Good Case Study On Toyota: To Pay Or Not To Pay

Toyota: To Pay or Not to Pay

Statement of the Problem
Some cars manufactured by Toyota were careening out of control and causing accidents, in a few cases even resulting in deaths. The company had a massive recall and held an investigation into the source of the problem. Profits dipped slightly, but the corporation is still financially sound. Positive public perception has also taken a hit, but seems to be recovering. Now, the dilemma facing the Toyota Corporation is the question of whether or not to pay a fine and publicly admit they were at fault, by acknowledging that they knowingly sold faulty automobiles. The implication that profit was more important to their management than the health and well-being of the people who drive their cars will have serious unpleasant consequences. Their other alternative is to try to fight the government’s ruling. Regardless of the outcome, the company’s mistake will be under scrutiny as well as their responses to the accidents. Again, the focus returns to Toyota’s moral and ethical responsibility to the consumers. In the sales business, success is largely determined by reputation of the company as a whole and by the quality of the specific product itself. As the management attempts to determine the best course of action, they must weigh the pros and cons of their potential course of action, in light of the effects their action will be likely to have on these critical factors as they continue to strive for entrepreneurial success in the global marketplace.

Analysis of Alternatives

If Toyota chooses to accept responsibility for the flaws in the cars, they face the probable lack of customer confidence in their manufacturing process. When the consumer doubts the quality of the product, they will naturally be less likely to buy it. Sales revenue is very likely to decrease in the months immediately following Toyota’s announcement of guilt. However, this issue was already on the public’s radar after the policeman died following the 911 call he made before his fatal crash in his uncontrollably accelerating car. The public perception did recover and in a relatively brief amount of time, it seemed the buyers felt comfortable that they could trust Toyota to make a reliable automobile. Therefore, it is reasonable for management to conclude that it would be likely to play out similarly if the problem were to be brought up again. It would also be reasonable to expect that the time it would take to recover from repeated media attention to the same issue would be somewhat longer than the first incident, because of the additional negative attention to the same problem. It is possible that repeated questions about production quality would shake consumers’ confidence enough so that it would be a serious financial blow in the long run, but with the addition of some positive press from their advertising and marketing teams, it could most probably be overcome. Ultimately, in conceding to the governments’ safety report, the most important effect would be the unfavorable impact on consumers’ perception of Toyota quality and their moral responsibility to the public.
Additionally, if they do choose to go this route, there is the question of who within the organization will bear the brunt of the responsibility. Is it upper level management? Or is it the engineering department? Quality control? Will someone be terminated? How does that decision help create the positive spin for the marketing department? Yet another line of questions springs from the potential flood of additional lawsuits that would inevitably pop up if they see the company is vulnerable as a result of admitting their awareness and disregarding of the safety issue. Beyond the dollar cost of these settlements, these additional lawsuits create more bad press, more negative impact on public perception of trust in quality and more lost revenue. It is difficult to project the long term impact of these additional considerations.
Alternatively, Toyota could choose to contest the government report, denying culpability in the production irregularity that resulted in the acceleration accidents. The factor of negative perception is equally important if they go this route, but they do save themselves the trouble of becoming vulnerable to additional lawsuits. For this reason alone, as all other considerations look to be somewhat equal in terms of negative image and lost income, this is most likely the safer route for Toyota to choose. They would, however, need to have a strong defense and the full support of their legal team. It would certainly not be to their benefit to fight a losing battle in the courtroom. Provided the lawyers feel they can win the case, this appears to be the better course of action for the company.