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  • Internal Code :
  • Subject Code : OPMT620
  • University :
  • Subject Name : Management

Operations Management

1. Abstract on Toyota Accelerator Crisis

This research paper is based on two different case studies based on Toyota Motor Company. The first case study is called “A profile of Toyota’s Production System” that was written in 2010. On the other hand, the other case study that makes up for the maximum part of this research paper is “Toyota: The Accelerator Crisis” written by Gretto et. al. in 2010. The first case study provides a very brief introduction to the history of Toyota Motor Company, the Toyota Production System and the crisis that the company faced in 2009-10. The second case study gives a much more detailed insight into the crisis faced by the company in 2009-10 and how the problem was tackled. This research paper focuses on studying these case studies and accordingly drawing inferences from them. After briefly summarizing the case studies, the paper will provide an in-depth understanding of the accelerator crisis that was faced by the company and further state recommendations on the steps that could have been taken to handle the crisis more efficiently. This research paper highlights the importance of a proper operations management system in a particular company and also highlights various aspects that can go wrong if the operations department is not competent. Reading this research paper provides insight into the working of the operations department and helps understand the effects of malfunctions in the department with the help of above mentioned 2 Toyota case studies.

Table of Contents

Abstract

Case Study Overview – Toyota Accelerator Crisis.

Toyota Accelerator Crisis (the history)

Recommendation.

Conclusion.

Reference.

Case Study Overview – Toyota Accelerator Crisis

The Toyota Accelerator Crisis is widely referred to the crisis faced by the company in 2009-10 where nearly nine million Toyota and Lexus models were recalled due to sudden acceleration problems. Back then, the company faced a lot of criticism for their slow response to the problem along with facing a huge risk of going into bankruptcy and losing their market value and reputation. After giving a brief introduction to the company and its history, the paper then describes the “Toyota Way”, which includes 14 principals related to manufacturing and production philosophies. Following that, the “2005 vision” is described stating that the company planned on not only making their cars cost-effective but also cut down the number of components. The case study then describes a small setback that was faced by the company in 2002 where more than 3 million owners had complaints regarding the engine of their vehicle. This lawsuit went on till 2007 where it was finally settled by the company. The case study then goes into the details of the 2009-10 accelerator crisis that the company faced soon after the engine crisis. Beginning from how the issue originally started, the case study goes into detail about how the crisis was handled and what barriers the company had to face because of them.

Toyota Accelerator Crisis (The History)

The accelerator crisis related to Toyota Motor Company started in August 2009 after a family was killed by a Toyota car whose accelerator was stuck (Daily Mail, 2011). Soon, the company was criticized for manufacturing a faulty product by various news channels and other sources. In September 2009, almost 3.8 million vehicles were recalled by the company due to issues related to the accelerator (the accelerator used to get stuck). In Jan 2010, 2.3 more vehicles were recalled by the company once the issues were realized (Kim, 2013). Over the next few months, several adjustments were made to the vehicles and at the same time suspended their sales and production for a few months (Kim, 2013). More vehicles were recalled bringing the total of vehicles recalled to over 8.5 million. Sources have stated that Toyota as a brand was in no hurry to fix the problem and “took their own time in addressing them”. In a press conference in February 2010, the President of the company addressed the issue and apologized to all the customers for the inconvenience caused to them (Yang, 2017). Subsequently, the company had to submit a testimony apologizing for the faulty vehicles, pay a heavy fine of 16.4 million dollars and face expensive lawsuits against the company (Yang, 2017). Additionally, the company suffered in their ratings, market capitalization and share prices.

Meanwhile, the structure of the company gained heavy criticism (Heller, 2011). Many told the company structure responsible for the delay in any actions and have heavily criticized it for functioning independently from one another. Further, the complex web of manufacturers and partners of the company also gained criticism (Heller, 2011). Apart from that, some people have also blamed the lack of consensus and difference between the cultures of Japan and the United States for the progression of the crisis. Toyota is a Japan-based company and the major crisis took place in the USA, where the subsidiary functions independently from the main headquarters (Heller, 2011). Analysts have also blamed the president of the company for how the situation was handled claiming that the president focused more on progress compared to the quality of the product.

The operations management of the company (responsible for Quality Management, Location Strategy, Supply Chain Management and Inventory Management) was also called into question during this crisis. During the crisis, the operations department had to manage the relations with all the stakeholders (Feng, 2010) along with receiving a lot of pressure from the competitors, the government and all those that were affected by the crisis. Like Heizer (2013) says in his book, every company has a “corporate social responsibility” to be innovative and keep the stakeholders happy along with being responsible. This 2010 accelerator crisis was not only regarded as a failure of the president but also the operations department of the company.

