Toyota Motor Corporation is one of the largest automobile manufacturing companies in the world and it is one of the Top 10 Fortune Global enterprises (Toyota, 2011). Nevertheless, the recall crisis brought a significant amount of negative impacts on Toyota’s development since the end of 2009 and the company was then facing a big challenge since the establishment of the company. Therefore, it is necessary to find out what caused such crisis and what the company needs to do to re-establish its reputation. The report consists of two parts. Firstly, the problems will be identified to explain the failure of Toyota with the support of relevant academic theories and secondly, appropriate recommendations will be provided based on the analysis and evaluation of Toyota’s problem.
2.0 Conceptual Framework
Eldridge and Crombie (1974), the culture of an organization refers to the unique configuration of norms, values, beliefs, ways of behaving and so on that characterize the manner in which groups and individuals combine to get things done. When mentioning culture, two concepts which are organizational and national culture must be taken into account (Dyer, 1984). Organizational culture concerns different elements, such as organizational structure, organizational vision and value and so on (Swailes &Senior, 2010). Different national cultures lead to the rise of the concept of cross-culture because different cultures may affect organizational structure as well as the way to manage. Tayeb (2003) demonstrates that culture is historically evolved values, attitudes and meanings that are learned and shared by the members of a community and culture influence people’s material and non-material way of life.
Congruence Model organization behavior
Nadler and Tushman (1980) illustrate that the maximum organization effectiveness could be achieved when both internal and external factors of the organization are congruent and a Congruence Model was developed (See Figure 1). The model indicates that the problems could be avoided if environment factors are congruence with four internal factors (Patridge, 2007). These internal factors include formal organizational arrangements, informal organization, task and individual.
Figure 1. Congruence Model of Organizational Behavior
(Source from: Nadler and Tushman, 1980)
3.0 Situational analysis and evaluation
Toyota’s recall crisis began at the end of 2009 and it last one year until 2010 which brought the company great losses that it led to a $5 billion’s financial loss and customers lost confidence about the quality of Toyota cars (Taylor, 2010). Toyota’s failure might be caused by different issues. However, the most influential one could be that the company did not take appropriate considerations of change into account.
Firstly, the company did not attach a great importance to organizational culture change. Toyota’s organizational culture shows a high centralized management that the head office in Japan has the highest authority when dealing with different issues (Taylor, 2010). For example, the decision making process takes a long time in Toyota because all the information must be delivered to Japan office and then sent back to headquarters in different countries once the final decision is made. However, this slows down the efficiency of problem solving which aggravates the recall crisis in Toyota. Even so, the company does not realize that there is a need to do changes. However, it is believed that Toyota was suffering the problem that it seemingly dominates market position but an arrogant and inflexible culture weakens the company. Therefore, the first reason for Toyota’s failure is that the company ignores organizational culture change.
Besides organizational change, cross-culture change must be considered when analyzing Toyota’s recall crisis. Toyota entered USA market by establishing U.S headquarters. However, there appear some conflicts on Toyota’s management in U.S and Japan. For example, different cultures made it more difficult to pricing that Toyota Japan insists upon a premium for reasons of prestige and to maintain its corporate margins while California, more mindful of the state of the American market and the actions of competitors, prefers a more aggressive approach (Taylor, 2010). Also, different culture makes customers have different preference on cars that big V-8-powered pickups are the most popular and profitable vehicles sold in the U.S while they are not sold in Japan (Taylor, 2010). The culture differences and changes greatly weaken Toyota’s marketing strategies which brought potential development problems. In addition, such culture changes brought communication problems so that Toyota’s operation and performance were hindered.
Congruence Model of behaviour could be applied to further analyze the existing problems in Toyota. Toyota has problem on ‘ individual’ that managers of the company insist that there is no need to change, there could be four main reasons which are parochial self-interest, misunderstanding and lack of trust, different assessment and low tolerance for change (Kotter and Schlesinger 2008). Furthermore, the centralized management indicates that the Toyota has the problem on ‘formal organizational arrangements’. As the development of modern management, centralized system is considered not suitable for the promising strategy (Andrews et al. 2007). Therefore, under such circumstance, it is crucial for Toyota to think about how to make appropriate changes.
From above analysis, it can be found that Toyota has the problems such as centralized authority, resistance to change, ignoring culture changes. When using Congruence Model of behaviour to further analyze the problem, it could be found that Toyota has problems on its internal factors such as ‘individual’ and ‘formal organizational arrangements’.
To make recommendation based on Toyota’s recall crisis, the very first one is that the company must have the awareness of replying any changes not only on culture changed mentioned above, but also on external changes. Organizations can only development once they are able to adapt to changing external environment. Therefore, it is necessary for Toyota to do sufficient research in order to obtain relevant information to understand how to operate the business effectively.
The president and managers of Toyota must learn to empower. That is to say, regional headquarters should have authorities to make decisions by themselves. By doing this, problems could be solved in a shorter time so that the company image and reputation would not be damaged greatly. For example, if Toyota allows U.S sale headquarters to deal with recall issue in U.S market, the loss will be greatly reduced.
Finally, as Toyota is an international company which expands market and sets up headquarters in different countries, it is very important to understand local culture before entering. As mentioned, there are conflicts between U.S headquarters and Japan headquarters on issues such as pricing and products. It is better for Toyota Japan to adopt different strategies in different countries based on different culture and allow regional headquarters to implement appropriate marketing strategies as they better understand local culture.
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