Key Stakeholders for Toyota in PR Communication - Essay Example

?Running Head: Toyota Case Study Toyota Case Study [Institute’s Toyota Case Study Brief Overview The following question answersare in relation to a case study on Toyota, the current biggest car-manufacturer in the world. This case study explores the incident that occurred during 2009 and 2010, during which the company faced severe problems due to a sudden decline in quality of its products. The exploration done in the case allows the reader to derive several important lessons pertaining to leadership and management, crisis management and public relations for large corporations. It is noteworthy that the crisis the company went through did not do damage which the company was not able to recover from eventually. As discussed below, their management techniques and contingency plans were lacking strategy and expertise. However, there was eventual improvement in the company’s ordeals and conditions, and it soon found itself recovering, and on its way back to the top, where it currently enjoys status of market leader in the car manufacturing industry. While this does not excuse or recommend their course of action to other companies which face similar circumstances, it shows how that no situation is too extreme or impossible to handle if a company realizes its mistakes as soon as possible, and sets about to correcting them. Nevertheless, the case study provides a guide on which courses of action to avoid when in the face, or while preparing for, a crisis. Key Stakeholders for Toyota in PR Communication As there are several externalities attached to the consumption of every good, several stakeholders are concerned with how a large company acts. These stakeholders include not only those parties, which have a direct connection with this company, but also those who may not seem related to it on the surface. A more specific and more explanatory definition of this term can be those parties who are in relation to the company in two main ways: the power they have over the company, and the interest that they have in the company’s operations, successes and failures (Reddi, pp.75, 2009). While applying this definition to the case of Toyota, with respect to its public relations, a significant stakeholder identifiable is the consumer. While a certain percentage of the consumers found their purchased Toyota vehicles to have flaws in them, the rest confronted discouragement simply by coming across such an incident. It did not matter if this larger percentage of customers did not find any flaws in the Toyota vehicles they owned themselves. It did not even seem important that they knew more people who did not have trouble, than people who had trouble with their vehicles. Once the public relations had initiated in spreading news of the several product recalls and product malfunctions, the customers felt the effect too, as they shifted their preferences elsewhere, and changed their opinions about the reliability of Toyota’s vehicles. This situation was further aggravated when Toyota failed to issue a solid, confident statement about its plans to correct this mishap, as well as its failure to explain the reasons behind this malfunctioning of its cars (Morgan, pp. 29-44, 2006). Thus, these stakeholders had not only power over this company, in terms of brand popularity and profits generated through demand and sales, but also had an interest in the company’s operations due to their vehicle preferences. Thus, consumers were the first stakeholders that Toyota’s public relations communications affected. If the sequence of events is considered, the stakeholders who were next in chronological order to confront the effect by this incident, and the PR communications, which followed, were the shareholders of Toyota. Once full effect set in on the consumers, following the public relations communication gap, the sales for Toyota decreased drastically during the year, while the costs incurred in product recalls increased. This effect on one stakeholder led to a large effect on another stakeholder, the shareholders. This party, being the true owners of the business, felt this drop in sales immensely as the profits changed into loss, and the shares fell by 4.3 percent on Japan’s Nikkei index (Morgan, pp. 59-64, 2006). Their interest in the business is perhaps the most important, and they suffered from this problem even though it was under the control of the management. Another major stakeholder, as repeatedly stressed in the case study as well, was the Japanese car manufacturers other than Toyota. Following the chronological order mentioned above, once the company’s sales decreased and product recalls increased, its reputation as a trustworthy car manufacturer declined. This affected not only the specific reputation of Toyota, but of all Japanese car manufacturers. This was again an effect occurring with respect to the public relations, which were circulating this situation. Since Toyota refrained from making any direct statements explaining, why their cars were turning out so faulty, the blame was transferred