (Hendy, 2010). However, in conjunction with the raunchy advertisement incident it shows that Mr. Toyoda needs to review the performance and operations of his marketing team as they are not performing up to the mark and are not learning from past experience nor have they taken any apparent corrective measures to prevent further mistakes from occurring. In regards to his marketing team Mr. Toyoda needs to create and oversee a temporary task group comprised of management and human resource personnel to:

Look at Leadership: It must be understood that in both cases who was tasked with overseeing those marketing operations and as such had to give the final approval. Was this person lax, performed mismanagement, is ill equipped to handle the post, etc. The previous questions will investigate how the head authority approved such a plan/allowed such a video and the circumstances of both situations.

Delegation of Authority: It must be understood what the chain of command was in both operations and if responsibility was clarified to each member of both operations and if any of these members pointed out the non-legitimacy of the advertisement or pointed out the various drawbacks of its initial response, and if not why, and what each member contributed in order to understand the rational from each member of why what they contributed felt appropriate to them.

Find and Fix the Cracks: In terms of the advertisement the task group should confirm whether or not there were any language barriers due to which the members of the competition operation did not understand the innuendos, or if they did not understand the culture properly and were led to believe that it was acceptable. Whatever the problems are, the task group should assign each member to a proper program that would rectify the gaps in their training. In relations to the faulty acceleration incident it should be thoroughly investigated just how qualified each member was and if they lacked any vital training, and as such how such qualified personnel committed such a mistake. Once the causes are understood the task group should assign the members to a proper program to reinforce their qualifications and to take care of any misgivings.

Review: Mr. Toyoda needs to review his marketing personnel as a whole and evaluate which personnel have gaps in their training or may not be performing adequately and have the matter resolved. This is to prevent future blunders as future operations will obviously not be run by marketing teams comprising of the same individuals who allowed the advertisement and acceleration system blunders to occur.

In terms of marketing solutions for now it is suggested that the organization undergo a defensive strategy that focuses upon regaining the level of customer retention Toyota had before the incident. Due to the fact that Toyota has, been following market leader strategies and has established itself as the dominant force in the market, losing its customers to competitors is a huge blow as for the first time its competitors were able to make significant gains as seen by the fact that its competitor Chrysler, which is considered the weakest of all automobile manufactures, experienced profits the first time since fiscal year 2007. Moreover, as previously mentioned independent studies found that it was five times cheaper to retain current customers than to gain more customers. As such, given the expenses it will incur to restore goodwill and the ground it has lost to its competitors it is nigh important that Toyota retain its current customers and loyal fan base and through a customer retention oriented approach increase the revenue it derives from each customer in order to partially offset the loss of consumer base (Keegan, 2001).

Under the customer retention strategy Toyota should implement the following tactics:

Contact:Firstly, it should contact each individual, via email, to inform them that the organization is troubled by the incident and apologizes for any inconvenience it has caused. Another important content of the email should that Toyotawill assuredly look into and deal with the situation and hopefully lay to rest all of the concerns of the valued customer. If the customer has any further complaints or queries regarding the matter then he can contact the organization via an email address which would be listed. There will be a task group comprised customer relations qualified personnel that will promptly reply to any queries that are sent to that contact address and if there is any repeating complaint or complaint worth noting then that will be sent to the crisis management task group and the technical task group (which is comprised of engineers) to make both groups aware of those complaints so that they too can be investigated and verified. The contact will help Toyota not only identify other areas of concern, if any, at minimal cost but most importantly will help restore faith in the concern of customer satisfaction the organization has.

Information:Furthermore, information should be provided in that email regarding a list of dealers through which repairs and avenues for compensation can be availed. This shall be given as all dealers in strategic locations shall have been contacted by Toyota and a strategic tactical alliance or partnership shall be forged on this matter between Toyota and its dealers. The dealers shall help validate who the affected are and rightly compensate only those who suffered damage from sudden acceleration of the vehicle. As such those who took the brunt of the damage from the faulty acceleration system shall have their perceptions of the firm restored.

Technical Services:Moreover, when the temporary and permanent solutions are implemented in order to assuage fears that the solutionsmay not have sufficiently resolved and dealt with the underlying cause, technical services, to a certain degree, should be offered for free or minimal prices to owners of recalled Toyota products. Though these would be an incurrence of costs to Toyota at a time when sales and revenue are declining, it is all for the sake of preventing further loss in brand equity for which Toyota would have to incur massive marketing costs anyway. Moreover, this expense would increase or at least stabilize brand equity. Straight up cash compensation shall not be an option as studies have shown that many customers view it as a “cold gesture” and that Toyota cannot be bothered with the complaints and concerns of the client. Offers on future purchases of Toyota products would be perceived as self-serving and would only serve to further damage the fragile reputation of the organization.

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