4. Recommendation on Toyota Accelerator Crisis

Though the crisis happened back in the past, some various steps and measures could’ve been taken before the crisis or while the crisis was going on to avoid the crisis altogether or at least reduce the scale at which the crisis happened. A few recommendations are as follows:

  • When the brand received reports of a faulty acceleration, the brand should have taken it seriously and immediately acted upon it. It is important to remember that the customers always come first and that any inconvenience witnessed by them should be taken very seriously. Instead, the company did not know how to handle them and delayed their reaction by months (InfoTrend, 2011). In the future, this should be avoided.
  • The company should have immediately guided the complaints towards the designers and engineers when questions were raised about the functions of the cars. These issues are not those that can be simply addressed by the operations team or the customer care and should have been handled by professionals who know the structure of the cars well.
  • The company should have also reached out to external experts to investigate the case when complaints were received by them (Liker, 2011). The help of outside experts can help the company get an unbiased professional opinion about the workings and functions of the vehicles and accordingly take a call. Getting a detailed unbiased opinion about vehicles should be done before the vehicle is launched in a particular market. If the vehicle was tested safe in all aspects, the company should have released those reports and effectively explained their stand.
  • It is highly recommended that once a company faces such a crisis, the company should understand that there are errors in their Quality Control Procedure and immediately rectifies it (Liker, 2011). When something goes wrong at this huge a scale, it is an indication that something within the company is not right. This would be a good time to introspect, analyze and observe what processes and departments within the organization are not working efficiently (Liker, 2011).
  • It is also highly recommended that there be clear and regular communication amongst all the different subsidiaries of an organization. When a company becomes a multinational cooperation, the same standards must be maintained in all the subsidiaries. This can be achieved only by proper communication and transparency between all the different sections. Every decision, change and procedure must be cleared by the headquarters before they are approved; and then these changes must be implemented in all the sections.

5. Conclusion on Toyota Accelerator Crisis

What happened with the company was unfortunate, but ultimately the company managed to raise over it and build a strong reputation again. Toyota as a brand increased the transparency between the company and the customers and, with the help of surveys, improved the quality and value of its products over time (Davis, 2012). From the research, it is clear how important the management of the operations of a particular company is. It can be witnessed that the incompetence of the operations department can massively shake the foundation of the company. The operations department is one of the main parts of an organization, and having clear organizational strategies and procedures is very important for an organization; especially while handling a crisis. Not only does an organization have to manage a specific crisis carefully, but the company also has to learn from that experience and evolve as an organization.

6. Reference for Toyota Accelerator Crisis

Daily Mail. (2011). Relatives of family killed when the accelerator stuck in loaned Toyota win $10m settlement. Retrieved from https://www.dailymail.co.uk/news/article-1361093/Relatives-family-killed-accelerator-stuck-loaned-Toyota-win-10m-settlement.html

Davis, S. (2012). Toyota: From Recalls to Relevance. Retrieved from https://www.forbes.com/sites/scottdavis/2012/03/27/toyota-gets-drivers-of-reputation-and-cars/#51af9a341b09

Feng, Y. (2010). Toyota crisis: management ignorance? Retrieved from https://www.diva-portal.org/smash/get/diva2:349746/fulltext02

Heller, V. L., & Darling, J. R. (2011). Toyota in crisis: denial and mismanagement. Journal of Business Strategy, 32(5), 4–13. https://doi.org/10.1108/02756661111165426

Hyunchul Kim. (2013). A Business Model View on TOYOTA Crisis. Productivity Review, 27(3), 387–399. https://doi.org/10.15843/kpapr.27.3.201309.387

InfoTrend. (2011). The Toyota recall crisis: Media impact on Toyota’s corporate brand reputation. Retrieved from https://instituteforpr.org/wp-content/uploads/JFGRA-InfoTrend-case-study-ver-2.pdf

Liker, J. (2011). Toyota’s Recall Crisis: What Have We Learned? Retrieved from https://hbr.org/2011/02/toyotas-recall-crisis-full-of

Render, B., Heizer, J., Munson, C., & Griffin, P. (2013). Operations Management (3rd ed.). Pearson.

Yang, Sung-Guk. (2017). The Crisis History and Implications of Toyota, GM and Volkswagen. The Review of Business History, 32(1), 25–54. https://doi.org/10.22629/kabh.2017.32.1.002

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