onto the general Japanese car manufacturer, as US consumers in particular started replying on US carmakers, like General Motors. Some observers (Morgan, pp. 29-44, 2006) even hypothesized that the way the US was reprimanding Toyota and Japan for this faulty supply, made it seem like they were searching for an implicit way of promoting their own local product. While this remains a theory, fact is that this was yet another major stakeholder, negatively under impact due to the public relations of Toyota in this case. Preparation of Toyota for a Crisis & Mitigation of Negative Effects When a firm is operating in an environment as risky as the business environment today, it is only as safe as its contingency plans. Firms, which have large factors at stake, or several prominent stakeholders, are encouraged to make contingency or emergency plans. These plans are designed even if the firm is not facing any imminent danger now, and has not predicted to do so either. However, for this contingency plan, it thinks up situations where some of the factors prevailing presently would be absent, leading to trouble for the company. Based on this ‘contingent’ event, the company plans in advance about what the best course of action would be in such a situation, and then tries to equip itself to handle such a situation Werther Jr. and Chandler, pp. 107, 2010). It would have been difficult for Toyota, to anticipate the exact incident that happened, where the quality of its goods slipped and led to a public relations crisis, to which it did not respond appropriately. This does not mean, however, that it was impossible for the company to think of a similar situation, in the light of events surrounding its competitors. Chrysler in 2007, General Motors in 2008, and Ford Motors in 2009 had experienced similar situations where due to a lapse in quality during that time, they had to go through an intense product recall and incur large expenses. Knowing that this was a common yet dangerous problem for motor companies, Toyota could have bases its own contingency plans on a similar situation happening to them. If this seems like a farfetched possibility, then one can argue that had the company had any contingency plans at all, it would have found less trouble in the face of this problem. However, it was too late for these measures once the incident had taken place a put Toyota in crisis. The correct measures from this point were simple: the company needed to undertake damage control. The product recalls had severely distraught the customer confidence that Toyota enjoyed in the past, with reference to both the cars malfunctioning and Toyota failing to take responsibility and announce plans to correct their error. The procedure for this damage control would have been a simple, but difficult one, but it would have helped curb the effects of the crisis. First, Toyota should have worked on minimizing the damage. This includes ensuring that none of the other vehicles in stock had the problems reported in the sold vehicles, and to correct any such mistakes found. While this would not have reversed the damage done to the reputation, it would slowly remove the grounds for the public to keep expecting such failures from Toyota. Then it would delve into the rewind stage, where it would trace it steps back to identify where the problem started (Magee, pp. 50-66, 2008). In this case, it would have to trace its production process to see where changes were made in the accelerator pedals, to turn them from being a part of the reliable Toyota, to the havoc-reeking instruments. Once identified, Toyota should have fixed this shortcoming in their production process, so that the problem would not have any chance of recurring, and Toyota could work on earning back its reputation as the third step. Here, the public admitted to being dismayed at how their trust in the reliability in Toyota cars had been broken. Therefore, the logical step was to first admit the mistake and apologize to the public, and then assure them that corrective measures had been taken and the company would be more careful from then on. This would improve the public relations of the company, as its stakeholders would once again see it as a trustworthy company, which is efficient in damage control and correcting its mistakes. Finally, there would be the recovery stage, where the company would slowly gain back the public confidence and increase its share in the market yet again. This process would be a long, slow one and would require patience from the company, as well as the stakeholders, but it would be the only way to restore the original reputation of the company (Gaines-Ross, pp. 1-70, 2007). Role of a Leader in a Crisis Experts (Gaines-Ross, pp. 1-70, 2007) often compare leaders to the head of the body. Just as the body would be directionless and defenseless against danger without the control of its head, an organization would not survive without a strong, determined leader. When Toyota faced the crisis of product recalls and falling reputation, all the employees and stakeholders were in turmoil and did not know