Case Analysis : Toyota Motor Corporation

On May 10, 2010, Toyota received another setback when there was an inquest by NHTSA on the timing of its announcement of the 2005 recall of certain pickup trucks and sport utility vehicles for a possible issue with the steering relay rod. The Toyota woes were not over as on December 21, 2010, Toyota and NHTSA announced that they had reached a settlement with respect to the relay rod and Toyota paid approximately $32.4 million in the aggregate to the U.S. Treasury

Toyota grew at a record speed and could not keep up with the speed in which it was growing. They are a centralized company and Japan only made the decisions. This prevented the company to keep up with the safety problems. The process that Toyota external suppliers follow when improving product and making sure the product is functioning properly before shipping to Toyota needs to be improved before they release the product from their warehouse to be sent to Toyota. This problem began when the company started to rapidly grow. Toyota’s lack of communication led to the faulty gas pedal recall.

One of the main errors leading to this situation was the fact that ChassisCo didn’t follow on the Toyota principle of giving the bad news up front. Toyota stated with every supplier that they expected a swift alert in case any risks were to arise, in order to tackle root causes and diminish the problems right away. On the same line, Toyota knew that the manufacturing process for the

Soon after, under pressure from the National Highway Traffic Safety Administration Toyota did recall some vehicles. Nevertheless, only one month later, four more lives were ended as a result of Toyotas quality plunge and failure to respond. Finally, one month after the death of its eighth victim, Toyota halted production to stop and fix the problem. On top of the oil sludge recalls, this quality failure resulted in another 8.8 million recalls, a $2 billion direct financial hit to Toyota plus another $16.8 million in fines, too many innocent lives, a strained relationship with the NHTSA, and further brand deterioration (Greto et al., 2010).

Due to Toyota’s financial greed and unethical practice, vehicles were wrongly equipped with faulty brakes, sticking pedals and poor quality door looks, which caused death of many Toyota customers and hundreds of dollars in damages. When a company like Toyota acts in an ethically questionable manner, it causes the company to lose customers and develop a negative reputation. Customer tend to lose faith in the company and have to look for better service

Toyota Motor Corporation was faced with a class action suit and hundreds of lawsuits due to a faulty accelerator pedal and brake problems

”Hold on and pray.” These were the last words spoken to a 911 operator on August 29, 2009, before the speaker, Christopher Lastrella, and 3 family members died in a horrific car accident in San Diego, California. The cause of the crash? The pedal of the rented Lexus E350 was stuck in full throttle, hurtling the car down the highway at speeds of up to 120 miles per hour, rendering the brakes completely useless. Those who passed away included two adult men, an adult woman, and a thirteen year old girl. Upon further investigation, it was determined that the floor mat had caused the accelerator to be caught and unable to be released.

The purpose of this report is to examine if the reasoning behind well-known car manufacturer, Toyota’s loss of revenue and leading market position is alone as a result of extensive product recalls following a fatal crash of a Lexus ES 350 on August 28th 2009. The journal article, “Toyota Crisis: Management Issue?” (Yuanyuan Feng 2010) provides an outline of the key factors that triggered the 2009 Toyota crisis, and explores whether the fall in the company’s returns by 19% were caused purely as a result of the recall and safety concerns, or something much deeper.

In 2009 Toyota Motors (TM) posted a net loss of $4.6 billion ("Market watch," 2014). From 2009 to 2011 Toyota encountered a number of factors contributing to their economic downturn. It began with recalling millions of vehicles, for quality related problems, followed by natural disasters hitting northeastern Japan. These disasters wiped out Toyota’s production capabilities (Tabuchi & Vlasic, 2014). While these events were occurring, the cloud of the 2008 global financial crisis was still being felt. This crisis weakened demand in the automotive industry. This weakened demand increased the competitive landscape for all automotive manufactures. This drove down automotive prices and effectively contribution margins (i.e. sold less

In late 2009, Toyota became the subject of media and U.S. government scrutiny after multiple deaths and injuries were attributed to accidents resulting from the unintended and uncontrolled acceleration of its cars. According to Smith (2012), despite Toyota's voluntary recall of 4.2 million vehicles for floor mats that could jam the accelerator pedal and a later recall to increase the space between the gas pedal and the floor, the company insisted there was no underlying defect and defended itself against media reports and regulatory statements that said otherwise.

We will start the external analysis with the PESTEL analysis of the automotive sector followed by the Porter’s five forces analysis and we will end by having a look at the key competitors and competitor pricing.

1) The buyer decision process of traditional Porsche customers relies on the motivations that determine these people to select this brand. Their purchasing decision process is based on the exclusivity of the brand that is connected with the car owner. In their opinion, by purchasing a Porsche, traditional customers purchase the exclusivity and luxury associated with the brand. These customers want to purchase a car that reflects their social status and their financial power. In addition to this, they are not interested in the utility of the car, but in the characteristics that differentiate it from utility cars. These traditional buyers are rather interested in their feeling while driving a Porsche in comparison with the size, price, or fuel economy of the car.

Toyota is a key player in global automotive market. Its structure constitutes if various production plants in different locations and a very strong branding which helps it capture a major market share. Like other enterprises, Toyota has several strengths and weakness which makes it what it is now. Toyota heavily invests in Research and development which helps it come up reputable product line which is spread out throughout the world because of its strengthening global distribution network however its recent product recalling, loose grip in key geographic areas and wrong allocation of resources shows that even a strong brand like Toyota has its weaknesses.

Challenging all the company stood for, in 2009, Toyota faced a series of recalls that would test their resolve and force the organization to examine their culture, methods and overall practices. The end of 2009 brought a recall of over 3.8 million vehicles for Toyota. Triggered by a deadly accident from an apparent stuck accelerator, reports of similar instances began pouring in. Publicity was brutal following the ordeal and the repercussions for Toyota were

One potential threat for Volkswagen is that Toyota may respond strategically by also cutting its prices. However, given Toyota’s quality problems over the past year, they will not be able to lower prices, as this possibly would create the perception of lower quality.. First and foremost, Toyota needs to ensure it handles its quality problems to its customers’ satisfaction. The auto maker needs to ensure the public perception is that Toyota is being upfront, honest, and responsible in dealing with recalls and the