Toyota was facing an unprecedented crisis and its president was asked to testify in the U.S. House of Representatives Committee on Oversight and Government Reform on its move regarding the said problem. Despite the accelerator crisis, Toyota pursued its goal to expand globally and implemented a marketing strategy focusing on quality and customer experience. This case study looks into the causes of the crisis, the actions undertaken by the company, and how well the company addressed the accelerator crisis.
Michael Greto, Andreas Schotter, Mary B. Teagarden
Harvard Business Review (TB0243-PDF-ENG)
December 15, 2010
Case questions answered:
- 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?
Not the questions you were looking for? Submit your questions & get answers.
Case answers for Toyota: The Accelerator Crisis
1. Who were the promoters of the Toyota accelerator crisis? Why was Toyota facing a recall crisis?
One of the main reasons for the accelerator crisis in the Toyota company was to pursue a fairly rapid growth objective and promote international expansion to outperform its other rivals within the automotive industry.
Repositioning the company as the head of the industry, increasing its margins and level of sales, failures in its cars also increased, and its reputation for reliability began to falter. This led to the oil crisis, where cars were damaged and stopped working.
From this same antecedent, Toyota managed to cause a great dissatisfaction with the customers since it accused them of having generated that error and was not responsible for the guarantee that they had proposed from the beginning. As they failed to admit this error, they reached a much more serious one that ultimately cost their lives and was going to continue to cost the lives of some customers.
First, Toyota management attributed the problem to operator error, which is the most frequent cause. of auto-acceleration problems in cars, then they included the mat as the culprit and finally as a failure in the electronic systems that generated an unintended acceleration, that is, a failure of one of their external suppliers.
Toyota recall was quite large (8.8 million cars globally), with an approximate cost of repair in the accelerator crisis of $8000 per unit. This represented a huge cost for Toyota because they had a lot of volume of units in the market and because it contradicts the perception of the brand and the quality of Japanese cars.
In the same way, the accelerator crisis was fueled by the emergence of organizational conflicts in the management, promoted by the late response of the US subsidiary, as well as by the mismanagement of the parent company under the direction of the Toyoda family and the other senior Japanese executives, as a result of the strongly centralized structure of the company that did not allow an effective response to the US state automotive safety agencies.
2. What were the promoters of the Toyota accelerator crisis? Why was Toyota facing a recall crisis?
Michael Porter claims that “operational effectiveness” is not a strategy. Why was the operational approach so effective at Toyota? What are the downsides of “lean manufacturing”?
In the words of Porter (1996), there is a fundamental distinction between operational effectiveness and strategic positioning. Operational effectiveness consists of performing activities better than rivals, while strategic positioning consists of competing to differentiate or perform similar activities in different ways.
On the one hand, operational efficiency is essential within a company. On the other hand, the maintenance (in the long term) of competitive advantage (strategic positioning) is based on the organization’s ability to differentiate itself (in its products and services).
As can be seen in the following graph that compares both notions:
Thus, based on Porter’s notion, specifically for Toyota, the operational approach was…