how to recover from the state of panic. It was not their responsibility to design a course of action to remedy this crisis. Rather they were the ones who needed protection from the crisis, protection that only the head can give the body through direction and control. This is the role of a leader in a crisis, who performs these duties and stays level headed and confident throughout, so that he or she can bring the company out of the crisis and back to a thriving success. Leslie Gains-Ross, whom Ethisphere Magazine titled one of the “Hundred Most Influential People in Business Ethics” in 2007, has laid out a simple course of actions for a leader to take when aiming to fulfill the role mentioned above. The first step is to respond immediately. One mistake the leaders at Toyota made was to stall making a statement about the situation, and even when they did, they made an ineffective speech, which excluded both, an explanation and a solution (Magee, pp. 28-41, 2008). This had a very negative effect of the PR of this company, as it showed the public that Toyota did not deserve the trust they had put in this company as its loyal customers. It also affected other parties, such as other Japanese car manufacturers, because since the company was unable to identify the root of the problem to the public, the problem was generalized as existing amongst all Japanese produced cars and the imports to the US of Japanese motor vehicles declines sharply. Had the leaders of the company, such as the president or the directors, responded to the public immediately, they would not have reached conclusions about the duration and the cause of the problem themselves. Other than this, the leader needs to communicate openly. Neither the public, not the employees are foolish enough to accept vague statements. In addition, the vague statements that Akio Toyoda, the president of the company gave at that time were not only vague, but also lacking any of the answers that the public had been waiting for. The vague statements of how he wanted to help and how the company would contact the customers in case the need for product recall arose, were themselves solutions which did not solve anything. This mistake caused panic amongst all the stakeholders. The communication of the leaders of Toyota (Browning, 2010) at the time also lacked empathy or a proper apology. They would go on air to speak of how they were sorry, but failed to express how truly sorrowful they were of the fact that their mistakes has resulted in deaths, injuries, and inconvenience for several people. Their apologies were empty ones, which communicated to the public that the company might not have a proper course of action in mind, since they do not even seem to realize the consequences of their mistakes. This again was a major downfall for the public relations of the company (Gaines-Ross, pp. 29, 2007). The actual reaction of the leaders comes under the umbrella of self-defense that one often employs to recover their self-image. The four broad reactions of denial, bolstering, differentiation and transcendence are common in a major public figure trying to recover their self-image (Botan and Hazleton, pp. 177, 2006). It was the duty of the leader to retain confidence and sink to apologetic discourse in a manner that made others lose faith in him as well (Johnstone, pp. 131, 1996). His failure to do so is visible in the major losses that Toyota incurred in the following year. Role of Broadcast, Digital, & Social Media Broadcast, digital, and social media all had vital roles to play in the crisis that Toyota experienced. The broadcast media played a large part in the spreading and even exaggeration of the issues that were then facing Toyota. It was, however the aspect of media that was approached when Toyota was ready to make amendments and sent one of their spokespersons on the Today Show to answer the questions of the public (Browning, 2010). The social media was also responsible for the way fire spread about this situation, as it often exaggerated statements made by officials, the way it exaggerated the ones made by US Transportation Secretary Ray LaHood. There were quite a few steps that Toyota to put a halt to these happenings at any time. Its actions were tinged by hesitance and delay, instead of confidence and surety as if they needed to be. When they made an appearance on the Today Show, they should have made this appearance earlier, before the public had given up hope of getting a straightforward answer from them, and deemed their efforts as “too little action, too late.” Apart from this, the company failed to make an effort to clarify their speech at any time during when the customers were looking to them for solutions and explanations. Instead, through their apologetic discourse, they avoided confrontation, which would expose their problems to the public. Finally, when the government started to approach them and mentioning that this may turn into a diplomatic issue, they needed to confront the issue there and then. They were supposed to address the issue, and address apologies to all the affected parties, which had empathy rather than formality in them. Their failure to offer a rebuttal to this was why the situation rapidly expanded out of proportion and caused the immense amount of harm that it did. Impact of Corporate Crisis on Reputation of the Company Even after experiencing the crisis, it was under, Toyota was eventually able to emerge from the problem, and gains back its reputation and success as a market leader and the largest car manufacturer in the world. This, however, does not imply that the situation they went through did not have the potential to have severe long-term implications. In fact, a crisis like this one, which involves not only a company’s profit, but also its public relations and its reputation, can have majorly detrimental effects on the company’s future. Toyota left a strong impression through its successes, for example, when it beat General Motors in 2007. Similarly, it could have left an easily strong impression following its failures. It is amongst a company’s corporate social responsibilities (CSR) to minimize the externalities attached to its operations (Werther Jr. and Chandler, pp. 107, 2010). Other such CSRs of every company is to properly compensate the public for any harm it causes them, while also trying to benefit them in whichever way possible. When Toyota’s operations led to faulty cars being produced causing both inconvenience and harm, it was their CSR to remedy the situation. Having built up a reputation over decades of hard work, Toyota could not afford to ignore these responsibilities in danger of damaging this hard-earned reputation. Another reason why this incident was so harmful was that since Toyota was a market leader, each detail of this failure was publicized. The harm this caused was deeper and more long termed than the same incident would have been for a smaller company. Their failure to offer a solution to the public, until it was too late, was another reason why the implications of this incident were huge. The public was confused and frustrated by the situation, which led to a long lasting drought of confidence for this company (Madslien, 2010). To add to this damage, the company was under the impression that since the media was blowing this issue out of proportion, it would not do any real harm to the company. This was untrue; there was a definite scar left behind in the reputation of the company, which could not be healed just as this incident cannot be forgotten. The reputation of Toyota as the maker of reliable cars was also damaged, as people started searching for alternatives, which had a long-term effect on the situation. This was especially true in the case of the loss of sales from the younger customers, as this would no doubt do long-term damage to the company. Making situations worse was Toyota’s failure to give the issue of recalls its due importance, as the public soon realized and protested that Toyota was “not taking the recalls seriously.” This did long-term damage not only to the company’s reputation as a manufacturer, but also as a redeemer (Madslien, 2010). Further negative implications were in how this incident affected Toyota’s reputation in the US, where the damage was more permanent, since the US population has highly competitive brands like GM to switch to. The largest long-term impact was under reflection in the shares of Toyota, which fell by 4.3% in Japan’s Nikkei index (Madslien, 2010). This damage almost transformed into a diplomatic issue as well, when it started affecting the other Japanese manufacturers, thus reducing the relationships Toyota might have had with these companies to a bare minimum. This again damaged the public relations of the company in a permanent way. It is thus a vital issue for companies like Toyota to manage their PR with efficiency, in both, the face of a crisis or even the preparation for a contingent crisis. Appendix (Browning, 2010) (Browning, 2010) References Botan, Carl H., Hazleton, Vincent. 2006. Public relations theory II. Routledge. Browning, Roger. 2010. “Toyota recalls across the world.” The Guardian. Retrieved on April 11, 2011: http://www.guardian.co.uk/news/datablog/2010/feb/09/toyota-recalls-full-list Gaines-Ross, Leslie. 2007. Corporate Reputation: 12 Steps to Safeguarding and Recovering Reputation. John Wiley and Sons. Johnstone, Christopher Lyle. 1996. Theory, text, context: issues in Greek rhetoric and oratory. SUNY Press. Madslien, J. 2010. Toyota fights back and problems escalate. Retrieved on April 11, 2011: http://news.bbc.co.uk/go/pr/fr/-/1/hi/business/8506240.stm Madslien, Jorn. 2010. Toyota's reputation could be tarnished for years. Retrieved on April 11, 2011: http://news.bbc.co.uk/go/pr/fr/-/1/hi/business/8498036.stm Magee, David. 2008. How Toyota became #1. Penguin Group. Morgan, James M. 2006. The Toyota Product Development System. Productivity Press. Reddi, Narasimha. 2009. Effective Public Relations and Media Strategy. PHI Learning Pvt. Ltd. Werther Jr., William B. and Chandler, David. 2010. Strategic Corporate Social Responsibility: Stakeholders in a Global Environment. SAGE. Read More